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Rehab Financial Group – changing lives by Lending to Investors Buying and Fixing Residential Properties

Susan Naftulin

President and Co-founder

Rehab Financial Group


John Santilli

(610) 632-7043

Interview conducted by:

Lynn Fosse, Senior Editor

CEOCFO Magazine

Published – November 8, 2021

CEOCFO: Ms. Naftulin, what is the basic idea behind Rehab Financial Group?

Ms. Naftulin: Rehab Financial Group is a private mortgage lender. We lend to business people who are buying and fixing residential properties for business purposes. That means that they are either buying it to fix and flip for profit or to fix and hold it, which means that they are going to fix it up and keep it as a rental property. We finance the purchase and the rehab, and then once they have a property that is ready to be occupied, they refinance it to a more traditional bank loan with a 15- or 30-year product, rather than our loans, which are higher cost and short term, meaning one year or less.    

CEOCFO: What lead to creating the company? When was it created and how have things changed over time?

Ms. Naftulin: What lead to creating the company was that my business partner, a gentleman named Jeff Goldberg, had been in a predecessor business. I was brought in to help during the wind down of that company during the great recession of 2006, 2007 and 2008 Over the year 2008, I managed the wind down of the prior company. In early 2009. Approached me with the idea that the markets had turned and that there was an opportunity for a new and improved company. We then created Rehab Financial Group. For one year, we lent our own money on a very limited basis, just to prove that the concept would work and that the market had indeed turned. We had success with the limited number of loans we made, so in 2010 we raised the funds and launched the company in a meaningful way.

CEOCFO: What is your geographic range?

Ms. Naftulin: Our clients are primarily along the East Coast, although we are open to doing loans in 29 states. The bulk of our business, however, comes from Southeastern Pennsylvania, where we are located, New Jersey, New York, Connecticut, North Carolina and Virginia, I would say.  

CEOCFO: What is the competitive landscape? Are there many companies specializing the way you do?

Ms. Naftulin: There are. We have a number of companies that do what we do, a few national, but mostly regional. We all do it a little be differently. For example, with our product, we do not necessarily require a down payment, depending on the borrower’s financials and the value of the underlying property being mortgaged. Most of our competitors do not do 100% financing under any circumstances. In the larger context, however, there are a fair number of competitors. As I said, we are all a little bit different, and for the customer, it is really a matter of finding the niche lender that works best for them.   

CEOCFO: How do you work with your customers? Is there much interaction after the initial loan? How do you keep tabs on what they are doing and to what extent do you need to keep tabs?

Ms. Naftulin: There is a lot of conversation before the loan is made. We really work with many borrowers, especially the newer ones, in an advisory capacity, where we can look at it and say, “You know, this is not a good deal, this is a deal you are not likely to make money on.” We try to figure out what they are seeing and make sure that, when they are newer, that they are not making a mistake, because an unsuccessful customer is bad for the customer and bad for Rehab Financial Group. We do not make enough money on one loan to make it worth it. We are really looking for relationship building with the customer. Once we make the loan, we fund the amount necessary to purchase the property and that gets paid at the closing table. We are holding their repair funds, however, as we are lending them money, not only to buy it, but to fix it up.

They borrower has to get it started with their own money, and then we reimburse them as their work is finished. Therefore, there is that constant give and take of “Okay, I have done the painting, I have replaced the windows; can I get reimbursed for that,” and then they go to the next phase. This means there is a lot of contact back and forth. Once the property is finished, they are then into the next phase of strategizing to pay it off. We will help them find take out financing, if they want to hold onto the property or we can assist them in getting the property sold.

We have a pretty “touchy-feely” relationship with our borrowers. There is a lot of back and forth. It is not just a closing and forget them. There is a communication and many adjustments made as needed, so we try to make ourselves as accessible as we can be to them for information and assistance before the loan closes. We are equally as accessible and interested in working with them afterwards, to make sure that they are successful in their project, or as successful as they can be.

CEOCFO: What might you look at, either about the borrower or about the property, that less experienced people do not take into account when they are deciding if they should provide a rehab loan? What are one or two of the things you understand that others do not?

Ms. Naftulin: What we are going to look at first is the person applying, because if we do not feel confident that the person can successfully complete the project, we do not even go to look at the property. We fully underwrite, so we need to make sure that this is a person who pays their bills, has the capacity to pay this bill, and we need to know that they understand what is involved, what the cash needs are, how they need to plan it out.

We need people who are methodical and understand what the process is. You would be amazed how many people come to us with a project that they just cannot make money on, and they do not understand that. Equally as important as the person applying for a loan is the viability of the project.

We look at every loan with a common-sense, fact-based point of view.  Does this project work?  Does the borrower have the financial ability to afford it?  Will this borrower pay us back?  When broken down into these questions, it is not generally a difficult decision.

CEOCFO: There are lots of challenges in the country today, money wise, security wise, business wise. How do you help your current clients and what do you look at differently now?

Ms. Naftulin: Really, the most recent big issues we have had is an incredibly rapid rises in the cost of materials and the length of time it takes to get those materials. For instance, over the summer the price of lumber almost doubled. We had made multiple loans to people in the spring based on a budget that did not incorporate doubling of the price of lumber. It was those sorts of challenges that RFG and its customers had to deal with. Since then, prices have come back down somewhat, but there are still disruptions in the supply chain. For example, we have a four-month loan product. If someone who does not have their own warehouse full of materials that wants to do a 4-month loan, the first thing we are going to tell them is, “It is never going to happen, because you are going to wait 4 months for your material. You are going to wait 4 months for appliances.” We have to look at things more pragmatically in that you cannot just go into Home Depot and Lowe’s right now and buy everything you need and have it delivered the next day. That is one of the challenges of making sure that people are dealing realistically with the current time we live in.

We will also advise borrowers. If we believe it to be a high crime area, we will remind them, “Do not leave materials in there until you are ready to install them. Do not put the appliances in there and walk away. Until you have installed them, they are going to walk away on their own.” Things like that, but that has always been the case. That is not necessarily new. In Georgia, there is a huge issue with people stealing air conditioning condensers outside. We are advising them to put cages on them. It is silly, stupid stuff like that, that we should not have to do, but in this world, we do.

The other thing is that we do not engage in political speech at all. It is very clear in our business, that if you are on company time with a company name, such as LinkedIn, you do not discuss politics at all. In these fractious times, political speech is best left outside of the business world. It does not belong in the workplace, and we keep it locked down, because we do not need more division.         

CEOCFO: How do you reach out to potential clients or do people know, either by word of mouth or when they start looking around, that Rehab Financial is a quality source of funding?

Ms. Naftulin: If you Google me, you will see that I have written a few articles, I have been featured in a few places, I have been quoted in US News and World Report and places like that. Sometimes, people find us organically just because of the amount of exposure we get. We are also active on social media and do search engine optimization work done by an outside vendor manager. Our biggest sell of the biggest source of new customers, however, is word of mouth. We have a very, very loyal customer based.

We work incredibly hard on customer service. In most companies you deal with these days, there is no such thing as customer service. If someone calls me and says, “I left a message for so and so 2 days ago in your office and they did not call me back,” my first call is, “what is going on, why did you not call them back, that is just not how we work.” It rarely, rarely happens. We deliver excellent customer service so that customer comes back to us. So many of the customers that do rehab are connected to other people who do rehab, either through investment groups or socially, where someone says, “Hey, will you work with me, I want to learn to be a rehabber,” that we get so many word-of-mouth referrals, that it just comes from all different places.

CEOCFO: Did you recognize the need for that high level, customer service on day one? Is it just in your nature or was there a point where you said, “Gee, this will distinguish us and a good way to operate?

Ms. Naftulin: Day one. I have a very unusual background, in that upon graduation from college I went into the retailing industry. I lived in New York City, and I spent 3 years as a department manager, in the Saks 5th Avenue Fifth Avenue flagship store. I learned there that you have got to be the best at customer service, because when someone is shopping at Saks 5th Avenue that is what they expect. That was my background. I spent 10 years in retailing and then went to law school. I practiced law for 6 years and again, your clients are your life blood. You have to keep them engaged. There are plenty of other law firms at that price line looking to steal your client.

From day one my mantra was that we are doing to deliver the best customer service in our lending space, so that once we have them, they will never leave us. That has been true for the 12 years we have been in business.

CEOCFO: Would you tell us about being recognized on the Philadelphia Business Journal’s Soaring 76 list?

Ms. Naftulin: Yes! It is very exciting for us because we are a little company. We started in 2009, a fund was raised in 2010 and up until a hear and a half ago we had 5 employees. We now have 15 employees and we have grown tremendously. We have been very fortunate. Sometimes luck just goes your way, but the truth is that you also make your own luck. To have been recognized as this little company in the western suburbs that is a rising star in the Philadelphia business scene was tremendously exciting and tremendously rewarding.

CEOCFO: What is next?

Ms. Naftulin: What is next is that we continue to grow the business. We continue to expand our footprint. We continue to expand our product offerings. We have a few new offerings in the works that I am not quite prepared to divulge yet, but we expect to continue growing. I do not know what our eligibility for the Soaring 76 awards is in future years. I do not know if you can only do it once, but I expect that we will be statistically eligible for that list, at least for the next couple of years. With the end of the foreclosure moratorium, there is beginning to be more foreclosures taking place, more distressed properties coming back into the space to be sold, so we see tremendous growth opportunities over the next 12 – 24 months.

CEOCFO: What, if anything, might someone miss when they first take a look at RFG?

Ms. Naftulin: The thing they might miss is that we are woman owned and woman managed. I built this company as a woman in a very male dominated field. We work with a lot of women, and we work with a lot of minority women. One of the best things about my job is that there are certain customers that I have worked with who all tell me the same things, that real estate is the key to generational wealth, and by working with us they have been able to unlock that thought of generational wealth to their daughters and their granddaughters.  They tell me that it opens their families dreams from limited to unlimited horizons, into the “you can be what you want to be” way of thinking. Their lives are no longer a pre-determined for you. That is just tremendously rewarding for me!

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“There are certain customers that I have worked with who all tell me the same things, that real estate is the key to generational wealth, and by working with us they have been able to unlock that thought of generational wealth to their daughters and their granddaughters. They tell me that it opens their families dreams from limited to unlimited horizons, into the “you can be what you want to be” way of thinking. Their lives are no longer a pre-determined for you. That is just tremendously rewarding for me!”
Susan Naftulin