#51 Reed Kawai Myers - Private Mortgage Investing

The Nalu Finance Podcast

In this episode of the Nalu Finance Podcast, Stefan Wagner interviews Reed Kawaii Myers, Principal of Myers Capital Hawaii and Myers Investment Group. They discuss private mortgage and bridge loan investing, and examine why Hawaii is a uniquely attractive yet underbanked market.

They explore how private lending operates outside of traditional banks, detailing how investors can access asset-backed mortgage opportunities. The episode covers expected returns, approaches to risk management, liquidity considerations, and the process when borrowers default.

What’s Inside:

• How private mortgage lending works — how it differs from bank lending, why underwriting is asset-focused, and how first-lien real estate collateral protects investors.

• Why Hawaii is a unique private credit market — underbanked, relationship-driven, and shaped by local knowledge, culture, and conservative loan-to-value discipline.

• Risk, returns, and reality — how double-digit yields are generated, what semi-liquidity really means, and how experienced lenders manage defaults when things don’t go as planned.

Why Listen:

This episode is a practical deep dive into private mortgage investing, grounded in real-world experience rather than theory. Reed brings a disciplined, relationship-driven approach to lending that highlights both the opportunities and the responsibilities that come with offering alternative credit solutions. 

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🎙️ Transcript: Intro: 00:01 Nalu FM Finance Podcast. Insight into the financial markets.

Reed Myers: 00:10 To me, my clients, both my borrowers and my capital investors are everything that determines the health of your company, your credibility, everything. But we want to be aligned as far as our culture and what we can actually provide and what we can't.

Sponsor: 00:22 This podcast is powered by Vestr, the engine behind Active Management. Vesta is a Switzerland-based fintech startup that provides software for issuers of actively managed certificates to automate their value chain fully. Visit Vestr, V-E-S-T-R dot com to schedule a meeting with an expert and to learn more about Vestr.

Stefan Wagner: 00:44 Welcome to the Nalu Finance Podcast. In this episode, we dive into the world of private mortgage and bridge loan investing, a space that blends real estate, lending, and income generations. Our guest is Reed Myers, principal and owner of Myers Capital Hawaii and Myers Investment Group, who has built a reputation for offering investors access to income-generating mortgage opportunities. Reed shares how private lending works, what makes Hawaii real estate market unique, and how investors can participate in these asset-backed strategies.

We'll discuss everything from risk management and default recovery to expected returns, liquidity, and who these opportunities are best suited for. Whether you're an experienced investor or just curious about alternative income streams, this episode will give you a practical insight into how private mortgage investing really works. Reed, you have built Myers Capital into a specialist in private mortgage and real estate lending and Myers Investment Group as an investment management company offering passive mortgage investments. How did you first become involved in this space and what market gap did you identify?

Reed Myers: 01:53 Great question and thanks for having us on the podcast. I first got started in real estate and finance out of college actually. So I got recruited to work for a small real estate investment trust in the Carolinas. And so that was kind of my first foray into real estate, finance, some development. And then shortly after that, we came on board with my family company, Myers Capital. My father started in 1998. At the time, we were just a very small, still small today for many respects, but commercial mortgage banker, primarily doing commercial lending for small apartment buildings, mixed use, things like that throughout the Carolinas and the Southeast. So I actually started off loan processing, doing some underwriting, the basics.

Stefan Wagner: 02:46 Yeah, but that way you learn what to look for. When it comes your way, you can probably very quickly spot certain patterns that you would have never known if you would have not done that.

Reed Myers: 02:56 Yeah, exactly.

Stefan Wagner: 02:58 So for the listeners less familiar, what exactly is actually private mortgage lending and how does it differ from traditional bank lending?

Reed Myers: 03:06 So private mortgage lending is one part of our business. So we actually do other types as well, but that's the purpose of the topic of conversation here. So private mortgage lending is basically outside of the institutional realm. So these are typically loans that don't require all your typical conventional requirements that much like you would think of a bank requiring. Um, less, less contingent on cashflow analysis, um, more based on the asset. You know, some people can call them hard money, hard money loans, private money loans, you know, different, different parts of the world call it different things, but basically, it's more, it's just less conventional.

So less, uh, emphasis on FICO scores, although we still look at them, less emphasis on cashflow, more on the underlying asset itself. It's kind of a conundrum because you would think that, well, underwriting is going to be easier than getting a conventional long-term bank loan or Fannie Freddie agency loan. It is, but it isn't. So it's a balancing act because we are taking on more risk and therefore our yield is much higher. Interest rates are much higher. Um, we still need to be very particular about how and what to lend on. So I'll kind of, we'll, we'll touch on that later, but it really, in my opinion, it's about deal flow, having good quality deal flow, the ability to say no. you know, 75, 80% of the time and pick the top 20% that you like.

Stefan Wagner: 04:28 Well, okay, that's, that's your ratio. Interesting. You talked about where you learned it in the Carolinas, but you are now located in Hawaii. Sort of what makes Hawaii real estate and credit market unique and how to sort of shape your lending strategy?

Reed Myers: 04:43 Yeah. So about 15 years ago, I, um, I was actually born in Hawaii. So that's, that's kind of my drawback to Hawaii. And I know, you know, I charter chatted offline a few times about our connections to Hawaii. So, uh, that was kind of my impetus to move back is, you know, I could kind of see where things were going, that you can do more and more things remote. Even 15 years ago, always got a great real estate market. So I took a, took a chance. It was a big chance and open up a branch out here just by myself.

And fortunately, we grew it and we've been very successful. The market is very unique. You know, everything, especially at the level that we do it, it’s very boutique, very creative, very opportunistic. You have to know your markets and know when to scale back on kind of your offerings as far as leverage and things like that. But Hawaii is unique, obviously it's a smaller market, it's kind of one of those areas where it gets passed up by a lot of the bigger companies, the bigger institutional. You can see that very clearly in banks.

Stefan Wagner: 05:47 I think it's completely underbanked, Hawaii.

Reed Myers: 05:50 So out here, yeah, you really have to understand the market. You have to understand the culture, how people work, how people think. The key thing is understanding your time frame for getting projects done, your cost factor, your ability to see the project through, knowing that a lot of the value is going to be in the land. So we actually are one of the few debt funds that I'm aware of that I will actually lend on land in Hawaii.

Stefan Wagner: 06:14 When actually capital investors invest with Myers Investment Groups, what actually are they investing in then? the mortgage itself? Is it a vehicle? How does this work?

Reed Myers: 06:24 Yeah. Yeah, great question. Yeah. So basically, we have two different sides of our business, right? We have our clients, our borrowers, people that come to us. And these are typically real estate investors, maybe some small developers, builders, commercial property owners. And the other side of our business is managing capital for capital investors. So you can participate as a capital investor into any of the deals that we put out as an offering.

Basically, when you do that, we assign the mortgage or the first trustee. Those are generally interchangeable, just terminology depending on the state. But basically, easiest way to think about it is you can participate as a lender. So when I say participate, you can acquire a portion of the mortgage or the entire thing. And this is done typically through a fractional agreement or just a full-on assignment of mortgage.

Stefan Wagner: 07:20 What is the first trustee and why is that important from a security and risk standpoint?

Reed Myers: 07:26 So basically, it's a mortgage, an asset to whoever owns it because it provides an income stream.

Stefan Wagner: 07:31 Is it a transferable asset?

Reed Myers: 07:33 It can be, yeah. Basically, you can invest into a particular mortgage and that will provide an income stream at a certain rate of return, assuming the borrower makes your payments. And the big factor here is reduction of risk. It's fully collateralized against an asset that we valued at a certain price. So, we're talking real estate. We're not talking equipment. We're not talking automobiles. We're not talking simply a PG, a personal guarantee. This is collateralized by a very hard asset. And in the investing world, arguably, what's more safe than real estate in a good area?

Stefan Wagner: 08:10 Yeah. And that leads me to my next question. How do you actually assess the loan to value, the value of the underlying, and what's the typical range for loans in your portfolio?

Reed Myers: 08:22 But we almost always will get a full appraisal by a licensed appraiser or MAI. It doesn't stop there because you still need to understand the comps that go into it. Not all appraisers are equal and not all are experts in certain areas. They still need to be checked. And that's kind of where, you know, our experience comes in is where the lender, we can always make adjustments, say, you know, I know this came back at $3 million, but because of this and this and this, and we look at the entire deal itself, we can easily dial back our LTV loan to value and what we're willing to lend to this particular bar for this particular situation, deal by deal.

Stefan Wagner: 09:03 What kind of returns can capital investors typically expect from private mortgages or trustee investment today? You said it's higher than other ones, like let's say the bank mortgage.

Reed Myers: 09:15 Yeah. You know, we're, we're foregoing traditional institutional underwriting guidelines for our own. Um, and this, this is the private market. So basically, we set the yield at what we feel the market can bear at the same time. It's not about, you know, just maximizing yield, no matter what it's about. Finding an equilibrium between what a good borrower and, you know, define that, right. A good borrower, a good deal. What can take, you know, it's a great project and, you know, we really like it and we can get more aggressive with the rate.

But, you know, usually we see the market being able to bear, at least in the way, well, maybe we learned in other states as well, but on average, our note rates are anywhere from like 13 to 14% on average. These are for typically first lien positions. So yeah, those are the yields that we're currently able to obtain. There might be some adjustments should interest rates drop, but generally over the years, this kind of lending will still capture double-digit yields.

Stefan Wagner: 10:25 Is there much difference between shorter-dated bridge loans and longer-term trustee positions? Is there a significant difference?

Reed Myers: 10:31 Well, we're only doing with this type of lending, we're only doing short term. So it's, you know, six to 12 months on average or about 12. It gives us a lot of flexibility to kind of reassess things. So sometimes our borrowers might need to extend or we might, you know, if we're comfortable, we write it up for another 12 months, but we usually like write them up for 12 months at a time. That gives us the option to say, you know, like, If the bar is not performing, if this and this, if the market's turning and we don't like it, we're going to issue a default.

On the other side, if a bar is making their payments religiously, our controllers and even myself sometimes will reach out to bars on a monthly basis saying, Hey, how are things going on? Trying to get a sense of where things are at. So the communication and that relationship that we build and maintain and that continued communication after the loan closes is incredibly important.

Stefan Wagner: 11:24 What are sort of the main risk factors investors should be aware of and how do you try to mitigate them?

Reed Myers: 11:30 Yeah, so that main risk factors are going to be, you know, obviously, I guess, higher level, you want to look at who your operator is, that would be who's putting these deals together. I mean, for us, like risk factors are obviously a borrower may not make their payment, right? They might have some liquidity issues. They might have a delayed back to development, right? Even if we're not doing development deals that much, we might be talking about, well, what does it take to renovate this property? How accurate are those numbers? So the borrower tells us these things we need to verify while we're underwriting. I'm market shifts right what's happening in the in the local the local area. How is the market performing or how are things shifted since we originated alone.

Stefan Wagner: 12:18 There's always risking and investing in a landing boys so what happens if a borrower actually defaults I mean.

Reed Myers: 12:25 You know, our, our average loan to value across our portfolio is about 50 to 60% right now. So, you know, our average loan amounts, you know, anywhere from maybe six to, you know, 600,000 to a million. So we play in this kind of low balance for a way, very, um, more low balance commercial kind of arena and. The way the process works is typically, you know, we, we issue default, we start to engage our, you know, our attorneys, litigation attorneys, file the appropriate paperwork. there still needs to be communication with the bar if, if they're, you know, open to it.

Because sometimes there might, we find ourselves where maybe we just negotiate a deed in lieu and save all of ourselves a whole lot of time, energy and effort costs. Um, saying like, look, this is, this deal is not working. Um, you're obviously not able to make the payments and let's, let's try to clean this, make a clean cut from where we're at right now. And we both move on and it becomes a win-win.

Stefan Wagner: 13:31 What are some of the early warning signs that a borrower or property might be in trouble?

Reed Myers: 13:36 Communication is usually where it starts. That's part of our hands-on.

Stefan Wagner: 13:41 If they go silent you mean?

Reed Myers: 13:42 Yeah, I mean, and these are things that we try to pick up on as much as possible up front too.

Stefan Wagner: 13:49 Yeah, I know what you mean. One common question, as always, with sort of, let's say, call them alternative investments, is how liquid are these investments? And if needed, is there a way of exiting early? Do you sometimes buy them back from investors, or how does this work?

Reed Myers: 14:03 Yeah, so there's a couple different ways you can invest with us directly. One is you can participate in a direct deal. You're a little bit more tied to the hip in that regard. You're tied to that specific deal. Either you own the entire mortgage or a fraction of it. The other way is through a fund model. Number one is don't invest money that you're going to need anytime soon. Now with that being said, this is not going to be, we call it semi-liquid. So it's not going to be obviously as liquid as your capital markets, your publicly traded securities. It's going to be more liquid than real estate itself. far as ownership goes and you know, generally these are the terms are, like I said, 12 months, right?

So you're already looking at more or less a defined timeframe, but you need to be a little bit flexible with that in case something were to happen. Semi-liquid in the sense that the short term semi-liquid in the sense that there are no buyers out there that may be willing to buy this note from you. Um, if you had to get out, including us, so we've, we've stepped in and. If we had a, you know, the capital investor that we had a good relationship with a lot of these times when we bring these deals to market, as far as an open opportunity, we've already lent the bar the money. So we already have it on our books. We're comfortable keeping it.

Stefan Wagner: 15:16 Yep.

Reed Myers: 15:17 So we've already put our money where our mouth is. We don't mind earning the return on it. We, we have no problem doing that, but it doesn't help us build our, you know, added capital base. If we can sell off a portion of this note or assign this mortgage over to an investor, we can free up capital and do more deals. So that's kind of goes without saying, right. But if we had to step in and, you know, take back a certain portion of it or the entire thing, we've definitely done that before. So it's semi liquid in that sense.

Stefan Wagner: 15:47 I mean, if I would come to you and say, you know, I want to invest in something, what's sort of my minimum investment size?

Reed Myers: 15:52 So minimum investments, investing into our first trust deed for us is $150,000. You do need to be accredited. So that, of course, means you have a million-dollar net worth excluding equity in your primary residence or have the appropriate income qualifications.

Stefan Wagner: 16:09 And if I wanted to take a whole mortgage on, in a sense, that is usually what's sort of the minimums where this starts.

Reed Myers: 16:16 It just depends on the size of the mortgage. We had one recently, we had an investor take over a $735,000 note. That was the entire amount of the note.

Stefan Wagner: 16:29 But you stay with the investor, you manage and help them with the reporting transparency. It's not like once it's off your books, they're on their own.

Reed Myers: 16:38 So we're, we're full service in that we're not out of the picture, even if we assign it to you. So we manage everything. Um, basically. After even after assignment, we're still going to continue to manage it and service it the same way we were doing prior. So we're still collecting the payments. We're still distributing, doing the waterfall and the splits. And we're still actively involved in the borrower's project, how it's progressing, especially if there's construction involved, managing those construction draws, which a lot of times we hold back. We also handle and manage any defaults and foreclosure situations as well.

Stefan Wagner: 17:15 And for someone considering maybe to start this, you know, into this, what's the right way to start and what should they look for?

Reed Myers: 17:23 I would say, you know, start by scheduling a suitability call with myself. And we kind of, you know, talk story as we call it here, you know, just it's a way to get to know each other, understand the capacity, make sure it's a good fit. And, you know, and I like to identify, you know, hopefully up front, like, is this a good fit or not? And why? And, you know, some I've turned away investors, not because we don't, you know, couldn't use their capital, but more of, you know, I can see their goals and, you know, I come from a very consultative approach because we help homeowners in Hawaii even purchase homes and even first-time homebuyers, different side of our business, obviously.

But I like to, I want to make sure things are a good fit for people from the start, because just like we tried to feel out our borrowers, you get clues on things like, OK, this is great. This could work very well. Um, to me, my clients, both my borrowers and my capital investors are everything to me. That's determines the health of your company, your credibility, everything. what we want to be aligned as far as our culture and what we can actually provide and what we can't. But yeah, it starts with a suitability call.

Stefan Wagner: 18:31 Excellent. And sort of, you know, you're in Hawaii, where do you sort of see the real estate market evolving? It's always a bit disconnected from the mainland, I always think about it.

Reed Myers: 18:46 Right. Yeah, I mean Hawaii's always been number one a high-cost market. Um, you know, you have some lower cost areas like the Big Island, the actual island of Hawaii, whereas, you know, islands like Oahu where I'm at. Kauai, Maui, they're usually considered very high cost. You know, big thing right now going on is kind of the pushback on tourism, which is concerning in a way. However, you feel about it politically, obviously we're not going to get into that, but more about what effects does it have on real estate? I mean, certain parts of Maui are taking hits dramatically. Most of the commerce is on Oahu. This is where most of the jobs are, highest population. and some of the highest costs across the islands. At the end of the day, there's still quite a bit of demand for people wanting to acquire assets in Hawaii. It's considered kind of a safe haven in many senses. So I don't really see that changing anytime soon. What Hawaii isn't is a strong cash flowing market. Hawaii is a strong appreciation market, a good way to store capital, store assets into real estate.

Stefan Wagner: 19:54 About you maybe a little bit, if that's okay. I want to ask you a couple of questions about what drives you, something about yourself that most people don't know.

Reed Myers: 20:04 For me, the important thing is having my name on the door, everything comes back to me for better or worse. The biggest thing that drives me is client relationships, client satisfaction, helping people with either growing or preserving their wealth, helping people get started into real estate, especially in Hawaii where it's very difficult. And kind of just parlaying what I know about real estate, what's worked for me or some of my other clients who have been successful and how this could help you. So that's, you know, that and just providing a good life for myself and my family, um, as well as a place for, you know, my staff and my employees to grow and better themselves as well.

Stefan Wagner: 20:47 question I always like to ask, I don't know if you have that, but do you have a favorite sort of finance book or business book that you left a lasting mark for you?

Reed Myers: 20:58 Yeah, I read a book, and I found it here on my bookshelf. I read it in 2019. It's an older book. It was published in 2008, I believe. So it's called Street Smarts by Norm Brodsky. It's more about entrepreneurship and running a business and things to be aware of. So I've got a couple of bullet points here that really kind of spoke to me. So number one, cashflow is everything. Number two, know your numbers. So that's still, you know, granular, but you still need to be aware of that. Um, and then this one really speaks to me is, is never falling in love with a deal.

So, and you can, you can apply this to both, you know, business partnerships, as well as. An actual real estate investment deal or borrower. Um, and I have people approaching us all the time. Hey, you should get into this and have you thought about expanding into this and this and it looks, it looks great. And you never want to let the emotion take over and, you know, same thing with like trading stocks or getting emotional with any kind of investment, never falling in love with a deal. knowing and being cognizant and aware of when to say no or when to say no. That's incredibly important.

Stefan Wagner: 22:07 I remember coming across that book. I have not read it, but it's going on my book list now. And last question is, what do you do? I mean, you clearly work and you're very committed to your business, but what do you do in your spare time outside work?

Reed Myers: 22:21 Yeah, like, obviously, you know, we're in Hawaii. So, you know, enjoying what we have here, hiking, you know, I don't do it as much as I'd like to, but I mean, there's just some beautiful areas just right in our backyard. So just, you know, taking time to step back and absorb that, and be fortunate and feel grateful for what we've got and where we're at.

Stefan Wagner: 22:39 It never gets old.

Reed Myers: 22:41 That drives me too.

Stefan Wagner: 22:42 Reed, thank you very much. Very much appreciate it. Thank you very much for coming on to the podcast.

Reed Myers: 22:49 Thanks, Stefan. Yeah, I appreciate you having us.