Diane was having “a bad hair day” when she arrived in Los Angeles in August 2003 to visit her daughter Allison. Allison called her friend Taylor at Lucas Echo Park for an emergency appointment and Diane and Taylor met.
When Taylor Lucas first visited Portland the following year, she knew she would return to the city to open a second location of Salon Lucas. She had opened her original location on Echo Park Avenue in Central Los Angeles when there were few other businesses on the block.
She marketed her new business while moonlighting on music video sets and has since created a salon that draws the likes of the Schwartzman brothers, Juliette Lewis, Beck, Sia and other members of the LA music scene.
Taylor opened her first salon at 23, maxing out her $25k credit card limit to do so. She quickly realized that credit card debt was not a sustainable model. Taylor sought advice from her aunt. Taylor’s aunt made her a loan so she could pay off the credit card debt. Taylor paid back her aunt with interest over the next two years.
Taylor met her husband on her first visit to Portland. Taylor’s visits became more frequent and, in 2005 at the age of 26, she decided to buy her first home in NE Portland. Though she had saved enough to put 10% on her new home, her mortgage broker convinced her to save her money and take on a subprime mortgage, with an adjustable rate and a 5-year balloon payment.
Initially Taylor rented the house while she developed plans to move from LA to Portland and open Lucas Portland. Taylor was pleased with the purchase of her house, but increasingly uncomfortable with her mortgage. Once again she sought advice from her aunt. Her aunt told her to refinance and get a 30-year, fixed rate mortgage. One year after purchasing her home, Taylor was able to refinance with Frontier bank, which was later consumed by Citibank, at 7.375% interest rate, fixed for 30 years.
Taylor delayed her plans to open Lucas Portland because of her high mortgage payments and Great Recession. She continued to split time between Los Angeles where business at Lucas Echo Park was strong and Portland where her husband lived and worked.
In 2010, Taylor decided to start Lucas Portland. Her husband drained his savings account and she again borrowed money from her aunt. Hidden on the corner of 2nd and Pine in SW Portland, the majority of traffic that passes Lucas Portland whizzes past, whether on bike or Max Line. The salon is a renovated bank with 26’ ceilings, a welcoming couch, and a bar for refreshments. The space is open, bright, and homey.
Small details like brightly painted chairs, vintage bikes, and flowers offer a preview of the care Taylor and her staff will dedicate to their clients.
The start up for Lucas Portland took longer than Lucas Echo Park. By 2013, business at Lucas Portland was on plan; Taylor had repaid her aunt’s loan.
Taylor had received dozens of notices from Citibank and other mortgage lenders, indicating she was eligible to refinance her loan and cut the 7.375% interest in half. Taylor collected her documents and went through the frustrating process of dealing with less than helpful customer service representatives, only to be told she was ineligible to refinance her loan.
Taylor was unable to find a single bank that would give her the money to refinance.
Taylor was baffled, frustrated, and ready to give up. She had perfect credit and a well-paying job. She had never missed a payment.
The reason for her ineligibility? She was self-employed.
Despite the proven success and growth of her two salons over 15 years, plus home improvements financed through out-of-pocket funds and sweat equity, lender after lender saw her small-business ownership status and immediately stamped her as financially unstable.
Meanwhile, her husband, who also owned a home in the Portland area was easily able to refinance his home. He works in a “stable” job at a large company with full time employment, yet makes than his wife. Lucas knows she will always find job stability in her occupation, while her husband would have a much more difficult time finding work should something happen with his job.
“The banks don’t care about you. They don’t take the time to learn about individual people and their businesses. They just lump everyone into the same category,” said Taylor while working on a client in her salon in SW Portland.
After Diane heard Taylor’s all too common story during a hair appointment, she saw an opportunity in Taylor’s experience. If she were to act as Taylor’s private lender, not only could she cut Taylor’s interest rate in half, she could also get her own money out of Wall Street.
The two began conversing about a private mortgage and 6 months later, Taylor found mortgage refinanced and Diane found a real and positive investment for her funds.
The process of transferring the loan to Diane was simple and familiar. Diane hired a local lawyer to create a user-friendly mortgage document, they had a closing, and went through a title company, just the same as if Taylor were to have refinanced through a bank.
“Simplicity is key”, says Diane, who uses simple Excel spreadsheets to keep track of Taylor’s loan. “The bank documents are too confusing and no one understands them. We have to get back to basics.”
Taylor makes a monthly deposit, including the mortgage payment, and 1/12 the estimated real estate and insurance payment, into and account at her credit union. The mortgage payment is automatically transferred to Diane’s account.