Key Factors RealEstateAF

Why Everyone Is Talking About Hard Money Now!

• Mark A Jones - Founder of ReviewMyMortgage.com

Share episode

Send us a text

Join Mark Jones and hard money expert Jade Florez of Longhorn Investments as they dive deep into the world of real estate investing in today's dynamic market. Discover why mom-and-pop investors are thriving with hard money loans, even as traditional buyers hesitate. Jade breaks down the BRRRR method (Buy, Renovate, Refinance, Rent, Repeat), explaining how investors can acquire properties with minimal out-of-pocket cash and build long-term wealth. Learn about the critical 70% rule for flips, the shift from rentals to flips due to rising costs, and how speed and flexibility make hard money a powerful tool. They also expose common pitfalls like contractor mismanagement and discuss the true landscape of institutional vs. individual property ownership. Whether you're a seasoned investor or looking to start your portfolio, this episode offers invaluable insights into leveraging hard money, managing risks, and navigating market changes for profitable real estate ventures.

Get in Contact with Jade : https://www.longhorninvestments.com/loan-consultants/jade-florez

Support the show

Key Factors Podcast is Powered by LoanBot.com
Host: Mark Jones | Sr. Loan Officer | NMLS# 513437
If you would like to work with Mark on your next home purchase or as a partner visit iThink Mortgage.

SPEAKER_02:

And welcome back to another episode of Key Factors Podcast Real Estate AF, where the AF stands for and finance. And I'm your host, Mark Jones, and we are powered by LoneBot, uh, Smarter Mortgage Matching. And today we're going to be talking about hard money. Um, over the past couple of discussions, we've talked about builder business, we've talked with brokers, realtors, uh, discussing that concept. Um, we even had uh Tommy Fryer with Meritage Homes in here uh to join us and give his take on the building aspect of it. But I came across an article that struck me by surprise. And it kind of makes sense, but I've brought along a friend who's been on here a couple of times um to get her take on all of this hard money discussion. Um so without further ado, let me introduce Jade Flores. Jade, how are you?

SPEAKER_04:

Good, how are you?

SPEAKER_02:

Doing well. Um, so having you back, we're now at 30,000 subscribers, and there are probably some folks that didn't get to see any of your discussions before. If you could tell us a little bit about yourself.

SPEAKER_04:

So I'm a mom of four, and I manage a hard money lending company. I've been doing that for about a decade. Uh, been investing also since I was 22. Uh, so I manage Central Texas for Long One Investment League.

SPEAKER_02:

Okay. Um, and how did you get into that? Tell us a little bit more.

SPEAKER_04:

Into hard money?

SPEAKER_02:

Heck yeah. Well, because nobody really just falls into hard money.

SPEAKER_04:

No.

SPEAKER_02:

Um most of the time, people stay away from it until they know more about it, then they use it.

SPEAKER_04:

Well, so I found out about it uh in an unusual way. So, first deal ever, when I was 22 years old, failed on it. Remember, we kind of talked about that last time. Um, but while I was failing on my deal, uh, I had to learn more about hard money because I was in a hard money loan. Okay. So I learned all the ins and outs of hard money and discovered what I liked and what I didn't like and ended up being an expert at it by the time we were done feeling. Um then flash forward about a year later after that, I got approached by a hard money lending company through wholesale deals.

SPEAKER_03:

Okay.

SPEAKER_04:

So made that connection there. And then they flew me out to Dallas, had no sales experience whatsoever, just you know, a little bit of my experience with the previous deal I had done with hard money. And they hired me on the spot, came home. We had probably five people in our company at the time. It was pretty small.

SPEAKER_03:

Okay.

SPEAKER_04:

Five reps. And I just completely did grassroots. So I started with local RIAs. Do you remember the RIAs back in the day?

SPEAKER_03:

Absolutely.

SPEAKER_04:

Those are not so popular anymore, but they were back then. Um, went to local RIAs, met new investors, and built my business that way.

SPEAKER_02:

Boom. Okay. So um you mentioned something that uh I would rather you explain than me, which is the idea of wholesale. Do you deal with number one? Do you deal with a lot of wholesale? Number two, probably goes before number one. What is wholesaling? A lot of people talk about it, uh, and not too many of the folks listening to this get that knock on their doorstep, but I want them to know what it is.

SPEAKER_04:

So wholesaling in short is just a person who uh approaches a seller, right, and gets a property under contract for a certain amount of money, and they assign that for a fee, which is the assignment fee, to an investor like myself. And the investor pays the assignment fee and then takes over the underlying contract and they close on it. So a wholesale fee is pretty much like a like a middleman.

SPEAKER_02:

Yeah, exactly. Middlewoman, middleman, either one.

SPEAKER_04:

But yes, I deal with them all the time because most of the deals that the investors purchase are typically some type of wholesale deal.

SPEAKER_02:

That makes sense. That makes sense. So in today's market, um are you seeing so we've got, and I'll paint the picture of what today's market looks like. We've got, I'm not gonna say high interest rate, we've got higher than what we've seen um in previous years, but lower than what we've seen in most recent years. Uh, as far as interest rate goes, we've got buyer sentiment that is, I'll say they are on the fence. They're on the fence about what the future looks like, they're on the fence about uh moving forward to purchase that first home. Um, but yet I have not stopped doing deals for investors since this started. Um, and I'm seeing a continuous rise in that. Is it they're taking advantage of the market? What what what are you seeing out there in regards to, let's say, your pipeline and the folks that you work with?

SPEAKER_04:

Well, production for 2025 significantly larger than 2024. Really? By at least 25%.

SPEAKER_03:

Wow.

SPEAKER_04:

Um, and I I do think it's interesting because the market has shifted for sure. Um, but I will say production has gone up. So investors are definitely taking advantage of the fact that these homes are sitting. They're able to get it for a little bit more of a discount. At the same time, we're also as investors having to understand that the homes when we sell them are also sitting.

SPEAKER_02:

That's right.

SPEAKER_04:

So it's a give and take there, but they're busy. I will say, people are still buying actively.

SPEAKER_02:

And and buying, you're it's it's a strange concept because a lot of folks out there, let's say on the real estate side and the home buyer side that tune into this show, um are feeling that hurt, uh, that squeeze of where am I going to get the next uh amount of money to suffice for this property that I want to buy? So they're holding off. And therefore the properties are sitting longer. Um, we're not seeing prices drop dramatically like they said it would. Uh, and reason being is most of the folks that are listing still have a sub-3% interest rate. So is it really a harm off their back to let it sit? Not really. And I think what a lot of the consumers today are not understanding is the idea of investors are coming in, and we're not talking uh uh uh big box investors, we're talking mom and pop investors. Um, the second time through however many time utilizing what they have available to leverage and build their empire, so to speak. Um that being the case, what what do you think that the I don't know, the sentiment or the hold off in today's buyer is and why investors are not having any problems going, I'm gonna pull the trigger on that.

SPEAKER_04:

Well, so I want to backtrack too, because you mentioned the the big box buyers.

SPEAKER_02:

Yep.

SPEAKER_04:

I feel like a lot of them have fallen off.

SPEAKER_02:

I agree. So I do agree.

SPEAKER_04:

It is primarily mom and pop investors. Um I do think that they are well, one, I think there's more education around it. So I think more people are learning more about fixing and flipping. Um but two, there's still an upside to it, right? Because a lot of these people, most of the investment properties that people are buying are not homeowners that have a beautiful home that they bought three years ago. The majority of properties that people are buying on the investment side of things are some type of distress situation.

SPEAKER_02:

Makes sense.

SPEAKER_04:

Or they really do need to be fixed up, or somebody's passed away. Um so there's a lot of upside there still because they can utilize something like a hard money loan, right?

SPEAKER_03:

Right.

SPEAKER_04:

Fix it up, build in all that equity, and then resell it. Again, they are sitting a little bit longer, but if they're getting good deals, which a lot of people are getting educated finally on how to actually buy good deals, there's enough equity to where even if they have higher days on market, they're still profiting.

SPEAKER_02:

Okay. So early in this discussion, I want to give the folks a little nugget of value. What would you say is a good deal from an investor standpoint? Because there's so many ways to chop up a good deal. Me personally, as a flipper, I could see a deal that I'm buying to hold and see that as a good deal. Whereas this different investor looking for a different MO is going, that's not a good deal. What are your thoughts?

SPEAKER_04:

Well, it depends on exit strategy too.

SPEAKER_02:

Sure.

SPEAKER_04:

Right. So if we're talking about flips, especially for a new investor, my rule of thumb is just follow the 70% rule, right? Get 30% equity in the deal because by the time that you buy it and you resell it, you're already in for about 10%. So then you've got a 20% equity spread. Then you have holding costs, right? And your holding costs are going to be longer because you're sitting in these things. So that will give you enough equity spread to be able to still be profitable. So I always tell new investors, follow the 70% rule. Now, when we were in a different market, when we had lower days on market and you could get in and out of things these things a lot faster, I would be okay with buying an 80% deal because I could get in and could get out. My money was constantly moving, but we're not in that market.

SPEAKER_02:

We're not. We're not. And I think that's important for investors, even first-time investors to understand is what market are you in? And the second thing is what is going to be your exit strategy for this property.

SPEAKER_04:

Um and not just seller, not just uh days on market, but sellers' concessions too.

SPEAKER_03:

Oh, absolutely.

SPEAKER_04:

So interest rates are high. So a lot of uh buyers are wanting some type of buy down.

SPEAKER_03:

Yeah.

SPEAKER_04:

And so sellers' concessions are coming into play with buying down that rate so that they can afford it.

SPEAKER_02:

Correct. Correct. So when you guys are looking at potential buyers for the products that you guys offer, are you looking at their track record? Are you looking at their assets, net worth, their uh, or is it just that property individually? Uh, like for example, when we were doing our hard money flipping back, gosh, 2020 through 20 end of 2023. No, when was it? Middle of 2023. We sold our last one, we got our asses handed to us, and we were like, okay, let's let's stop this for a little while. Um, but when doing that, they wanted, I think it was 10% down. Um, and then they wanted our strategy, what we were gonna use. Well, our strategy was we're gonna use your money to buy it, we're gonna use our money to fix it. Bottom line, we're not we're we're going fast. We don't have time to do inspection and this and that. Um, so the idea was give us the big chunk, we'll use our chunks to get all the stuff redone, get it on the market and sold. But with you guys, does it work the same way? Do you have different programs that you offer that you can put people in as far as buckets? Are they customizable? What does that look like if someone out there is looking to increase their portfolio or start their portfolio?

SPEAKER_04:

So I look at it on a deal-by-deal basis. There's basic qualifications, but then it's based upon the deal that they end up buying.

SPEAKER_03:

Okay.

SPEAKER_04:

It needs to be parallel to the amount of money that they have, right? So if somebody's got 20,000, they're not going to be buying a million-type dollar deal.

SPEAKER_02:

No.

SPEAKER_04:

Nor are they going to be doing a hundred thousand dollar renovation.

SPEAKER_02:

That's right. Should they shouldn't be, and someone shouldn't be lending them that money for something like that.

SPEAKER_04:

But somebody will, absolutely, and they will try.

SPEAKER_02:

That's right.

SPEAKER_04:

So it's it's my job to look at that size of rehab and the size of the deal. Compare that to their experience.

SPEAKER_02:

Size does matter.

SPEAKER_04:

In this case, it does.

SPEAKER_02:

There you go.

SPEAKER_04:

Uh so their experience, um, the size of the deal matters because they're monthly payments, right? The bigger the deal, the more monthly payments they're gonna have. Um, and then, you know, the size of the rehab goes into play with their experience.

SPEAKER_03:

Right.

SPEAKER_04:

Bigger rehabs, you we want to see more experience. Oh, for sure. They're just a just a different animal. Yeah. Start entering into those. So 20K is like the threshold just to get started.

SPEAKER_03:

Okay.

SPEAKER_04:

You have to have 20K in the bank, yeah, checking savings. Um, you can use retirement accounts, but you have to liquidate them.

SPEAKER_02:

For sure.

SPEAKER_04:

So 20K in the bank and a 600 score.

SPEAKER_02:

And then from there, did you say 600 credit score? Wow. Yeah. Okay.

SPEAKER_04:

We dropped it recently.

SPEAKER_02:

Wow. Okay.

SPEAKER_04:

Now, the better the credit score, the better the rate. Yep, exactly. Um, but they can technically get in the door with 600. Now, from there, what I gather from those pre-qualification measurements is then I can give them specs. Like here's where you need to stay at threshold-wise for your renovation, for your after-repair value, here's the percentage you need to be buying at. And then they can tailor the type of deals that they're finding to that.

SPEAKER_02:

Okay. That makes that makes good sense, and that's a good kind of starting point. Now, we talked about how lending has changed or what uh investors are seeking the difference between, let's say, a pre-2020 market versus now. How are you seeing hard money used differently in in vice versa market? Well, because I'm sure the folks that you are working with now, they could more than likely be the same that were before, but are they using it differently? Are they did they change their exit strategy based on what the current climate is, or are they still doing if it ain't broke, don't fix it?

SPEAKER_04:

No. I so yes. Um the flip versus uh rental ratio on their exit strategy has flip-flopped.

SPEAKER_03:

Okay.

SPEAKER_04:

So I actually measured it and I did all the the metrics right before I came. 79% of people in 2025 are buying flips.

SPEAKER_03:

Okay.

SPEAKER_04:

21% are buying rentals.

SPEAKER_02:

Really?

SPEAKER_04:

It is significantly dropped. And but it's not just interest rate, right? There's other factors.

SPEAKER_03:

Oh, for sure.

SPEAKER_04:

Taxes, insurance costs has freaking skyrocketed.

SPEAKER_03:

Yep.

SPEAKER_04:

So all of those factors come into play with their P I T I, which makes it hard to cash flow.

SPEAKER_03:

Oh, for sure.

SPEAKER_04:

Because rents are not, you know, raising the same at the same speed. So flips right now are definitely taking the cake.

SPEAKER_02:

Really? Now, in regards to flips, all of the deals that we personally found were someone told another person that we were buying houses, and they told somebody else that had either somebody pass away in the family, they were trying to get rid of the property. Um, those are the best deals. It's true. Um, and we were helping them out, but they were helping us out at the same time. Um how are investors finding deals right now? Uh I mean, maybe wholesale. A lot of wholesale. Yeah.

SPEAKER_04:

A lot of wholesalers.

SPEAKER_02:

Take us through that. What what what are they doing? What are you seeing being done? And and you yourself, are you still flipping properties? Holding?

SPEAKER_04:

Both.

SPEAKER_02:

I don't blame you.

SPEAKER_04:

So the holding part is hard. Um, I will say though, on the equity play. On the equity play, that's all I can focus on right now.

SPEAKER_03:

Okay.

SPEAKER_04:

There's not really any cash flow.

SPEAKER_03:

Right.

SPEAKER_04:

So anything that I buy, it's all equity. Yeah. And I'm just gonna hold it until interest rates eventually when they decide to drop, or I can cash out the equity at a later date. Um, flipping is harder. I have a couple. There's still, I just got one under contract. They sit for a little bit. Yeah. It's just the nature of the game. Um, but even myself, I primarily buy from wholesalers.

SPEAKER_03:

Okay.

SPEAKER_04:

It's like playing a game of fetch, right? Like I've got the ball, I let them know this is what I need you to fetch for me. I throw it out and they bring something back.

SPEAKER_02:

Ah. So that's nice to have that. And I think the way that that is set up is pretty brilliant because they make a cut of the quick sale, which is not the bulk of the profit. The bulk of the profit goes to the person that actually puts the money into it and turns it into what it needs to be in order to be marketable and sale.

SPEAKER_04:

So the way that they make their money is okay. So let me let's backtrack on what a wholesaler does because I think it's important to know like what they do to make their money. So imagine you do five, six months worth of marketing.

SPEAKER_03:

Okay.

SPEAKER_04:

They do um mail outs, they some door knock.

SPEAKER_03:

Yeah.

SPEAKER_04:

Um, there's all different uh SEO, right? But they invest money and they invest time for months to be able to get a deal. Then they have to meet the seller, you know, build rapport, negotiate with the seller. All of this can take, I mean, a wholesaler could maybe get one deal in six months. Wow. So then they negotiate the deal with the seller, and then they have to find the buyer for it, which is somebody like myself. So it's a lot of effort just to get a deal. And I think until somebody actually goes and does all of that, they don't understand the nature of what a wholesaler actually has to do.

SPEAKER_03:

Yeah.

SPEAKER_04:

I'm not talking about the daisy chainers who just like throw fees on somebody else's deal. I'm talking about the people that get organic deals. So but sometimes these wholesalers make I've seen$80,000 wholesale fees.

SPEAKER_02:

Wow.

SPEAKER_04:

Yeah.

SPEAKER_02:

That's impressive. Okay.

SPEAKER_04:

Sometimes they're$3,000, sometimes they're$5,000, sometimes they're$20,000.

SPEAKER_02:

Yeah.

SPEAKER_04:

The spread that is built in is what the wholesaler has worked to build in. And the lower that they can negotiate the original price with the seller, the more spread, the more money they can make on the deal. So as long as my numbers work, I'm okay with it.

SPEAKER_02:

But wholesalers can make a good amount of money on the deals that they so then the idea of buying houses on the courthouse, is that still a thing? Is that still something that you're seeing your customers utilizing you guys' funds to do? Most of the time, they have to use their own money, period, because it's like, I need to have the wire by the end of the day. Yes.

SPEAKER_04:

Yeah. With those, it's very old school. You have to have like your money in your suitcase and show up. We don't do that because you have to go through the traditional title process to we want to have make sure we're insured. Uh, we have our you know, vendors lean on there, but they can buy it and come back to me.

SPEAKER_02:

That's what I was gonna ask is could someone utilize their money to secure the property? Because realistically, that is the name of the game is buying the home before anybody else gets to it. That's what makes your profit, so to speak. And then praying that there's not more than what you thought or anticipated that needs to be fixed, repaired, upgraded, etc.

SPEAKER_04:

I don't have a lot of those. I'll be honest. Most of the best deals are if they can get them before they go to auction and they negotiate directly with the seller.

SPEAKER_03:

Right.

SPEAKER_04:

Those are gonna be honestly, in my experience, more profitable than if they have to buy them at the auction.

SPEAKER_02:

Yeah, that makes sense. That does make sense. So from your side of the tracks, which I'm in lending, you're in lending, but we lend on two totally different, I'm residential, uh first-time buyer, multi-buyer, that kind of stuff, 20, 25% down, period, or we're going non-QM, um, which is like a DSCR concept, um, which those have been on the rise dramatically. So I can only imagine that your side is doing the same because they're the same type of buyers, but I think on your side of the tracks, they're a little bit more um advanced, educated, and willing to leverage versus the mom and pop investor that is going, okay, what are the traditional ways we're gonna do this by the book and we're gonna buy one property maybe every 10 years? Concept.

SPEAKER_04:

Which doesn't really make any sense if you think about it.

SPEAKER_02:

I love it. Go.

SPEAKER_04:

On a$100,000 property, 20% down on an investment down payment, that's$20,000 for a hundred thousand dollars. And that's you're not gonna find that.

SPEAKER_03:

Yeah.

SPEAKER_04:

Like, so typically it's gonna be around forty thousand dollars for a down payment on a two hundred thousand dollar home if they go, you know, traditional on conventional loan. You can buy like three or four investment properties with that amount if you use the Burr method.

SPEAKER_03:

Yeah.

SPEAKER_04:

And you have all the equity in there afterwards. So you not only have equity, but you have a lower down payment, and you typically cash flow a little bit better because your mortgage rate, your mortgage is lower since you have all the equity and you got it for cheaper than what it's actually valued for.

SPEAKER_02:

That's right.

SPEAKER_04:

So it just doesn't make any sense to go traditionally.

SPEAKER_02:

That's very true. And and as an investor, putting that hat on, the idea is to use someone else's money first always and leverage that to the max. Um, if you can, and and this is uh side note, but also pertaining to this, the Burr method, you mentioned it. And I know you've explained it to us before, but it was probably two, two and a half years ago. Tell us what the Burr method is, because there's still folks out there that will go and Google it and then they'll read like excerpts, and then they'll come to me and go, okay, I'm gonna do the Burr method on this. And I'm like, nope, you didn't read the right stuff because I'm not the person you come to for that.

SPEAKER_04:

Right. And it's it can be confusing. So let's spell it out Burr, B, R, R, R, R.

SPEAKER_02:

So how many R's again?

SPEAKER_04:

B, I'll I'll count at the end.

SPEAKER_02:

There's a bunch of R's method.

SPEAKER_04:

So B is for buy.

SPEAKER_02:

Okay.

SPEAKER_04:

Buy hard money, right? So buy something discounted. You renovate it. So there's one R. Okay, we're gonna count our Rs. V R, renovate, and then once the renovation is done, refinance, rent, repeat. So four Rs.

SPEAKER_02:

Okay. Okay. And and when they're doing that, what is the goal? What is the overall goal in that?

SPEAKER_04:

Uh reduce the requirement for the 20% down payment because we do 100% funding. Okay. So if they get a 70% deal, for instance, or a 75% deal, I'll fund all of purchase and all of rehab.

SPEAKER_03:

Wow.

SPEAKER_04:

So there's no down payment, just closing costs.

SPEAKER_03:

Yeah.

SPEAKER_04:

So let's say they spend$8,000, well, max,$10,000 on closing costs, right? Title policy, insurance, um, survey, appraisal, uh, prorated, monthly payment, all that,$10,000, right? They buy the house, they renovate it. We fund all of the renovation.

SPEAKER_03:

Right.

SPEAKER_04:

And then when the renovation is done, then they go to refinance. Now, if this investor is coming to you now at this point, because you're the refinance and you do either a DSCR type product or a conventional type product, and they've already bought it at 70%, what loans value do you go up to for those?

SPEAKER_02:

Um, it depends how many units. I mean, if it's a single unit, then say single family home. Single family, we'll do 20%. So 80% LTB.

SPEAKER_04:

So if they're in my loan at 70% and they can go to you and you go up to 80%, they have a 10% threshold right now. So not only do they not have a down payment on their refinance, but they could potentially roll some of the closing costs into their loan because there's that threshold of 10% of equity, right?

SPEAKER_02:

And in some cases, there's even more equity after the refi because of what they've done to the property that they can what pull money out for the next deal up to 80%, right?

SPEAKER_04:

Now they still have 20% equity left over. Right. So all they really have, if they can roll their closing costs in, is the original$10,000 hard money closing cost payment or the the down the closing cost amount that they put out of pocket. So they could potentially have that whole property with an extra 20% in equity after everything's said and done, because they did the bird method.

SPEAKER_03:

Yeah.

SPEAKER_04:

So own a property, an investment property for 10 grand out of pocket. And now, because they have that 20% threshold, right? So now your loan with them is less than had they bought it and at market value. So they're typically their payments are lower as well.

SPEAKER_02:

So I want to look at something real quick. Uh and JC, before you throw that up, let me put a new one on there. Okay, you can throw it up now. Um, I wanted to look up because there's a lot of folks out there that I'm still seeing, especially on social media, that the big lenders, the the big investors, the hedge funds are buying up all the properties. And I call BS on it. And I'd like to find out, let's see here, overall in the US, what are what is the breakdown of investment properties that are owned by mom and pop investors versus um what are we institutional investors? Bang. Let's see what this says. Okay, what do we know? It says in a joint center from the housing study of Harvard, 2021, that's quite a while ago. 25% single family rental units are owned by non-individual investors. Um, boom, boom, boom, boom, boom, up from 17%. So it has increased. Let's see here. Common side is 80% of single rentals are held by mom and pop investors. So a large majority, and we're not talking like a little bit more, a large majority, uh, the ratio is totally lopsided. It's more mom and pop investors that own most of the investment properties that are out there on the market.

SPEAKER_04:

And only 3% are held by mega landlords, which are over a thousand homes. So that shows that's your black rock.

SPEAKER_02:

That's your absolutely. Um, so the idea of these folks on social media that are sharing the concept of the black rocks are taking over. They're they're gonna push people out of their homes, this and that. I call BS why statistics are it data is what it is, but at the same time, I'm also seeing real life and people like yourself that are doing plenty of volume and you don't lend to a black rock. No, they use their own money, yeah, right. So therefore, you're working with the mom and pop investors, and there's plenty of business opportunity uh to go around. So I'm wondering why that idea is not being spread further. That, hey, you buyer, you own a home, great, you've got some money sitting around. Why don't you throw your hat in the ring? Type concept.

SPEAKER_04:

I feel like nobody talks about it. It's hard money. Yeah. It's like the underground world of lending.

SPEAKER_02:

It's true.

SPEAKER_04:

Nobody advertises it.

SPEAKER_02:

Well, the idea has always had a negative connotation, which I don't understand why. It could the higher interest rates. Yeah, but it is what it is. Uh as an investor, I go, wait a minute, higher interest rate, I get to use that as a write-off.

SPEAKER_04:

It's very true. They're interest-only payments, it's 100% deductible.

SPEAKER_02:

Absolutely.

SPEAKER_04:

It scares people. I think the interest rates scare people. And I think people are becoming more okay with it because the traditional interest rates are raising.

SPEAKER_03:

Yeah.

SPEAKER_04:

So they're like 7%, but a hard money loan is, you know, 10%. Oh, that's not that much more.

SPEAKER_03:

Yeah.

SPEAKER_04:

But back then, interest rates were three, four percent. Correct. So an 11%, 10% hard money loan was like, whoa.

SPEAKER_02:

Yeah.

SPEAKER_04:

You're taking advantage of us.

SPEAKER_02:

Good point.

SPEAKER_04:

So the gap has definitely closed.

SPEAKER_02:

So as rates are higher, is hard money equally as higher like it was when rates were at threes? Or no, right? No. So that's what I'm seeing on the non-QM side. It's it's almost what they are in traditional finances. Yes. And it's like, guys, use this as much as you can because at a certain point the other rates will come back down and then you can start buying and holding again. Or use this money to do that and then to acquire and then use that money to burr out of it.

SPEAKER_04:

You can always refinance too. Absolutely. You're not stuck in a loan forever. No. But yeah, no, I agree. And I I think um so the the, you know, the gap's closing, people are becoming more okay with that, more comfortable with that. But there's not enough education surrounding how to do things the non-traditional way of buying, renovating, refinancing. Everyone's taught to buy a home 20% down and just continue to do that. So I do wish there was more education.

SPEAKER_02:

Yeah.

SPEAKER_04:

I just don't know.

SPEAKER_02:

Hmm. Well, I've got this article. Um, these two guys here, this is really what struck this conversation. Um, headline real estate investors explain why they're willing to pay nearly double in interest to work with private money lenders, which you would consider yourself private money lender, right? Yes, right. Yeah, that's hard money. Look at these two clowns. They're making money, just so you guys know, taking risks. Uh, Mike, I can't even say his last name, Goris, Gurius, I don't know. And Kevin Hart, not the original. I'm like, why does that name sound so wait a minute? Okay, and these guys are out of Kentucky. Um, let's let's go into this. I'm not gonna read the whole thing and uh says the G Man told Business Insider that compared with where. Working with traditional lenders, there's a lot less paperwork and a lot fewer hoops to jump through. He and Hart would quit their W-2 jobs to invest in real estate and pursue financial independence, do wholesales, wholetails, and flips, primarily in uh Louisville, Kentucky. What in the heck is a hot hotel?

SPEAKER_04:

So it's similar to a wholesale. The only difference is they buy it and uh they'll just resell it without doing any work to it, or sometimes they'll just do something very cosmetic and then put it on the market right away.

SPEAKER_02:

Okay. So a quicker flip.

SPEAKER_04:

Yes. And a lot of times wholetails will go to another investor.

SPEAKER_02:

Okay.

SPEAKER_04:

And not always, sure. But a lot of times when I've done wholesales, I will just sell it to another investor.

SPEAKER_02:

Makes sense. Okay. Um, they also own more than 20 rental properties, including short, mid, and long term, which BI uh or B yeah, BI verified by looking at settlement statements and closing documents. So they're they're not full of it, guys. They are the real deal. Um, so the G Man noted that there are three main ways to borrow money in this industry through private money lending, hard money lending, or a traditional lender. Traditional lenders generally offer the lowest rates, while hard money lenders tend to be most expensive. As of right now, having this conversation, uh, what we are seeing is interest rates between 10 and 12% with private money lenders. Um, hard money lenders we're seeing around 11 to 13, and usually they're a little bit higher just because they're actually going to have some uh staff in office building. And if you went through a Fannie Mae or Freddie Mac, interest rate could be anywhere from six to seven percent. Um, let's see here, working on PMLs and closing deals quickly. While private lenders can't compete with traditional lenders, no call uh no cost, they can offer speed and the importance to this guy uh with the G and Heart uh are closing deals weekly, meaning they're buying, they're in buy mode, they're bullish, they're they're they're attacking the market. Um, we do our own inspections because Kevin has all the experience, and we don't need to do appraisals because we're working with off-market sellers who are happy to work with us on the price. Um, he went on to say things can just move a lot quicker, and it's what allows us to buy properties in the mean uh in a matter of days versus a matter of weeks, um, which makes good sense. So let me continue. Um G said that uh fastest uh they'd ever closed a deal was eight days, whereas working with a traditional lender would take up to 30 days and require more paperwork and headaches. Um I'll end it there. How accurate is what they're saying?

SPEAKER_04:

So there's a lot to chew. So if you go back up, so for instance, um tell me when to stop. A couple of different things. You can stop right there. So the difference between private money and hard money, okay. Um, typically in what they're we are typically, we are technically a private money lender because it's our own capital that we're lending out, right?

SPEAKER_03:

Yep.

SPEAKER_04:

Um the way that they're using this term is private money lenders would be like uh attorneys or people that have money in like a self-directed IRA, an individual. But you also have to remember that with private money lenders, their their money is capped.

SPEAKER_02:

Yeah, that's true.

SPEAKER_04:

They don't have an unlimited supply of money. So, you know, if they have a million dollars, that's only going to go into maybe three deals. That's right. And then they're done and they have to wait for you to sell that house to be able to do anything else.

SPEAKER_02:

That's right.

SPEAKER_04:

Uh, hard money lenders, we have an abundant amount of money. You can do as many deals as you need to continuously recycle, right?

SPEAKER_02:

Make good sense. Yep.

SPEAKER_04:

Interest rates that he's saying, uh, that also depends on experience and loyalty. So hard money lenders do go as low as 10 and a half, uh, which is comparable to private money lenders.

SPEAKER_00:

Absolutely.

SPEAKER_04:

And yeah, it can go up to 13% depending on how qualified you are. Um, now closing time frame, yes, it's a huge selling point for private and hard money to go that route because I mean, I've closed a deal in 48 hours. Wow. So fast.

SPEAKER_03:

Wow. Yeah.

SPEAKER_04:

Go into foreclosure, and you have to get that wire out to save that person's house. So uh the speed of use is very unique, which is great.

SPEAKER_03:

Yeah.

SPEAKER_04:

And you don't have to jump through hoops. So, like I said, qualifications are bank statements to show me you have money and then your credit score, and that's it. We don't look at tax returns, we don't look at debt to income ratios, no, employment verification. You could you could have never worked in your entire life and we don't care. Main thing is capital. So less uh hoops to jump through.

SPEAKER_02:

For sure. And like they say, time kills all deals. And if you do have a deal on on the docket, it's like, let's get this thing to funding ASAP before they change their mind or before something happens. We go to foreclosure. After go to foreclosure, shit hits the fan. Uh, now you gotta ask for more money to clean the shit off the fan before you close. And it's like we didn't even have to get there if we used hard money.

SPEAKER_04:

So suite of use. Um, yeah, you do have higher interest rates. I would agree with that. Um, but again, suite of use and ease of use are huge. Yeah, most especially when you're trying to do more volume.

SPEAKER_02:

So when I would imagine that the the interest rate, like we've talked about, is one of the hurdles that um first, second time investors maybe have to deal with or have to overcome. What is a combatant that you use that makes sense when talking to somebody like that?

SPEAKER_04:

Well, you're only in the loan for a couple months. This is not a 30 year, 15-year no, you're not even gonna be in the loan, hopefully for a year.

SPEAKER_02:

That's true.

SPEAKER_04:

And if you are, that's not a successful flip.

SPEAKER_02:

I totally agree.

SPEAKER_04:

You should only be in my loan for anywhere from three to six months.

SPEAKER_02:

Yeah.

SPEAKER_04:

Okay. And if it goes on longer than that, something had to have not gone right.

SPEAKER_02:

Right. So and essentially they're paying interest only on the deal. So I don't know, doing some round math, they're adding, let's say, um, let's say the interest payment for round number purposes is$1,500 a month times six, we know what that is. And essentially, JC, if you don't have this on the screen, don't put it on the screen. Uh, let's see here, times let's say worst case scenario, seven months. So they paid 10,5 in interest. Um, their closing costs could have been negotiated and paid by the sellers. Is there a cap on these kind of deals in regards to seller contributions? Uh, like for example, when we're do using uh non-QM, well, I'll start with traditional. Traditional, anytime you mention investment, max you're gonna get is two percent. Doesn't matter how much put down, it is what it is. Conventional deal. Going the non-QM, I haven't seen a cap on it. Um, on your side, what does that look like?

SPEAKER_04:

We don't want them to net below 100%.

SPEAKER_02:

Okay.

SPEAKER_04:

We want them to have a little bit of skin in the game.

SPEAKER_03:

That's true.

SPEAKER_04:

Because we're funding all of purchase and all of rehab.

SPEAKER_03:

Yeah.

SPEAKER_04:

The people that don't have any skin in the game are way more likely to say, you know what, you can take it. Right. You can forklize.

SPEAKER_02:

Yeah. And and that's not a good spot for you guys to be in. So that leads me to another question randomly. Are there telling signs that you have experienced in doing these types of deals where you can go, oh shit, this one is not, this wasn't a good loan. This wasn't a good investment.

SPEAKER_04:

Yes. Um, typically newer guys, or um how would you say it? They know it's not, and they will continue to do those serial, like serial defaulters.

SPEAKER_03:

Okay.

SPEAKER_04:

Um you can usually tell if the rehab is too large, uh, they don't have enough capital, they don't understand what they're doing, they're relying on the contractor, they don't typically the people that just don't do enough research, and I can see it from a mile away. And they're relying on everybody else to do it for them.

SPEAKER_03:

Right.

SPEAKER_04:

Not understanding that all of those people are financially invested in it, they're making money off of you.

SPEAKER_02:

That's right.

SPEAKER_04:

They're not here for your best interest, and those are typically the deals that go wrong.

SPEAKER_02:

Ah, naive, naive and lazy, in my opinion. Um so I tell you what, could you give me an example of a shit show that you've experienced recently?

unknown:

Oh god.

SPEAKER_04:

I have so many of them.

SPEAKER_02:

Bring it on. This is what this is what they want to hear.

SPEAKER_04:

Oh my god, let me think of one recently. All the foreclosures are shit shows, if we're being completely honest. Um I had one that I did not realize was like a serial type uh whatever you want to call it, bad borrower. Okay, that's what we're gonna say. Okay. Um so they would they they worked together. So the realtor also acted as a wholesaler, but he was partners with the borrower. Oh, these were guys out of Austin. Um the realtor would put a large assignment fee in there and cash them out on the front end behind the scenes.

SPEAKER_03:

Okay.

SPEAKER_04:

So then the borrower is all in at a sell a hundred percent, but he got a big lump sum with his realtor partner on the front end. Then they also act as the contractor. So they built in GC fees into this renovation. So, but they're not doing a great renovation.

SPEAKER_02:

So they're basically making revenue from their own deal structure, so to speak.

SPEAKER_04:

And to the point they front load it.

SPEAKER_02:

Uh-huh.

SPEAKER_04:

So front loading your rehab would be like um if your foundation costs$5,000, but you put in there it costs$15.

SPEAKER_01:

Right.

SPEAKER_04:

And then the foundation's done, and we send you$15, but you really only needed five, and you front load and you take out the extra 10 for yourself.

SPEAKER_03:

Yep.

SPEAKER_04:

That's front loading it. So getting out a bunch of funds from renovation at the very beginning, and then they default. And then we get stuck with a property.

SPEAKER_02:

So in those cases, would that not be the last one that they get an opportunity to do, you would think?

SPEAKER_04:

So then or do they flip? Well, that's where the shit show comes into play. So we foreclose on them.

SPEAKER_02:

Okay.

SPEAKER_04:

And then they get somebody, it's it turned out to be his dad.

SPEAKER_02:

Oh, wow.

SPEAKER_04:

And in a separate LLC that they tried to apply through.

SPEAKER_02:

And these have to be purchased in an LLC, if I'm not mistaken, right?

SPEAKER_04:

No, they can purchase in their personal name, but they're masking through an LLC. So the dad applies with a similar name uh and did it through an LLC. So I look further into it, start requesting, you know, uh ID copies, operating agreements, and I noticed the signature was the same as the gentleman we foreclosed on prior.

unknown:

Wow.

SPEAKER_04:

And all of it just started, I realized that it was my it was dad and son. Continue to deny it, but we we wouldn't do it. So stuff like that happens, and they'll get new people to act to be that person.

SPEAKER_02:

Yes. The front. Wow.

SPEAKER_04:

Yeah.

SPEAKER_02:

Wow. I mean, how profitable can that be if it's almost your last deal? Every deal is almost your last deal, basically. When you're transactional, that's right.

SPEAKER_04:

It's yeah.

SPEAKER_02:

Wow. That's um not surprising because if there is a way, they're gonna find it. Uh, then they'll exploit it and then they'll blame everybody else.

SPEAKER_04:

Or they'll go to another lender and do it.

SPEAKER_02:

Again.

unknown:

Wow.

SPEAKER_02:

Um, so that leads since you mentioned foreclosures, I'd want to get your take because you're on a different uh different perspective, different level than I in regards to what you're seeing out there. A lot of folks are believing, hypothixing. I don't know. Um did I even say that right?

SPEAKER_04:

Hypothesizing. Hypothesize. That's the one I was looking for. She's gonna let you run with it. Like somebody else.

SPEAKER_02:

So this hypothetical scenario, no. Um, some people are predicting that there's gonna be a wave of foreclosures, but they're gonna come from the new construction side of things because they're seeing all of the uh properties that they're going up against still having to build. Um, so they're having to lower their price and lower their price to get it sold. Let's say if you purchased within the next uh six months, and then you have to move within the next six months. Well, that builder's still building. So there's no way that someone's gonna come in and pay you what you paid for it if they can just go get a brand new one.

SPEAKER_04:

Oh, okay. That's what I'm saying. Totally out of my sphere. I'm so cute.

SPEAKER_02:

And that is that is what is I'm seeing as the future of where foreclosures will come from, simply because, yeah, you gave them this low rate, but all that money was packed into the price of the home, and you as the builder has to continue to maintain that while the person that is selling in your neighborhood, there's no way they can compete with you as the builder. So they have to drop their price, i.e., in that scenario, basically selling it for a loss. On your side of the tracks, you're dealing with a lot of individual investors, a lot of um pre-owned properties for many years, most cases. What are your thoughts on the future of foreclosures, near future, that kind of?

SPEAKER_04:

Um, I mean, have you seen an uptick in in traditional foreclosures?

SPEAKER_02:

I personally have not.

SPEAKER_04:

I haven't I haven't seen that either. I'm not getting like a crazy amount of investors coming in from that are buying foreclosures right now.

SPEAKER_02:

Okay. Um and that's kind of what my question was is you'd probably see it first before anyone, because the people that know about it will scoop them up most of the time before they even hit the market.

SPEAKER_04:

I haven't done enough research to see what the actual like statistic is for foreclosures this year in the real world. Mine is really just the hard money world.

SPEAKER_03:

Right.

SPEAKER_04:

Um, but I haven't seen a huge amount of like, like you said, influx of people buying foreclosures per se. It's always been a source. Yeah. It's inevitable. People are forever going to be in some type of situation where they have to where they get foreclosed on or they have to sell before they get foreclosed on.

SPEAKER_03:

True.

SPEAKER_04:

It's always been a source. I haven't seen that like dramatically increase to where it's raised red flags.

SPEAKER_03:

Yeah.

SPEAKER_04:

Um I have seen a little bit of an uptick in foreclosures on the hard money side, I will say.

SPEAKER_03:

Okay.

SPEAKER_04:

Um investors that just get in over their heads.

SPEAKER_02:

Yeah. So that's a lot of improper planning. Um, would you say that it is not doing enough legwork in the beginning or too many surprises, uh, lack of experience? I mean, there's a ton of different reasons as to why, but what do you think that the reason for that is for this new wave of hard money foreclosures?

SPEAKER_04:

Um, I would say number one would be getting in over their head, trying to do too many large rehabs at one time. Those typically go south. Yeah. And so we try to limit those for the borrower's own interest, honestly.

SPEAKER_02:

Um we we did two at the same time, and it was it was a cluster, right? Using the same GC, same crew, it's like, okay, now they're going over there. It's just, it's, I wouldn't recommend it either.

SPEAKER_04:

And they get excited and they feel confident because they've done several and they want to scale, which is understandable, but it becomes really hard when you do multiple. I'm talking three or four big projects at a time.

SPEAKER_02:

In addition, and this is not a bad thing or a great thing, but you guys make it so simple to get a hold of this money that they feel like they've already won and they haven't done shit yet.

SPEAKER_04:

It's the confidence. Does that make sense? Yeah.

SPEAKER_02:

Um, they were able to capitalize on the property with very little down. Um, they came in with a game plan uh to refinance it or to to rehab it, I'm sorry. And at a certain point, like you said, life happens and oh shit, the foundation does actually cost a little bit more than what we intended.

SPEAKER_04:

Yes, the financial management of multiple large projects because the bigger the project, um, the more capital you need, inevitably, right? Money is moving around at a much faster and larger pace.

SPEAKER_03:

Sure.

SPEAKER_04:

Especially when you have multiple at a time. So that um the second thing I would say is the inexperienced, relying on other people, not doing your due diligence. Uh, that's big.

SPEAKER_02:

Yeah.

SPEAKER_04:

And then the third would be giving money to contractors.

SPEAKER_02:

Yes, that that is let's talk about that for a minute. Let's talk about that for a minute. Because for me, I was super, super lucky, blessed, call it what you want. Um, when we set out to do this, I had a buddy from high school that I trusted with everything and said, Hey, this is how it's gonna work. We're gonna go in, we'll buy the houses, we'll front the rehab money. You handle all of the rehab, all of that stuff, we'll chop it up right down the middle, 50-50. So there was really no additional incentive for him to screw us in any way because he's really screwing himself. Everything's split the profit? Absolutely right down the middle. So it was it's like if if you're going to inflate your cost on this side, well, then it's gonna come out in in in the wash. There is no uh way to hide that. But if that contractor has zero skin in the game, well, yeah, invoice says 15,000. All we have to go off of is we can't do that, so I guess it's 15,000 type concept.

SPEAKER_04:

Which is how most people do it.

SPEAKER_02:

Yep.

SPEAKER_04:

Um, the problem is the lump deposits, the lump sum deposits. So my contractor needs a deposit of 15,000. You give that contractor 15 grand, and sometimes what happens is that 15 grand gets applied to somebody else's project. Yep. And if something happens on the other person's project, then they don't have that money because most of them are not uh set financially capitalized, right? Well capitalized. And then they don't have money to start or do thing that you paid them for on your project.

SPEAKER_03:

That's right.

SPEAKER_04:

So then your project either gets delayed or just never gets done or they disappear, which is usually what happens.

SPEAKER_02:

That's right. It's I compare it to like back in the day when I worked at the bank, people would do the same thing uh with checks. They deposit a check over here, then they'd go over here and they'd write a check to their other bank account, and it was just floating money from account to account. So you're floating money from project to project, hoping it doesn't catch up. Uh, and at a certain point, it'll implode.

SPEAKER_04:

So the way to mitigate that is not give large down payments. I pay when the work is done.

SPEAKER_02:

That's right. That's right. Uh that is a great tip for most uh that have not done it before. Uh, if you are starting a project, number one, make sure that you get plenty of references on the contractor.

SPEAKER_04:

Yes, that's big.

SPEAKER_02:

Um, make sure that you're monitoring what the heck they're doing. And there's no reason in the world that you shouldn't compare that contractor that you're working with right now. I mean, hey, they say it's gonna cost that much. Well, they should be able to stand behind it. So I'm gonna check with somebody else on the pricing of that. And if it lines up, okay, sounds good.

SPEAKER_04:

Getting multiple bids. Absolutely. Yeah, you should always get multiple bids. Uh, and then visit the project. Like people will trust the contractor to do what he and they'll get lazy. That's right. And they don't go on site and they'll pay before going and actually verifying that work was done.

SPEAKER_02:

Man, I cannot, I can't fathom because we were on site on all of them. It was like number one, we wanted to know how it was all done. Um, I can't imagine, but at the same time, I kind of can because you've got a chunk of change that you want to grow. You've got your normal job, let's say, that you do on a day-to-day. Uh, this is the money that's supposed to be working for me. Uh, I'm not working for this money. So therefore, I'm gonna continue what I'm doing and I'm gonna put the shades on over here. That that man, I can see how that would happen.

SPEAKER_04:

Yeah, it usually goes wrong.

SPEAKER_02:

Yeah. Um, I think I've gotten through just about everything. JC, what are we at time-wise? All right. So, this last, let's call it 10-15 minutes, what do you want to talk about? What do you want to tell us about uh in regards to your world, some updates, some stuff going on uh on the hard money side, flipping side? Um let's see. I in regards to the and this will be my last question, then I'll give it back to you. Sorry, I thought of something. Yeah, totally, totally. So the idea of buying and holding versus flipping properties. Okay. Are you seeing number one, do you guys invest in multi-units? Um, and number two, are you seeing a rise in that concept? Because as we're hearing and seeing, there is a lack of affordability in regards to those type of homes or homes in general for um not necessarily first-time buyers, but even just the rental market of things.

SPEAKER_04:

So no, I have not.

SPEAKER_02:

Okay.

SPEAKER_04:

Primarily still single family. Single family commercial. I forgot your first question. What was the first question?

SPEAKER_02:

Um, the first question was to do with uh multifamily.

SPEAKER_04:

Am I I don't do very much of them at all. Oh, I do. But do you guys lend all to four doors?

SPEAKER_02:

Okay.

SPEAKER_04:

Anything after that's commercial.

SPEAKER_02:

Gotcha.

SPEAKER_04:

Um, I don't do a whole lot. Really? I don't have a whole lot of buyers for them, which is surprising.

SPEAKER_02:

Yeah, I'm I'm shocked at that because, like, for example, Austin, I'm hearing that's what's happening up there because of the way that it's growing.

SPEAKER_04:

Really?

SPEAKER_02:

They're just stacking people in to these new concept unit type things.

SPEAKER_04:

Um I've maybe done one single family in a whole quarter.

unknown:

Wow.

SPEAKER_04:

Not much at all.

SPEAKER_02:

Hmm. Okay. Well, that's good to know. Yeah. That's good. And you do a lot of volume.

SPEAKER_04:

So you would know. And I don't do much of those at all. Wow.

SPEAKER_02:

So that either means that there's a lack of those here in our local market that are that have opportunity to make money, because let's face it, investors don't invest to lose money or to break even. I don't ever break even, guys. That's not the concept of investing. Uh, the idea of um, for example, New York. We don't live there, thank goodness. But they're talking about making the rent uh ceiling or whatever. Yes, pretty much you can't raise your rent.

SPEAKER_04:

What?

SPEAKER_02:

But the idea is like, do you guys realize that you're not going to get any other investors to come in there to buy your properties that these folks will rent from if they can't make money doing it?

SPEAKER_04:

Well then, you know, where is the source of housing coming from if people can't afford to buy homes?

SPEAKER_02:

Right.

SPEAKER_04:

And you see that 80% of people are the ones that's right, mom and pop investors. That's exactly right. So if you cap them out to where you they're having to come out of their family's pocket to pay for you to live there, you're going to reduce the amount of people that want to do that. And then where's your sourcing of housing coming from?

SPEAKER_02:

That's right. And I was talking to somebody recently about this, and it was like one of those tug at your heartstrings because there's people that can't afford it. Totally understand. I empathize with those people. Um, have they considered moving to another part of the United States where it's cheaper, more cost effective? Absolutely. Because the the idea of trying to infiltrate an investor and change their MO to now this is what it has to be because of affordability. Well, they're gonna go, okay, see you later. We'll go over here.

SPEAKER_04:

To force them to have to not make any profit or to, if anything, because you're right. Mom and pop landlord is just somebody that has a family that's trying to make a and these cash flows are not much, right? So they're just trying to make a little extra money for their family.

SPEAKER_03:

Yeah.

SPEAKER_04:

If you put them in the red, then they're taking a hundred, two hundred, three hundred dollars a month out of their family's pocket to be able to pay for you to live there.

SPEAKER_02:

It's exactly correct.

SPEAKER_04:

Well, how do you think that that's how is it possible? Right.

SPEAKER_02:

No, I I totally agree with your your uh sentiment on that. Um, it's just getting folks to understand the basic economics of it. The driver of these properties moving in the first place is the fact that an investor sees an opportunity for their money to make them more money. Um, and like we said, 80% of them are mom and pop. So there it's not like this could be their whole life savings that they put into this property, hoping to get that residual back after that original investment is paid off. Now they're living on that minus taxes, minus insurance, etc. But putting a cap on it, I mean, how can that even work?

SPEAKER_04:

I feel like that that shouldn't be legal.

SPEAKER_02:

JC, do you know what it's called? What is it called that they're trying to do in uh New York?

unknown:

Free rent.

SPEAKER_02:

I'm not gonna say free rent. Uh let me see here.

SPEAKER_04:

Even like the the the foreclosure process, I think people have a weird uh understanding of that as well, or a weird impression of that, because I've personally been through it and um and I and I can't remember exactly where, but I can tell you there's it Texas and every state's a little bit different, but they they make it very easy for tenants who understand how to do certain things to stay in a property without paying for it.

SPEAKER_03:

Right.

SPEAKER_04:

So imagine another me, my family, right? I've got four kids that I am taking care of. And the rental properties that I have, uh you know, if they're if somebody stays in that home and they're not paying me for two or three months, we'll say it's fifteen hundred bucks a month. That's what thirty five hundred bucks. No, what is that? 4500 bucks that I've just taken from my children to be able to pay for you to live there for free.

SPEAKER_02:

That's right.

SPEAKER_04:

Rent free.

SPEAKER_02:

Rent freeze. Rent freeze. There you go. Rent freeze. New York, okay. What we're uh what you're referring to is New York generally under umbrella term rent regulation. Uh, more specifically, a term Housing Stability and Tenant Protection Act of night uh 2019 uh is often cited for recent major reforms in landlord tenant laws in New York State and within New York City part of the state. Uh two key programs are rent control. That's what I was looking for. Rent control, um, strict cap on the rents for certain older units, and I think, and rent stabilization. And I think what they're essentially saying is these investors have owned these properties for so long that they're already made money, they've already made enough money. How do you know what their life is like? Yeah, how do you know what their expenses are? How do you know what any of this stuff is? But it's almost like you're penalizing someone. I said penalizing instead of penalizing, what a weirdo. I say refinance instead of refinance, anyway. Um, how is it that we are capping the potential for something that we're at the same other end of our mouth trying to educate others to actually do to better themselves? It's like, well, why the hell would I do that?

SPEAKER_04:

They're like, well, you figured out how to do it. So now you need to take care of all the people who, you know, can't afford it.

SPEAKER_02:

That's exactly right. Yeah, that's nuts. Yeah, that's nuts. Um, so yeah, that I just wanted to to that that popped in. I'm like, now seems like a good time to talk about New York. It's like we live in Texas. That's right. That's right. Um, so I've gotten through everything that I wanted to ask. I think that there's plenty um for the folks listening uh to to dabble on and to actually utilize.

SPEAKER_04:

Yeah, I feel like you went through quite a bit. And there was quite a bit. We talked about wholesaling, wholesaling. Yes, the difference between private and traditional hard money financing, yeah. How to get started, the burr method, which we spelled out and found out it really only has four burr ours.

SPEAKER_02:

And it's not really br. It's more like brrr.

SPEAKER_04:

It's like brrrrr.

SPEAKER_02:

There you go. And then but not Mickey Machinage like brrrr.

SPEAKER_04:

No, not like brrrr. There you go. Like a brrrr.

SPEAKER_02:

I love it.

SPEAKER_04:

Yeah. So now they then know how they can buy a rental property with only 10 grand. Yep. Instead of having to put 20% down on every property that they buy, absolutely maximize the amount of money that they have by leveraging the right way, not the way that everybody tells them to do it, but doing it the right way, buying more rental properties, building their cash flow, building their equity. Those are like little banks that you can set yourself up with.

SPEAKER_02:

That's very true.

SPEAKER_04:

For retirement.

SPEAKER_02:

That's very true.

SPEAKER_04:

Um that will continue to appreciate and that you'll continue to pay down.

SPEAKER_02:

And like I tell everyone when they ask me about my flipping journey and and and uh the idea of this hits even harder when the person went to college and paid all this money. I'm like, you paid how much for college? And we talked about that, remember? Yeah, the school of

SPEAKER_04:

Hard knock.

SPEAKER_02:

I mean, it's like you paid, let's say, I don't know, twenty, forty grand in a year for your college. If you go through a property flip, and let's say you lose 10, 20 grand, I'm hoping that you learn something because at the end of the day, that still was a cheaper education or lesson than going to college. And most that are coming out of college can't use that piece of paper for anything right now.

SPEAKER_04:

And another thing that I want to point out though, since you know, it's a little bit of a tidbit, like property flipping is great, but it's transactional. Okay. We have to keep that in mind. It's transactional. Just like a wholesale deal, it's transactional. You do it, you make money, but that's it. After that transaction is done, that's it. So you have to use, and I always suggest people use uh flipping as a way to graduate.

SPEAKER_03:

Okay.

SPEAKER_04:

And then utilize those transactional profits to continue to build your longer-term profit, which can be buying rental properties, buying short-term, long-term rentals. Um, you can even use hard money to start creating notes.

SPEAKER_03:

Okay.

SPEAKER_04:

So like you can buy the property, renovate it, refinance into another type of loan, and then you can always wrap that note and uh stabilize that note for a couple of years, sell that off to a note buyer. Um, but that's cash flow right there as well. So there's there's a long-term strategy to continue to build wealth, but flipping can be utilized as the interim transaction to be able to build your capital to do that.

SPEAKER_02:

Yes, that was well put. That is very well put. Um, Jade, it's always a pleasure. Um, is there anything else you want to tell these folks out there?

SPEAKER_04:

Call me.

SPEAKER_02:

There you go. Um, so I will put Jade's information um into the uh description of this uh episode. So if you guys out there have questions about um flipping properties, if you have questions about what it takes in order to do that, um, maybe it's uh something that you've done differently before and want to get somebody else's take in regards to an expert's opinion, uh, reach out to her. Um I'm working on getting her to become the national hard money lender for loan bots. So you may see a lot of her. That being said, guys, uh Jade, I want to thank you again for joining me on this discussion. Um and the folks out there, I promise you, as my commitment to continue bringing experts from all different angles of this great industry we call mortgage and real estate. Um that being said, we will catch you on the next one. If you're still sending out pre-approval letters and praying your realtors send you the next lead, you're already behind.

SPEAKER_01:

Top producers are winning because they're giving their agents more than just rate sheets and donuts, they're giving them loan bot. With loan bot, you can offer realtors a white-labeled co-branded digital mortgage tool that they send straight to their buyers. It's like giving them a mini loan officer in their pocket, available 24-7, fully loaded and branded with your name and their trust. Buyers can self-diagnose, compare loan programs, check real numbers, search properties, and explore down payment assistance without blowing you up at 10 p.m. And the best part? You see everything, every scenario, every lead, every milestone. You're looped in the whole way. Loan bot isn't a widget, it's the referral machine you've been waiting for. Here's the deal your realtors can get it from us directly for$9.99 a month. But it'd be in your best interest if they got it from you. Either way, they're going to get it. White labeled, co branded, transparent, and more. Sign up for your demo with our team of innovators.

Head Shot

Mark Jones

Host