Why Everyone Is Talking About Hard Money Now!

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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

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Episode Transcript

SPEAKER_02 (00:34):
And welcome back to another episode of Key Factors
Podcast Real Estate AF, wherethe 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 betalking about hard money.
Um, over the past couple ofdiscussions, we've talked about
builder business, we've talkedwith brokers, realtors, uh,

(00:55):
discussing that concept.
Um, we even had uh Tommy Fryerwith Meritage Homes in here uh
to join us and give his take onthe building aspect of it.
But I came across an articlethat struck me by surprise.
And it kind of makes sense, butI've brought along a friend
who's been on here a couple oftimes um to get her take on all

(01:18):
of this hard money discussion.
Um so without further ado, letme introduce Jade Flores.
Jade, how are you?

SPEAKER_04 (01:24):
Good, how are you?

SPEAKER_02 (01:25):
Doing well.
Um, so having you back, we'renow at 30,000 subscribers, and
there are probably some folksthat didn't get to see any of
your discussions before.
If you could tell us a littlebit about yourself.

SPEAKER_04 (01:38):
So I'm a mom of four, and I manage a hard money
lending company.
I've been doing that for about adecade.
Uh, been investing also since Iwas 22.
Uh, so I manage Central Texasfor Long One Investment League.

SPEAKER_02 (01:50):
Okay.
Um, and how did you get intothat?
Tell us a little bit more.

SPEAKER_04 (01:54):
Into hard money?

SPEAKER_02 (01:55):
Heck yeah.
Well, because nobody really justfalls into hard money.

SPEAKER_04 (02:00):
No.

SPEAKER_02 (02:00):
Um most of the time, people stay away from it until
they know more about it, thenthey use it.

SPEAKER_04 (02:04):
Well, so I found out about it uh in an unusual way.
So, first deal ever, when I was22 years old, failed on it.
Remember, we kind of talkedabout that last time.
Um, but while I was failing onmy deal, uh, I had to learn more
about hard money because I wasin a hard money loan.
Okay.
So I learned all the ins andouts of hard money and

(02:28):
discovered what I liked and whatI didn't like and ended up being
an expert at it by the time wewere done feeling.
Um then flash forward about ayear later after that, I got
approached by a hard moneylending company through
wholesale deals.

SPEAKER_03 (02:44):
Okay.

SPEAKER_04 (02:44):
So made that connection there.
And then they flew me out toDallas, had no sales experience
whatsoever, just you know, alittle bit of my experience with
the previous deal I had donewith hard money.
And they hired me on the spot,came home.
We had probably five people inour company at the time.
It was pretty small.

SPEAKER_03 (03:04):
Okay.

SPEAKER_04 (03:04):
Five reps.
And I just completely didgrassroots.
So I started with local RIAs.
Do you remember the RIAs back inthe day?

SPEAKER_03 (03:11):
Absolutely.

SPEAKER_04 (03:12):
Those are not so popular anymore, but they were
back then.
Um, went to local RIAs, met newinvestors, and built my business
that way.

SPEAKER_02 (03:19):
Boom.
Okay.
So um you mentioned somethingthat uh I would rather you
explain than me, which is theidea of wholesale.
Do you deal with number one?
Do you deal with a lot ofwholesale?
Number two, probably goes beforenumber one.
What is wholesaling?
A lot of people talk about it,uh, and not too many of the

(03:40):
folks listening to this get thatknock on their doorstep, but I
want them to know what it is.

SPEAKER_04 (03:45):
So wholesaling in short is just a person who uh
approaches a seller, right, andgets a property under contract
for a certain amount of money,and they assign that for a fee,
which is the assignment fee, toan investor like myself.
And the investor pays theassignment fee and then takes

(04:05):
over the underlying contract andthey close on it.
So a wholesale fee is prettymuch like a like a middleman.

SPEAKER_02 (04:12):
Yeah, exactly.
Middlewoman, middleman, eitherone.

SPEAKER_04 (04:15):
But yes, I deal with them all the time because most
of the deals that the investorspurchase are typically some type
of wholesale deal.

SPEAKER_02 (04:21):
That makes sense.
That makes sense.
So in today's market, um are youseeing so we've got, and I'll
paint the picture of whattoday's market looks like.
We've got, I'm not gonna sayhigh interest rate, we've got
higher than what we've seen umin previous years, but lower
than what we've seen in mostrecent years.

(04:41):
Uh, as far as interest rategoes, we've got buyer sentiment
that is, I'll say they are onthe fence.
They're on the fence about whatthe future looks like, they're
on the fence about uh movingforward to purchase that first
home.
Um, but yet I have not stoppeddoing deals for investors since

(05:02):
this started.
Um, and I'm seeing a continuousrise in that.
Is it they're taking advantageof the market?
What what what are you seeingout there in regards to, let's
say, your pipeline and the folksthat you work with?

SPEAKER_04 (05:15):
Well, production for 2025 significantly larger than
2024.
Really?
By at least 25%.

SPEAKER_03 (05:23):
Wow.

SPEAKER_04 (05:23):
Um, and I I do think it's interesting because the
market has shifted for sure.
Um, but I will say productionhas gone up.
So investors are definitelytaking advantage of the fact
that these homes are sitting.
They're able to get it for alittle bit more of a discount.
At the same time, we're also asinvestors having to understand
that the homes when we sell themare also sitting.

SPEAKER_02 (05:44):
That's right.

SPEAKER_04 (05:45):
So it's a give and take there, but they're busy.
I will say, people are stillbuying actively.

SPEAKER_02 (05:51):
And and buying, you're it's it's a strange
concept because a lot of folksout there, let's say on the real
estate side and the home buyerside that tune into this show,
um are feeling that hurt, uh,that squeeze of where am I going
to get the next uh amount ofmoney to suffice for this

(06:14):
property that I want to buy?
So they're holding off.
And therefore the properties aresitting longer.
Um, we're not seeing prices dropdramatically like they said it
would.
Uh, and reason being is most ofthe folks that are listing still
have a sub-3% interest rate.
So is it really a harm off theirback to let it sit?
Not really.
And I think what a lot of theconsumers today are not

(06:39):
understanding is the idea ofinvestors are coming in, and
we're not talking uh uh uh bigbox investors, we're talking mom
and pop investors.
Um, the second time throughhowever many time utilizing what
they have available to leverageand build their empire, so to
speak.
Um that being the case, whatwhat do you think that the I

(07:02):
don't know, the sentiment or thehold off in today's buyer is and
why investors are not having anyproblems going, I'm gonna pull
the trigger on that.

SPEAKER_04 (07:13):
Well, so I want to backtrack too, because you
mentioned the the big boxbuyers.

SPEAKER_02 (07:18):
Yep.

SPEAKER_04 (07:18):
I feel like a lot of them have fallen off.

SPEAKER_02 (07:20):
I agree.
So I do agree.

SPEAKER_04 (07:23):
It is primarily mom and pop investors.
Um I do think that they arewell, one, I think there's more
education around it.
So I think more people arelearning more about fixing and
flipping.
Um but two, there's still anupside to it, right?
Because a lot of these people,most of the investment

(07:44):
properties that people arebuying are not homeowners that
have a beautiful home that theybought three years ago.
The majority of properties thatpeople are buying on the
investment side of things aresome type of distress situation.

SPEAKER_02 (07:59):
Makes sense.

SPEAKER_04 (08:00):
Or they really do need to be fixed up, or
somebody's passed away.
Um so there's a lot of upsidethere still because they can
utilize something like a hardmoney loan, right?

SPEAKER_03 (08:11):
Right.

SPEAKER_04 (08:11):
Fix it up, build in all that equity, and then resell
it.
Again, they are sitting a littlebit longer, but if they're
getting good deals, which a lotof people are getting educated
finally on how to actually buygood deals, there's enough
equity to where even if theyhave higher days on market,
they're still profiting.

SPEAKER_02 (08:27):
Okay.
So early in this discussion, Iwant to give the folks a little
nugget of value.
What would you say is a gooddeal from an investor
standpoint?
Because there's so many ways tochop up a good deal.
Me personally, as a flipper, Icould see a deal that I'm buying
to hold and see that as a gooddeal.

(08:49):
Whereas this different investorlooking for a different MO is
going, that's not a good deal.
What are your thoughts?

SPEAKER_04 (08:55):
Well, it depends on exit strategy too.

SPEAKER_02 (08:57):
Sure.

SPEAKER_04 (08:57):
Right.
So if we're talking about flips,especially for a new investor,
my rule of thumb is just followthe 70% rule, right?
Get 30% equity in the dealbecause by the time that you buy
it and you resell it, you'realready in for about 10%.
So then you've got a 20% equityspread.
Then you have holding costs,right?
And your holding costs are goingto be longer because you're

(09:17):
sitting in these things.
So that will give you enoughequity spread to be able to
still be profitable.
So I always tell new investors,follow the 70% rule.
Now, when we were in a differentmarket, when we had lower days
on market and you could get inand out of things these things a
lot faster, I would be okay withbuying an 80% deal because I

(09:39):
could get in and could get out.
My money was constantly moving,but we're not in that market.

SPEAKER_02 (09:44):
We're not.
We're not.
And I think that's important forinvestors, even first-time
investors to understand is whatmarket are you in?
And the second thing is what isgoing to be your exit strategy
for this property.

SPEAKER_04 (09:56):
Um and not just seller, not just uh days on
market, but sellers' concessionstoo.

SPEAKER_03 (10:01):
Oh, absolutely.

SPEAKER_04 (10:01):
So interest rates are high.
So a lot of uh buyers arewanting some type of buy down.

SPEAKER_03 (10:06):
Yeah.

SPEAKER_04 (10:07):
And so sellers' concessions are coming into play
with buying down that rate sothat they can afford it.

SPEAKER_02 (10:12):
Correct.
Correct.
So when you guys are looking atpotential 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 wewere doing our hard money

(10:33):
flipping back, gosh, 2020through 20 end of 2023.
No, when was it?
Middle of 2023.
We sold our last one, we got ourasses handed to us, and we were
like, okay, let's let's stopthis for a little while.
Um, but when doing that, theywanted, I think it was 10% down.

(10:53):
Um, and then they wanted ourstrategy, what we were gonna
use.
Well, our strategy was we'regonna use your money to buy it,
we're gonna use our money to fixit.
Bottom line, we're not we'rewe're going fast.
We don't have time to doinspection and this and that.
Um, so the idea was give us thebig chunk, we'll use our chunks
to get all the stuff redone, getit on the market and sold.

(11:15):
But with you guys, does it workthe same way?
Do you have different programsthat you offer that you can put
people in as far as buckets?
Are they customizable?
What does that look like ifsomeone out there is looking to
increase their portfolio orstart their portfolio?

SPEAKER_04 (11:34):
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 (11:44):
Okay.

SPEAKER_04 (11:44):
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 (11:52):
No.

SPEAKER_04 (11:53):
Nor are they going to be doing a hundred thousand
dollar renovation.

SPEAKER_02 (11:56):
That's right.
Should they shouldn't be, andsomeone shouldn't be lending
them that money for somethinglike that.

SPEAKER_04 (12:01):
But somebody will, absolutely, and they will try.

SPEAKER_02 (12:03):
That's right.

SPEAKER_04 (12:04):
So it's it's my job to look at that size of rehab
and the size of the deal.
Compare that to theirexperience.

SPEAKER_02 (12:11):
Size does matter.

SPEAKER_04 (12:13):
In this case, it does.

SPEAKER_02 (12:15):
There you go.

SPEAKER_04 (12:16):
Uh so their experience, um, the size of the
deal matters because they'remonthly payments, right?
The bigger the deal, the moremonthly payments they're gonna
have.
Um, and then, you know, the sizeof the rehab goes into play with
their experience.

SPEAKER_03 (12:31):
Right.

SPEAKER_04 (12:31):
Bigger rehabs, you we want to see more experience.
Oh, for sure.
They're just a just a differentanimal.
Yeah.
Start entering into those.
So 20K is like the thresholdjust to get started.

SPEAKER_03 (12:42):
Okay.

SPEAKER_04 (12:42):
You have to have 20K in the bank, yeah, checking
savings.
Um, you can use retirementaccounts, but you have to
liquidate them.

SPEAKER_02 (12:49):
For sure.

SPEAKER_04 (12:49):
So 20K in the bank and a 600 score.

SPEAKER_02 (12:52):
And then from there, did you say 600 credit score?
Wow.
Yeah.
Okay.

SPEAKER_04 (12:56):
We dropped it recently.

SPEAKER_02 (12:57):
Wow.
Okay.

SPEAKER_04 (12:58):
Now, the better the credit score, the better the
rate.
Yep, exactly.
Um, but they can technically getin the door with 600.
Now, from there, what I gatherfrom those pre-qualification
measurements is then I can givethem specs.
Like here's where you need tostay at threshold-wise for your
renovation, for yourafter-repair value, here's the

(13:20):
percentage you need to be buyingat.
And then they can tailor thetype of deals that they're
finding to that.

SPEAKER_02 (13:26):
Okay.
That makes that makes goodsense, and that's a good kind of
starting point.
Now, we talked about how lendinghas changed or what uh investors
are seeking the differencebetween, let's say, a pre-2020
market versus now.
How are you seeing hard moneyused differently in in vice

(13:52):
versa market?
Well, because I'm sure the folksthat you are working with now,
they could more than likely bethe same that were before, but
are they using it differently?
Are they did they change theirexit strategy based on what the
current climate is, or are theystill doing if it ain't broke,

(14:13):
don't fix it?

SPEAKER_04 (14:14):
No.
I so yes.
Um the flip versus uh rentalratio on their exit strategy has
flip-flopped.

SPEAKER_03 (14:25):
Okay.

SPEAKER_04 (14:26):
So I actually measured it and I did all the
the metrics right before I came.
79% of people in 2025 are buyingflips.

SPEAKER_03 (14:36):
Okay.

SPEAKER_04 (14:37):
21% are buying rentals.

SPEAKER_02 (14:40):
Really?

SPEAKER_04 (14:41):
It is significantly dropped.
And but it's not just interestrate, right?
There's other factors.

SPEAKER_03 (14:45):
Oh, for sure.

SPEAKER_04 (14:46):
Taxes, insurance costs has freaking skyrocketed.

SPEAKER_03 (14:50):
Yep.

SPEAKER_04 (14:50):
So all of those factors come into play with
their P I T I, which makes ithard to cash flow.

SPEAKER_03 (14:55):
Oh, for sure.

SPEAKER_04 (14:56):
Because rents are not, you know, raising the same
at the same speed.
So flips right now aredefinitely taking the cake.

SPEAKER_02 (15:04):
Really?
Now, in regards to flips, all ofthe deals that we personally
found were someone told anotherperson that we were buying
houses, and they told somebodyelse that had either somebody
pass away in the family, theywere trying to get rid of the
property.
Um, those are the best deals.
It's true.
Um, and we were helping themout, but they were helping us

(15:28):
out at the same time.
Um how are investors findingdeals right now?
Uh I mean, maybe wholesale.
A lot of wholesale.
Yeah.

SPEAKER_04 (15:37):
A lot of wholesalers.

SPEAKER_02 (15:39):
Take us through that.
What what what are they doing?
What are you seeing being done?
And and you yourself, are youstill flipping properties?
Holding?

SPEAKER_04 (15:47):
Both.

SPEAKER_02 (15:48):
I don't blame you.

SPEAKER_04 (15:50):
So the holding part is hard.
Um, I will say though, on theequity play.
On the equity play, that's all Ican focus on right now.

SPEAKER_03 (16:00):
Okay.

SPEAKER_04 (16:00):
There's not really any cash flow.

SPEAKER_03 (16:02):
Right.

SPEAKER_04 (16:02):
So anything that I buy, it's all equity.
Yeah.
And I'm just gonna hold it untilinterest rates eventually when
they decide to drop, or I cancash out the equity at a later
date.
Um, flipping is harder.
I have a couple.
There's still, I just got oneunder contract.
They sit for a little bit.
Yeah.
It's just the nature of thegame.
Um, but even myself, I primarilybuy from wholesalers.

SPEAKER_03 (16:24):
Okay.

SPEAKER_04 (16:24):
It's like playing a game of fetch, right?
Like I've got the ball, I letthem know this is what I need
you to fetch for me.
I throw it out and they bringsomething back.

SPEAKER_02 (16:34):
Ah.
So that's nice to have that.
And I think the way that that isset up is pretty brilliant
because they make a cut of thequick sale, which is not the
bulk of the profit.
The bulk of the profit goes tothe person that actually puts
the money into it and turns itinto what it needs to be in
order to be marketable and sale.

SPEAKER_04 (16:54):
So the way that they make their money is okay.
So let me let's backtrack onwhat a wholesaler does because I
think it's important to knowlike what they do to make their
money.
So imagine you do five, sixmonths worth of marketing.

SPEAKER_03 (17:10):
Okay.

SPEAKER_04 (17:11):
They do um mail outs, they some door knock.

SPEAKER_03 (17:14):
Yeah.

SPEAKER_04 (17:15):
Um, there's all different uh SEO, right?
But they invest money and theyinvest time for months to be
able to get a deal.
Then they have to meet theseller, you know, build rapport,
negotiate with the seller.
All of this can take, I mean, awholesaler could maybe get one
deal in six months.
Wow.
So then they negotiate the dealwith the seller, and then they

(17:35):
have to find the buyer for it,which is somebody like myself.
So it's a lot of effort just toget a deal.
And I think until somebodyactually goes and does all of
that, they don't understand thenature of what a wholesaler
actually has to do.

SPEAKER_03 (17:49):
Yeah.

SPEAKER_04 (17:50):
I'm not talking about the daisy chainers who
just like throw fees on somebodyelse's deal.
I'm talking about the peoplethat get organic deals.
So but sometimes thesewholesalers make I've seen
$80,000 wholesale fees.

SPEAKER_02 (18:01):
Wow.

SPEAKER_04 (18:02):
Yeah.

SPEAKER_02 (18:02):
That's impressive.
Okay.

SPEAKER_04 (18:04):
Sometimes they're $3,000, sometimes they're$5,000,
sometimes they're$20,000.

SPEAKER_02 (18:08):
Yeah.

SPEAKER_04 (18:09):
The spread that is built in is what the wholesaler
has worked to build in.
And the lower that they cannegotiate the original price
with the seller, the morespread, the more money they can
make on the deal.
So as long as my numbers work,I'm okay with it.

SPEAKER_02 (18:25):
But wholesalers can make a good amount of money on
the deals that they so then theidea of buying houses on the
courthouse, is that still athing?
Is that still something thatyou're seeing your customers
utilizing you guys' funds to do?
Most of the time, they have touse their own money, period,
because it's like, I need tohave the wire by the end of the

(18:45):
day.
Yes.

SPEAKER_04 (18:46):
Yeah.
With those, it's very oldschool.
You have to have like your moneyin your suitcase and show up.
We don't do that because youhave to go through the
traditional title process to wewant 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 (19:02):
That's what I was gonna ask is could someone
utilize their money to securethe property?
Because realistically, that isthe name of the game is buying
the home before anybody elsegets to it.
That's what makes your profit,so to speak.
And then praying that there'snot more than what you thought
or anticipated that needs to befixed, repaired, upgraded, etc.

SPEAKER_04 (19:21):
I don't have a lot of those.
I'll be honest.
Most of the best deals are ifthey can get them before they go
to auction and they negotiatedirectly with the seller.

SPEAKER_03 (19:29):
Right.

SPEAKER_04 (19:30):
Those are gonna be honestly, in my experience, more
profitable than if they have tobuy them at the auction.

SPEAKER_02 (19:35):
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 twototally different, I'm
residential, uh first-timebuyer, multi-buyer, that kind of
stuff, 20, 25% down, period, orwe're going non-QM, um, which is

(19:55):
like a DSCR concept, um, whichthose have been on the rise
dramatically.
So I can only imagine that yourside 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 bitmore um advanced, educated, and
willing to leverage versus themom and pop investor that is

(20:17):
going, okay, what are thetraditional ways we're gonna do
this by the book and we're gonnabuy one property maybe every 10
years?
Concept.

SPEAKER_04 (20:23):
Which doesn't really make any sense if you think
about it.

SPEAKER_02 (20:26):
I love it.
Go.

SPEAKER_04 (20:27):
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 findthat.

SPEAKER_03 (20:35):
Yeah.

SPEAKER_04 (20:35):
Like, so typically it's gonna be around forty
thousand dollars for a downpayment on a two hundred
thousand dollar home if they go,you know, traditional on
conventional loan.
You can buy like three or fourinvestment properties with that
amount if you use the Burrmethod.

SPEAKER_03 (20:49):
Yeah.

SPEAKER_04 (20:50):
And you have all the equity in there afterwards.
So you not only have equity, butyou have a lower down payment,
and you typically cash flow alittle bit better because your
mortgage rate, your mortgage islower since you have all the
equity and you got it forcheaper than what it's actually
valued for.

SPEAKER_02 (21:06):
That's right.

SPEAKER_04 (21:06):
So it just doesn't make any sense to go
traditionally.

SPEAKER_02 (21:09):
That's very true.
And and as an investor, puttingthat hat on, the idea is to use
someone else's money firstalways and leverage that to the
max.
Um, if you can, and and this isuh side note, but also
pertaining to this, the Burrmethod, you mentioned it.
And I know you've explained itto us before, but it was
probably two, two and a halfyears ago.

(21:30):
Tell us what the Burr method is,because there's still folks out
there that will go and Google itand then they'll read like
excerpts, and then they'll cometo me and go, okay, I'm gonna do
the Burr method on this.
And I'm like, nope, you didn'tread the right stuff because I'm
not the person you come to forthat.

SPEAKER_04 (21:43):
Right.
And it's it can be confusing.
So let's spell it out Burr, B,R, R, R, R.

SPEAKER_02 (21:49):
So how many R's again?

SPEAKER_04 (21:51):
B, I'll I'll count at the end.

SPEAKER_02 (21:54):
There's a bunch of R's method.

SPEAKER_04 (21:56):
So B is for buy.

SPEAKER_02 (21:57):
Okay.

SPEAKER_04 (21:58):
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 therenovation is done, refinance,
rent, repeat.
So four Rs.

SPEAKER_02 (22:12):
Okay.
Okay.
And and when they're doing that,what is the goal?
What is the overall goal inthat?

SPEAKER_04 (22:18):
Uh reduce the requirement for the 20% down
payment because we do 100%funding.
Okay.
So if they get a 70% deal, forinstance, or a 75% deal, I'll
fund all of purchase and all ofrehab.

SPEAKER_03 (22:30):
Wow.

SPEAKER_04 (22:30):
So there's no down payment, just closing costs.

SPEAKER_03 (22:33):
Yeah.

SPEAKER_04 (22:33):
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, theyrenovate it.
We fund all of the renovation.

SPEAKER_03 (22:49):
Right.

SPEAKER_04 (22:50):
And then when the renovation is done, then they go
to refinance.
Now, if this investor is comingto you now at this point,
because you're the refinance andyou do either a DSCR type
product or a conventional typeproduct, and they've already
bought it at 70%, what loansvalue do you go up to for those?

SPEAKER_02 (23:07):
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 (23:14):
So if they're in my loan at 70% and they can go to
you and you go up to 80%, theyhave a 10% threshold right now.
So not only do they not have adown payment on their refinance,
but they could potentially rollsome of the closing costs into
their loan because there's thatthreshold of 10% of equity,
right?

SPEAKER_02 (23:33):
And in some cases, there's even more equity after
the refi because of what they'vedone to the property that they
can what pull money out for thenext deal up to 80%, right?

SPEAKER_04 (23:44):
Now they still have 20% equity left over.
Right.
So all they really have, if theycan roll their closing costs in,
is the original$10,000 hardmoney closing cost payment or
the the down the closing costamount that they put out of
pocket.
So they could potentially havethat whole property with an
extra 20% in equity aftereverything's said and done,

(24:07):
because they did the birdmethod.

SPEAKER_03 (24:08):
Yeah.

SPEAKER_04 (24:09):
So own a property, an investment property for 10
grand out of pocket.
And now, because they have that20% threshold, right?
So now your loan with them isless than had they bought it and
at market value.
So they're typically theirpayments are lower as well.

SPEAKER_02 (24:26):
So I want to look at something real quick.
Uh and JC, before you throw thatup, let me put a new one on
there.
Okay, you can throw it up now.
Um, I wanted to look up becausethere's a lot of folks out there
that I'm still seeing,especially on social media, that
the big lenders, the the biginvestors, the hedge funds are

(24:47):
buying up all the properties.
And I call BS on it.
And I'd like to find out, let'ssee here, overall in the US,
what are what is the breakdownof investment properties that
are owned by mom and popinvestors versus um what are we

(25:18):
institutional investors?
Bang.
Let's see what this says.
Okay, what do we know?
It says in a joint center fromthe housing study of Harvard,
2021, that's quite a while ago.

(25:40):
25% single family rental unitsare 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 singlerentals are held by mom and pop
investors.
So a large majority, and we'renot talking like a little bit
more, a large majority, uh, theratio is totally lopsided.

(26:05):
It's more mom and pop investorsthat own most of the investment
properties that are out there onthe market.

SPEAKER_04 (26:10):
And only 3% are held by mega landlords, which are
over a thousand homes.
So that shows that's your blackrock.

SPEAKER_02 (26:16):
That's your absolutely.
Um, so the idea of these folkson social media that are sharing
the concept of the black rocksare taking over.
They're they're gonna pushpeople out of their homes, this
and that.
I call BS why statistics are itdata is what it is, but at the
same time, I'm also seeing reallife and people like yourself

(26:40):
that are doing plenty of volumeand you don't lend to a black
rock.
No, they use their own money,yeah, right.
So therefore, you're workingwith the mom and pop investors,
and there's plenty of businessopportunity uh to go around.
So I'm wondering why that ideais not being spread further.

(27:01):
That, hey, you buyer, you own ahome, great, you've got some
money sitting around.
Why don't you throw your hat inthe ring?
Type concept.

SPEAKER_04 (27:09):
I feel like nobody talks about it.
It's hard money.
Yeah.
It's like the underground worldof lending.

SPEAKER_02 (27:15):
It's true.

SPEAKER_04 (27:16):
Nobody advertises it.

SPEAKER_02 (27:18):
Well, the idea has always had a negative
connotation, which I don'tunderstand why.
It could the higher interestrates.
Yeah, but it is what it is.
Uh as an investor, I go, wait aminute, higher interest rate, I
get to use that as a write-off.

SPEAKER_04 (27:31):
It's very true.
They're interest-only payments,it's 100% deductible.

SPEAKER_02 (27:35):
Absolutely.

SPEAKER_04 (27:35):
It scares people.
I think the interest rates scarepeople.
And I think people are becomingmore okay with it because the
traditional interest rates areraising.

SPEAKER_03 (27:45):
Yeah.

SPEAKER_04 (27:46):
So they're like 7%, but a hard money loan is, you
know, 10%.
Oh, that's not that much more.

SPEAKER_03 (27:51):
Yeah.

SPEAKER_04 (27:51):
But back then, interest rates were three, four
percent.
Correct.
So an 11%, 10% hard money loanwas like, whoa.

SPEAKER_02 (27:59):
Yeah.

SPEAKER_04 (27:59):
You're taking advantage of us.

SPEAKER_02 (28:00):
Good point.

SPEAKER_04 (28:01):
So the gap has definitely closed.

SPEAKER_02 (28:04):
So as rates are higher, is hard money equally as
higher like it was when rateswere at threes?
Or no, right?
No.
So that's what I'm seeing on thenon-QM side.
It's it's almost what they arein traditional finances.
Yes.
And it's like, guys, use this asmuch as you can because at a

(28:26):
certain point the other rateswill come back down and then you
can start buying and holdingagain.
Or use this money to do that andthen to acquire and then use
that money to burr out of it.

SPEAKER_04 (28:39):
You can always refinance too.
Absolutely.
You're not stuck in a loanforever.
No.
But yeah, no, I agree.
And I I think um so the the, youknow, the gap's closing, people
are becoming more okay withthat, more comfortable with
that.
But there's not enough educationsurrounding how to do things the
non-traditional way of buying,renovating, refinancing.

(29:00):
Everyone's taught to buy a home20% down and just continue to do
that.
So I do wish there was moreeducation.

SPEAKER_02 (29:08):
Yeah.

SPEAKER_04 (29:08):
I just don't know.

SPEAKER_02 (29:10):
Hmm.
Well, I've got this article.
Um, these two guys here, this isreally what struck this
conversation.
Um, headline real estateinvestors explain why they're
willing to pay nearly double ininterest to work with private
money lenders, which you wouldconsider yourself private money
lender, right?
Yes, right.
Yeah, that's hard money.

(29:30):
Look at these two clowns.
They're making money, just soyou guys know, taking risks.
Uh, Mike, I can't even say hislast name, Goris, Gurius, I
don't know.
And Kevin Hart, not theoriginal.
I'm like, why does that namesound so wait a minute?
Okay, and these guys are out ofKentucky.
Um, let's let's go into this.

(29:52):
I'm not gonna read the wholething and uh says the G Man told
Business Insider that comparedwith where.
Working with traditionallenders, there's a lot less
paperwork and a lot fewer hoopsto jump through.
He and Hart would quit their W-2jobs to invest in real estate
and pursue financialindependence, do wholesales,

(30:13):
wholetails, and flips, primarilyin uh Louisville, Kentucky.
What in the heck is a hot hotel?

SPEAKER_04 (30:21):
So it's similar to a wholesale.
The only difference is they buyit and uh they'll just resell it
without doing any work to it, orsometimes they'll just do
something very cosmetic and thenput it on the market right away.

SPEAKER_02 (30:34):
Okay.
So a quicker flip.

SPEAKER_04 (30:36):
Yes.
And a lot of times wholetailswill go to another investor.

SPEAKER_02 (30:39):
Okay.

SPEAKER_04 (30:39):
And not always, sure.
But a lot of times when I'vedone wholesales, I will just
sell it to another investor.

SPEAKER_02 (30:46):
Makes sense.
Okay.
Um, they also own more than 20rental properties, including
short, mid, and long term, whichBI uh or B yeah, BI verified by
looking at settlement statementsand closing documents.
So they're they're not full ofit, guys.
They are the real deal.
Um, so the G Man noted thatthere are three main ways to
borrow money in this industrythrough private money lending,

(31:09):
hard money lending, or atraditional lender.
Traditional lenders generallyoffer the lowest rates, while
hard money lenders tend to bemost expensive.
As of right now, having thisconversation, uh, what we are
seeing is interest rates between10 and 12% with private money
lenders.
Um, hard money lenders we'reseeing around 11 to 13, and

(31:31):
usually they're a little bithigher just because they're
actually going to have some uhstaff in office building.
And if you went through a FannieMae or Freddie Mac, interest
rate could be anywhere from sixto seven percent.
Um, let's see here, working onPMLs and closing deals quickly.
While private lenders can'tcompete with traditional
lenders, no call uh no cost,they can offer speed and the

(31:54):
importance to this guy uh withthe G and Heart uh are closing
deals weekly, meaning they'rebuying, they're in buy mode,
they're bullish, they're they'rethey're attacking the market.
Um, we do our own inspectionsbecause Kevin has all the
experience, and we don't need todo appraisals because we're
working with off-market sellerswho are happy to work with us on

(32:16):
the price.
Um, he went on to say things canjust move a lot quicker, and
it's what allows us to buyproperties in the mean uh in a
matter of days versus a matterof weeks, um, which makes good
sense.
So let me continue.
Um G said that uh fastest uhthey'd ever closed a deal was

(32:38):
eight days, whereas working witha traditional lender would take
up to 30 days and require morepaperwork and headaches.
Um I'll end it there.
How accurate is what they'resaying?

SPEAKER_04 (32:51):
So there's a lot to chew.
So if you go back up, so forinstance, um tell me when to
stop.
A couple of different things.
You can stop right there.
So the difference betweenprivate money and hard money,
okay.
Um, typically in what they're weare typically, we are
technically a private moneylender because it's our own
capital that we're lending out,right?

SPEAKER_03 (33:11):
Yep.

SPEAKER_04 (33:12):
Um the way that they're using this term is
private money lenders would belike uh attorneys or people that
have money in like aself-directed IRA, an
individual.
But you also have to rememberthat with private money lenders,
their their money is capped.

SPEAKER_02 (33:27):
Yeah, that's true.

SPEAKER_04 (33:28):
They don't have an unlimited supply of money.
So, you know, if they have amillion dollars, that's only
going to go into maybe threedeals.
That's right.
And then they're done and theyhave to wait for you to sell
that house to be able to doanything else.

SPEAKER_02 (33:37):
That's right.

SPEAKER_04 (33:38):
Uh, hard money lenders, we have an abundant
amount of money.
You can do as many deals as youneed to continuously recycle,
right?

SPEAKER_02 (33:45):
Make good sense.
Yep.

SPEAKER_04 (33:46):
Interest rates that he's saying, uh, that also
depends on experience andloyalty.
So hard money lenders do go aslow as 10 and a half, uh, which
is comparable to private moneylenders.

SPEAKER_00 (33:56):
Absolutely.

SPEAKER_04 (33:56):
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 gothat route because I mean, I've
closed a deal in 48 hours.
Wow.
So fast.

SPEAKER_03 (34:12):
Wow.
Yeah.

SPEAKER_04 (34:13):
Go into foreclosure, and you have to get that wire
out to save that person's house.
So uh the speed of use is veryunique, which is great.

SPEAKER_03 (34:23):
Yeah.

SPEAKER_04 (34:23):
And you don't have to jump through hoops.
So, like I said, qualificationsare bank statements to show me
you have money and then yourcredit score, and that's it.
We don't look at tax returns, wedon't look at debt to income
ratios, no, employmentverification.
You could you could have neverworked in your entire life and
we don't care.
Main thing is capital.
So less uh hoops to jumpthrough.

SPEAKER_02 (34:44):
For sure.
And like they say, time killsall deals.
And if you do have a deal on onthe docket, it's like, let's get
this thing to funding ASAPbefore they change their mind or
before something happens.
We go to foreclosure.
After go to foreclosure, shithits the fan.
Uh, now you gotta ask for moremoney to clean the shit off the
fan before you close.
And it's like we didn't evenhave to get there if we used
hard money.

SPEAKER_04 (35:05):
So suite of use.
Um, yeah, you do have higherinterest rates.
I would agree with that.
Um, but again, suite of use andease of use are huge.
Yeah, most especially whenyou're trying to do more volume.

SPEAKER_02 (35:16):
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 investorsmaybe have to deal with or have
to overcome.
What is a combatant that you usethat makes sense when talking to
somebody like that?

SPEAKER_04 (35:37):
Well, you're only in the loan for a couple months.
This is not a 30 year, 15-yearno, you're not even gonna be in
the loan, hopefully for a year.

SPEAKER_02 (35:44):
That's true.

SPEAKER_04 (35:45):
And if you are, that's not a successful flip.

SPEAKER_02 (35:47):
I totally agree.

SPEAKER_04 (35:48):
You should only be in my loan for anywhere from
three to six months.

SPEAKER_02 (35:52):
Yeah.

SPEAKER_04 (35:52):
Okay.
And if it goes on longer thanthat, something had to have not
gone right.

SPEAKER_02 (35:58):
Right.
So and essentially they'repaying interest only on the
deal.
So I don't know, doing someround math, they're adding,
let's say, um, let's say theinterest payment for round
number purposes is$1,500 a monthtimes six, we know what that is.
And essentially, JC, if youdon't have this on the screen,

(36:20):
don't put it on the screen.
Uh, let's see here, times let'ssay worst case scenario, seven
months.
So they paid 10,5 in interest.
Um, their closing costs couldhave been negotiated and paid by
the sellers.
Is there a cap on these kind ofdeals in regards to seller
contributions?
Uh, like for example, when we'redo using uh non-QM, well, I'll

(36:43):
start with traditional.
Traditional, anytime you mentioninvestment, max you're gonna get
is two percent.
Doesn't matter how much putdown, it is what it is.
Conventional deal.
Going the non-QM, I haven't seena cap on it.
Um, on your side, what does thatlook like?

SPEAKER_04 (36:59):
We don't want them to net below 100%.

SPEAKER_02 (37:01):
Okay.

SPEAKER_04 (37:02):
We want them to have a little bit of skin in the
game.

SPEAKER_03 (37:05):
That's true.

SPEAKER_04 (37:05):
Because we're funding all of purchase and all
of rehab.

SPEAKER_03 (37:08):
Yeah.

SPEAKER_04 (37:08):
The people that don't have any skin in the game
are way more likely to say, youknow what, you can take it.
Right.
You can forklize.

SPEAKER_02 (37:16):
Yeah.
And and that's not a good spotfor you guys to be in.
So that leads me to anotherquestion randomly.
Are there telling signs that youhave 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 (37:35):
Yes.
Um, typically newer guys, or umhow would you say it?
They know it's not, and theywill continue to do those
serial, like serial defaulters.

SPEAKER_03 (37:51):
Okay.

SPEAKER_04 (37:52):
Um you can usually tell if the rehab is too large,
uh, they don't have enoughcapital, they don't understand
what they're doing, they'rerelying on the contractor, they
don't typically the people thatjust don't do enough research,
and I can see it from a mileaway.
And they're relying on everybodyelse to do it for them.

SPEAKER_03 (38:13):
Right.

SPEAKER_04 (38:15):
Not understanding that all of those people are
financially invested in it,they're making money off of you.

SPEAKER_02 (38:19):
That's right.

SPEAKER_04 (38:20):
They're not here for your best interest, and those
are typically the deals that gowrong.

SPEAKER_02 (38:24):
Ah, naive, naive and lazy, in my opinion.
Um so I tell you what, could yougive me an example of a shit
show that you've experiencedrecently?

unknown (38:39):
Oh god.

SPEAKER_04 (38:40):
I have so many of them.

SPEAKER_02 (38:42):
Bring it on.
This is what this is what theywant to hear.

SPEAKER_04 (38:45):
Oh my god, let me think of one recently.
All the foreclosures are shitshows, if we're being completely
honest.
Um I had one that I did notrealize was like a serial type
uh whatever you want to call it,bad borrower.
Okay, that's what we're gonnasay.

(39:06):
Okay.
Um so they would they theyworked together.
So the realtor also acted as awholesaler, but he was partners
with the borrower.
Oh, these were guys out ofAustin.
Um the realtor would put a largeassignment fee in there and cash

(39:29):
them out on the front end behindthe scenes.

SPEAKER_03 (39:32):
Okay.

SPEAKER_04 (39:33):
So then the borrower is all in at a sell a hundred
percent, but he got a big lumpsum with his realtor partner on
the front end.
Then they also act as thecontractor.
So they built in GC fees intothis renovation.
So, but they're not doing agreat renovation.

SPEAKER_02 (39:54):
So they're basically making revenue from their own
deal structure, so to speak.

SPEAKER_04 (39:59):
And to the point they front load it.

SPEAKER_02 (40:01):
Uh-huh.

SPEAKER_04 (40:02):
So front loading your rehab would be like um if
your foundation costs$5,000, butyou put in there it costs$15.

SPEAKER_01 (40:09):
Right.

SPEAKER_04 (40:09):
And then the foundation's done, and we send
you$15, but you really onlyneeded five, and you front load
and you take out the extra 10for yourself.

SPEAKER_03 (40:17):
Yep.

SPEAKER_04 (40:18):
That's front loading it.
So getting out a bunch of fundsfrom renovation at the very
beginning, and then theydefault.
And then we get stuck with aproperty.

SPEAKER_02 (40:29):
So in those cases, would that not be the last one
that they get an opportunity todo, you would think?

SPEAKER_04 (40:36):
So then or do they flip?
Well, that's where the shit showcomes into play.
So we foreclose on them.

SPEAKER_02 (40:40):
Okay.

SPEAKER_04 (40:42):
And then they get somebody, it's it turned out to
be his dad.

SPEAKER_02 (40:49):
Oh, wow.

SPEAKER_04 (40:50):
And in a separate LLC that they tried to apply
through.

SPEAKER_02 (40:53):
And these have to be purchased in an LLC, if I'm not
mistaken, right?

SPEAKER_04 (40:56):
No, they can purchase in their personal name,
but they're masking through anLLC.
So the dad applies with asimilar name uh and did it
through an LLC.
So I look further into it, startrequesting, you know, uh ID
copies, operating agreements,and I noticed the signature was
the same as the gentleman weforeclosed on prior.

unknown (41:19):
Wow.

SPEAKER_04 (41:20):
And all of it just started, I realized that it was
my it was dad and son.
Continue to deny it, but we wewouldn't do it.
So stuff like that happens, andthey'll get new people to act to
be that person.

SPEAKER_02 (41:33):
Yes.
The front.
Wow.

SPEAKER_04 (41:35):
Yeah.

SPEAKER_02 (41:36):
Wow.
I mean, how profitable can thatbe if it's almost your last
deal?
Every deal is almost your lastdeal, basically.
When you're transactional,that's right.

SPEAKER_04 (41:44):
It's yeah.

SPEAKER_02 (41:45):
Wow.
That's um not surprising becauseif there is a way, they're gonna
find it.
Uh, then they'll exploit it andthen they'll blame everybody
else.

SPEAKER_04 (41:57):
Or they'll go to another lender and do it.

SPEAKER_02 (41:59):
Again.

unknown (42:00):
Wow.

SPEAKER_02 (42:01):
Um, so that leads since you mentioned
foreclosures, I'd want to getyour take because you're on a
different uh differentperspective, different level
than I in regards to what you'reseeing out there.
A lot of folks are believing,hypothixing.

(42:21):
I don't know.
Um did I even say that right?

SPEAKER_04 (42:24):
Hypothesizing.
Hypothesize.
That's the one I was lookingfor.
She's gonna let you run with it.
Like somebody else.

SPEAKER_02 (42:30):
So this hypothetical scenario, no.
Um, some people are predictingthat there's gonna be a wave of
foreclosures, but they're gonnacome from the new construction
side of things because they'reseeing all of the uh properties
that they're going up againststill having to build.
Um, so they're having to lowertheir price and lower their

(42:50):
price to get it sold.
Let's say if you purchasedwithin the next uh six months,
and then you have to move withinthe next six months.
Well, that builder's stillbuilding.
So there's no way that someone'sgonna come in and pay you what
you paid for it if they can justgo get a brand new one.

SPEAKER_04 (43:05):
Oh, okay.
That's what I'm saying.
Totally out of my sphere.
I'm so cute.

SPEAKER_02 (43:09):
And that is that is what is I'm seeing as the future
of where foreclosures will comefrom, simply because, yeah, you
gave them this low rate, but allthat money was packed into the
price of the home, and you asthe builder has to continue to
maintain that while the personthat is selling in your
neighborhood, there's no waythey can compete with you as the

(43:31):
builder.
So they have to drop theirprice, 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 ofum pre-owned properties for many
years, most cases.
What are your thoughts on thefuture of foreclosures, near

(43:51):
future, that kind of?

SPEAKER_04 (43:54):
Um, I mean, have you seen an uptick in in traditional
foreclosures?

SPEAKER_02 (43:59):
I personally have not.

SPEAKER_04 (44:00):
I haven't I haven't seen that either.
I'm not getting like a crazyamount of investors coming in
from that are buyingforeclosures right now.

SPEAKER_02 (44:08):
Okay.
Um and that's kind of what myquestion was is you'd probably
see it first before anyone,because the people that know
about it will scoop them up mostof the time before they even hit
the market.

SPEAKER_04 (44:18):
I haven't done enough research to see what the
actual like statistic is forforeclosures this year in the
real world.
Mine is really just the hardmoney world.

SPEAKER_03 (44:27):
Right.

SPEAKER_04 (44:28):
Um, but I haven't seen a huge amount of like, like
you said, influx of peoplebuying foreclosures per se.
It's always been a source.
Yeah.
It's inevitable.
People are forever going to bein some type of situation where
they have to where they getforeclosed on or they have to
sell before they get foreclosedon.

SPEAKER_03 (44:45):
True.

SPEAKER_04 (44:46):
It's always been a source.
I haven't seen that likedramatically increase to where
it's raised red flags.

SPEAKER_03 (44:51):
Yeah.

SPEAKER_04 (44:52):
Um I have seen a little bit of an uptick in
foreclosures on the hard moneyside, I will say.

SPEAKER_03 (44:57):
Okay.

SPEAKER_04 (44:58):
Um investors that just get in over their heads.

SPEAKER_02 (45:01):
Yeah.
So that's a lot of improperplanning.
Um, would you say that it is notdoing enough legwork in the
beginning or too many surprises,uh, lack of experience?
I mean, there's a ton ofdifferent reasons as to why, but
what do you think that thereason for that is for this new
wave of hard money foreclosures?

SPEAKER_04 (45:22):
Um, I would say number one would be getting in
over their head, trying to dotoo many large rehabs at one
time.
Those typically go south.
Yeah.
And so we try to limit those forthe borrower's own interest,
honestly.

SPEAKER_02 (45:36):
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'trecommend it either.

SPEAKER_04 (45:47):
And they get excited and they feel confident because
they've done several and theywant to scale, which is
understandable, but it becomesreally hard when you do
multiple.
I'm talking three or four bigprojects at a time.

SPEAKER_02 (45:59):
In addition, and this is not a bad thing or a
great thing, but you guys makeit so simple to get a hold of
this money that they feel likethey've already won and they
haven't done shit yet.

SPEAKER_04 (46:13):
It's the confidence.
Does that make sense?
Yeah.

SPEAKER_02 (46:15):
Um, they were able to capitalize on the property
with very little down.
Um, they came in with a gameplan uh to refinance it or to to
rehab it, I'm sorry.
And at a certain point, like yousaid, life happens and oh shit,
the foundation does actuallycost a little bit more than what

(46:36):
we intended.

SPEAKER_04 (46:36):
Yes, the financial management of multiple large
projects because the bigger theproject, um, the more capital
you need, inevitably, right?
Money is moving around at a muchfaster and larger pace.

SPEAKER_03 (46:48):
Sure.

SPEAKER_04 (46:49):
Especially when you have multiple at a time.
So that um the second thing Iwould say is the inexperienced,
relying on other people, notdoing your due diligence.
Uh, that's big.

SPEAKER_02 (47:00):
Yeah.

SPEAKER_04 (47:00):
And then the third would be giving money to
contractors.

SPEAKER_02 (47:03):
Yes, that that is let's talk about that for a
minute.
Let's talk about that for aminute.
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 everythingand said, Hey, this is how it's
gonna work.
We're gonna go in, we'll buy thehouses, we'll front the rehab

(47:25):
money.
You handle all of the rehab, allof that stuff, we'll chop it up
right down the middle, 50-50.
So there was really noadditional incentive for him to
screw us in any way because he'sreally screwing himself.
Everything's split the profit?
Absolutely right down themiddle.
So it was it's like if if you'regoing to inflate your cost on
this side, well, then it's gonnacome out in in in the wash.

(47:48):
There is no uh way to hide that.
But if that contractor has zeroskin in the game, well, yeah,
invoice says 15,000.
All we have to go off of is wecan't do that, so I guess it's
15,000 type concept.

SPEAKER_04 (48:01):
Which is how most people do it.

SPEAKER_02 (48:02):
Yep.

SPEAKER_04 (48:03):
Um, the problem is the lump deposits, the lump sum
deposits.
So my contractor needs a depositof 15,000.
You give that contractor 15grand, and sometimes what
happens is that 15 grand getsapplied to somebody else's
project.
Yep.
And if something happens on theother person's project, then
they don't have that moneybecause most of them are not uh

(48:26):
set financially capitalized,right?
Well capitalized.
And then they don't have moneyto start or do thing that you
paid them for on your project.

SPEAKER_03 (48:34):
That's right.

SPEAKER_04 (48:35):
So then your project either gets delayed or just
never gets done or theydisappear, which is usually what
happens.

SPEAKER_02 (48:40):
That's right.
It's I compare it to like backin the day when I worked at the
bank, people would do the samething uh with checks.
They deposit a check over here,then they'd go over here and
they'd write a check to theirother bank account, and it was
just floating money from accountto account.
So you're floating money fromproject to project, hoping it
doesn't catch up.
Uh, and at a certain point,it'll implode.

SPEAKER_04 (49:03):
So the way to mitigate that is not give large
down payments.
I pay when the work is done.

SPEAKER_02 (49:09):
That's right.
That's right.
Uh that is a great tip for mostuh that have not done it before.
Uh, if you are starting aproject, number one, make sure
that you get plenty ofreferences on the contractor.

SPEAKER_04 (49:23):
Yes, that's big.

SPEAKER_02 (49:24):
Um, make sure that you're monitoring what the heck
they're doing.
And there's no reason in theworld that you shouldn't compare
that contractor that you'reworking with right now.
I mean, hey, they say it's gonnacost that much.
Well, they should be able tostand behind it.
So I'm gonna check with somebodyelse on the pricing of that.
And if it lines up, okay, soundsgood.

SPEAKER_04 (49:44):
Getting multiple bids.
Absolutely.
Yeah, you should always getmultiple bids.
Uh, and then visit the project.
Like people will trust thecontractor to do what he and
they'll get lazy.
That's right.
And they don't go on site andthey'll pay before going and
actually verifying that work wasdone.

SPEAKER_02 (49:58):
Man, I cannot, I can't fathom because we were on
site on all of them.
It was like number one, wewanted to know how it was all
done.
Um, I can't imagine, but at thesame time, I kind of can because
you've got a chunk of changethat 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'ssupposed to be working for me.

(50:20):
Uh, I'm not working for thismoney.
So therefore, I'm gonna continuewhat I'm doing and I'm gonna put
the shades on over here.
That that man, I can see howthat would happen.

SPEAKER_04 (50:29):
Yeah, it usually goes wrong.

SPEAKER_02 (50:31):
Yeah.
Um, I think I've gotten throughjust about everything.
JC, what are we at time-wise?
All right.
So, this last, let's call it10-15 minutes, what do you want
to talk about?
What do you want to tell usabout uh in regards to your
world, some updates, some stuffgoing on uh on the hard money
side, flipping side?
Um let's see.

(50:54):
I in regards to the and thiswill 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 andholding versus flipping
properties.
Okay.
Are you seeing number one, doyou guys invest in multi-units?

(51:16):
Um, and number two, are youseeing a rise in that concept?
Because as we're hearing andseeing, there is a lack of
affordability in regards tothose type of homes or homes in
general for um not necessarilyfirst-time buyers, but even just
the rental market of things.

SPEAKER_04 (51:36):
So no, I have not.

SPEAKER_02 (51:38):
Okay.

SPEAKER_04 (51:39):
Primarily still single family.
Single family commercial.
I forgot your first question.
What was the first question?

SPEAKER_02 (51:44):
Um, the first question was to do with uh
multifamily.

SPEAKER_04 (51:50):
Am I I don't do very much of them at all.
Oh, I do.
But do you guys lend all to fourdoors?

SPEAKER_02 (51:55):
Okay.

SPEAKER_04 (51:55):
Anything after that's commercial.

SPEAKER_02 (51:56):
Gotcha.

SPEAKER_04 (51:57):
Um, I don't do a whole lot.
Really?
I don't have a whole lot ofbuyers for them, which is
surprising.

SPEAKER_02 (52:02):
Yeah, I'm I'm shocked at that because, like,
for example, Austin, I'm hearingthat's what's happening up there
because of the way that it'sgrowing.

SPEAKER_04 (52:11):
Really?

SPEAKER_02 (52:11):
They're just stacking people in to these new
concept unit type things.

SPEAKER_04 (52:16):
Um I've maybe done one single family in a whole
quarter.

unknown (52:19):
Wow.

SPEAKER_04 (52:20):
Not much at all.

SPEAKER_02 (52:22):
Hmm.
Okay.
Well, that's good to know.
Yeah.
That's good.
And you do a lot of volume.

SPEAKER_04 (52:26):
So you would know.
And I don't do much of those atall.
Wow.

SPEAKER_02 (52:31):
So that either means that there's a lack of those
here in our local market thatare that have opportunity to
make money, because let's faceit, investors don't invest to
lose money or to break even.
I don't ever break even, guys.
That's not the concept ofinvesting.
Uh, the idea of um, for example,New York.

(52:54):
We don't live there, thankgoodness.
But they're talking about makingthe rent uh ceiling or whatever.
Yes, pretty much you can't raiseyour rent.

SPEAKER_04 (53:06):
What?

SPEAKER_02 (53:07):
But the idea is like, do you guys realize that
you're not going to get anyother investors to come in there
to buy your properties thatthese folks will rent from if
they can't make money doing it?

SPEAKER_04 (53:19):
Well then, you know, where is the source of housing
coming from if people can'tafford to buy homes?

SPEAKER_02 (53:25):
Right.

SPEAKER_04 (53:25):
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 whereyou they're having to come out
of their family's pocket to payfor you to live there, you're
going to reduce the amount ofpeople that want to do that.
And then where's your sourcingof housing coming from?

SPEAKER_02 (53:44):
That's right.
And I was talking to somebodyrecently about this, and it was
like one of those tug at yourheartstrings because there's
people that can't afford it.
Totally understand.
I empathize with those people.
Um, have they considered movingto another part of the United
States where it's cheaper, morecost effective?
Absolutely.
Because the the idea of tryingto infiltrate an investor and

(54:08):
change their MO to now this iswhat it has to be because of
affordability.
Well, they're gonna go, okay,see you later.
We'll go over here.

SPEAKER_04 (54:16):
To force them to have to not make any profit or
to, if anything, because you'reright.
Mom and pop landlord is justsomebody that has a family
that's trying to make a andthese cash flows are not much,
right?
So they're just trying to make alittle extra money for their
family.

SPEAKER_03 (54:34):
Yeah.

SPEAKER_04 (54:34):
If you put them in the red, then they're taking a
hundred, two hundred, threehundred dollars a month out of
their family's pocket to be ableto pay for you to live there.

SPEAKER_02 (54:43):
It's exactly correct.

SPEAKER_04 (54:44):
Well, how do you think that that's how is it
possible?
Right.

SPEAKER_02 (54:47):
No, I I totally agree with your your uh
sentiment on that.
Um, it's just getting folks tounderstand the basic economics
of it.
The driver of these propertiesmoving in the first place is the
fact that an investor sees anopportunity for their money to
make them more money.
Um, and like we said, 80% ofthem are mom and pop.

(55:09):
So there it's not like thiscould be their whole life
savings that they put into thisproperty, hoping to get that
residual back after thatoriginal investment is paid off.
Now they're living on that minustaxes, minus insurance, etc.
But putting a cap on it, I mean,how can that even work?

SPEAKER_04 (55:30):
I feel like that that shouldn't be legal.

SPEAKER_02 (55:33):
JC, do you know what it's called?
What is it called that they'retrying to do in uh New York?

unknown (55:41):
Free rent.

SPEAKER_02 (55:43):
I'm not gonna say free rent.
Uh let me see here.

SPEAKER_04 (55:46):
Even like the the the foreclosure process, I think
people have a weird uhunderstanding of that as well,
or a weird impression of that,because I've personally been
through it and um and I and Ican't remember exactly where,
but I can tell you there's itTexas and every state's a little

(56:06):
bit different, but they theymake it very easy for tenants
who understand how to do certainthings to stay in a property
without paying for it.

SPEAKER_03 (56:16):
Right.

SPEAKER_04 (56:17):
So imagine another me, my family, right?
I've got four kids that I amtaking care of.
And the rental properties that Ihave, uh you know, if they're if
somebody stays in that home andthey're not paying me for two or
three months, we'll say it'sfifteen hundred bucks a month.
That's what thirty five hundredbucks.

(56:38):
No, what is that?
4500 bucks that I've just takenfrom my children to be able to
pay for you to live there forfree.

SPEAKER_02 (56:43):
That's right.

SPEAKER_04 (56:45):
Rent free.

SPEAKER_02 (56:46):
Rent freeze.
Rent freeze.
There you go.
Rent freeze.
New York, okay.
What we're uh what you'rereferring to is New York
generally under umbrella termrent regulation.
Uh, more specifically, a termHousing Stability and Tenant
Protection Act of night uh 2019uh is often cited for recent
major reforms in landlord tenantlaws in New York State and

(57:08):
within New York City part of thestate.
Uh two key programs are rentcontrol.
That's what I was looking for.
Rent control, um, strict cap onthe rents for certain older
units, and I think, and rentstabilization.
And I think what they'reessentially saying is these
investors have owned theseproperties for so long that
they're already made money,they've already made enough

(57:30):
money.
How do you know what their lifeis like?
Yeah, how do you know what theirexpenses are?
How do you know what any of thisstuff is?
But it's almost like you'repenalizing someone.
I said penalizing instead ofpenalizing, what a weirdo.
I say refinance instead ofrefinance, anyway.

(57:51):
Um, how is it that we arecapping the potential for
something that we're at the sameother end of our mouth trying to
educate others to actually do tobetter themselves?
It's like, well, why the hellwould I do that?

SPEAKER_04 (58:08):
They're like, well, you figured out how to do it.
So now you need to take care ofall the people who, you know,
can't afford it.

SPEAKER_02 (58:15):
That's exactly right.
Yeah, that's nuts.
Yeah, that's nuts.
Um, so yeah, that I just wantedto to that that popped in.
I'm like, now seems like a goodtime to talk about New York.
It's like we live in Texas.
That's right.
That's right.
Um, so I've gotten througheverything that I wanted to ask.
I think that there's plenty umfor the folks listening uh to to
dabble on and to actuallyutilize.

SPEAKER_04 (58:37):
Yeah, I feel like you went through quite a bit.
And there was quite a bit.
We talked about wholesaling,wholesaling.
Yes, the difference betweenprivate and traditional hard
money financing, yeah.
How to get started, the burrmethod, which we spelled out and
found out it really only hasfour burr ours.

SPEAKER_02 (58:52):
And it's not really br.
It's more like brrr.

SPEAKER_04 (58:55):
It's like brrrrr.

SPEAKER_02 (58:57):
There you go.
And then but not MickeyMachinage like brrrr.

SPEAKER_04 (59:02):
No, not like brrrr.
There you go.
Like a brrrr.

SPEAKER_02 (59:04):
I love it.

SPEAKER_04 (59:05):
Yeah.
So now they then know how theycan buy a rental property with
only 10 grand.
Yep.
Instead of having to put 20%down on every property that they
buy, absolutely maximize theamount of money that they have
by leveraging the right way, notthe way that everybody tells
them to do it, but doing it theright way, buying more rental

(59:26):
properties, building their cashflow, building their equity.
Those are like little banks thatyou can set yourself up with.

SPEAKER_02 (59:33):
That's very true.

SPEAKER_04 (59:33):
For retirement.

SPEAKER_02 (59:34):
That's very true.

SPEAKER_04 (59:35):
Um that will continue to appreciate and that
you'll continue to pay down.

SPEAKER_02 (59:39):
And like I tell everyone when they ask me about
my flipping journey and and anduh the idea of this hits even
harder when the person went tocollege and paid all this money.
I'm like, you paid how much forcollege?
And we talked about that,remember?
Yeah, the school of

SPEAKER_04 (01:00:00):
Hard knock.

SPEAKER_02 (01:00:01):
I mean, it's like you paid, let's say, I don't
know, twenty, forty grand in ayear for your college.
If you go through a propertyflip, and let's say you lose 10,
20 grand, I'm hoping that youlearn something because at the
end of the day, that still was acheaper education or lesson than
going to college.

(01:00:22):
And most that are coming out ofcollege can't use that piece of
paper for anything right now.

SPEAKER_04 (01:00:27):
And another thing that I want to point out though,
since you know, it's a littlebit of a tidbit, like property
flipping is great, but it'stransactional.
Okay.
We have to keep that in mind.
It's transactional.
Just like a wholesale deal, it'stransactional.
You do it, you make money, butthat's it.
After that transaction is done,that's it.
So you have to use, and I alwayssuggest people use uh flipping

(01:00:50):
as a way to graduate.

SPEAKER_03 (01:00:52):
Okay.

SPEAKER_04 (01:00:52):
And then utilize those transactional profits to
continue to build yourlonger-term profit, which can be
buying rental properties, buyingshort-term, long-term rentals.
Um, you can even use hard moneyto start creating notes.

SPEAKER_03 (01:01:07):
Okay.

SPEAKER_04 (01:01:07):
So like you can buy the property, renovate it,
refinance into another type ofloan, and then you can always
wrap that note and uh stabilizethat note for a couple of years,
sell that off to a note buyer.
Um, but that's cash flow rightthere as well.
So there's there's a long-termstrategy to continue to build

(01:01:27):
wealth, but flipping can beutilized as the interim
transaction to be able to buildyour capital to do that.

SPEAKER_02 (01:01:34):
Yes, that was well put.
That is very well put.
Um, Jade, it's always apleasure.
Um, is there anything else youwant to tell these folks out
there?

SPEAKER_04 (01:01:43):
Call me.

SPEAKER_02 (01:01:44):
There you go.
Um, so I will put Jade'sinformation um into the uh
description of this uh episode.
So if you guys out there havequestions about um flipping
properties, if you havequestions about what it takes in
order to do that, um, maybe it'suh something that you've done

(01:02:05):
differently before and want toget somebody else's take in
regards to an expert's opinion,uh, reach out to her.
Um I'm working on getting her tobecome 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, Ipromise you, as my commitment to

(01:02:26):
continue bringing experts fromall different angles of this
great industry we call mortgageand real estate.
Um that being said, we willcatch you on the next one.
If you're still sending outpre-approval letters and praying
your realtors send you the nextlead, you're already behind.

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