September 12, 2024 • 33 mins
Unlock the secrets of asset-based lending with Chad Skelton, our Texas real estate investment luminary, in a candid conversation that will transform your understanding of funding strategies. In an enlightening exchange, we navigate the nuances of hard money lending versus private equity funding, stripping away the myths to reveal the core principles that drive successful real estate investments. This episode isn't just about lending; it's a masterclass in financial savvy, highlighting how private equity solutions like the 30-year fixed DSTR loan can be the lifeblood of your investment portfolio, even if traditional income documentation isn't in the cards for you.
When it comes to thriving in the real estate market, the right partnerships are worth their weight in gold. This dialogue with Chad Skelton explores the indispensable role of a lender who ventures beyond mere financing to provide strategic advice and a thorough assessment of every deal's potential. Discover how tailor-made lending solutions and a lender's insight are key ingredients in achieving your property investment aspirations. For those just dipping their toes into the property pool, we've distilled invaluable advice to help you set attainable goals and grow your real estate ambitions with care.
As we wrap up this episode, we emphasize the importance of preparation and transparency for anyone looking to navigate the real estate investment realm. We shed light on the essential metrics such as loan-to-value ratios, loan-to-cost, and after repair value, crucial for gauging your borrowing capability. The narrative drives home the significance of honesty in your dealings with lenders, as integrity forms the bedrock of a viable investment journey. Tune in to discover how to align your financial and legal affairs before diving into the financing world, and why truthfulness with lenders is non-negotiable for long-term success. Join us for these and more nuggets of wisdom on the TDJ Equity Funding Insiders Podcast.
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If you need assistance in obtaining funding, email us at podcast@tdjequityfundinginsiders.net. Tell what the scope of funding is needed and the amount. A broker will contact you to discuss your funding needs. And remember, at TDJ Equity Funding, we do not force your funding needs into a lender's box but find a lender's box that fits you!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Intro (00:13):
Ready to get the inside scoop on equity funding?
Tune in to TDJ Equity FundingInsiders Podcast for an in-depth
look at what it takes to accessfinancial capital and maximize
your investments.
Hear from experiencedprofessionals, including bankers
, underwriters, loan officersand industry experts, as they
(00:36):
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funds securing funds.
Jacquelyn Jackson (00:52):
Hello everyone, I'm Jacqueline Jackson
and I'm your host at TDJ EquityFunding Insiders Podcast, and
today we have a distinguishedguest co-host that is joining us
is Mr Chad Skelton.
He's a luminary in the world ofreal estate investing lending
that hails from the great stateof Texas, but Chad also brings
with us a wealth of expertiseand experience to our podcast.
(01:12):
With a background deeply rootedin mortgage, real estate, loan
origination, the dynamic hardmoney space and the intricate
world of private equity funding,chad is truly a trailblazer.
His insights and knowledge arenot just academic.
They are forged in the fire ofreal-world deal-making,
strategic financial maneuvering.
(01:34):
Chad's unique perspective andseasoned advice are invaluable
to anyone looking to navigatethe complex landscape of real
estate investing and financing.
So if you would listeners,let's welcome our guest today,
mr Chad Skelton.
Thank you for coming today,chad.
Chad Skelton (01:52):
Thank you, jackie, it's great to be here.
Jacquelyn Jackson (01:54):
Okay and wonderful again to have you.
So let's start off a little bit, because you're coming in as a
commercial lender, real estateinvesting lender, am I correct?
Chad Skelton (02:02):
That's correct.
Jacquelyn Jackson (02:03):
Okay, so let's talk about that field, if
we would.
Let's get a little backgroundof your background.
I mentioned some, but I wantyou to mention some more and, at
the same time, if you wouldkind of explain to us more of
what the lending, how did thatlandscape look with the I think
we talked about, with the heartmoney image and all that as well
?
Okay, if you could do that forus, sure.
Chad Skelton (02:24):
Absolutely.
Yeah, I don't know if I canlive up to everything that you
just described there, but I'lldo my best.
So my background's in realestate and then different parts
of the mortgage industry Went toschool at North Texas and my
first job out of college was ata mortgage company.
I worked my way up to doingshort sale negotiations.
(02:47):
That was my first real exposureinto the mortgage real estate
landscape, so to speak.
So I worked in variousdifferent parts of the servicing
default servicing side ofthings for seven to nine years
there and I got very, veryfamiliar with negotiating real
estate transactions from amortgage perspective.
And then I started to originatesecond liens for agency Freddie
(03:13):
Fannie During COVID.
That was very, very profitable.
It was a huge thing.
And then about a year ago Iswitched over to the.
We say hard money, but weconsider it private equity
lending.
It's for more of your realestate investment non-owner
occupied properties.
(03:34):
So fix and flips, fix and holdssingle family residence,
multifamily and mixed useproperties.
Okay and mixed use properties.
Okay, I think to hit on whatyou were talking about, one of
the misconceptions between uh,of the hard money concept is,
traditionally people would thinkhard money is like I'm going to
(03:54):
get a loan from uncle Vinniewho's going to charge me 20%
interest and be able to close itin two days because I've been a
tight spot.
That is really more hard money.
I would say Private equity ismore of a traditional mortgage.
In a sense.
They're more fix and flip.
Fix and hold type loans areshorter term interest only, but
(04:19):
you are funding off of in-housemoney, usually leveraging some
type of warehouse lines, butyour loan structure is still
30-year amortization.
You have a note that has a termdate and then also your 30-year
fixed DSCR loans.
Those are basically just anormal mortgage.
Jacquelyn Jackson (04:41):
Just normal.
So let's talk on that, becauseour listeners are now learning
the difference betweenowner-occupied and
non-owner-occupied.
Owner-occupied, for thispurpose of this show, is going
to be residential.
Let's say that's residentialhome, something you buy, get a
mortgage from Fannie Mae andthose guys right, correct.
So when you talk aboutmortgages, you're talking about
(05:02):
non-owner-occupied mortgage,which is a business type loan.
At that point, right.
Chad Skelton (05:07):
Correct, okay.
Jacquelyn Jackson (05:08):
So I want to make sure if you could clear up.
We talk about the hard money,like you just mentioned that,
and a lot of people put hardmoney and private equity
together, but the big differencebetween them is what I would
like you to say.
I'm going to start off withwhat I think it is based on what
we've done.
It's still the same as aregular mortgage you would have
(05:29):
to do, but you're looking at therequirements being a little bit
different.
So let's talk about therequirement compared to because
we don't do hard money as welleither.
What's the requirement for that, to get those type of loans
usually?
Chad Skelton (05:44):
Sure.
So yeah, I'm glad that you madethat distinction.
There are no incomedocumentation.
So for your private equityloans, we're not looking at your
employer, we don't look at DTI,we're not looking at W-2's tax
returns, anything like that.
We don't even have a spot onour application for you to put
your employer like that.
(06:05):
We don't even have a spot on ourapplication for you to put your
employer.
I've actually been funny acouple of different times,
having closed a loan withsomebody and then one of my
superiors will be like what dothey do for work?
I'll be like I don't even know.
Jacquelyn Jackson (06:18):
Right, because in that industry it
doesn't matter right.
Chad Skelton (06:20):
It's more along the lines of asset-based lending
an asset in terms of theprofitability of the project and
the profitability of your assetas far as the property goes.
Okay, that's what that is yeah,that's what it's about and it's
based on your experience.
Fico score is weighted.
It's more so weighted heavilyon the 30-year fixed DSCR loans.
Outtro (06:42):
Okay.
Chad Skelton (06:43):
But on the fix and flip, fix and hold loans, it's
mainly your experience level,what you've done within the last
three years in similar typeprojects, and then the
profitability of the project.
Jacquelyn Jackson (06:56):
Right Now.
Let's talk on that On our endas loan brokers and I know you
run into it as well.
When you talk about experience,the experience that we're
talking about is experiencewhere you are on the closing
documents or the LLC thatactually closed on the property,
because people have a tendencyto believe that if I invest my
(07:18):
money, then that means I'm aninvestor.
But you all, how do you alllook at a person for his
experience?
What do you consider anexperienced investor?
Chad Skelton (07:28):
That's a really good question.
An experienced investor in oureyes is somebody that is either
on the HUD at the time ofacquisition of a property and
the time of exit, whether thatis a refinance or a sale If
they've held it.
(07:48):
If you've had a property thatsay you got a conventional loan
on, we can still count yourexperiences in a rehab project,
but you've got to be able todocument that in some way.
Jacquelyn Jackson (08:00):
Okay.
What document would you like tosee if they were doing it?
Chad Skelton (08:03):
An appraisal will typically work if the appraiser
lists property was acquired Xday this XYZ.
Improvements have been completedsince the new owner has owned
it.
Or we can get creative.
The great thing about thislandscape is it's kind of living
in the gray area.
We can get creative withinvoices from your general
(08:27):
contractors, before and afterpictures, whatever it takes.
Just that's the thing.
And even if you were just inthe LLC, we would want to see
the LLC that acquired theproperty.
We would want to see that, viayour operating agreement, you
were at least a 30% owner ormore in that.
(08:47):
But to your point, just becauseyou put up money to help
someone acquire property, that'snot going to account for
experience, for your personalexperience in terms of these
loans, not to say you have tohave experience.
We do loans all the time fornew investors because
everybody's got to startsomewhere.
We get that, but you may notget the lowest interest rate,
(09:11):
you may not get the highest loanto value percentage on your
first one or two, but that's whythere's always a starting point
.
We're willing to work with you.
Jacquelyn Jackson (09:21):
Right, just to actually start.
But we do want to make surepeople understand what that
starting point is, becausesometimes a lot of people come
to us with some misunderstandingof a lot of how this world
works.
Now, something you mentionedabout the landlord is, for us,
something that we see that theyneed to be aware of is taking
pictures Whenever you doimprovement.
(09:42):
You know they don't thinkthey've always done it, it's
done, it's all right.
But something you said I wantto make sure people understand
when you do improvements on yourproperty, you should take
pictures, keep your receipts andkeep up with your pictures,
because even if you refinance ityears later, they are going to
ask those questions about howmuch you put in it and, like you
said, if document is needed,then if you got the receiptsipts
(10:02):
they can show it on appraisal,they can show it.
Then that'd be good.
But I think the least expensiveway just keep the receipts
right, absolutely, and they cankind of do it for that.
So I think that's a great point.
So you guys that's already intothe real estate investment field
you are listening to this isthat's important for you guys to
actually keep up with yourreceipts.
Now, with us talking about thatand the type of funding that's
(10:25):
out there.
You're saying basically, we'retalking about the private equity
field of what you guys do.
What is something?
What do we do, or what do ourlisteners do as realtors, to
find an agency or a loan lenderthat can help them?
What do they need to look forin a lender that can help them
do?
Exactly what is that which isgetting into real estate?
Chad Skelton (10:44):
What are they looking for?
Jacquelyn Jackson (10:45):
Yeah, what should they look for in a lender
?
Because?
Chad Skelton (10:46):
you're a lender, oh, okay.
Jacquelyn Jackson (10:47):
So what do you think in your experience,
because you've been doing it fora while and I noticed you said
some stuff that we really don'thave to talk about, because you
know how it looks when it's ugly.
Chad Skelton (10:55):
Yeah.
Jacquelyn Jackson (10:56):
Yeah, so we'll talk about that in a bit
too, but go ahead.
Chad Skelton (10:59):
So, yeah, I mean.
So what you want to look for ina lender is somebody that can
actually do what they say thatthey will do upon quoting your
deal to actually close it,someone that's got some skins on
the wall.
Word of mouth is always a greatmethod, you know.
(11:21):
You know somebody for a factthat has closed a deal with this
company that has referred youover to them, but you know it is
a very competitive landscape.
I would say speed to close isalways a really big hot topic
item with people.
Also, your size of your companycan play a factor.
If there's a lot of red tapeyou got to cut through every
(11:42):
single time you have a question.
It takes 24 to 48 hours to getan answer.
Or 20 to 48 people to get ananswer 20 to 48 people to chime
in to get a straight answer.
Yeah, I happen to work for amore of a niche investment.
Happen to work for more of aniche private equity company.
To where the beauty is.
(12:04):
If I get a question that mysenior vice president of sales
can't answer, I walk down 20steps down the hallway and I
talk to the CEO founder of thecompany, who's got more than 25
years experience doing thesetypes of loans, and if he can't
answer it, there ain't no answerfor it.
Jacquelyn Jackson (12:21):
Right.
So and I want to say that evenfor us, being loan brokers, we
don't co-broke.
We don't co-broke it.
If you're actually broken outloans, you're not a direct
lender, you guys are direct.
So we work with you guysbecause y'all are direct.
But we have some people thatapproach us that are actually
just that.
They work with differentlenders and they're like oh, we
can work with you on yourco-worker and that doesn't work,
(12:42):
because we see the importanceof you to a client.
I guess when we say that, itkind of leaves a little bit, as
you have more and more peoplePlus people don't know you, they
don't know what you do, but youdo because you've talked to us,
you've talked to me, so youknow what I'm trying to do and I
like that because it stays withyou and, like I say, if it's a
(13:03):
problem, you don't send us alleverywhere.
You take care and you'll comeback and say, okay, this is what
they say we can do.
And that is really importantbecause a lot of us don't know
that there are retail marketsout here that's selling the
money.
You know money, like we'redoing as well, but then it's
those individual more.
I think you like privateconnections, which is what
(13:24):
you're saying.
That's a lot better.
I mean, that's what youropinion is.
You believe those a lot betterthan those retails, right?
Chad Skelton (13:29):
True yeah.
Jacquelyn Jackson (13:33):
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Jacquelyn Jackson (14:59):
So what have you seen been like a really
great, I guess, lending I wantto say lending program that,
like real estate investors arereally to get into right now.
Do you know of any of themthat's pretty good, like on a
fix and flip.
What kind of programs y'allhave that's working really good
for them?
Chad Skelton (15:17):
So fix and flips are always a popular mode of
investment properties.
A lot of people do just likethe turnkey investments.
That's why we do offer the30-year fixed DSTR loan.
Those operate about, I wouldsay they've got a lower interest
rate, maybe about two pointsabove prime.
Those are turnkey properties.
(15:38):
Sometimes you buy them with alease already in place.
Those are pretty simple.
But for fix and flips or fixand holds, you identify a
property that you think you havea good chance of putting X
amount of money into it and theneither turning a profit by
(15:58):
selling it or putting a tenantin that property and leasing it
out as an investment.
Those are really our bread andbutter.
We love to partner with you.
We get very, very detailed andin-depth partnering with you on
the scope of work, what you'redoing, we want.
We're not going to give you aloan that doesn't make sense
(16:19):
just to sell it, Right, right.
Jacquelyn Jackson (16:21):
Because you want them to be successful, and
that's something not to break inon you.
That's something we try to tellour clients, because they come
and they think, like the lenderis after you.
No, the lender is not.
He want to give you the money,but they also want to make sure
they don't get their money back.
That's basically what you'relooking for, and so that
one-on-one relationship isreally important with you guys,
with us as well, because you arelooking out for the client.
(16:42):
You want this to be success andthat's something I think our
investors need to know.
You have an alternative insteadof going to the bank or these
national I think I call themretail spots to come to lenders
that's individual, like you guyson a private equity line is it
may be more beneficial to them,right?
Is that what we're thinking?
Chad Skelton (17:00):
Yeah, absolutely, and it's not our goal to just
close one loan.
We'll take one loan with you.
We want to close all of theloans that you do now in every
single next loan that you domakes it that much quicker
because we've got 80% of yourfile that moves forward for the
next one.
(17:20):
We've got, you know just to useone of my colleagues, investors
for an example, this lady has80 loans with us.
And she basically does two orthree a month and just sends him
updated bank statements and wejust move it on.
We get the property information, the purchase contract and boom
(17:41):
, we're off to the races becauseshe knows exactly what we're
doing and we can scale up anoperation as big as you want it
and make you creating a big,burly business that's going to
have generational wealth for youand your family.
Or if you want to do two a year, one a year, that's fine too.
But coming direct to a lenderthat can partner with you,
(18:05):
that's the main thing.
And then being able to havetrust with each other and
knowing that if there's anypossible way to get this done
for you, I'm going to get itdone.
Jacquelyn Jackson (18:14):
Right, exactly.
Chad Skelton (18:19):
And if it doesn't make sense for you to do it, I'm
going to tell you right upfront that this is not a good
deal.
I'm telling you I'm not goingto lend money on it because
you're going to lose your shirt,if anybody does.
Jacquelyn Jackson (18:25):
And that's what I like about Islanders.
What you're saying of courseyou're one of them is that you
guys will look at a deal with usand you will say I don't think
he need to do this.
This one doesn't seem right.
He may need to look at doingthis or doing that, and that's
what makes it that one-on-onethat's so important.
So for our listeners that arejust starting they might have
(18:46):
wanted to get into it or thosewho's thinking about getting
into it what type of advice canyou give a person that wants to
get into real estate investment?
What are some advice you cangive them that want to start
into that?
Chad Skelton (18:58):
Sure.
So I would say be realisticwith goal setting.
Don't bite off more than youcan chew.
You need to have a logicalprogression.
Don't just because you did asingle family 900 square foot
fix and flip with $20,000 intorehab, think that you can bite
off a 10 unit multifamily with250 grand worth of rehab.
(19:20):
Wow.
That's so true, you know that's, that's uh it, not saying that
you can't.
You might very well be able todo that, but don't expect a
lender to think that that's agreat loan idea.
Jacquelyn Jackson (19:35):
You know what I mean.
Let me say this and I'm goingto bring this because you
brought this up as a good pointwe deal with a lot of.
We have athletes and we havepast athletes, professional
athletes, and the biggest thingthat we have when they come to
us, that when we ask them aboutexperience, they're like oh,
we've already, I've beeninvested, I built this, I built
that, and then you find out youjust put your money in, Like you
(19:57):
said, you just can't put yourmoney in.
It's more to that and I think,like you said, if we start doing
a due diligence, like you said,if you kind of do your homework
and kind of research, what youneed to do, that would help them
be better prepared.
So I think that's really good.
I just want to bring, I justreiterate what you're saying.
I totally agree.
So what else do you think theyneed to, like you said, to do
(20:20):
diligence?
They need to do be realistic,which is true.
Which is question, for you is aperson that wants to start
multifamily and they come to mesaying that they do need to have
experience first.
What type of experience do youlook for?
For?
If somebody want to come and doa 10 apartment complex.
What would you look for?
Chad Skelton (20:37):
So a multi?
Well, I think that to start off, we should define what we
consider multifamily.
Okay, right, in my space andmost other lenders I would
assume will agree we consideranything that's one to four
units a single family.
Gotcha, that kind of goes bythe Uniform Residential
(20:58):
Appraisal Report standards, butanything five plus units is a
multifamily.
So that within itself has awhole different set of
requirements and parameters asfar as how your loans are not
necessarily how they'restructured but the requirements
for experience are going to belooked at a little bit more
(21:20):
heavily, like you're going to bescrutinized a little bit more
on what is your actualexperience?
Because, right, you don'tnecessarily have to have a
multifamily experience to get aloan for a multifamily property,
because how would that work?
Because you've got to have afirst time for everything.
What we would want to see is alogical progression that you can
(21:43):
paint the picture that thisperson started with a single
family, they then did a duplexand now they want to do a four,
or then they did a four unit andnow they're looking at a six
unit.
Jacquelyn Jackson (21:53):
So, basically what you're saying, in the
portfolio you need to show yoursingle family.
That's great, but also let'slook at some duplex and fourplex
to put in there.
That is really good.
That's good.
That's some good information toknow, because I think a lot of
people don't understand what thelenders and that's why we have
this show because they don'tunderstand what the lenders are
wanting.
And what you're asking for issimple.
(22:15):
It's just when they come to us,and probably to you as well,
that when they don't have thethings they should have in place
, it's frustrating.
One, it may not happen, or two,it may take longer.
So, by knowing this, startingout what you're going into,
because a lot of people jumpinto I want to do the
multifamily thing and I'm likeor they want to start with new
construction.
I forgot about that one, theywant to start with new
(22:37):
construction.
And they have no real estateinvestment experience.
So you all are hearing it froma lender, and I've had other
lenders to say it on the showtoo.
You have to have thatexperience and that's what
they're looking for.
And if you're wondering whattype of experience, then reach
out to us and, like I said,we'll get you connected with
someone that can actually workwith you on showing you
(22:57):
everything you guys need to doand how you need to have it done
.
So that is good.
So let's go on to our nextquestion that we have Now.
This one is where I think we'vetalked before, and you talked
about the call of actions thatyou think our lenders should be.
So what is one of the main callof actions you think the
listeners should do?
Chad Skelton (23:18):
I would say that all times are good times to
invest.
We have a real estate housingshortage in this country that
needs to be filled, and it'sonly going to be through people
investing in real estate,continuing to gain the
experience to build new houses,you know then.
(23:41):
Then don't I'm not saying totry to skip steps like we had
just talked about.
You know, you got, you're goingto have to have a little
experience to do a ground upconstruction, um, unless you
just did it out of your ownpocket.
And then right.
But to get a loan for it you'regoing to need to have some
experience, right.
And then multifamily is aroundthe same same lines, but those,
(24:04):
those are quick.
Multifamily is a quick way toalleviate a housing shortage,
for sure, but I mean, thebiggest shortage is the single
family residences.
You know, from 200 to $500,000range Right.
Jacquelyn Jackson (24:15):
And that is true.
That is true, that is there.
I think some of my investorswas telling me how they show up,
you know, to look at homes andthere are people actually
purchasing investment homes forthemselves.
So you're right, that shortageis there.
So you, now you got the regularresidential homeowner.
They're showing up at anauction or at the place where
you're bidding on rentalproperty to be fixed up.
(24:37):
So you're right, it is Now.
I do want to go into something.
I know you and I have talkedbefore, but you had mentioned
something I thought was soimportant that when people start
wanting to get into real estatethat you talked about, they
need to start by getting theirbackground checked and clearing
up all their stuff and lienissues.
Can we talk a little bit ofwhat you think?
(24:57):
I thought that was a greatadvice that you gave when we
talked before about what theyneed to do background wise.
What do you think they shoulddo to prepare to go into real
estate investing?
Chad Skelton (25:07):
Sure, well, I think two main things would be
to do a true self-reflection ofyour experience level, don't
overstate your experience leveland don't overstate your assets,
and don't try to sugarcoat anytype of blemish on your
(25:27):
background or your credit.
It's just, it's not like thosethings aren't going to be
identified immediately uponstarting the process.
So you might as well just ifyou've got something like a
felony on your background,that's not saying it's.
Don't be embarrassed by that.
You're talking to somebody youknow.
Your, your loan officer shouldbe somebody that is well-versed
(25:48):
in hearing that and I guaranteeyou they've heard it all.
Um, so prepare a letter ofexplanation for it, prepare to
be asked for that at least.
And um, credit things that arethat are outstanding.
Um, you know, charge offaccounts, collection accounts
that are recent things like thaton your credit that you are
(26:09):
going to present the argumentthat you're disputing it or
something.
Have those docs ready to go.
Right you know, just do that.
And I think that the experiencepart, just don't overstate it.
And I'm not saying thateverybody is purposely going in
to do that, but it's things likethis that help educate the
(26:31):
people to know what is trulyconsidered experience.
Jacquelyn Jackson (26:35):
And the fact that we look it up in the courts
.
That's how they find out ifit's yours and I've had that a
lot, where a loan, a processoror a closer call me and say, hey
, can you give me a list of thehomes he said he had, because
we're not seeing his name comeup or anything.
They're checking this, soyou're not and they know that.
We know the answers.
(26:55):
The closing guys, they know theanswer that they're asking.
So, like what you're saying, wetell people just be truthful
and everybody need to know this.
Every felony does not mean youcannot get money to do real
estate investment.
That's what people don'tunderstand is according to what
type it is.
That's where we come and that'swhere we have our attorneys
look at it.
We kind of see what everythingis and if that's what the case
(27:16):
is and usually if you have likethose minor ones, they don't
make a big deal about it butagain it's according to what
bank you're dealing with, whatlender you're dealing with.
So we know that is a majorfactor.
So I also wanted to add to onthe background I tell people you
could actually go to a titlecompany and have them pull a
(27:37):
title.
You know not title, but youknow research on you.
You know to see what comes up,what shows up, because and I
don't know fee could be anywherefrom three to five hundred.
I've had people to do that andand you'd be amazed what you can
find out about yourself beforeyou start down that road If it's
something you need to correct.
And, like he said, he thought hehad some houses that was sold
in the family.
His name was still on all ofthem and guess what?
Those houses was really set upin a bad situation so he had to
(28:01):
get that all kind of caught up.
So it's even great to do thatfrom time to time if you're not
even doing real estate.
But that is out there for youto get.
And I think that was some greatadvice you had mentioned that
check all that stuff out beforeyou start, because when we get
to the money part it's going toshow up.
You know, we're going to knowwhat it's doing.
(28:25):
Okay, so let's talk aboutexplaining a 75% or the loan to
value.
Um, we do want to explain thatbecause a lot of people was not
understanding that, that it comein to talk to us.
So I said you know what.
We got someone coming on let'stalk about when you talk about
loan to value, as far as howmuch people qualify for, what's
the percentages you all usuallygo with when you do loan to
value and why.
Chad Skelton (28:42):
Sure.
So depending on the type ofloan that you're going for,
obviously, and the property typeand your experience level and
your credit score, that willdetermine what loan to value
we're able to offer.
Everybody's always going toadvertise their best case
scenario 90% loan to value, 100%rehab.
(29:03):
That's what we're looking at asfar as for our very experienced
investors who've got 700 pluscredit score and when I'm
talking experience I'm talkingverifiable on HUD, documentable
experience.
But so I guess loan to valuemeans if it's an acquisition
(29:27):
it's to the purchase price.
Jacquelyn Jackson (29:29):
Right.
Chad Skelton (29:30):
Not to the as-is value.
If you're getting a great deal,that is great, but we're still
going to base our 75% of yourpurchase price as far as
loan-to-value goes, and there'stwo other metrics that pretty
much every lender in the privateequity space would have in its
loan-to-cost and its loan-to tothe ARV after repair value and
(29:54):
whichever one of those metrics,by the data of the deal you hit
first.
That's where you're capped.
Any lender is going to becapped out, and maybe it's 70%
to the after repair value.
If you're capping at ARV, thenthat means your loan to value is
going to be lower.
Or if you're capping at ARV,then that means your
loan-to-value is going to belower.
Or if you're capping atloan-to-cost, most ground-up
(30:16):
construction deals are based onloan-to-cost, so that's your
purchase price for the land plusyour rehab construction budget.
That's your cost, right.
So if you're at 85% to 90% ofcost and you're covering 100% of
your rehab budget, you justtake 85 or 90% of your cost
(30:36):
minus your rehab budget.
That's your initial loan amount.
Jacquelyn Jackson (30:38):
That's it.
That's it.
So that is something you needto know when you determine how
you want to go about the loan.
That's what you have to do,based on the property, the
utilization, what you're goingto be doing with the dollar.
That determines how you setthat up and that's where that
lender comes in at the counter.
Yeah, I'll figure out what'sthe best program for you based
on what you have, right, becauseeverybody's not the same and I
(31:00):
think we have a lot of peoplethat can actually come in and
they go on what they've heardother people do.
You know, and we know, in realestate it is a custom deal, not
one deal, two deals.
Real estate, it is a customdeal, not one deal.
Two deals are the same.
They're just not.
So I think that's real good andI appreciate you coming in and
saying that.
Is it any other last notes oractions you'd like to talk to
(31:23):
our listeners about before weclose out?
Chad Skelton (31:26):
I would just like to say I've thoroughly enjoyed
this.
This is a really uniqueperspective that I think is
extremely valuable in thismarketplace and I don't really
know of anybody else that'sdoing anything particularly like
this.
So keep it up and I appreciateyou having me here, Okay, but
yeah, I mean the biggestpitfalls that I see, if I could
(31:49):
just leave with some pitfalls toavoid for potential real estate
investors.
I just want to reiterate knowyour experience, Don't overstate
it.
It's not always good to justshop around.
You got to find somebody thatyou feel that you can trust and
that you're comfortable with.
The grass is not always greener.
It matters who can actuallyclose your transaction at the
(32:11):
end of the day.
Jacquelyn Jackson (32:17):
That's true, that's true.
So you've given us some greattakeaways of what we had today
and I hopefully you guys havekind of heard that and in tuned
in.
If you like what we've said andyou would like to have more, we
definitely invite you guys tocome to our website, to go to
our website atwwwtdjequityllcnet backslash
podcast to get more information.
For right now, we want to thankour guest, chad, for being with
(32:39):
us today and definitely want towelcome you to come back in the
future to be on our show aswell.
Chad Skelton (32:44):
Well, hey, I thank you for having me, and if
you'll have me back, I'll beback.
Jacquelyn Jackson (32:49):
All right, well, it sounds like a done deal
, so for our listeners.
I want to thank you again toour listeners for being there.
Again, if you like theinformation that you heard on,
please visit us on our websiteat wwwtdjequityllcnet slash
podcast.
Until next time, thank you andtake care.
Intro (33:09):
We hope you enjoyed this episode of TDJ Equity Funding
Insiders Podcast.
If you'd like to be a guest orget in touch with us, please
visit our website attdjequityllcnet.
Forward slash podcast or emailus at podcast at
tdjequityfundinginsidersnet.
Until next time, take care.
Ready to get the inside scoop on equity funding?
Tune in to TDJ Equity FundingInsiders Podcast for an in-depth
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Hear from experiencedprofessionals, including bankers
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(00:36):
share their unfiltered storiesand valuable lessons on securing
funds securing funds.
Jacquelyn Jackson (00:52):
Hello everyone, I'm Jacqueline Jackson
and I'm your host at TDJ EquityFunding Insiders Podcast, and
today we have a distinguishedguest co-host that is joining us
is Mr Chad Skelton.
He's a luminary in the world ofreal estate investing lending
that hails from the great stateof Texas, but Chad also brings
with us a wealth of expertiseand experience to our podcast.
(01:12):
With a background deeply rootedin mortgage, real estate, loan
origination, the dynamic hardmoney space and the intricate
world of private equity funding,chad is truly a trailblazer.
His insights and knowledge arenot just academic.
They are forged in the fire ofreal-world deal-making,
strategic financial maneuvering.
(01:34):
Chad's unique perspective andseasoned advice are invaluable
to anyone looking to navigatethe complex landscape of real
estate investing and financing.
So if you would listeners,let's welcome our guest today,
mr Chad Skelton.
Thank you for coming today,chad.
Chad Skelton (01:52):
Thank you, jackie, it's great to be here.
Jacquelyn Jackson (01:54):
Okay and wonderful again to have you.
So let's start off a little bit, because you're coming in as a
commercial lender, real estateinvesting lender, am I correct?
Chad Skelton (02:02):
That's correct.
Jacquelyn Jackson (02:03):
Okay, so let's talk about that field, if
we would.
Let's get a little backgroundof your background.
I mentioned some, but I wantyou to mention some more and, at
the same time, if you wouldkind of explain to us more of
what the lending, how did thatlandscape look with the I think
we talked about, with the heartmoney image and all that as well
?
Okay, if you could do that forus, sure.
Chad Skelton (02:24):
Absolutely.
Yeah, I don't know if I canlive up to everything that you
just described there, but I'lldo my best.
So my background's in realestate and then different parts
of the mortgage industry Went toschool at North Texas and my
first job out of college was ata mortgage company.
I worked my way up to doingshort sale negotiations.
(02:47):
That was my first real exposureinto the mortgage real estate
landscape, so to speak.
So I worked in variousdifferent parts of the servicing
default servicing side ofthings for seven to nine years
there and I got very, veryfamiliar with negotiating real
estate transactions from amortgage perspective.
And then I started to originatesecond liens for agency Freddie
(03:13):
Fannie During COVID.
That was very, very profitable.
It was a huge thing.
And then about a year ago Iswitched over to the.
We say hard money, but weconsider it private equity
lending.
It's for more of your realestate investment non-owner
occupied properties.
(03:34):
So fix and flips, fix and holdssingle family residence,
multifamily and mixed useproperties.
Okay and mixed use properties.
Okay, I think to hit on whatyou were talking about, one of
the misconceptions between uh,of the hard money concept is,
traditionally people would thinkhard money is like I'm going to
(03:54):
get a loan from uncle Vinniewho's going to charge me 20%
interest and be able to close itin two days because I've been a
tight spot.
That is really more hard money.
I would say Private equity ismore of a traditional mortgage.
In a sense.
They're more fix and flip.
Fix and hold type loans areshorter term interest only, but
(04:19):
you are funding off of in-housemoney, usually leveraging some
type of warehouse lines, butyour loan structure is still
30-year amortization.
You have a note that has a termdate and then also your 30-year
fixed DSCR loans.
Those are basically just anormal mortgage.
Jacquelyn Jackson (04:41):
Just normal.
So let's talk on that, becauseour listeners are now learning
the difference betweenowner-occupied and
non-owner-occupied.
Owner-occupied, for thispurpose of this show, is going
to be residential.
Let's say that's residentialhome, something you buy, get a
mortgage from Fannie Mae andthose guys right, correct.
So when you talk aboutmortgages, you're talking about
(05:02):
non-owner-occupied mortgage,which is a business type loan.
At that point, right.
Chad Skelton (05:07):
Correct, okay.
Jacquelyn Jackson (05:08):
So I want to make sure if you could clear up.
We talk about the hard money,like you just mentioned that,
and a lot of people put hardmoney and private equity
together, but the big differencebetween them is what I would
like you to say.
I'm going to start off withwhat I think it is based on what
we've done.
It's still the same as aregular mortgage you would have
(05:29):
to do, but you're looking at therequirements being a little bit
different.
So let's talk about therequirement compared to because
we don't do hard money as welleither.
What's the requirement for that, to get those type of loans
usually?
Chad Skelton (05:44):
Sure.
So yeah, I'm glad that you madethat distinction.
There are no incomedocumentation.
So for your private equityloans, we're not looking at your
employer, we don't look at DTI,we're not looking at W-2's tax
returns, anything like that.
We don't even have a spot onour application for you to put
your employer like that.
(06:05):
We don't even have a spot on ourapplication for you to put your
employer.
I've actually been funny acouple of different times,
having closed a loan withsomebody and then one of my
superiors will be like what dothey do for work?
I'll be like I don't even know.
Jacquelyn Jackson (06:18):
Right, because in that industry it
doesn't matter right.
Chad Skelton (06:20):
It's more along the lines of asset-based lending
an asset in terms of theprofitability of the project and
the profitability of your assetas far as the property goes.
Okay, that's what that is yeah,that's what it's about and it's
based on your experience.
Fico score is weighted.
It's more so weighted heavilyon the 30-year fixed DSCR loans.
Outtro (06:42):
Okay.
Chad Skelton (06:43):
But on the fix and flip, fix and hold loans, it's
mainly your experience level,what you've done within the last
three years in similar typeprojects, and then the
profitability of the project.
Jacquelyn Jackson (06:56):
Right Now.
Let's talk on that On our endas loan brokers and I know you
run into it as well.
When you talk about experience,the experience that we're
talking about is experiencewhere you are on the closing
documents or the LLC thatactually closed on the property,
because people have a tendencyto believe that if I invest my
(07:18):
money, then that means I'm aninvestor.
But you all, how do you alllook at a person for his
experience?
What do you consider anexperienced investor?
Chad Skelton (07:28):
That's a really good question.
An experienced investor in oureyes is somebody that is either
on the HUD at the time ofacquisition of a property and
the time of exit, whether thatis a refinance or a sale If
they've held it.
(07:48):
If you've had a property thatsay you got a conventional loan
on, we can still count yourexperiences in a rehab project,
but you've got to be able todocument that in some way.
Jacquelyn Jackson (08:00):
Okay.
What document would you like tosee if they were doing it?
Chad Skelton (08:03):
An appraisal will typically work if the appraiser
lists property was acquired Xday this XYZ.
Improvements have been completedsince the new owner has owned
it.
Or we can get creative.
The great thing about thislandscape is it's kind of living
in the gray area.
We can get creative withinvoices from your general
(08:27):
contractors, before and afterpictures, whatever it takes.
Just that's the thing.
And even if you were just inthe LLC, we would want to see
the LLC that acquired theproperty.
We would want to see that, viayour operating agreement, you
were at least a 30% owner ormore in that.
(08:47):
But to your point, just becauseyou put up money to help
someone acquire property, that'snot going to account for
experience, for your personalexperience in terms of these
loans, not to say you have tohave experience.
We do loans all the time fornew investors because
everybody's got to startsomewhere.
We get that, but you may notget the lowest interest rate,
(09:11):
you may not get the highest loanto value percentage on your
first one or two, but that's whythere's always a starting point
.
We're willing to work with you.
Jacquelyn Jackson (09:21):
Right, just to actually start.
But we do want to make surepeople understand what that
starting point is, becausesometimes a lot of people come
to us with some misunderstandingof a lot of how this world
works.
Now, something you mentionedabout the landlord is, for us,
something that we see that theyneed to be aware of is taking
pictures Whenever you doimprovement.
(09:42):
You know they don't thinkthey've always done it, it's
done, it's all right.
But something you said I wantto make sure people understand
when you do improvements on yourproperty, you should take
pictures, keep your receipts andkeep up with your pictures,
because even if you refinance ityears later, they are going to
ask those questions about howmuch you put in it and, like you
said, if document is needed,then if you got the receiptsipts
(10:02):
they can show it on appraisal,they can show it.
Then that'd be good.
But I think the least expensiveway just keep the receipts
right, absolutely, and they cankind of do it for that.
So I think that's a great point.
So you guys that's already intothe real estate investment field
you are listening to this isthat's important for you guys to
actually keep up with yourreceipts.
Now, with us talking about thatand the type of funding that's
(10:25):
out there.
You're saying basically, we'retalking about the private equity
field of what you guys do.
What is something?
What do we do, or what do ourlisteners do as realtors, to
find an agency or a loan lenderthat can help them?
What do they need to look forin a lender that can help them
do?
Exactly what is that which isgetting into real estate?
Chad Skelton (10:44):
What are they looking for?
Jacquelyn Jackson (10:45):
Yeah, what should they look for in a lender
?
Because?
Chad Skelton (10:46):
you're a lender, oh, okay.
Jacquelyn Jackson (10:47):
So what do you think in your experience,
because you've been doing it fora while and I noticed you said
some stuff that we really don'thave to talk about, because you
know how it looks when it's ugly.
Chad Skelton (10:55):
Yeah.
Jacquelyn Jackson (10:56):
Yeah, so we'll talk about that in a bit
too, but go ahead.
Chad Skelton (10:59):
So, yeah, I mean.
So what you want to look for ina lender is somebody that can
actually do what they say thatthey will do upon quoting your
deal to actually close it,someone that's got some skins on
the wall.
Word of mouth is always a greatmethod, you know.
(11:21):
You know somebody for a factthat has closed a deal with this
company that has referred youover to them, but you know it is
a very competitive landscape.
I would say speed to close isalways a really big hot topic
item with people.
Also, your size of your companycan play a factor.
If there's a lot of red tapeyou got to cut through every
(11:42):
single time you have a question.
It takes 24 to 48 hours to getan answer.
Or 20 to 48 people to get ananswer 20 to 48 people to chime
in to get a straight answer.
Yeah, I happen to work for amore of a niche investment.
Happen to work for more of aniche private equity company.
To where the beauty is.
(12:04):
If I get a question that mysenior vice president of sales
can't answer, I walk down 20steps down the hallway and I
talk to the CEO founder of thecompany, who's got more than 25
years experience doing thesetypes of loans, and if he can't
answer it, there ain't no answerfor it.
Jacquelyn Jackson (12:21):
Right.
So and I want to say that evenfor us, being loan brokers, we
don't co-broke.
We don't co-broke it.
If you're actually broken outloans, you're not a direct
lender, you guys are direct.
So we work with you guysbecause y'all are direct.
But we have some people thatapproach us that are actually
just that.
They work with differentlenders and they're like oh, we
can work with you on yourco-worker and that doesn't work,
(12:42):
because we see the importanceof you to a client.
I guess when we say that, itkind of leaves a little bit, as
you have more and more peoplePlus people don't know you, they
don't know what you do, but youdo because you've talked to us,
you've talked to me, so youknow what I'm trying to do and I
like that because it stays withyou and, like I say, if it's a
(13:03):
problem, you don't send us alleverywhere.
You take care and you'll comeback and say, okay, this is what
they say we can do.
And that is really importantbecause a lot of us don't know
that there are retail marketsout here that's selling the
money.
You know money, like we'redoing as well, but then it's
those individual more.
I think you like privateconnections, which is what
(13:24):
you're saying.
That's a lot better.
I mean, that's what youropinion is.
You believe those a lot betterthan those retails, right?
Chad Skelton (13:29):
True yeah.
Jacquelyn Jackson (13:33):
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Jacquelyn Jackson (14:59):
So what have you seen been like a really
great, I guess, lending I wantto say lending program that,
like real estate investors arereally to get into right now.
Do you know of any of themthat's pretty good, like on a
fix and flip.
What kind of programs y'allhave that's working really good
for them?
Chad Skelton (15:17):
So fix and flips are always a popular mode of
investment properties.
A lot of people do just likethe turnkey investments.
That's why we do offer the30-year fixed DSTR loan.
Those operate about, I wouldsay they've got a lower interest
rate, maybe about two pointsabove prime.
Those are turnkey properties.
(15:38):
Sometimes you buy them with alease already in place.
Those are pretty simple.
But for fix and flips or fixand holds, you identify a
property that you think you havea good chance of putting X
amount of money into it and theneither turning a profit by
(15:58):
selling it or putting a tenantin that property and leasing it
out as an investment.
Those are really our bread andbutter.
We love to partner with you.
We get very, very detailed andin-depth partnering with you on
the scope of work, what you'redoing, we want.
We're not going to give you aloan that doesn't make sense
(16:19):
just to sell it, Right, right.
Jacquelyn Jackson (16:21):
Because you want them to be successful, and
that's something not to break inon you.
That's something we try to tellour clients, because they come
and they think, like the lenderis after you.
No, the lender is not.
He want to give you the money,but they also want to make sure
they don't get their money back.
That's basically what you'relooking for, and so that
one-on-one relationship isreally important with you guys,
with us as well, because you arelooking out for the client.
(16:42):
You want this to be success andthat's something I think our
investors need to know.
You have an alternative insteadof going to the bank or these
national I think I call themretail spots to come to lenders
that's individual, like you guyson a private equity line is it
may be more beneficial to them,right?
Is that what we're thinking?
Chad Skelton (17:00):
Yeah, absolutely, and it's not our goal to just
close one loan.
We'll take one loan with you.
We want to close all of theloans that you do now in every
single next loan that you domakes it that much quicker
because we've got 80% of yourfile that moves forward for the
next one.
(17:20):
We've got, you know just to useone of my colleagues, investors
for an example, this lady has80 loans with us.
And she basically does two orthree a month and just sends him
updated bank statements and wejust move it on.
We get the property information, the purchase contract and boom
(17:41):
, we're off to the races becauseshe knows exactly what we're
doing and we can scale up anoperation as big as you want it
and make you creating a big,burly business that's going to
have generational wealth for youand your family.
Or if you want to do two a year, one a year, that's fine too.
But coming direct to a lenderthat can partner with you,
(18:05):
that's the main thing.
And then being able to havetrust with each other and
knowing that if there's anypossible way to get this done
for you, I'm going to get itdone.
Jacquelyn Jackson (18:14):
Right, exactly.
Chad Skelton (18:19):
And if it doesn't make sense for you to do it, I'm
going to tell you right upfront that this is not a good
deal.
I'm telling you I'm not goingto lend money on it because
you're going to lose your shirt,if anybody does.
Jacquelyn Jackson (18:25):
And that's what I like about Islanders.
What you're saying of courseyou're one of them is that you
guys will look at a deal with usand you will say I don't think
he need to do this.
This one doesn't seem right.
He may need to look at doingthis or doing that, and that's
what makes it that one-on-onethat's so important.
So for our listeners that arejust starting they might have
(18:46):
wanted to get into it or thosewho's thinking about getting
into it what type of advice canyou give a person that wants to
get into real estate investment?
What are some advice you cangive them that want to start
into that?
Chad Skelton (18:58):
Sure.
So I would say be realisticwith goal setting.
Don't bite off more than youcan chew.
You need to have a logicalprogression.
Don't just because you did asingle family 900 square foot
fix and flip with $20,000 intorehab, think that you can bite
off a 10 unit multifamily with250 grand worth of rehab.
(19:20):
Wow.
That's so true, you know that's, that's uh it, not saying that
you can't.
You might very well be able todo that, but don't expect a
lender to think that that's agreat loan idea.
Jacquelyn Jackson (19:35):
You know what I mean.
Let me say this and I'm goingto bring this because you
brought this up as a good pointwe deal with a lot of.
We have athletes and we havepast athletes, professional
athletes, and the biggest thingthat we have when they come to
us, that when we ask them aboutexperience, they're like oh,
we've already, I've beeninvested, I built this, I built
that, and then you find out youjust put your money in, Like you
(19:57):
said, you just can't put yourmoney in.
It's more to that and I think,like you said, if we start doing
a due diligence, like you said,if you kind of do your homework
and kind of research, what youneed to do, that would help them
be better prepared.
So I think that's really good.
I just want to bring, I justreiterate what you're saying.
I totally agree.
So what else do you think theyneed to, like you said, to do
(20:20):
diligence?
They need to do be realistic,which is true.
Which is question, for you is aperson that wants to start
multifamily and they come to mesaying that they do need to have
experience first.
What type of experience do youlook for?
For?
If somebody want to come and doa 10 apartment complex.
What would you look for?
Chad Skelton (20:37):
So a multi?
Well, I think that to start off, we should define what we
consider multifamily.
Okay, right, in my space andmost other lenders I would
assume will agree we consideranything that's one to four
units a single family.
Gotcha, that kind of goes bythe Uniform Residential
(20:58):
Appraisal Report standards, butanything five plus units is a
multifamily.
So that within itself has awhole different set of
requirements and parameters asfar as how your loans are not
necessarily how they'restructured but the requirements
for experience are going to belooked at a little bit more
(21:20):
heavily, like you're going to bescrutinized a little bit more
on what is your actualexperience?
Because, right, you don'tnecessarily have to have a
multifamily experience to get aloan for a multifamily property,
because how would that work?
Because you've got to have afirst time for everything.
What we would want to see is alogical progression that you can
(21:43):
paint the picture that thisperson started with a single
family, they then did a duplexand now they want to do a four,
or then they did a four unit andnow they're looking at a six
unit.
Jacquelyn Jackson (21:53):
So, basically what you're saying, in the
portfolio you need to show yoursingle family.
That's great, but also let'slook at some duplex and fourplex
to put in there.
That is really good.
That's good.
That's some good information toknow, because I think a lot of
people don't understand what thelenders and that's why we have
this show because they don'tunderstand what the lenders are
wanting.
And what you're asking for issimple.
(22:15):
It's just when they come to us,and probably to you as well,
that when they don't have thethings they should have in place
, it's frustrating.
One, it may not happen, or two,it may take longer.
So, by knowing this, startingout what you're going into,
because a lot of people jumpinto I want to do the
multifamily thing and I'm likeor they want to start with new
construction.
I forgot about that one, theywant to start with new
(22:37):
construction.
And they have no real estateinvestment experience.
So you all are hearing it froma lender, and I've had other
lenders to say it on the showtoo.
You have to have thatexperience and that's what
they're looking for.
And if you're wondering whattype of experience, then reach
out to us and, like I said,we'll get you connected with
someone that can actually workwith you on showing you
(22:57):
everything you guys need to doand how you need to have it done
.
So that is good.
So let's go on to our nextquestion that we have Now.
This one is where I think we'vetalked before, and you talked
about the call of actions thatyou think our lenders should be.
So what is one of the main callof actions you think the
listeners should do?
Chad Skelton (23:18):
I would say that all times are good times to
invest.
We have a real estate housingshortage in this country that
needs to be filled, and it'sonly going to be through people
investing in real estate,continuing to gain the
experience to build new houses,you know then.
(23:41):
Then don't I'm not saying totry to skip steps like we had
just talked about.
You know, you got, you're goingto have to have a little
experience to do a ground upconstruction, um, unless you
just did it out of your ownpocket.
And then right.
But to get a loan for it you'regoing to need to have some
experience, right.
And then multifamily is aroundthe same same lines, but those,
(24:04):
those are quick.
Multifamily is a quick way toalleviate a housing shortage,
for sure, but I mean, thebiggest shortage is the single
family residences.
You know, from 200 to $500,000range Right.
Jacquelyn Jackson (24:15):
And that is true.
That is true, that is there.
I think some of my investorswas telling me how they show up,
you know, to look at homes andthere are people actually
purchasing investment homes forthemselves.
So you're right, that shortageis there.
So you, now you got the regularresidential homeowner.
They're showing up at anauction or at the place where
you're bidding on rentalproperty to be fixed up.
(24:37):
So you're right, it is Now.
I do want to go into something.
I know you and I have talkedbefore, but you had mentioned
something I thought was soimportant that when people start
wanting to get into real estatethat you talked about, they
need to start by getting theirbackground checked and clearing
up all their stuff and lienissues.
Can we talk a little bit ofwhat you think?
(24:57):
I thought that was a greatadvice that you gave when we
talked before about what theyneed to do background wise.
What do you think they shoulddo to prepare to go into real
estate investing?
Chad Skelton (25:07):
Sure, well, I think two main things would be
to do a true self-reflection ofyour experience level, don't
overstate your experience leveland don't overstate your assets,
and don't try to sugarcoat anytype of blemish on your
(25:27):
background or your credit.
It's just, it's not like thosethings aren't going to be
identified immediately uponstarting the process.
So you might as well just ifyou've got something like a
felony on your background,that's not saying it's.
Don't be embarrassed by that.
You're talking to somebody youknow.
Your, your loan officer shouldbe somebody that is well-versed
(25:48):
in hearing that and I guaranteeyou they've heard it all.
Um, so prepare a letter ofexplanation for it, prepare to
be asked for that at least.
And um, credit things that arethat are outstanding.
Um, you know, charge offaccounts, collection accounts
that are recent things like thaton your credit that you are
(26:09):
going to present the argumentthat you're disputing it or
something.
Have those docs ready to go.
Right you know, just do that.
And I think that the experiencepart, just don't overstate it.
And I'm not saying thateverybody is purposely going in
to do that, but it's things likethis that help educate the
(26:31):
people to know what is trulyconsidered experience.
Jacquelyn Jackson (26:35):
And the fact that we look it up in the courts
.
That's how they find out ifit's yours and I've had that a
lot, where a loan, a processoror a closer call me and say, hey
, can you give me a list of thehomes he said he had, because
we're not seeing his name comeup or anything.
They're checking this, soyou're not and they know that.
We know the answers.
(26:55):
The closing guys, they know theanswer that they're asking.
So, like what you're saying, wetell people just be truthful
and everybody need to know this.
Every felony does not mean youcannot get money to do real
estate investment.
That's what people don'tunderstand is according to what
type it is.
That's where we come and that'swhere we have our attorneys
look at it.
We kind of see what everythingis and if that's what the case
(27:16):
is and usually if you have likethose minor ones, they don't
make a big deal about it butagain it's according to what
bank you're dealing with, whatlender you're dealing with.
So we know that is a majorfactor.
So I also wanted to add to onthe background I tell people you
could actually go to a titlecompany and have them pull a
(27:37):
title.
You know not title, but youknow research on you.
You know to see what comes up,what shows up, because and I
don't know fee could be anywherefrom three to five hundred.
I've had people to do that andand you'd be amazed what you can
find out about yourself beforeyou start down that road If it's
something you need to correct.
And, like he said, he thought hehad some houses that was sold
in the family.
His name was still on all ofthem and guess what?
Those houses was really set upin a bad situation so he had to
(28:01):
get that all kind of caught up.
So it's even great to do thatfrom time to time if you're not
even doing real estate.
But that is out there for youto get.
And I think that was some greatadvice you had mentioned that
check all that stuff out beforeyou start, because when we get
to the money part it's going toshow up.
You know, we're going to knowwhat it's doing.
(28:25):
Okay, so let's talk aboutexplaining a 75% or the loan to
value.
Um, we do want to explain thatbecause a lot of people was not
understanding that, that it comein to talk to us.
So I said you know what.
We got someone coming on let'stalk about when you talk about
loan to value, as far as howmuch people qualify for, what's
the percentages you all usuallygo with when you do loan to
value and why.
Chad Skelton (28:42):
Sure.
So depending on the type ofloan that you're going for,
obviously, and the property typeand your experience level and
your credit score, that willdetermine what loan to value
we're able to offer.
Everybody's always going toadvertise their best case
scenario 90% loan to value, 100%rehab.
(29:03):
That's what we're looking at asfar as for our very experienced
investors who've got 700 pluscredit score and when I'm
talking experience I'm talkingverifiable on HUD, documentable
experience.
But so I guess loan to valuemeans if it's an acquisition
(29:27):
it's to the purchase price.
Jacquelyn Jackson (29:29):
Right.
Chad Skelton (29:30):
Not to the as-is value.
If you're getting a great deal,that is great, but we're still
going to base our 75% of yourpurchase price as far as
loan-to-value goes, and there'stwo other metrics that pretty
much every lender in the privateequity space would have in its
loan-to-cost and its loan-to tothe ARV after repair value and
(29:54):
whichever one of those metrics,by the data of the deal you hit
first.
That's where you're capped.
Any lender is going to becapped out, and maybe it's 70%
to the after repair value.
If you're capping at ARV, thenthat means your loan to value is
going to be lower.
Or if you're capping at ARV,then that means your
loan-to-value is going to belower.
Or if you're capping atloan-to-cost, most ground-up
(30:16):
construction deals are based onloan-to-cost, so that's your
purchase price for the land plusyour rehab construction budget.
That's your cost, right.
So if you're at 85% to 90% ofcost and you're covering 100% of
your rehab budget, you justtake 85 or 90% of your cost
(30:36):
minus your rehab budget.
That's your initial loan amount.
Jacquelyn Jackson (30:38):
That's it.
That's it.
So that is something you needto know when you determine how
you want to go about the loan.
That's what you have to do,based on the property, the
utilization, what you're goingto be doing with the dollar.
That determines how you setthat up and that's where that
lender comes in at the counter.
Yeah, I'll figure out what'sthe best program for you based
on what you have, right, becauseeverybody's not the same and I
(31:00):
think we have a lot of peoplethat can actually come in and
they go on what they've heardother people do.
You know, and we know, in realestate it is a custom deal, not
one deal, two deals.
Real estate, it is a customdeal, not one deal.
Two deals are the same.
They're just not.
So I think that's real good andI appreciate you coming in and
saying that.
Is it any other last notes oractions you'd like to talk to
(31:23):
our listeners about before weclose out?
Chad Skelton (31:26):
I would just like to say I've thoroughly enjoyed
this.
This is a really uniqueperspective that I think is
extremely valuable in thismarketplace and I don't really
know of anybody else that'sdoing anything particularly like
this.
So keep it up and I appreciateyou having me here, Okay, but
yeah, I mean the biggestpitfalls that I see, if I could
(31:49):
just leave with some pitfalls toavoid for potential real estate
investors.
I just want to reiterate knowyour experience, Don't overstate
it.
It's not always good to justshop around.
You got to find somebody thatyou feel that you can trust and
that you're comfortable with.
The grass is not always greener.
It matters who can actuallyclose your transaction at the
(32:11):
end of the day.
Jacquelyn Jackson (32:17):
That's true, that's true.
So you've given us some greattakeaways of what we had today
and I hopefully you guys havekind of heard that and in tuned
in.
If you like what we've said andyou would like to have more, we
definitely invite you guys tocome to our website, to go to
our website atwwwtdjequityllcnet backslash
podcast to get more information.
For right now, we want to thankour guest, chad, for being with
(32:39):
us today and definitely want towelcome you to come back in the
future to be on our show aswell.
Chad Skelton (32:44):
Well, hey, I thank you for having me, and if
you'll have me back, I'll beback.
Jacquelyn Jackson (32:49):
All right, well, it sounds like a done deal
, so for our listeners.
I want to thank you again toour listeners for being there.
Again, if you like theinformation that you heard on,
please visit us on our websiteat wwwtdjequityllcnet slash
podcast.
Until next time, thank you andtake care.
Intro (33:09):
We hope you enjoyed this episode of TDJ Equity Funding
Insiders Podcast.
If you'd like to be a guest orget in touch with us, please
visit our website attdjequityllcnet.
Forward slash podcast or emailus at podcast at
tdjequityfundinginsidersnet.
Until next time, take care.
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