December 11, 2023 • 31 mins
Ready to unearth the secrets of successful real estate investing and hard money lending? For this episode of the Legacy Wealth Code podcast, we had the pleasure of chatting with Ryan McGuinness an industry titan who started his adventure in equities and options before hitting the jackpot in real estate. Ryan walks us through his shift from flipping houses to private lending in 2015, introducing us to a business model that offers both quick loan approvals and a passive investment avenue for lending partners.
As we navigate the landscape of hard money lending, Ryan opens up about the rewards and risks tied to lending vast sums to real estate investors. He shares his journey to growing his business to a whopping $90 million, all while maintaining premium service quality. Ryan delves into the art of building robust relationships with lending partners and managing borrowers, offering invaluable insights to anyone looking to make it in the industry.
But that's not all. We steer the conversation towards real estate investing, where Ryan, now the CEO of a thriving lending company, spots the benefits of investing in short-term loans. We talk about the impact of rising interest rates on the real estate market and how hard money lending can be a lifeline for real estate agents and buyers. So, gear up for an episode brimming with golden nuggets about the real estate market and hard money lending.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This is the Legacy Wealth Code podcast helping you
build long-term wealth andelastic legacy through real
estate investing, tax strategiesand motivational stories from
some of the most successful andinfluential people out there.
Here are your hosts real estateinvestor and entrepreneur,
Michael Notbohm, and real estateinvestor and attorney, Andrew
Hoek.
Michael Notbohm (00:23):
Welcome back to the next episode of the Legacy
Wealth Code podcast.
My name is Michael Notbohm andI am here today with a good
friend of Ry.
an McGuinness, .
Welcome to the show.
Ryan McGuinness (00:32):
Appreciate it.
Thanks for having me on.
Michael Notbohm (00:33):
We've got some technical issues, so Andrew is
taking the day off.
Got to try to dial this wholetechnology thing in a little bit
better, but you know it is whatit is.
I want to chat with you today.
I know you were on here, Iguess what about six months ago
or so, probably Talking aboutyour awesome life that you've
built through the hard moneylending business, and you know
you and I have had a lot ofconversations around.
(00:54):
You know what it is that you'redoing, kind of your track
record and history that broughtyou to building the business
that you have now.
And I think it's really coolbecause there's so many
opportunities out there wherepeople try to say it's a truly
passive opportunity until youget into it and you're fixing
toilets at three in the morningand you know garbage disposal,
so you've actually got what Iwould consider a truly passive
(01:17):
opportunity.
Do you agree?
Ryan McGuinness (01:18):
Yeah, I mean it's.
You know we're a lot moreactive as the portfolio managers
, but for our lending partnersit's 100% passive.
I mean we underwrite everything, we handle everything.
It can be as passive as theywant it to be.
Michael Notbohm (01:30):
So walk me through, I guess, just for
people that don't know yourbackground.
You're real.
You know from college till nowkind of your real estate.
You know what's brought you towhere you're at now.
Ryan McGuinness (01:40):
Yeah, I saw value in real estate around
2009,.
Right, so sort of after thecrash.
Prior to that I was kind of inequities and options and bonds,
more stock market relatedventures, and we saw real estate
as a way to make income andthrough a friend, I started
flipping a lot of houses.
You know, back then houses were, we were flipping, buying stuff
for 50, 60, 70 grand, puttingfive, 10 grand into it you know,
(02:03):
and making a nice, a nicespread.
Now those houses are all 300,000, right, I wish I kept them all,
but we did that and newconstruction as well, and that
kind of carried me into 2015,2016, where I was looking to
stay in real estate, but I waslooking for a product that
eliminated a lot of the risk ofit, because at that time the
market had been going up formaybe five years.
Michael Notbohm (02:25):
Now you know, we've had you look at the normal
cycle and you're kind oftraditionally at the top of it.
Ryan McGuinness (02:30):
Sure.
So we wanted to see what couldstill achieve a high yield but
not have that dollar for dollarrisk and return like flipping
and construction, and we kind oftransitioned that point into
doing a lot more private lendingin real estate.
Michael Notbohm (02:43):
Yeah, I kind of laughed because I remember when
I did that the beachfront,waterfront property and you know
you as a friend you're like,yeah, man, that's great.
And then I know that you andyour brother were like these
guys are idiots for doingbecause it's, you know, that was
our first big, you knowmulti-million dollar flip, which
I mean most.
You know it's there's adefinitely an element of risk
(03:04):
and flipping yeah.
And then now you add on amillion dollars that you're, you
know, taking out hard moneyloans on, and it's like, yeah,
all right, this is like ithappens to everybody.
Ryan McGuinness (03:14):
You know every, every aspect is going to be
over budget.
Every aspect is going to beover time.
You know people think withflipping, hey, I'm buying a
property, a 30 day rehab, 30days on the market and 30 days
closed right, yeah, that 30 dayrehab could be six months, could
be a year, who knows, could siton the market a couple of
months and then you may have atime or two of of under contract
(03:34):
that fall through before youactually find your your end
buyer.
So it can definitely rapidlyincrease in in time and money.
Michael Notbohm (03:41):
Yeah, so all right.
So you've got the portfolio.
You decided to kind of startliquidating some of that, and
then are you using your ownfunds to to start the hard money
business?
Are you using mezzanine debt?
What's that look like?
Ryan McGuinness (03:53):
Yeah, so initially our own capital and
then some private you know,friends and family, much of the
model that we have now.
We don't really deal withinstitutional lenders, because
then you're under the scrutinyand the same rules that that
they have right so we are theend decision makers on all of
our notes in our portfolio.
That that allows us to give a aquick answer to the
underwriting of of that deal forour borrowers.
Michael Notbohm (04:14):
And so you know and I can definitely attest to
that because you know, doinghard money loans on a project,
they always make it seem likeit's super easy and then you end
up basically going through thesame underwriting processes.
If it's like a conventionalloan, like I need to see the you
know four months of bankstatements, I need to see your
tax returns, like I thought thiswas, you know non QM, now all
(04:34):
of a sudden I'm basically givingyou my entire life story.
Ryan McGuinness (04:37):
Yeah, and it'll tell you that day one.
Right, that's that they tellyou that.
Michael Notbohm (04:40):
They tell you that in their flyer, Like it's
oh, you know, you don't evenhave to, you know, don't even
submit an application, We'lljust send you the money You're
like wow, this seems easy.
Ryan McGuinness (04:48):
Sure, and I would say with us in particular
it is almost that easy.
A lot of other hard moneylenders or private lenders like
you say, you know they sayapprove the deal.
And then they start askingquestions later.
You know, with our deals we tryto, within an hour or two,
fully underwrite and approve thedeal.
You're never going to have anysurprises or changes after that.
Maybe it takes us a day tounderwrite it if it's something
(05:09):
complex, but we can get thoseanswers to our borrowers very
quickly.
Michael Notbohm (05:12):
Well, what's funny?
Like in our friend group, ofcourse we've got a lot of
friends that are in real estateand that you know we all kind of
joke because it's like everyone, you know they'll call you.
You give them the breakdown.
All right, let me see if I canfind a cheaper version of this.
They might find something thaton paper looks better and more
attractive, and then the daybefore closing then they call
(05:32):
you back and they're like hey,man, this didn't work out.
How often does that happen Allthe time, all the time.
Ryan McGuinness (05:37):
Yeah, so a lot of times we're very clear with
our pricing structure andupfront.
So even though you know wemight seem a little more costly
or we may be more costly upfront, you're never going to get
those hidden fees that you don'tsee until the closing table
right.
All of a sudden somebody showsup.
You see an admin fee, anunderwriting fee, an application
fee, a wire fee, you know allthese other fees, five or six
fees that add up, that we'resimply not going to have any of
(05:59):
that with us.
We have our origination fee andthat's it.
Michael Notbohm (06:02):
You may need to start building in a I told you
so fee, though that's it, yeah,for sure, I told you, so it's
going to be an extra 3% now.
Ryan McGuinness (06:08):
Yeah so a lot of times we'll get that.
And then, a few days beforeclosing, like you say, either
they're under capitalized andcouldn't close the deal their
current you know lender or itwas a conventional deal that
fell through or they're justtired of the waiting process and
they're under a deadline toclose, or they're going to lose
their hard deposit, and thenwe'll get the deal done.
Michael Notbohm (06:25):
Yeah, all right , so walk me through like a
typical deal.
What does that look like?
Ryan McGuinness (06:28):
Yeah, so our asset only lending.
So we're not pulling yourcredit, we're not pulling your
tax returns, we're not pullingyour bank statements, no income
verification.
So you can eliminate that piece, which is the majority,
typically with bank underwriting, right that's they look a
little bit out of the propertybut they're pulling all this
other information.
That takes time and there's allthis variable.
(06:49):
So we eliminate that 100%.
There's none of that.
We're asset only lending.
We need to determine the valueof the property, either through
an appraisal or our ownknowledge or comps that we can
do and we lend up to that.
70% of current as is value.
70% would be like a clean,single family home.
If we're dealing withmultifamily or commercial, we
may be closer to like a 65% andthen raw land.
(07:11):
We're typically up to 50% LTVloan to value.
Michael Notbohm (07:15):
And do you even like so on raw land.
Do you care what their goal isLike?
I wanna buy this piece of land.
Do you wanna know what's the?
What are you gonna do with it?
Ryan McGuinness (07:23):
Not really.
I mean it's you know we'lllisten, but all we're looking at
is as is value today, right?
So if they have some grand idea, that's great and we hope they
exit that way.
But we're not lending on that.
We're lending on what is itworth today, because if we get
it back into the fall, we'reselling it today.
We don't hold anything right,so we don't wanna be in the
business of being a landlord.
We would sell that property, sowe just need to know how can we
(07:44):
safely exit it.
Michael Notbohm (07:46):
And so now you were you know I know we've
talked about scale before andwhen you were doing flipping.
To flip the amount ofproperties that you now have
loans out on would be a hugeundertake.
Ryan McGuinness (07:57):
Sure, right now we have about 250 active loans
today.
So I mean, even if I had 20 or30 flips, but I can't imagine
200, something you know we'dhave to have dozen employees,
probably at least a 10,000square foot office space.
We're talking about millions ofdollars of payroll, millions of
dollars of overhead and all theunknowns that go with that.
Right the there's so manyvariables Dealing with the city,
(08:20):
dealing with people not showingup for work, material cost,
Right insurance to the roof,taxes to the roof, all the
problems that ownership comeswith it would carry over into
that flipping where with lendingit's totally scalable,
virtually no employees.
You know we have a book ofabout 90 million now in total
loans and it's very easy tomanage.
Michael Notbohm (08:40):
Well, I know I gave you that book, the Banker's
Code and I told you that you'dbeen holding out on me because
I'm reading this like okay, sothis was like the Rothschild's
their family secret that waspassed down generation to
generation and I think thatthere's so much to learn from
that because, realistically, inany environment, the banks are
always the ones that win.
Right, you sell a house.
If you're upside down, the bankgets paid first, and then you
(09:02):
know they're probably gonna comeafter you for the rest, if you
don't have the equity, butyou're never gonna get your
money.
First, the bank always getstheir money first, right.
Ryan McGuinness (09:09):
I mean there's larger upside potentially to
flipping.
But as long as you'recomfortable with the yield that
your notes are returning you,then who cares?
You know you hope yourborrowers kill it, you hope they
kill it and come back and comeback, and come back, and you
know so that's.
The only thing is that with abank you're generally limited to
your loan.
You know your loan around orpossibly default interest rate
(09:30):
or possibly if you got theproperty back you'd have an
upside there.
But I don't think the riskversus reward or the headache of
doing it it makes it worth it.
Michael Notbohm (09:38):
Yeah.
So you transition into thishard money thing and went
through friends and family, yourown cash.
You get to a certain thresholdwhere you're like, okay, the
demand is still, it's more thanthe capital that we have, right.
So then you started.
Essentially it's kind of like afund, but I don't think you
call it that right.
Ryan McGuinness (09:54):
Yeah, it's not a fund per se, because each
individual lending partner knowsexactly the specific deal that
they're in.
So when we get a deal and weunderwrite it.
We underwrite everythingin-house, we fully approve it.
At that point we'll kind ofcustom tailor that deal to
already know who's in queue forthat size deal or that duration
deal.
Some lending partners mayprefer a longer term, which in
(10:16):
our case would be two-yearballoon.
Some you know a guy might say,hey, I'm gonna flip this, it's
gonna be 90 days or 60 days, andsome people, some of our
lending partners, prefer ashorter term.
So we kind of fit that mold towhat our lending partners want
and then give them the fullunderwriting on that and they
have the final approval, ofcourse.
But if I'm sending you a deal,I'm in it myself and you should
(10:38):
approve it as well.
Michael Notbohm (10:39):
Okay, so you got a deal.
You know, one comes across thedesk today for half a million
dollars.
You're gonna lend a 70% on that, or up to 70%.
You package it up, this isapproved.
You send it out to the peoplethat they're not giving you
their money until the deal isdone and they're not even giving
it to you directly.
Right, correct?
Ryan McGuinness (10:55):
They just fund the title company or the closing
attorney directly.
We don't ever manage theirprincipal.
The only thing we would managewould be the monthly payments
every month.
Michael Notbohm (11:04):
And then how does that work for if somebody
invests money with you?
Ryan McGuinness (11:07):
Yeah, so all of our notes are 12% annual.
We take a servicing fee fromthat and we net the lending
partner around 10% roughly andthat's a baseline.
You know, in Florida the faultinterest rate goes to 18 or 25%
depending on the size of thenote.
If it's under 500,000, it's 18%, if it's over 500,000, it's 25%
.
So they would participate inthat upside should the property
(11:30):
go into default.
How often does that happen?
To go all the way through withthe foreclosure is extremely
rare.
You know we've done more than900 deals and we've taken back
maybe five properties becauseour borrowers have so much
equity and skin in the game,even if something unfortunate
happens to them.
We kind of work with them like,hey, sell this property, don't
allow us to take the propertyback.
Right, you have a milliondollar home.
We lent you 600 grand on it,700 grand, whatever.
(11:53):
You know, don't allow us Sell ityeah, sell it for 850 if you
had to, or 900 in a fire sale,get rid of it.
And we work with our borrowers.
We're not like, hey, you'refive days late, now there's this
fee, and now we're filing thisand now we're doing that.
If you're community with us andyou're saying, hey, I got
behind, but in 30 days I'mselling this property, I want to
get caught up or in 60 days I'mdoing this, we always try to
(12:14):
work with you and that's howwe've kind of built our business
right.
We see a lot of other lendersthat are just all about fees and
just driving every cent ontheir borrowers.
Michael Notbohm (12:23):
Yeah.
Ryan McGuinness (12:24):
And you know, we see it in every aspect and
we're total opposite of that.
Michael Notbohm (12:28):
Well, it's kind of crazy being able to maintain
that you know level of servicewhen you get to.
You know 90 million on thestreet is a lot.
Yeah, you know that'ssignificant.
I think what was the award yougot this year Fastest?
Ryan McGuinness (12:39):
50 companies in Tampa.
Which is awesome right, socongrats on that.
I appreciate it.
Michael Notbohm (12:43):
But yeah, I mean once you grow, you know
it's like anything business-wiseonce you get to certain levels
of scale, there's always a newset of problems.
Sure, so like what do you thinkfrom what were you at last year
?
Ryan McGuinness (12:53):
Probably 60 million Okay.
So I mean, that's a significantgrowth.
Sure.
Michael Notbohm (12:58):
What do you think the new problem is now?
Ryan McGuinness (13:00):
Yeah, I mean, the hardest part of the equation
is always the borrowers.
For us, we've been veryfortunate that our lending
partners are very wellcapitalized and, over the decade
of doing deals with them, whenthey compare their returns to
other investments and especiallythe risk of other investments,
you know they have a lot ofmoney on the sidelines that are
ready to go and we've definitelypicked up some significant you
(13:22):
know 10 million plus net worthinvesting lending partners
within the last year or two.
That really help out.
So, the borrower is always thehard part of the equation, right
?
It's because that's the finitething, you know.
You got to have a guy that hasa lot of money down or a lot of
equity, and also decided not togo to the bank route, the
traditional bank route, forwhatever reason.
Michael Notbohm (13:44):
So is that, is the majority of the people
coming to you fix and flip typeguys?
Ryan McGuinness (13:48):
or are they?
They're really just one-offscenarios where time is of the
essence.
They need to get a deal done inyou know, five, 10, 15 days, or
maybe they had 90 days, but thebank's been jerking them around
for 85 days of it right.
And they're going to lose thedeal or something is going to
happen to where they need to gettheir deal.
Yeah, their escrow's gone yeahso you know they decided to put
$50,000 hard down becauseanother hard money lender said
(14:10):
they'll definitely you know getthe deal approved and they call
us with a few days.
So it's really just somebodythat doesn't want any
questioning of all theunderwriting.
That's typical and needs toclose quick and really the
premium in interest is isn'tanywhere near what it used to be
right.
All of our notes have alwaysbeen 12%, even going back two,
three, four or five years ago.
So the spread back then whenyou could get a mortgage at
(14:32):
2.75% or 12%, you know it's likeman 9%.
Michael Notbohm (14:36):
Yeah, that's a big difference.
Yeah, that's a big difference.
Ryan McGuinness (14:38):
You know, now we're seeing 7, 8, 9, you know
some SBAs 11, there's a lot ofhybrid loans, you know non-QM
stuff in double digits.
So it's paid a little bit ofspread.
Another reason that ourbusiness has really increased
yeah, I mean it makes you callyou.
Michael Notbohm (14:52):
Okay, I got the equity here, I got the down
payment.
That's pretty much.
That's the last question thatyou really need to know what's
the property worth.
Ryan McGuinness (14:59):
Yeah, and then you need the money to put down
to purchase it.
Michael Notbohm (15:02):
Now the, you know, as interest rates have
gone up, why have you notincreased yours?
Ryan McGuinness (15:07):
You know that's a good question.
Like I said earlier about we'rehappy with our yield, we're
happy with the income that we'remaking.
Our lending partners are happywith that.
You know we're not trying tosqueeze every last dollar from
our borrowers.
We could have raised it, butthen you know, then's the
question rates go down, am Ilowering?
I like that.
All of our network knows ourrates, knows our term.
So when you have realtors thatare helping their assist, their
(15:30):
clients, they know what they cancall us and get, or mortgage
brokers, or attorneys, or titlecompanies they've done, you know
, dozens or tens of deals withus and they know our terms, so
they're not having to.
Well, let me see what Ryan'srates are today and let me see
what you have to put down today.
Let me see what they can dotoday.
You know we are the simplest,easy one pager and we're truly
sticking to those facts.
You know as to what we can getdone.
Michael Notbohm (15:52):
Yeah, and I know I've said you've deals.
We've done an interesting dealnot too long ago where I think
it changed about what?
A hundred times.
Ryan McGuinness (15:58):
Probably.
Yeah, that was the Now and withit closed, there's so many
different properties in and out.
Michael Notbohm (16:02):
I had to I remember you called me and
you're like well, 10 minutes agoit was off and now we just
closed it.
Ryan McGuinness (16:07):
Yeah, and that was at like four in the morning
and like five in the morning.
Things were changing and likewhat's going on?
Michael Notbohm (16:11):
Yeah, usually when you get those calls at four
in the morning, you kind ofknow what the condition of the
borrower is Sure sure.
He's thinking about somedifferent things based on maybe
like a roulette session or acraps.
Or a craps session.
So if somebody wants to be aninvestor with you guys, what
does that look like?
Ryan McGuinness (16:27):
Yeah.
So they would come in.
They would just give us ageneral ballpark that they want
to put to work.
Now if they say, hey, I have amillion dollars I want to put to
work, it doesn't mean they'reputting a million dollars in one
deal, so I know what to limitthem up to.
So I might call them and say,hey, I have a $200,000 deal and
now they fund it a couple dayslater.
Hey, I have a $300,000.
So we'll kind of go up to theircomfort level.
(16:49):
Every month they're going to getthe interest payment dispersed
to them on the first of everymonth for all the deals prior of
that month.
So most of our lending partnershave multiple deals.
So their borrower pays on the20th and the 25th They'll get a
report, it's all automated.
And then the ACH batch goes outon the first day of that month
and sends them their payment outTo fund those deals.
They'll have a full our fullunderwriting file and you know
(17:13):
why we want to fund this deal.
And they give a commitment andthen within you know, usually
five or 10 days is the actualclose date.
They wire the money directly tothe title company and that's it
.
It's really, it's really simple.
In the event, there needs to be, you know, a demand letter for
a late payment or even aforeclosure.
They're not actively involvedwith that at all.
We handle all that.
(17:34):
We have the legalinfrastructure to handle all
that.
Obviously, they have finalapproval and we'll keep them.
You know abreast of what'sgoing on, but they're not okay.
You know my loan's in the fault.
Now I need to find an attorney.
There's none of that.
It's truly, truly, trulypassive for them, as much as
they want it to be.
Michael Notbohm (17:48):
So the person wires the money to the title
company get paid monthly.
Worst.
Like longest terms, two years.
Correct, most of the time let'sjust say it sells in eight
months or nine months, yeah.
Ryan McGuinness (17:58):
So all of our notes are two-year balloons.
So somebody's not, you know,stuck in some long-term 30-year,
15-year product.
The borrower has no prepaymentpenalty on our notes, so they
can pay it off, you know,anytime.
I would say around that eightto 12, 14-month mark is probably
the majority of the payoffs,right, okay, it could go up to
two years and we've had deals gotwo years and again other
(18:19):
lenders might say hey, yourballoon, we're not renewing,
we're foreclosing on you.
Now, if the property's good andthe economy's relatively the
same and that borrower has beenmaking payments, we'll renew it
another year or two-year term.
There's no, you know, we're notout to get any of these buddies
property, nor do I wantanybody's property.
I'd rather just collect theinterest and have them in it.
So we would extend at thatpoint.
And there's always liquidity inour notes.
(18:40):
We hold all of our notes inhouse, right, we don't sell our
notes off.
But if somebody has a liquidity, personal liquidity event they
need, I would just assume nonote with my own personal
capital or another lender wouldtake over.
So it's not like oh man, nowI'm not going to see my money
for two years.
Michael Notbohm (18:55):
Right, I'm screwed for two years.
That's pretty awesome, okay, sosomebody wants to get involved
with you.
What like they call you?
What's the process look like?
Because they're not giving youthe money, they're just
basically saying, hey, I want tobe an investor with you.
Ryan McGuinness (19:08):
Correct, we're servicing and everything.
Yeah, they can contact me.
My cell phone is 352-262-3722.
They can reach out to medirectly.
Michael Notbohm (19:16):
And I can verify that.
You answer, I think, prettymuch all the time, unless you're
boxing or it's past 8.30 atnight and you're asleep.
Ryan McGuinness (19:23):
Yeah, and in between boxing rounds I might
still pick up.
Michael Notbohm (19:26):
Yeah, that might be true, if you catch me
past my bedtime.
Ryan McGuinness (19:29):
I'll call you back at 4 am, don't worry, yeah.
Michael Notbohm (19:31):
So what are you looking for?
I mean, now that you went from60 to 90 million, what's the
goal for 2024?
Ryan McGuinness (19:37):
Yeah, Just continue to the growth that
we're on.
I mean, I believe for surewe'll be well into the low
hundreds of millions.
We're just trying to keepgetting our name out there and
keep growing.
But the organic growth of thecompany, because you're doing
all these good deals.
And one thing when Bank ofAmerica says they're going to
fund you and you sold your housein Virginia and you're moving
(20:00):
down, and it's Tuesday andyou're moving down, you're
closing Friday and you got yourwife and your kids and your dog
in the U-Haul and you're allcoming down, and Bank of America
calls you on Thursday and sayshey, we didn't realize how much
money you spent on Best Buy onyour credit card last month.
We can't fund this deal anymore.
It's off right, which is real.
Michael Notbohm (20:18):
Yeah, no, I'm laughing because you're not
wrong.
Ryan McGuinness (20:19):
Yeah, so we get that call.
If Bank of America funded thatdeal on Friday, they wouldn't
have told anybody about it.
It's just expected.
So we get that call on Thursdayon a guy who doesn't know us,
who, guy who's been dealing withwhoever for 30 to 60 days, and
he calls us and says man, we'resupposed to move in tomorrow.
We got everything packed in,we're on the way down.
Is there any way that you canget this deal done?
(20:40):
And we get it done in one day?
He's telling everybody.
Speaker 1 (20:44):
Right.
Ryan McGuinness (20:44):
And the two real estate agents that were
about to make no commission aretelling everybody.
And the title company that wasabout to do all the work for
free was telling everybody.
And the attorney that did thework he's telling everybody.
So it really sells itselfversus just an ordinary lender
or other hard money lender thatjust do what they're supposed to
do.
When we come in and savesomething, that was like a
catastrophic event for a family.
Michael Notbohm (21:04):
Yeah, when you think about too, I mean from
like an investment standpoint.
I've got friends who you knowand Andrew and I on the last
episode talked about what wealthmeant and what building wealth
meant and I've got friends whohave this mindset that they just
well, I save my money and likethey literally have hundreds of
thousands of dollars in achecking account or a savings
account that makes like 0.025%interest.
(21:27):
It's like the end of the year,on 300 grand, they made like 12
bucks.
Ryan McGuinness (21:30):
Yep, yeah, and you know we're in a higher
interest rate environment.
So even somebody like thathopefully they're getting three
or four or something percent ina CD.
And I always tell people you'regoing to make more than double
that with us.
And if you truly understandwhat we're doing, you realize
that the risk isn't there, right?
People think, oh, mortgages I'mlending, what if they don't pay
?
Michael Notbohm (21:50):
Well, that's your most profitable deals.
Probably, right, exactly.
Ryan McGuinness (21:53):
Yeah, you know, my baseline is 12%, but my
default interest is going to be18 or 25% or potentially a house
with a half off coupon.
Right, I lent 500 grand on amillion dollar house.
Those are the biggest home runsbecause you're making almost
100% return then.
Michael Notbohm (22:08):
And most of the time that 500,000 dollar house,
like when shit hits the fan.
They were halfway throughconstruction and they ran out of
money, so now it's worth more,anyways, because they did a lot
of stuff to it.
Ryan McGuinness (22:20):
Almost always, our borrower has improved their
property on their own money.
We don't lend on rehab, right?
So those little stickysituations I think that's how
you find yourself in a badsituation, Lending on rehab and
people don't perform, and thenyou're like all right, well,
where's the money we lend themon?
You know, we gave them 100grand for rehab and the guy
didn't do much with it becausehe's paid something else off
with it.
We will never have those issuesbecause we don't underwrite like
(22:42):
that and we don't lend on thatkind of stuff.
Michael Notbohm (22:43):
Is most of your stuff in Florida.
Ryan McGuinness (22:45):
Almost all yeah , because again we have organic
network right.
So probably 90% of it is withintwo hours of Tampa, probably 9%
throughout the state and then1% outside of Florida.
Michael Notbohm (22:56):
Like when I call and say hey, can you lend
me money in Indiana, correct?
Ryan McGuinness (22:59):
correct.
Yeah, you know, outside of thestate we don't have the legal
infrastructure, we don't have aton of construction crews if we
need it.
I'm not there to manage theproject in person.
So that would be something thatwe would lend to lower LTV If
somebody had a single familyhome.
We may only go 60% to 65% onthe out of state deal.
Michael Notbohm (23:17):
So are you optimistic of the real estate
market going into 2024 andbeyond?
I know we're in an electionhere, so it's kind of.
Ryan McGuinness (23:23):
Yeah, I think it's healthy to have a tapering
or even a down.
I think Florida and Tampa ingeneral is maybe insulated for
much of a downturn becauseeveryone continues to want to
move here and live here.
But I think it's okay to godown a little bit.
And these higher interest rates, who knows if they're going to
trickle back down or go back up?
(23:43):
But it has to slow things down.
You can't tell me that 3% rateenvironment and 8% rate
environment.
I mean it just killsaffordability.
It kills payments, lines ofcredit, car notes, all these
things that really add up and ithurts people in their
pocketbook.
I don't care if you're middleclass and you're doing well.
When your interest expense is 2to 3x of what it was a few
(24:06):
years ago, that's really goingto hurt on what you have.
Michael Notbohm (24:11):
And I think what's the most surprising to me
is the fact that we haven'tseen a huge downturn.
Sure, it's like to your point,like back in 2016, when you're
like, well, we're kind of at thetip of where normal market
would turn and it just keptgoing up, kept going up, and in
2022, it's still going up, andnow you start to see a little
(24:31):
trickle off, but it's like I'mnot seeing prices go down.
Ryan McGuinness (24:35):
I agree with you.
My opinion on that is thatpeople have the properties First
of all.
They're not in a big rush tosell, because then they have to
go by a higher interest rate,note right.
Michael Notbohm (24:44):
Yeah.
Ryan McGuinness (24:44):
A lot of those properties for sale are locked
in at 2%, 3%, 4%.
So if they did sell?
So they're kind of like, okay,this is my price if I get it,
but they're not willing to godown.
But I think over time you'regoing to have more and more
people.
They get into a situation wherethey have to sell and then
you're going to have those pricecuts and then you're going to
have, you know, appraisals comedown and kind of the butterfly
effect of that.
But I don't think it's a rushlike we've seen, maybe an 08 or
(25:07):
you know 09, something like that.
Yeah, that was kind of like theperfect storm of everything that
could go wrong.
Sure, sure.
No-transcript Loans generallyhave good underwriting.
You know, it's not the days of08 where somebody with no job
with 780 credit can go buy fivebeachfront condos because they
did a stated income loan andthey have okay credit.
Michael Notbohm (25:29):
When the mortgage guy calls his buddy the
appraiser hey I got this 123Main Street.
I really needed to come in at650 and it's worth 425 on a good
day.
Ryan McGuinness (25:38):
Or they're lending 100% LTV or 120%.
Michael Notbohm (25:41):
LTV.
Yeah, the 120s was always great.
Like what could go wrong inthis scenario.
It was just so great idea.
Ryan McGuinness (25:45):
The banks like, hey, let me lend you 20% more
than it's possibly worth andthink this is okay.
Michael Notbohm (25:52):
Which is really kind of crazy to think about,
because banks are veryconservative typically, so for
them to be like I'm banking thatthis is gonna go up by at least
20% and we're so confidentwe'll lend it to you now, yeah.
And then, obviously, what couldgo wrong?
We saw what went wrong Prettymuch everyone being foreclosed
upon.
So well, I mean, dude, I thinkthis is awesome, you know, I
(26:13):
think what you've built in afairly short amount of time I
mean you saw a good niche.
I think you know there's otherpeople out there that call
themselves hard money lenders orprivate money, and it ends up
being really a, you know,basically a normal loan in terms
of all the underwriting andeverything.
You've made it a prettystraightforward and simple
process.
You know, I would say the onlyyou know when I talk to people
(26:36):
about you know what you do andkind of how they can invest some
of their money.
The negative side and I think apart of it's just not
understanding it is hard money,I think has this like weird
negative connotation.
Ryan McGuinness (26:50):
Absolutely.
Michael Notbohm (26:50):
You know, like you're imagining a mob boss,
like in a basement, like he'sgiving you the hard money loan
if you don't pay by Friday.
Ryan McGuinness (26:56):
Yeah, that's why I like getting out there and
talking to real estate firms,you know, and if anybody has
real estate firms, I'm happy tocome talk to them, because even
seasoned real estate agents, andespecially newer real estate
agents, they understand, youknow, the term hard money
private lending, but they reallydon't understand what it means
or what it is, and even if theydo understand it, they don't
understand our company, right?
(27:16):
They maybe they've dealt withanother hard money lender and
they were like, hey, yeah, well,they said they had approved it
and day 25 of 30, the hard moneylender bailed.
Like you're never gonna havethat.
So I've been trying to get infront of a lot of agents and
explaining what we can do andhow we can save all their deals,
right, because I mean, as anagent, you've seen how many
deals fall apart because offinancing and a lot of times it
falls apart late into thecontract.
Michael Notbohm (27:38):
Well, you remember that guy set you Paul.
He was with you know, a hardmoney guy and everything looked
great.
It was actually a hard moneyguy I had used and it was easy
when I did it, but that wasbecause I had done so many deals
.
That my experience.
But they give you know,absolutely, absolutely.
Then in the 11th hour theypulled the rug out from
underneath them and you came tosave the day.
Ryan McGuinness (27:58):
I'm getting in front of agents and brokers and
explaining that and explainingthere's a lot of other
advantages.
Like when you're a buyer andyou're negotiating with a seller
and they want 500,000 for theirhouse and you say, hey, you
know I wanna give you 450 andthey're like, no, I want 500.
But when you approach them andsay, hey, I'm using a private
(28:19):
lender, there's a little bitmore of a spread of interest.
You know we can close next week.
There's not gonna be anyunderwriting.
You know we're not closing in30 to 60 days.
How about 450?
Because I'm absorbing theseother costs that I'm gonna have
to incur and there's theguarantee we're closing next
week as a seller.
That's much more reasonablethan a guy just saying, hey, I
want 50,000 off because of it.
So you know, explaining that tothe agents to kind of coach
(28:42):
their clients and use that inthe development of the deal, it
really has helped out.
Michael Notbohm (28:46):
Yeah, no, and I think that there's definitely a
huge education piece there foragents, because if you don't do
anything on the investment side,you don't really understand it,
and I think getting peopleinformed on that is key.
So, investors, though, thatwanna partner with you, how
often are you explaining thatthis is a pretty safe way to do
it?
Ryan McGuinness (29:05):
I get a lot of calls.
I get calls most days.
I'm not the pushy salesman,probably because we're well
capitalized from other people,so it's not like, oh man, we
committed to this deal and Ifind this money.
Let me just call the last eightpeople I talked to and beg them
for cash.
Right, I'm always happy to getanybody in.
I love getting people in.
I love people making money andentrusting me with their money.
(29:26):
So it just depends on the dealflow of who we need to get in.
Michael Notbohm (29:30):
Yeah, so we'll drop a link in the bottom, I
guess, just your website andobviously your cell phone number
for anyone who wants to explorethe opportunity.
I know we've got a couple offriends in our immediate group
that started with a couplehundred thousand on a deal and
they're like, man, this isawesome, and now they can't wait
to fund the next deal, causeit's I mean, part of it's just
(29:51):
the fact that once you see themoney in your bank account, it's
like okay, this is trulypassive.
I didn't have to do anythingand every month I'm getting a
deposit, which is great.
Ryan McGuinness (29:59):
Yeah, anybody that's gotten in has always
significantly increased theirmoney with us.
And then you just keep pilingin and piling in.
They're getting their monthlydisbursements of interest, and I
didn't mention this earlier.
When their deal closes out,they get all their principal
back too, because from the titlecompany again, we don't handle
that.
So then they have the option tohey, I wanna reinvest that, or
I wanna add more, or whateverthey wanna do with it.
Michael Notbohm (30:21):
How quickly like say, something closes today
, how quickly can somebody getin another deal?
Ryan McGuinness (30:26):
We close deals most days, so obviously have
lender other lenders to dealwith too.
But if you made a commitmentwith capital, I would hope that
within one to two weeks we canget you worked in and always get
you in that flow.
That's great.
Michael Notbohm (30:42):
Yeah, all right , so we'll drop that in the
bottom.
I appreciate you being on again.
It's always great chatting withyou and I love the fact that
you've built such a crazy bigbusiness and I've been here to
kinda watch the whole thing grow.
Ryan McGuinness (30:54):
Yeah, I appreciate it.
Have me on anytime.
Michael Notbohm (30:56):
Absolutely All right till next time, guys.
Legacy Wealth Code podcastonward.
Speaker 1 (31:00):
Thank you for joining us for another episode of the
Legacy Wealth Code podcast.
If you enjoyed this episode,click subscribe now and never
miss an episode Until next timeonward.
This is the Legacy Wealth Code podcast helping you
build long-term wealth andelastic legacy through real
estate investing, tax strategiesand motivational stories from
some of the most successful andinfluential people out there.
Here are your hosts real estateinvestor and entrepreneur,
Michael Notbohm, and real estateinvestor and attorney, Andrew
Hoek.
Michael Notbohm (00:23):
Welcome back to the next episode of the Legacy
Wealth Code podcast.
My name is Michael Notbohm andI am here today with a good
friend of Ry.
an McGuinness, .
Welcome to the show.
Ryan McGuinness (00:32):
Appreciate it.
Thanks for having me on.
Michael Notbohm (00:33):
We've got some technical issues, so Andrew is
taking the day off.
Got to try to dial this wholetechnology thing in a little bit
better, but you know it is whatit is.
I want to chat with you today.
I know you were on here, Iguess what about six months ago
or so, probably Talking aboutyour awesome life that you've
built through the hard moneylending business, and you know
you and I have had a lot ofconversations around.
(00:54):
You know what it is that you'redoing, kind of your track
record and history that broughtyou to building the business
that you have now.
And I think it's really coolbecause there's so many
opportunities out there wherepeople try to say it's a truly
passive opportunity until youget into it and you're fixing
toilets at three in the morningand you know garbage disposal,
so you've actually got what Iwould consider a truly passive
(01:17):
opportunity.
Do you agree?
Ryan McGuinness (01:18):
Yeah, I mean it's.
You know we're a lot moreactive as the portfolio managers
, but for our lending partnersit's 100% passive.
I mean we underwrite everything, we handle everything.
It can be as passive as theywant it to be.
Michael Notbohm (01:30):
So walk me through, I guess, just for
people that don't know yourbackground.
You're real.
You know from college till nowkind of your real estate.
You know what's brought you towhere you're at now.
Ryan McGuinness (01:40):
Yeah, I saw value in real estate around
2009,.
Right, so sort of after thecrash.
Prior to that I was kind of inequities and options and bonds,
more stock market relatedventures, and we saw real estate
as a way to make income andthrough a friend, I started
flipping a lot of houses.
You know, back then houses were, we were flipping, buying stuff
for 50, 60, 70 grand, puttingfive, 10 grand into it you know,
(02:03):
and making a nice, a nicespread.
Now those houses are all 300,000, right, I wish I kept them all,
but we did that and newconstruction as well, and that
kind of carried me into 2015,2016, where I was looking to
stay in real estate, but I waslooking for a product that
eliminated a lot of the risk ofit, because at that time the
market had been going up formaybe five years.
Michael Notbohm (02:25):
Now you know, we've had you look at the normal
cycle and you're kind oftraditionally at the top of it.
Ryan McGuinness (02:30):
Sure.
So we wanted to see what couldstill achieve a high yield but
not have that dollar for dollarrisk and return like flipping
and construction, and we kind oftransitioned that point into
doing a lot more private lendingin real estate.
Michael Notbohm (02:43):
Yeah, I kind of laughed because I remember when
I did that the beachfront,waterfront property and you know
you as a friend you're like,yeah, man, that's great.
And then I know that you andyour brother were like these
guys are idiots for doingbecause it's, you know, that was
our first big, you knowmulti-million dollar flip, which
I mean most.
You know it's there's adefinitely an element of risk
(03:04):
and flipping yeah.
And then now you add on amillion dollars that you're, you
know, taking out hard moneyloans on, and it's like, yeah,
all right, this is like ithappens to everybody.
Ryan McGuinness (03:14):
You know every, every aspect is going to be
over budget.
Every aspect is going to beover time.
You know people think withflipping, hey, I'm buying a
property, a 30 day rehab, 30days on the market and 30 days
closed right, yeah, that 30 dayrehab could be six months, could
be a year, who knows, could siton the market a couple of
months and then you may have atime or two of of under contract
(03:34):
that fall through before youactually find your your end
buyer.
So it can definitely rapidlyincrease in in time and money.
Michael Notbohm (03:41):
Yeah, so all right.
So you've got the portfolio.
You decided to kind of startliquidating some of that, and
then are you using your ownfunds to to start the hard money
business?
Are you using mezzanine debt?
What's that look like?
Ryan McGuinness (03:53):
Yeah, so initially our own capital and
then some private you know,friends and family, much of the
model that we have now.
We don't really deal withinstitutional lenders, because
then you're under the scrutinyand the same rules that that
they have right so we are theend decision makers on all of
our notes in our portfolio.
That that allows us to give a aquick answer to the
underwriting of of that deal forour borrowers.
Michael Notbohm (04:14):
And so you know and I can definitely attest to
that because you know, doinghard money loans on a project,
they always make it seem likeit's super easy and then you end
up basically going through thesame underwriting processes.
If it's like a conventionalloan, like I need to see the you
know four months of bankstatements, I need to see your
tax returns, like I thought thiswas, you know non QM, now all
(04:34):
of a sudden I'm basically givingyou my entire life story.
Ryan McGuinness (04:37):
Yeah, and it'll tell you that day one.
Right, that's that they tellyou that.
Michael Notbohm (04:40):
They tell you that in their flyer, Like it's
oh, you know, you don't evenhave to, you know, don't even
submit an application, We'lljust send you the money You're
like wow, this seems easy.
Ryan McGuinness (04:48):
Sure, and I would say with us in particular
it is almost that easy.
A lot of other hard moneylenders or private lenders like
you say, you know they sayapprove the deal.
And then they start askingquestions later.
You know, with our deals we tryto, within an hour or two,
fully underwrite and approve thedeal.
You're never going to have anysurprises or changes after that.
Maybe it takes us a day tounderwrite it if it's something
(05:09):
complex, but we can get thoseanswers to our borrowers very
quickly.
Michael Notbohm (05:12):
Well, what's funny?
Like in our friend group, ofcourse we've got a lot of
friends that are in real estateand that you know we all kind of
joke because it's like everyone, you know they'll call you.
You give them the breakdown.
All right, let me see if I canfind a cheaper version of this.
They might find something thaton paper looks better and more
attractive, and then the daybefore closing then they call
(05:32):
you back and they're like hey,man, this didn't work out.
How often does that happen Allthe time, all the time.
Ryan McGuinness (05:37):
Yeah, so a lot of times we're very clear with
our pricing structure andupfront.
So even though you know wemight seem a little more costly
or we may be more costly upfront, you're never going to get
those hidden fees that you don'tsee until the closing table
right.
All of a sudden somebody showsup.
You see an admin fee, anunderwriting fee, an application
fee, a wire fee, you know allthese other fees, five or six
fees that add up, that we'resimply not going to have any of
(05:59):
that with us.
We have our origination fee andthat's it.
Michael Notbohm (06:02):
You may need to start building in a I told you
so fee, though that's it, yeah,for sure, I told you, so it's
going to be an extra 3% now.
Ryan McGuinness (06:08):
Yeah so a lot of times we'll get that.
And then, a few days beforeclosing, like you say, either
they're under capitalized andcouldn't close the deal their
current you know lender or itwas a conventional deal that
fell through or they're justtired of the waiting process and
they're under a deadline toclose, or they're going to lose
their hard deposit, and thenwe'll get the deal done.
Michael Notbohm (06:25):
Yeah, all right , so walk me through like a
typical deal.
What does that look like?
Ryan McGuinness (06:28):
Yeah, so our asset only lending.
So we're not pulling yourcredit, we're not pulling your
tax returns, we're not pullingyour bank statements, no income
verification.
So you can eliminate that piece, which is the majority,
typically with bank underwriting, right that's they look a
little bit out of the propertybut they're pulling all this
other information.
That takes time and there's allthis variable.
(06:49):
So we eliminate that 100%.
There's none of that.
We're asset only lending.
We need to determine the valueof the property, either through
an appraisal or our ownknowledge or comps that we can
do and we lend up to that.
70% of current as is value.
70% would be like a clean,single family home.
If we're dealing withmultifamily or commercial, we
may be closer to like a 65% andthen raw land.
(07:11):
We're typically up to 50% LTVloan to value.
Michael Notbohm (07:15):
And do you even like so on raw land.
Do you care what their goal isLike?
I wanna buy this piece of land.
Do you wanna know what's the?
What are you gonna do with it?
Ryan McGuinness (07:23):
Not really.
I mean it's you know we'lllisten, but all we're looking at
is as is value today, right?
So if they have some grand idea, that's great and we hope they
exit that way.
But we're not lending on that.
We're lending on what is itworth today, because if we get
it back into the fall, we'reselling it today.
We don't hold anything right,so we don't wanna be in the
business of being a landlord.
We would sell that property, sowe just need to know how can we
(07:44):
safely exit it.
Michael Notbohm (07:46):
And so now you were you know I know we've
talked about scale before andwhen you were doing flipping.
To flip the amount ofproperties that you now have
loans out on would be a hugeundertake.
Ryan McGuinness (07:57):
Sure, right now we have about 250 active loans
today.
So I mean, even if I had 20 or30 flips, but I can't imagine
200, something you know we'dhave to have dozen employees,
probably at least a 10,000square foot office space.
We're talking about millions ofdollars of payroll, millions of
dollars of overhead and all theunknowns that go with that.
Right the there's so manyvariables Dealing with the city,
(08:20):
dealing with people not showingup for work, material cost,
Right insurance to the roof,taxes to the roof, all the
problems that ownership comeswith it would carry over into
that flipping where with lendingit's totally scalable,
virtually no employees.
You know we have a book ofabout 90 million now in total
loans and it's very easy tomanage.
Michael Notbohm (08:40):
Well, I know I gave you that book, the Banker's
Code and I told you that you'dbeen holding out on me because
I'm reading this like okay, sothis was like the Rothschild's
their family secret that waspassed down generation to
generation and I think thatthere's so much to learn from
that because, realistically, inany environment, the banks are
always the ones that win.
Right, you sell a house.
If you're upside down, the bankgets paid first, and then you
(09:02):
know they're probably gonna comeafter you for the rest, if you
don't have the equity, butyou're never gonna get your
money.
First, the bank always getstheir money first, right.
Ryan McGuinness (09:09):
I mean there's larger upside potentially to
flipping.
But as long as you'recomfortable with the yield that
your notes are returning you,then who cares?
You know you hope yourborrowers kill it, you hope they
kill it and come back and comeback, and come back, and you
know so that's.
The only thing is that with abank you're generally limited to
your loan.
You know your loan around orpossibly default interest rate
(09:30):
or possibly if you got theproperty back you'd have an
upside there.
But I don't think the riskversus reward or the headache of
doing it it makes it worth it.
Michael Notbohm (09:38):
Yeah.
So you transition into thishard money thing and went
through friends and family, yourown cash.
You get to a certain thresholdwhere you're like, okay, the
demand is still, it's more thanthe capital that we have, right.
So then you started.
Essentially it's kind of like afund, but I don't think you
call it that right.
Ryan McGuinness (09:54):
Yeah, it's not a fund per se, because each
individual lending partner knowsexactly the specific deal that
they're in.
So when we get a deal and weunderwrite it.
We underwrite everythingin-house, we fully approve it.
At that point we'll kind ofcustom tailor that deal to
already know who's in queue forthat size deal or that duration
deal.
Some lending partners mayprefer a longer term, which in
(10:16):
our case would be two-yearballoon.
Some you know a guy might say,hey, I'm gonna flip this, it's
gonna be 90 days or 60 days, andsome people, some of our
lending partners, prefer ashorter term.
So we kind of fit that mold towhat our lending partners want
and then give them the fullunderwriting on that and they
have the final approval, ofcourse.
But if I'm sending you a deal,I'm in it myself and you should
(10:38):
approve it as well.
Michael Notbohm (10:39):
Okay, so you got a deal.
You know, one comes across thedesk today for half a million
dollars.
You're gonna lend a 70% on that, or up to 70%.
You package it up, this isapproved.
You send it out to the peoplethat they're not giving you
their money until the deal isdone and they're not even giving
it to you directly.
Right, correct?
Ryan McGuinness (10:55):
They just fund the title company or the closing
attorney directly.
We don't ever manage theirprincipal.
The only thing we would managewould be the monthly payments
every month.
Michael Notbohm (11:04):
And then how does that work for if somebody
invests money with you?
Ryan McGuinness (11:07):
Yeah, so all of our notes are 12% annual.
We take a servicing fee fromthat and we net the lending
partner around 10% roughly andthat's a baseline.
You know, in Florida the faultinterest rate goes to 18 or 25%
depending on the size of thenote.
If it's under 500,000, it's 18%, if it's over 500,000, it's 25%
.
So they would participate inthat upside should the property
(11:30):
go into default.
How often does that happen?
To go all the way through withthe foreclosure is extremely
rare.
You know we've done more than900 deals and we've taken back
maybe five properties becauseour borrowers have so much
equity and skin in the game,even if something unfortunate
happens to them.
We kind of work with them like,hey, sell this property, don't
allow us to take the propertyback.
Right, you have a milliondollar home.
We lent you 600 grand on it,700 grand, whatever.
(11:53):
You know, don't allow us Sell ityeah, sell it for 850 if you
had to, or 900 in a fire sale,get rid of it.
And we work with our borrowers.
We're not like, hey, you'refive days late, now there's this
fee, and now we're filing thisand now we're doing that.
If you're community with us andyou're saying, hey, I got
behind, but in 30 days I'mselling this property, I want to
get caught up or in 60 days I'mdoing this, we always try to
(12:14):
work with you and that's howwe've kind of built our business
right.
We see a lot of other lendersthat are just all about fees and
just driving every cent ontheir borrowers.
Michael Notbohm (12:23):
Yeah.
Ryan McGuinness (12:24):
And you know, we see it in every aspect and
we're total opposite of that.
Michael Notbohm (12:28):
Well, it's kind of crazy being able to maintain
that you know level of servicewhen you get to.
You know 90 million on thestreet is a lot.
Yeah, you know that'ssignificant.
I think what was the award yougot this year Fastest?
Ryan McGuinness (12:39):
50 companies in Tampa.
Which is awesome right, socongrats on that.
I appreciate it.
Michael Notbohm (12:43):
But yeah, I mean once you grow, you know
it's like anything business-wiseonce you get to certain levels
of scale, there's always a newset of problems.
Sure, so like what do you thinkfrom what were you at last year
?
Ryan McGuinness (12:53):
Probably 60 million Okay.
So I mean, that's a significantgrowth.
Sure.
Michael Notbohm (12:58):
What do you think the new problem is now?
Ryan McGuinness (13:00):
Yeah, I mean, the hardest part of the equation
is always the borrowers.
For us, we've been veryfortunate that our lending
partners are very wellcapitalized and, over the decade
of doing deals with them, whenthey compare their returns to
other investments and especiallythe risk of other investments,
you know they have a lot ofmoney on the sidelines that are
ready to go and we've definitelypicked up some significant you
(13:22):
know 10 million plus net worthinvesting lending partners
within the last year or two.
That really help out.
So, the borrower is always thehard part of the equation, right
?
It's because that's the finitething, you know.
You got to have a guy that hasa lot of money down or a lot of
equity, and also decided not togo to the bank route, the
traditional bank route, forwhatever reason.
Michael Notbohm (13:44):
So is that, is the majority of the people
coming to you fix and flip typeguys?
Ryan McGuinness (13:48):
or are they?
They're really just one-offscenarios where time is of the
essence.
They need to get a deal done inyou know, five, 10, 15 days, or
maybe they had 90 days, but thebank's been jerking them around
for 85 days of it right.
And they're going to lose thedeal or something is going to
happen to where they need to gettheir deal.
Yeah, their escrow's gone yeahso you know they decided to put
$50,000 hard down becauseanother hard money lender said
(14:10):
they'll definitely you know getthe deal approved and they call
us with a few days.
So it's really just somebodythat doesn't want any
questioning of all theunderwriting.
That's typical and needs toclose quick and really the
premium in interest is isn'tanywhere near what it used to be
right.
All of our notes have alwaysbeen 12%, even going back two,
three, four or five years ago.
So the spread back then whenyou could get a mortgage at
(14:32):
2.75% or 12%, you know it's likeman 9%.
Michael Notbohm (14:36):
Yeah, that's a big difference.
Yeah, that's a big difference.
Ryan McGuinness (14:38):
You know, now we're seeing 7, 8, 9, you know
some SBAs 11, there's a lot ofhybrid loans, you know non-QM
stuff in double digits.
So it's paid a little bit ofspread.
Another reason that ourbusiness has really increased
yeah, I mean it makes you callyou.
Michael Notbohm (14:52):
Okay, I got the equity here, I got the down
payment.
That's pretty much.
That's the last question thatyou really need to know what's
the property worth.
Ryan McGuinness (14:59):
Yeah, and then you need the money to put down
to purchase it.
Michael Notbohm (15:02):
Now the, you know, as interest rates have
gone up, why have you notincreased yours?
Ryan McGuinness (15:07):
You know that's a good question.
Like I said earlier about we'rehappy with our yield, we're
happy with the income that we'remaking.
Our lending partners are happywith that.
You know we're not trying tosqueeze every last dollar from
our borrowers.
We could have raised it, butthen you know, then's the
question rates go down, am Ilowering?
I like that.
All of our network knows ourrates, knows our term.
So when you have realtors thatare helping their assist, their
(15:30):
clients, they know what they cancall us and get, or mortgage
brokers, or attorneys, or titlecompanies they've done, you know
, dozens or tens of deals withus and they know our terms, so
they're not having to.
Well, let me see what Ryan'srates are today and let me see
what you have to put down today.
Let me see what they can dotoday.
You know we are the simplest,easy one pager and we're truly
sticking to those facts.
You know as to what we can getdone.
Michael Notbohm (15:52):
Yeah, and I know I've said you've deals.
We've done an interesting dealnot too long ago where I think
it changed about what?
A hundred times.
Ryan McGuinness (15:58):
Probably.
Yeah, that was the Now and withit closed, there's so many
different properties in and out.
Michael Notbohm (16:02):
I had to I remember you called me and
you're like well, 10 minutes agoit was off and now we just
closed it.
Ryan McGuinness (16:07):
Yeah, and that was at like four in the morning
and like five in the morning.
Things were changing and likewhat's going on?
Michael Notbohm (16:11):
Yeah, usually when you get those calls at four
in the morning, you kind ofknow what the condition of the
borrower is Sure sure.
He's thinking about somedifferent things based on maybe
like a roulette session or acraps.
Or a craps session.
So if somebody wants to be aninvestor with you guys, what
does that look like?
Ryan McGuinness (16:27):
Yeah.
So they would come in.
They would just give us ageneral ballpark that they want
to put to work.
Now if they say, hey, I have amillion dollars I want to put to
work, it doesn't mean they'reputting a million dollars in one
deal, so I know what to limitthem up to.
So I might call them and say,hey, I have a $200,000 deal and
now they fund it a couple dayslater.
Hey, I have a $300,000.
So we'll kind of go up to theircomfort level.
(16:49):
Every month they're going to getthe interest payment dispersed
to them on the first of everymonth for all the deals prior of
that month.
So most of our lending partnershave multiple deals.
So their borrower pays on the20th and the 25th They'll get a
report, it's all automated.
And then the ACH batch goes outon the first day of that month
and sends them their payment outTo fund those deals.
They'll have a full our fullunderwriting file and you know
(17:13):
why we want to fund this deal.
And they give a commitment andthen within you know, usually
five or 10 days is the actualclose date.
They wire the money directly tothe title company and that's it
.
It's really, it's really simple.
In the event, there needs to be, you know, a demand letter for
a late payment or even aforeclosure.
They're not actively involvedwith that at all.
We handle all that.
(17:34):
We have the legalinfrastructure to handle all
that.
Obviously, they have finalapproval and we'll keep them.
You know abreast of what'sgoing on, but they're not okay.
You know my loan's in the fault.
Now I need to find an attorney.
There's none of that.
It's truly, truly, trulypassive for them, as much as
they want it to be.
Michael Notbohm (17:48):
So the person wires the money to the title
company get paid monthly.
Worst.
Like longest terms, two years.
Correct, most of the time let'sjust say it sells in eight
months or nine months, yeah.
Ryan McGuinness (17:58):
So all of our notes are two-year balloons.
So somebody's not, you know,stuck in some long-term 30-year,
15-year product.
The borrower has no prepaymentpenalty on our notes, so they
can pay it off, you know,anytime.
I would say around that eightto 12, 14-month mark is probably
the majority of the payoffs,right, okay, it could go up to
two years and we've had deals gotwo years and again other
(18:19):
lenders might say hey, yourballoon, we're not renewing,
we're foreclosing on you.
Now, if the property's good andthe economy's relatively the
same and that borrower has beenmaking payments, we'll renew it
another year or two-year term.
There's no, you know, we're notout to get any of these buddies
property, nor do I wantanybody's property.
I'd rather just collect theinterest and have them in it.
So we would extend at thatpoint.
And there's always liquidity inour notes.
(18:40):
We hold all of our notes inhouse, right, we don't sell our
notes off.
But if somebody has a liquidity, personal liquidity event they
need, I would just assume nonote with my own personal
capital or another lender wouldtake over.
So it's not like oh man, nowI'm not going to see my money
for two years.
Michael Notbohm (18:55):
Right, I'm screwed for two years.
That's pretty awesome, okay, sosomebody wants to get involved
with you.
What like they call you?
What's the process look like?
Because they're not giving youthe money, they're just
basically saying, hey, I want tobe an investor with you.
Ryan McGuinness (19:08):
Correct, we're servicing and everything.
Yeah, they can contact me.
My cell phone is 352-262-3722.
They can reach out to medirectly.
Michael Notbohm (19:16):
And I can verify that.
You answer, I think, prettymuch all the time, unless you're
boxing or it's past 8.30 atnight and you're asleep.
Ryan McGuinness (19:23):
Yeah, and in between boxing rounds I might
still pick up.
Michael Notbohm (19:26):
Yeah, that might be true, if you catch me
past my bedtime.
Ryan McGuinness (19:29):
I'll call you back at 4 am, don't worry, yeah.
Michael Notbohm (19:31):
So what are you looking for?
I mean, now that you went from60 to 90 million, what's the
goal for 2024?
Ryan McGuinness (19:37):
Yeah, Just continue to the growth that
we're on.
I mean, I believe for surewe'll be well into the low
hundreds of millions.
We're just trying to keepgetting our name out there and
keep growing.
But the organic growth of thecompany, because you're doing
all these good deals.
And one thing when Bank ofAmerica says they're going to
fund you and you sold your housein Virginia and you're moving
(20:00):
down, and it's Tuesday andyou're moving down, you're
closing Friday and you got yourwife and your kids and your dog
in the U-Haul and you're allcoming down, and Bank of America
calls you on Thursday and sayshey, we didn't realize how much
money you spent on Best Buy onyour credit card last month.
We can't fund this deal anymore.
It's off right, which is real.
Michael Notbohm (20:18):
Yeah, no, I'm laughing because you're not
wrong.
Ryan McGuinness (20:19):
Yeah, so we get that call.
If Bank of America funded thatdeal on Friday, they wouldn't
have told anybody about it.
It's just expected.
So we get that call on Thursdayon a guy who doesn't know us,
who, guy who's been dealing withwhoever for 30 to 60 days, and
he calls us and says man, we'resupposed to move in tomorrow.
We got everything packed in,we're on the way down.
Is there any way that you canget this deal done?
(20:40):
And we get it done in one day?
He's telling everybody.
Speaker 1 (20:44):
Right.
Ryan McGuinness (20:44):
And the two real estate agents that were
about to make no commission aretelling everybody.
And the title company that wasabout to do all the work for
free was telling everybody.
And the attorney that did thework he's telling everybody.
So it really sells itselfversus just an ordinary lender
or other hard money lender thatjust do what they're supposed to
do.
When we come in and savesomething, that was like a
catastrophic event for a family.
Michael Notbohm (21:04):
Yeah, when you think about too, I mean from
like an investment standpoint.
I've got friends who you knowand Andrew and I on the last
episode talked about what wealthmeant and what building wealth
meant and I've got friends whohave this mindset that they just
well, I save my money and likethey literally have hundreds of
thousands of dollars in achecking account or a savings
account that makes like 0.025%interest.
(21:27):
It's like the end of the year,on 300 grand, they made like 12
bucks.
Ryan McGuinness (21:30):
Yep, yeah, and you know we're in a higher
interest rate environment.
So even somebody like thathopefully they're getting three
or four or something percent ina CD.
And I always tell people you'regoing to make more than double
that with us.
And if you truly understandwhat we're doing, you realize
that the risk isn't there, right?
People think, oh, mortgages I'mlending, what if they don't pay
?
Michael Notbohm (21:50):
Well, that's your most profitable deals.
Probably, right, exactly.
Ryan McGuinness (21:53):
Yeah, you know, my baseline is 12%, but my
default interest is going to be18 or 25% or potentially a house
with a half off coupon.
Right, I lent 500 grand on amillion dollar house.
Those are the biggest home runsbecause you're making almost
100% return then.
Michael Notbohm (22:08):
And most of the time that 500,000 dollar house,
like when shit hits the fan.
They were halfway throughconstruction and they ran out of
money, so now it's worth more,anyways, because they did a lot
of stuff to it.
Ryan McGuinness (22:20):
Almost always, our borrower has improved their
property on their own money.
We don't lend on rehab, right?
So those little stickysituations I think that's how
you find yourself in a badsituation, Lending on rehab and
people don't perform, and thenyou're like all right, well,
where's the money we lend themon?
You know, we gave them 100grand for rehab and the guy
didn't do much with it becausehe's paid something else off
with it.
We will never have those issuesbecause we don't underwrite like
(22:42):
that and we don't lend on thatkind of stuff.
Michael Notbohm (22:43):
Is most of your stuff in Florida.
Ryan McGuinness (22:45):
Almost all yeah , because again we have organic
network right.
So probably 90% of it is withintwo hours of Tampa, probably 9%
throughout the state and then1% outside of Florida.
Michael Notbohm (22:56):
Like when I call and say hey, can you lend
me money in Indiana, correct?
Ryan McGuinness (22:59):
correct.
Yeah, you know, outside of thestate we don't have the legal
infrastructure, we don't have aton of construction crews if we
need it.
I'm not there to manage theproject in person.
So that would be something thatwe would lend to lower LTV If
somebody had a single familyhome.
We may only go 60% to 65% onthe out of state deal.
Michael Notbohm (23:17):
So are you optimistic of the real estate
market going into 2024 andbeyond?
I know we're in an electionhere, so it's kind of.
Ryan McGuinness (23:23):
Yeah, I think it's healthy to have a tapering
or even a down.
I think Florida and Tampa ingeneral is maybe insulated for
much of a downturn becauseeveryone continues to want to
move here and live here.
But I think it's okay to godown a little bit.
And these higher interest rates, who knows if they're going to
trickle back down or go back up?
(23:43):
But it has to slow things down.
You can't tell me that 3% rateenvironment and 8% rate
environment.
I mean it just killsaffordability.
It kills payments, lines ofcredit, car notes, all these
things that really add up and ithurts people in their
pocketbook.
I don't care if you're middleclass and you're doing well.
When your interest expense is 2to 3x of what it was a few
(24:06):
years ago, that's really goingto hurt on what you have.
Michael Notbohm (24:11):
And I think what's the most surprising to me
is the fact that we haven'tseen a huge downturn.
Sure, it's like to your point,like back in 2016, when you're
like, well, we're kind of at thetip of where normal market
would turn and it just keptgoing up, kept going up, and in
2022, it's still going up, andnow you start to see a little
(24:31):
trickle off, but it's like I'mnot seeing prices go down.
Ryan McGuinness (24:35):
I agree with you.
My opinion on that is thatpeople have the properties First
of all.
They're not in a big rush tosell, because then they have to
go by a higher interest rate,note right.
Michael Notbohm (24:44):
Yeah.
Ryan McGuinness (24:44):
A lot of those properties for sale are locked
in at 2%, 3%, 4%.
So if they did sell?
So they're kind of like, okay,this is my price if I get it,
but they're not willing to godown.
But I think over time you'regoing to have more and more
people.
They get into a situation wherethey have to sell and then
you're going to have those pricecuts and then you're going to
have, you know, appraisals comedown and kind of the butterfly
effect of that.
But I don't think it's a rushlike we've seen, maybe an 08 or
(25:07):
you know 09, something like that.
Yeah, that was kind of like theperfect storm of everything that
could go wrong.
Sure, sure.
No-transcript Loans generallyhave good underwriting.
You know, it's not the days of08 where somebody with no job
with 780 credit can go buy fivebeachfront condos because they
did a stated income loan andthey have okay credit.
Michael Notbohm (25:29):
When the mortgage guy calls his buddy the
appraiser hey I got this 123Main Street.
I really needed to come in at650 and it's worth 425 on a good
day.
Ryan McGuinness (25:38):
Or they're lending 100% LTV or 120%.
Michael Notbohm (25:41):
LTV.
Yeah, the 120s was always great.
Like what could go wrong inthis scenario.
It was just so great idea.
Ryan McGuinness (25:45):
The banks like, hey, let me lend you 20% more
than it's possibly worth andthink this is okay.
Michael Notbohm (25:52):
Which is really kind of crazy to think about,
because banks are veryconservative typically, so for
them to be like I'm banking thatthis is gonna go up by at least
20% and we're so confidentwe'll lend it to you now, yeah.
And then, obviously, what couldgo wrong?
We saw what went wrong Prettymuch everyone being foreclosed
upon.
So well, I mean, dude, I thinkthis is awesome, you know, I
(26:13):
think what you've built in afairly short amount of time I
mean you saw a good niche.
I think you know there's otherpeople out there that call
themselves hard money lenders orprivate money, and it ends up
being really a, you know,basically a normal loan in terms
of all the underwriting andeverything.
You've made it a prettystraightforward and simple
process.
You know, I would say the onlyyou know when I talk to people
(26:36):
about you know what you do andkind of how they can invest some
of their money.
The negative side and I think apart of it's just not
understanding it is hard money,I think has this like weird
negative connotation.
Ryan McGuinness (26:50):
Absolutely.
Michael Notbohm (26:50):
You know, like you're imagining a mob boss,
like in a basement, like he'sgiving you the hard money loan
if you don't pay by Friday.
Ryan McGuinness (26:56):
Yeah, that's why I like getting out there and
talking to real estate firms,you know, and if anybody has
real estate firms, I'm happy tocome talk to them, because even
seasoned real estate agents, andespecially newer real estate
agents, they understand, youknow, the term hard money
private lending, but they reallydon't understand what it means
or what it is, and even if theydo understand it, they don't
understand our company, right?
(27:16):
They maybe they've dealt withanother hard money lender and
they were like, hey, yeah, well,they said they had approved it
and day 25 of 30, the hard moneylender bailed.
Like you're never gonna havethat.
So I've been trying to get infront of a lot of agents and
explaining what we can do andhow we can save all their deals,
right, because I mean, as anagent, you've seen how many
deals fall apart because offinancing and a lot of times it
falls apart late into thecontract.
Michael Notbohm (27:38):
Well, you remember that guy set you Paul.
He was with you know, a hardmoney guy and everything looked
great.
It was actually a hard moneyguy I had used and it was easy
when I did it, but that wasbecause I had done so many deals
.
That my experience.
But they give you know,absolutely, absolutely.
Then in the 11th hour theypulled the rug out from
underneath them and you came tosave the day.
Ryan McGuinness (27:58):
I'm getting in front of agents and brokers and
explaining that and explainingthere's a lot of other
advantages.
Like when you're a buyer andyou're negotiating with a seller
and they want 500,000 for theirhouse and you say, hey, you
know I wanna give you 450 andthey're like, no, I want 500.
But when you approach them andsay, hey, I'm using a private
(28:19):
lender, there's a little bitmore of a spread of interest.
You know we can close next week.
There's not gonna be anyunderwriting.
You know we're not closing in30 to 60 days.
How about 450?
Because I'm absorbing theseother costs that I'm gonna have
to incur and there's theguarantee we're closing next
week as a seller.
That's much more reasonablethan a guy just saying, hey, I
want 50,000 off because of it.
So you know, explaining that tothe agents to kind of coach
(28:42):
their clients and use that inthe development of the deal, it
really has helped out.
Michael Notbohm (28:46):
Yeah, no, and I think that there's definitely a
huge education piece there foragents, because if you don't do
anything on the investment side,you don't really understand it,
and I think getting peopleinformed on that is key.
So, investors, though, thatwanna partner with you, how
often are you explaining thatthis is a pretty safe way to do
it?
Ryan McGuinness (29:05):
I get a lot of calls.
I get calls most days.
I'm not the pushy salesman,probably because we're well
capitalized from other people,so it's not like, oh man, we
committed to this deal and Ifind this money.
Let me just call the last eightpeople I talked to and beg them
for cash.
Right, I'm always happy to getanybody in.
I love getting people in.
I love people making money andentrusting me with their money.
(29:26):
So it just depends on the dealflow of who we need to get in.
Michael Notbohm (29:30):
Yeah, so we'll drop a link in the bottom, I
guess, just your website andobviously your cell phone number
for anyone who wants to explorethe opportunity.
I know we've got a couple offriends in our immediate group
that started with a couplehundred thousand on a deal and
they're like, man, this isawesome, and now they can't wait
to fund the next deal, causeit's I mean, part of it's just
(29:51):
the fact that once you see themoney in your bank account, it's
like okay, this is trulypassive.
I didn't have to do anythingand every month I'm getting a
deposit, which is great.
Ryan McGuinness (29:59):
Yeah, anybody that's gotten in has always
significantly increased theirmoney with us.
And then you just keep pilingin and piling in.
They're getting their monthlydisbursements of interest, and I
didn't mention this earlier.
When their deal closes out,they get all their principal
back too, because from the titlecompany again, we don't handle
that.
So then they have the option tohey, I wanna reinvest that, or
I wanna add more, or whateverthey wanna do with it.
Michael Notbohm (30:21):
How quickly like say, something closes today
, how quickly can somebody getin another deal?
Ryan McGuinness (30:26):
We close deals most days, so obviously have
lender other lenders to dealwith too.
But if you made a commitmentwith capital, I would hope that
within one to two weeks we canget you worked in and always get
you in that flow.
That's great.
Michael Notbohm (30:42):
Yeah, all right , so we'll drop that in the
bottom.
I appreciate you being on again.
It's always great chatting withyou and I love the fact that
you've built such a crazy bigbusiness and I've been here to
kinda watch the whole thing grow.
Ryan McGuinness (30:54):
Yeah, I appreciate it.
Have me on anytime.
Michael Notbohm (30:56):
Absolutely All right till next time, guys.
Legacy Wealth Code podcastonward.
Speaker 1 (31:00):
Thank you for joining us for another episode of the
Legacy Wealth Code podcast.
If you enjoyed this episode,click subscribe now and never
miss an episode Until next timeonward.
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If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.