00;00;00;00 - 00;00;03;21
Speaker 3
I think there's more money out there than there are projects out there right now.
00;00;03;21 - 00;00;07;06
Speaker 3
investors need to realize, like they're in the driver's seat and
00;00;07;06 - 00;00;13;16
Speaker 3
use us against each other, like, be upfront about it and just be like, hey, I'm shopping. You, like, you know, give me your best terms.
00;00;13;16 - 00;00;27;20
Speaker 3
And and that's where you really make us be competitive and give best terms. Be front foot. I'd be very clear. And then you go and take that same information to three other people, and then do your apples to apples, and then you can decide on what's best for you.
00;00;27;20 - 00;00;32;25
Speaker 3
that is the only way, like we say, all stay competitive and you guys all get the best rates.
00;00;32;28 - 00;00;39;06
Speaker 3
And then we get really quality borrowers as well because everyone is, you know, everyone's got their ducks in a row, not just one side of it.
00;00;46;07 - 00;01;09;18
Unknown
Welcome back to the seven Figure Flipping Podcast. I'm Adam Whitney. Today we're tackling one of the biggest roadblocks in real estate. Funding your deals. Just yesterday we had Melissa Quarter sit down with our community and break down hard money, private money and everything in between. If you've ever wondered how top investors scale from a couple of flips to hundreds a year, this episode is for you.
00;01;09;22 - 00;01;10;16
Unknown
Let's go.
00;01;10;16 - 00;01;38;15
Unknown
within the 705 community, we have a couple different tiers of members. And in doing different things, we've got people doing hundreds of deals every single year. We've got people who are newer just getting going. And one of the things that that comes up, we're really good at raising private money. And if you've ever heard Bill Allen talk, especially if you've been a part of a funding challenge or something like that.
00;01;38;15 - 00;02;02;15
Unknown
He's always talking about, we want to fund our deals at 115% and where that and then you start hearing about hard money. And it's kind of like sometimes people who have always self-funded deals, like what is hard money? What does that mean? It sounds tricky. It sounds like what? What is it? Or maybe your experience is just with a local bank, you know, that you've had.
00;02;02;15 - 00;02;22;08
Unknown
So you've self-funded with assistance from a local bank. And that's great. And then you start learning about hard money, what it is. And then you're also working on raising private money, and you start having some success with private money. And then you hear of all of our members that are in the altitude group are using hard and private money together.
00;02;22;08 - 00;02;40;29
Unknown
And it's like, what? Wait, what? Why? So, Melissa, like, I haven't even told you any of this in advance, but we're kind of setting the stage of hopefully you can answer some of these questions of why I do a mix of hard and private money, you know, and then why are all the people who are scaling and really moving quick?
00;02;41;02 - 00;03;04;27
Unknown
Why are they all using hard money, you know, and then what is there's a value add that comes from the relationship with a good hard money lender. So there's where they're looking over your shoulder, basically making sure that your, your, your deal makes sense. Is that okay? Is that a fair to say, Melissa? Okay.
00;03;04;29 - 00;03;34;09
Unknown
Yeah. Good. So it matters. Not all hard money lenders are equal at all for a number of reasons. One has to do with speed. One has to do with, like, consistency in having a relationship. Are you working with the same support people? Terms and conditions. And then making sure that they can they can fund your deals and helping you understand kind of what the what's needed to do a deal with them.
00;03;34;10 - 00;04;00;02
Unknown
So Melissa, maybe if you could go into kind of what's required also to do a deal with consensus. And then I know you have a special offer, for everybody who's a part of the seven community too. So I want to make sure we hit that. Melissa, just for some context, too, we're always talking to our members about funding 115% of their deals, and that's mixing hard and private money.
00;04;00;02 - 00;04;26;23
Unknown
And part of that is the draw system. So maybe if you could, you know, explain a little bit of that too, when we're funding purchase price and then there's a rehab budget and then I just got off a call. We were talking burst strategy and rentals and DSR, you know, came up as well. So maybe if you could not just address fix and flip, but also DSR, I just put a lot on the table.
00;04;26;23 - 00;04;49;26
Unknown
I probably should have told you this like two weeks ago as you prepared, but, okay. Is that a good enough Tracy of, like, why we're here today? Let's understand the hard money and how it works and what's required and all of those things that work. Yes, that works perfectly. Okay. And I mean, honestly, the title of today's presentation.
00;04;49;26 - 00;05;12;13
Unknown
Right, like maximizing your real estate investment through lending. And there's many different types of lending products that are out there. And I'm sure Melissa is going to touch on all of them and why they matter and why there are different products. Right? Because there are different things that make sense for different types of projects. And so, I'm just really excited to have Melissa joining us today.
00;05;12;16 - 00;05;33;21
Unknown
She and I met through a women's real estate and entrepreneurship group, and I've just been super impressed with the work that she does. And I hear so many wonderful things from other women in the group who have partnered with Melissa on projects. I was like, you need to be working with us at seven figure because we have incredible folks who need good lenders.
00;05;33;21 - 00;05;55;04
Unknown
And so part of my job is to make sure that we're bringing great lending partners to our community. So super excited to bring Melissa here today. I'll let you do a little bit more of your personal, background and introduction. Melissa, I don't want to take that away from you. So I will hand the floor over to you to kick things off.
00;05;55;04 - 00;06;19;14
Unknown
And, we've still got some more folks joining, so I'll just keep admitting. Yeah. And if anybody has questions that you drop in the chat, Melissa, we'll watch the chat. Perfect. We'll just bring this up. Yeah. And like everything you talked about I'm pretty much going to cover. We all need a little bit more of something. So those that do will have opportunity to like reach out to me and kind of like delve into what they need more.
00;06;19;16 - 00;06;33;05
Unknown
But I think we're going to cover it all. We're going to go fast, but it'll be, it's going to be eye opening. I always get told that I laugh, but, it's good. So now I need to share, right? Because for my PowerPoints, your permission, you should be able to share.
00;06;33;05 - 00;06;38;28
Unknown
So nice to meet you guys. I know virtual is kind of like this new thing and weird and but we're all getting used to it, right?
00;06;38;28 - 00;06;57;05
Unknown
So, I'm excited to be here. My passion started with lending. I do, and I have passion for it because I really found a way to help people. But I do do. I haven't been doing this forever. So my passion is really, like, grown over the last four years. So I'm based out of Seattle and I didn't become a lender until Covid.
00;06;57;07 - 00;07;15;11
Unknown
So prior to that, I was a, I have a masters kinesiology. I my I had a different world. I was going to retire at plan. Everything was in line. And then Covid hit. I became a stay at home mom, and it was probably the worst job I'd ever taken. And I was forced to do it. And it was slave labor.
00;07;15;13 - 00;07;31;23
Unknown
But in that I really learned a lot about myself and kind of like what I wanted for my future. And I was forced to make a choice about things. And so I started this new endeavor because I was a flipper, so I wasn't, I enjoyed investing, but just not on this side of it. And I did that, like on the side of my W-2.
00;07;31;24 - 00;07;46;17
Unknown
So I've kind of been in all of your shoes at one point. But as I so I took I jumped into this job. I didn't really think it was going to be a long term thing, but I absolutely love it. Like if people ask if I could snap my fingers and just go back to the way it was, I would say, no.
00;07;46;20 - 00;08;04;15
Unknown
I absolutely love what I do. 20 years in an industry, and I hope I can spend the next 20 years in this industry. Because I really get to my love. Language is helping and so I get to do that. But then we all get to make money and, like, succeed and, like, see, like growth happen. So it's kind of, it's really fruitful.
00;08;04;18 - 00;08;24;04
Unknown
And I was lucky to land with a company called convince, and we do a really good job, on the lending side. But what I learned and why I'm here today and why, like, I have a passion for for teaching is I learned that there's so much fraud and there's so much, clarity about lending and borrowing and all the different products that people.
00;08;24;04 - 00;08;49;17
Unknown
There needs to be more of that. So instead of just being a salesperson approach, like I come from the educational approach of if this is your goal, these are your options, these are roots. And then you decide with more, you know, feeling like you have more tools, more equipped and more empowered. You can decide like what's the best path rather than getting just talked into a great deal that sounds good or sold on something, or in some Facebook scam that, are pretty good nowadays.
00;08;49;17 - 00;09;15;28
Unknown
So that's why I'm here. So I'm going to teach about lending, but it's not it's it's going to be a holistic approach. So I'm going to maybe pop in some things that we do really well. I'll probably talk about some things that we don't do. Great. But I want you to walk away feeling like you have a better understanding of products that are out there and routes you could take to and fund your investments and just feel a bit more empowered to ask the right questions and vet your lenders correctly.
00;09;16;01 - 00;09;37;28
Unknown
I hope to be one of them. I can't win every deal, and I'm not for everyone, but, the goal is to at least just empower you to to make a good choice when you're out there shopping. Okay, I have oh, I got gotta scroll. Sorry sorry sorry sorry. Okay. So nobody take notes. I'm going to send this PowerPoint to, you guys, so you don't have to take notes.
00;09;38;04 - 00;09;53;25
Unknown
There's a lot of verbiage on it. But I'm going to start from the beginning real quick and just go over the bigger picture because there is a bigger picture. It's not just find a good deal, do the rehab and close. There is a whole process to getting a loan and the entire step. So I always try to lay this out.
00;09;53;25 - 00;10;12;00
Unknown
So it's kind of so people are more eyes open. So it's not like oh you know that's easy. Like no problem. Like there are a lot of things that have to happen to make a loan happen. And this is with a private lender, a hard money lender or even a bank. We all go through these steps. And then I also make this sheet that has ABC's lending.
00;10;12;00 - 00;10;28;20
Unknown
So you kind of understand what lenders are saying. I feel like sometimes we talk through borrowers and we're just like oh the like of LTV. And not even really one understands or you get an Loi and you're like everything's an acronym. Like what does it all mean? So I broke down the basics of these, but I could do three pages of this.
00;10;28;20 - 00;10;52;06
Unknown
But this is the basic terms, you're always going to come across something new. But just kind of a, of a base of understanding of what you're looking at, what you're reading. Okay. So to just kick it off, there are lots of great options for funding your deals there. I always say to have a few favorites because you never, like one great lender will not be able to do every single deal for you.
00;10;52;06 - 00;11;09;17
Unknown
You're going to have to have options, but conventional. I want to break down the difference of all of us. So conventional is the standard way. It's the bank, it's the credit union, it's the charter process. Do you have to do income verification? There's got to be seasoning on your funds, it tax your debt to income ratio, airports, your credit.
00;11;09;19 - 00;11;32;00
Unknown
It's a longer process to close. And there's lots of restrictions. However like you can get really good deals if it's your first time buying a property. Credit unions, local credit ensue. A really good job. If they're really trying to work on, the area. So I always say to have a couple good relationships with a credit union or a bank because you just never know, like when they will fit for you and when you can use them.
00;11;32;03 - 00;11;51;17
Unknown
But eventually investors kind of graduate from conventional because we run out of DTI and we end up not having income anymore. That's the goal, right? So that's where hard money comes in. And hard money has a whole different names, hard money loans, bridge loans. It depends on what generation you're from is what you're what you call it.
00;11;51;20 - 00;12;11;06
Unknown
But hard money loans are kind of like the bridge between a conventional loan and a private money lender. And I'll tell I'll go there next. But hard money is not a bank, but it's not a person. It's like a it's still smaller, institutionalized thing. It's a company usually backed by a board or some kind of group. But it's a, it's an entity that usually has guidelines.
00;12;11;06 - 00;12;30;06
Unknown
And so parameters. But here we no longer look at income. We're no longer looking at seasoning of funds. So we just eliminated that issue. We don't touch DTI eliminated that issue. No credit reporting a 5 to 10 day process to close these guys. And they do. And we do bridge loans construction in DSR on the hard money side.
00;12;30;08 - 00;12;52;19
Unknown
So you can see like how restrictive banks can be versus hard money and how many doors just open for you. So that's a big, big that was a big plus of having these having hard many companies be and more readily available. But then on the other farther side of the spectrum, you have a private money lender, and these guys are great because they're very similar to hard money.
00;12;52;19 - 00;13;14;00
Unknown
So all those things that we eliminated with the banks private money doesn't do either, but they generally can be like a person and their money that lends it out. It could be a small group of people, a fund. It's not so institutionalized. So instead of like the guidelines, it's smaller guidelines. Like if we like the property or we like the deal, we like the borrower, their faith is not great.
00;13;14;00 - 00;13;36;10
Unknown
But we know that they, you know, executed will still lend to them. They have a lot more control, a lot more freedom. They do a lot more creative deals. As far as like what hard money will do. So these guys are great because they help you with exit plans or with projects that aren't so, mainstream. But you do pay more, so you always pay for what you get.
00;13;36;10 - 00;13;55;25
Unknown
Like if you want that flexibility and you have that lower Fico or you need all the money upfront or something like that, you're going to pay more in rate and fees compared to hard money loans. I was there a time for them? Yes. Like, absolutely. You always want to have a good couple of private money lenders in your pocket, as well as hard money too.
00;13;55;28 - 00;14;13;20
Unknown
And with cash, people ask all the time, like, why would I not use all my cash to fund deals? Or, you know, I should save all my money. I don't want to use any cash. I think it's important to use cash as a tool and not as your only avenue. Cash can be. It helps you get better rates if you put more, more funds down.
00;14;13;22 - 00;14;31;09
Unknown
It helps you to scale and grab properties faster. There's loan products that can come in and replace your cash. So there's there's ways that cash can be useful. I come to the generation. If you didn't have the money, you can't spend it. So you like no credit, no nothing. And so using credit and debt was a big deal for me as an adult.
00;14;31;12 - 00;14;51;12
Unknown
But it definitely is a useful tool. It's just being smart with your cash and like, making sure you never, I believe, making sure that you never use all of it. And you don't always just save all of it either. So in a nutshell, that's a that's kind of like an overview of the different things. Now I'm going to talk the most about hard money because that's what I do and know the most about.
00;14;51;14 - 00;15;07;14
Unknown
But definitely like there's no knock on any other kind of lending. If your project needs it and your project can use it, and it's the best one when it pencils use it. Like that's really all that matters. But let's go to hard money. Oh, let's go to vetting the lender first. Okay. So now you know what kind of product you need.
00;15;07;14 - 00;15;24;21
Unknown
You've decided you need a hard money lender. Now you're going to vet your lender. These are things to consider when you're talking to lenders and looking like there are different types of us. So we're a direct lender and there's many direct lenders. It's not like it's only a couple, but that means that we control the fund, that it's it's our money.
00;15;24;21 - 00;15;41;13
Unknown
We decide, we don't have to ask other people. We don't have to do anything like that, like it is controlled by us. But then you have third party lenders and you see these guys on Facebook a lot where they, you know, I have access to all these lenders and all these programs. And, usually they are white labeling.
00;15;41;13 - 00;16;01;26
Unknown
So they are pretending to be a lender basically. And there's a lot of fraud with that because there is no liability land, you know, there's no real chain of liability or where you're wiring money or anything. So I do say, I do believe, like we need to avoid as a whole, avoid the third party lenders and really focus on direct lenders and then broker relationships.
00;16;01;26 - 00;16;21;02
Unknown
There's brokers out there that are basically middlemen for the lender and the borrower, and they do a service that helps if you need that. Like there's a specific reason I think brokers are very helpful. But the thing to understand is you don't need a broker to do a deal and to get a lender. And when you do need a broker and you and you are going to use one, you are going to pay a fee for that.
00;16;21;02 - 00;16;40;06
Unknown
So you almost pay double the fees to have a broker in that. Like they will add on their fees to be the middleman. So as you guys are in these groups and like learning about, you know, costs and like keeping everything about profit in my rate, I'm like Google direct lender and go direct to the source. It helps with communication and it helps with decreasing fraud.
00;16;40;06 - 00;17;08;21
Unknown
It helps with closing time and it really does help your bottom line. But don't get me wrong I. Yeah go ahead. Yeah. So I was just thinking about part of the brokers you form these relationships, like you said at the beginning, you know, you want to have options. So you relationships with multiple lenders and you start to understand, like what their sweet spot is like, what they land on and how it matches for you and what your play is, how I typically see it is you find these lenders, you have that relationship, but then you have a deal.
00;17;08;21 - 00;17;28;08
Unknown
That's just not what they do, right. It's just something that's out there and oftentimes they can refer you to somebody, but then if they can't, that's oftentimes where a broker can come in because they may have relationship with 40 different, you know, entities out there. And they yeah, it be a little bit creative. And they go, yeah, let me connect you with someone.
00;17;28;08 - 00;17;49;24
Unknown
They can start doing some work for you. Totally. You're running your business and then they're finding you funding for your deals. Totally plays for both. Absolutely. And I, I, somebody said once like, well, you know, our brokers in your calls when you say that and I'm saying I don't know, but that's the truth. Like, as far as I'm a I'm an investor based like, that is the truth.
00;17;49;24 - 00;18;06;29
Unknown
Like you don't need a broker, but you may. So it's good to have wine and a good resource because there are like right now path splits are hot and not every lender will exit a long term pad split. So having a broker that can find them and good and good pricing, yeah, you'd pay for that. Like you're going to pay for that service.
00;18;07;05 - 00;18;24;27
Unknown
Another way brokers are really useful is if you still have a W-2 and or if it's just not your wheelhouse, like you're not that person. That's the finances and the lender and you don't want to, then that's not your thing. They do a lot of work for you, and they can help you really take that off your plate in a way.
00;18;24;29 - 00;18;43;22
Unknown
But it's again, there's a lot more, diligence, I would say, like I would I always say when you use a, when somebody like, make sure you're using referrals and they have a good background and, but there's a lot more diligence, not because you're really relying on a third party to make a deal happen. And that sometimes is, you know, very difficult.
00;18;43;22 - 00;19;07;11
Unknown
So no knock on brokers. There's a place for everyone in this industry. But I just think, like, if we're really talking about scaling and, and keeping those costs down, that my borrowers are doing that directly to lenders, going to a relationship, there is such thing as repeat power benefits. The when you get with like with us, the more deals that you do with us, the better things you get.
00;19;07;11 - 00;19;26;26
Unknown
Like you get more leverage, you'll get better rates. Your underwriting faster will close faster. It's just it's just easier. It's like dating, you know, every time you meet somebody new, you have to, like, get to know each other, find out all the information, and it takes a while. So I, I'm always encourage staying with good borrowers that you have and have good relationships.
00;19;26;26 - 00;19;43;29
Unknown
But I do encourage you to, to, build up multiple ones of those. Like I do think it's important because when your favorite lender can do it, your second favorite lender can do it, and you're already in their system. You're already in the, in the, in the, cycle. So, you do we do benefit from having a good relationship.
00;19;43;29 - 00;20;02;12
Unknown
Repeat business. And then I think, like one thing we all miss is as lenders, we're in sales like we're salespeople. So we have to like you guys as investors. Remember, we're in sales like they understand our intentions, understand like we're trying to sell you our product as much as, like you're trying to get us to give us give you money.
00;20;02;14 - 00;20;22;18
Unknown
The relationship goes both ways. In there's a lot of lenders. I think there's more money out there than there are projects out there right now. So I think, like, investors need to realize, like they're in the driver's seat and use us against each other, like, be upfront about it and just be like, hey, I'm shopping. You, like, you know, give me your best terms.
00;20;22;18 - 00;20;43;17
Unknown
And and that's where you really make us be competitive and give best terms. Be front foot. I'd be very clear. And then you go and take that same information to three other people, and then do your apples to apples, and then you can decide on what's best for you. I think, that is the only way, like we say, all stay competitive and you guys all get the best rates.
00;20;43;20 - 00;20;59;00
Unknown
And then we get really quality borrowers as well because everyone is, you know, everyone's got their ducks in a row, not just one side of it. So it's not just don't ever feel like you're begging somebody to lend you on a deal. Like there's a lot of lenders like have that empowerment to know, like you've got a great deal, you've underwritten it.
00;20;59;03 - 00;21;14;00
Unknown
You look at it 25 different ways. Like, now you just need the money and, have that confidence. I get a lot of times people will call me and say, like, do you think you give me some money or do you think you would lend? Like, what do I need? And and I'm always laughing like, I need you as much as you need me.
00;21;14;00 - 00;21;36;12
Unknown
So it's a win win for both of us. And then always compare apples to apples. Like when you're looking at term sheets. Understand? Like, really look at the fees, the interest, the rehab. And pencil them all out. So when you look at everything, don't just look at, oh, they have a better rate, but then their fees are double or this one charge and draws all upfront at closing.
00;21;36;12 - 00;21;53;06
Unknown
Were this one let you pick how many draws you do and you pay as you close. Like you have to look at all of that and pencil it all the way through the exit, not just through the close of your purchase, because that's where people a lot of times I feel like don't, they don't underwrite well because they only underwrite through the purchase.
00;21;53;06 - 00;22;10;18
Unknown
And then everything else is the RV in the hope of that. It's going to close that way. But I really encourage people to underwrite all the way through the exit. So if this takes you five months, add up all those holding costs. Now add up the fees to sell this in the costs for the, the closing on the on the exit of that.
00;22;10;21 - 00;22;33;26
Unknown
And then look at numbers two numbers and see like which one really in the long run was better. And that I find, is really eye opening for borrowers. Okay. Moving on okay. So bridge loans we're going to get into those now. So bridge loans is your short term loan. These ones need rehab. They are construction loans. They need stabilization in the time you had to close fast.
00;22;33;29 - 00;22;55;29
Unknown
This is your bridge loan. So think bridge from crappy house dream to bridge it to your future sale doctor rental. These guys are. There's lots of options here. It's not just a fix and flip. So you can do renovations with a bridge loan. You can all your granite construction, your 80 you build. That's all bridge loan refinances you can do in a bridge loan transactional.
00;22;55;29 - 00;23;21;02
Unknown
You can do an a bridge loan and delayed financing. All bridge loan. Bridge loan is usually 12 months, 12 to 18 months. There's no pre pays on these guys. There's it's interest only. So it's really just, temporary loan to get you through your project and this and no personal residence. Now when you look at a bridge loan, I laid out, kind of how it looks like basic structure.
00;23;21;02 - 00;23;43;09
Unknown
So most of us lenders, our minimum is 100,000 for a loan. We all maxed out at 75% LTV. And that's really protect you as well, because if we go higher than that, you might over leverage yourself on your exit or on your sale or on your refi. You get better pricing. If you're a LTA, RV is at 70% and that means loan to to after repair value.
00;23;43;09 - 00;24;01;04
Unknown
So looking at the projection numbers, most of these loans are 12 months. Some will go to 18. There's no prepay interest on the undrawn non Dutch. We'll talk about that in a minute. But most most good lenders will do no interest on your undrawn. So you're not making any any interest payments on budget money until you use it.
00;24;01;06 - 00;24;16;00
Unknown
And these guys can go and personal name or LLC names. So when you look at these you're going to get your term sheet. And everyone asks me what are your feet? Then I tell them my fees and then I wait for them to ask me what are the other fees? And no one does. So know that there are some other fee.
00;24;16;00 - 00;24;34;21
Unknown
So our fees we have a rate. We have an origination point which is a percent of your loan. We have processing fee, rehab fee and then we have draw fees. But there's third party fees. You're going to pay for an appraisal. You're going to pay for legal fees in certain states. And then escrow and title have fees depending on if you do construction versus rental.
00;24;34;28 - 00;24;53;22
Unknown
Title and escrow will have different fees for those as well. Side note on escrow and title, that's all negotiable. So if you have a good company you like, you can negotiate those fees to to try to help you. If you don't know that, but you can aim. So yeah, maybe just circling back real quick, like what is a point?
00;24;53;24 - 00;25;16;04
Unknown
Because people hear that, okay. It's like it's one point and then this is the percent. If you could just kind of share that. And then also cash flow is so important. We've had we've Adams given a couple really good examples. So as Bill of all of these fees and what they end up being in total. But if you could and if it's coming up in the presentation, we could wait.
00;25;16;04 - 00;25;38;24
Unknown
But just to talk through cash flow, like how much of this do you need upfront? Are you paying monthly? Yeah. Just if you could make sure we hit on that. Yeah. No. Absolutely. So the point thing, I actually added that percent of total loan amount because that is a good question everyone asks. So I don't know why we call it a point, but that is the origination fee to do the loan.
00;25;38;24 - 00;26;00;26
Unknown
And most all direct lenders are going to charge one point. So like we charge one point, we'll do promos and stuff where it's less. But the average loan, I'd say 90% of our loans are one point. We charge more if they're riskier or like there's issues or something, but most are one point you'll know if you are with a broker or a third party, or just a really expensive lender.
00;26;00;26 - 00;26;18;00
Unknown
If it's like to. Two plus points, like even one and a half seems like a lot because all of us are really we're all around one point, but it's the percentage of your total loan, so it's not just 2% of your purchase. What we funded on the purchase, it's of the rehab fund as well. And we're going to get to that part.
00;26;18;00 - 00;26;39;11
Unknown
I have a slide on that. So when you do the point, you're going to look at the percentage of the total loan amount. And then when you talk about we talk about cash flow. These all these loans are monthly payments. So you're going to do an interest only monthly payment. And so if you're doing the add value project, you're going to pay so much per month until you start doing your rehab.
00;26;39;18 - 00;26;57;13
Unknown
And then you'll start accruing interest on the rehab that you use. So your payment will go up throughout the life of this loan as you use your rehab money. So as far as that, like we definitely ask, like when we're doing construction loans, we asked people to have at least 10% of their total loan amount in reserves to that.
00;26;57;13 - 00;27;21;03
Unknown
They just show and have, you know, they don't have to give it to us. But we do ask that a new borrowers can show it, like at least three months of interest only payments, like you don't ever want to be without reserves. That's why it's always good to have some of that cash reserves just there. And then when we get to, I'll talk about the cash to start your rehab projects too, because there is funds involved with that as well.
00;27;21;06 - 00;27;37;20
Unknown
Okay. So going to the bottom and how it looks. So when you get a quote on a, on a, on a bridge loan, we're going to tell you how much we can lend on the purchase price. So anywhere from 80 to 90% is the average and then 100% of your rehab budget. Most all of us will do 100% of the rehab budget.
00;27;37;22 - 00;28;01;28
Unknown
Now, there are lenders that advertise, we'll do 100% of everything. And it's it's true. But then they'll say it has to be under 75% of the RV. So that really like eliminates a lot of loans because if you find 100% of the purchase and 100% of the rehab, it's well over 75% of the RV. So the loan to after repair value.
00;28;01;28 - 00;28;20;19
Unknown
So there's not a ton of instances when you have that cap of LTV. So there are social programs that do 101 hundred and they fit for that, that really experienced the borrower. But for the most part, when you're when you're looking at how lenders advertise, look at all of it, not just percentage of the purchase, percentage of the rehab.
00;28;20;19 - 00;28;45;15
Unknown
Look at the total loan cap at because it's usually like in small print. And that really does change the entire I mean, we could say that to like we'll find up to 100% of everything, but we'll still cap at 75%, which will bring everything back down to normal. Normal terms. And then excuse the average loans right now for bridge loans are about 10.5% with experience, one point $1,500 processing fee.
00;28;45;18 - 00;29;07;07
Unknown
And what we talked about with Dave said about the promo is everyone in this organization, you guys have a special offer with us to do a no no points on your flip. Your first step with us is no point, but then all your processing fees are 500 with us. Just as a relationship builder. And just try to like for us for direct or cost that we can cut down to help people scale.
00;29;07;10 - 00;29;30;10
Unknown
So added perk, make sure you take note of that one. Hey Melissa, before we go on, and again, I mean, you set it up, you said, hey, we're it's competitive. So that's, I actually your quote was investors are in the driver's seat right now. And you just showed it by saying, here's a little here's something extra to start a relationship with us and see how it goes.
00;29;30;12 - 00;29;55;27
Unknown
I did just want to highlight the 10% in resources and then new investors, you want to see three months that they can make three months of payments. That kind of stuff is important to know. And I know we're going through quickly on this and people can read it later. But for newer investors, sometimes there's added requirements. It's all about risk management and it's about making sure you have those pieces in front of you.
00;29;55;27 - 00;30;13;04
Unknown
If they have a call with you. It's really kind of the beauty of that relationship for you to say, okay, where are you at as an investor? Yeah, you've done in the past, where are you right now? And you get to know them and then tell them what's coming so they know what to expect. They can navigate it.
00;30;13;04 - 00;30;37;13
Unknown
They make sure they have the reserves that are needed. And maybe what I'm getting at is the relationship with lenders should start now before you have a deal. So you know what's coming. Maybe just say something on that and then keep going. You're doing a great job. Yeah. No, I couldn't agree more because and that's why I do this is because I feel like the more people see it when they come to me, they're more prepared.
00;30;37;13 - 00;31;00;14
Unknown
They're like, oh, you know, like, I didn't know that, you know, they have more info knowing what we're going to expect. So I love those conversations of like, I don't have a deal yet, but this is where I'm looking. This is kind of what it's going to look like. This is my reserves. And just you'll get an idea of what lenders will do for you, but you'll also get an idea of how hard lenders will work for you, because it's not easy to manage deals and stuff.
00;31;00;14 - 00;31;19;25
Unknown
And so lenders don't always want to do a deal if they know it's not gonna, you know, like we're all over the ones I got close now, but you'll kind of see how they operate too, because there are definitely times where it's busy. And, you know, I have to triage my list. And the ones that don't have urgent deals, kind of get pushed to the back to.
00;31;19;28 - 00;31;40;22
Unknown
And I have to navigate that as a lender to make sure no one feels like they're not important, depending on, you know, what kind of deal they have. So you definitely want to learn your communication style of the lenders you work with and like how they respond, how timely they are. If they take a few days like you got to give them to it, you know, a few days notice if it's urgent, like you figure out how you can get urgent to them.
00;31;40;22 - 00;31;57;19
Unknown
Like for me, my clients all know if they sent me an email, I don't respond and it's urgent. Like I get a little text like, hey, I know you're busy, right? I, you know, this one's time sensitive. And then I'll go to it because it's just an it's a relationship. So it is good. And you kind of get a good feel of, you know, who you want to work with.
00;31;57;26 - 00;32;14;05
Unknown
I do too, is a lender. I get calls all day from people and I'm, you know, like the reality is, is not everyone's a good fit. So I'm always kind of like, okay, bye. Or there's ones are like, I really excited. And I'll find them on Instagram. And like I, you know, we all there's, there's so much of us out there on both sides of it.
00;32;14;05 - 00;32;32;28
Unknown
Like you'll find where you work really well and your communication styles gel. And that's the relationship regardless of rates. Sometimes like that's what's going to help you make investing fun and successful, because the happier when you do it, the more you're profit and progress you're going to make. And Melissa, I have a question for you. I'm I'm Adam, by the way.
00;32;33;01 - 00;33;01;20
Unknown
Hi. I can't see you. Sorry. Cool. Hey, look all around, I'm like, I don't know. Okay? I'm really fortunate to be able to, lead the seven figure flipping community as a CEO, but we we talk a lot in our community about, we teach our people how to raise capital from private investors, friends and family. And, you know, over the last ten years, we've seen house flippers scale their businesses to 100, 200, or 300 house flips in a year.
00;33;01;20 - 00;33;25;04
Unknown
And people are often like, oh my gosh, that's crazy. One of the biggest limitations on that oftentimes is capital. And where we've seen people have the most success is have a great relationship with a hard money lender that typically we'll do the purchase price on their properties, and then they typically raise the holding cost and the rehab costs from private lenders, which is a little more flexible.
00;33;25;04 - 00;33;49;11
Unknown
Money typically doesn't often have a draw process. I know that, this is like a sensitive subject for hard money lenders. There are actual rules around bringing in second position lenders, and some hard money lenders make it even more complicated because they have the rules, but they choose to look the other way a lot, which we're totally cool with.
00;33;49;11 - 00;34;11;14
Unknown
By the way. We're being recorded, right? Yes. This is all internal, and this is a family. Is is 70 or 50 families all in house? I'm just kidding. I mean, I'm just because here's what happens, especially as we bring up, budding newer investors in our community. They see somebody like us doing 100 flips in a year, and they go, what's the playbook?
00;34;11;14 - 00;34;26;24
Unknown
And I go, cool. You just mix hard and private money. They go to do it. Their deal blows up at the table. They go, wait a minute, I need your private lender, social security, number of blood drawn, their firstborn child. And they gotta sign these documents before I'll allow you to take that second position. Yeah. So can you.
00;34;26;25 - 00;34;44;13
Unknown
Can you just talk about the mechanics of that and how it actually works in the industry? Because that's really, really important for, the investors who are growing their business. Yeah. So I've been a lender for four years and I've seen it evolve because when I first started it was like, no way. Like, not a thing like, don't do it.
00;34;44;13 - 00;35;07;26
Unknown
Like, absolutely not. We got to know whose money is coming from where. But I think as every the industry evolves and the use of raising capital and private money has been successful, it's not just, you know, like loan sharking, like it is actually there's a successful way it's being executed. I do feel like lenders are allowing it. Like, I know I compete against it sometimes with other lenders that do it.
00;35;07;28 - 00;35;31;01
Unknown
The reality is, is disclosure. People need to disclose what they're doing in the plan. And so a lot of the like in my questionnaire, I say, where is the money coming from for the down payment? Like I ask straight up because if they say it's my savings, I'm like, cool. If they say friends and family or pmml, then we have a conversation of what that looks like because having a pmml do a relationship with them.
00;35;31;01 - 00;35;50;25
Unknown
Where do you have it? You know, I deal, handshake, promise or I know a lean on a different property and you know, that money ends up being in your hands, but you close with that. That is something like lender. We don't all know, like how that functions, right? Like, that's kind of like behind the scenes that happens between all of your investing stuff.
00;35;50;27 - 00;36;10;25
Unknown
But if you have a second position, if you have a heart. Pmml. Who wants to be in second position, like they want to slap it on to our loan, that has to get disclosed and we do them now. We do them for repeat borrowers, people we have relationships with, but it's all disclosed. So it's something that like they tell us this money is coming from a pmml.
00;36;10;25 - 00;36;40;29
Unknown
It's, you know, we they tell us straight up and then they tell us the second is going on and you might pay a little bit more just depending on where you are in your experience and like your borrower position. But those don't blow up because it's all just blows. What happens that blows up. And we're at the closing table and somebody's the escrow that the buyer that, sorry, the wire is from so-and-so, who's not part of our loan and legally, like, our loan documents, can't have money coming from some person that's not signing on that loan.
00;36;41;02 - 00;37;03;19
Unknown
So that's where the that's where the the problem arises is it's, it's outside funds because we're digging deep. But this just to understand is when, when we look at a borrower, we do a background check and we look at, different fraud list, we look at, terrorist watch list, we look at everything about this borrower making sure money is not being laundered.
00;37;03;22 - 00;37;24;16
Unknown
Money is not coming from other countries. Like we definitely as a U.S, financial source, like we have like those regulations we have to follow. So when we get money randomly from some random person at closing, that just can't happen because we don't even know anything about this and that can't be attached to a loan. And that is why lenders are so strict about it.
00;37;24;16 - 00;37;47;21
Unknown
And are so cautious about it, because it can cause a lot of problems. And down the road, if we're audited or they do financial digs and they're like, who's this person? And no one knows they're just someone's family, that loan gets flagged and then we have issues. So the takeaway is it's possible you just have to disclose it and discuss with your lender, like how they handle that and like the options to do that.
00;37;47;23 - 00;38;09;11
Unknown
And do you guys. So let's say I come to you Melissa and you say like okay Adam, you're pretty experienced that you have a good track record. You're going to get favorable, you're going to get favorable rates, treatment, whatever. And I say, okay, Melissa, I'm bringing private capital into every flip I do. I'm only taking purchase price money from you.
00;38;09;13 - 00;38;35;17
Unknown
My deals are good. They're going to be deep. There's plenty of margin on them. Do I have to have my private lender sign anything? Do you need their Social Security numbers? Do you need to get on the phone and talk to them? Because some lenders do that? No. The only time that we have to involve anybody is if they're signing on our, our loans or they're, they're providing their money from their bank accounts to our loans.
00;38;35;19 - 00;38;54;29
Unknown
Can you give me an example of what that means? Like, what do you mean? So so in your example, you're raising the funds for the rehab and all of that stuff, but that's outside of our loan. So at the closing table that private money isn't get that person is not sending money to the escrow. Right. They will send it through title.
00;38;54;29 - 00;39;20;27
Unknown
But I mean, this is how I when we teach a lot of people how to raise capital. I personally do tell them to run everything through a third party, fiduciary, like a title company and escrow, just to keep the keep the money track. Everything's track. The the way that it happens is, my private lenders will wire, and that will just end up getting distributed to me directly.
00;39;21;00 - 00;39;48;00
Unknown
After closing. And then usually what we'll do is we'll register the second the day after, obviously disclose. But, usually that's the mechanics of how it works for us. So that system works for us as long as we that's disclosed. What doesn't work is where what doesn't work is where that private money lender wires that money directly to escrow versus directly to you, so they can wire it to you.
00;39;48;00 - 00;40;13;00
Unknown
And we close and then the second gets put on. But when it goes to escrow that's where that now new name is put on there. And that has to be diligence. Interesting okay. Good to know. Would you say that a lot of lenders are like that? I would say that there's probably half of us that allow the second now and how they all do it is different.
00;40;13;00 - 00;40;29;22
Unknown
But I but I would say it's not so much the lender. It's like title and escrow as well. Like all the like escrow. So to be honest, when somebody spends money to escrow, we don't even see it. We don't see who comes from. They flag us and tell us like, this is not this person's not on the loan.
00;40;29;28 - 00;41;01;10
Unknown
And then they show us who it's from, and then we have to diligence and go through it. So it's kind of like a combination of talent. Escrow is also putting insurances on this loan. So they have to make sure all those ducks are in a row. Cool. Thanks for, coming down that rabbit hole with me, I, I just, I, I see a lot of we have a lot of investors and some finger flipping and they'll, they'll go to do maybe their first loan, their first deal in this fashion where they're excited to scale and they've gotten out capital.
00;41;01;12 - 00;41;20;25
Unknown
They have less capital limitations with private and hard money. And then, you know, it's there's a lot of friction. It becomes friction because they haven't walked through the process with their lender. They haven't disclosed appropriately. They just, you know, they haven't walked through all the steps yet. And then it's like at the closing table now they're like, oh, hard money sucks.
00;41;20;27 - 00;41;40;26
Unknown
They don't let me do anything. Right. Yeah. Well it's back open. It's relationship. Yeah. And that goes back just to the conversation. I asked the right questions because I know that if I got a yes fair, that just that's going to be a conversation we have versus a no. So I think like that can all be disclosed in a nutshell.
00;41;40;29 - 00;41;58;09
Unknown
There's a way to do it right. And easy and and as long as it's disclosed like you'll find out who can do it, who can't do it. But it's when it all comes up at the end, like when people do assignments, we need to know upfront because it's not we can't do an assignment. We just have to know, because when we get that info, we're not going to go, why are all these different names on this?
00;41;58;09 - 00;42;26;26
Unknown
Because an assignment contract has different names. So it's it just helps smooth the process and make everything go fast because that's what we all want is fast. Thanks a ton. Great. You're doing a great. Yeah. Thank you. I think I'd love to have more conversation with you on that. It's interesting topic. I'm never going to get through this in 16 minutes though, so, do you guys ever go over or am I really done in 15 minutes?
00;42;26;28 - 00;42;49;13
Unknown
I mean, they're going to they're going to get it. They're going to get the presentation. We could always do something else again later in the okay, maybe just like think of our our group. What's most important I really want to it hit the draw system so people understand. Yeah. So this is I was going to say we we definitely won't talk about this because the draws is where there's a lot of misconception.
00;42;49;13 - 00;43;06;04
Unknown
Everyone thinks like, oh, they're funding my rehab and they're and when we close you're going to get all that rehab fund in your pocket to go either do your rehab or maybe go to Vegas. So that's not what happens. So say we agree that we're going to fund your purchase, and we're going to fund 100,000 of your rehab budget.
00;43;06;06 - 00;43;26;24
Unknown
You're actually going to have that money moved into a fund for you to use as you do the rehab. And it's a reimbursement fund. So the dissolution of money at close is not a thing like that's where a pmml is useful, because they usually they have more freedoms to be like, here's the money to start your rehab. You know, go ahead and go like it's a different relationship.
00;43;26;27 - 00;43;46;23
Unknown
We don't. So we would say, okay, you would come to us and say, I installed I bought the windows, they were installed. We'll ask you to do, a draw request through like a portal. We have a virtual. We do virtual in person and then self sourced draws. There's different ways. But then you verify that the work was done, it was paid for, and then we.
00;43;46;23 - 00;44;05;19
Unknown
Why are you that amount. So maybe if 100,000 your windows cost 10,000 we'll send you 10,000. So now you're going to pay interest on that new 10,000 that was added to your loan. That 90,000 will still set their interest free. Now that's called the non Dutch thing. That thing I talked about earlier. And not every lender does that.
00;44;05;25 - 00;44;24;17
Unknown
You'll see some lenders with really really good pricing and you'll see Dutch. And that means that they compensated for their pricing being low and added interest from day one on the 100,000. So whether you use that money or not, you're going to pay interest from day one. Again, a cost that could kill your deal or just take away from your profit.
00;44;24;19 - 00;44;43;10
Unknown
So the thing to understand about draws is there's fees for them. Some lenders say you have to take ten draws. They cost this money and it's going to they they take all that money. It close were other lenders. And this is the way that we do this is we only do draws as you decide like you'll tell us like I'll probably do four draws.
00;44;43;13 - 00;44;57;02
Unknown
We'll say, yeah, it looks about right. And then you draw your project. You can take draws if you want. You don't even have to use that money. It's it's their interest free. And some people get to the point where they're like, I don't need for draws. I just want to do two. And then I'm it's already in contract.
00;44;57;02 - 00;45;15;26
Unknown
I don't even need to worry about it. I'm going to sell it. And then they they don't. So it just depends on how you want to do that. But it does save some money because you're not locked into having to take a draw. And they range from anywhere from 100 to 265 across like hard money lenders. And I know this because I see enough enough that I kind of see what I compete against.
00;45;15;29 - 00;45;42;03
Unknown
Our highest is 265 and our lowest is about a little over 100, and it's again per draw. And most the time from from a cash flow perspective. I'm paying a contractor on Friday work was just finished. Just done verified. I submit it through the portal. How long do I need to carry that? Until I get reimbursed. So our average draw time is three and a half days, so it's fast.
00;45;42;03 - 00;46;00;03
Unknown
But I would say the first draw is going to be longer. So I always say like give it five days like 3 to 5 days. And then I would say like bigger rehab, like a bigger draw. Like you just did the framing in foundation or something like, it might take a little bit longer just to diligence that because it's not like one person slips through it.
00;46;00;03 - 00;46;17;22
Unknown
It's there's a system that they review the pictures, they look at the invoice, and then they have to order the wire. So it does take a process. And, you know, we're all human. So, but we're three and a half days. I would say, I would say in this market draws this huge thing, like all of us are competing that way as well.
00;46;17;22 - 00;46;36;05
Unknown
Just who has the best draws process because it can kill your deal if you're not getting that money recycled back to you to use. And, many people just have enough to do their rehab, so they can't just have that held up and a GC won't keep working if they're not keep getting paid. So it is important to understand that process.
00;46;36;08 - 00;46;51;29
Unknown
And art like on our website there's a link where we have you, you can anybody can go and click how we do construction draws. You can see our portal. And it was something over the years we've really improved on. We were terrible like everyone. I mean, I remember jaws were like 10 to 20 days when I first started.
00;46;51;29 - 00;47;15;18
Unknown
It was horrible. So I feel like we've come a long way. But yeah, that draws is a really big thing. Draws in how reimbursements are done. And then just another note on when you're doing rehab and construction. One thing that most borrowers are shocked by new ones are builders risk insurance. It's so expensive like stupid expensive. But you are going to be required by any of us lenders to do it.
00;47;15;18 - 00;47;36;16
Unknown
If you're changing square footage, you're changing layout, ground up construction. There's definitely ways to like, maneuver. Like maybe not get builders risk day one when it's ground up and you know you're not going to have permits for nine months, like we'll let you delay getting that builder's risk insurance, but you won't get a draw or anything until we have that in place and ready to go.
00;47;36;19 - 00;47;59;22
Unknown
So plan for that in your underwriting. If it's a big rehab, big changes in square footage, ground up construction, add that builder's risk on top of your liability insurance. And then the last thing I'll say about Jaws and Rehab getting organized is would be really good, is really good on this end. Because if you're doing the BR method and you're going to hold this when you come to us to do the refinance, we're going to ask you about your rehab.
00;47;59;29 - 00;48;21;22
Unknown
We're going to ask you what you did, how much you paid. So I I'm always sad when I see somebody scrambling with a loan and having to dig out Home Depot receipts and like, scanning. I mean, it's it's, it's painful, but it's a reality. I'm the same way. I have issues with certain receipts, too. But if you could get organized and track that stuff ahead of time, it makes it so nice.
00;48;21;22 - 00;48;43;27
Unknown
Like some of my really experienced borrowers will send me. You can tell it's a repeat package. It's like before and after pictures, RV comps, all the spreadsheet of all the costs they've spent. The sums, the totals, the performance, and then receipts all scanned in the back of it. It makes it so quick to underwrite and it just it just helps again, keep that process moving fast.
00;48;43;27 - 00;49;03;10
Unknown
And you're not in the middle of your lives trying to dig up receipts and figure out how much that roof cost that you did last year. So side note track rehab for all your deals. So, Melissa, since we're short on time, there's a couple of questions in here to maybe just tease the group on like, what else are topics that you might cover?
00;49;03;10 - 00;49;18;11
Unknown
And maybe we just need to have you back, again or. Yeah, we're community. Yeah. So like the next part. So the whole next part of DSR. So that was where I was going to talk about the other side. And I think like, maybe that would be another good conversation to come back and talk about how that is.
00;49;18;11 - 00;49;37;23
Unknown
But on with DSR. We talked about the BR method, and that's something I always love talking about because that takes the fix and flip bridge loan carries it with the DSR loan. And that's your BR method. So this is the exit of the BR. And when you find a lender like when you're looking for if your exit is boring, find a lender that supports that.
00;49;37;23 - 00;49;52;18
Unknown
So like we do a really good job because we don't charge you again when you do. So if you paid a point for the flip, we don't charge you the point again on the BR because it on the DSR because it's our loan. We funded it. We've probably tracked all the draws. We just don't make you do that again.
00;49;52;26 - 00;50;13;22
Unknown
So there are lenders that do that. Our vendors do. Yeah a lot of it is do. So Tracy let's let's do that for you know, we'll just specifically everybody who's doing rentals. So you're funding as a short term fix and flip a difference does you have options to. Yeah. One would be to flip it. Another would be to keep it and then you're making it easy.
00;50;13;22 - 00;50;31;03
Unknown
And let's just talk through what that looks like. Yeah. So we can save DSR for another time. But I'm going to scroll through because there was some stuff at that just about borrowing power. And I'll leave. I know I've said it, I've really short time, but this is I want to go through this because there's some stuff I can provide you to help.
00;50;31;06 - 00;50;50;16
Unknown
So some of the big factors with borrowing power is what you can do for yourself. And it's Fico, like it's number one is protect your Fico. I, many people have, bad vehicles because they weren't monitoring them. They didn't realize they missed payments. They didn't notice something. There was fraud on there. So really monitor these guys, find an app, freeze all of your credit scores.
00;50;50;16 - 00;51;09;05
Unknown
Don't let us don't let our, lenders pull your credit just to do an application. And just make your payments, you know, like, those are important, but find a system to where you're really protecting your Fico because it is your, like, currency with us. And the other thing is experience. Like, I know some people are starting out at zero, and that's okay.
00;51;09;05 - 00;51;29;14
Unknown
We lend to people with no experience but you. As you grow, you will see like you will open more doors as you get experience. But not everyone understands how to build that. Like some people. So experience is really on title. So if you partner with somebody, you're going to be on title that will count. If you're the GC for a project that doesn't count, you're not on title.
00;51;29;16 - 00;51;48;05
Unknown
If you, did the interior design of a project, not on title. If you were in an LLC that owned you were part of an LLC that was listed on title for a project and you were part of it, that's experience for you. So understanding how we track that, all the lenders are kind of different, but we're all kind of the same.
00;51;48;05 - 00;52;11;29
Unknown
We really stick to who's on title, but we have different levels. So like for us at three you get better pricing five, ten, 20 and that's in the last three years, other lenders might use two years. They have different numbers. But just understanding like how the lender looks at experience, kind of helps you kind of set goals like, okay, when I get to three, I'm going to get better leverage or better, rate or something.
00;52;12;01 - 00;52;28;11
Unknown
Slips and holds account. So even if you, if you rehab it and then you fold it, it'll count. But they have to have something that has been rehabbed. We want to know that you're rehabbing these things, that you have that experience. So not always turnkey. That doesn't really help your experience on far as, like, pricing and stuff.
00;52;28;11 - 00;52;45;22
Unknown
Overall confidence in you. Yes, but not so much pricing. And then we look at properties, we don't look at doors. So a lot of times you'll be like, I have 100 doors and I'm or they'll say, I have 100. I'm like, wow. And then it's like ten, you know, ten buildings with tons of doors. So when we're talking to a lender, we care more about the titles.
00;52;45;22 - 00;53;07;01
Unknown
So the parcels and the closings than we do about the doors, even though I know doors are important for you guys. Got it. And then what is the psycho score that you that you require. So we go down to on the bridge. We'll go to 650 and then we'll go lower if there's good reasons like repeat business, you know, like some something happened like there's lots of good stories of white.
00;53;07;01 - 00;53;31;03
Unknown
If I go slow, there's a lot of bad stories too. So it just depends. And then on the darker side, it's really, really a weighted on Fico. It starts there. And that's, the lowest we go is 680 on those guys. Got it. The cool thing about DSR though is if you have like husband or wife or partners and one has a really low Fico and one has a really good Fico, we price off the really good Fico, which is awesome.
00;53;31;05 - 00;53;51;24
Unknown
But on brand, if that's the same situation, we average the two. So sometimes that can kind of make it harder. But and then I provide this intake diligence sheet for all different loan types. So this is the bridge I have a DSR one and construction and this helps you really vet and really organize. It tells me everything as a lender what I need.
00;53;51;27 - 00;54;09;04
Unknown
But what you do is you fill this out, put your deal in here, and then you cut you. You send this to the lenders you want pricing on. And it's if the lender can't provide you with this information, you don't want to work with them. This is enough information we could be able to tell you in 30 minutes if we can, and we can do it, and what pricing and leverage we can do it.
00;54;09;06 - 00;54;25;07
Unknown
So this helps you go faster and be more efficient. And when I see this I'm going to answer it is when I see an email with 20 documents attached and like paragraphs of you and the purchase and why and your background, that's an after lunch email. When I get through my closings and I have time to read it.
00;54;25;07 - 00;54;46;29
Unknown
So if you want to be seen by the lenders first, this is a great way to scale and get faster, faster responses. Just cut and paste it. I get plenty from other lenders of intake sheets, and I just laugh because I don't think it's getting you got a price. And then I recommend all my borrowers use a personal financial statement, and this is a simple one I provide.
00;54;46;29 - 00;55;07;05
Unknown
It's an Excel. You can buy these, you can create your own though. The the moral is just have something where you're tracking and you're organizing and it's kind of a living document. This is, this helps us as a lender not have to dig through stuff we can kind of see upfront, like where your assets and liabilities are, and also see how your experience sheet is.
00;55;07;05 - 00;55;24;23
Unknown
There's a schedule, a real estate tab with it, too. And all of these all send to Tracy to have for you guys to use if you want. As resources. And then the last thing that I do share is an underwriting calculator. I'm sure you guys have stuff like this, but you'd be surprised how many groups I talked to that don't.
00;55;24;25 - 00;55;45;04
Unknown
So if you don't have an underwriting calculator, use one, find one, create one, make one. This really helps you look at your holding costs. When I said pencil it through the exit. This shows you penciling through the purchase, the rehab, the cost to of all your agents to buy the property and then just sell it again. And it really tells you like are you really making a profit?
00;55;45;06 - 00;56;03;13
Unknown
And that's something I, I have some slides on deal structure of like where a profit looked amazing. And then we, we actually put it through the pencil. It was still amazing but not as amazing. So you can kind of see like the difference in what happens with holding cost an actual the hard cost to exit a deal.
00;56;03;15 - 00;56;21;02
Unknown
And then I'm going to skip through this because we won't have time for this stuff. But then this is my contact information. This, my Instagram is down there. And then the QR code is if you want more information or you want to set up a call with me to do one on ones. This is kind of like our code with, seven figure funding.
00;56;21;02 - 00;56;39;24
Unknown
So we can, flipping sorry. So we can keep track of everyone that's kind of come through the system. So definitely use this QR code. But this is if you want information, if you want to get on my list for the promo, if you have like specific questions that you're just like, okay, you kind of talked about this, but I want to know more like, feel free to reach out, get on my calendar.
00;56;39;27 - 00;57;00;17
Unknown
I want to be a resource and help. And I feel bad because I like skipped half the the the I feel like I left you guys with, like, lots of click. But we can do that. If you can stay a few minutes, there's a couple of you for those that can. And then, Tracy, you know, for some people who are connected via their phone right now or driving, is there a way for us to send out the link so that people can get this?
00;57;00;22 - 00;57;19;17
Unknown
I actually just dropped the I dropped the link that the QR code connects to. I dropped that in the chat. Okay. And we'll we'll definitely share that, you know, kind of across all the resources. Yeah. When we send out the resource, you can put that out. Okay. And I don't send my PowerPoint to. So you can have all the stuff we talked about today.
00;57;19;20 - 00;57;38;04
Unknown
Great. I've got a question from Jeff. And you know just thank you. So much Mercer to for those of you that have to drop, for being on you great energy. You kept it up the entire way in the five hour framework that we have focused. Fine. And then fund, you know, this is a big piece of that funding.
00;57;38;04 - 00;58;00;26
Unknown
And as Adam said, this is one of those points where people say, how are people doing this many deals, right? It's the funding is just so critical. So thank you. Thank you everybody who is on. If you have some questions Melissa can stay. I've got one from Jeff. He was asking about proof of funds. So he said provide investors with proof of funds.
00;58;00;28 - 00;58;18;07
Unknown
We do and that goes out and relationship thing because I don't have time to make a letter for every deal that you're going to say, you want to make a letter for. So I want you to build a relationship with a lender. Like I will give you a word document that you, you know, pinky swear that you're not going to change my verbiage, that you'll just change your name.
00;58;18;07 - 00;58;44;15
Unknown
The address and the purchase price and then save as PDF use as a document. The only caveat, though, is tell your lender what you're making offers on, because then I get calls and I'm like, oh, sure, I know that property, and I have no idea what somebody's talking about or anything. So if you use lender's letter, which we totally have, just Q them into like property that you're looking at because then we don't we're not in the dark.
00;58;44;17 - 00;59;10;10
Unknown
Awesome. Okay, good. Let's see, the Hills questions is a little there's complexity to it. His, his he said I thought private lending loans were cheaper than hard money loans. And they can be right. So it it just depends. And there's certainly benefits of of private money. And it also depends on kind of what your sources are of private money.
00;59;10;10 - 00;59;33;05
Unknown
So it's a little bit difficult to answer. You can usually sort of what you can offer consistently that comes from your your organization. Right. Yeah. And I mean like when somebody says it's cheaper, there's a lot of factors that go into making something cheaper expense like we're talking rate down payments, the, the fees that go involved with it.
00;59;33;05 - 00;59;52;18
Unknown
So there's a lot of things that can make something more expensive and, and not just at that one moment, like holding costs might draw a draw. This process could make something expensive. So I think like as investors, we need to not just focus on the one the that rate or that the or that something, but like the overall thing of the whole process.
00;59;52;18 - 01;00;10;11
Unknown
Like which process is more expensive? Is it going with this hard money lender who has a great rates, has great fees with their draws process makes it, you know, like I have to do a draw process with them and it takes time. So that cost me holding costs. And you know, is it faster if I do a pmml and pay a higher rate?
01;00;10;11 - 01;00;31;14
Unknown
But it's a shorter loan term because I had more flexibility and I could just keep funneling through and it was easier. So it kind of just depends on where you're at and what is. And if you're looking at the overall thing, not just like one fee, like when people say, I'm sorry, I feel like I'm rambling, but it's hard to say something expensive or not because it's like there's so many things involved with that.
01;00;31;16 - 01;00;55;07
Unknown
But generally PMS are no, they're not lower than I mean, I don't know many that are lower than 10%. Melissa I can I can this because these get a lot of these guys came to our training and yeah. Well, one of the we're talking about raising money from friends and family, not sophisticated private private money lenders who are like the kind of people who are raising money from we're not selling out applications or not.
01;00;55;08 - 01;01;14;25
Unknown
Yeah, they're not running my credit score. This is like true friends and family. We get it. We bucket them with three avatars. So you have the most expensive avatar, which would be like a sophisticated Sam. So if I were to go borrow money from Dave Morris because he's got a lot of it, Dave is going to be a sophisticated Sam.
01;01;14;25 - 01;01;36;21
Unknown
He's going to want, okay, he's going to be 12 and two probably. But he's going to be real easy. Like, I'm not saying the application is going to spend the money easy. Okay. Then we have, the balance Ben, who isn't necessarily real estate savvy but balanced. Ben might want eight, 8 to 12% in that range. And then we have the what we call the cautious Claire, the cautious Claire.
01;01;36;21 - 01;01;57;10
Unknown
So my grandma, you know, if I told my grandma I was going to give her 12% balloon payments at the end, don't tell this story. But, like, she would think it's a scam because she's on the CD at 5%, she'd be happy just to get six. Right? So that's my questions, Claire. So, like, private money is a loose term that the industry.
01;01;57;10 - 01;02;25;21
Unknown
Totally. When we speak about private money, we're talking about human to human lending. Like Melissa, your lending your personal cash or self-directed IRA to me and my business. There are some there are some lenders that are really hard money lenders that call themselves private money lenders, maybe because they're not institutional backed. They probably do have warehouse lines, but they're doing a little, you know, they're raising a lot of their own capital.
01;02;25;21 - 01;02;53;17
Unknown
That's like, you know, some other folks for. No. But yeah. Which are private. We're talking people. People. Okay. Yeah. And I think that's also just kind of like the different like when I, when I do these, I talk about like who, who. So I think that's like a different that's good to know. Like that's the, that's good to know that that is a my a perspective on private lending because where I'm at most of the private lending I'm around or see or compete against is in place of me.
01;02;53;17 - 01;03;08;07
Unknown
So not always like in compliment of me. What you guys have is a lot of stuff that would be in compliment of what I do. A lot of my borrowers use private money for down payments and closing costs and like, we work together like I have private lenders that I refer people to because like, I know that they need that.
01;03;08;08 - 01;03;28;17
Unknown
I'm sorry. Like, you should talk to them. So so yeah, that's like a good thank you for doing that because, like, I sometimes get too close minded on, like, the interest institutionalized pmml. So. Yeah. And I totally I think it's, I think it's also important to know, like from our perspective, we, we talk to our community about having all the types of lenders.
01;03;28;20 - 01;03;46;22
Unknown
Yeah. You need every I need the hard money lender that can access but charges me a lot and doesn't have as many requirements. I need a good, stable, hard money lender that's got really fair rates. I need private money like true private like. We want people to have a strong capital stack. So liquidity isn't the reason that they're not able to grow their business.
01;03;46;25 - 01;04;05;05
Unknown
Absolutely, absolutely. I hear it all the time where people are like, I just bought something and I found this new deal. And, and we actually don't cap our borrowers on how many deals that they can do. Like eventually, like we're seeing like, are you actually in these deals, you know, like we want to see that happen, but it's like, you know, people are always like, I can do three with you.
01;04;05;05 - 01;04;23;06
Unknown
And we're like, yeah, like that's fine. It's it works out as long as, you know, like the numbers all work. So but yeah, it is kind of some people, like I said, let's give us some of the caps on that. Like, you know, how much what's the max cap that can Ventas will lend. And then also we had a question from Charlie in here.
01;04;23;08 - 01;04;44;22
Unknown
The, what was convinces convinces is highest leverage fix and flip loan. Okay, so, Max cap, we got up to 10 million, and I'll tell you, like, in four years I've gone there no time for the most I'm done is, like 8 million. But I do. You know, San Diego builds multifamily, stuff like that. So, I've never gone to 10 million.
01;04;44;22 - 01;05;04;22
Unknown
I don't think I ever will. But we are. We do have borrowers that go up to 10 million, and it is done. I've seen it through our company. But like, max exposure to like, we don't have anything like that. Like we don't really. Everything is really, personal. Like our CEO actually like, reviews every single loan. Like when I bring a loan in, he looks at it like he knows borrowers.
01;05;04;22 - 01;05;26;24
Unknown
He goes and visits guys. So it's really like relationship based. If we feel comfortable that they keep they keep exiting and we'll keep lending. What's the other question, Max? Yeah. I don't even know what size of the loan to value you'll do. Yeah. So we're going to the max, like, for our best, most qualified borrowers.
01;05;26;24 - 01;05;50;06
Unknown
We, out the door every day. No and no committee to approve. Like, well, up to 90% of the purchase price and 100 of the rehab. Now, we have a program that goes up to 95. And eventually soon we're told we're up to 100 of the purchase price. But what's going to happen is that pricing is going to go up too, and it's going to be a matter of like, here's 100, here's 95, here's 90.
01;05;50;08 - 01;06;06;25
Unknown
These are the pricing. Which one do you want? And I've we have a lot of experienced borrowers who are like oh 90 still looks really good. So you kind of you're going to pay for what you get in a way. But we are starting to add that option for a select number of, and I believe a lot of your students will fit into that.
01;06;06;28 - 01;06;30;29
Unknown
Just with the higher levered leverage, we call it our built for speed program. So just the higher leverage so we can be faster. And and they're giving the percentage of after repair value. We're always going to cap at 75. We'll never go a penny over that. Yeah. And then newer investors is it often lower. No experience. Yeah.
01;06;31;00 - 01;06;54;12
Unknown
Still like a my new my no experience I'm a real estate agent. I just finally want to jump in and flip. Like those guys are getting 1099 and 1.80% and 100 every day. All day. So it's I think it's still really competitive. There are some not as great markets that maybe are in like the 11.5, 11.25 just because they're like lower, turn markets.
01;06;54;12 - 01;07;15;19
Unknown
But it's still very competitive as far as like no experience. Once you get to like 1 or 2, like you now are getting options to get up to 85% of your purchase price. So we immediately like start lending more. And then I would say like about five is where we, where borrowers also have enough experience that they can start being like, well, I've got a good track record, like I want cheaper.
01;07;15;19 - 01;07;32;17
Unknown
Like I want lower rates. And that's where I see a lot of times when I get I've had clients, I start with zero and they're up to like ten, 12, and that's pretty awesome for me because my experience is in three years I've been here for four years, so I'm starting to see people like really like grow in scale.
01;07;32;25 - 01;07;47;23
Unknown
So it's kind of cool because, you know, at first they were like, you know, they'll take anything we'd offer because they just wanted a chance to start, and then they get up there and now they're like, well, I need better. I'm going to shop you. And so I love it because that's kind of like the the nature of this beast.
01;07;47;23 - 01;08;10;01
Unknown
It's like the more experience you get, the more confidence to be able to like well, I'm now a tier three like, now, what can you offer me? And I think we should start that a little bit sooner. Like it's so like I said, like this is a sales industry. Like you guys are a commodity and just need to, but need to present yourself like you can't come to someone and be like, I'm a disaster with low Fico and no money like you need me now.
01;08;10;03 - 01;08;28;14
Unknown
Lenders don't need that. So you want to be organized. You want to show that, you know, you really you manage your projects well, that you understand what's happening, and any lender will jump on a good deal like that. So we're out there looking for him. That's our job. Melissa. Thank you for being real. We're desperate to have you back to talk DSR and rentals.
01;08;28;14 - 01;08;46;10
Unknown
Oh, thank you for your offer. And, we'll get all that information out. Tracy will connect with you on all of that and even ask questions that people are just saying. Thank you. Thank you. Great presentation. I can't see the chat. I don't know where it went. Oh my gosh. Well, you know what a lot of compliments for you okay.
01;08;46;12 - 01;09;08;01
Unknown
It's been on I'm gonna fire emojis right now from. Oh yeah. Yes a lot of fire emojis. Yeah. And I know this is, this is a lot because my kids have heard this me talk and they're like, do you breathe like the I know, like I just go, so if people, you know, do not feel like, hey, Melissa, you talk about this, you lost me.
01;09;08;03 - 01;09;22;24
Unknown
Hello. Just give me a call. We'll sit down and chat, and I'll try to break it down at your level and kind of like how you want to intake it. So feel free to reach out. I love that part. The time to connect is now not right when you get that first deal. Let's do this now. Start the relationship.
01;09;22;28 - 01;09;29;25
Unknown
Right. Yeah okay. Yep. All right. Thank you everybody. So awesome. Thanks, Melissa.
01;09;29;25 - 01;09;44;22
Unknown
Thanks to Melissa Quarter for joining us. Remember, the right mix of hard money and private money is what allows investors to scale fast. If you're looking for the special terms that Melissa mentioned, check the link in the description and show notes and I will see you on the next podcast.
