Episode Transcript
[00:00:00] Speaker A: Hey, guys. I'm Marlena Alvarez, and this is the unfiltered Agent podcast. And today I have my friend Jamie on the show. She is with central lending. They're actually my bank that I use for all of my investment loans. And I brought her on because the number one question I get asked more than anything because I am an investor and most people know that I buy investment properties. I have a lot of Airbnbs, and we've rehabbed a bunch of stuff. And they always ask me, I want to get into investing and I want to buy an investment property, or I want. I want to get into Airbnb, or I want to flip houses. And that's the main question they tell me is like, how do I get started? And me and Jamie were talking about it before we started this show. It's such a loaded question because there's so many different ways to invest, but I want to talk about just this one slice of real estate investing, which is similar to what I've done. So Jamie just did a financing deal for me, and it was for a property I intend to buy and hold. Now, this property, I got it off a wholesaler, and it is in need of a lot of renovations. So a traditional lender would not have even wanted to work with me because it needed a lot of things to be done. But what's great about working with a company like Jamie's brokerage at central lending is that they are able to finance what most banks can't, and they work specifically with investors. So I want you guys today in this episode to trash everything you know about residential real estate for from the framework of some house you're going to live in to thinking about it in terms of investment, because it is not the same. It's a different world and we don't know anything. So we need Jamie to tell us what the deal is. So, Jamie, give us a little bit of an idea of how central lending is different than, say, your traditional mortgage bank.
[00:01:56] Speaker B: So we are, it's considered harmony and we are a private lender as well. The director of funding, he does fund out of his own fund.
So he has full on control over all the files. He looks at them himself. He's like, okay, we can do this or this, that he has more flexibility. And we're able to talk one on one with him with the file as like a, you know, a traditional bank. You really don't get that one on one with the head guy who's in charge, you know, and with hard money, it's considered cash so if you're going to go the route of hard money with central lending, it will be considered a cash transaction. So make sure if you do put any offers on investment property that you do say it's cash. We do not order an appraisal. That's why we're. We're able to close very quickly. It's just a valuation on the property because most of them are not appraisal worthy.
I mean, we do houses that don't have roofs because they are, you know, they went through a fire. Like a lot of. A lot of stuff has to be really rehabbed in these properties that are cash.
[00:03:17] Speaker A: And it's such a service that you guys are doing to the industry. You're providing funds to take houses that were unsellable or they weren't really a marketable asset to a traditional buyer. But somebody like me, who's an investor, can go in and partner with a bank like central lending and get hard money. And I'm sure you guys have heard the term hard money and probably had no clue what it actually meant. And hard money is just like what she said. It's a bank or a private lender that's able to do what Andrew does and look it up subjectively and say, is this a deal I want to lend on? And it's not always going to be out the gate accessible for just your first time investor. And I really want to talk about this because I know people watching this video most likely are not investors already, or maybe they have a rental property, but they've never had an investment loan before. And it's really important that I feel people get a good grasp on what's it going to take for me to have access to hard money like you guys provide essential lending. Because I know when I first started, I found a house, which this is what Jamie and her company were able to lend on. When I first found the property, I was looking for financing, and one of the guys who I'd actually used before for hard money, he's a personal friend of mine who was able to finance a deal or two for me that I didn't need to necessarily go to Jamie, get hard money cause I had a connection, but he was tapped out. He's like, I don't have any more money. So I had to go find another bank. So I went to a couple local lenders. I asked them if they could do anything for me and what the terms would be. They were awful. Super high interest rates rate. And if it didn't pass a four point, which this house did not. They couldn't touch it. And to get a rehab loan from a traditional bank would have cost me a crap ton. And to be honest with you, this was a house I bought from a wholesaler, which if you get into investing and you start working with wholesalers, they're fantastic. You can find great deals, but you have to be able to move quick. A traditional bank does not move quick. Jamie and her team can. But here's the caveat. If I had not had real estate experience, because I talked to a ton of other real estate brokerages, not real estate. Well, hard money lenders that do what Jamie's company does before I ended up picking them, even though I knew Andrew, the owner, and then I knew Jamie, and I have tons of friends who've worked. I wanted to just see what's the market rate, what's it like out there, who can finance this? And am I getting a good deal with them or not? Because I wanted to do my due diligence, even though I ended up working with them. And what I found is that a lot of them didn't like the fact that I'd only had a couple of true investment properties. And the terms they were willing to provide me with were not very good, you know, because I didn't have any extra real estate experience. So tell me a little bit about what do hard money lenders like yourself look for when it comes to partnering with an investor in order to get deals like this funded?
[00:06:12] Speaker B: So in order to get deals funded, you first have to start with your LLC. Make sure you have an LLC in the works. If you don't already have one registered with the state that you are wanting to buy this property in because we can fund nationwide pretty much. There's a few states that we don't fund in, but for Florida, you would definitely want to open up one in Florida. And we also check background and credit check. Now, I do lend to people that have 600 credit score.
It's, you know, like I said, we're flexible. We're able to do that with hard money bank. They're not going to look at you, they're not. New investor, not going to look at you. I fund new investors all the time. All the time. 100% rehab will be funded for you. New investor, not new investor. You'll get 100% rehab. Funding banks, like you said, four point inspection has to pass. They don't like to really fund any rehab. We'll do 100% of it. Every loan that we do. If you don't want us to fund the rehab? We don't even have to fund the rehab. We'll just fund the purchase for you. I do that a lot with people as well because they have money for the rehab funds. Even if they're new investors, they can do that.
[00:07:31] Speaker A: That's amazing. So if I'm a new investor and I'm coming to you, what kind of information? So I need an LLC do this first, guys, because I did not have an LLC ready when I came to Jamie. And it was one of the things that, remember when I said I bought was buying with a wholesaler, and the closing was really short. And by short, I mean we had, like, ten days to close this loan, and Jamie helped me pull it off, but I was freaking out because I had to get an LLC done because I had to do the offer in an LLC's name. They had to lend it in an LLC because they're not going to lend it to me personally. This can't be my personal residence. You can't live in an investment house. It has to be for business, you know? And so we got that done. But get that done first. But what kind of resume would they need to be able to submit to you to be able to show that they're prepared and able to do a loan like this?
[00:08:16] Speaker B: I would say you would probably need to have around 2020, 5% down payment, depending on the purchase price of the property and how high your rehab budget is.
The higher the rehab budget is, the more you'll probably have to have for a down payment. That's how it usually works because we are going to fund 100% of that. So we will need to make sure you have enough funds. We also need to make sure that you don't have any felonies because we do background check and just make sure you're not, what part of the cartel, stuff like that, you know, you're not laundering money. I mean, you know, then you're good. We'll clear you.
[00:08:58] Speaker A: And so, yeah, that's really great. So you're going to go to a lot of. I went to a lot of hard money lenders that would not work with me because I was a first time investor. I was. I'm not really a first time investor, but to do a full funded rehab like this, I had not done all my rehabs in the past that I've worked on were money I'd spent out of my own pocket, and I just financed it myself. And so this was a really unique scenario. I'd never gone to a lender like Jamie's and had to. I found the house. It needed a lot of work, and now I'm going to get the rehab financed. And it was actually a lot less difficult than I thought it was going to be, to be honest, because. But I did have to do my due diligence, which was difficult to do in ten days. And I don't recommend. If you're a new investor and you don't have a good, good relationships in that area, you're buying with roofers, h vac companies, carpenters. If it's going to take a lot of work for you to get a performer or a scope of work done, get a longer closing period as possible, because that's one of the things that they needed for me, was a cost breakdown of what the rehab was going to be and where I was going to spend the money. So how much was I going to spend on paint outside the roof, structural repairs, the bathrooms, anything that I was going to be putting money into the house. I needed to account for every penny that I was going to spend because they're going to lend money on it. And it did take time to go and get quotes and estimates and stuff, but they made it super easy for me, submitted it, they reviewed it. They were good with what our plans were for the property, and we were able to get it done. And also, like, if you need permitting and everything like that, what does it look like if you're doing a rehab job that needs permitting?
[00:10:30] Speaker B: So it depends on what type of work you're having done. If it's permitting for a roof, the roofer is going to be in charge of pulling that permit. H vac. The H vac. The company is going to be in charge of pulling that permit. But if you're doing a heavy duty, like you're moving walls, stuff like that, you need a GC, you need a contractor to actually pull the permit. So it wouldn't just be the owner doing, it's, you know, doing the work themselves, watching over the project. We would need an actual GC license contractor to pull the permit for. If you're moving walls and stuff like that.
[00:11:08] Speaker A: Yep. And you guys, look at that. When you're looking at your scope of work, you're going to ask those questions and say, hey, what structural work are you doing? Is it going to merit a GC or not? And so once we have that submitted into you, you'll kind of ask those follow up questions, right?
[00:11:25] Speaker B: Yes, ask a lot of different questions. I get that a lot. Actually, with new investors, they're like, wait, how am I supposed to know what the rehab budget is. I'm like, well, you're going to have to do your due diligence. You're going to have, if you don't know, bring somebody with you that knows. If you have a GC, bring them. If you have an inspector, bring anybody with you to walk the property. You're going to have to know what you're looking at, what a roundabout number is. I mean, it can adjust, of course, along the way, but we just need a rough estimate of what needs to be done in the beginning because we're going to order evaluation on the property based on that rehab budget.
[00:12:03] Speaker A: Yep. And that's the next thing I want to talk about. So they helped me get originally approved for the property. You guys agreed to work with me. You gave me an estimation of what it was going to cost because Andrew looked at the file, he looked at the property, he says, okay, I think the numbers work. We'll be open to lend on this. Then I was, you guys got me to do the work performant. I submitted exactly what our plans were, where we were going to spend the money, what improvements we were going to make. And then once that was done, you guys could use that and say, okay, we're going to. Then you ordered that valuation and that took what, about six days to get back? I think.
[00:12:35] Speaker B: No, it takes two business days to get back. But if the comps, like, if the ARV, which is the after repair value, is low, we want to send in comps, hey, you know, this needs to come up more. That's what's been happening a lot. Our valuations have been coming back lower. So we have to keep revising.
[00:12:57] Speaker A: So we don't do on hard money with your lender specifically. You guys don't do an appraisal. You do have that valuation because it takes a lot less time to get those back than it would a traditional appraisal. And they're going to look at it differently. They're going to look at it from, okay, this is what we're going to be doing. How's that going to affect the value? Is it going to be where we're projecting it at? And that way you can confidently land on it and, well, we don't want.
[00:13:20] Speaker B: Our borrower to lose money. You know, if it's like, hey, they're gonna lose $30,000. We don't want you to lose $30,000. Why don't you just do this little bit? Because the report will come back and say, hey, if they do light rehab, this is how much they'll make if they do moderate, you know, this is how much. That's crazy. That's awesome.
[00:13:39] Speaker A: Great info.
[00:13:39] Speaker B: Yes it does give you a graph to where, if you're, what type of rehab would be best for your type of project.
[00:13:47] Speaker A: That's awesome. So let's talk a little bit about the cost of a loan like this compared. A lot of our people watching this have probably bought a primary residence so they understand, you know, traditional closing costs for a normal mortgage. But this is not a normal mortgage, it's hard money. So what kind of fees are associated with this from the lending side?
[00:14:07] Speaker B: And also they, this is a twelve month bridge loan.
[00:14:11] Speaker A: That's a good point to make.
[00:14:12] Speaker B: So it's twelve months interest only payments and there's no prepayment penalty. So say with your property you wanted a fix and hold. So once you were done with the rehab you could refinance that into the DSCR long term loan.
And if you're like ah, you know, maybe the market went up, you know, went up with, with cells, you're like oh, I want to sell it because I'm going to make more of a profit. No problem, go ahead, sell it. But if it's before the twelve months, just pay off the loan. No big deal. You don't get prepayment penalty. So that's what's different with us. It's twelve months interest only payments.
We also, so in the beginning process of the valuation that we get, you do have to pay for that. So that is between five and $600.
I believe an appraisal is about the same. Okay. All right, so they're about the same there. And then we have points. Typically the points run between one and a half to two points for closing.
[00:15:11] Speaker A: Can you explain for people who aren't familiar with these terms, like what is a point, what does that mean?
[00:15:16] Speaker B: It's an origination point. So it's pretty much for us doing the loan for you.
[00:15:23] Speaker A: It's basically the commission on top of the other fees that the lender makes for basically financing them.
[00:15:31] Speaker B: So that pretty much, that is for the lender too. Exactly, yes, that is the lender. The processing fee is just for processing your loan.
[00:15:42] Speaker A: That's the administrative cost.
[00:15:43] Speaker B: Right. That's just the administrative cost. And then we also have a legal docs fee. So that's for pulling all your documents. Yes. So the only, so the points are the origination fee for the lender.
[00:15:56] Speaker A: Got it. And when you buy a house it's called an originate. You'll see it when you buy like a residential home, you'll still pay points. Typically it'll just be listed as the loan origination fee. We mean. And when you're going out there, say you decide you don't want to use central lending, pay attention to how they charge points, because that was one thing, and that's commissions, you know, that they're making on financing the deal. I had one lender that I talked to, if I did not close the loan with them, they were going to charge me another point at closing. And you guys don't do that, right?
[00:16:26] Speaker B: No. And we let you know all of our fees up front. We don't have hidden fees, we don't have junk fees. Some, some lenders also, they'll take three months payments at closing too. We don't do that.
[00:16:40] Speaker A: Yep, it made, it was super easy. It was just like a no brainer. I mean, the rates with another lender, if I had maybe ten deals under my belt, could have been better, but yours would have be better as well. And what I'm excited about is that the more you do typically with, in the relationship that you build with your hard money lender, the better terms they're usually able to offer you. Correct?
[00:16:59] Speaker B: Right, exactly. The more you do, you'll get better terms. Well, and, you know, we trust you more. I mean, if we have one on one relationship and, you know, we're gonna know what we can do. We can fund for you, but it with other lenders, you just don't know what they're gonna do at the end. They may not be honest upfront completely.
[00:17:22] Speaker A: And that was scary for me. And I had a lot of friends who use central all the time, and I think that's important. So if you're a new investor and you're going to look at, or maybe you're not even an investor yet, but you're looking to become an investor, I highly recommend going to your local investment groups. There's probably lots of networking groups that meet locally. Get on eventbrite, get on Google, you know, get on Facebook events, and see what kind of investor meetups are happening in your market. Go to those meetings and ask them who do they like to use for funding, and then they'll tell you. That's how I, you know, I'd already known Andrew even way before he started central lending, so I already knew his reputation, I knew his quality character. I knew kind of how he did business and just working in real together over the last ten years. And so it was easy for me to just, you know, trust them with my business, but they've also done so many loans for good friends of mine and helped them build incredible real estate portfolios. And so building a relationship with a bank and with a lender that is going to believe in your business and help be a partner in that is critical, I think, to your long term success and they will be able to give you the best, best rates. And so that's one of the things I really liked about what the future looks like when it comes to partnering with Central. So when it comes to being a new investor, are there some things that you've experienced in your career just doing loans and seeing all kinds of things that you would advise people to stay away from or like? Big mistakes a lot of investors make that you would wish they would avoid?
[00:18:50] Speaker B: Well, they do. Yes. They look online, right? They'll just Google search for lenders and then they come across brokers and they don't know that brokers, if they're telling them the truth or not. So they're coming to us though, the lender. Right. So I get brokers coming to me and sometimes the client doesn't know that there's a broker involved. They think that they're dealing directly with the lender when that's not the case. So then it spirals out of control with them because the broker will take them to like different lenders along the way, ordering different valuations, different appraisals, and then they end up spending way too much money.
[00:19:36] Speaker A: Right.
[00:19:36] Speaker B: So I would suggest going to just a direct lender and if you're in Lakeland, of course, go to central lending.
[00:19:43] Speaker A: Where you are in the United States, because they can lend anywhere.
[00:19:47] Speaker B: We know the area. I mean we don't lend in California, okay. And Utah.
[00:19:53] Speaker A: But everyone else they're doing, they do loans in South Carolina where I'm also licensed, which is really cool. And I just think that.
So to go back a little bit to explain the difference, you have brokers and this is true for residential lending and for investment property lending or hard money lending, if you want to call it that. There's brokers and then there's direct lenders. I genuinely like working with lenders. Direct lenders. The other residential lender I work with is a direct lender. And the benefits are that they're more in control of the underwriting process. Right. You're not having to go through a middleman because a broker is just a loan origination company. They go out and they find people who want to get a mortgage or a home loan and then they go to lenders like Central, and they try and sell the debt to them. Right. And so. So you could end up paying way more in the long term because you're not only paying the lenders origination fees and points, you could be paying extra points from the broker as well. So you're going to have more, like she said, hidden fees. You're not going to know everything. You're going to get surprised at closing and like, oh, my gosh, what is all this extra stuff? And it's just not a fun route to take. So do your due diligence. Try and work with a direct lender and somebody that your network or people you trust have had dealings with that they can vouch for. And if. And a lot of companies won't work with new lenders. But if you need someone that will, and we'll help you. I know Jamie's happy to talk to you.
[00:21:23] Speaker B: I love new lenders. I love new clients. Yes. I love them new investors. I'll just guide you through the whole process, let you know what you need to do, what you need to bring to me, and we can get it rolling. I can close a loan in three business days, no problem.
[00:21:38] Speaker A: That's awesome.
[00:21:39] Speaker B: But you have to have your LLC opened up.
[00:21:41] Speaker A: That's true. And it makes it. Yeah. And if you don't, then it's just up to the government.
[00:21:46] Speaker B: Right? I know.
[00:21:48] Speaker A: Honestly, when it browses your paperwork, we were literally, when we had our LLC, we were literally just sitting at the email, like, constantly updating it like 100 times for like, the last three days because I think it was literally like two days before we were supposed to close. Our LLC got approved and I had, I was working with a wholesaler and it required me to put a very large escrow deposit down. And I was at risk of losing that. My LLC didn't get, but it all worked out. But that was the most stress I've ever been.
[00:22:14] Speaker B: Yeah.
I'm closing a loan today for a client that had to keep putting more and more money down for an extension with another lender, and they were never closing. So then they finally came to me. I got it done in a couple business days.
[00:22:30] Speaker A: That's awesome, Jamie. It makes such a difference who you work for and who you work with.
Okay, so let's talk about loan types. So is hard money type bridge loans and rehab bridge loans the only kind of loans you guys do, or do you guys offer other companies?
[00:22:47] Speaker B: No, we also do ground up. We do ground up loans even for new builders. They come to us all the time. Because if you do not have a ground up build on your resume, banks are not lending to you. We will lend, though.
[00:23:02] Speaker A: That's amazing. Ground up several lots I want to build on and I'm excited to learn how to do that.
It's, it's something that I hope to do a podcast on this time next year because I'll have done it.
[00:23:12] Speaker B: Awesome. And also DSCR. We do DSCR.
[00:23:15] Speaker A: Can you explain what a DSCR is?
[00:23:17] Speaker B: So that is if you have a property that you're going to hold as a long term rental.
So you would just, you would refinance that loan that you have, a bridge loan or if you want to purchase it, if you find a property that doesn't need any rehab work, you could purchase it with a DSCR loan for a 30 year long term loan right then and there. The interest rates are around 7% right now.
[00:23:42] Speaker A: That's amazing. Yeah. So just a little fun fact. I don't think all, even real estate agents truly understand what a DSCR loan is. And it's such a huge tool. So when I have people come to me and they're like, I want to get into real estate investing, the DSCR loan is the first one I teach them about because what it does is it allows you to buy an investment property, not having to qualify for the mortgage with your own income. What a DSCR loan is, is it's a loan that's funded based on the income of the property covering its own mortgage. So the house we sit in right now we're filming is actually one of my Airbnbs and I bought that two and a half years ago with a DSCR loan. So it's a debt service ratio loan.
[00:24:27] Speaker B: Or something like that to income ratio to be 1.0 or higher. And we get that number based on the monthly rent amount, the annual taxes, annual insurance and if there's hoa or not.
[00:24:42] Speaker A: Yep. So you look at the total cost of what it's going to, what your mortgage payment's going to be, and then you're going to do, and not only are you going to do a valuation appraisal, like is it worth the amount you're paying for it, but they also do a rent appraisal. So they'll go and they'll comp out the rental amounts in that area around that house and they'll make sure that you can actually rent it out for what they're going to be lending. So that that mortgage payment is covered by your lease, not by your personal income.
A lot of times DSCR loans. Depending on the market, the down payment rates can be different.
Like for this house, for example, we paid 600,000. I had to put 20% down with this. So I put down a big chunk of change. And in other scenarios, I think there are opportunities or have been in the past. I don't know about the market right now, but they have been able to do a little bit less. But anywhere between 25 and what, 10% is pretty normal for a DSCR level.
[00:25:35] Speaker B: I haven't seen 10% yet for DSCR, but I see 2020, 5% down payment. We also offer for rural properties as well, and that's going to be 30% down payment. And now since there's a lot of Airbnbs, we also, there's a program where they look at the air. DNA is what it's called for the, for the rent instead of just a monthly rent because, you know, Airbnbs, we.
[00:26:06] Speaker A: Make a lot more money. Yep. So for example, like for this house we're sitting in, if I was gonna go rent it on the real estate market as a long term rental, it probably rent for around $4,700 a month. If I, as I'm air being vegan, we average anywhere between eight to $10,000 a month gross on income from this house.
[00:26:24] Speaker B: And that your DSCR ratio is going.
[00:26:27] Speaker A: To go, it's going to be much more attractive now. I was still able to borrow the money at 40. I didn't get the opportunity when I bought my house. This particular one we're sitting in to do a Airbnb evaluation on it. I had to go LTR. And I actually do. I like the, I like the idea of LTR because it gave me a lot of peace of mind knowing that I could still, if the Airbnb didn't work out, I could still ltr it, which is long term, rent the property and make money. And I think as a real estate agent, I that's something to consider when you're getting into new creative ways of investing. And I had a mentor of mine who does strictly commercial, and his best advice to any client is always look at a property and don't just see one way to make money with it. So, like, for me, when I was looking at buying King, which you guys did the mortgage for, I'm like, okay, I'm buying this as a long term investment. I want to hold it and I want to rent it out. I may be doing some long term rent here, I may be Airbean being it, but I'm going to keep it in my portfolio. I have no intention of selling it. If Airbnb goes away, can I make money on this? Is there an out for this property? Is there a way for me to make money with this? And still, even if I couldn't Airbnb it, because what we've seen, and I know a lot of real estate agents who are watching this and can attest to it, and maybe even non real estate agents who just have friends who got Airbnb thinking it was going to be a great, easy get rich quick scheme, right? That you can't just buy anything and expect it to rent. Sometimes it doesn't do as well as you think. Or maybe you don't like being an Airbnb host because it is not passive income. If you don't have a management company, it's a full time job. So is this property going to be good as a long term rental or if I buy it, I sell it, like Jamie said, now you decide. Oh, I just think, I mean, there's so much meat on the bone. The market's gone up. I can make $100,000 on this now. I don't want to hold it for ten years. I'm going to go ahead and sell it. I'm going to buy something else. You could do that, you know, but make sure there's more than one way to make money on an asset when you're going to purchase, because it's part of that contingency plan and it's part about being a smart investor and don't be overzealous thinking, oh, well, so and so did it, you know, and I don't expect your results to be the same as everybody else's and just have a contingency plan. Like have three or four ways to get out of that house. Like, I also can take that lot off and build a house on it because a lot we bought with King actually had two lots as well. So I can take one of those and build on it and make money. And I have the flexibility to do that with, with you guys where I wouldn't have the ability to do that at all with a traditional lender as long as the numbers make sense. When I go to reevaluate, evaluate to refinance before I do that, if the valuation works without the lot, there should be no reason. Andrew's like, yes, let's go. Let's build something on there. It's exciting and I love that. That was a potential thing I could do with you guys. So always when you're looking on your shopping, if I'm not your real estate agent. Go and see what are the possibilities for that asset. Don't just think one way of doing it is going to be the only way that you're going to be able, because things change, expect the unexpected, because we don't have control over what the market does. So that's my advice for new investors. And so, Jamie, when it comes to wrapping up the process, say you're mid rehab like I am, and now you finance the rehab for my King avenue. I think we got, like, what, $35,000? And it's going to cover paint, it's going to cover a new kitchen, new bathroom flooring. What's the process look like for actually financing that? I'm having to pay for the rehab upfront, so I'm paying the contractors, I'm buying supplies up front. What's the process look like for me to actually get reimbursed for that?
[00:30:09] Speaker B: So when you have a rehab budget, say you said 35,000, we take that 35,000, put it in a construction reserve account, and that's where you make draws on. So each draw costs 295, because an inspector goes out to the property, looks at the work that you're requesting the draw for, make sure it was completed correctly, then you'll receive the money. So I would allow five business days from the time you request the draw to the time you receive it. So sometimes, like, in your case, you're reimbursing yourself with the draw money.
Other, I have other clients that they'll know they're subcontractors, so they have, like, net seven terms.
But when that happens, I have them calling me all the time, too.
[00:30:57] Speaker A: Where's my money?
[00:30:58] Speaker B: They're freaking out on me. They're not gonna come back. I need the money. I'm like, oh, maybe pay them and then just reimburse yourself. Because, I mean, if. If you request it right before a weekend.
[00:31:10] Speaker A: Yep.
[00:31:11] Speaker B: You know, sometimes it could prolong the process of the inspector going out there and you and you getting that money back. So if you gave us a rehab budget and said, oh, it's going to cost $10,000 for us to put windows in. Well, you have to have the windows in and then say, okay, I need the money for the windows. They've been installed. So the inspector will go out, make sure the windows were installed correctly, and all of them that you accounted for, you said seven windows. We have to make sure seven windows were installed, then you would receive the money.
[00:31:45] Speaker A: So, yeah, so it's a great point to make that if you guys are planning on buying an investment property, not only do you need to have have a down payment, which I think for you guys, there was a couple different options that Andrew gave me based on the terms I was willing to accept. So you'll just have to get with Jamie or whatever hard money lender you're working with and kind of go over the options. I was, I think I put down 15% on my property, so I had to do that. And I had to be aware that I was going to need to carry the upfront cost, potentially, of the rehab and that they reimburse me after the fact. So just because she's financing the rehab doesn't mean they're going to give it to you in the front end. So just when you're budgeting and you're thinking in your head, okay, I got a house. I found a house I want to fix and flip, or I want to buy and hold it, but it needs x, Y and z.
There's things you want to think about when it comes to budgeting. So you need your closing costs as well as your down payment and whatever rehab budget you're going to need now, you'll get the rehab budget money back. So if you're putting it on a credit card or you're like, using credit with your contractor, just keep that in mind because it does play a factor and a role in your overall cost of the job.
So the next thing for that would be just to get that. And once you're completely done, you've got all your rehabs done, you've finished your draws. Now it's time to move from that loan out of that bridge loan into your refi. And you guys are able to support your clients in that, right? So you would be able to refi it into a DSCR product if it's going to be a rental property and if. Or if it's going to be a fix and flip, you'll just list it and liquidate it. But like you said, there's no prepayment penalty for that.
[00:33:23] Speaker B: There's no prepayment penalty. There is a seasoning period to refinance. It's three months. Three months seasoning from when you purchase the property. But then you will have to order another appraisal. So we'll order an actual appraisal whenever you do refi into a DSCR loan.
[00:33:41] Speaker A: That's good to know because then. But that'll also tell you where your equity position is because so are you ever in a position like so for my property, I bought it really low. I know the ARV is going to be over 400,000. There's going to be a discrepancy. So am I able to borrow more on that and get back a little bit more money?
[00:34:01] Speaker B: Right. If it comes back at a higher valuation than what you expected, you can absolutely get that cash back.
[00:34:09] Speaker A: Okay.
[00:34:10] Speaker B: It's 75% cash out that you can get up to the appraised value of the property.
[00:34:17] Speaker A: Right. As long as the numbers still work. I can do that if I wanted to. Now, let's say it was lower. What would the repercussions be for that?
[00:34:25] Speaker B: Yes. So a lot of people, they get over leverage from certain lenders, too, with their rehab and the purchase price, and they have to do a cash in refinance.
[00:34:37] Speaker A: So they need to bring more down.
[00:34:38] Speaker B: Payment, so they have to bring more to closing again to pay off their bridge loan, to refinance it into the long term loan. They have to do a cash in instead of a cash out.
[00:34:49] Speaker A: Yeah. Which is probably not a fun, fun feeling. Now, if you went into it, knowing it, I guess maybe it would be different and it would depend on your motivations and different things like that.
[00:34:57] Speaker B: But a lot of people that are in that situation that I've been in contact with, they know it up front because they're holding it as a rental and they're like, I know this is just what I have to deal with for the first couple of years, and.
[00:35:11] Speaker A: They see the long term vision for that property. That's awesome. So when it comes to deciding if becoming an investor is a good idea or not, what do you feel like the best parts of being in this industry are, and what is the best payout that you see for your clients? What is the best part of moving forward with doing the rehabs and building the long term equity versus just going and buying something that's already, already done, like, what is the benefits and upside for that?
[00:35:45] Speaker B: So it really depends on the actual investor themselves. Some people may not want to do rehabs or remodels, and they want turnkey, and they're like, this is, you know what I like to do? I just want to have a bunch of rentals that works for them. Then there's other clients that just love to get their hands dirty and they want to do remodels. So it really is up to the client. I've seen a lot of properties in the Tampa Bay area that they've been getting a lot of higher values back, so that's good. So once they sell the property they're making more than what the valuation even said that they were gonna make.
[00:36:24] Speaker A: Yeah.
[00:36:24] Speaker B: So that's great for them.
[00:36:26] Speaker A: I love it. And, you know. Cause I'm not really one.
I'm never gonna say never, because I definitely, probably will in my lifetime become a person that buys a house, rehabs it, then resells it to make the profit. I totally see myself doing that one day. But right now, that really wasn't the goal for us. But the beautiful thing about us deciding, hey, we're gonna buy this property, we know it needs a lot of work, but we're getting a great deal on it. And there's a lot of equity to be had here is I can go in a. I'm not borrowing as much, so it feels like, less risky. Right. Because I'm not. I still have positive equity in the house right away. And I know that if I something changed, or I wouldn't be stuck with it or be upside down. So I really like that part. And being a newer investor, meaning I don't have like 20 or 30 of these yet, but it gave me a lot of security knowing that I was going to be able to go in and add value to the house without, and be able to potentially do the. Get the cash out of that, like, without having to actually sell it. I could still hold the asset and get that cash flow from that property and still benefit from maybe the 50 or $60,000 that maybe a flipper would have gone when he went to sell it. I can do the same thing now. You can do that in all scenarios. You're not always in this market. Especially things are more expensive than they've ever been and interest rates are higher. But, you know, if you buy right, you can get something with enough meat on the bone that you can hold it and still do some cash out, and then it'll fund your next deal. And that's kind of what we're hoping it will be able to get enough money to pay for the new construction.
[00:37:55] Speaker B: Right. I mean, you can't go wrong with real estate investing. You just can't have, if you don't wanna sell it, you can hold it for long term, you don't wanna do long term, you can do short term. I mean, it's the best piece of investment for people, real estate.
[00:38:08] Speaker A: I agree.
I like it. Cause I like to have the control. I know that sounds bad, but I like the control. I know I've got ten plus years of experience in real estate. It's something I know inside and out. So for me. I have so much more confidence going and investing in real estate than going and putting money in the stock market, which I know very little about, day trading. You know, it seems to me like just something, but everybody has to find their own thing. But if you're watching this, you're probably somebody who's super interested in real estate investing, and this is just a little piece of the pie. There's a million different ways to make money in real estate, and this is just one of the ways that I've chosen to proceed. And, you know, if you guys have questions, we would love to support you. Jamie and I are here anytime. I'm going to be putting my, my contact info, obviously, is always in, in the description. Jamie's is going to be in the description as well. We'd love to support you. If you're looking to become an investor and just have general questions, there's no stupid questions. We're happy to help. We want everybody to have the opportunity to have that financial freedom and start growing their portfolio. So hit us up if we can do anything to help. And Jamie, thank you so much for being on the show today.
[00:39:15] Speaker B: Thank you for having me. It was great. All right, if anybody has questions, let us know.
[00:39:20] Speaker A: That's right. Bye, guys.
