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Real Estate Investing School Podcast
131. How to Qualify for ANY Loan with Jeff Welgan
01:06:05
Welcome back to the Real Estate Investing School Podcast. In this episode, Joe sits down with the man who has all the answers, Jeff Welgan. Jeff is an experienced mortgage broker who practices in 49 of the 50 states. If you have any questions...
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- [00:00]
A
Everybody's like, how do I find a deal? How do I find a deal? Well, you have to know it's a deal and if you can't run the numbers because you don't know what kind of loans you can get, then you're not. You're going to miss all these deals. Welcome to the Real Estate Investment School podcast. I'm your host, Joe Jensen. Today we've got Jeff. Well, again, I'm super excited for this one. I met Jeff at the Bigger Pockets convention this year in Orlando and, and I was super impressed. There's like 100 different lenders with boost there. I felt like, but, but me and you were able to connect and we talked about some different creative strategies and traditional strategies and it's like, oh, this is the guy. So I was excited to have you on. Jeff has, he's been an investor strategist with blueprint home loans. He's been in the mortgage industry for 19 plus years. Done plenty of personal investments as well, from long holds to flips, it's, Etc. So I mean, you name it, Jeff knows about it. So anyway, welcome to the show, man.
- [00:57]
B
Thank you, Joe. Appreciate the invite.
- [00:59]
A
Yeah, so I just want to dive into it, man. So one of the biggest pieces of the puzzle that makes real estate investing so powerful is, is leverage being able to leverage debt in a way you just can't really do with other investment tools. You know, we, I talk about this when I coach students or train corporations. Like, you know, you can only buy Apple stock for whatever Apple stock's trading for. Right? You know what I mean? And if you want to buy a hundred thousand dollars worth of Apple stock, you got to give your broker $100,000 like that's it. There's not a lot of leeway there. But with real estate, you can buy below mark, you can, you can, and you can leverage, you, you can go buy a million dollar asset and literally put nothing into it or put $50,000 into it or, or even, you know, only 250,000, but that's still a lot of leverage that is powerful to control that big of an asset using debt. And so anyway, as a mortgage broker, as a lender, you understand that on a really, really powerful level that I think if investors understood what you know about how to leverage debt more wisely and more creatively, then they can position themselves better to really grow and achieve their goals. So let's dive into it. Tell me about debt, tell me about leverage. Tell me why it's important. Let's dive into all the different Ways you can do it?
- [02:17]
B
Yeah, absolutely. No, I mean, that was perfect. I mean, you hit the nail on the head. I had a investor years ago tell me that the lending side of real estate investing is like a Rubik's Cube. And what we've really focused on, I built a team around solving problems for real estate investors and really try to simplify the process. And so like you mentioned, I've been doing this for almost 19 years, almost 20 years, a little over 19 now. And I've been working with investors the majority of my career and I've had the awesome opportunity and I love the challenge of it. I mean, it's the bottom line. I love the mindset of real estate investors. I grew up in a real estate investing family, so I grew up around it. I saw it, I saw what it can do for families and I've seen how it's created generational wealth for countless people that I've seen in my life. So really what I've made it, my mission to do is really spread the word and really break down the barriers to real estate investing. Because you get to think for most investors that are just getting their start, you know, the barrier to entry seems a mile high. And so what we're trying to do is really simplify the process, get the word out that it's not as difficult as most people think, and really connect the dots and show people how to get started and then how to effectively and efficiently build and scale their real estate businesses. So when I always like to start in the beginning by kind of talking about the shift, the pendulum shift that we've experienced over the last year and a half, two years, because there's so much misinformation and so much negativity out there right now. And you know, my goal is really kind of cut through some of the noise and provide clarity as to what's happened, you know, over the last couple of years. And to simplify that, it's. This pendulum has shifted. I mean, we went through a period from, you know, the Great Recession through, let's call it March of 2022, where it was cheap, easy money investors could get, you know, cheap, easy capital. There wasn't a lot of restrictions. And really what occurred with the Biden administration coming in, we're going through a very similar era, post, you know, Bill Clinton era, through, let's call it the mid 2000s, where now with the pendulum shifting the other way, the priority of Fannie Mae and Freddie Mac and government funding is for first time home buyers and low to moderate income families. And so what they've really done is they've opened up all of this down payment assistance money and they're trying to make it as easy as possible for people that have never owned a home or don't own a primary currently. And they've really tried to slow down real estate investors from continuing to use government funds to build and scale their businesses. And so what we've seen occur is, you know, with all this new down payment assistance money, if, you know, if you haven't owned a home in the last three years, it hasn't been easier since the mid 2000. And we even have some programs for people that are looking for, let's just say, a new primary residence where we can do down payment assistance up to 103% nationwide. And in some states, like where I am in California, we can do 105% financing, which just basically means 100% of the purchase price and then up to 5% of the closing costs. And we have another program that just came out relatively recently that's 101.5% financing. And you can currently own a home. So there's no first time home buyer requirement on that. So really some programs. Go ahead.
- [05:30]
A
No, no, that's crazy. So first, real quick, you're nationwide, then you cover what, 48 of the 50 states or something?
- [05:37]
B
49. Yeah. So we're everywhere except for New York.
- [05:39]
A
And I called you about, I'm like, hey, I need a lender in New York. You're like, that's the one place I don't do it.
- [05:44]
B
Well, don't get me started by New York. But it's, it's like a five year process to get licensed there. And we're about two, two and a half years into it.
- [05:50]
A
So. But anyone listening, they're like, wait, you know, you can reach out to Jeff. Like you're, you know, and all loan officers are not created equal. Like you said, like the Rubik's Cube, you know, it's a puzzle. And it's even. It's like a Rubik's Cube with changing colors. You know, you might get halfway through and now it's a different color. It's like, oh my gosh, like having someone that's super experienced like you is, is priceless. But tell me about this 105%, because most people talk about, oh, if I go get a primary loan, I can put 5% down. If I do FHA, I can get 3 1/2% down. How are you getting 105% of the loan? Are they still putting a down payment on that or are they putting zero down or whatever? What does it mean to get, you know, 100% of the loan covered?
- [06:30]
B
It's a great question. Yeah. So it's a hundred and anywhere between 101.5 to 105%. It varies by state. Varies depending on whether or not each client qualifies for the first time homebuyer option. Which just means you can't have owned a home in the last three years. But back to your question. So with, let's just say 105% financing here in California, we can do 100% of the purchase price and then up to 5% of the closing costs. Where we have clients that are coming in and buying properties with no money down.
- [07:00]
A
No money down.
- [07:01]
B
Yeah, yeah. And very little money to close. So, you know, you look at certain parts of the country, you know, in the Midwest, it's hard to make these deals work. By the coast right now there's not a lot of inventory, but there are areas throughout the United States where there's a lot more inventory than what we're seeing out here in California, where we have clients that are coming in buying homes for, you know, less than $1,000 right now.
- [07:22]
A
So these are primary residence loans?
- [07:23]
B
Yes.
- [07:23]
A
Are these conventional Fannie Mae, Freddie Mac backed loans?
- [07:27]
B
Like so these are actually FHA loans when it comes to the down payment assistance.
- [07:31]
A
And it's not three and a half percent down. You can do zero percent down on these FHAs, correct?
- [07:36]
B
Yeah. As long as you haven't owned a home in the last three years, that's crazy.
- [07:40]
A
And that's just because the government is like you said, they're just trying to make it really, really, you know, the buried entry so low for these new home buyers. And that's crazy. I mean like for anybody listening, like, like go get a house. Like, like that's insane. You know what I mean? And if you can find a way to house hack and have someone help cover the mortgage, because you still got to pay the mortgage once you're in. But, but man, like when you can get into a house with nothing out of your pocket or a thousand bucks, two thousand bucks, you know. And I've heard of some local credit unions doing some really creative stuff, especially when the weights rates were like crazy high and no one's buying, they're doing these 40 year amortizations with zero down and stuff like that too. It's like there's opportunities out there. So anyway, that's, that's, that's exciting. That, you know, for those that are looking to get into the game or do these little one offs like say you can't really scale that, but you don't have to, you can still take advantage.
- [08:31]
B
Well, this is the way most investors get their start and it's obviously a slower way to scale, but with what's called the annual move up strategy. I mean you can buy a new primary every year and the way the underwriting guidelines are set up is that anything outside of a year you can buy your next primary. So anybody that has purchased a home, you know, or owns a home currently and is looking to buy another one, we can do up to 101.5% financing. And then if you have a down payment, you're going to get better terms than any of these down payment assistance programs. And I'm sure you've heard and a lot of your, you know, listeners have heard that this new program just came out through Fannie Mae where we can do units now up to four units with 5% down. And it doesn't have the self sufficiency test like the FHA loan does, where that's the big game changer in all of this. With the FHA loan on units, three to four units and we have to pass what's called the self sufficiency test where you know, the rent of the units have to, has to self sustain the property. So that's to cover the all in, you know, piti. If it doesn't, then it fails the test and you have to put a larger down payment down. With the Fannie Mae option there's no self sufficiency test and you can do, you know, 5% down on, you know, two to four units nationwide.
- [09:43]
A
Wow, that's really big. Like that just open up so many doors for people to, to really start growing a pretty, you know, you don't need a huge portfolio to like have real estate be a game changer in your life. You know, this is like the ultimate house hack lending, you know, strategies. This is cool. So, so what else is going on so that you've got this traditional stuff like, like these conventional loans, I don't know, I keep expounding upon that. Or what are the kind of loans should people be looking forward to things that are new right now?
- [10:16]
B
Yeah, and we'll get into the next step. So that's the way most investors will get their start. I have some clients that have, you know, bought seven or eight properties over the last 10 plus years and move every year. So if you, any of your audience are open to moving every year or so. This is a great way to scale slowly. And then what most investors will do is look at either the 10 or the 15% down options through Fannie Mae. So with the 10% down vacation home loan, everybody's heard of it, it's the infamous vacation home loan. There's tons of misinformation out there surrounding this program. So with this program, you can do mid and short term rentals. It is a personal use loan. So there is that requirement of using it for personal use for some portion of the year. It's not two weeks. The two week rule is an IRS tax rule. There's no restriction on our side. The Fannie Mae guideline literally states some portion of the year. It's that big. I mean, we've confirmed it with them. There is no set guidance, so we recommend two to four weeks a year. Now you use it for personal use, you, your family, and then there's no restriction on how long you can short or midterm rent it while you're not there. And so that's usually the next step where you're going to maximize your cash flow and cash on cash return because you're only putting 10% down. These loans have gotten a lot more expensive over the last year and a half because with this shift that we went through, the government realized that this program and the 15% down option to talk about next are the preferred methods to scale for real estate investors. So they have made this significantly more expensive than it was a couple of years ago. And just to put it into perspective, in the first 17 years of my career, second home loan financing was only about an eighth to a quarter higher than primary residence. It was looked at very similarly because it was originally intended for people that wanted to buy, you know, a vacation.
- [12:04]
A
It was actually a second home.
- [12:06]
B
Exactly. Yeah.
- [12:06]
A
Just their home. No one else lives in it. They don't rent it out as just their second house.
- [12:11]
B
You got it. Yeah. It was long before the evolution of Airbnbs, you know, short, short term rentals. So, you know, they, the government, you know, realized that, you know, this over the last five years, it's turned into this quasi investment property loan. And they, you know, they did a deep dive on it. They were trying to figure out how to slow down investors from using it. And it was talks about getting rid of the program entirely. And, you know, they went back and forth for a couple of years and they, you know, government, in their infinite wisdom, they just came out with a broad brush and they made it synonymous with investor financing. And basically what they did was, is they raised the rate. So they increased the upfront cost and raised the rate spread between primary residences and investment properties. And so where, you know, second homes used to only be about an eighth to a quarter different. And we could do no point loans. I mean it was very inexpensive. Now they rolled out a four point hit on these things. They increased that rate spread.
- [13:07]
A
Four point. Wow.
- [13:09]
B
Yeah. So they, it really slowed down investors and they were trying to make it almost cost prohibitive where you know, the numbers weren't made. You know, math wasn't mathing anymore after this big change. And so you know, it, it had the, its desired effect. But there are some workarounds that we use that we can talk about here in a little bit as far as the seller credit strategies and stuff like that that we were talking about, talking about before the call. But this is the, you know, with this program, the big, the important part with this is, is that it can only be used in markets where you don't own real estate. So if you're going to go into a new market, you want to use this program first because you can't go into a market where you already own real estate, buy a second home. It needs to be over 50 miles from your home and it can't be used for, you know, joint ventures. You can't go out and you know, social media and you know, find investors that way. It wasn't intended for that. It's a personal use loan. You can partner up with your friends and family and stuff along those lines. But it is not an investment property loan. And I just have to be clear about that because there's a lot of misinformation surrounding it. But it is still available. We're doing them all the time. And then you do need to fully qualify for the payment. And this is where it gets a little tricky and it's a slower way to scale because we can't use any rent to help our clients qualify for these. And we all have our limitations. So I mean you can have multiple second homes, you can, you know, I have clients that buy, you know, up in the beach, you know, up in the desert and up and up in the mountains, you know, one in the desert up and then another one up in the mountains that are just over 50 miles away. But you have to fully qualify for those payments. And that's where we all run into our, our limitations with these, with our debt to income ratio because they are full DOC loans. I mean you have to fully qualify for Them and we can't use any, you know, any rent to help you qualify.
- [14:55]
A
Even though it says you only need to live in, in a portion of the time and they know you could rent it out for the other 90% of the time, they're not letting you count that 90% of the income as rented.
- [15:06]
B
Great question. Not until it's on a tax return. So that's the workaround. So if you think, if you buy, let's just say you bought a property in 20, 23, you know, early on, you get it up and running. We can't use any rent that entire year to help you qualify for the next one until it's on the tax return the following year.
- [15:25]
A
So you guys, just for the first one you're buying though, you got to just fully qualify without it counting as any rent to qualify for one to purchase it. But then if you want to get a second one, you're not going to necessarily have to cover two because one's been around for a year and now it's covering its own costs.
- [15:40]
B
Yeah, I mean once it's on a tax return then we can. Yeah, so we use that.
- [15:46]
A
So we've got all these amazing strategies, especially right now. Like you said, it's the, the barrier to entry for first time buyers or you know, people who haven't bought in the past three or four years or don't have their name on a home. You know, the barrier entry is really low right now. It sounds like, you know, for, for that. So you can do this primary house hack stuff, you can do these secondary homes, what's the next level up to that and then how do we get to a point where we're capped out? We can't, you know, was a person like I don't have enough income to qualify, how do I scale after that.
- [16:17]
B
So that the next program. So is the 15 down investor loan. So by putting that extra 5% down, it takes all the second home loan restrictions out of the equation. And the important part with this is, is that we can use the forecasted rent to help you qualify and we can use it during that first year before it's on a tax return. So because it is a true investment property loan, Just to kind of put it into perspective, for every 1/2 home loan our clients usually take out, they can qualify for anywhere between 2 and 4 15% down options. Because of the, the forecast of rent, we can use 75% of that. In a lot of cases, you know, when you're buying a property, it will be self sustaining. So it has a very minimal impact to your debt to income ratio and it's a much faster speed to scale. Doing the 15% down option versus the 10. But for our clients that only want to buy let's say a property two within a year, the 10% down option is going to have a higher cash on cash return because you're putting less down in comparison to the 15.
- [17:16]
A
Cool. Yeah, that's awesome. And I mean almost seems like, yeah, if you have the extra cash that might be almost skip the 10% down, go straight to the 15% investment loan. And these are still conventional loans. 30 year lockdown, you know, 15% down. These are government backed, like conventional loans.
- [17:36]
B
There are some non conventional options as well. But yeah, everything we're talking about so far, there's there, you know, 10 and 15% down conventional, 30 year fixed, no prepayment penalties like we see on a lot of the non conventional stuff. And yeah, they're just, they're cookie cutter loans.
- [17:52]
A
Awesome. So and all of these though, they're, they're going to want to see less than 10 loans, loans in your name to qualify for these. Yeah, right. So let's say somebody's done 2 or 3 of the primary 5% or 0% downs. They do a couple of these 10%, couple 15. Now they're at, they're at 9, 10 loans in their name and they're like, you know, as a, you know, you could obviously they could go refinance those and you know, move them around. But let's say they leave them. Like how do I go from there? What's the next step after I've taken advantage of all these awesome conventional loans with nice 30 year locks.
- [18:24]
B
Yeah, it's a great question. Yeah. So with these we can do up to 10 finance properties. So it's, we're looking at properties that have loans against them. It's not, you know, if you have a first and a second on one property, that still counts as one finance property.
- [18:37]
A
Okay.
- [18:37]
B
And then for partnerships or you know, husband, wife's teams, we can do 10 each. So as long as they can qualify independently, we can do up to 10 each. There are points that we hit from a tax perspective which we can talk about here in a few minutes where usually between property 6 and 8, it may make more sense from a tax perspective to start going to some of these non conventional options that I'm going to talk about in a sec. Because of the increased amount of income you have to document and you know, higher tax liability, it may make more sense to Take that money and actually apply it toward a larger down payment. But we do a lot of planning on an annual basis. We do five year strategic planning with our clients and then we do every year before tax time, we have a consultation with our clients to make sure we update their goals, know what their goals are for the upcoming year, and then work backwards and connect the dots and give them a range for the amount of net income and depreciation that they need to document. So just a little window into that as well, if any of your audience are interested in having that conversation. But as far as additional programs, so where we go from there, so you could you hit a point where you hit the limit with conventional financing. Then we start looking at the non conventional stuff like the DSCR loan. With this program, it is the commercial style loan. This is the loan that's used on the commercial side, that's been adapted for residential real estate. For anybody that doesn't know, DSCR stands for Debt Service Coverage Ratio just rolls off your tongue. I know, it's a mouthful. It's a fancy acronym for does the property cash flow. That's all we're looking at. And on the residential side, all we're looking at is the all in PITI or iti, the, you know, principal interest, taxes and insurance. Or if it's an interest only loan, interest, taxes and insurance. And if there's, you know, association dues, whether or not the forecasted rent is going to cover it, if it does, then cash flows. And the minimum right now is 20% down, if it doesn't cash flow. So let's just say, you know, the forecasted rent is lower, which we've been seeing a lot of over the last couple of years with these higher rates, then the minimum down is typically 25% on these. And this is the program that investors use to scale up. So when you hit a point, like I was mentioning with conventional financing, where you either hit the 10 loan cap or depending on the strategy that you're using, it may make more sense to switch over to these non conventional options much sooner than that 10 loan cap from a tax perspective, we then in turn can use these DSCR loans to scale up from, let's just call it property 6 to 8 plus all the way up to as many doors as you can dream up. We have investors that will go up to hundreds of doors with these programs because once you get to this point and you have this type of experience level, it's much easier to borrow money on a much larger scale. Once you have the Credibility and the experience level that's required when you start going from, let's just call it the intermediate to, you know, expert or advanced level now.
- [21:39]
A
And these DSCR loans, you know, they're not 30 year locked typically, right? I mean are they, are you doing 20 year, 30 year amortizations and like balloons and arms or, or do you have 30 year locks on these?
- [21:52]
B
We do, yeah, we have 30 years on these. The pricing on the 5 year and the 7 and the 10 year arms typically are a little bit better than the 30 year, but it keeps going back and forth recently. Yeah, we're doing 30 year fix on these all the time. We do have balloon balloon loans as well. You know, this kind of goes back to a lot of the programs that we were doing prior to the collapse where I just, I personally don't like putting any of my clients in a position where they have, you know, kind of a ticking time bomb with a balloon just to get a little bit lower of a rate. So unless there's a huge benefit to it. And as of right now, kind of like the 40 year that you were talking about, you know, is great, it sounded great on paper, but the rates are higher on them. And if you look at the interest difference, if you were to actually keep one of these loans for that period, I mean it is significantly higher and the benefit just hasn't been there on the 40 year. And the balloons that I've been seeing that are relatively new, these things have been coming back out over the last six months to a year. You know, they just don't have. The rate differential hasn't been as significant as you think you would need to see in order to take on that additional risk.
- [23:03]
A
And I agree, I'm not a big fan of the balloons like I feel I tell people like to avoid them if they can. I would rather pay more and know that I'm good for 30 years even if I end up selling it in four. But at least I know I'm just avoiding that variable of risk that just you don't need to take on. If you can avoid it with your loans like yours, if you have 30 years, my advice is pay a little more, get the 30 year lock. It's just like an insurance, you know what I mean? It's a security. Then you know a lot of these balloons and even an ARM is better than a balloon, you know, because an ARMS adjustable rate mortgage for those listening where, you know, maybe after five years or seven years the rate will adjust but you don't have to Go refinance the entire thing or, or pay it off. You know, you can be like, dang, I'm cash flowing less, but it's still covered. You know, that's a safer move than having a true balloon that's going to pop and it's like paid off for refinance, but you don't have a choice, you know, and if the market's in a weird spot when that happens, you know, that's a, I don't like that.
- [24:02]
B
Yeah, yeah.
- [24:03]
A
I don't know if, I mean, that's balloons. I know I have arms, but I don't know if I have any balloons. I don't like those.
- [24:08]
B
Yeah, well, they, they're really making a comeback now. At least they have been over the last, you know, six to nine months.
- [24:13]
A
But I've been seeing a lot of seller finance deals on balloons. Everybody's doing these, you know, five year, I've seen two year, three year balloons on seller finance. I'm like, what's going to be different in two years? Like, what are you doing?
- [24:24]
B
You know, putting a lot of hope in this Fed and hoping rates come down quickly.
- [24:29]
A
Yeah, I wouldn't trust that.
- [24:32]
B
Interesting year. Yeah. And then one of the other considerations too, before we move, you know, past the DSCR is, you know, with all of these non conventional options, including, you know, we can talk about these too. We have a business bank statement loan for our clients that, you know, don't qualify conventionally but are business owners. And then we also have an asset qualifier loan where we can use assets instead of documentable income. These are all non conventional. So with these programs like the dscr, there is a required rate of return from these pools of money. On the secondary money. That market that's lending this money, they have a required rate of return that's already baked into for, you know, lending this money. And so one of the things that doesn't get a lot of coverage that your listeners should know about are the prepayment penalties associated with these loans. They're not on the conventional side, just on the non conventional. And you can do anywhere from a one to a five year prepay. And what ends up happening is that the longer the prepay, the lower the rate and the terms because that required rate of return is made over a longer period of time by locking you into the loan. Shorter prepayment penalties, let's just say a one or a two year, you're going to take a higher rate, potentially a higher upfront cost, but you're going to have the ability to get out of these loans much quicker. So that's one of the things that, you know, if your listeners are calling around talking to different lenders, they need to ask what the prepayment penalty period options are right now with where this market's going. I don't recommend anything over a one or two year prepayment penalty because we do have a refinance market coming. I mean it's probably not going to come as quickly as we all would like. I think rates are going to come down slowly and the Fed's trying to do everything they can right now to you know, kind of temper expectations going into next year. But it'll be interesting. But this is just another consideration because that prepayment penalty, there's different types of prepays. So some are 80% of six months interest. So if you take six months interest times 80%, it's a huge penalty. Yeah, there's other ones that are step downs where it goes 5% the first year, 4, the SEC, you know, the second, 3. And so it goes down as you continue to, you know, make your payments over the next, you know, how many ever years that prepayment penalty is in effect. But just know that you're not going to be able to refinance, sell or pay down more than 20% of the principal within that period without getting penalized.
- [26:54]
A
Yeah, I think that's a really good point and it's something that isn't really necessarily people don't even realize like it's not brought up. It's not like a big like hey, we need to have a conversation about this. People are talking about interest rates. You know, they're talking about like the lender is going to, you know, you sign off on the bold interest rates and the length of the term. But the prepayment penalties are usually just kind of slipped in there in the small print somewhere. Like you might not ever notice it, the lender might not ever mention it. And then you're looking back over your docs and like oh, I have a five year prepayment penalty at 80%. Like that's a big chunk if I want to get out of this property. That that won't be. I don't know, I felt like other parts of the terms are, are brought up more than the pre penalty.
- [27:35]
B
Well the reason for that is, and it's more of my industry is that you know, everybody calls and wants the lowest rate. Well in order to get the lowest rate, especially if you just want to quote with the lowest rate. Well, we're going to Quote you at a five year prepare a three year prepaid just so you can see what our lowest rate is. And then where, you know, my industry does a disservice a lot of times is they just don't take the time to explain all of this. You know, they're upfront or through the process. And you know, fortunately, I mean, it's caused my industry to get a bad reputation over the years. But I think that's changing now. We've had a lot over the last couple years. We've had a lot of people squeezed out because of what's happened and it's left, you know, primarily the professionals in the industry at this point.
- [28:13]
A
Well, and it goes to like I always tell my students and it's like, you need to know what your goals are. You know what I mean? Because if your goal with a property is to hold it long term, then yeah, take the lowest rate. Who cares about a prepayment penalty if you know you're getting a super high interest rate and your goal is to cash out refinance in two years? Pay attention to what you know, like you gotta kind of have some sort of game plan and strategy going into this stuff where you can again, you're not going to get destroyed. It's just like, oh, you might have to pivot a little or wait a little longer. Like the downside of this stuff's like, still better to have bought and made a mistake than not bought at all. Typically.
- [28:47]
B
Absolutely.
- [28:48]
A
But man, the more you can know, the more you can strategize. And that's why I love this call with you. This is so valuable is if people can have a few of these pieces in mind, especially, you know, the more intermediate advanced investors. It's like this could really just help move things and protect them a lot. So anyway, yeah, this is awesome. I love all these little nuances you don't hear about.
- [29:10]
B
So that's great. Thanks Joe. I appreciate the feedback. Is there other things that you'd like to talk about? Any other questions?
- [29:16]
A
Oh man, I feel like there's so many. But you probably know, what are some creative things maybe people aren't thinking about that they could do to qualify? I feel like a lot of times I get this question is like, well, do I write off everything on my taxes? I work with a lot of entrepreneurs, you know, or do I, but then I won't be able to qualify for a loan, or do I like just pay a bunch of taxes and then like, so I can qualify? What's your thoughts on that? And any other strategies that you know of that maybe I don't even know to ask about?
- [29:48]
B
Okay, yeah, sounds good. So, yeah, this is part of the planning that we do with our clients. And this is one of the biggest problems that we solve for investors. Is this, okay, what do I do with my taxes? How much income do I need to document to meet my goals? I write everything off. Are there different ways, are there different strategies and approaches to help minimize taxes without backing yourself into a corner where you don't qualify conventionally? And so what we do, and we start in Q1 every year we send out emails, we follow up with our clients to schedule strategy calls going into the year, update our clients goals, figure out how many properties they want to buy in the upcoming year, and then we work backwards. And you've got to keep in mind that accountants are always going to look at it from the lens of minimizing your tax liability or maximizing your refund, which doesn't always put you into the best position to qualify for conventional financing. And so what we try to do is find that equilibrium point where you're not overpaying in taxes and not giving the IRS a dime more than you have to, but still showing enough net income and depreciation to meet your goals for the upcoming year. And the important part with all of this is, is not to file your taxes until we have this conversation. If any of your audience members are interested in having this discussion, because it's much easier to work with your accountant and get this correct going into tax time than it is to go back and amend the tax returns. All amendments are hand reviewed by IRS agents. It can trigger an audit. And you know, we obviously try to avoid that whenever possible. So with that being said, you know, I'm not an accountant, I can't give tax advice, I'm not a cpa. I've got to say that. But what we can do is look at it from the perspective of let's for instance, we have a client that wants to buy three properties and we'll talk about the different loan programs that are available that we'll use based off of how much capital they have for these purchases. And then work backwards and connect the dots and say, okay, based off of your goals for the upcoming year, we're going to need a range, a little bit of a range of what the target needs to be of net income and depreciation. Then we loop in their account and see if that, that's realistic. I mean, we can't say you have to report this we say from a lending standpoint, this is what's going to need to be reported. Is that attainable? If the accountant says yes, great. We can, you know, based off of their income, that's spot on. Perfect. We put together a copy of the draft copy of the return and move forward. If not, if the accountant says no, that's, you know, pushing the income or there's just not enough income. Then in that same example, maybe we do one or two conventional loans or, and one or two, depending on what it looks like, DSCR loans. So there's different ways to structure it. It's just a matter of where I'm going with this is the earlier we can have these conversations, the better I get the question of, you know, well, what do I do with my credit? What do I do with savings, what do I do with taxes? Let's sit down, have a conversation. Whether you're buying something now or six months or a year and a half from now, the earlier you can have these conversations with us or whoever you're working with, the better because I can tell you how many times in the last 19 years I've had clients show up with a contract in hand or, you know, I found a property but they don't qualify. They need to get their credit score up, they need to save a little more money. So it's just a lot of times us as investors, and I did it early on in my career and even before, you know, was in the mortgage industry. Get so excited when you find a property but then realize, I'm not ready yet, I need to do X, Y and Z before I'm going to be able to qualify. And you end up missing out on that opportunity because we didn't have the conversation sooner.
- [33:24]
A
100%. So anybody listening, you can see why they're called blueprint home loans, right? Like this is the blueprint. Like I love how you're talking about these strategy calls. A year before, six months before for coming tax season. Like you're really creating a blueprint and strategizing which is so different than a way a lot of people approach this, you know, and it is the first thing I tell everybody I ever talk to who wants to get into real estate. I'm like, go get with your lender and see what you qualify for, you know, and then you might have a six month game plan or a year game plan to get you there. But I think that's so, so vital and that's so cool that you guys offer that to be able to help people really figure out what they need to do. And then you know, it's kind of a back and forth like I said, between that you and the accountants to figure that out correctly and doing it all legally and everything like that. But that's super cool. I wanted to bring up back you mentioned something about these asset based loans based off of what kind of portfolio of assets you have and business like bank account loans. Maybe you could expound upon those a little more. Yeah, we didn't dive into those. I'd love to hear more about those.
- [34:38]
B
Yeah. So let's start with the business bank statement loan with that one, you know, with. For any of your listeners that are business owners. You know, the one of the primary benefits of being a business owner is you get to write everything off and pay very little in taxes. But again, it doesn't always put you in the best position to qualify for conventional financing. And so the workaround is, is that we can do, you know, look at 12 to 24 months business or personal bank statements. If you're, you know, business Inc. Is run through a personal statement and use the qualified deposits as income. In lieu of looking at tax returns, you get a little bit better pricing. If we can do a 24 month look back. But the, you know, we do the 12 month all the time and it's only about a, you know, eight quarter difference to the interest rate. So for our business owners that are just getting their business up and running over the past few years, the 12 month look back may look a lot better than the 24. Or if we have established business owners that can, you know, we can go full 24 months back and you know, the numbers make sense, we'll go that route. And this just negates the need to look at the tax returns. We're not asking for the tax return, we're just looking at profitability of the business. And this is the solution for business owners and there's not a lot of limitations. So it could be any type of business. You need to be in business anywhere from, you know, a year to two years, we've got to be able to show that there's income there. So we will get these through from time to time. If a business owner has only been in business for a year to 18 months, as long as there's enough income where on conventional financing you need to be in business for two years minimum before we're going to be able to look at that income even if it's on a tax return. You know, if you've only been in business for a year and it's on a tax return. We can't use it until you have a full two years on taxes. And then once you've been in business over five years, we're only doing a one year look back on conventional. So this is where it gets on the non conventional side, it's a world of gray. The conventional side is very black and white. So the guidelines are the guidelines and the non conventional, there's a lot we, you know, can do, exceptions and stuff like that. And it's, there's a lot of room for, you know, outside of the box stuff. And then next is that asset qualifier.
- [36:53]
A
That's okay, let's, let's move forward. So this one's called the bank statement loan. Is that what you call it?
- [36:58]
B
Yeah, yeah.
- [37:00]
A
A business bank statement loan. So it needs to be a business. It needs to be like incorporated in some sort LLC or S Corp or whatnot then.
- [37:07]
B
No it doesn't. It can be run so it can be a sole proprietor run through a schedule C. Yeah.
- [37:12]
A
So they might not even have a official business and an ein or anything like that and you can still do a business bank statement loan.
- [37:18]
B
Yeah.
- [37:19]
A
And they, you don't need two years of income and you don't even need to use the taxes. So they could be making a grip ton of income but then write it all off on taxes and show nothing on their taxes but still qualify for the loan through this bank statement loan.
- [37:33]
B
Yeah, yeah.
- [37:34]
A
So what kind of terms are these? Are these like 30 year locks? Are they really high interest, a ton of points or what? What kind of terms you get on a bank statement loan?
- [37:41]
B
Believe it or not, it's actually a little better than the DSCR is because you're showing an ability to repay the loan. They're higher than conventional so they're going to be right in the middle of DCRs and conventionals. And then the down payment requirements are a little bit different. So on, you know, primary residences it's a minimum of 10% down on investment property loans and second homes it's a minimum of 20. So you can't do this on the 10% down vacation loan or the 15. But it's a workaround where you can still put less down than let's say on a DSCR and get better terms.
- [38:14]
A
Yeah, I mean that sounds really valuable. A lot of our listeners do like sales, like door to door commission sales. That's where I started and Brody and so. But a lot of them, yeah, they only have a year into it or they write everything off in taxes. So this, you know, business bank statement loan could be a huge benefit. So for anybody listening, you know, hit up Jeff and his team or your lender and ask them about the business bank statement loan.
- [38:40]
B
Yes.
- [38:41]
A
That can be really powerful.
- [38:43]
B
Yeah, it's great for exactly what you just said. People that are, let's say in commission based businesses, we deal with a lot of realtors that do these. So, you know, there you don't need to be, you know, like you said, a corporation or an LLC that's established. You don't even really need a dba, depending on the business that you're in. You know, if you're a 1099 contractor, you're in business like most Realtors. And we can, you know, use the income that way through their, their bank statements.
- [39:08]
A
That's awesome. And you can even do primary residence loans with these. Yeah, that's crazy. That's awesome. So, so you. Okay, so then that's. That opens up. Hopefully a lot of listeners are like, well, that's another option. That's again, why I love this conversation. If you know all the different tools, you know, if you just go to a lender who doesn't do this, they're just gonna say, no, you don't qualify, or a lender that doesn't know this. And I've done this, I've gone to lenders and there's just been a straight flat. Nope, can't do that. That's not possible. I'm like, oh, I give up. You know. But then I found if you ask enough lenders, there's one like you who knows all the tricks and they go, oh, well, we can't do that, but we can do this. And it's like, there's so many options, so the more we know, the less deals we'll walk away from. I always imagine how many deals people dropped and just walked away from because they're like, oh, well, the numbers don't work, or I can't qualify because they didn't know there was more options. You know. So tell me about these asset port or asset based, what do you call that loan? The asset loan.
- [40:05]
B
Yeah, the asset qualifier loan.
- [40:07]
A
Yeah. Let's talk about asset qualifier loan before.
- [40:10]
B
We move on from what you just said. That was a very good point. Because working with real estate investors is the hardest thing that we do in my industry. So it takes a certain experience level. And this is one thing that I like to pass on to, you know, investors that, you know, whether you're working with us or any anybody else, make sure, you're asking the right questions. Find out their experience level, how long they've been in the business. Ask them about their real estate investing experience, what deals they've worked on for themselves and their clients recently. And if you don't like the answers, move on, you know, and make more than one call. Because we're not perfect. There's no perfect lender out there, and we're not all created equal. So I'll leave it at that. But with the asset qualifier option. So with this program, this is for people that have typically anywhere between 100 and 200,000 minimum in the bank. And it can be in any type of account. It can. It could be checking, savings, retirement, money market, CDs, I mean, you name it. Stock accounts. We'll look at any type of assets, liquid assets, and be able to use those to qualify in lieu of documenting income. And so there's different calculations depending on the type of loan program and what individual client qualifies for. And there's credit score requirements, stuff like that. So different calculations that we need to do based off of the total assets. But this is one of the workarounds where, you know, I get the question all the time. It's like, well, I don't have a job. I don't. You know, we have no documentable income, you know, that kind of thing. But I have a lot of money in the bank. Is there anything we can do? And the answer is yes. I mean, this is the. A way to show ability to repay without actually having to look, you know, actually have a W2 job or a business in operation.
- [41:56]
A
So are you actually putting a lien against these assets to protect yourself to loan them, or you just look and go, hey, we know they're there.
- [42:04]
B
So.
- [42:04]
A
So cool.
- [42:05]
B
Yeah, there's no cross collateralization, so we're just. We're looking at just the property, or. Excuse me, just the. The assets and doing a calculation based off of the assets. We're not putting any type of lean or anything like that against the accounts.
- [42:20]
A
Wow, that's really cool. So for those listening, the name of the game is risk mitigation. Okay? When you, as an investor looking at doing underwriting on a property, like, ooh, how do I make sure this is a safe property that I should buy? When the lenders, you know, when Jeff and Blueprint or whoever your lender is, is looking to give you hundreds of thousands of dollars to go buy property, they got to look at you and say, where's our risk? How can we mitigate this risk? Oh, you have a ton of assets. Cool. You have a ton of income. Cool. You have a really good stable job. Cool. And they, and then, then there's a loan associated with each type of risk mitigation, which one, however safe they feel that is, and that's what determines the interest rate and the down payments and the points is how risky they feel it is. And so that's really cool. So you're saying if someone has, you know, not a lot of income to show, but they have a ton of assets, whether it's, you know, million dollars cash in the bank or whether it's just a bunch of properties that they're cash flowing off of, but they don't really have a stable job or a lot of income because they write it all off, they can show a really good portfolio. You'll be able to say, hey, that gives us enough security to loan you to go buy the next deal. Is that right?
- [43:26]
B
Yeah, absolutely. Yeah. And so it all boils down to, and that was a great point Joe, is that ability to repay. And really what changed from, you know, the collapse to now when the Frank Dodd act was implemented and came out back in 2009, we have to show an ability to repay these loans. We can't. That's why we can't do stated income loans anymore because we have to show either through you know, debt to income ratio and documenting income and employment or through let's say on the DSCR loan, the fact that the, we're showing what the rent is and that it can cover the mortgage or you have enough income in the bank to where you can make these payments for the next, you know, year, two years, five years, that kind of thing. That's really the way that we look at it from a risk or required to look at it from a risk perspective of, you know, no more stated income loans based off of equity position and credit score anymore. But there are these workarounds that have evolved over the last ten plus years.
- [44:21]
A
Dude, so many different options. Like I love this. So, so that's really exciting. And, and how do you determine like how much you would lend someone like that? So they've got like a good portfolio. Are you looking kind of doing the, looking at the asset itself as well? Like a DSCR going okay, well is the asset you're trying to buy gonna cash flow? Is it sustainable as well? And you just kind of look at a holistic picture. How do you determine how much you're going to lend to somebody just based off of a good portfolio?
- [44:49]
B
That's a Great question. So there is technically still a debt to income ratio in that scenario on the asset qualifier. So we'll take the total asset amount, do the equation that's required, depending on the different, you know, there's multiple investors on the secondary market, pools of money, there's pension funds, there's some insurance companies. Wall street lends this money directly. A lot of the big hedge funds have been stepping into this because they see the returns that we've been getting on these. And so depending on the actual investor on the secondary market, there's different calculations that we use and they all have their different sweet spots. Some won't lend on short term rentals, they only want long terms. Others will allow us to use a much more liberal calculation of the assets than others. And so it's just what we end up doing is we look at the total assets, figure out, okay, which box is this going to fit in? And then back to your original question. Yes, we can use the forecasted rents on an investment property, not on a primary or a second home obviously, but on the primary to help supplement between the assets and the forecasted rent.
- [45:59]
A
That's so cool. So your team does all these, do you do all these different kind of loans?
- [46:04]
B
Yeah, yeah, we do them all in house too. So where a good majority of our competition has to broker these loans, we have under in house underwriting teams for both conventional and non conventional and we make our own decisions. So we have eight different relationships set up on the secondary market for the non conventional products that we actually underwrite. Fun in house and then securitize them for the listeners.
- [46:29]
A
The reason that's so powerful, like I said, if you go to a lender and all they do is, you know, these three types, they won't know anything about any other type. They're not trying to mislead you, they just, they can't do it. But what's really cool with Jeff is you can go to say, hey, how do I buy this? And he's like, oh, here's every 20 different types of loans I can think of and they'll be able to find one that fits you. Because you guys even do short term, like hard money stuff for flips and burrs and stuff. So if I could virtually go to you, do a flip through you or a birth through you, get the hard money and then also turn around and get the long term financing through you once it's repaired. And you already have all my credentials, you already know me and I could do, I can move through three different types of loans over the years through you at this with the same company. Like, how cool is that? Like, I love that.
- [47:16]
B
Well, that's one of the other problems that we're solving for investors, is that when you go to different lenders, they usually have their, you know, regions that they cover. And then every time you want to go to a different market, you've got to set up a whole new relationship with a new lender. And so that was one of the primary problems that we solved for real estate investors. So you can easily shift markets and shift strategies without having to shift lenders.
- [47:38]
A
Oh, my gosh. Okay. We are running out of time, But I could tweet, could talk about this forever. And, like, for those who listen like this, maybe this sounded a little over the head for some people. Maybe a lot of people are just chewing it a bit, loving this. But the more you understand about the types of loans, the more deals you're gonna find. Everybody's like, how do I find a deal? How do I find a deal? Well, you have to know it's a deal, and you can't run the numbers because you don't know what kind of loans you can get. Then you're not. You're gonna miss all these deals. So these are really awesome. You. You mentioned another one. Jeff. I want to talk a little this about cross collateralization. Okay. So we've covered, you know, just to recap, we've got, you know, your primary residency loans, your secondary residency loans, your investment loans. That's the 5, 10, 15, and then your typical investment loans at 20%. Then we go into the DSCR stuff, bank statement, and then what was the asset asset qualifier? Asset qualifier.
- [48:33]
B
The asset loan. Yeah.
- [48:35]
A
And then there's also this cross collateralization. Let's talk a little bit about that and how we can. What's different ways we can strategize with that.
- [48:44]
B
Yeah. This is the conversation you and I had out of bigger pockets.
- [48:47]
A
This is where we started.
- [48:48]
B
Yeah, it's coming back. So it's funny that we're talking about this guy. I just got an email yesterday there from one of our investors that said, cross collateralization is back. I haven't had a chance. We had a work event yesterday. I haven't had a chance to go through the details on it, but it, you know, like we talked about it became challenging over the last couple of years because it's risky. And especially in a situation like yours where you have properties, you know, different parts of the US what cross collateralization means for your, you know, audience members, that don't know. It just means when you have multiple properties that have equity in them, you can cross collateralize or cross for short, multiple properties in lieu of having to come in with a large down payment every single time. The caveat to this is, is you do need to have equity in the properties. So you can't, you know, build a business on 10% down vacation home loans and then say I want to cross collateralize all of them six months, you know, six months or a year later, if you've had that portfolio for a long time and property values have come up and you're at an equity position of, you know, let's call it 30 to 40% equity in each property, plus then there, there could be an option to cross collateralize all of these properties to purchase and help you purchase your next property.
- [50:02]
A
Yeah, so I think there's a lot of people right now sitting on a lot of equity because prices went through the roof. Right. So home values went way up, everybody's got all this equity, but then they couldn't go do cash out refinances or anything because the rates are so high. So this is a way you can tap into the equity that's sitting in your primary or an investment where you've got, you know, hundreds of thousands of dollars in equity in these properties. And you're like, what do I do with it though? How do they use that? So you guys cross cloud, you goes, oh, okay, we'll put a lien against the property with equity and then we use that as a down payment for the other loan. Or how does that work?
- [50:40]
B
Yeah, there's different ways. So typically, especially if you have low rates on your first, we're going to just go into second position. And typically up to depending on the asset, I mean, this varies because this is another area where there's a lot of gray. So we're going to be looking at the DSCR of the overall global, looking at the, you know, the overall portfolio is what that means. And so there's different ways to do this. And one of them is like that we do seconds. Others we can do what's called a portfolio loan where we do one big loan on all of the properties, which is another alternative in your case you were looking for, I should remember exactly the details on yours because you didn't want to come in with any money on the next purchase. Correct. When we were talking about that, you.
- [51:25]
A
Know, I was playing, it was a good idea. If I could figure out, you know, why not.
- [51:28]
B
Right? Yeah. And I still think that that's going to come back at some point. It's just, I think we're a little bit of a ways out on that. And that's why the LTV restrictions have been so tight. If you can even find anybody that's going to cross and they typically want to keep it in either the same state or the same region. And where I know your portfolio, we were talking about, you know, coast to coast, where it got a little tricky. But the workaround to this has been, you know, like you said, either cash out refinances, which haven't been making sense for most people, or home equity lines of credit, if you can find them. We've just had a couple of our investors come back online with invest investment home equity lines. So this is something that everybody's wanted for the last year and a half. But it's just such a risky space that, you know, what I always recommend is, you know, if you're looking for cash for your next purchase, unless you're in a situation where you can either do a cross collateralization and you have that experience level and equity position in multiple properties, most investors don't have that type of portfolio, you know, that are just, you know, starting out. I've only been doing this for a few years, so I always recommend instead of refinancing your properties and trying to take cash out, take a look at your primary first. Because primary residence home equity lines are going to be the cheapest money out there. You can do free home equity lines through regional banks and credit unions. I don't do them in house, the free ones. We do home equity lines, but there's a little bit of a cost to them. So I always recommend check with whoever you bank with first. The big banks are not doing them right now. They've all stepped out of the space due to the risk. But you can find people or credit unions and smaller regional banks that are willing to do small home equity lines. The rates are not great on these, but it's a means to an end where you're taking the money out without having to touch the low rate first to bridge the gap between now and when rates eventually come down.
- [53:21]
A
Yeah. And you're saying people are trying to do these home equity lines on investment properties as well, not just the primaries, which is really cool.
- [53:29]
B
We've had a couple of our investors that are willing to do it. It's the, I'm going to say the terms aren't great cap and I think it's 65 or 70 LTV the rates, you know, they're well up into the tens. And it's almost like the period coming out of the Great Recession where they're lending money in this space. It's available, but it's almost for the people that don't need it. And that's, you know, that's what we, we saw coming out of, let's call it, you know, 2009 through 2011 ish, where there was money that came back and we were, you know, we were lending it, but it was almost like you, it was there for you if you don't need it, if you're overqualified for it. And that's the good news is, is that the money's coming back because that's the evolution of it. It comes out on a limited basis to see whether or not the asset is going to, or it's going to perform. And then if it does, then it becomes more available on a broader scale. You know, as we continue to come out of this financial cycle that we're in right now.
- [54:25]
A
I love that. Okay, we need to wrap up a little bit. Just want to touch real briefly hard money loans so you can use across collateral to help to offset the hard money loan if you want to be able to borrow more towards the hard money flip. Is that true? Now? I don't know if you guys do this, but I know some will do this. Like if you want to say, hey, you know, I want to borrow $500,000 to buy and fix up and flip this home and then you put a lien on my condo, that's 200,000 in equity, you might give me the full 500,000 instead of just 400,000 or whatever. And like an 80%. Is that something you guys do?
- [55:02]
B
Yeah. So they're looked at case by case. So yeah, I mean we do the one year bridge fix and flips. That obviously the exit strategy on those changed a little bit over the last couple of years. So we've had a lot of clients that have been coming in and you know, doing the fixed aspect and then holding the property and turning it into a short mid or long term rental. And we do have the ability to cross with other properties as long as the equity position's there. And typically with the cross options we want to see experience. So this is not something that's going to be available for newbie investors typically.
- [55:34]
A
Right.
- [55:34]
B
And we're doing 36 month look backs when it comes to fix and flip and ground up construction. So we're looking at, you know, completions, not renovations. And even the, you know, the buy and holds tend or the fix and holds. From a fix and flip standpoint we want to see actual completed flips and but if you do have experience in this space and we can show it over the last three months, that will definitely help. But we do and I don't want to make sure that everybody hears this. We do, you know, newbie fix and flip loans. So there's a couple of products and we can get a little further into the details if you'd like. But there's the one year bridge that everybody knows about and the terms are a little bit worse if you don't have experience but it is available. And then we also do a Fannie Mae home style loan. It's a little different from the FHA 203k. It's much easier than the FHA 203k. It'S a Fannie Mae product. There's no HUD advisor involved in it and we can use it for light to moderate rehabs and you know, pool editions, adus, that kind of stuff. So we've been doing a lot of that recently as another alternative for our clients that you know, the want to do an adu. It's big out here in California now because we've had all these law changes and it's starting to know carry across the United States. So if anybody has questions in those space in that about any of these programs, I mean, feel free to ask me anything. I mean there's no stupid questions. And get you guys my contact information here.
- [57:03]
A
Why don't you share that? You know we're going to roll into our final four questions and let you go. We'll definitely have to have you get back on. I feel like we barely scratched the surface but, but man, I wanted people to see how many options there are. But what is the best way to reach out to you or your team? If people are like man, I need a have a strategy blueprint lender like this. This is amazing.
- [57:23]
B
Yeah, our website is bpinvestor team.com. that's my team's website. It's Blueprint Investor Team. Go on there. There's a schedule, a strategy call on there and then that goes right to my calendar and then the I'm on Instagram, I'm at Jeff the mortgage Expert. Turns out there's another Jeff the Mortgage Expert. There's underscores. I'm not the underscore guy. So I just found out about that recently. But anyways, yeah, so those two. And then there's also you guys. You guys can give Me a call myself too. I've always like to give this out, especially for these investor groups like this. It's area code 949-306-1287. What time? That's 949-306-1287. And just leave me a message and get back to you as soon as we can. And then as far as our company, it's Blueprint Blu Blue print, not blue. So I just always like to say that as well.
- [58:21]
A
Guys, there you go. They cover 49 states. If you're not in New York, you know, and you're, you're not going to be there for a few years, everywhere else you're good to go. So I love that. You know, again, say I buy from Hawaii to New York, Kentucky, Oklahoma, Utah, you know, I'm all over the place and it's like I'm tired of going to different lenders every state and so it's like I'm really excited to be able to work with Jeff and his team. I think anybody listening? It seems like a great solution. There's a ton of good lenders out there. You know, go to whoever you want. But I'm excited for how many of the solutions are in one place with Jeff and that's what I want to have him on the show. But yeah, we'll definitely have you come back. But let's dive into our final four questions. Unless you have anything else you want to share before we do that?
- [59:05]
B
No, that's it. Yeah, it's all right. Last four.
- [59:08]
A
Let's do it, man. Well, this is great. All right, so question for you. What is your dream deal or deal you'd hope to tackle some day?
- [59:19]
B
That is a great question. And you know, we actually just achieved our last 10 plus year goal. So we bought another property. Yeah, this was the. We talked about it briefly in the beginning before we went on. This is the. We bought a property in a town that I live in and down here in Southern California. It's down by the beach. It's expensive. We spent a year renovating this place. It's about two blocks from the beach, old 1940s property. And it was like peeling back layers of an onion. We went almost two times the budget and this was one of those ones where it really pushed us out of our comfort zone and tested us in a lot of ways. But we ended up, we just got the final. It's incredible. So this was one of. This was the dream over the last 10 years was doing something like this. We got it up and running it's a duplex. It's incredible. And now we're on to the next project, so we're trying to figure out where to go from here.
- [60:17]
A
So is it a flip or a long hold or what?
- [60:19]
B
This is a long. Yeah. So this, this is a long term hold. Yeah.
- [60:23]
A
That's awesome. Do you Airbnb it or is this just a vacation home?
- [60:27]
B
No, this is actually. It's a long term duplex because there are Airbnb short term rental restrictions that have been in place where I live since 2010, 2011. And we got a property down here where I tried to get a short term rental permit back in 2012, and I had to go in front of the city council and just got shot down. So it was interesting. Even 10 years ago, we were at the forefront of trying to shut down short term rentals because we're in a small town by the beach and our city council got out in front of it. Sure.
- [60:56]
A
And so were you able to kind of burr some of this and like refinance after you put all that money into it?
- [61:03]
B
So we haven't yet because we're in the similar position where we ended up getting a 3.75 on this thing. And it's. We're not going to touch it. We've been waiting for, you know, home equity line to option. Option to open up. So this, these investment home equity lines just came out here over the last week or two. So I'm, I'm sitting on a lot.
- [61:22]
A
Of equity in that.
- [61:23]
B
Yeah, we're doing all right on this.
- [61:24]
A
One on the ARV on that. I'm sure. That's awesome. All right, question number two. What's been one of the most pivotal books you've ever read?
- [61:34]
B
Pivotal books. So I went to Cal State Long beach here in Southern California when I came out of school, I didn't want to see a book for years. I mean, I went a long period of time where I didn't read. And the one that got me moving in the right direction again that really created the momentum was Seven Habits of the Highly Effective People by Stephen Covey. So that was the very first one. That's turned into a lot behind me, as you can see.
- [62:04]
A
But that's a classic. That's a good one. That was, that was like my first. Like, whoa. Like, this is how to live life. Yeah, I need to go back and read that one again. I love that one.
- [62:13]
B
Yeah, it's an oldie but a goodie. And it, you know, they've got a great organization behind them as as you know. So it really got me into all these different other books, you know, and different, you know, it's all about leadership and you know, they, they do a very great job, you know, in training on that side. So I've gotten involved with them and it's led to just, I mean, so many great things. So I highly recommend reading that.
- [62:36]
A
Absolutely. All right, question number three. What is the most expensive or interesting mistake you've made in real estate investing? It doesn't have to be the most.
- [62:48]
B
It could just be a question. Yeah, no, there's, there's been a few of them, but I would say we, right before the collapse, we were in the middle of a flip and we were in a six month Libor back then. It was a great loan at the time that you can't even get nowadays because it was a ticking time bomb and we lost our rear ends on that one.
- [63:12]
A
What is a Libor?
- [63:13]
B
For the listeners, it was the London Interbank offering rate that is no longer even available. I mean, it's, it was one of the indexes that adjustable rate mortgages would follow. And it's, it's gone. They got rid of it a few years back. But anyways, it, that was an interesting lesson because we got, we got in pretty deep on that one and we didn't, it wasn't as bad as it could have been. We got out by the skin of our teeth. We lost about 175,000 on it, but had we held it any longer, it would have been a lot less.
- [63:43]
A
Jeez. There you go.
- [63:45]
B
Some lessons in that one. So, I mean, that's the takeaway, is that we all have failures. The key is not to get hung up and stuck on them. Learn the lessons that are in them and don't make the same mistakes twice.
- [63:56]
A
Absolutely. I love that. All right, last question. What's the purpose of life, Jeff?
- [64:03]
B
The purpose of life.
- [64:05]
A
It's the easy questions for last.
- [64:07]
B
Yeah, I know, that's a great one. So my purpose in life, I mean, I have found what drives me. I love what I do, my purpose. I've got my personal whys that drive me, which I won't get into because we don't have time. But from a business standpoint, I love where I'm at in my career. I love teaching the people on my team how to become real estate investor strategists the way that I have over the years. And I love passing the knowledge. I love doing these types of things, just getting out there and spreading the word and helping people. I mean, If I had to say one thing is just paying it forward. Living a life of, you know, gratitude and abundance and trying to keep that in mind in every decision that I make on a daily basis to help improve as many lives as I can. It's been good to me. And I think that we didn't really get into my why, but a big part of this is because real estate investing has been so important and so impactful in my family's lives. I mean, my dad grew up in poverty, and because of some wise investments and smart choices and a lot of hard work, he just completely changed the trajectory of our family, which has created so many opportunities for us. And so it's just really trying to pay that back and really do what I can for who I can, when I can.
- [65:30]
A
I love it. Jeff, this has been great. Thanks so much for, you know, just freely sharing so much information with us and helping us. I think this would be, you know, a keynote podcast we have. I'm going to refer so many people to. To give them a foundation for lending practices and whatnot. So, anyway, thanks for being on the show. Glad you made it.
- [65:48]
B
Yeah. Thanks for the invite, Joe. Yeah, I'm looking forward to the next one.
- [65:51]
A
Absolutely. This is Joe Jensen signing off for the Real Estate Investing School podcast, reminding you that there are so many solutions.