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The Secret Loan That Lets You Buy a Fixer-Upper With 3.5% Down — And Skip the Renovation Bill | Sal Rizzolo
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C
Freedom Mortgage has collaborated with Claude and they're basically working to see how quick they can completely cut out any human element or
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A
these pretty standard type loans. W2s 20% downs.
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C
Well, they want to do it for everyone. They would love a world where they don't have to pay anyone.
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A
You're telling me they're already trying to find ways and I'm going to say it bluntly, to kind of remove the loan officer.
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C
I think any big company is looking for ways to cut costs because if they don't do it, someone else is going to.
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What is up the More Show Family? We are back with another episode, another incredible guest. This guest also will be in the More Club. If you are not yet a part of the More Club as you are listening and watching this, we are going to give you lifetime value for free. When we launch it it'll be $3,600 a year. But right now if you go to time4more.com pre launch and you register, you will join for free for life before we officially launch and then it'll be 30$600 a year so make sure you get there. This guest will be a part of this club. Sal Rosolo has been doing loans for 10 years and he has something to say about what's the state of the loan world these days. How are you dude?
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C
I'm good thank you for having me. Give me a reason to come to Miami.
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A
It's going to be great. So let's talk about how you see the industry changing real time right now in front of your face.
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C
So basically, I mean, AI is something that I think everybody's been worried about as far as desk jobs or office jobs. Right. We're even hearing people leaning into, like, blue collar work because of the fear of AI.
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A
Yeah.
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C
So in our industry, we've always used what's called an automated underwriting system. So loans are qualified, and basically we put in the borrower's information, it gets ran through an automated underwriting system, and then from there we match the underwriting findings to the documentation that we collect.
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A
What is. So what is the automation looking for? Like, credit score stuff?
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C
So I'll put in. This guy's been working here for four years. This is how much money he makes. This is his residency, this is his occupancy. Right. It'll approve the loan based on those parameters, and then we have to prove it. So what's happening with AI now is they have what's called day one certainty. Banks are logging with plaid. Like, I'm sure you've seen.
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A
Like, I've heard of plaid. Yay. I used it for. I've paid certain things on plaid. Right. Okay.
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C
So it'll pull in your bank statements.
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A
Okay.
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C
There's. There's work verification programs that, that like correspond with, with. With ADP to pull in your W2s. So what's happening is the cookie cutter files are becoming so automated that you're not gonna need a loan officer.
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A
And when you say cookie cutter, you mean like someone like me is 20% down? Million dollar Home. Like those are cookie cutter.
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C
Well, now, I would venture you're self employed.
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A
Yes, I am. So it's probably not like me.
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C
Actually, it's not. Right. Because self employed is a different animal. But tax returns are tax returns. So if the loan program that you're working with is specifically catered to tax returns and tax returns can be viewed by AI, that's also, you know, easily calculated.
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A
Yeah.
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C
So what we're seeing is the easier it gets to do a file, the more likely it is to be automated from soup to nuts.
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A
Yeah.
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C
And then it's a race to the bottom as far as how much money needs to be made on the file because it's. There's no one working on it anymore.
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A
Yeah.
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C
So Better Mortgage has collaborated with, I believe, OpenAI.
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A
Okay.
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C
And freedom Mortgage has collaborated with Claude.
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A
Okay.
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C
Right. And they're Basically working to see how quick they can completely cut out any
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A
human element for these pretty standard type loans w two 20% downs.
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C
Well, they want to do it for everyone, of course, you know, I mean they would love a world where they don't have to pay anyone.
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A
Yeah.
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C
But this is, you know, and this kind of segue.
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A
So this is really do. This is crazy because a lot of us in the real estate space, we try to make the argument like, oh, you can't replace the real estate world. Right. It's very hand to hand combat, very personal, very relational. You're telling me they're already trying to find ways, and I'm going to say it bluntly, to kind of remove the loan officer.
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C
Yeah, I think, I think any big company is looking for ways to cut costs because if they don't do it, someone else is going to. So everybody's always got their bottom line in mind. And if they can cut out people liability, payroll tax, the home, you know, it's, it's, it's the biggest expense a company has. I think that it's not as easy as they think it's going to be. But we operate in Long Island, New York. Miami is a very niche area. There's parts of California that's very niche. But you know, you go to states like North Carolina, South Carolina, it's very, very cookie cutter. You know, the title comes back super clean.
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A
Yeah.
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C
House is three years old. It's a new development. It's the same builder selling it. So those are the files that will be automated.
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A
Now, new build is not a big thing right now. Right. It's just the builders have not been building that much. There's some.
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C
Mm.
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Is that like an arena that this should be almost a slam dunk? Like all AI will run all those loans because the new building. Before we dive in, I want to talk to you about Ellevest Capital. If you're looking to build passive income through multifamily real estate, Ella Vest gives you access to exclusive apartment investments that aren't available to the public. If you want to diversify beyond stocks and create real cash flow, visit LFS capital.com to learn more and to get on the investor list. I personally invest with Ellevest Capital and they have been incredible to work with. Their team is top notch. I get passive cash flow distributions to my bank account every month and I'm always in the loop with what's happening with the apartments I'm invested in. The best thing is I don't have to worry about managing tenants or Dealing with repairs. The team at Ellevest handles absolutely everything. And my income is 100% passive. And that's just the way I like it. So if you want to build wealth and passive income without all the work and additional risk, visit Elevest.com now let's get to the show. Low down payment, would you think that's probably the first area they're going.
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C
So the lower down payments are tougher because if you're putting down three and a half percent and you have any type of an appraisal gap that's, you know, then everyone has to get involved. People need to cut costs or whatever. Builders almost kind of set their own price. You know, you sell a house, they, they aim high on the first one. They'll give a seller concession on purpose. So the automated underwriting system will determine value on new homes based on other homes in the area. So sometimes three or four houses sell in a development and then an appraisal isn't even needed.
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Man, this is going to really change your, like, how do you keep a job? How do loan officers keep their job? How do they show value?
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C
So funny you ask.
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That's why I'm here, to show the opportunity in the marketplace.
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C
So Frank is, you know, however I segue, Frank is someone I've worked for for 10 years. Right. He kind of got me into the business. I used to cut hair and I met him through this and he has been a pioneer, you know, from, from the beginning and, you know, and all the way up until now. So when I first got into the business, all we did was refis. Right. The rates went up. There are no refi's.
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A
Yeah.
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C
You have to do purchases, Right. We're doing purchases. These are the purchases that are easy. We need to find a way to provide value to people who otherwise wouldn't get homes.
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Right.
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C
The lower down payments, the seller concessions, the lower credit scores.
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Yeah.
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C
So we've always positioned ourself as a team to work with a bank that is willing to take on higher risk clientele. Lower FICO is higher debt to incomes. So that's always been step one.
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Yeah.
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C
Is make sure that we operate in a box that if, if, if someone can fit, I'll say like this. If Fannie or Freddie is willing to do the loan, we need to be able to do it. There you go. We can't have overlays or, or bank, you know, bank regulations that mask on top of whatever else can be done.
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A
Got it.
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C
And then this 2 or 3k way, which is, which is becoming Our biggest value add to, to the Long island community is basically a loan product that involves contractor documentation, licenses, you know, is appraisal, you know, appraisal nuances. It's, it's going to be the last thing to go.
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A
Yeah.
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C
As far as automation.
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So what I'm hearing at least is you guys keep your job because you actually provide real value. Real value versus just pushing paperwork with automation. Right.
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C
Correct. And so, so I've taken it. Whether it's a step further or a step closer. We don't, I don't appeal to the end users as much as a lot of loan officers do because the end user doesn't come to me when they're buying a house. They go to an agent. An agent?
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A
Yeah.
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C
Every time.
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Yeah.
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C
I don't care if it's my cousin, they're going to an agent and then their agents, like, do you have a little. Oh, yeah, my, my cousin, you know. So for us, I've always felt that it's important that Realtors understand these products and that they're available. Because if you're a Realtor that takes a Zillow call and opens the door, what separates you from the person they called before you and what's going to separate you from the next person that they call when you don't answer?
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A
Nothing.
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C
You need to provide value as a Realtor.
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A
So if, if I can call out right now, the listener or viewer watching this, your avatar of who you'd like to talk to is the realtors that have, that have buyers that are, I don't want to say trouble buyers, but like, that have more hair on it. Right. They don't have a lot of money. They want a house that might be over their price point. They want a house that they may or may not be able to afford this moment. And there's a way to get the deal done. You're saying realtors bring me these people. Because if there's any company going to get this done, I'm going to get this, this done. Yeah.
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C
And. Or create these people.
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A
Yeah.
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C
Right. So in our industry, in our area. Right. When you have $25,000 and you need to sell a concession, it's basically a death sentence on an offer letter. Can't ask for a seller concession.
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Right.
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C
There's people paying cash above ask.
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A
Right?
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C
Right. The reason the 2 or 3k plays such a big part is because the appraisal is almost a moot point. Right. FHA allows you to finance 110%. So this is your language and realtor language. FHA allows you to finance110% of the after repair value of a property, even if you're just adding appliances. A very small job.
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A
Yeah.
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C
So now you can guarantee a seller concession and you can waive the appraisal contingency because you're, you know, you're not overpaying by 10%. So you start to put people who don't have, who are shopping with a hope and a dream. Right. 25, 30 grand. In long island, if you don't have something set up like this, you're.
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A
Yeah, you're screwed. What. What are you doing to try to, like, inform? I mean, obviously being on this podcast. But how are you getting to the agents right now to say, guys, there's guys and girls. There's a way to get these deals done that you're just not thinking about.
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C
So in Long Island, I've always. I've hosted events. I do two events a year. And then prior to the events, we usually come up with, like, some sort of marketing, like, ploy, and we throw a seminar before the event and we give out tickets to the event. If you come to the seminar.
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Yeah.
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C
The last one we did, we called. We called it End Renovation Discrimination. So we based renovation discrimination. Right. So we basically explained to the realtors that as a listing agent, you should be accepting these offers above regular FHA offers because they're better and easier to qualify. As a buyer's agent, you should be embracing these, because now the Massapequa that only has three available houses. Now there's 15 houses, even though 12 of them are in total shambles. You can take any one of these houses and make them the house that the buyer wants.
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A
You're solving a big issue, which is the supply and demand issue. So everyone wants a new property, just like a new car. Like, you always want it. Now you don't need it all the time, but you're taking the. The Looky Lou Shopper and actually getting them over the finish line with this idea. Yeah, that's going to be huge. So what is the misnomer right now that either agents are like, this doesn't work, or this is a myth or that's a lie. It can't happen like that. What would you want to try to teach them or prove wrong about what they're thinking about? All this?
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C
The common thing that you always see is if. If you're going to make $10,000 on a transaction, and one of them, you have to open the door, and one of them, you have to open 50 doors, everyone gravitates towards the path of least resistance. And realtors are no better. Neither are loan officers.
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A
Right.
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C
So a busy loan officer who knows what he's doing normally, his pipeline is covered and he's not even going to bother with these types of loans or he doesn't have it sorted out to where he's going to be able to shine. We have a dedicated renovation department in New American Funding. Right. The guy that runs it, we call him the Godfather of renovation. He's been doing it for 20 years. He worked for Wells Fargo. He did $100 million a month in renovation loans back when they were, like, really pumping.
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A
Yeah.
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C
The reason people get put off by this is because they think it takes too long. I think there's too much paperwork or they're just unfamiliar with it.
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A
Yeah. They're not informed.
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C
Right. And we're trying to close the gap on all that.
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Well, listen, people want the path of least resistance. You said that. So when agents have opportunity, what should they be doing? Like, how can you help them get more business? Because that's only going to serve you. Right.
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C
Yep. So this is what I kind of employ agents that I deal with, and it works in Long island and it will work all over the country. As an agent, when you go out of your way for somebody or you solve a real problem. Anybody can work with an agent when they're putting down 20% and they have a solid offer and they're offering cash and they're waiving everything. Right. If you get someone into a house that was told by someone else that they couldn't get into a house, that's. That's residual business. That person will be your sports, they will be your ads, they will be your marketing. Right. And I would go so far as to say that you're going to start losing those clients. They're not going to need realtors anymore, they're not going to need loan officers anymore.
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A
Yeah. Like, I. When I bought my home, I just called, it was for sale by owner in Zillow. I mean, you know the story. Right?
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C
Right.
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A
I didn't use a realtor. I.
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C
Because.
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A
But I was a very standard 20% down type of person.
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C
And you were savvy back then. Right. So what's going to happen is you're not going to need to be as savvy anymore, and that's going to be a problem.
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A
Yeah. You mentioned Long island several times. I know that's where you're based. Are you able to do this? Where can you can do this in all 50 states?
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C
Yep.
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Is there Any limitation for you, Sal, like you can't do it, whatever.
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C
I mean, I believe Washington is the only state, and don't quote me that, I think that might be the state that we don't do business in.
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A
Where can people find you right now, just so I don't forget, like Sal Rosola, but where can they find you to just pick your brain, ask you questions, figure out, like, whatever.
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C
So as. As cliche as it sounds, Instagram is honestly the best place to follow along and keep updated. And it's just my first name, last name, Sal was all Sal, R, I Z, Z.
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A
If you couldn't tell, he's Italian. So he's also going to be a part of the group. Just so you guys know, get into the group. He will be in there to help you guys in agents, are you trying to help other loan officers understand this? Like, would it benefit them to understand it more or be a part of your team or know this?
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C
So New America, this is another big. A big value add. So we service these loans after closing. We are the ones that issue the drawers. We are the ones that control the renovation department.
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A
Essentially.
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C
The bank, right? Yeah, we are the bank, but we also, we also service. So normally when you work for 95% of mortgage banks, they'll sell it to either Planet or Plaza. Those are the two banks that take the renovation loans.
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A
Okay.
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C
Not only, not only are they more expensive.
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A
Yeah.
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C
You know, they price out worse. We service and we have matching pricing to our regular FHA loans. So an agent that. Or a loan officer that wants to be niche and handle these types of files. There is something to say about working at the bank that I work at.
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A
Yeah.
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C
But it's all. It's not, you know, it's. It's not necessary or, you know, I'm not here to recruit. I'm really not, you know.
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A
Yeah. Well, so, I mean, listen, this podcast is all about finding the opportunity in the marketplace. Right. Maximizing opportunity. What is everyone missing? This. The fact that there's little inventory that you can go and find a home that maybe is not ideal. What you want, because the kitchen is oak cabinets and you want white cabinets, whatever. And this is the space that you can go find that.
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C
Yeah. And this is. So most people with an FHA loan or that are using an FHA loan, they're putting down three and a half percent. Sometimes they don't even have money for closing costs. They sure as hell don't have money to renovate the property afterwards. Right. So if it was a million different Documents. And it took an extra three months. You know, we got to get away from that. We close these loans just as fast as regular loans because of the way. Yeah, so. So the new American will take an assumption on a contractor bid, and we'll get the appraisal done based on what the buyer wants done in the house. And then throughout the process, they just need to find a contractor that's willing
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A
to match that bid, and you will assume the contract.
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C
Correct.
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A
And that way you can close. Like, what's the fastest you've seen close or willing to close?
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C
Put it this way. Usually finding the contract is the biggest problem. And up until recently, you have to do that first. We let that be the last thing that needs to be done. So we have a bid for $200,000. It's a conservative estimate. It's the most that this should cost. Your contractor is willing to do it for 180. Cool. Sign the paperwork, cut the cost where it is. Let's close.
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A
So you guys are looking at what the top number would be? 200 max.
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C
Yep.
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A
And contractor comes in at 194. Great. Done.
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C
Yep.
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A
As long as the 200 or less you guys are going to be done close.
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C
Yeah.
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A
30 days, 45 days, whatever this is.
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C
Yeah.
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A
Do you work with contractors that so Open Door is a contractor I love in Florida. They're in Georgia.
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C
I've heard of them.
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A
Right. Offer pad. They run. It doesn't matter. It doesn't matter who it is. Long as they give you the bid.
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C
Licensed and insured. And in some states, it's basically whatever the requirement is by the state is the same requirement by the FHA to be you.
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A
I've done a lot of remodeling. I'd imagine contractors can sometimes not necessarily hit the dollar amount per se. Right. And they change order you to death. Right. This is actually why I'm bald. But we'll save that for another episode. What happens in that circumstance? Like, where they're like, oh, I didn't realize it was going to be an extra 10 grand.
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C
And there's always a 10% contingency on the entire cost of rental.
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A
Got it.
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C
And if the electricity is off or the house is winterized, it's 20%.
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A
Okay.
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C
Whatever's left over afterwards goes back to the principal balance of the loan.
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A
Oh, good. So you guys take. So if it's 200, really, you have 220 in it? Yep.
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C
240. If the house is, you know, if the house. The water's not running.
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A
Yeah.
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C
What's going to happen? When you turn the water on.
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A
And so how do you think loan officers are going to be kicked out of this space? Like, what are you doing to really stay on top of this? Trying to remove yourself from the AI because we talked a little bit off camera just about this. Like, it is going to.
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C
Yep.
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A
Drastic. You and I both believe it'll drastically change the shape of lending.
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C
Yeah. So this. And I've never really thought about this out loud, but basically, when Covid. When Covid hit, everything started booming. When the rates went up, half of our industry, or maybe 70% of our industry, all got flushed out.
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A
Yeah. Because they were only doing refi's, and now they had to go to purchase.
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C
But we got busier. Why?
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A
Because you are even real value.
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C
Yes. And Right. And we were one of the only ones left standing.
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A
Yeah.
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C
Right. So the value needs to be there. As a realtor or as a loan officer. Right. I've always said this to my guys that work for me. You need to be the first person and the last person that these people talk to. Right. You want to provide enough value on that first phone call that these people really look at you like, you know, something that nobody else does. They're happy to have met you. They're lucky to be working with you, and they're not looking anywhere else. Right. So this product, if you know your way around this product and you can explain this to somebody who's never heard it before, the more people that they've talked to, the better, because nobody's brought this up.
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A
Yeah.
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C
So maybe they don't end up buying a house that's in shambles to put $200,000 into it, but they're going home that night with their wife to talk about what it would mean if they were able to build the house that they wanted with the $25,000 that they have in their bank account.
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A
You guys should almost do a tour teaching agents and loan officers. I don't know how that benefits you. I'm just more thinking out loud of, like.
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C
No, it does. So. So when I did the seminar, I had 16 realtors at the seminar. Right. I had already been doing business with two of them. I'm actively doing business with, I think, 13 of them now.
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A
So let's just use. I have a buddy. I'm thinking of my buddy Mike right now in Phoenix. He's a loan. Loan officer. If he comes across this, does he just call you? And then there's a world that you guys can play together. Because I don't know, can anyone offer
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C
this Yeah, I mean, I'll always talk to loan officers, especially if they've been in the business, you know, less of a time than I have. I'm happy to give back. You know, someone did it for me. You are kind of restricted to your bank's ability to do these loans and how familiar they are with them, because no matter how familiar you are, you got your underwriters if it's their first time. You've got your QC department if it's their first time. So we're almost cornering that space. And, like, we have an unfair advantage,
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A
but the biggest advantage is you are the actual bank.
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C
Yes.
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A
So all this runs through you, and so you guys get to essentially call the shots because you're funding the deal anyways.
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C
Right. So we almost get to say, like, the head. Do it. Try. Yeah, like, you're not going to be able to do it the way that we do.
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A
Right.
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C
And. And I'm happy to work with you in any capacity, whether you want to come and work with us or whether you're a realtor and you want to be able to push this product. But you got to push them to us. Otherwise it's, you know, it's only going to get as far as.
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A
So Realtors like Sal, this is great. I love this. I need to talk to you. What advice can you give them prior, just so people don't blow up your phone. You're just talking to people in Kansas about, like, what advice can you give realtors to say, hey, here's what I suggest.
- [21:59]
C
So I would. I would, you know, encourage any realtors to message me if they're interested in this. We did a seminar recently. We're waiting for. For it to be, like, you know, put together and pretty up. There is an angle for realtors on every side of a transaction, whether it's a listing appointment, a buyer's appointment, an offer, like how to structure offers, or how to pitch themselves to, you know, people selling dilapidated houses. There's an angle, and I work with a realtor who exclusively uses this in every pitch. It doesn't matter. He just has to figure out a way to put it in. Yeah, and that's been his. He's been trialing it, and it's working phenomenally.
- [22:34]
A
Do you know what he says?
- [22:35]
C
So something.
- [22:36]
A
I mean, it's all.
- [22:37]
C
He'll either use us a previous story or he'll explain. Like, if. If you were selling a house, right. And the house was in shambles. Well, let's. Let's say you're the buyer, right? So Justin Colby wants to flip this house.
- [22:48]
A
Yeah.
- [22:49]
C
The seller wants 300 and you need to put 100 into it. You want to sell it for five.
- [22:53]
A
Yeah.
- [22:53]
C
Right. You need to make your profit.
- [22:55]
A
Yeah.
- [22:55]
C
You're borrowing money at 10%, two points. Whatever you tell the seller or the agent tells the seller, hey, you're, you're going to be lucky if you get 300 for this from Justin.
- [23:03]
A
Of course.
- [23:04]
C
Right. And the seller's like, well, okay, but what other choices do I have? No one can buy this house in the condition it's in with a loan. What if I put together an AI drafted, you know, production of what this house would look like when it's done. The buyers that come to the open house see how much their payments going to be, how much money they need. Seller concession fully available. Three and a half percent down. Buyers encouraged. 350 is the target now for this house. And they'll get it.
- [23:29]
A
Yeah. Because you painted the vision, we're cutting
- [23:31]
C
you and we're cutting you out.
- [23:32]
A
That's right. The investor gets cut out.
- [23:33]
C
Right. So the buyer gets $50,000 more in equity when they're finished. The seller gets 50,000 more in their pocket and nobody's upset because the person that lost out wasn't even in the deal to begin with. Yeah.
- [23:44]
A
Because I need, as a flipper, I need the lowest number I possibly can get. I want to buy 250 nothing. You know what I mean? Like, yeah, so, but the seller know this. So. And this is, this is huge. Like you're going to, you're, you're going to upset some flippers. Right. Because, and I'm okay with that. I'm done flipping is, Listen, we want to 50 on that 300. But if you show the homeowner a vision of what the renderings of what it'll look like after the payment that they're going to have when it is done and the fact that they don't have to come out of pocket.
- [24:11]
C
Right.
- [24:13]
A
You're solving a massive issue with this whole demand thing.
- [24:17]
C
And as a realtor, realtors love, love the attention. Right.
- [24:20]
A
Of course.
- [24:21]
C
Make a video, promote the open house, you know, send out flyers.
- [24:24]
A
Yeah.
- [24:24]
C
Like this needs to be like, we are targeting a buyer that has $25,000 in their checking account and wants to live in a brand new home. Who's even, who's not going to at least come to the open house? And as a listing agent, what do you want? You want to double side the deal and that's what's going to happen.
- [24:38]
A
And this could go for the homeowner. You know, I spoke about it with Matt on a different episode. But this can go for the homeowner that's like, dude, I want a new home, but the next home is out of. Yeah. Out of reach. And I don't have the money to get to the next. Like, I got some money. I got 100 grand. Like, I could do something with it. I can't get to double the price value. And then you also have. What would you tell the homeowners that have this? The classic, like, 3% mortgage, so they just feel like they're. They're handcuffed to the home. Would this just be a better option for them?
- [25:10]
C
So. Well, when you. When you do a 203k refinance, you. You reconsolidate the loan so that the interest rate changes. So they would. They would go back up.
- [25:16]
A
They can't afford the next one. Right. And so they're like, well, I'm not going to go from a 3% loan to a 6% loan plus a higher. Yeah. Price point. I mean, that's part of the reason I, like, I have a 4% loan, which isn't that low. I mean, it is relative today, but, like, I would have to double my house value plus have an extra 2% on my loan.
- [25:34]
C
Yep.
- [25:35]
A
My payment's going to be ridiculous. Right?
- [25:37]
C
Yeah. I mean, and it's. It's a good alternative to selling if you're not. If you don't want to. I mean, you can take the house that you have, put 100 grand into it. You skip the mortgage payments that you're supposed to make while the house is being renovated. There's a lot of cool nuances in it. Homeowners, you know, everyone wants to look at their house as an investment, but we can't forget the fact that we have to live somewhere. And most people do not have the option of living anywhere for free. So, like, your primary residence should be something that you're happy in and should be something that you're comfortable in, whether it's an extra three to five hundred a month on top of what you find ideal. You come home and sleep there every night.
- [26:10]
A
I even just love, like, I'm in Florida. So pools are a big thing.
- [26:14]
C
Yep.
- [26:14]
A
Prior to Florida, I live in Arizona. I just love the opportunity to say, hey, my house is pretty good. I'm okay there. But, like, I would want a pool. And you could maybe your pool's a little older and you're like, oh, to renovate this pool, it's going to be 30 grand. New pools are 100 grand. You can use it for that too.
- [26:29]
C
Yeah, the conventionals, home styles and homereadys. You can use those for, for pools, landscaping, adus. All nine.
- [26:35]
A
Is it just because agents don't know it? Like, why is this even something that,
- [26:40]
C
like, agents are deterred by the loan officers? Because the loan officers don't want to learn anything new. Yeah, I mean, we, we went out of our way. Like, we knew that the bank was going to hate us in the beginning. We knew that we were going to, you know, we were going to pioneer this and we were going to take our bumps and bruises. But we also knew that we needed not a DSCR loan, a bank statement loan. Like, you know, everybody's. If you're not doing a bank statement loan right now you're working at Chase, like everyone is doing that. You need something different and you need to use it as a hook to get business.
- [27:09]
A
If you're a loan officer, what would you go tell? Let's say you have a team of 10 loan officers. What are you telling them every day to go get business? I feel like this is the, this is the call agents. Teach them bring donuts. Show them, say, hey, show me the last four properties you showed your buyer, Mr. Agent. Oh, why didn't they move forward? Oh, they didn't like the kitchen. Oh, they didn't like that. It didn't have a pool. Oh, they didn't like the whatever. Okay. And teach them how they could have done this loan. Right. Wouldn't this be the fastest way to get loan officers to like, go get more business?
- [27:39]
C
It would be the fastest way for realtors to get people into new houses or into houses. Like when someone's working with a buyer and they haven't found a house yet, the answer is always the same. Why haven't you found the, you know, why aren't they in a house yet? We can't find the house. It's always the same supply and demand, right? So create the supply instead of, you know, instead of waiting for it to pop up. When you wait for it to pop up, you're not going to be the only person that wants that house either.
- [28:00]
A
You can't. Can you do a tear down?
- [28:02]
C
You can, you have to leave the basement or you have to leave some sort of a foundational wall. They want one wall. Okay. But yeah, yeah, I mean, you could do, you know, literally a round up,
- [28:12]
A
like the west wall and that's it,
- [28:14]
C
the west basement wall. If you are kidding. And what I Was going to say before is, I mean, for loan officers that have an existing book of business, how many people within the last four years already have rates in the sixes and put down three and a half percent on a less than perfect house. That's a refinance literally waiting to. I mean, I've been killing the refinance game right now. Yeah.
- [28:34]
A
How are you winning right now?
- [28:36]
C
My refinances are going from six and a half percent to six and a half percent. They don't even need to save any money. They just need to be able to renovate the house that they don't have the money to do.
- [28:44]
A
Right.
- [28:44]
C
So you're, you're creating entirely new opportunity.
- [28:47]
A
That's the key. Yeah, it's the message of the show, maximizing opportunities in real estate. So the, the big win right now that you're doing is you're taking someone that bought a home a year and a half ago. They have 6%.
- [28:59]
C
Yeah.
- [29:00]
A
And they're like, I bought it because I wanted something that, but I don't really love it or I wanted to add the pool or I wanted. And you're able to call them, say, hey, yeah, here's an opportunity for you.
- [29:10]
C
And in a lot of realistic situations, let's say their rate is six and a half, six, seven, five, seven percent. You know, no one's going to refinance from seven percent to six and a quarter just to save, save the money. But if we go from 7%, we discount the rate with 3 points. We go down into the fives. You could probably build in a hundred thousand dollars worth of renovations and the payment doesn't even move.
- [29:30]
A
Can you buy down the rate in this? Yeah, you can. Obviously increases the loan, but you can take, they can take that and say, hey, I, I want a 5%, I want a 4%. Cost of money. Is it built into the loan?
- [29:44]
C
It's built into the loan. You could build in like up to three points on a refinance. You can't go crazy. It's, it's, it's points and fees. But you have to look at it when you're, when you're paying for a house with a loan.
- [29:53]
A
Yeah.
- [29:53]
C
You are paying your monthly payment times360. That's what the house is costing you, the price. And none of that really matters because if you're making minimum payments, you have to make 360 of those payments. So if we keep your payment the same, I don't want to say who cares what gets rolled in? But it's, it Becomes a numbers game. And the numbers will make sense no matter what.
- [30:12]
A
I'm literally sitting here, I'm like, I don't think I would ever buy a home without doing this now.
- [30:17]
C
Right.
- [30:18]
A
Especially when the fluctuation of interest or the economy is not ideal. Because you can also refi out of it later. Right.
- [30:25]
C
Well. And it's a regular FHA loan.
- [30:27]
A
Yeah.
- [30:27]
C
And if you don't have to keep
- [30:28]
A
it for the 30, like, no. Three years later or six months. A year.
- [30:31]
C
Six months. Yeah. If you build 20% equity into the home and you want to flip to a conventional loan, you could do it in six months.
- [30:38]
A
And I don't know why someone would
- [30:39]
C
per se, wipe out the mi.
- [30:41]
A
Oh.
- [30:42]
C
But I mean, if you get a good enough rate with an FHA loan, the MI is only 0.5%. You kind of just take it.
- [30:48]
A
Yeah. You just let it ride.
- [30:49]
C
Yeah. I have an FHA loan.
- [30:51]
A
Yeah. This is incredible. It is. What question am I not asking that you think would be really informative for agents? I. You know, because even investors, you'd have to live in it for a year. It has to be your primary. Yeah.
- [31:07]
C
So, okay, so we can. We could thin the herd a little bit or at least answer the most common question. This is for owner occupied residents. Right. So, you know, we see it all the time in Long island, like, oh, I'm moving from my two family to my four family. It's down the block because it's closer to my, you know, it's got to kind of make sense.
- [31:25]
A
Yeah.
- [31:25]
C
Because now we know you're flipping a four family house. You know, like there are emails like property flipper@gmail.com, like, come on, dude, be a little wiser. Yeah.
- [31:33]
A
So let's just use the owner occupant. That's just like, I can't find anything. I need to redo the inside. What if they have to move? Like, what happens? Like, I now I got to go take my family, rent a place while this renovation is happening. How does that play into the loan? Does it?
- [31:48]
C
So the reason that they. The reason that they waive mortgage payments while the work is being done is so that you can afford to stay somewhere else if you have to. You know, you're technically floating whatever you're wherever you're paying to stay and your mortgage, because you have to. But there it is.
- [32:04]
A
So it's built into the mortgage. So I'm just using fake numbers. Round numbers is $100,000 loan. It costs you three grand a month. So that loan is $136,000.
- [32:12]
C
Correct.
- [32:13]
A
I'm just using fake news, but yeah.
- [32:14]
C
Yep.
- [32:15]
A
So they float it into the loan.
- [32:16]
C
Yep.
- [32:16]
A
So you don't have to pay. So you can pay the rent at the other house for three grand a month. So you're still same same.
- [32:22]
C
Right. And you're allowed to build in up to 110% of the after repair value. That goes for your closing costs, that goes for your, you know, monthly mortgage payments, that goes for your property taxes, your escrow online.
- [32:33]
A
Is there a loan limit?
- [32:35]
C
Yes. So FHA has county loan limits. So it gets trickier in like lower priced areas. But New York, Miami, you see like the conforming loan limit's always been. Well, right now it's around 830,000.
- [32:47]
A
Yeah.
- [32:47]
C
And then in high cost areas it's 150% of that. So we've done 2 or 3ks for 1.1 million on a single family home.
- [32:55]
A
Yeah.
- [32:56]
C
And then the twos, threes and fours go up from there.
- [32:58]
A
Yeah.
- [32:59]
C
Like you could buy a Brooklyn, you know, four family with a $2.1 million loan. And it's a conforming loan. You can go FHA.
- [33:05]
A
So to some extent. And let's just use me. Right. So I have a, my home's probably worth 2 million at this point. So if I wanted to go build a new home, I wouldn't be able to because it's going to be. I'd probably build for 2 million, 1.2 or whatever. Yeah, okay.
- [33:23]
C
Yeah, yeah, yeah.
- [33:24]
A
There's some restriction on depending upon where you're at in your home and value of your home now.
- [33:28]
C
Yeah. Because there are no jumbo products for this. Like, this really is for like the person trying to get a start, you
- [33:35]
A
know, because anyone that's a nicer home that they can afford.
- [33:38]
C
Yeah. Because you know what FHA is? They're, they're putting three and a half percent down. They're like, hey, you got $3 million to go build a house. Borrow the money from someone more expensive.
- [33:46]
A
Yeah.
- [33:46]
C
You know, that's how they look at it.
- [33:47]
A
This is, I just, but I even just love the, the homeowner just is like, I want a new kitchen, I want a pool, I want
- [33:56]
C
whatever you want.
- [33:57]
A
I don't even need a new home. I just want the one thing that I don't currently have. Yeah. Holy moly.
- [34:02]
C
Yeah. And if the realtors don't start explaining this to their buyers, then we're just going to start fixing up everybody's house and then they're not going to have
- [34:08]
A
to enter in all 50 states. Yeah. Sal or Zolo, he's a part of the club. In the space of like, lending, where do you see it going right now? I mean, you've been in 10 years, so you've seen a big rise and then you've seen the COVID craziness and now you've seen this dip. Do you think, what are your thoughts
- [34:28]
C
right now on the lending, like on the mortgage side of things? Yeah, I think there's two separate worlds. There's the world that I play in and then there's the world that, like Chase and Wells Fargo and Bank of America plan. And I think that they're going to. You're going to see a big gap. It's going to expand even more. Right. Those banks are going to take over the cookie cutter. It's going to be super cheap.
- [34:48]
A
It's all the stuff going to be automated, like easy automated, low overhead.
- [34:52]
C
Yep. And then there's going to be people like me who people value enough to want to talk to and have them walk them through something that is more beneficial to them than just, you know, punching stuff into Chase.com.
- [35:03]
A
what could disrupt the value of a 2 or 3K loan? Like, like builders are building to rent and things like that. That might take some of the oxygen out of, like, this could work anywhere. Can you think of something that might disrupt it?
- [35:18]
C
No. I mean, you are, you're looking for houses that most people aren't willing to pay for. You know what you're going to be willing to pay for. So it's not like the builder can come in and, you know, swing a hammer and be like, I'm shutting this down. All right, then you pay 350 for this house.
- [35:36]
A
Yeah.
- [35:37]
C
You're not going to.
- [35:37]
A
Well, I was even thinking when I asked the question, what was going through my head was new builds. But we all know new builds are barely. They're happening. They're just. And they're not going to ramp up anytime soon.
- [35:48]
C
And it's a different market because the new, you know, there is there. I've done renovations to a home. I don't know that I would ever do it again. I want a new home. I want it done.
- [35:55]
A
You have great hair.
- [35:56]
C
Keep it right. Yeah, but I paid my dues.
- [35:59]
A
Yeah.
- [35:59]
C
I put three and a half percent down. I rented every room in my house. I was, I was collecting cash flow. So, like, it's, you know, different strokes for different folks. The new build is always going to be for the person who wants to walk in and slap the money on the table and not worry about it. But those aren't even the people we're appealing to.
- [36:15]
A
Yeah. At all.
- [36:16]
C
Right.
- [36:17]
A
This is going to have some Runway.
- [36:18]
C
Yeah.
- [36:19]
A
It's going to be great.
- [36:19]
C
It has. I mean, we've. We've cornered a ton of the Long island market. There are because for me, a realtor is not just going to send me the 203k business. They're going to send me the people that want to use two or three, you know, and then we just start working together and it is.
- [36:31]
A
What about Florida? You guys pretty big in Florida?
- [36:33]
C
Yeah. That's our second biggest.
- [36:34]
A
Second.
- [36:34]
C
Yeah. And I'm in Tampa. I spend a lot of time in Tampa.
- [36:39]
A
Guys and girls, Sal Rosolo. This is the more show. We're talking about how to maximize opportunity. I think this is a big spot. If you're an agent, a loan officer, get a hold of Sal. You're also going to be in the group. We'll do some live calls. We'll teach even further.
- [36:51]
C
Yep.
- [36:52]
A
I love that. Reach out to him. This is the more show. We're maximizing opportunities and if you're not a part of the group is free right now at this second time. Fourmore.com pre launch get in there in lifetime for free. Otherwise when you miss out, it'll be $3,600 a year. We'll see you guys on the next episode. Appreciate it.
- [37:09]
C
Thanks, Justin.
- [37:11]
A
Yeah, man.
- [37:24]
B
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- [37:54]
C
If you like the show, please take
- [37:56]
A
a moment to rate, review and subscribe. It really does help the show to grow. Thank you for listening.