244 Profitable Small Dollar Lending | REI Show - Hard Money For Real Estate Investors

Bill Fairman

00:00:01

Hi everyone. We're right on time as usual. Sorry about that. Mike. Thanks for hanging around for an extra minute. Our theme this month has been Small dollar lending, raising capital, and investing with family and friends. Yep. And we are going to get in depth with our special guest who's going to give us some insights into her. What is it? What are we talking about today?

 

Jonathan Davis

00:00:32

Small dollar lending. Lending with smaller amounts.

 

Bill Fairman

00:00:35

And we'll do that right after this. Hi everyone. Thank you so much for joining us on The Real Estate Investor Show Hard Money for Real Estate Investors. We are Carolina Capital Management and we are private lenders in the Southeast for real estate professionals. So if you'd like us to take a look at one of your projects, go to carolina hard money.com and click on the apply now tab. If you're a passive investor looking for passive returns, go to the accredited investor tab. Don't forget share, like, subscribe, hit the bell and all that good stuff. And don't forget about Wednesdays with Wendy. Wow, that was four seconds. Was that four seconds? Yeah,

 

Jonathan Davis

00:01:43

I think it

 

Bill Fairman

00:01:44

Was, It seemed like two and a half.

 

Jonathan Davis

00:01:46

Oh,

 

Bill Fairman

00:01:46

Okay. So Wendy devotes 30 minutes per person on Wednesday afternoons to talk about anything real estate related. If you go to our comments section on the right side of your screen or underneath, depending on the platform you're reviewing us from, then you can click on get right onto her schedule. Yep. She's usually booked a couple of months out in advance. It's well worth it. So let's get into some breaking news,

 

Jonathan Davis

00:02:17

Some breaking news. I like it.

 

Bill Fairman

00:02:32

So England's newest Prime Minister resigned this morning. So this is now six prime ministers, no, four prime ministers in the last six years.

 

Jonathan Davis

00:02:46

So

 

Bill Fairman

00:02:47

That's what I call stable government.

 

Jonathan Davis

00:02:50

Yeah, yeah, absolutely. To, to bring a more, more home are what we're sitting right now at the average 30 year mortgage. It's 6.92 for a full 30 year. I think if you get a five one arm, you're right around 5.9. So we're almost, we're creeping up on 7% inflation staying around that eight to eight and a half percent mark when you take out, you know, fuel and food, cuz apparently those are too volatile. You don't want to include those in the, in the core numbers, you know, but, you know, not like people need food and fuel. So it's sticking around there, which is probably going to lead to at least two more interest rate hikes. This year of anticipation is 75 basis points. Each one.

 

Bill Fairman

00:03:50

It, it's not the rate that really is gonna hurt, it's the how quickly they're, they're going up on these things.

 

Jonathan Davis

00:04:00

Well it's the, it's the, this is the well, and, and so we can have a little, you know, history with this 6.92 is the highest 30 year fixed mortgage rate since 2002. Right? So 20 highest one in 20 years. Our interest or our inflation is, you know, obviously the, you know, the highest in 40 years. So we are, we're, we're navigating some interesting waters. One of the interesting things that I thought, or that I found was through all of this, now we know that, you know, single family homes, the appreciation is were still right around what, eight 9%?

 

Bill Fairman

00:04:40

Yeah.

 

Jonathan Davis

00:04:42

Mobile home appreciation. 35%. Yeah. Nationally.

 

Bill Fairman

00:04:49

Well it is the, one of the most affordable housing alternatives. And so people are turning the mobile homes cuz they can't afford to get into some stick built

 

Jonathan Davis

00:05:00

Homes. Yeah, I think I think the, the average cost of a mobile home now nationally bringing it it's around 1 50, 1 60 is kind of the, which is a lot higher than it used to be.

 

Bill Fairman

00:05:11

The the average five years ago was 65.

 

Jonathan Davis

00:05:15

Yeah. So,

 

Bill Fairman

00:05:16

So it's, it's jumped up quite a bit.

 

Jonathan Davis

00:05:17

It's jumped up a lot.

 

Bill Fairman

00:05:19

And then the most recent builder sentiment survey, and and I I love this, they're not using actual numbers, they're just, how do you feel? They, they survey how they feel about the market. Not necessarily And how's the market doing?

 

Jonathan Davis

00:05:33

Well it's how we feel that determines what the market does because it determines what we

 

Bill Fairman

00:05:37

Do. It's how the, it's how the general public should be feeling, not the, not the builders.

 

Jonathan Davis

00:05:43

Mm. You think so?

 

Bill Fairman

00:05:44

Yeah. Well in, in my opinion. Yeah. And this is my opinion, if you're behind 6 million homes, you know, based on population growth, even though there's gonna be a slowdown, wouldn't you want to continue to at least kind of get ahead of the game so when it does turn around quickly, you'll have plenty of inventory.

 

Jonathan Davis

00:06:07

Yeah. The the, the sentiment is when will it happen? Yeah. And how can they time it and do you get,

 

Bill Fairman

00:06:11

So you build 'em to rent and then when it's time to you, you put 'em on six month leases or anyway you have 'em available to sell when the, when the time comes, Bill

 

Jonathan Davis

00:06:21

Will be putting a mastermind together for all the developers. If you would like to join [email protected].

 

Bill Fairman

00:06:29

See, last thing, what was the last one? Oh, housing sales for the month of September, 4.2 million, which is usually in the close to 6 million a month, which is down considerably, but the price of homes still went up 9% for the months. So the, the sellers and the new buyers haven't reached that equilibrium yet. The people selling still think the homes are worth a lot of money. And apparently the people that are buying, I agree with 'em cause it still went up

 

Jonathan Davis

00:07:10

9% the people that are buying. But also, you know, it's this weird place that we're in between high inflation, but jobs are still good. Yeah. Like, so it's like until, until jobs get hurt, I mean you're gonna have this weird relationship between buyers and sellers and, and the home prices. The homes won't start coming down until jobs get hurt

 

Bill Fairman

00:07:31

And, and, and again, there's still a lack of inventory. There's plenty of families being informed and there's not enough single family homes to go around. So anyway, that's our news for this week. I'm sure there'll be some next week whether we want it or not. Right.

 

Jonathan Davis

00:07:50

News or noise. We're trying to determine which one it's gonna be.

 

Bill Fairman

00:07:54

So let's, let's get this train wreck moving. Huh? What did that mean?

 

Jonathan Davis

00:08:06

Like it was just to cut you off, it was just to like get Bill to stop talking.

 

Bill Fairman

00:08:09

All right. I don't wanna keep Sue in the green room too long. Sue Jensen is one of our favorite people. She's invested with us. She's an experienced lender as well. She has self-directed IRAs that she has been taking control of for years and she's got great experience that I wanted her to share with our audience on getting your money invested. Sue, welcome. Come on out of the green room. Hey guys, how are you?

 

Susan Jensen

00:08:45

Good, good seeing you guys.

 

Bill Fairman

00:08:48

You too. You as well. I, I love that brick wall behind you. That's awesome.

 

Jonathan Davis

00:08:53

It almost looks real.

 

Susan Jensen

00:08:54

Yeah. I'm on my back porch in the breeze

 

Bill Fairman

00:08:58

And the only way I can get real brick is if I have a fake background that the software system helps us with.

 

Susan Jensen

00:09:06

Yeah.

 

Bill Fairman

00:09:08

So one of the questions that I had for you is, because I know for a fact that you have several accounts you work with and then when you have Roth accounts and then when you have traditional accounts and, and then you know, you, you have entities that you invest with as well that have nothing to do with self-directed retirement accounts. They all typically have, you know, different dollar amounts and there's a lot of people that have IRAs that may only have $20,000 in it and they're like, well, you know, I'm very limited on what I can do to get this money invested. Give me an idea of what you've done to, to get those smaller dollars invested alongside of the, the larger dollars that you have invested.

 

Susan Jensen

00:09:57

Yeah, so, so my husband and I deal, we have four IRAs, self-directed IRAs. We also have a, an LLC outside our IRAs that we invest with. And then I manage my son's ira, my son-in-law's ira and another pastor's ira. So, so I, what I try to do is leverage all of our IRAs so that we keep that money working in all of them. And especially with the, the young guys, they're just starting out building up their self-directed IRAs. My son-in-law, he's, he's up to 20,000 now in his, but he just started a couple years ago and he's slowly building that. So yeah, so we just leverage with each other and, and just try to build our wealth and with for one another.

 

Bill Fairman

01:10:56

So what are the some, some of the things that you have to do cuz you can't just depend on each other to invest the money. You have to get other, at, at least network with other like-minded people to get involved in deals. Cuz it's easy to find people that want to invest their money, but it's little bit more difficult to find the deals to put 'em in.

 

Susan Jensen

01:11:20

Right.

 

Bill Fairman

01:11:22

And and I, I know being, I'm sorry, I didn't mean to cut you off, but being a part of an IRA group that has education and events and put those things together, is that part of what you do as well?

 

Susan Jensen

01:11:36

Yeah, I meet a lot of people just watching a lot of webinars. I walk, I, I get a lot of Quest education. I'm usually watching a Quest webinar at least once a week. And so I, I try to get a feel for who these people are, whether they have a fund or whether they are looking for capital. And, and then I go to events and I'm in a mastermind. I, I lend to a lot of people in, or a handful in the mastermind. And, and then I tend to, once I find someone that I really like, like you guys for years and years I started with you guys and I've been working with you for 10 years now. You guys got me started, Wendy did. So once you have a good person to work with you, you keep going back to that same, that same lender, the same borrower, and you, you just keep working together and then, you know, we, people know people and you, you just build your circle that way.

 

Bill Fairman

01:12:42

Well, I know one of the unique things that most people aren't gonna do this, but one of the things that you did that was extremely smart was you volunteered to be the president of our local R group for a year or two. And you certainly meet a lot of people that way. It's a lot of work. Don't get me wrong. You were doing it not because you were just trying to meet people to do deals with, you were doing it to volunteer your time and, and also learn. But I mean, volunteering anything in a, in a local r or a mastermind is gonna be beneficial, right?

 

Susan Jensen

01:13:18

Yeah, yeah. There was, that was about three years that I did that and I'm put a lot of subgroups into the r and met a lot of people that way. So yeah, it is, it's, it's great to be able to volunteer and join arms with other people. You really get to know them that way. And, and in my, in my business, my number one priority is the person. So with lending they say it's, you know, you've, you've gotta do your due diligence on the person, the paper and the property and that's all right. But the, the person to me is the most important. I just wanna make sure that I'm working with good people that I can trust and that I like.

 

Bill Fairman

01:14:04

Yep. Well the, the key to making money is making sure it's making money consistently. And any time there's a break in between, you're not making any money. So whether you get a property back or not is not the issue is, is my money working for me while I'm waiting to do this stuff? And you know, if you're lending, you don't want the property back, If you wanna buy the property, then that's fine. Yeah. You can do that too. Yeah. Did you have something you wanted to add or you want me to just run off at the mouth the

 

Susan Jensen

01:14:39

Whole time off?

 

Jonathan Davis

01:14:40

You're doing, you're doing great.

 

Bill Fairman

01:14:41

I'm, I'm just, I feel, I feel guilty because I keep cutting you off.

 

Jonathan Davis

01:14:45

Oh, that's all right. Keep going, Bill, you're doing

 

Susan Jensen

01:14:47

Great. No, I would say about, about that point, I usually, I, one of the things I really don't like is when any of our accounts that I'm managing are not working. If there's any money in there that's if, if if I've got an account that's up to $8,000, $10,000, that's just, just doesn't sit well with me. So I'm looking for a place to put it. But I've gone as low as one of our accounts going as low as $7,000 and linking that up, partnering with three or other accounts to get that money working. So as long as your borrower doesn't mind cutting four checks per month, it's a great way to build up your small dollar ira.

 

Jonathan Davis

01:15:34

So you're, you're talking about linking up with other people's IRAs and, and you know, someone's needing a hundred thousand, but maybe you have, you know, 8,001 30 in another and just kind of pairing them all together. Yeah, go

 

Bill Fairman

01:15:48

Ahead Bill. I was gonna say real quick to, to kind of get around that, if the borrower doesn't wanna write four checks, you can always hire a third party manage That's right. Servicing company, send all the money to them and they'll cut the checks for you.

 

Susan Jensen

01:16:01

Yeah. Like you guys did.

 

Jonathan Davis

01:16:03

Yeah.

 

Bill Fairman

01:16:03

Yeah. Well to, to be fair, we're not really a third party servicer. We can only service loans that we have a piece in. We, we have to own a piece of the loan before we can services. However, there are plenty of companies out there that hire out, they have to be licensed. Some states require certain licenses, others not so much. But there are companies out there that are, are specifically there for IRA folks. Right.

 

Susan Jensen

01:16:32

It's good for when you're new at this to have a third party servicer or, or someone like Carolina hard money to take care of your loans. And then if something goes south, you're not just left hanging trying to figure out how, what to do with this property. You've got someone that's experienced that can help you with that.

 

Jonathan Davis

01:16:53

Yeah. I mean, yeah. Cause when, when things, you know, and things do go wrong in real estate and, and notes all the time. So, you know, it's, you know, do they have that loss mitigation experience to help you through a default, through a foreclosure, through a bankruptcy? Yep. You know what, what have you until you learn those things yourself. Yeah, I know. Let's see, someone says, so as little as 20 K would be okay to partner with someone as little as $1,000, as little as 500 would be okay to partner with somebody you, you know, as long as the need is there. Yep. And you can partner with somebody. It doesn't matter what amount you have.

 

Susan Jensen

01:17:31

Just, I've finished Quincy's book, Quincy Long wrote a book on self-directed IRAs. It's really, really good. It's self-directed. Self-directed. IRA Secrets revealed. He's got a, a chapter in here on small investing, small dollar amounts. Nice. Are you guys still there?

 

Jonathan Davis

01:17:54

Yeah, yeah, we were, we were just, it was just focused on

 

Susan Jensen

01:17:56

You. Oh, okay.

 

Bill Fairman

01:17:57

Cause it cause this show is all about you, so,

 

Susan Jensen

01:17:59

Okay. I thought I was wondering if I was all alone. So, but he had a, a piece in here that was so good. He, there was an investor that was looking to get a $5,500 loan from someone he connected with this lender who had $550 in his Roth ira. So what he did was he connected six other people, I think it was six five, let's see, there were eight different accounts and five people, IRA owners, and they came up with the 50 555,000. But he, he got, he, they gave him, he gave him 12%, he gave him two points. The guy who found the deal kept the two points and everybody split the, the undivided interest of their, of their, they

 

Bill Fairman

01:19:03

All got the 12%.

 

Susan Jensen

01:19:04

Yep. And in the end, and after 10 months, this guy with $550 in his Roth made $1,100 on that. Yeah. So, I mean it's a, it's it's work and he really leveraged his time and his knowledge and Sure. You know, his effort and everything and his network, I mean he found all those people and he made it happen.

 

Bill Fairman

01:19:28

Yeah. Yeah. And to Mark's question, if you have, if you know someone who needs a loan and you know some other people that have larger IRAs that are willing to go in with you, and because you're the deal maker, you're the deal architect, Right. You put the deal together. Let's say for example, you charge two points. Yep. And let, let's say you split the one point with the, the other people in the deal and you keep one point because you're the deal maker, right. And you take your 20,000, you could charge a little bit. For example, you could do a, and I'm just throwing out easy numbers, you could do 12% and everyone else is charging 10 and they each get a piece of that one point. And then you get to keep the difference between the 10 and the 12 on your $20,000 and that, that way you can right. Jack up your $20,000 fairly quickly because you're the one that put the deal together. Right. It's, it's a great way to do it. How else are you getting into deals? Are you just a lender in some of these, in most of these deals or are you doing other things? Are you purchasing anything? Are you doing any kinda options or, or wrap loans or anything like that?

 

Susan Jensen

02:20:43

The only other thing I'm doing besides lending is from our self-directed IRAs, I've been converting a lot of our money into investing in syndications.

 

Bill Fairman

02:20:53

Okay.

 

Susan Jensen

02:20:54

So self storage and multi-family, The multi-family only in the south and the red states. And I've got money in one self storage syndication in Pennsylvania. And another one that I'm looking at with that has like five self storage facilities in the south and in Texas. So that's what

 

Bill Fairman

02:21:20

I'm see that's a, you, you were saying that you were always concerned that your money is working constantly and when you invest in a fund, any, any kind of fund including the syndications, you know that money's always working,

 

Susan Jensen

02:21:33

Right? Yep. Yeah. And we do have some money in one fund. It's a real estate fund, but that's in our self-directed IRAs because our llc, we live off that money. So I've gotta keep that cat that mailbox money coming in. Right.

 

Jonathan Davis

02:21:49

I want to answer Al Cook's question here. You may have covered this, but what security do you use for these loans? You can use whatever you want. However, I know Sue, no matter what she's doing, she's taking a lean position and probably a first lean position when, when you have these, like when you're working with other people, there's, there's different ways to do it. But I'm gonna tell you probably the, the way that most people with IRAs are gonna do it, it's just gonna be a fractionalized para pursue interest. So everyone has a shared first lean position based off of your investment amount

 

Bill Fairman

02:22:23

And para pursue, meaning everyone is equal in the transaction based on their percentage of the investment.

 

Jonathan Davis

02:22:30

Para Sue is French for equal footing. Yes.

 

Susan Jensen

02:22:32

Yep. It's all undivided interest and it all, it's a percentage and everybody gets what's what's fair.

 

Bill Fairman

02:22:39

Yeah. And it has to be among people. Either you need to have a third party putting these together who are, is gonna make the decisions for you or somebody in the group has to make the decisions with the, you know, on the front end of this before you ever get into it saying that, you know, if this happens, this is what we're gonna do and if this happens, this is what we're gonna do. Because you can't have, you know, four or five captains and no lieutenants.

 

Jonathan Davis

02:23:06

Well and that brings up the, the prime

 

Bill Fairman

02:23:08

When, when something

 

Jonathan Davis

02:23:09

Does go bad, that's the prime example of, you know, and, and Sue's been with through this with us as well, where we have like, you know, her money and other people's money into a, a fractionalized position on a loan. I'm thinking of the, the movie theater and, and what was it, Monroe, right?

 

Susan Jensen

02:23:25

Monroe. Yeah.

 

Jonathan Davis

02:23:27

And you know, we, you know, we had to play quarterback on that because we went through, you know, we had a, we had a movie theater in a restaurant and we went through Covid and you know, it was shut down. And so how do we, you know, work through this and well sue, you know, did it work out okay?

 

Susan Jensen

02:23:45

Yeah, it worked out great in the end because our agreement, our note it was, we made sure that we were covered with extension fees and late fees. So even though it was months and months, we all made out. Well we just had to be patient.

 

Jonathan Davis

02:24:02

Yeah. I mean that's, that's the thing. Yeah. You, you, you, you, you'll make mo you know, tip, you know, when you have someone that can handle these things and you know, and favorable outcomes, you know, happen all the time. But you, you will make more than you ever thought you were gonna make when you initially got into the loan. It's just gonna take a little bit longer. That's, that's the trade off.

 

Susan Jensen

02:24:22

And we're work and you guys are working on one right now with Dewey out in Oregon. Same thing. Yep. Just months of no payments. But you've just gotta be patient and because you guys are competent, you know what you're doing and you've got good attorneys in the end it'll be great. It's just, we all wanna get our principal back.

 

Bill Fairman

02:24:42

Would you mind telling my wife that I'm competent? Yeah. My my my point to all this Al, is that someone has to be in charge. If it's not a third party, it needs to be one of the people that's invested in the loan. Right. Because you can't have everybody making different decisions. If you can't get a consensus, then that person that wants to go a different direction needs to buy the others out. Right. And then they can take it over. So those are the only things you need to look out for. Everybody needs to be like-minded and understanding that everybody just wants to get the, the return on their investment.

 

Jonathan Davis

02:25:20

Yeah. And if you wanna avoid any issues like that, if you, if you wanna be a little more savvy, you can do inner creditor agreements when you do loans like this where it outlines all of that for you.

 

Bill Fairman

02:25:31

Yeah. Who, who makes the final decisions, that kind of stuff. Yeah. Awesome. So thank you so much for being a part of the show. If we have anyone that would like to get in touch with you and pick your brain a little bit more or maybe you want to get in on a deal with you, how can they get ahold of you?

 

Susan Jensen

02:25:51

Yeah, they could email me at Susan Jensen 97 gmail.com.

 

Bill Fairman

02:25:56

Excellent. We got it right here in the screen and we will have it over there on the comments section as well.

 

Jonathan Davis

02:26:02

Yeah, like I said, she's been doing this for over 10 years. There's a lot of experience there, a lot of lessons learned. So a lot of good

 

Bill Fairman

02:26:09

Stuff. You know, I remember when you had a few accounts with Equity trust and you met a guy in equity trust who you know, right after 2008 all the banks dried up with their lines of credit for buy here, pay here, car dealerships, remember. And that guy was using his IRA to do little lines of credit for those car dealerships so they could buy cars, you know, wholesale and then as they're selling 'em off the lots, they, he would charge a release fee of the title and then he was getting 18% interest on his, on his small little lines of credit. Yeah, I remember that. I thought that was

 

Susan Jensen

02:26:50

An awesome way. Yeah, glad about that. I remember that now.

 

Bill Fairman

02:26:53

Yeah, it's funny, it was your group and I'm the one that remembered it. It just stuck out with me that I thought it was a really innovative way to put Yeah, put his IRA to work. But, but you have to understand how all that works and it is, you know, almost a full-time gig doing it anyway,

 

Susan Jensen

02:27:12

So yeah, I love being around smart people and just learning from smart people cuz there's just so much you can learn in this business.

 

Bill Fairman

02:27:22

So I, I don't know if you saw that or not, but Tracy Z is on the comment section saying hello and that you're doing a great job. Yep.

 

Susan Jensen

02:27:30

Hey Tracy.

 

Bill Fairman

02:27:31

Hey Tracy. All right, now we're gonna have to wrap this up, Sue. Thanks again folks. Thank you so much for joining us on the Real Estate Investor Show Hard Money for Real Estate Investors. We are Carolina Capital Management. Did I say something wrong?

 

Jonathan Davis

02:27:48

No, I was just, Oh, I don't know, it just tickled me. We,

 

Bill Fairman

02:27:52

We are private lenders in the Southeast for real estate professionals. If you want us to take a look at one of your projects, go to carolina hard money.com, click on the apply now tab. If you are a passive investor looking for passive returns, go to the accredited investor tab. Don't forget the like share, subscribe, hit the bell and Wednesdays with Wendy. She's gonna, she's gonna hate that picture.

 

Jonathan Davis

02:28:22

That's an old one.

 

Bill Fairman

02:28:23

Yeah, don't, don't put that picture back up. Anyway, Wendy is going to be speaking at some events coming up. I think we got some names and we'll put links in the comment section after the show closes out. Let's look at the first one perhaps. Okay.

 

Jonathan Davis

02:28:51

The

 

Bill Fairman

02:28:52

Fear message that that one is actually today. So you're gonna be late.

 

Jonathan Davis

02:28:56

Yeah, that's in or Yeah, that Orlando, she flew down there.

 

Bill Fairman

02:28:58

Yeah. And here might be another one and Real estate invest her. I don't know exactly when that's coming up, but we'll have all that in. Do we have two more? Okay.

 

Jonathan Davis

02:29:21

I hope,

 

Bill Fairman

02:29:22

I hope you wrote all that down.

 

Jonathan Davis

02:29:24

Quest gone. But yeah, we will put all the links.

 

Bill Fairman

02:29:26

I'll have it all into

 

Jonathan Davis

02:29:27

Yeah,

 

Bill Fairman

02:29:33

I didn't know we had a millionaires panel in the upstate

 

Jonathan Davis

02:29:35

Man. We have a lot going on. That's right.

 

Bill Fairman

02:29:37

Sure. Good about all that. Okay, I think we're done. You guys have a great week. We'll see you next week