Passive Income, Active Wealth - Hard Money for Real Estate Investing
Passive Income, Active Wealth Podcast starring Wendy Sweet, Jonathan Davis and Bill Fairman. Founders of Carolina Capital Management., LLC in Rock Hill SC. Wendy & Bill have a passion for educating and sharing their 25+ years of investing and lending experience! Both are regularly asked to speak at National Real Estate events and always come away as a crowd favorite. 100% Content!! The Most Trusted Voice in Hard MOney
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251 Plans & Goals For 2023: Real Estate Investor Show - Hard Money For Real Estate Investors
12/20/2022
251 Plans & Goals For 2023: Real Estate Investor Show - Hard Money For Real Estate Investors
Bill Fairman (00:01): Hi, folks. This is the time of the year that you hate. It's called Setting Your Goals for 2023. We're gonna have more about that right after this. (00:33): Thank you for joining us on the Real Estate Investor channel, hard Money for Real Estate Investors. We are Carolina Capital Management private lenders in the Southeast for real estate professionals. If you have a project you'd like us to take a look at, 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. Oh, and you must click it as well. Don't forget the like, share. So subscribe. Hit the bell, sit there and look at it. <laugh>, don't forget, Wednesdays with Wendy. Wendy sets aside 30 minutes per person to talk about anything real estate related. On Wednesdays, there's a link to get on her calendar. She's typically booked up pretty far in advance, so get in while the giddings. Good. Wendy Sweet (01:36): <laugh> excuse me. So Wendy, you had the Quest Con thing, and I'm pausing, I feel like the president when I'm reading a speech pause here, (01:59): <laugh>. Bill Fairman (02:01): So tell us about it. How'd it go? Wendy Sweet (02:04): It was a great, it, the whole event was incredible, but the panel was terrific. I was just so honored to be with the two panelists that I was on there with, that their, their brains are incredible. What was really cool is that were all three lenders and we all three underwrite a little bit differently. And, and that's really what we talked about were the, the different things that we look at. So you can still buy a recording from that event, so it's worth it. If, if you do that, it's well worth it. Bill Fairman (02:40): Is there a URL that you know of where people can Wendy Sweet (02:43): I'm sure there is one, but No, I don't know of it. But if you get on Quest Con Live 2022 on the, of course the internet Googles it, as we say. Well, Bill Fairman (02:56): I'm, I'm pretty sure it'll materialize Jonathan Davis (02:58): In our comment section. Wendy Sweet (03:00): That's exactly right. <laugh>. But that'll, and, and then you can buy it at a discount too with Carolina 15, I believe is what we had that I'm sorry, Bill Fairman (03:11): I said sweet. Yeah, Wendy Sweet (03:12): That's Bill Fairman (03:13): Me, Wendy Sweet (03:13): Not you. Sweet <laugh>. Well, I, you know, it, it pains me to see you guys with that background of, you know, the beautiful Bill Fairman (03:23): Tropical, tropical Wendy Sweet (03:24): Plant. Sure. Yeah. It's cold here. Jonathan Davis (03:27): It was, it was really tough to set out there this morning. Wendy Sweet (03:32): I feel bad for you Jonathan Davis (03:32): Guys barefoot while, you know, the sun, you know, was just beaming over the water. Wendy Sweet (03:38): Just amazing how you guys constantly just take it for the team. Bill Fairman (03:41): <laugh>, Wendy Sweet (03:42): <laugh>, Bill Fairman (03:42): Those who don't know, we're in Fort Lauderdale at the family office event. Yeah. It's called the Family Office Club. There's ultra high net worth individuals office here. Yeah. there's institutional investors as well as people that are trying to raise capital and people who are trying to deploy it. Jonathan Davis (04:01): One of the great things, if, if you are interested in learning how to talk to or approach family offices, this is a great event because there's many panels with the, the managing partners of those family offices, setting there, telling you what they're looking for and how they look at things. So it can give you an insight into how to approach a family office, which is, which is is a great resource for a lot of people when you're looking f to, you know, a little bit more than buying or selling one or two loans, you know, kind of scaling. Bill Fairman (04:35): Yeah. Quick tip. One pager and a one liner on what you do. They don't wanna see a whole blown out email your slide deck and all that. They're not gonna look at it to get inundated with stuff. Wendy Sweet (04:46): Awesome. To explain just for a quick second, what a family office is, because many people may not know. Jonathan Davis (04:53): Yeah. Family office is just it's a aggregation of family a family or multiple families. and they typically have a minimum of 10 million net worth. Wendy Sweet (05:07): well jump change. Jonathan Davis (05:08): Most of them are probably closer to the a hundred million plus smart, but minimum of 10 million to kind of make the metrics work to start a family office. And it basically just helps you propel your wealth forward through multiple generations so that you can create a legacy. I mean, that's really it. Bill Fairman (05:29): Well, most, most people that are in a family office or at start one, they want the money to last at least five generations. Mm-hmm. <affirmative> and unfortunately ultra net, high net worth families tend to run outta money in three <laugh>. So it takes planning, Jonathan Davis (05:52): A lot of planning, a lot of money, but yeah, no, it's, it's great to, to be here. we've enjoyed a lot of the connections and conversations and, and really the insights, I mean, on how to capital raise and how these, you know, we, we sat in on a panel with six different family office members, and they were judging and rating the one liners and the one pagers that were submitted. And it's so, you know, it's so interesting because you would get ranged from, oh, a scale of one to 10. Someone would give it a three, another person would give it a nine. Huh. And it's, and it's, and it's because it's just knowing who you're talking to because like, a family office isn't a family office isn't a family office, they're all different and they're all looking for different things. So it's just knowing who you are, knowing your voice and setting it for that. and, you know, that's, that's really it. And just being clear and concise. Yeah. Like Yeah. Oh, a one-liner should be a one-liner, not a one paragraph or <laugh>. Bill Fairman (06:50): It was funny, they were judging this one that took up the whole freaking slide and it was supposed to be a one line. Yeah. And it just went on and on and on. And the, the guy's holding up a three, he goes, yeah, you could have stopped after the first four words. Jonathan Davis (07:06): <laugh>. Yeah. So it's, it's, it's been insightful. So really good, you know, and the weather makes it a little more enjoyable. Yeah. Wendy Sweet (07:14): <laugh> four guys. Bill Fairman (07:15): Yeah. Here's how I suffered. I had to come here and get into a t-shirt because I had already soaked through my dress shirt. Had to take off my sport coat because it was so hot walking over here. <laugh>. Wow. Yeah. Isn't that awful? Yeah. Wendy Sweet (07:28): That really is. Jonathan Davis (07:30): Well, and to, to segue this, you know, a little bit into what we're talking about goals. So one of our goals is to, you know, partner up or source more capital from mult or from family offices. So that's why we're here to learn how, you know, how they think, what they're looking for. Right. Because that's part of our long-term goal. Bill Fairman (07:50): Right. Right. Good, good segue. Yeah. All right. Before we get started with goal setting, however, we do have a little bit breaking news talk about, and when I say a little bit, I mean a little bit <laugh> haven't been keeping up with the news much this week, but I did see that the consumer price index, CPI and the ppi, that's the producer price index, all came in this week. And I'm not giving you exact numbers, but I can tell you that they were less, a little less than expected mm-hmm. <affirmative>, which is better Wendy Sweet (08:37): Than expected. Bill Fairman (08:38): Yeah. Less inflation than inspect than expected. Right. And it, it's kind of given us an indication that maybe we've kind of hit the, the peak and hopefully it's going down from there. <laugh> Wendy Sweet (08:54): Can only pray fairly, Bill Fairman (08:56): Excuse me, fairly certain that the Fed raised the rate another 50 basis points today mm-hmm. Jonathan Davis (09:05): <affirmative>, and you know, it's not, you know, I, I got a nice little headline. what is it? The, the, the buying sentiment. So people who believe like now is a bad time to buy has reduced, it's reduced from 80% of people think it's a bad time to buy down to 79 Bill Fairman (09:27): <laugh> to buy what? Jonathan Davis (09:29): To buy real estate single family, like they're primary residents. Yeah. Yeah. Bill Fairman (09:34): Well, also it has to depend on people, you know, what are they doing with their next house? Jonathan Davis (09:40): well, yeah. The people who wants to sell, and Bill Fairman (09:42): If they're, if they're moving up or they're having to change jobs and or they don't have any choice if they're changing jobs and they have to move. Yeah. Jonathan Davis (09:50): Well, the, the, the sentiment of selling, the percentage of respondents who said it was a good time to sell increased from 51 to 54%. So 1% people think it's or, you know, there's, you know, better time to buy <laugh> and 3% think it's a better time to sell. So maybe it's starting to move in that in a good direction. Bill Fairman (10:12): I think it's, prices come down a little bit, that'll change, but it, it's really all gonna be reflected in how much can I forward per month. So it really has a lot to do with interest rates. Interest rates come down Jonathan Davis (10:25): $900 more per month is what it costs Bill Fairman (10:28): You. Yeah. So we, we've already proven it doesn't matter how much the house cost, it's how much can I forward a month? Mm-hmm. <affirmative>. Jonathan Davis (10:34): Yeah. Wendy Sweet (10:34): What's, what's the cash flow too? Jonathan Davis (10:36): Well, on the assessment side. Yeah. What's, you know, what's, you know, what's the house produce. Yeah. So, I mean, and that's, you know, we, we, we beat it into the ground all the time, but it's, you know, it's not what you sell the house for. It's what you buy it for. So yeah, there's still good deals out there. You just have to find the right motivated buyers and or Right. Motivated sellers rather. And, you know, apparently there's being a few more of those popping up. Wendy Sweet (11:01): Well, as a matter of fact, I, I've had deals literally dropping in my lap just this past week. and it's just a amazing how it really just flipped and flipped so quickly. That's amazing and exciting. And I mean, and they're deals, they're, Jonathan Davis (11:20): You're getting these from wholesalers who have had, you know, someone fail to close or, or how are, how are you sourcing these, or how are they dropping in your lap? Wendy Sweet (11:27): Well, you know, when you're in the lending business, you kind of hear about deals first. And when people are backing off of them and don't want to buy them, you know, they're wholesalers are just reaching out to anybody else just so they don't lose the contract. Yeah. so, so, you know, a lot of that tends to, tends to occur pretty quickly. but just people, I know, people I've been talking to saying, Hey, if you wanna sell it, I'm interested. And it, it's amazing how that's, how, how it's really changed. Like, I have three of 'em sitting here for, for this week that that I'm pretty excited about. And Don Harris says he's a hundred percent ready either way. I love that. <laugh>. Bill Fairman (12:13): So we, Don's always that way. Wendy Sweet (12:15): Yes, he is. And he is al he's always ready to go and ready to perform. We love Don Harris. Jonathan Davis (12:22): Oh, well. Bill Fairman (12:23): So let's move on into our segment for this week. it's best time of the year when you wanna start setting up your goals. you know, we'll have our annual meeting in January mm-hmm. <affirmative>, but, and each year we, you know, we're setting up goals for the, for the upcoming year and, and you need to do that. Mm-hmm. <affirmative>, I know. It's, it really is a pain. People hate it. Well, most people hate it. There are people that love setting goals. I'm not one of 'em <laugh>. Wendy Sweet (12:55): I like it. Jonathan Davis (12:57): I like it too. Wendy Sweet (12:58): I like having a target. Jonathan Davis (12:59): I mean, so, I mean, I'll, like last, last year when we set the goal of, we wanted to fund 50 million in, in loans, and we set that in, when did we set that? Jan? It was right around January. Mm-hmm. Wendy Sweet (13:13): <affirmative> the beginning. Jonathan Davis (13:14): And we're like, and yeah. Remember, do you remember that meeting? I Wendy Sweet (13:17): Thought you were Jonathan Davis (13:18): Nuts. You, you were like, you, you and everyone else were like, oh, this is crazy. We're not gonna hit, Wendy Sweet (13:22): There's no way. Why are we setting it up so high? Jonathan Davis (13:24): Because the, the, that year prior, we had just closed out at 33 million I think it was. That's right. 3 million. That's right. And they're like, we're, we're not, like, you're not gonna increase by 50%. Come on now. so, you know, it was like, you know, we'll, we'll set it. and then we're closing out this year right. At 80 million. Wendy Sweet (13:42): Yeah. That doesn't suck. Jonathan Davis (13:44): Yeah. Bill Fairman (13:45): So we were sandbagging Wendy Sweet (13:47): <laugh>. Yeah. Jonathan, what were you doing, <laugh>? Well, the thing is, is, you know, and, and we should, you know, we're talking about this, but we should let people know we had an additional stream of income through a long-term product mm-hmm. <affirmative> that we didn't have the previous year. We were actually had just started a previous year, and that's really what we were thinking or what you were thinking when you came up with that 50, 50 million to be funded. So that did occur mm-hmm. <affirmative> and did make a big difference. But the over and above didn't come from that. It came from really a different portion or a different segment of an asset that we really got much more into. And that's the small commercial type loans that we were doing. Jonathan Davis (14:34): So, you know, to, to break it down, we've, you know, we did 30, 33 million last year in total originations. And if we break it out for this year, of that 80 million, 45 million is our short term construction fix and flip, small balance commercial. It's not the, the long term loans that we added. So we almost hit 50 million with just what we do on the short term side. Right. Wendy Sweet (15:05): Right. Jonathan Davis (15:05): Phenomenal. Bill Fairman (15:07): And if rates hadn't gone up in the middle of the year, we had really blown it out of the water. Wendy Sweet (15:11): Yeah. That's, Bill Fairman (15:12): That's it really slowed down that that revenue stream because everybody kind of paused on, you know, longer term stuff Yeah. Thinking it was gonna go down, or I don't know what they're thinking. Jonathan Davis (15:24): <laugh>. Yeah. Well Wendy Sweet (15:25): That's, that's one of the things that a lot of, some of the other companies, other, other hard money lenders or private money lenders are running into that we're depending on those long-term D S C R products to grow. You know, they did really well this past year too. A good majority of them are now out of business because those programs have been pulled. So I mean, that's a great example of, you know, be careful what you're concentrating on. You have to have the multiple streams mm-hmm. <affirmative> of income to be able to, to, to turn that ship when it, when it needs to be turned. And, you know, I'm, I'm very interested in seeing what's gonna happen, especially in the first quarter coming up because it, it, from how it looks to me is we're just actually getting back onto the normal track of what it was two years prior, which is, you know, it's gonna slow down in the winter, the middle of February, light turns back on and things start to sell again. So I'm interested to see if that's the path that we're back on. It appears to be, but you know, our, our site is so short in front of us at this point that it's really a week to week. We don't know what's really gonna go on, but that's kind of what we're planning on. That's what we're hoping on and planning on. Jonathan Davis (16:46): Yeah. Bill Fairman (16:47): And just to make sure that we keep with some additional revenue streams. I run down to the stoplight in front of our office at lunch, and I clean people's windshields. Wendy Sweet (16:57): <laugh> got that big cup that says raising funds, <laugh>, we'll work for Food <laugh>. Bill Fairman (17:05): We're, we're trying to grow that part of the business. <laugh>. Jonathan Davis (17:09): Yeah. I mean, but you know, part of, you know, our goal setting and part of our, just our overall goal is that we want to be as much as we can be in control of our destiny and in control of the returns to our investors. now, you know, Wendy alluded, you know, these people who are going out of business on these DSCR R loans and other, other brokering, they're dependent on somebody else to say yes or to, you know, here's the funding, here's your line of credit, what have you, you know, warehouse facility, whatever it is. when you, like, for us, when we run it through a a fund model, we are in control of those funds and how they're allocated out, which also allows us to control the returns back to our investors. So, you know, while these people are dropping on the D S C R programs and either other, other short term programs, we're still able to keep moving forward lending and while also getting outsized double digit returns to our investors. Wendy Sweet (18:17): Right. Jonathan Davis (18:18): So it, like, that's one of our goals and always has been. And that goal has, and I think a lot of people's eyes made us s kept us smaller than other people. Mm-hmm. <affirmative>. Mm-hmm. Wendy Sweet (18:32): <affirmative>. Jonathan Davis (18:33): But right now, I'd rather be smaller. I Wendy Sweet (18:35): Smaller and solid <laugh>. That's, that's the key. You know, the other thing too that I think will pertain to a lot of people that are listening is, you know, not only only are we pretty vanilla in our lending category, but but solid in that. But personally, our, our personal investments with the self-storage mm-hmm. <affirmative> and single family long-term rentals are, you know, we've been building that as well. you know, all of us individually, whether it's 30, 60, 90 days or long term or, or you know, Airbnb, whatever, whatever those models are, and we do all of those. it's, it's important too that we stay diverse in that market as well because you have to jump from what's hot to what's not Jonathan Davis (19:33): Mm-hmm. <affirmative>. Well, and you have to, you have to be able to move, but all within the scope of what you're, of, of your expertise and your lending, you don't want to just be jumping from place to place. you know what, what Wendy's saying...
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250 Issues & Anomalies: How To Figure Your Daily Challenges | Hard Money for Real Estate Investors
12/16/2022
250 Issues & Anomalies: How To Figure Your Daily Challenges | Hard Money for Real Estate Investors
Bill Fairman (): Greetings, everyone. We are live. Thank you for joining us. Wendy will not be with us today. She is currently at, I don't know, 30,000 feet on, on an airplane. So we're gonna talk about the year end review, even though the year isn't over with yet, but I don't know what much more will transpire between now and the first. So we're gonna, I'm do a, I'm, we're in a review today and we'll get to that right after. It's funny, that graphic we're showing the, the passive income gang. Yeah. With all the money flying. I'm going, that looks kinda active to me. <Laugh>, Jonathan Davis (): He makes so much money passively, he just actively throws it away. Is that what Yeah, I guess that's Bill Fairman (): The, so by the way, welcome to the show. We are what is the name of the show? I keep forgetting? It's real estate. Real Estate Investor Show Hard Money for real estate investors. We are Carolina Capital Management private lenders in the Southeast for real estate professionals. If you have a project that you would like us to take a look at, please go to carolina hard money.com. Click on the apply now tab. If you're a passive investor looking for passive returns, we have a place for you as well. Click on the accredited investor tab. Don't forget to like, share, subscribe, hit the bell. And don't forget about Wednesdays with Wendy, since this is Thursday. She's not here. <Laugh>. So Wendy Dev devotes 30 minutes per person on Wednesdays to talk about anything real estate. Yep. She's usually booked up in advance quite a bit. So there's a link to get on her calendar. Jonathan Davis (): Yeah. She's usually a month or two out. Yeah. Bill Fairman (): Yeah. Take advantage of it. Jonathan Davis (): Mm-Hmm. <affirmative>. Absolutely. Well, a month in review, or a month in review, A year in review, that's even worse. But Bill Fairman (): First Jonathan Davis (): Yeah. Bill Fairman (): I always like freaking out our production group. Jonathan Davis (): I love that. Yeah. I mean, we'll, we'll get to the, we'll get to the breaking news in a second. But yeah, I mean, just kind of a, an over overarching cap. Like we Bill Fairman (): Had a lot Jonathan Davis (): Going on this year has been Wow. It's just, you know, Bill Fairman (): Yes. Jonathan Davis (): Not to, you know, the same, the same investor loan that would've captured over 4.1% in January is capturing an 8.7% rate in December. I mean, it's, that's a big swing. Bill Fairman (): Yeah. And if you're, you know, if you bought a piece of property and before you get it finished and then the numbers don't work out for you mm-hmm. <Affirmative> you're gonna have to readjust. Yeah. Obviously. Jonathan Davis (): Yeah. I mean, I think the, you know, if you, you know, $400,000 investment in house, you know, typically, you know, you need about $1,800 of rental income at a three and a half percent rate to cover it. And with the rates jumping where they are, and now you need $2,700 in rents to cover the, the payment Yeah. Rents while increasing didn't increase that much. Right. Bill Fairman (): And they will eventually. But, but do, do you wanna lose money until then? No, you always have to have cash. It has to cash. Even if it's only $200 a month. Jonathan Davis (): Even if it's only $50. I mean something, you know, 200 is better than 50, but Yeah. Don't have a negative cash flow. Yeah. Bill Fairman (): But like I said, in the long run the rents will eventually outpace. Mm-Hmm. And then, you know, at some point rates should come down and then you can refinance and improve that. Jonathan Davis (): I love the certainty of the wood. Should <laugh> makes me not think of that. Never know. What's that phrase? Don't should all over me. Bill Fairman (): Don't shit all over me. It's nice. All right. But before we get to this year end review we have a little bit of breaking news. I a little, oh, the corner. You guys can't see it from here, but we got an emoji of Oh my gosh. What are you talking about, Jonathan Davis (): <Laugh>? Well, so, you know, not necessarily breaking, but you know, it's news nonetheless. What is interesting is the days on market or the inventory market in, in a single family is 1.6 months for October for the prior month, which is almost, Bill Fairman (): That's not even close to normal, Jonathan Davis (): Not even, but for the last five years, that is the lowest days on market for the last five years. Bill Fairman (): Is that nationally? Jonathan Davis (): Yes. Nationally for the last five years. So that even, even with what we're going through, higher interest rates, low, you know, low supply, we still, you know, loans are, houses are still closing and they're closing fast. Bill Fairman (): So as we always say here, a stable market is six months worth of inventory. Mm-Hmm. <affirmative>. And so now we're talking about still less than two months. Yeah. Jonathan Davis (): Yeah. Absolutely. also, you know, you know, just wanna throw out North Carolina, Charlotte, and Raleigh they made it into the top 10 best markets for growth for multifamily and single family. So looks like Raleigh Raleigh came in at nine and Charlotte came in at seven. Wow. Bill Fairman (): Yeah. Well that just goes to show you all the people that are migrating to these parts. Jonathan Davis (): Yeah. And notables, you know, Tampa came in in the top 25. So did Atlanta. And those are also places that we lend in. Yeah. so, you know, we love that. And then, you know, the top five multifamily markets to invest in, just released by, who is it? Yardi, Yardi Matrix. Number one is Atlanta. You know, we get that. But number four, Charlotte. Wow. Yeah. So, you know, even, even with everything going on, you know, it still rounds out the top five for markets to invest in a multi-family. Bill Fairman (): Yeah. I, I lived in Atlanta in the very late seventies and early eighties while I was going to school down there. And I was always told if you can't get a small business off the ground in Atlanta, you'll not be able to get a small business off the ground Jonathan Davis (): Anywhere. That's true. There's a lot of small businesses in Bill Fairman (): Atlanta. Cause it was just a market that even in those high I mean that at that time they were high interest rate. We were in the middle of recession as well. Jonathan Davis (): Yeah. Bill Fairman (): And people were still very optimistic about you know, business growth in the Atlanta market. Mm-Hmm. <affirmative>. And that has really kind of translated into most of the, the southeast, because Yeah. A lot of people are migrating here. You got anything else? Jonathan Davis (): Just, you know, I thought it was interesting. Maybe you all will as well. I did not know exactly how many hours the average renter had to work to pay for their rent. Mm-Hmm. <affirmative> it's 62 hours. Yeah. 62 and a half hours. Bill Fairman (): For the month's rent. Jonathan Davis (): For the month's rent, they have to work 62 and a half hours to, you know, to pay their month's rent, which is now, which that is up six hours more than it was Yeah. Before the pandemic. So, you know, you have to work six more hours to live in the same place. I, I like, you know, equating those things together, it's like what, you know, we, we can say it costs $200 more, but, you know, or it's, you know, you know, we like, you know, we like the expression of time returning time return on effort. You have to work six more hours to stay in the same place. Bill Fairman (): Well, you think about that if you're trying to qualify for a mortgage, your housing expense can't be more than what, 28%? Jonathan Davis (): Yeah. Yeah. 28. Yeah. I think that's right. Bill Fairman (): Brian, if Brian's listening, he'll Jonathan Davis (): Go correct it. Yeah. Bill Fairman (): He'll chime in. But I, I think it's in the 28% range, so mm-hmm. <Affirmative> that's much higher. 62 hours is much higher than what it's gonna be to qualify for a mortgage. Yeah. So rents are going up higher than your affordability for Oh yeah. Buying a home. Jonathan Davis (): Yeah. You know, and they'll say like, rents have, you know, have slowed down. They have the rate of appreciation or arising has, has slowed down, but they still rose seven over 7% year over year for October. Yeah. Which is, you know, yeah. You know, more than average, but, but slowing down. Bill Fairman (): Okay. So let's talk about the, and I'm gonna talk about single family prices first or home appreciation for the year in review. Jonathan Davis (): This is the year in review. <Laugh>, Bill Fairman (): It looks like a heavy metal here in Jonathan Davis (): Review. I love it. I only did that cuz I like to throw bill off. Bill Fairman (): That's okay. It's easy to do. So peak home appreciation hit in June of 2022 at an annualized rate of 20%. Jonathan Davis (): Did you round I think it was 19.8. Bill Fairman (): Yeah, I rounded it. Yeah. 20%. That's incredibly high. And as we always talk about here, unsustainable Jonathan Davis (): <Laugh>, 20% growth. Yeah. Was is unsustainable. Bill Fairman (): So what what's funny, I, I hear a lot of the, the pundits talk about this and how all the markets are overvalued, which they are for the most part. And as the things shake out, they believe that appreciation will drop all the way down to between two and a half and three and a half percent. Jonathan Davis (): You mean to normal, Bill Fairman (): Which is been the normal rate of appreciations. It's the fifties. Jonathan Davis (): It's terrible. It's going to, it's gonna just crash. The market's gonna crash, it's gonna get down back to normal appreciation. Bill Fairman (): 2022, I also saw record energy prices. Jonathan Davis (): That is true. Yeah. Bill Fairman (): Our fuel has gone through the roof, which means that's gonna add pain to everything that we do. Yep. Everything. Jonathan Davis (): Everything. Bill Fairman (): Yep. That's one. I mean, we had inflation because of supply chain, which was, you know, kind of a short term thing. Jonathan Davis (): Yeah. I I didn't, it was supply chain. It had nothing to do with four, you know, what was it trillions of dollars? Was it 4.2 trillion being printed? Well, that didn't help. Bill Fairman (): Yeah. But I mean, we did have inflation because we, we had a lot of people demanding stuff. We couldn't get it. Yeah. So if you could get it, you were gonna pay more for it. Jonathan Davis (): Sure. But you had 4 trillion more dollars. Bill Fairman (): No, I, I get all that. I'm not saying that's not the only thing, but that would've been temporary. But the, the cost of energy going up keeps it going even longer. Yeah. And then the Fed, in my opinion, it's not the rates that were so low that caused a lot of this and then the free money that the government was giving out, but the balance sheet of the Fed mm-hmm. <Affirmative>. I just wanna, they weren't reigning that Jonathan Davis (): In. Just wanna point out, bill said, you know, the free money that the government was handing out, as you all know now, there is no such thing as free money. You're feeling, everyone's been feeling for how long? Yeah. Bill Fairman (): It's free to some people. <Laugh> Jonathan Davis (): Not to us. Yeah. Bill Fairman (): And here's another thing that's been kind of an issue. We have the lowest employment participation rate since the oh eight crash. Jonathan Davis (): Yeah. Bill Fairman (): And that's also causing inflation, but it's, it's more of a employment inflation because you're, you have a shortage of of workers. Yep. And so you have to pay more to get 'em there. And then a lot of them are, you know, playing that off and just going from one place to another. Jonathan Davis (): <Laugh> mm-hmm. Bill Fairman (): <Affirmative>. Jonathan Davis (): And, you know, you, you know, record energy prices you brought up. And it's not just here, it's in Europe and everywhere abroad. But I thought it was notable. I remember mentioning this way back after, you know, right after the pandemic. Do you, do you all remember what the first business or first thing that Warren Buffet bought coming outta the pandemic? Bill Fairman (): Oh, Jonathan Davis (): An energy company. Oh, no. Smart guy. Bill Fairman (): Yeah. That's why he was the, what do they call him? The something of Omaha, the, Jonathan Davis (): Oh, I don't know. Bill Fairman (): No. Anyway, something important of Omaha. The Oracle. Jonathan Davis (): The Bill Fairman (): Oracle. The Oracle of Jonathan Davis (): Omaha. I had no sir Dam in my head. I couldn't, couldn't get Bill Fairman (): It out. Yeah. No, he, he's a smart guy. <Affirmative>, let's go to how things have changed. So 2020 OB or 2021, we obviously had inventory issues with single family housing. Yeah. So in, in order to keep up with that change a lot of investors started moving into smaller and multifamily and self storage. Yep. Those are two property types that are still recession resistant. Sure. the multifamily, you still have to have a place to live mm-hmm. <Affirmative>. And while the, you know, the zero, there's a few more zeros on 'em, there's still great investment opportunities. Yeah. so what do you think about that? From an investor's perspective? People get a little concerned about the extra zeros that makes them a little afraid. It makes, it's easier to do the single family homes because it makes you feel better. You can get rid of one. If you run into trouble, if you have an apartment complex or a self storage facility you're dealing in a lot higher dollar amounts and people get a little nervous about that. Jonathan Davis (): Oh, that's true. You know, there's a whole lot of different ways to look at it. So we, we know that in like sales and cap rates, multifamily was the big winner in 2021. Mm-Hmm. <affirmative>. And it looked like in 2022 for the first half of the year, they were going to be as well. And then, you know, then the interest rates and inflation and everything happened. But with single family, you are tied solely to the conditions of the market to that ebb and flow, to demand supply interest rates. You are tied solely to those things. And there's not much you can do to increase your value beyond market. You know, unless there's just, you know, no supply. And, and then we've seen that what's, you know, 20% appreciation in multifamily. While there are more zeros, you have more control. And you can, you know, with the rising or rising rents, you know, rents are, are, are rising. (): So you can increase your net operating income. And that is based off of the capitalization rate of whatever the market is in that area. We know how much demand is. But you know, you're kind of stuck with that. And so now what do you do? Well, you can create a shared laundry room where you create additional, you know, income or you can create other avenues of income for this property or, or take away expenses from the property and you can, and you can inflate or deflate that price or that value accordingly. So it just gives you a little more control. So we're still seeing multi-family selling. Not like it was, you know, six months ago and definitely not like it was a year ago. You know, October, November and December of last year. I mean, we saw record sales and multi-family. The interest rates are, you know, are hurting a bit of that cuz you know, you have to buy in at a much lower operating capitalization rate, which just means how much you're gonna make off of it. (): So that's really compressing the market for a lot of people. Those additional zeros. Most people kind of get around that additional risk factor by bringing other people in, whether it's equity investors or partners in the llc, what have you to kind of share that risk across the board. Which you don't really, you see it in single family, but the, the, you know, to buy a hundred thousand dollars house or a million dollar multi-family, I mean, you know, you can, you can make the risk more palatable on a hundred thousand. You can a million for one person. Yeah. Bill Fairman (): There. And there's differences in commercial financing. It finances differently in a lot of cases. You can't get 30 year fixed rate. You have to go to more of a a on multifamily 20. I mean there are some available, it's not, Jonathan Davis (): We do 30 year fixed on multifamily. Bill Fairman (): The way to value of property is based on the income that it receives. Mm-Hmm. <affirmative>, you can add value to the property, raise rents and then, or lower expenses or a combination of the two. Mm-Hmm. <affirmative> and you will add value to the property, which is not gonna happen on a single family home. No. It's just gonna go based on what home down the street sold for. Jonathan Davis (): Exactly. Exactly. Bill Fairman (): So there's a lot more you can do with those that you can with a single family home. That said, if you need to move it quick, single family homes are the most liquid Jonathan Davis (): <Laugh>. That's true. There are more buyers in that. And it's, it's a faster move. It's a, yeah. Bill Fairman (): It's Jonathan Davis (): Easier financing, lower due diligence period. You know, all those things. Yeah. Wendell asked, will appreciation go below inflation? Well, I like that you didn't put a time period on that, so I'm gonna say yes. Bill Fairman (): Well, the numbers for appreciation will go be below the current inflation rate, but I don't know if they go below the inflation rate at the time they, they drop down to the lower single digits. Jonathan Davis (): Say that again to me. I'm not sure. I Bill Fairman (): Don't know that we'll have high, that high of inflation when I'm expecting appreciation at some point to be in the five to six range. Yeah. We may not have inflation at five or 6% when that occurs. Well, we could, but that's okay. It, it's Jonathan Davis (): Are you saying it be above or Bill Fairman (): Below? But what I'm saying is inflation may be in the fours when we have appreciation in the sixes, but it could be that it goes into the threes and we still have inflation in the sixes. Jonathan Davis (): Mm-Hmm. <affirmative>, Bill Fairman (): It's not gonna stay that way for long. Jonathan Davis (): Yeah. Bill Fairman (): It will eventually bottom out. And again, if, if the homes appreciation rate, if you're buying single family homes for rental, it doesn't matter because it's about the cash Jonathan Davis (): Flow. It's about the cash flow and what you bought in at. Bill Fairman (): Yeah. And you know, and Wendell, you already know this, the house does not care what it's worth. Mm-Hmm. <affirmative>, it depends on the income that's coming in. It's all about the money coming Jonathan Davis (): In. But yeah, I mean, in short, yes. Appreciation will go below inflation. I mean, you know, they ebb and flow as Wendell knows. That was a great question. Bill Fairman (): Yeah, that was awesome Jonathan Davis (): Question. But, you know, win win is always, it's, it's not, you know, it's not really if it's, you know, it's win and no one really...
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249 Your 2022 In Review! Real Estate Investor Show - Hard Money for Real Estate Investors
12/05/2022
249 Your 2022 In Review! Real Estate Investor Show - Hard Money for Real Estate Investors
Your 2022 In Review! Visit our website: Join Bill Fairman, Wendy Sweet, and Jonathan Davis, LIVE! every Thursday at 12 pm ET for the Real Estate Investor Show - Hard Money For Real Estate Investors! As 2022 is nearing its end, the Carolina Capital Management team takes a look back at the relevant real estate events that occurred this year. What have you learned and accomplished this year? What are the preparations you need to look out for in order to survive the ever-unpredictable real estate market? Be up to date, be informed. Be educated. Learn the numbers and data. Discover the best niches of the real estate business where you should invest.
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248 Today's Market and the Non-QM Loan | REI Show - Hard Money For Real Estate Investors
11/18/2022
248 Today's Market and the Non-QM Loan | REI Show - Hard Money For Real Estate Investors
Today's Market and the Non-QM Loan Join the Carolina Capital Management team LIVE every Thursday at 12 pm ET for the Real Estate Investor Show - Hard Money For Real Estate Investors! This week, Bill Fairman, Wendy Sweet, and Jonathan Davis are joined by Bryan Maddex of AmeriFirst Home Mortgage to discuss Non-Qualified Mortgage Loans! With over 20 years in the financial industry, Bryan used his experience and insight to help get financing and loan products for his clients, many of whom are first-time homebuyers and real estate investors. One of his top priorities is providing consistent and frequent communication. His team ensures that the buyer knows exactly where they are in the mortgage process, as well as their agent and listing agent. Amerifirst works with many clients who have not been successful in getting loan approvals from other lenders. They take the time to educate their clients on overcoming prior obstacles to achieve success as they navigate the steps to homeownership, including the pre-approval process. It is not unusual for Bryan to work with his customers for a year or more to help them get their credit mortgage ready, and for him, it is especially gratifying to share in his client's joy on closing day. Amerifirst offers a full line of flexible loan products including FHA, VA, USDA Rural Development, renovation, and conventional mortgages. They also offer a range of non-traditional products such as Investor Cash Flow Loans and Bank Statement Loans. Bryan is proud that his Amerifirst team includes his wife, father, and brother, and they feel truly blessed to be able to serve their clients as a family.
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247 Market Updates & DSCR Loans | REI Show - Hard Money For Real Estate Investors
11/18/2022
247 Market Updates & DSCR Loans | REI Show - Hard Money For Real Estate Investors
Join Bill Fairman, Wendy Sweet, and Jonathan Davis LIVE! every Thursday at 12:00 PM ET for the Real Estate Investor Show - Hard Money For Real Estate Investors! Brett Sims, the Head of Growth of Renovo Financial, joins the Carolina Capital Management team to talk about the current market updates, especially the DSCR loans. Renovo Financial: Their story begins in 2011, at the Starbucks on Sheffield and Armitage in Chicago’s Lincoln Park neighborhood. It’s here where Co-Founders Kevin Werner and Daniel Rosen met to discuss founding a new real estate investment company. But this company would be different. They wouldn’t simply throw money at clients and expect them to figure out the rest. No, they would take the time to assist their clients through the entire process, never sacrificing service to make a quick buck. With the help of Granite Creek Capital Partners, the initial equity firm that back Kevin and Daniel, they were ready to start growing their new company, Renovo Financial. With support from Granite Creek and caffeine in their system, Kevin and Daniel began slowly and carefully lending in Chicago and building their team of rockstar real estate lenders. For the first five or six years, they focused solely on the city of Chicago. Today, however, Renovo is rapidly expanding across the country with local lenders in more than 10 markets stretching from San Diego to Boston.
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246 - How To Raise Capital | REI Show - Hard Money For Real Estate Investor
11/04/2022
246 - How To Raise Capital | REI Show - Hard Money For Real Estate Investor
00:00:01 Greetings, everyone. Welcome to the show. We are going to talk about capital raising and why it's important to your deals right after this. Wendy Sweet 00:00:34 That's funny. That's like a so funny when you see people on the news doing a news set and they say something and they just wait for stuff to happen and they wait for stuff to happen, it's, Bill Fairman 00:00:45 Well, just so you guys know, half of our, our crew is in another country, so it's occasionally there. Wendy Sweet 00:00:52 Two different countries. Bill Fairman 00:00:53 Yeah. There, there's occasionally a little bit of lag time when we talk. So that's, that's really it. Wendy Sweet 00:01:00 So the whole show's coming from three different countries. That's true. Actually. That's pretty Bill Fairman 00:01:03 Cool. And technology amazing. It anyway is, 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 for real estate investors in the Southeast. 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, then click on the accredited investor tab. Don't forget the like, share, subscribe, Hit the bell. And don't forget about Wednesdays with her. Wendy Sweet 00:01:38 Woohoo. Awesome. Bill Fairman 00:01:46 Wendy devotes like 30 minutes per person, right? Wendy Sweet 00:01:50 Yep. Bill Fairman 00:01:51 Every Wednesday, but she's booked out a couple of months in advance, so get on her calendar Wendy Sweet 00:01:57 That, And I actually got this idea from our guest that's coming on. Bill Fairman 00:02:01 That's right. It was Tuesdays with Jeff, Wendy Sweet 00:02:05 Whatever, whatever day anybody could get in with Jeff that, that's the big thing. Bill Fairman 00:02:09 So, So anyway, the link is right there and also in our comment section, which is on the right side of your screen or underneath, depending on the platform you're viewing us from. Anything else to add? Wendy Sweet 00:02:21 Well, I just want to say this, you know, we always talk about, you know, if you're interested in passive investing to go in and, and click on our pass our investor tab. But I, we've got some bragging rights. We've, we've had, we've had a phenomenal year. Our trailing 36 month is really good, but I, I mean our, our last quarter we were at 10.76 Bill Fairman 00:02:46 And this is not a solicitation for selling of any type of security. Do your due diligence, your mileage may vary, blah, blah, blah Wendy Sweet 00:02:56 Ppm. Yes, it's very important to do that. But we need to, I mean we need to talk that, cuz it's been, it's been really great. It's been over, well over 10 for the Bill Fairman 00:03:04 Year. The, the real estate business. While it sounds like it's really going downhill, if you listen to the news, it's still way outperforming the Wendy Sweet 00:03:13 Stock market and it's adjusting to normal. Yeah. Which is really nice. We, we all need a little normal. Bill Fairman 00:03:19 All right, real quick, some breaking news. Good Lord. Wendy Sweet 00:03:42 It, So now the news isn't breaking anymore. It's, it's old already. Bill Fairman 00:03:46 It's, it's old news now. So the Fed raised the rate another 75 basis points. Wendy Sweet 00:03:55 That's right. Bill Fairman 00:03:56 It's like there's, it's like 3% height now since they started, or at least close to it. Wendy Sweet 00:04:02 I can't wait to hear Brian Maddox talk about it tomorrow on our sunrises meeting that we have every Friday morning at 7:30 AM Bill Fairman 00:04:10 Yeah. And I'm sure we'll have a link to that over here in the comment section Wendy Sweet 00:04:13 As well. Yeah, yeah. It's, we, we'll talk in depth about that. That's, that's good stuff. Bill Fairman 00:04:17 Yeah. There it is right here. Wendy Sweet 00:04:18 Yeah. Awesome. Bill Fairman 00:04:19 Sweet. Thank you. Sha Wendy Sweet 00:04:21 We, we also know that when the Feds hike the rates like that, that it really isn't your mortgage rates that are going up 0.75. A lot of people assume that it's completely correlated and it is attached a little bit, but really Bill Fairman 00:04:40 Historically, the Fed is always chasing the market, right? Wendy Sweet 00:04:43 That's right. Bill Fairman 00:04:44 If you, if you, well, you have to know people that have the graphs, but they're always behind the curve. Yeah, Wendy Sweet 00:04:51 Always. Yeah, for sure. Bill Fairman 00:04:53 They're trying to destroy the housing market and they're working on it pretty well. Yeah, Wendy Sweet 00:05:01 We're not gonna let 'em do that Bill Fairman 00:05:02 Though. What Wendy Sweet 00:05:04 Else? So I was reading this morning on a newsletter that I follow called Essa, S T E S S A. They always have some good information, but they were really talking about the rent and apartment complexes versus single family residential, which I thought was really, really interesting. You know, apartment apartments have been going up and up. The rents for apartments have been going up and up. The vacancies have been going lower and lower, which it's been very, very strong and it will continue to remain strong. However, what we're seeing is that one and two bedroom apartments are for the first time in a very long time going down in price, which I thought was really interesting. And you brought up, because people are getting roommates to, to Bill Fairman 00:05:59 Probably having higher vacancy rates. So they're bringing their rates down a little bit. Yeah. Try and fill 'em, but it's because people can't afford to live on their own Wendy Sweet 00:06:07 Anymore. Yeah, yeah. But the whole point of that article is really to talk about single family rentals and how strong the rent is for a single family home. And, you know, it's a great day to be in the buy and hold business. It's always a great day to be in the buy and hold or the build and hold business. It's, it's, Bill Fairman 00:06:32 But it happens. If you can't afford mortgage payments, you have to rent. You Wendy Sweet 00:06:36 Get cold. Bill Fairman 00:06:37 Yeah. You have to rent. Yeah. So there you go. For sure. Or if you can't buy a house, you can rent one until the rates come down. That's right. Wendy Sweet 00:06:44 Right. That's exactly right. Bill Fairman 00:06:46 Or you can find one with a lease to own kinda deal as well. Wendy Sweet 00:06:49 That's exactly right. Bill Fairman 00:06:50 All right. So enough Gibber, Joe. Wendy Sweet 00:06:52 Well, I wanna talk about, just a quick point too, for the sunrises for our meeting on sunrises. Tomorrow at seven 30 is on Zoom and that link is right there in in the chat box. We are going to be talking about subject to real in, in real estate, in the real estate business, which is basically taking over a property subject to the financing in place. So I'm really excited about us talking about that Bill Fairman 00:07:20 One thing, that Wendy Sweet 00:07:21 Particular type. Bill Fairman 00:07:22 I have a quick question before we move on. I'm always concerned about how you get the person that has the mortgage to agree to take over that mortgage when they're ultimately responsible for it. Wendy Sweet 00:07:35 Well, you need to turn tune in tomorrow and because that's the topic we're gonna talk about Bill Fairman 00:07:41 For that would be my biggest fear is letting somebody else take over my mortgage, even though I'm the one that's on Wendy Sweet 00:07:47 The Yeah. And there are ways around that. We're definitely gonna gonna talk about that tomorrow. Bill Fairman 00:07:51 It's a great way to do it because you know, obviously you're not gonna take over a, a loan with a high rate. Wendy Sweet 00:07:56 That's right. Not these days. Bill Fairman 00:07:58 That's right. That's Wendy Sweet 00:07:59 Right. Bill Fairman 00:07:59 And they don't have any more non qualifying FHA loan assumptions out there anymore. Wendy Sweet 00:08:04 Nope. Long gone. So folks, we are really, really excited about our guests today. You'll, you may have noticed if you've been watching for the past, what, four weeks? Three weeks? Four weeks. We have been talking about raising capital and raising capital from your financial friends, which could be your family and friends, people that you know, like, and trust. And we really wanted to end this theme with a dear, dear friend of ours, Jeff Johnson, who is the bomb. And he's really, really good at raising capital. That's how he runs his business. So folks, Bill Fairman 00:08:48 And, and by the way, he's also known for packing more than one belt with him when he travels. So thank you for that. Wendy Sweet 00:08:54 Evidently he pulled you out. Bill Fairman 00:08:56 I forgot to pack my belt. Wendy Sweet 00:08:59 So here's our friend Jeff Johnson. Jeff, welcome, welcome to the show my friend. Jeff Johson 00:09:05 Hey guys, how are we doing? Bill Fairman 00:09:07 Great. Wow. You look like you're like doing a reality show. Jeff Johson 00:09:12 Well, this is a house that I just finished and is going on the market tomorrow. Is that right? Tomorrow. Wendy Sweet 00:09:17 Wow. Jeff Johson 00:09:18 Look tonight at that Wendy Sweet 00:09:19 Beautiful, beautiful kitchen. Bill Fairman 00:09:21 That's gorgeous. Jeff Johson 00:09:22 Yep. So there you can get a little, a little vision, a little view of what's going down. Wendy Sweet 00:09:27 That is gorgeous. Okay. Tell us a little bit about, Oh, look at that fireplace. Oh my goodness. Tell us about this house. Where is it? What's the price? What, what's the deal? Jeff Johson 00:09:39 Okay, so this is one of four houses that I built up in Oakhurst, which is 28, 2 5 in Charlotte Bill Fairman 00:09:46 Live there. My first house was in Jeff Johson 00:09:48 Oakhurst. Yeah, yeah, yeah. So I bought a, I bought a lot and you guys saw Shannon, my realtor, actually Shannon helped me get this lot, but bought this lot from the guy. There was a single house on it. We ended up splitting it into four lots. So I built four houses down the, down the road here. And so this is the first one that's going on the market. So let's see, I paid 4 65 for the lot. So what is that? A little over a hundred thousand dollars per building lot. Yeah. Not too bad. Wendy Sweet 01:10:21 Not in that area. Jeff Johson 01:10:23 Yeah. So my build cost in these is right around three 50 I think. So this is a 2,700 square foot house, this one. And this one's going on to market tomorrow or tonight for 7 99 9. So not too bad. Wendy Sweet 01:10:37 Wow. Wow. That is awesome. Okay, I'm so glad you're throwing those numbers out. So Jeff, how did you finance this? What, where'd you get the money? What'd you do to raise it? Tell, tell me about what that looks like. Jeff Johson 01:10:51 Well this, this actually was a combination. So I actually did an partial owner finance. So the lot was 4 65 and the owner actually gave me a $300,000 owner carryback. So I only had to come to the table with 165 grand. Wendy Sweet 01:11:09 Wow. Nice. Jeff Johson 01:11:11 And then he, he subordinated his loan to a bank loan. So I actually was able to do all this construction with a bank loan. But that, you know, that's taken me years to get to that point and build my business to a point where I can go in and get a, you know, $1.5 million loan to build four houses. So. Wendy Sweet 01:11:26 That's awesome. And what kind of a bank is it? Is it a local bank? A a credit union, a regional bank? Jeff Johson 01:11:32 It's a, it's a local bank. Yeah, it's a local bank that I've had a relationship with for probably seven years now. They've financed several homes for me over the years. So we've got a, you know, ongoing relationship. Wendy Sweet 01:11:45 That's awesome. That's awesome. Bill Fairman 01:11:47 You know, you're, you're throwing those numbers out there and I told you my first home was in Oakhurst. I paid 23 5 for a 14 year square foot two story house on Commonwealth Avenue. Jeff Johson 01:12:00 Don't, don't you wish you, I built one on Commonwealth too. Don't you wish you would've kept that? Bill Fairman 01:12:04 Yeah. Oh my gosh, no doubt. Absolutely. Wendy Sweet 01:12:07 He even had his motorcycle in the living room. I remember that. It Bill Fairman 01:12:11 Was never in the living room. It was in the foyer. Jeff Johson 01:12:13 Nice, nice. Wendy Sweet 01:12:16 So are you nervous at all about being in that price range in these dark times that we're living in? Jeff Johson 01:12:26 Well, sure. I mean, everybody's a little bit nervous. I mean, you know, I think part of the problem was, is we all got used to things selling in 35 minutes and now it's kind of back to normal the way it was before Covid. So, yeah, I mean this is, I started my business in oh nine, so I was used to, you know, two months, three months to get something under contract. So this is not something I haven't experienced before, but I think a lot of people who just got started are probably a little bit freaked out because it, you know, they didn't figure in holding onto their properties for three months or six months. They didn't figure that into their costs. Plus, you know, everything got so expensive there for a little while that, that everybody just assumed that they were gonna make their money on the back end. You know, I always say you make your money when you buy the property, just like I did with this property. I made my money when I bought this property. If I'd have paid a million dollars for this, I'd be super nervous. Wendy Sweet 01:13:19 Yeah. Yeah. I actually had a call this morning from someone that we did a loan for. She's still in it eight months into it, you know, the contractor didn't really do a right. She had to let him go. So she's working with a new contractor, but unfortunately her, you know, our appraisal subject to appraisal when she bought it came in at 2 65, 8 months ago. Right. And her agent told her she could easily get a little over 300 for it. So I, you know, I, and, and, and so she's been moving forward in her head, putting her own money out instead. Yeah. Because we're only gonna fund from the numbers we run. And now she's sitting at a place where, you know, she'll be probably getting what the appraisal originally said it would be worth. And she's, she's not gonna make any money on this deal. I mean, that's the difference between somebody new and somebody that's experienced. Jeff Johson 01:14:20 Right. Well I think, I think a lot of what you're seeing is people who, you know, way overpaid because they wanted, they just wanted to keep growing or they wanted to get more property. I actually really, I kind of stopped buying rehab property the last few years because I saw what was happening with the prices and I knew it couldn't last. Wendy Sweet 01:14:39 Right. Jeff Johson 01:14:40 So I sort of tapped out, kept doing new construction and cuz I can add the most value doing new construction. Sure. And there's less unknowns, you know, once I, once I get the foundation outta the ground, there's really not a whole lot of unknowns when it comes to cost. Wendy Sweet 01:14:53 Right. Jeff Johson 01:14:54 So, so Wendy Sweet 01:14:55 Jeff, talk a little bit about really how you started raising funds and what kind of people you were approaching to lend you money. How, how did you get started and all that? Cause I, I think you are just so superb at having a good tool bag full of financing opportunities. Jeff Johson 01:15:23 Well, it's a, I mean it's a, it's a long story but a short story. I mean, I I, I started, you know, rehabbing in oh nine and I was in a, I was actually in a men's group with our church and I used to drag my trailer to the men's group cuz I'd be, you know, that was my Fridays as the days I'd go do my real estate. And I was doing it all with, you know, hard money loans or whatever. And, and one of the guys in my small group said, Hey, what's with the trailer? What are you doing? And I started to explain to 'em and I had just taken a class on borrowing money from people's self-directed IRAs. And so this was a friend from, from my men's group. And so I used all the tools. I just had, I had just learned and said, Hey, you know, if you want to invest with me, you can lend me money from your 401K and I can pay you a return. Jeff Johson 01:16:16 And I think that the stock market had tanked at that point. So he was very unhappy with his stock returns. So I ended up borrowing I think $50,000. We ended up changing his IRA over to his self-directed ira and I ended up borrowing, I think $50,000 from him to help with one of my projects. And then I returned his money and then he said, Well now I have a hundred. So I, I'm, I'll lend you a hundred pretty soon. He, he had basically liquidated his entire regular 401k with his jobs. He worked for Bank of America and, and had put it all in a self-directed RA and, and, and lent me every penny that he had in his retirement account. And he still does. So that was in 2009. So what is it now? 2022. So he is been lending to me for 13 years and I think we've tripled, I've tripled his money since he started as he started lending to me. Wendy Sweet 01:17:08 That's awesome. Now is, is he, are you doing the same kind of deal with him that you did in the beginning or has your, have your ch terms changed Jeff Johson 01:17:19 Any Nope, same exact same exact terms. We haven't changed anything. It's been the same interest rate since day one. I have not changed it one bit. It's, you know, it, in my mind I wanted to give my lenders a return that was good enough that they wouldn't go anywhere else. And that, you know, once we build that trust relationship that they know that, that they're gonna get a great return and they're gonna get their money back to me because what, I don't buy any crappy deals. And then, but I didn't want it to make it too much to where I couldn't actually deploy the capital. Right. You know, I think that's part of the problem is you get a lot of private lenders, they want these crazy interest rates and it's, right now it's almost impossible to deploy the capital, which is as, as expensive as it is to rehab properties and build. I mean, gosh, my build costs went from, for these houses I used to probably maybe $120 a square foot. I'm $175 a square foot. Wendy Sweet 01:18:18 Wow. Wow. Jeff Johson 01:18:20 And that's in two years. Wow. So, so that only took two years for that change to happen. So it's gonna get harder to deploy expensive capital in this market. So Wendy Sweet 01:18:30 Now is, is he lending Yeah. You know, in a secured position or are you, is he just lending to your llc? Jeff Johson 01:18:39 Okay, so he's, right now he's lending us about a million dollars total and he's probably got about half of that inec secured loans. And then the other half is in unsecured, you know, loans to the llc. But one of the things we don't do is just have that money floating around in the Ethereum. We actually have it assigned two properties. So it does have an as it does have assigned property that it is loaned on. Right. But we just don't have a deed to trust on it. Wendy Sweet 01:19:10 Gotcha. So, Gotcha....
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245 Investing With Family & Friends | REI Show - Hard Money for Real Estate Investors
10/31/2022
245 Investing With Family & Friends | REI Show - Hard Money for Real Estate Investors
Bill Fairman 00:00:02 Greetings. It's another week, Wendy Sweet 00:00:05 Ola. Bill Fairman 00:00:06 Lovely time in the, in the city. The big, big city of Rock Hill. South's, right? Carolina, Excuse me. Wendy Sweet 00:00:12 Poor guy. Bill Fairman 00:00:14 Today we're going to talk about investing with family and friends, and we will get to it right after this. Hello win. Thank you for joining us for another episode of Real Estate Investors Show. Wendy Sweet 00:00:45 We forgot the name again. That's what happens when you're over Bill Fairman 00:00:48 Hard money for real estate investors, we are Carolina Capital Management. We are private lenders in the southeast for real estate professionals. If you have a project you would like us to look at, please go to carolina hard money.com and 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 don't forget about Wednesdays with Wendy. So every Wednesday, Wendy gives up 30 minutes of her time to folks that would like to have a real estate conversation. The link to her calendar is over in the chat, which is to the right or underneath your screen, depending on the platform you're viewing us from. She's usually booked up a couple of months in advance, so get on now. Wendy Sweet 00:01:50 Sometimes I just come into the office. Yeah, well that's what happened yesterday. It was awesome. Bill Fairman 00:01:56 So apparently since I don't allow people to talk here much, Wendy has to go out of town to do most of her talking. So we have a few events coming up right after this. Wendy Sweet 00:02:15 Boy, that was quick. Yeah, it's short, Short and sweet. Bill Fairman 00:02:17 So where, where is it? Where are you going? What are Wendy Sweet 00:02:20 You doing? Where's Waldo or where's Wendy? That should be it. Right? So the, I think the first one is actually this Saturday Best Her love that name. It's a great, it really, really is her, how you spell her. That's right. And it's in no confidence in spelling that one on, on the tv. It's, it's gonna be this, they're, they're actually having the event this Friday and Saturday, which is what's, what's the weekend this 29th and 30th? Yeah. Bill Fairman 00:02:51 Yeah. It'd be this weekend Wendy Sweet 00:02:52 Or maybe it's the following weekend. 29th and 30th is this Bill Fairman 00:02:56 Weekend. Halloween is on Monday, correct. Wendy Sweet 00:02:57 Oh gosh. You know what? I forget the days. I, it is the following weekend. Jonathan Davis 00:03:00 We've really prepared for these shows. Wendy Sweet 00:03:02 I have to look at my calendar. I'm sorry. But anyway, it's, it's gonna be really good. It's, it's, it's, it's for invest her, it's for the chicks, but the guys can show up too, cuz you'll be able to learn great stuff. And that's gonna be in Winston Salem. Bill Fairman 00:03:16 You pointing at me personally? Wendy Sweet 00:03:18 Yeah. And then the next one is Bill Fairman 00:03:26 Quest Con. Wendy Sweet 00:03:27 Yeah, Quest Con. So we love Quest Iron Bill Fairman 00:03:30 And this is about the future. So you have to have your crystal ball. Wendy Sweet 00:03:33 That's right. And here's an opportunity for you to save $15 on the event. It is online. They call it a live event because it's gonna be on Zoom Live, but you will be able to get a discounted ticket to get on there. It's, it's gonna be great if you attended the Quest event that just occurred, you know, what was it? A couple, maybe a month ago? Yeah, it was fantastic. Great group of people. Almost a thousand people were there. Yeah, the speaking was incredible and it's gonna be similar to that but online. So I'm really looking forward to it. I don't think they've done one similar to this one. I Bill Fairman 00:04:13 Still want it to be all about me. Wendy Sweet 00:04:14 Yeah. But I'll be speaking on a panel called Be the Bank. Ah, thanks. So that'll be really good. Bill Fairman 00:04:21 And, Wendy Sweet 00:04:23 And Bill Fairman 00:04:23 Do we have any other, Wendy Sweet 00:04:29 Oh yeah, I forgot about that one too. Yeah, Jonathan Davis 00:04:31 No, State Korea Millionaire. Wendy Sweet 00:04:33 The Upstate Korea is, that's upstate, that's the Greenville Spartanburg Real Estate Investor Association meeting. And they do this millionaire panel, but they invited me to be on it anyway. And it's really just talking about how you got started, you know, what's the worst thing that ever happened and, you know, how'd you get out of it. So it's, it's good stories about scars, which I always think is really excellent. Yeah. And then there might be another one. Yeah. Is there another? Jonathan Davis 00:05:06 Nope, don't think so. Wendy Sweet 00:05:08 Nothing that we have online. It's back to your show. I do have a couple more, but we, we'll talk about those later. I, I don't remember the exact, Bill Fairman 00:05:16 You didn't remember the ones we had listed. I Wendy Sweet 00:05:18 Know, I know. Oh, I'm speaking at the Raleigh Real Estate Investor Association tria in January. And I'm, I'm really excited about that too. I think that's the 23rd of January. All Bill Fairman 00:05:28 Right, sweet. So there's a lot going on in the fall and almost early winter. Wendy Sweet 00:05:34 Well, now's the time to learn, get networking, make sure you understand what's going on. Cuz it changes week to week. Jonathan Davis 00:05:41 I wanna, yeah, I wanna rescue a word that I think fell off a little bit after a couple years ago in these unprecedented times. It's really good to plug yourself into local areas and, and masterminds and, and people who are in real estate. Yeah, Bill Fairman 00:05:56 I was kind of, of hoping we had gotten rid of that for a while, but it is coming back. Okay. Little bit of breaking. Okay. This was a nice little headline on, on Fox Business and the headline was that prices, home prices were gonna drop 20% the next year. And this was Alan Shepherdson, which is a Ian. Oh, she, Oh, Alan, yeah, Ian. She, I was confused with the last name. Jonathan Davis 00:06:41 No worries. You want me to read it Bill Fairman 00:06:43 For you? No, Chief economist of Pantheon Microeconomics said in an analyst note published last week that really for the first time since 2001, because interest rates have gone up to 7%, he anticipates that home prices will plunge 15 to 20% next year. So, and I thought about that and first I was a little ill because I thought that was kind of dramatic, but Jonathan Davis 00:07:12 Yeah, well, I mean, get quite clicks, doesn't it? Bill Fairman 00:07:15 No, that's true. And this was actually on the Fox Business channel too, so it was just taken from one of their segments. But I did a little research, and I'm sure Don can attest to this as well, our upcoming guest, by the way, who we haven't mentioned yet. So I've spoiled the surprise You just did. I went and I looked at my home at the peak of 2018. Yeah, 2018, the highest point at 2018. And then I went all the way to what it's valued now, and I reduced that value by 20%. Jonathan Davis 00:07:55 It's still higher than Bill Fairman 00:07:56 20 and it was still 40% higher than it was in 2018. Jonathan Davis 00:08:00 Yeah, that's, that's, that's, yeah, that's not a Bill Fairman 00:08:03 Bad fault. And if I take the five years now, let's say we lose 20%, and I take the five years where it's still up 40%, that's an 8% year appreciation for the last five years, which is Jonathan Davis 00:08:16 Still average, The average Bill Fairman 00:08:16 Appreciation since the fifties has been three and a half. Jonathan Davis 00:08:19 It's almost three Bill Fairman 00:08:20 Times ago. So it's okay to look, listen, there are some people that are gonna feel pain from a 20% reduction, like the person who just bought the house last week Jonathan Davis 00:08:29 And needs to sell. Yeah, Bill Fairman 00:08:30 Right. That said, Jonathan Davis 00:08:33 I'm not sure I subscribed to that, but Bill Fairman 00:08:35 We need to, we need to have a correction because what we had was unsustainable. And even if it does drop 20%, we're still 40% ahead in most, And Jonathan Davis 00:08:44 Of course it has to do with the market. There's yeah, there's too many variables. I mean, Bill Fairman 00:08:47 Like, I'm just saying it's not as bad. Like Jonathan Davis 00:08:50 What we're seeing right now is like the, the lack of inventory is increasing prices, but the rates are, he like, it's, it's like a tug of war right now and they're still appreciating. Yeah, I mean, I think we're between eight and 9% on appreciation still. It, I mean, unless inventory increases or rates, you know, jump to 14%, I mean, yeah, I think you're gonna have to have something a little more extreme than what we're experiencing right now. Wendy Sweet 00:09:18 And that's year over year through the end of September, October. Once we get those numbers out, I think we're gonna see a little difference. But not much. Not a Jonathan Davis 00:09:26 Whole lot. And Brian Max, even if the market does drop, you don't lose money unless you settle. There Wendy Sweet 00:09:30 You go, buddy. Bill Fairman 00:09:33 Excuse me. Or unless you're trying to get a big cash out refi and now you're not getting as much money as you thought. That's right. Anyway, Wendy Sweet 00:09:40 It's getting gone in here. I don't wanna miss out on him. Yeah, I only got Bill Fairman 00:09:43 15 minutes. Okay. So introduce him. Wendy Sweet 00:09:46 I I would love that. So folks, not only is this guy just incredible in his industry, he's a real estate agent. A real estate investor. He Jonathan Davis 00:09:57 Got me out of a problem, Wendy Sweet 00:09:58 A lender. He's a lender as well. He is just a stellar standup human being. And a dear, dear friend, and I just wanna welcome Don Harris to the show. Bill Fairman 01:10:10 Welcome, Don. Don Harris 01:10:17 Hi guys. Good to join you. Bill Fairman 01:10:20 Yeah, you had, you had your own intro video. Jonathan Davis 01:10:24 Hey, you're, you're lucky most people don't get on the show until at least 20 minutes in, so Wendy Sweet 01:10:28 That's right. I had to get Billy to pause. Don Harris 01:10:31 Yeah. Yeah. Well the good thing about that, it doesn't leave much time for me to stumble on myself, so, Jonathan Davis 01:10:37 Oh, don't worry. You know, it's, it's a change of pace you stumble on yourself as opposed to Bill doing it. Don Harris 01:10:44 So, Bill Fairman 01:10:45 So Don, I our, our theme has been this month a couple of things, but we're kind of focusing in on investing with family and friends. I I understand that you're doing investing with your kids, your wife, other, other friends and, and you're, you're you basically helping them with their ira investing through real estate. Can you give us an idea of what it is you're doing with that? Don Harris 01:11:12 Yeah, I'll try to give the Readers Digest version of that. But, but that, that is what we're doing. I'm a real estate agent by day and then I'm an investor by night is typically how I say that. And an investor, I strictly loan money as a private lender. Now sometimes we do that in conjunction with like your company and we partner on a note with you, but most of the time it's family and friends. We have a b a lending opportunity. And so my wife and I, we have six different self-directed IRA accounts and we cobble those accounts together. And in the last two years, my, I've introduced my daughter to this lending as investment in a self-directed ira. And many times she will be involved in our lending as well. Wendy Sweet 01:12:23 Awesome. Now, I've been blessed to be one of your borrowers for my personal investments as well involving your, your wife and your daughter. And what I really, and, and I've been bragging on you to so many other people is what I really love about you is that you don't let your money sit idle in between deals. You have the next one queued up when you know you're about to get paid off on, on on the one you're already in. And h how, how are you keeping up with that? What does that look like for you? Don Harris 01:13:03 That's a great question. It's the same story that Sue was saying last week, that idle money is not working money. And the good thing about investing is lending is that your money's working for you 24 hours a day while I'm sleeping. It's still earning interest. And so I don't like for, I don't like lazy money that's not working. So we are, you know, I network a lot of the same events that you all do and talking to investors who are building new homes or flipping homes or a buy and sell opportunity that you're helping another family with. And so I've always got my feet on the street listening to opportunities and then qualifying the people that I may potentially invest with. And then when they have a transaction, typically I'm being pitched transactions on a pretty regular basis. So if, if the same that I've heard you say, you need to have a kind, a handful of lenders that you work with, especially if you're dealing with private lenders. Don Harris 01:14:19 And then you can use capital, Carolina Capital Management as well to where you've, you're always have access to capital if you're the borrower. If you're the investor. Because if you come to me with a transaction opportunity, I may be a hundred percent loaned out at the, at this particular time you said I try to be, but I also anticipate when a note's going to be paid off. And that's when I start having more conversations with people who are about to close on a deal. And so we just try to time it close to when money's in the self-directed IRA and when money needs meets opportunity. Wendy Sweet 01:15:03 So, you know, there are so many people that wanna do what you're doing, but they have a great fear of how do I really qualify not only the deal, but the person that I'm lending to. What are some of the things that make you say no, Don Harris 01:15:22 No skin in the game. And I would say no experience, but you can overcome ex lack of experience with skin in the game. So if someone's willing to risk a whole lot more than what they're asking me to do than, and the numbers, the metrics of the transaction work, then we can consider that transaction. But it's mostly the character of the folks that you're doing business with. Wendy Sweet 01:15:58 Awesome. You know, that's something that's still important to us with the size of the fund that we're dealing with, the number of borrowers that we're dealing with. Character is still number one for us as well. Don Harris 01:16:12 It's always character number one. And then, then you look at the transaction and you know, it turns out to be repetitive people, right? The good people borrow money, do a transaction, make a lot of money, pay a little bit of interest, and then do it again. And so that, that, that's the majority of our transactions. It's, it's on rents and repeat. And then so have you go ahead here. Here's something else though. When if I don't personally generate a transaction or an opportunity, then I've gone to Carolina Capital Management and asked if you guys have any notes that you would sell, you know, the whole note or part of a note any times I've invested in notes with you guys and that takes capital that is sitting on the shelf and puts it to work, you know, instantly. And that's, that's where somebody who wants to start, that's a great place for somebody without any experience who wants to lend, is to take a piece of a note that you guys may have. Wendy Sweet 01:17:28 Awesome. Thank you for mentioning that. We we love doing that. That's, Jonathan works on that hard. Jonathan Davis 01:17:34 Yeah. And you know, just pointing out one thing, it's, you, you, you mentioned it idle money and like when you combine notes or have deals like you can hold out and try to get that perfect situation where you think you're gonna get 12, 14% or you can put your money to work. Now if you wait three months to find that, that situation, you might find it that's three months of idle money that you weren't making anything. So your 14% isn't 14. That's right. You know, so it, it's getting it working and, and you know, sometimes work, I mean, not sometimes all the time working money is better than not working money. So we completely agree with you on that. Don Harris 01:18:15 And if I can, and what a new investor who wants to, who's just opened a, a self-directed ira, they don't have the experience in lending. They don't know how to qualify a deal yet. They don't know how to qualify a buyer yet. They don't know how to do the paperwork yet. They don't know how to collect the money. They don't know how to even fund the transaction. And so you guys are a good entry ramp into someone who wants to get into that space. Wendy Sweet 01:18:46 Awesome. I have one more question for you and then I'll let other people talk. I am really curious about how you handle any loans that you've done on your own. Like that people are afraid. What happens if I have to take it back? What happens if I lose money? Has that happened to you and how did you handle it? Don Harris 01:19:06 You're, you're starting to sound like my wife now Wendy Sweet 01:19:12 Donna and I are tied. Don Harris 01:19:14 Yeah, yeah. You, you know Donna real, real well actually we don't do a transaction loan unless we do talk about it. And you know, that's always the question. Well what if they don't pay a properly underwritten loan if it doesn't pay and you end up getting the property back either through, through them de it back to you or through a foreclosure action, you should come out whole or okay. And yes, I've had, I've had multiple transactions that have gone backwards over the years and some of those we've made money on, some we've broke even and some we've lost on. And with all types of investing, you cannot be willing to make the gain if you're not willing to take some of the loss. And you just have to be right. Most of the time you're not gonna be right all the time and you mitigate your risk by not putting all of your eggs in one basket. You spread the risk along as many transactions as you can and you know, your underwriting is probably along the same lines as mine. We're looking to be into a, an investment at no more than 65 or 70% of its after repair value. So if you do get a property back then you still should be in, in the property back of what its actual value is. Wendy Sweet 02:20:49 Hmm. Now when you say you've lost money in some deals, can you give us kind of a round percentage of what that investment might have been that you lost? I mean, you, you lose it in the stock market. It's bye bye forever. You lose it on real estate. What, what is a common percentage on something that you may have lost funds on? Don Harris 02:21:14 The most we lost on one was probably 40% and it was a, we just got duped by a repeat person, however. Wow. But we got duped by this person and yet, you know, you learn from it and you moved on from there. Another one early in my lending experience very early on, one of the very first people that we loaned money to, we, we ended up getting the property back. But the, the real problem with the transaction was our paperwork was bad. We got, we got a bad note from our attorney that...
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244 Profitable Small Dollar Lending | REI Show - Hard Money For Real Estate Investors
10/25/2022
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...
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243 Hot Topics In Real Estate: Small Dollar Lending, Investing With Family & Friends, Raising Capital
10/14/2022
243 Hot Topics In Real Estate: Small Dollar Lending, Investing With Family & Friends, Raising Capital
Bill Fairman 00:00:02 Greetings. Hope everyone is doing well. We are actually live with this show. Maybe you didn't know this, but last week's was not live. It was prerecorded because we were all out of town. So we're going to talk about several things today, being a small dollar lender, investing with family and friends, and raising capital. And we'll get to some examples right after this. Hi everyone. Welcome to the Real Estate Investors, Show Hard Money for real estate investors. We are Carolina Capital Management. We are lenders in the southeast for real estate professionals. If you have a project you'd like us to take a look at, go to carolina hard money.com and click on the apply now tab. If you are a passive investor looking for passive returns, then click on the accredited investor tab. Don't forget to like, share, subscribe. Hit the bell. And don't forget about Wednesdays with Wendy. Bill Fairman 00:01:35 I think this one is so short now that we should just play that twice Next time. Not now. Next time. Yeah. That's funny. So Wendy devotes 30 minutes per person each Wednesday. Talk about anything real estate, there's the link, it will be over in the chat, which on the right side of the page or underneath, depending on the platform that you're viewing us from. And in case you were wondering, yeah, somewhere in the same shirt that's been on this show three times in a row. I don't think anyone was wondering that, however, but way of telling yourself it's very, I'm being very self-conscious about it. Yes, it's been watched. It's a nice shirt. Yeah, you can see the crease. Thank you. Yeah. Anyhow, let's do some breaking news. You man. No. Bill Fairman 00:02:41 So today, very important. CPI numbers came out and that stands for consumer price index. This is the third quarter reading and this determines people that are on fixed income social security on how much they will get raised for next year. Yeah. And it came in at eight point, excuse me, 8.2%. So we have inflation of 8.2% year over a year. The core number for month to month was 0.4%. So it is higher this month than it was last month. You pull out energy and food, which as we all know, that is really the most expensive and the most important. Jonathan Davis 00:03:28 So that is the core. Bill Fairman 00:03:29 It's still 6.2%. I mean that's, that's pretty high. Yeah. So that means everything is going up. So guess what? The stock market didn't really appreciate that this morning and I haven't looked at it before we came on the air today, but we were below 2,900 on the Dow, you know, before I came to work. Yeah. On the, on the future's market. So those folks that were hoping for the Fed to maybe postpone or maybe do a 50 basis points raise in the interest rate, Nope. Be prepared for another 75 basis points. Oh Jonathan Davis 00:04:10 Yeah. Bill Fairman 00:04:10 That's all I can say. Jonathan Davis 00:04:11 It's coming. And yeah, I mean they have stood by, you know, bringing inflation down and as you know, these numbers continue to, to set where they are. If they do what they say they're gonna do, it's, it's gonna be 75 or even, you know, one full, you know, percentage. Bill Fairman 00:04:29 Well, they were too slow to act because they said it was transitory. The rest of us knew it wasn't. Jonathan Davis 00:04:34 Oh gosh. Yeah. Bill Fairman 00:04:36 And then on top of that, you've got our, not just our government, but governments around the world are counteracting what the fed's trying to do. Every time they try to slow stuff down, the government gives out more money and more money. They give out more. It's stimulates activity. And you can't lower inflation if you have an activity being, I mean the whole point of raising rates is to have what we call demand destruction. Jonathan Davis 00:05:09 Yeah. You want, I mean, right now they want to, you know, lower the demand for houses and also, you know, and raise the, you know, unemployment. Yeah. I mean that's, that's the goal. Bill Fairman 00:05:22 Well the, the target is housing and why do they target housing? Number one, it's one of the largest expenses, but all the other products that are connected to housing, furniture, H V A C, all that stuff. Yeah. Building materials. There's a lot of things that are attached to housing that if, if you slow down housing, you're gonna slow down a large chunk of the overall economy. Correct. Yep. That said, I don't want anybody to freak out people. Were still fixing and flipping homes and making a profit when home. We, we still hadn't figured out if we were at a bottom yet after 2008 crash. Jonathan Davis 00:06:11 Yeah. I mean like, like we were talking about with a, a room full of real estate investors last week. I mean, or real estate lenders rather. We're really excited. We're excited for our partners and ourselves and our clients because opportunities will now be more readily available. Bill Fairman 00:06:33 Yeah. And as a selfish note, businesses like ours and we're, we're talking to other private lenders, hard, hard money and private lenders that are balance sheet lenders like us, we are all going to capitalize on this because the short-term lenders that got in bed with the institutional financing people who are pulling back because interest rates are going up and getting nervous. Yeah. That's not affecting us. Cuz we hold our own loans. Yeah. It's really affecting them. We, we had some information that there are some people in our area that are gonna have to start laying off a bunch of their, their folks because they can't get the capital anymore. Jonathan Davis 00:07:19 Yeah. I mean it's what we've been talking about for a long time. Scaling responsibly and you know, not building a machine that you have to feed and when market shift there's nothing left to feed it. Right. Bill Fairman 00:07:31 And I got one more breaking news before you get to some Okay. Multifamily stuff today. Jonathan Davis 00:07:38 Oh, look at that Bill Fairman 00:07:39 Is our man, Scott's birthday. Happy birthday Scott Fatten Jonathan Davis 00:07:45 Since, since he Bill Fairman 00:07:46 Wonderful smile Jonathan Davis 00:07:47 Since he runs the, the video we had to print something off to stay incognito. It's funny. Happy birthday. So yeah, well wanna talk a little bit about multifamily. So real page has been keeping track of absorption or you know, you know, how much, how many units are being rented by the quarter. And they've been doing this for about 30 years and this third quarter of marks the first quarter ever in that 30 years where there was a negative absorption rate. What does that mean? It means that there's just less people in the third quarter renting apartments and getting those apartments. And so typically why is that? Why is that anomaly typically third quarter is very strong. Everyone that's, that's a strong lease up period. Fourth quarter is usually the, the, the, the, the ti you know, where it trails down. So this is quite an anomaly. We'll, we'll keep track of it. That being said, you know, vacancy is still 4.4% nationally. So it's, you know, vacancy's really low. It's just, we've had such a run up to this point that, Bill Fairman 00:09:07 And that's what I was gonna ask are, are we getting to a point where there's over saturation in we're Jonathan Davis 00:09:13 We're building, we're a building towards that. Yes. That will con I think that's a trend that we will continue to see for the next few quarters. Bill Fairman 00:09:21 And if you think about it too, we have an oversaturation of a class Yeah. Properties too. So, so these are the brand new luxury type apartments. That's what's been being built over and over again. And as the economy slows down and people start spending less money Yeah. They're going to start going towards those B and and C class properties. Yeah. Cause they can't afford that rent. Jonathan Davis 00:09:50 Now the other side of that is we're seeing, you know, rents kind of where they're, they're around 20% year over year of last year. Now we're running in the nines, which is still an increase. It's just, it, you know, it seems to have plateaued and, and coming down now everywhere except Florida. And that is due to, you know, most recently the, the hurricane there. Sure. There are several instances I was, you know, of people renting two bedroom, one bath houses for $5,000 a month. Wow. I think it's, it's, it's crazy. During one, they Bill Fairman 01:10:27 Weren't damaged by Jonathan Davis 01:10:28 The hurricane. Yeah. Because it's because people are scrambling to find shelter and Yeah. So everywhere, unfortunately Bill Fairman 01:10:35 A lot of parts of the Florida that got hit are second home. We call 'em snowbird homes. So I, about half the population that's in those areas that were hit are only there in the winter. Jonathan Davis 01:10:50 Yeah. Bill Fairman 01:10:51 So it's not like it's their primary residence. I don't think it's gonna be as bad as it could have been in other areas because you know, the housing that was there was in most cases wouldn't occupy it anyway. Yeah. And as much as we like to get into the warm weather in the winter, you, you may have to stay home this winter until you Sure. Get your place fixed up. But if your place was not damaged, then you can still rent it out to others who need a place. Not to mention all the contractors and stuff that are coming in the area. Sure. They're gonna need the place to live Always. Yeah. While they're working down there. I know when, that's where Wendy is right now, she carried a, I think they have like a 32 foot travel trailer and she had to park it at a campground that's an hour away from Englewood. Oh wow. Because you, there was no places available any closer. Jonathan Davis 01:11:46 Well let's jump into, I know we wanted to talk about, so Oh Bill Fairman 01:11:50 Yeah. So our theme this month is how to do small dollar lending, investing with family and friends and then raising capital and we're gonna go over some of these items and then later on in the month we're gonna have some guests that are gonna be coming on that have experience in this and they'll give us some case studies on how they did it. Cuz the one thing I love about the real estate business is that there's a problem that is solved, whether it's on the lending side or the acquisition side or raising a capital side. And there's, Jonathan Davis 01:12:33 That's the, you know, with everything that, that anyone does in, I think in any arena you don't look at how much can I make or how much will I pay? It's what problem or what pain is being solved or what pain or problem is being caused and how do I solve that. So if you can look at it that way, that's usually the, you know, better way to go about it. Bill Fairman 01:12:54 Oh, I'm sorry, one last thing before we get onto this. I did see a piece yesterday, I believe it was about this second quarter for 2022 was the smallest percentage of fix and flips since 2009. I think it was. Jonathan Davis 01:13:15 I believe it, It have to be. Yeah. However, Bill Fairman 01:13:18 It was the highest profit of any time since then. Jonathan Davis 01:13:22 The, the the net game per property. Yes. Yeah. Bill Fairman 01:13:25 So two things to, to consider with those numbers is that there are fewer, we'll call 'em non-professionals doing it now. Yeah. So because it's harder to find inventory and things are questionable on how the future's gonna look. I, I think you're professionals that have good marketing, those are the ones that we're able to find the properties and, and get 'em fixed up and sold. Yeah. Secondly, excuse me, the reason they're making the most money is because, you know, the market in the second quarter was still pretty good. Yeah. Right. Oh yeah. I mean it was still about seller's market that said, I hate when they always come up with these fix and flip numbers because they only go by what they paid for it and what they sold it for. They have no idea how much anybody has put into it cuz they don't have those numbers. So how do we know they really profited more? We don't, Jonathan Davis 01:14:30 It was the potential of profit is that Bill Fairman 01:14:33 They just sold it more than what they paid for it originally. Jonathan Davis 01:14:35 Yeah. Bill Fairman 01:14:36 So, Alright. Jonathan Davis 01:14:37 I mean there was more demand. Yeah. The, the highest, you know, appreciation. Yeah. So they had the, Hey Scott, happy birthday. Bill Fairman 01:14:51 Have a birthday. speaker 4 01:14:52 Happy a birthday. Thank you. Sure will. Get me out of here. Bill Fairman 01:14:58 So that's funny. Gotta love live streaming, don't you? Yeah. Okay. So let's talk about the, the first one that we discussed, the small dollar lending. There's a lot of people that have small, say a Roth account that they're just getting started with their self-directed retirement fund and they have no idea how to get that money and put it to work. Jonathan Davis 01:15:21 Yeah. Bill Fairman 01:15:22 So one example is networking. If, you know, if you have a good network, you know people that need money, you know, other people that lend money Yeah. You can put that to work fairly, fairly easily. So I I'll give you an example. Let's say, you know, someone who needs a hundred thousand dollars loan, Jonathan Davis 01:15:43 That's a small dollar amount. Bill Fairman 01:15:45 No. Oh, you need somebody, you're no, you know, someone that needs a hundred thousand dollars loan. Jonathan Davis 01:15:49 Okay. Bill Fairman 01:15:50 You know, another person that probably has $99,000 they could lend if they wanted to and they wanna put that money to work. But you have a, you know, a Roth IRA that maybe has a thousand dollars in it or it might have six or $7,000 in it, but you don't have to use all that money. So how, how can you put that money to work or at least jack that up quickly? Jonathan Davis 01:16:15 I feel like you're gonna make a VUL on reference. No. Oh, okay. Go. Bill Fairman 01:16:20 So because you be, because you become the deal architect. Jonathan Davis 01:16:23 Okay. Bill Fairman 01:16:24 You have the borrower that needs the money, you know the person that has most of the money. Let's assume an interest rate of 10%. Okay, well the person that has money that's not doing any of the work, Jonathan Davis 01:16:37 Can we do 12%? And that's really easy math for everybody. Bill Fairman 01:16:40 Okay. Whatever. Jonathan Davis 01:16:41 All right. 12%. Bill Fairman 01:16:42 All right. So it's 12% interest rate, Jonathan Davis 01:16:44 1% per month. Crazy. Bill Fairman 01:16:48 You as the deal architect, you put the deal together, you get the, the friend who has, we'll just say 99,000. Okay. And then you have a thousand that you're putting in from your account. Now how is that a good deal for you? Well, you charge the actual interest rate is 12%, but the person that has the 99,000, they're happy getting 10, right? Yep. You also charge a couple of points origination on this thing. Yep. And maybe you get two or there's two charged total. You get one and the person that has the $99,000 loan gets one. Okay. Right. It's still 2% of a hundred thousand. That's $2,000. Okay. So the thousand dollars that you just Jonathan Davis 01:17:40 Correct. Bill Fairman 01:17:41 So now none of your money is at risk. Jonathan Davis 01:17:44 You've, you've already, you've already made a hundred percent return and you haven't got the first right. Monthly check yet. Bill Fairman 01:17:51 So as this loan goes on, you're the one collecting the payments, you're sending the 10% part to the person that has the 99,000. Actually you're not sending it to them, you're sending it to their custodian ira, assuming that they also have an ira. Yeah. And then you're keeping the additional 2% of that payment and it's going into your Roth throughout this transaction. So not, not only did you make a thousand dollars because at the end when it pays off, you get that thousand dollars back, plus you made a thousand dollars plus you're making 2% of the payment the whole time and you've only put that little small amount to work. So that's how you put small dollars to Jonathan Davis 01:18:34 Work. And I know everyone's out there saying, But if I do that, aren't I subject to third party servicing laws? No, you're not because you're in it at a thousand dollars or 1%, you are an owner or a lender in that deal. Right. So you own a lean position and you can service your own debt, which allows you to service the entire loan. Right. So anyone that had that question pop up, which I know several of you did, just wanted to put that Bill Fairman 01:19:01 In reality, nobody asked that question, but they should, In some states, you're not allowed to service a mortgage loan unless you were a licensed servicer. Jonathan Davis 01:19:11 Third party just means someone else's loan. Yeah. Bill Fairman 01:19:13 Unless it's your loan. Jonathan Davis 01:19:15 Yeah. You are in every state of the United States, you are allowed to service your own loans. Right. Bill Fairman 01:19:21 And because you have a piece of it, you're not a third party. Yeah, Jonathan Davis 01:19:24 Exactly. You are a party to the transaction. Right? Yeah. Bill Fairman 01:19:27 And then, and the other way of doing it is you could just be in second position in, in, in another small deal. But what it, what it boils down to is you still need to have a network. You can do these smaller deals, you just need to have friends that have deals. Yeah. You just need to be the deal architect. You don't have to have a whole lot Jonathan Davis 01:19:49 Of money. And that's, you know, like that, that's just how it is in, in real estate. And, and most, I think in most things, you know, if you have a thousand, 2000, $5,000, you're gonna have to do a little bit more work to get that level of return. However, that work is going to allow you to get up to, you know, 150 and 200% return on your money and that can grow your small balance IRA or, or whatever investment vehicle it is. It can grow it rapidly. So that was a, you know, a really good, good point, Bill. Bill Fairman 02:20:22 You wanna talk about investing with family and friends? Jonathan Davis 02:20:25 Don't do it. Bill Fairman 02:20:28 Okay. From a banker or from a lender side of things. Yeah. Never, never lend family money because if you, you have to assume you're not gonna get it back. Jonathan Davis 02:20:39 Always go back to that, you know, setting at the Thanksgiving table. Yeah. It's like, you still owe me $30,000. That's right. Bill Fairman 02:20:46 But there's nothing wrong with investing with somebody getting equity to a piece of property. At least you know that if something happens, you know, on a piece of property that's worthless. Jonathan Davis 02:20:57 Yeah. Yeah. I mean, and you, you can jump Bill Fairman 02:20:59 In. I'm just kidding. Family and friends are the first people you go to when you start. Jonathan Davis 02:21:05 Especially when you're looking for more like mezzanine prep and common equity. Do Bill Fairman 02:21:13 You want to explain that, what mezzanine is and common Jonathan Davis 02:21:16 Prep? Sure. Yeah. So, so you know, we talk about capital stack all the time. So you have, you know, your first lean debt, which is typically like your banks or someone like us that's gonna take a...
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242 How To Scale Responsibly | Real Estate Investor Show - Hard Money for Real Estate Investors
10/07/2022
242 How To Scale Responsibly | Real Estate Investor Show - Hard Money for Real Estate Investors
Bill Fairman 00:00:00 Oh, see that. Hey, welcome back. We are going to talk about scaling responsibly. One of the things that we run into is, should you scale in a coming downturn? Absolutely. You have to scale responsibly. We're gonna talk about that right after this. Bill Fairman 00:00:37 Welcome. We're back here with our take two or question 2.0 with Hunter Big to elevate capital. We're gonna talk about scaling responsible respons. Sorry guys, I'm actually out of town right now, so I'm a little sluggish. Let's get started off with a little bit of housekeeping. Thank you so much for joining us on the Real Estate Investor channel, Hard Money for Real Estate Investors. We are Carolina Capital private lenders in the southeast for real estate professionals. If you have a a project you want us to take a look at, go to carolina hard money.com and click on the Apply Now tab. If you are a accredited investor and you're looking for passive returns, click on the accredited investor tab. Don't forget to like, share, subscribe, Hit the bell and don't forget about Wednesdays with Wendy. Wait. Oh wow. That was quick. That was a nice one. Yeah. Yeah. Wendy, excuse me, gives 30 minutes of her time per person on Wednesday afternoons to talk about real estate. There's the link. It will be in the chat side to the right side of the page or underneath, depending on the pro, excuse me, platform you're viewing us from. Jonathan Davis 00:02:03 You good there? Yeah, you got all about It's Bill Fairman 00:02:06 Alright. It's a lot of loans. Jonathan Davis 00:02:07 It's alright. But yeah, no, Wednesdays Wendy's a great thing. If you want to join on the calendar link, you can do that. You will get something from it. I guarantee you. She has a lot of experience and she will tell you she's made a lot of mistakes. So learn from her mistakes. Bill Fairman 00:02:24 And before we get started, I wanted to mention the Quest Expo was awesome. If you, you guys didn't get a chance to go, I think you can still purchase the videos from all the speakers that were there. It was excellent event. I think there were over almost 900 people, I Jonathan Davis 00:02:44 Think 857? Bill Fairman 00:02:45 Yeah. Yeah. Okay. Well that's close enough to nine. Yeah. Thanks for being so exact. Jonathan Davis 00:02:49 It's my job. It's his job. Yeah. Bill Fairman 00:02:52 But there was great information. Excuse me, If you have a self-directed ira or if you don't know what a self-directed IRA is, then there's plenty of implication for that. If you want to go to quest trust.com, all the information is free, so check it out. Jonathan Davis 00:03:11 Excellent. So we wanna talk about scaling or responsibly. Yes. And what the heck does that even mean? Bill Fairman 00:03:19 Well, it means getting either bigger or we're Okay. I promise I wouldn't say this, but it's about cleaning your fish. Jonathan Davis 00:03:28 No bad joke. Yeah, yeah, yeah. But no. So we have Hunter on here with Elevate Capital and since February of 2018, him and his partners have been investing into multifamily in primarily North Carolina. Hunter Bick 00:03:44 Oh, actually all North Carolina. All Jonathan Davis 00:03:46 North Carolina. Okay. Hunter Bick 00:03:46 We looked elsewhere, but Jonathan Davis 00:03:47 Yeah, you like North Carolina. So they have went from zero doors to several hundred in that time, you know, timeframe. Hunter Bick 00:03:57 500 ish. Jonathan Davis 00:03:58 500 ish. It was more, But you just sold 120, didn't you? We did, yeah. Yeah. So they were over 600. So they have scaled in that time period from Jan, from February of 2018 to now on several hundred doors. And to kind of wanna just pick your brain on, what was your thought process like? You know, when you were looking at this, what, like, did, did it feel too much, too little or kind of how, how did you look at adding to your portfolio? Hunter Bick 00:04:30 Yeah, that's a good question. You know, we kind of, we, we, we've always kind of taken the approach where if this deal makes a lot of sense and we think the upside is large, it's our job to figure out how to get it done. Sometimes that meant buying four things at once. Like there was a day we actually closed 200 doors in one day. Wow. There are other times where maybe we go several months without putting anything under contract. But the va, we knew the value was the value and we were always really confident when we thought we had a really great deal under contract, we had to figure it out. Our approach has typically been, you know, we found so many great deals off market that our approach has typically been how do we keep as much equity as possible? And that often meant hard money, hard money, maybe a debt stack, maybe some investor capital, whatever it was that we needed, we were going to do it. Hunter Bick 00:05:27 But the first choice was always keep all the equity with a, with high leverage because we knew we were gonna add the value so quickly that we could refinance into permanent debt in six to 18 months, depending on the deal. And, and so the higher leverage was not for us was, was not risky or not scary because we knew it was gonna be very short term and we knew the value was gonna be there. Yeah. And so that's how we've done a lot of our deals. You know, you get to a certain size and, you know, you see more opportunities. And so we are, we are looking, we are kind of getting to the point where we're gonna be taking more passive investor capital to do some of those, some more deals. You know, we do think we're gonna see some really good opportunities here in the next 12, 18 months. I agree. We're getting positioned for that and create a little more, you know, a predictable type of, you know, capital process. Yeah. You know, and with higher interest rates, it's a little trickier these days to count on low interest on a per, on a per loan 12 months from now, which Jonathan Davis 00:06:31 Is more reason why Yeah. You win when you purchase it. Right? Hunter Bick 00:06:34 Absolutely. Yeah, absolutely. You know, and so obviously the, the lower the basis, the, the more money you're gonna make and it really is that simple. Jonathan Davis 00:06:44 Yeah. I wanted to go back, you mentioned debt stack. So for everyone that doesn't know what debt stack is, you have your primary, like first lean position loan, which would be, you know, just your, your, what you would normally get. And then on top of that, you can get mezzanine debt, which can be secured by a second lean or it could be unsecured. And then on top of that you can give up. You, you have equity and then there's multiple levels of equity that you can give up and that just gets, you know, higher and higher. So that's, that's what a debt debt stack is. Bill Fairman 00:07:17 I I call that a wallet full of credit cards. That's my Jonathan Davis 00:07:21 Well, and that's how a lot of people Hunter Bick 00:07:22 Use a lot of those on the way too. Jonathan Davis 00:07:23 Yeah. That's how a lot of people do this. I mean, like, when you're buying five, 10, 20 million properties, like no one's really using their own money to do that typically. Now they might use some of their money, but typically people don't have $5 million to just say, Hey, let me put it here. And because that, you know, even if they have $5 million, you wouldn't do that. So you want to stack your debt with, you know, mezzanine or, you know, whatever the case may be. A as Hunter said, like their, their whole goal has been to try to avoid giving up equity and you know, why? Well, that's allowed them to capitalize on the back end, on the exit at a higher return, which then, like he said in the previous show, he took the earnings from Applewood and 10 31 them into another project. So it allowed them to buy more assets. It allowed them to scale. Bill Fairman 00:08:22 And, and as markets change, we, we are in a higher rate environment as well as an environment where credit's gonna be a little tighter for the institutional type blenders. So you have to take on a few more equity partners in order to get these same deals done, because the fact that they're going to be a little tighter on the credit means that they're gonna lend less money on it. Yep. If you do go the mezzanine route with a larger gap or a larger percentage of that, those rates are typically a lot higher. Correct. You're almost better off having an equity partner to fill in that gap than the, than the mezzanine financing am I Hunter Bick 00:09:04 Agree. Well, it, well, well, depends on a couple. I, I would agree or disagree depending. Right. Every deal is different. Absolutely. Bill Fairman 00:09:12 Every situation Hunter Bick 00:09:13 Is different. Absolutely. How long, how long do you need the Mezz debt? Right? Yeah. And or you know, if it's a longer term for construction project on a bigger asset and you're gonna, and you wanna, and your options are take some equity partners versus loaded up with 10% debt, but it's an 18 month project that 10% debt's gonna be expensive for 18 months. Right? Yeah. Jonathan Davis 00:09:32 And so how long can you negative carry? Hunter Bick 00:09:33 Exactly. And so you gotta, you gotta factor the negative carry in and all of that. And so equity partnerships become, they become less risk if something goes wrong, you can bring others in to profit along with you, you know, it's important to align incentives at all points, by the way. Yep. That's a huge thing for us. But yeah, so the, and the other thing too, in to your point Bill, and today, today's debt markets, even a year ago, nine months ago, you could get bridge debt for, in the fives five and a quarter, five and a half for 80% of the purchase and a hundred percent of the construction today, that quote is 75% of the purchase, 75% of the construction, and it starts with a nine, right? Like it might be nine and a half. So different types of debt are appropriate depending on the market. Hard money at what, 11, 12? Where are you guys right now? Yeah, something like that. Between Jonathan Davis 01:10:23 10 and 12. Hunter Bick 01:10:24 Yeah. Okay. Hard money is now all of a sudden really, really cheap because there's no alter. Well if you're gonna go 75% on bridge at nine and a half, why would you not go a hundred at 11? Like that's a no-brainer. Right. And so, not to mention you don't have the breach debt org structure and all the crap that comes with it. Yeah. So that's, you know, that's a tool that has become more attractive right now For sure. Jonathan Davis 01:10:50 Well, yeah. When, when you break it down, I mean, someone's gonna do 75 and 75, so 75 of the purchase, 75 with a re that means you have to bring 25% of the costs of the total cost. So typically you're not gonna have that. You're gonna have to either get mezzanine debt or equity, and typically you're gonna give up equity and what is that equity gonna cost you? So when you're factoring this, you're factoring, okay, I'm paying nine for 75% of the cost and then this equity's gonna cost me X amount. And if you can get 95 or 90% loan to cost on, on hard money or private lending at 12 or 10 or whatever the case may be, when you run those side by side, a lot of times the private lending is the cheaper option in the long run. But again, it comes down to the carry. Can you, you know, is there a negative carry? Is there a lease that period? Do you have to get out all the units, you know, flushed out and then rent them all? Can you rent em them as you go? So each one is different, but I will say it debt is always cheaper than equity. Bill Fairman 01:11:58 Well, yes, I, I totally agree with that. That's what we talk, we talk to people about that all the time. Why do you get a, a money partner who's gonna take half of your equity when you can get a hard money loan and spend, you know, five, 10 grand worst case scenario on your financing on a, on a home Yeah. Scaling. You have to have good systems and processes in place. Do you wanna absolutely. Talk about any, how you guys are doing it? Hunter Bick 01:12:28 Sure. You know, so I mean, for us, everything starts with, you know, a goodbye. Right. And so, you know, we probably model a hundred deals for every one or two that we buy. I mean, we're super, and, and everything's off market too, so it's not like we're, you know, modeling deals that are on LoopNet or Right. Publicly listed. Like we don't bother Jonathan Davis 01:12:47 Except that first one. Hunter Bick 01:12:49 Well, yes, except that first one. But, you know, so, you know, so, so has to start there and like, you ha you just have to be, you have to stick your guns and you have to be super selective because it's very easy to like go through your spreadsheet model and say, Okay, well I think I can whittle the, I think I can get this rental done for 10% less and oh yeah, I think I can get 10% better on my takeout loan or a little bit better leverage. And before you know it, you've just, you know, inch your way, you talked yourself into doing a deal that maybe you shouldn't be doing. Right. Jonathan Davis 01:13:19 You've modeled a unicorn situation that probably won't Hunter Bick 01:13:22 Happen. Exactly. Yeah. So we try to, we always, I always try to say, I mean, everything be is a probability again, you know, so what's a range of probabilities for each piece of the process? What's the average, what's the worst case? What's the best case? And if you know, kind of that between average and worst case, if something like that still works, then it, it's, it's gonna be a great deal. If things can go wrong and you still make money, it's gonna be a really good deal. Jonathan Davis 01:13:47 Do you, when, when you're modeling this, do you stress test them at higher cap rates on the exit? Do you, you know, like let's say like, you know, Charlotte's trading on a B level asset, I don't know, a six cap, do you stress test them at a, at a different cap rate? Or kind of what do you do to to stress test those, those models? Hunter Bick 01:14:07 Yeah. So the way we kind of look at it, we're less worried about the cap rate because the, the, the, the end result, because we're not doing, we're not doing a new construction, right? We're, we're doing B and C value add and so on, on the takeout. If it's, if, if it's a sell, the NOI is really what's gonna matter, right? That's gonna drive it. And you know sure. If, if, if we have to have a five cap on the finished NOI in order to make any money, like no. Right? Like, I mean, come on. But, so if we're gonna make money at selling it at a seven, it's probably a great deal, right? Yeah. For us, we always wanna see what can we refinance at that? Can we do a cash out or would a refi require cash in? That's what we never want to do. Always. You always wanna cash out or cash neutral worst, you know, worst case for us. And, but the cap rate's not the constraining factor there. The, the cash flow is especially in a low cap rate market like Charlotte, right? So, you know, so yeah, we definitely look at different exit scenarios, like what happens if there's some, if the expenses are actually higher than we're projecting, what does that do to each scenario? But we always wanna have multiple exits. We don't wanna be locked into a one path. Jonathan Davis 01:15:20 Yeah. And we, you know, for the people out there, if you're working with syndicators or other people who are doing this, you know, that's what you want to be savvy about is understanding the net operating income, understanding that there's a difference between the acquisition capital capitalization rate and the operating capitalization rate and the exit capitalization rate. Hunter Bick 01:15:40 Yeah. Lemme talk about that real quick. Yeah, go for it. So the acquisition cap rate is I think, a huge misnomer, right? That matters a lot if you're buying a stabilized asset. Like if you're buying an A and you're buying this thing for the cash flow and you're buying it for, you know, market appreciation, call it the going in cap rate does matter. Anything else, like value add, the cap rate means nothing because the whole point is you're buying something that's already distressed. Yeah. So we've bought zero caps, like a, an empty property is a zero cap, right? Yeah. We've bought one caps because the financials were so bad, right? Yeah. That, that means nothing because all we care about is what's the cap rate after we renovate, stabilize, you know, improve the operations, What's that cap rate? Exactly. Because that's what, that's what matters. Yeah. All, all in on, all in on cost. So those Bill Fairman 01:16:29 Of you in the single family fix and flip business, it's basically what's the place gonna be worth after the repairs your thing? Same, You're not buying a, a property because it's, it's valued at what, what it's the sales price is. That's not why you're doing Jonathan Davis 01:16:44 Yeah. Yeah. And, you know, just to, to beat the dead horse here, I mean, we've, we've, you know, Hunter and I've had, I don't know how many hours of conversations about cap rates, but Bill Fairman 01:16:54 I got feeling there were adult beverages involved Jonathan Davis 01:16:57 Maybe on some of them. Yeah. Yeah. But yeah, it's like people don't understand like what's the most important, is the most important or two things, and Yeah. Excluding if you're buying like an A level asset, which, you know, like that's not what we're talking about here. It is your operational cap, right? What, what is your yield, what is your cash flow? And then what can you, what multiple can you sell that asset for? Those are the only things that matter. Not, it's like, well, I can't buy it, it's a four cap. It's like, that doesn't matter. I mean, if, if you're gonna be putting in $600,000 and raising the rents 200 per unit four cap doesn't matter. Hunter Bick 01:17:38 Exactly. No, exactly. And that's the key thing a lot of people get tripped up on. Bill Fairman 01:17:41 Now, as Jonathan was saying, if you're involved in a syndication, you're a passive investor in this syndication, what is it you would like more the sale of the property and get a big chunk of change at the end, or a refinance at the end of the out, and you get a big chunk of change. What's more beneficial Jonathan Davis 01:17:59 Depends on where you are Bill Fairman 01:18:00 To the investor. Jonathan Davis 01:18:01 Well, it depends on what you are. So if you, Hunter Bick 01:18:03 How good was the buy? Yeah. Jonathan Davis 01:18:04 How good was the buy? Like, am I willing to pay the, the capital gains on the, on the sale if the buy was good, or would I rather take the no capital gains on a refinance cash out? So it depends Bill Fairman 01:18:18 That, that was my point. If you get the same amount of money on either end, and if it's a refinance, it's tax free. Jonathan Davis 01:18:24 Yeah. So yeah, that is true. So if you were an equity member on this property, that's, that, that refinances that is a cash or a tax free transaction that you get. But again, as Hunter, you know, pointed out as someone who does this, what am I selling it for? What did I buy it for? Right. You know, I, I might not mind to pay the taxes if it's Bill Fairman 01:18:44 At, at the same time, if you're getting a capital gain during the process, you're probably also have some passive losses that you can also add Dang. To them. Jonathan Davis 01:18:53 Exactly. Hunter Bick 01:18:53 And the cash out refi for us, I mean that's, that's how we, that's along with, you know, high leverage on great...
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241 How To Find Emerging Markets | REI Show - Hard Money for Real Estate Investors
10/03/2022
241 How To Find Emerging Markets | REI Show - Hard Money for Real Estate Investors
Bill Fairman 00:00:01 Not this time. Oh, we're on now. What a surprise. So there's been a lot of discussion about how to get into markets that are not overpriced. So we're gonna do a show today about finding emerging markets, and you will get that information right after this. Bill Fairman 00:00:44 Good afternoon everyone. It's Bill and Jonathan and or special guest hunter. But we were, we were gonna tease him in, but too bad he's already here. Thank you again for, well, not again, but thank you this time for joining us on the Real Estate Investor, Show Hard Money for Real Estate Investors. We are Carolina Capital Management. We are a private lender for real estate professionals in the Southeast. If you have a project you'd like us to take a look at, please go to carolina hard money.com and click on the apply Now tab. If you're a passive investor looking for passive returns, click on the accredited investor tab. Don't forget to like, share, subscribe, hit the bell, all that good stuff. Excellent. And don't forget, Hey, Brian. What? Oh, Wendy. Wendy. Don't forget about Wednesdays with Wendy. She, and yes, I will talk right through the graphics. Anyway, Wendy devotes 30 minutes per person on Wednesdays that wants to talk anything about real estate. So there's her link. It will also be on the comments and chat section on the right side or underneath, depending on the platform that you are viewing us from. She usually gets booked out about two months in advance. So book your spot now Jonathan Davis 00:02:16 For everyone out there wondering. I'm six foot two hunter's, just seven foot. Bill Fairman 00:02:24 Yeah, I'm Jonathan Davis 00:02:25 Just sure. I'm trying to keep my head in the Bill Fairman 00:02:26 Frame for you. I can go ahead and admit that I'm vertically challenged. Oh, that I don't have an issue with that. No. So yes, we have our, our guest Hunter B he is with Elevate Capital. We have what about a three year history? Guess? 4, 4, 4 Jonathan Davis 00:02:45 And a half. Four and a half year history. Bill Fairman 00:02:47 It's a great story. We're gonna let him tell it instead of me or Jonathan tell Jonathan Davis 00:02:52 It. Yeah. And before he tells that, I just wanna get some quick information in for everyone. Just want, this was some data that we have that will kind of lead into what Hunter's gonna talk about, but also about the emerging markets. We are, this is what, the third month in a row where we've seen rents slow, but they are still rising. Charlotte is kind of, I think in the top seven on still rent increases, which is 11.5% year over year. The median rent in Charlotte right now is almost $1,800. And if you've followed the show, you also know that the median house payment for a mortgage is 18, 18 50. So they're, they're right there with each other, which is, you Bill Fairman 00:03:49 Know, that means there's room to grow. Jonathan Davis 00:03:50 I suppose so. I suppose so. So we're also seeing, give me a second. Bill Fairman 00:03:57 No issues. Jonathan Davis 00:03:58 We're also seeing a slow down and starts on single families and a slow down and starts on multifamily. However, construction that is in process is up on multifamily by 27% and up on single family still by 4%. So we're still seeing, you know, there's still growth, but we're next, you know, Hunter and I were talking a little offline a little earlier, and you know, as the next month and, and two months comes in, we're gonna see that decline and that slowing down hit even harder and boasted because of the interest rates. Supply chains, picking up lumber, you know, as we were talking about earlier, as, you know, back to pre pandemic levels, which is good. So also if the, if you're in the way of the hurricane, we're very sorry. I think, Bill, did you lose a home? Bill Fairman 00:04:51 Well, yeah, that's what I was gonna jump in into before we got too, too far into this that you guys pray for the folks in Florida, we have some short-term rentals down there, but we don't live there full time. So it's not affecting us like it would the people that live down there full time. And there are people that are missing as well. So keep 'em in your prayers. It's gonna be a while to recover where it hit the hardest. Yeah. That said, starts almost always do this when there's a coming recession. Jonathan Davis 00:05:24 Exactly. Bill Fairman 00:05:25 People are being a little bit more cautious. Banks are kind of holding off on commercial and residential development because through every downturn, or we'll just call it a crash. Yeah. What's the first thing that goes under? And it's the start of a development. Exactly. So it, it, here's the problem though. We're still 5 million homes behind where we need to be based on the population growth. So all it's gonna do is increase demand for what's out there. Yeah. Right. Yeah. Jonathan Davis 00:05:57 Well, talking about increasing demand, want, you know, get Hunter talking here. We wanna know kind of, you demanded each stop by we demand. So wanting to know kind of how you all got started, What was the first project, and then just kind of take us through and, you know, I'm sure Bill and I will interrupt and jump in from time to Hunter Bick 00:06:17 Time. Okay. So like the three to five minute version, not the 20. Hey, you Jonathan Davis 00:06:21 Take all the time you need. We're on your time, man. Yeah. Hunter Bick 00:06:23 All right, cool. So we kind, we, our, our partnership Elevate Cowboy Group got started really, we started 2017 ish, mid 2017. And one of our partners, it was high school, buddy of mine, his name's Matt. And then we met our third partner, Shannon, pretty shortly thereafter. And we just really clicked really well. And you know, we at the time, even, even now, but like the, the whole idea is effectively we do is value add multifamily, where we can go in, find something that's underpriced because of distress or a bad rent roll or whatever it is. We can go in, renovate, improve the quality of life, improve the asset. And Jonathan Davis 00:07:06 You pulling those off with mls, right? Hunter Bick 00:07:08 No. Now the very first one had been on LoopNet, believe it or not, our very first deal was in an emerging market. So good segue. Yeah. In Fayetteville, North Carolina. And it had been on loop net, we made an offer, didn't get it, came back to us a few months later, fell out a contract and it was $2 million for 56 doors in Fayetteville, which in today's world would be Absolut absolutely unheard of. That was, and that was in Jonathan Davis 00:07:33 2018. Hunter Bick 00:07:34 It was 2018. And at the time, everyone told us we were idiots for wanting to buy anything in Fayetteville, and we'll get into that in a minute, but they were wrong. And so we had an appraisal for this property and we had like a hundred grand to buy an apartment building. And we had an appraisal, said it was worth two and a half million. And Shannon and I were talking about it, We were like, Well, why don't we put hard money on it? So we came down here to Carolina Hard Money, aka Carolina Capital Management now, Excuse me. Yes. Yep. And showed you guys what we had and you guys got it. And that's what helped launch us. We wouldn't be here today without, without that first deal and all the other ones we've done together and, and you guys gave us a hundred percent of the purchase and some rental money five months later, that thing appraised for 3.3. Yep. And we did a cash out. I think our new loan on it was two and a half, maybe paid you guys back, took some cash out to put towards future renovations. And that's kind of how we found our model. It's basically like a leveraged buyout private equity type model. Yeah, we've done that. We've done what, 20 deals now? We've done most of them in some similar structure. I was gonna say on this first deal. Yeah. Bill Fairman 00:08:55 It was based on market conditions. It was pretty much fully occupant, right? Hunter Bick 00:09:00 Yeah. It was like 85 something. Bill Fairman 00:09:02 Yeah. And while it, there might have been some updates that could be made. It wasn't that it was in bad shape, it was just outdated. Right? It Hunter Bick 00:09:13 Was, it was compared to some of the stuff we've seen, it was not in bad shape. Yeah. It, it definitely needed some deferred maintenance. It had some issues. The that one though, the, the income statement was where lot of the value add was, right? Like the expenses were off the charts. Like the previous owner was, this is not, this is no joke. He was spending $400 a month to lease a copy machine. Why on earth does an apartment comp? First off, you could buy one for half of that. Second of all, what is an apartment comp? Like what is it like, why would that be on an apartment complex as Bill Fairman 00:09:45 Books? Right? It was installed in a new car. That's the difference. Hunter Bick 00:09:48 It must have been. Right. And so, you know, we knew enough to say, okay, 400 times 12 is $4,800 a month, $4,000 a year to divide that by, at the time it was like a seven cap. I mean, the math on that is big money on the valuation. And so we, we, we fixed a lot of stuff like that. Jonathan Davis 01:10:09 And that's, you know, just, just to jump in. I mean, when you're looking at these that it's not what you can increase. Everyone thinks what can, you know, what's the rents that I can increase, You know, and under market rents. That's, that's, you know, a great way to look at it. However, this particular asset that when I was underwriting it, it was actually the, you know, when I joined with Wendy Bill, this was the first multifamily that I under underwrote for them. We could see immediately there was exorbitant amount of expenses on there that shouldn't have been there, that created hundreds of thousands of dollars of value once they just removed them. Bill Fairman 01:10:44 No. Now on, I was gonna say on the reverse side of that, if your brother-in-law is gonna be able to do stuff a lot cheaper than the market Yeah. That's not gonna count than the valuation. So something to keep an eye on when you're looking Jonathan Davis 01:10:57 At these things. Yeah. You can't say like, you know, well my expense ratio is gonna be 20 when market's 35. Right. You can't say that. Hunter Bick 01:11:04 No. I mean, you can, but no one's gonna believe you. Bill Fairman 01:11:06 No Jonathan Davis 01:11:06 One no, no price's Hunter Bick 01:11:07 Gonna use that. Yeah, no, no. Good lender will buy it. Yeah. Yeah. And so, you know, the commercial real estate is valued on the operating income, the, the, the net operating income, the noi, and that's the game. And depending on the deal, it could be that could be through, you know, buying an empty property and fixing it and, and leasing it to market. It could be cutting expenses from mismanagement. It can come in many different ways. Yep. And you know, a lot of 'em, the CapEx, some of them need so much CapEx that doesn't generate revenue. Like we looked at one where capital Jonathan Davis 01:11:40 Expenditures, things that you have to do to the property is what CapEx is. Yeah. Hunter Bick 01:11:45 Thank you. Yes. And so, but there's different types like roofs, structures, Jonathan Davis 01:11:52 Hvac, Hunter Bick 01:11:52 H H V C Jonathan Davis 01:11:53 Sales things don't add value because people expect a roof and they expect, you know, Hunter Bick 01:11:57 Exactly. A lease is a two-way document and these things are supposed to work per your side of the leasing, the lease contract. And so you don't get bonus, you don't get anything for that. But if all of the, all of the CapEx that a property needs is unit upgrades or improving the landscaping or the curb appeal or things like that, those things drive value immediately. And that, and so you ideally you want properties that have new roofs and new parking lots and don't need structural work. Yep. And you can just go renovate doors. Now all your CapEx money is going to where it makes the biggest difference. Yep. And so you can see any combination of that. Some, you know, some deals work, some people don't. But you know, that's definitely something to, to look for. Bill Fairman 01:12:41 And and your typical business model is essentially whatever the, the best deal is. Right. It's not just about buying hold, it could be buy or renovate and sell at the same time, depending on the high Jonathan Davis 01:12:55 Best use for the Bill Fairman 01:12:56 Property. Cause there could be some great offers that are coming in. Yeah, Hunter Bick 01:12:58 It could be. Yeah. You know, when we go in, we, we don't want to be married to a particular exit strategy. Sure. You know, and so if, if the deal only works, if we can turn around and sell it in a year, 18 months, probably not gonna do it. Right. There have been a couple, there would, I can think of a couple exceptions to that, depending on markets and different types of assets. But in general, like, you don't wanna be locked in to one path because if that one path doesn't work and you're gonna, if if it doesn't work and you're gonna lose money, that's tough. That's not a situation you wanna be in because real estate's illiquid, it's expensive to sell. You don't wanna be in a situation where path A you lose X and path B you lose X times two. That is not a situation. Our job, my job is to keep us outta that situation. Right. So everything we do, we wanna be able to have the option to refinance it. Yeah. We Jonathan Davis 01:13:48 Sell it. Absolutely. Yeah. That's, we talked about multiple exits always. So why, why is Hunter here on this show for emerging markets? That's because when I talk with him and his partners, what's really important and what they're really good at is sourcing deals and underwriting deals. So much so that like, you know, in 2018 they were, you know, in Fayetteville before a lot of people got into Fayetteville. And what we want to talk about is, Hunter, what are some of the metrics that you look at when you're underwriting a, a project or a property and maybe it's in a, you know, a market that you're not familiar with or you're thinking about getting there, or it seems like it's a great deal, but, you know, what are the metrics you look at for those particular markets? Hunter Bick 01:14:38 Sure. Yeah. So the first thing we, the first thing I wanna look at for any deal is the rent roll, right? Is I wanna know where are these rents compared to the average or median in that market, right? You look at some markets where maybe the rent roll 600 bucks, it's like, okay, well that, that could be high, that could be low. It depends on the rest of the market, right? Yeah. And so then the, you know, the, the second thing, if it's a new market, we wanna see rent to median income. Yep. Where, how low are the rents compared to the median income? And if you look at, But that only matters if you look at a bunch of other cities too, right? Everything's relative. So when we were looking at Fayetteville, for example, in 2018, Fayetteville's rent media income at that time it was like 18%. If you, Charlotte was like 32, all these other cities were like high twenties, like Raleigh times 20, Jonathan Davis 01:15:24 They're 25 and up. Hunter Bick 01:15:25 Yeah. Yeah. They're all 25 up. And then here's Fayville, like all the way at the bottom, like way below like every other, you know, 30 other cities. And we're like, okay, clearly the media income in Fayetteville can support higher rents, you know, in the near Jonathan Davis 01:15:38 Future. And, and in rents to median income, it's, it's just a, a hunter's way or someone who's buying multifamily or lender. It's the same way as looking at like your debt to income. That's, it's it's the exact same thing. So kind Hunter Bick 01:15:52 Of at scale it's Jonathan Davis 01:15:53 Yeah, yeah, exactly. At scale. So it's instead of an individualized debt income, it's a generalized debt to income for what are the average people making and what are the average rents. Right? Hunter Bick 01:16:02 Exactly. And so, and, and so then, so you wanna have an idea of not only where, where are rents at this particular asset, relative to this particular market, but what higher risks can this market in general support? Yeah. So that's kind of the by far away when you, Jonathan Davis 01:16:17 When you 18% you think could Hunter Bick 01:16:20 Rise. Yeah. Yeah, it could rise. Absolutely. Yeah. When plenty of other cities are sustaining at 30, right? Jonathan Davis 01:16:25 Yeah. But when you see something at, at 28, you're like, hm. You know, Yeah. It might rise a little bit, but there's not a lot of potentially a lot of meat Hunter Bick 01:16:32 There. And it may not disqualify it either because even, let's say, let's say it's a 28 or 30 for the market, but this particular asset is still $200 below the average in that market. Still a great deal. Right? Jonathan Davis 01:16:43 Exactly. Yeah. Hunter Bick 01:16:44 So, you know, so you wanna, you just wanna have the perspective of all that together. The other, the other big one of course is what kind of employers, what's the job base? How stable are these jobs? The case with Fayetteville and you know, we tell the story a lot, but so many people told us we were crazy to be buying in Fayetteville because obviously Fort Bragg is in Fayetteville. That is the biggest military base on the planet by far. Jonathan Davis 01:17:10 By personnel. Yeah. Hunter Bick 01:17:11 Yeah. By, by by count is 45,000 active duty soldiers. It is the home of the US special forces and, but then there's another like 30 or 35,000 civilian contractors that work on that base every day. So obviously that's a key economic driver of Fayetteville. No question. They also have a lot of healthcare, higher education. They have other job, the other industries that are doing well and growing. Yeah. Jonathan Davis 01:17:37 This their support systems all around for for that. Hunter Bick 01:17:40 Yeah, exactly. So people were like, Well, you're crazy mother, what if Fort Bragg goes away? It's like, okay. It's like, can we talk in probabilities please? Because okay, sure that might happen. But what is the probability of the US government moving the biggest military base on the planet out of fort away from Fayetteville? Why would they do that? That will probably never happen. So, I mean, I'm a former poker player, everything's a probability to me. Let's put a probability on this point. Oh oh 1% maybe? Sure. Maybe oh oh two, maybe oh two. Perfect. I can model that. Yeah. Great. I'm willing to take that chance to buy something that is half off. Yeah. That is half, literally half of what this asset is worth all day long. Yep. No problem. I'm happy with that risk. Bill Fairman 01:18:25 Now do you still have that asset? Hunter Bick 01:18:27 We actually did sell that one. Okay. That one we 10 31 into try house. Oh Bill Fairman 01:18:32 Nice. Now let's start at the beginning. What'd you pay for it Hunter Bick 01:18:37 For? For Apple Applewood. AK metal metal 0.2 million. Right. 2 million. And then Bill Fairman 01:18:43 And you sold it, You exited for what? Hunter Bick 01:18:45 Four three. Four four. And Bill Fairman 01:18:47 You did that and how many years Hunter Bick 01:18:50 Was it two years? Yeah, it was 18 months. 1818 months was 18 months was 18 months. I think it was 18 Bill Fairman 01:18:55 Months. So not a bad roi. Hunter Bick 01:18:58...
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240 What Financial Freedom Means To Us! | REI Show - Hard Money For Real Estate Investors
09/23/2022
240 What Financial Freedom Means To Us! | REI Show - Hard Money For Real Estate Investors
Bill Fairman 00:00:02 Hello, everyone. Welcome to the show. Our whole theme. This month has been about financial freedom and we are going to discuss this, to discuss what financial freedom is for each of us, Jonathan, Wendy, and myself, right after this greetings everyone. Bill Wendy, Jonathan. We are Carolina capital management. And thank you so much for joining us on the real estate investor show hard moneyed, real estate investors. What Wendy Sweet 00:00:48 We've been running up the steps. You can't get your breath. Bill Fairman 00:00:51 We have been running around a lot. We're getting Wendy Sweet 00:00:52 Ready to leave Bill Fairman 00:00:54 For the quest expo. So we're trying to put all our stuff together. So where was I? Who Wendy Sweet 00:01:00 Are we and where, what we do? Bill Fairman 00:01:01 We are here, Carolina, capital management. We are lenders in the Southeast for real estate professionals. So if you have a project that you would like us to take a look at, go to Carolina, hardman.com and click on the apply. Now tab, if you are a passive investor, looking for passive returns, click on the accredited investor tab and get all the information you want there. We would also like for you to like share subscribe, Wendy Sweet 00:01:27 Tell all your friends, hit the bell, the bell liking the bell. Bill Fairman 00:01:31 Anything else? Wendy Sweet 00:01:31 That's it Wednesdays with Wendy? Yeah. Yeah. Bill Fairman 00:01:33 Nope. Nope. Not yet. We have a question and answer thingy on the side or underneath. Oh yeah. If you'd like to talk to us during the show and after the show and leave wonderful comments. Wendy Sweet 00:01:46 Cause we do monitor it bad ones and we answer questions. So it's yes we do. Yeah. Bill Fairman 00:01:52 Oh, excuse me. Don't forget about when. Wendy Sweet 00:01:56 Yeah. Now he says, now you're good. That was Bill Fairman 00:02:09 Cool. We won't go there. But that was a neat little graphic. Wasn't it? Yeah, it was, it was, as I was saying earlier, we're on our way to Wendy Sweet 00:02:19 Questex quest Bill Fairman 00:02:20 Quest expo. Wendy Sweet 00:02:22 Yeah. Which is in Houston, right? Bill Fairman 00:02:25 Yes. I was waiting for the final quest expo graphics. Wendy Sweet 00:02:31 So ETT Smith will be there. I'm excited about that. I really like him. He's he's pretty awesome. Bill Fairman 00:02:36 Yeah. I got to meet him about five years ago at another conference. He's been, I'm not about that. He a real estate investor for many, many years. So he's not just there because he is a pretty Wendy Sweet 00:02:44 Face. He's not just a pretty face. He's a smart guy too. That's Bill Fairman 00:02:47 Awesome. By the way, the Wednesdays with Wendy, you can get on her calendar because she's usually booked up a couple of months in advance and it's gonna be over there in the comment section. So just click it on and get on our calendar there. Yeah. Yeah. So if you haven't got your tickets yet for quest expo, I'm sure you can get 'em at it. It's Wendy Sweet 00:03:08 Not too Bill Fairman 00:03:08 Late at, at a discount with using our code. Yeah. But your airplane, ticket's probably gonna be pretty expensive. Wendy Sweet 00:03:15 Yeah. Unless you're already in Houston because for Bill Fairman 00:03:17 Close by. Yeah. Or you could drive there. Yeah. All right. So let's get the breaking news. Wendy Sweet 00:03:44 The, the sky is falling. Bill Fairman 00:03:45 How many of you have surround sound on your device that you're listening to us? Rob? Jonathan Davis 00:03:50 I was gonna say, you know, Wendy Sweet 00:03:51 The sky is falling. Stocks are falling. Jonathan Davis 00:03:53 The, the fed raises are up the fed raised at 75 bases points. Volker is proud. Vulgar is gives the chairman from the early eighties. Wendy Sweet 00:04:08 Voker yeah. Bill Fairman 00:04:09 Yeah. Wendy Sweet 00:04:09 It's Bill Fairman 00:04:10 Been a while. So here's to sum up our breaking news rates are high stock market low Jonathan Davis 00:04:16 To, to, to sum rates are normal. Yeah. Yeah. For answer normal. They're not high higher. They higher than, than the historic low of 1.9. 5%. Yes. Wendy Sweet 00:04:28 Yes. But, but, and people need to remember that when the fed raises the rates, mortgage rates usually drop a little bit. So, Jonathan Davis 00:04:37 Well the average just crossed the 6% to 6.02. Oh, I know. Well, I mean, it's up from 1.95. So you're, you're sitting at like, yeah, right at six and you Bill Fairman 00:04:50 Know, so the fed chairman and this comments and press conference afterwards basically said, we're gonna have another 75 basis points to raise in January. They'll at that point, they're gonna let the data, see where it goes. But frankly, Wendy Sweet 00:05:11 Prices come down on everything. Yes. Bill Fairman 00:05:13 But they're looking at 2025 before they think, right. We will be out of a recession, so to speak. They, they keep saying, they don't know whether it's gonna be a recession or not, but it's gonna take until 2 25 to work this through the system. They want to have a higher unemployment rate and they want, Jonathan Davis 00:05:36 We're not sure if it's a recession, but if it is, that's what we want. It'll be 20, 25 before it's over. Yeah. But we're not saying it's, Bill Fairman 00:05:43 It's, it's gonna take a while to move all this thing through the system. Yeah. That said they Wendy Sweet 00:05:47 Want prices to come down. That's bottom Bill Fairman 00:05:49 Line. I'm pretty old. And I have lived through many, a downturn. I remember before I even got my driver's license sitting in the gas lines, I bought my first house when Jimmy Carter was president. Jonathan Davis 00:06:02 Oh, I thought they were on steam at that point. Bill Fairman 00:06:05 But my pretty much my, my whole point to this is it's not the end of the world. You just have to manage your expectations. Gotta Wendy Sweet 00:06:13 Roll with the changes should Bill Fairman 00:06:15 Be something. And there, there have been real estate investors when rates are high, the real estate investors, when rates are low, when prices are high and when prices are low, that's the thing about being a real estate investor is that you're a problem solver. That's right. And there's always gonna be problems. Wendy Sweet 00:06:32 That's right. Jonathan Davis 00:06:33 Right. I don't know. Sometimes I feel like I'm a problem survivor. Wendy Sweet 00:06:37 It does feel that way. Sometimes Bill Fairman 00:06:39 You're a problem creator. Jonathan Davis 00:06:42 Well, Bill Fairman 00:06:43 But if you know how to create him, you know how to fix him. Right. Wendy Sweet 00:06:46 He's just, practicing's putting on practice for himself. That's Bill Fairman 00:06:48 Right. So our theme this month has been, you know, financial freedom, how to get there. Your Jonathan Davis 00:06:55 And members go ahead. Before, before we get there, just, just to give a little more backstory or not backstory, a little more data. Like for the inflation numbers we are using inflation is, is measured year over year. So it's, you know, August of this year to August of last year. Well, we didn't cease inflation above 3% until October of 2021. Right? So this October, when we can compare those first inflationary numbers to the year over year, that's gonna give us a better idea. That's gonna give the fed a better idea of what's going on. Right. Is it, is it, is it staying around seven to 8%? Is it nine? Or is it, is it two? You know, and if, if those numbers come out and they're a lot lower, then that that rate probably won't happen. That rate rise won't happen in January, but with what three and a half percent unemployment, 11 million jobs still unfulfilled, you know, everyone's fighting for talent and over, I'll use the word overpay Wendy Sweet 00:08:03 That is everybody doing for work? I don't understand. Yeah. Where did all the employees go? Jonathan Davis 00:08:10 Well, and so everyone's fighting for new employees or the, the higher and they're overpaying and now will, and it is Wendy Sweet 00:08:16 Overpaying. Oh yeah, no doubt. Jonathan Davis 00:08:17 And that is one of the key ingredients to inflation. Yeah. And that's one of the key ingredients to the inflationary numbers and why they're so high is the, the income, or I guess the, you know, the average salary or monthly, you know, wage has increased dramatically in a short period of time, Wendy Sweet 00:08:35 $15 to flipping a hamburger. That's pretty strong. Bill Fairman 00:08:39 Well, to me, it's the energy that's what's causing inflation. Energy is a part of every single piece of our economy. Well, Jonathan Davis 00:08:50 Gas is going down bill Wendy Sweet 00:08:52 Way down. That's, Jonathan Davis 00:08:53 It's not $5 anymore. Wendy Sweet 00:08:55 I just paid for 4 29 a gallon this morning. Bill Fairman 00:08:59 But if we continue to try and listen, I'm, I'm in awe of the above, but you can't just cut one off and start another. Right. Because right now the other is not very reliable and it's not inexpensive to operate. Yeah. Jonathan Davis 00:09:15 Yeah. And the question, I think Scott said, well, wages drop. Yeah. The question is when, cause Wendy Sweet 00:09:22 You know, as soon as we have an Bundance of employees, well, Jonathan Davis 00:09:24 It's, it's that, but you know the cause what, what is that doing with those higher wages it's causing the cost of goods to, to go up, Wendy Sweet 00:09:32 Continue and shipping costs too. I mean, that adds a whole lot to it. That's gonna be hard to reverse that. I Jonathan Davis 00:09:38 Think, yeah. Bill Fairman 00:09:39 I disagree with you. Okay. I think love it. I think, I think wage point counterpoint wages, wages are sticky. You can't even say, and you can't once you've you can't put the toothpaste back into two. Wendy Sweet 00:09:50 Yeah. That's true. However, Bill Fairman 00:09:51 They can find other ways to be more productive so they don't have to pay as many people. Does that make sense? Like more, Jonathan Davis 01:10:00 I would agree with you if we, if we passed a law federally that the new minimum wage is $15 an hour, if that had happened, I would agree with you. However, that has not happened. And wages are dependent on where you are. Yeah, no agree. And the federal mandate is seven and a quarter still or the seven and a half. Right. There are at seven. So is it sticky because it's double what the minimum wage requirement is. I'm not sure I'd use the word sticky Bill Fairman 01:10:33 Again. That's good. It's a lot like real estate it's location. Wendy Sweet 01:10:38 Yeah. It is location driven. Bill Fairman 01:10:39 And when, when you, when we end up and what the fed is hoping for is that we have a higher unemployment rate. Sure. Jonathan Davis 01:10:46 Yeah. Bill Fairman 01:10:46 Because you're, they're trying to take demand and get rid of it or at least lower it. And that's how they cure their, the inflation. Yeah. That's a sticky Jonathan Davis 01:10:58 Question. Thank you. Bill Fairman 01:11:00 But they're trying to do demand destruction right now and that's gonna cause unemployment rates to go up, which means fewer people will have jobs, which means there won't be as high a demand on increasing wages. Yeah. Jonathan Davis 01:11:16 At Bill Fairman 01:11:16 That point. Jonathan Davis 01:11:17 And to clarify, no one, no employer is going to say, oh, now instead of paying you $15 an hour, we're gonna lower you down to 12. Right. Right. Wendy Sweet 01:11:25 That're just gonna, Jonathan Davis 01:11:26 That doesn't happen either. You have you a turnover and that person leaves or you help them leave. Right. Yeah. And then you hire in, at a lower Wendy Sweet 01:11:35 Wage, right? Jonathan Davis 01:11:36 Yeah. Or the other side of it is the wage appreciation just becomes stagnant. And that way it allows, you know, the cost of goods to catch to lower, which Wendy Sweet 01:11:48 May be the 20, 25 number might Jonathan Davis 01:11:50 Be, you know, Bill Fairman 01:11:51 You get back to contract employees. That's where, where a contract employee started anyway, as wages were going up. And I, I don't wanna single at any particular company, but go ahead. Bank of America used to do that all the time. Yeah. They would eliminate certain departments or eliminate people in departments. They would lower 'em but then they would end up no same people would get jobs with contractors that were doing the same jobs they were doing before. But now they're working with another company who was under contract with bank of America, making less money. Yeah. Jonathan Davis 01:12:22 Yeah. Bill Fairman 01:12:23 And they didn't have to pay 'em benefits. And that kind of, Jonathan Davis 01:12:25 I feel like you just proved my point. Well, Bill Fairman 01:12:27 He I'm saying wages are sticky, but there's other ways to make 'em less expensive for the Jonathan Davis 01:12:33 Less, less sticking. Bill Fairman 01:12:35 Yeah. Less. Wendy Sweet 01:12:36 I wonder too, what, how higher education is gonna come out on this? You know, because you know, to go to college, now you have to take out a loan. It's pretty sad. But, but it's, it's almost imperative that, that you borrow money to go into college unless your parents have been able to save money for you or you've worked to make that happen Jonathan Davis 01:12:58 Or you don't Wendy Sweet 01:12:59 Go that's right. And, and you know, I hate that they're considering this $10,000 or they might have already proved it. Reduction on what's owed on, on college education. I hate that they're doing that. We're teaching people not to be responsible, but I, I, you know, the college college tuition should come down. I don't know that it will, but I do believe there are a lot of people that will be coming out of high school learning trades rather than paying those high college prices. Bill Fairman 01:13:34 There's a Senator. I hope that it is introducing a bill that wants the colleges to pay half that bill and also be more open about the income that their students, after they graduate are earning and that type of thing. And one of his comments was that he's tired of the universities charging extortion amount for tuition while teaching stupid stuff that has never happen. Like men getting pregnant. Wendy Sweet 01:14:06 Yeah. That's a good one. Now. I don't Bill Fairman 01:14:09 Know. I don't know how, how far that will go through, but at at least they're bringing it to the attention. All right. So we we're, Wendy Sweet 01:14:18 I know we're close. We gotta keep moving. Bill Fairman 01:14:19 We've been, we've been rattling on about the breaking news now. Yeah. For almost the entire session. Yeah. Wendy Sweet 01:14:24 We're gonna solve the Bill Fairman 01:14:25 World's problems. What's financial freedom to you, Jonathan. Jonathan Davis 01:14:28 What is financial freedom to me, man? That I can, yeah, just up in it is appreciation depreciation and cash flow. Like that is what financial freedom is to me. What do I mean by that? It means I was, I was having a conversation with friend today and you have friends. Wendy Sweet 01:14:52 I do have friends one at least one. Jonathan Davis 01:14:54 Yeah. They'll never admit to it. But we were talking about how the credit unions are being saturated with more and more money because now the savings accounts are paying over a percent. Wendy Sweet 01:15:08 Woo. Jonathan Davis 01:15:08 What they're paying over percent. Wow. Wendy Sweet 01:15:10 And Jonathan Davis 01:15:11 You know, that's one of the things, you know, I think I use the word stupid money, but yeah, no, I, I still I'll keep with it. The stupid money. Wendy Sweet 01:15:19 Yeah. Jonathan Davis 01:15:19 Puts all their money there. Cuz I can make 1%. It's been paying 0.2, five before, but now can make Wendy Sweet 01:15:25 1%. That's right. That's right. Jonathan Davis 01:15:26 And inflation is how much, like you are losing at an eight, a negative eight one rate ratio. Right. So how about don't do that because you're giving them free money to lend out which well, you know, on the, on the lending side, people love it because that's what we were talking about. Like friend, he, you know, he would use their money to buy multifamily, but I guess I'm getting a long way. Like don't put your money there, put it in an asset that appreciates over time allows you to depreciate on your taxes for capital expenditures and then also gives you cash Wendy Sweet 01:16:04 Flow. That's right. Like Jonathan Davis 01:16:05 If you can, if you can cover all of those things, you will outpace inflation. You will outpace the stock market and you will be financially free. Now it's not an easy road. I was having dinner with a, with a guy the other day and we were talking about how expensive it can be, especially right now to own real estate and stay in it and not just sell or, or become a whole seller or Wendy Sweet 01:16:31 What have you. Yeah. Taxes are up. Jonathan Davis 01:16:32 Taxes are up all, you know, they've reassessed all the values when you know, they won't be reassess. Well they have to do it every five years. Yeah. It'll be a while. They won't be doing it at any time soon. Yeah. Right. So us taxes are gonna stay high. Yeah. So it is expensive and it is, it is difficult and it's not the easy path, but it is the one that leads to financial freedom. Wendy Sweet 01:16:52 I agree. I agree. So for me, financial freedom is one sentence. My money working for me instead of me working for money. Yep. That's that's the bottom line and which is really what you're talking about. Yeah. I, I, you know, I will never retire and I let me knock on wood. When I say that I have no intention to ever retire and walk away from working. I enjoy it. You know, I I've got like a serious, you like having you around, well, I, you must want something. So I love real estate. I have a serious passion for real estate. All that entails real estate notes, you know, rentals, self storage, apartments, whatever it is. I love everything about real estate. It's just a passion for me. I don't ever wanna stop learning more and being involved in the art of the deal, which is my favorite part of real estate. I don't ever wanna stop that. But what I do want is the opportunity to say, I don't have to do this if I don't want to. Right. You know, I want my money to work for me. I wanna be able to go to sleep at night and know that I've got money. That's being deposited into my account. You Jonathan Davis 01:18:09 Know? And, and you mentioned the art of the deal. I mean, that's one of the pieces of financial freedom is that when, when you do have that knowledge base and that drive and that, that determination to do deals and that desire, like you need the space to be able to do so. So part of that freedom is having the space to analyze deals, to look at them, cuz you can't analyze and look at deals and close 'em. If you're out there scrubbing toilets or cleaning up your Wendy Sweet 01:18:36 Rentals. That's exactly right. So that's exactly right. And you know, a lot of people...
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The Meaning of Financial Freedom | REI Show - Hard Money for Real Estate Investors
09/16/2022
The Meaning of Financial Freedom | REI Show - Hard Money for Real Estate Investors
Bill Fairman 00:00:00 I don't even see it up there. Oh, hi folks, bill Fairman here. We are going to talk about what freedom financial freedom actually means to you right after this greetings from the grand downtown rock hill, South Carolina. Woohoo. We are Carolina capital management. Thank you so much for joining us on the real estate investor show hard money for real estate investors. Wendy reminds me. I have to smile. Wendy Sweet 00:00:57 You can do it. You can talk. At the same time. Bill Fairman 00:01:00 We are Carolina capital management. We are private lenders in the Southeast for real estate professionals. And if you have a project that you would like us to take a look at good Carolina, hard money.com, click on the apply. Now tab. If you are a passive investor looking for passive returns, then click on the accredited investor tab. Don't forget to like share subscribe, hit the bell. And don't forget about Wednesdays with Wendy. Wow. That Wendy Sweet 00:01:35 Was cool. And short and sweet. And it matched my junior high school school colors. That's Bill Fairman 00:01:40 Right. Very nice. So Wendy donates 30 minutes of her day per person on Wednesdays to talking about real estate. She's usually booked up a couple of months in advance. So there's the link. It will be over in the comments and questions side, which is either gonna be on the right hand side of your screen or underneath, depending on the platform that you are viewing us from. Well, since we teased it last week, this show is recorded. Wendy Sweet 00:02:08 That's Bill Fairman 00:02:08 Right. So we don't have any breaking news because that would've been last week's news. Wendy Sweet 00:02:12 That's right. We don't know. We can't see into the future. Although sometimes we claim that we do, but we really can't. Jonathan Davis 00:02:18 I mean, when it works out, you have any Bill Fairman 00:02:19 Additional commentary you'd like to add for the fake breaking news for Jonathan Davis 00:02:23 The fake breaking news. Wendy Sweet 00:02:24 Yeah. Jonathan Davis 00:02:26 No, but no breaking news, but you know, we are, we, we would where we're at, like the first month in 17 months where homes are selling under asking price. Oh Bill Fairman 00:02:38 Nice. Wendy Sweet 00:02:38 Yeah. Yeah. That's so amazing. Jonathan Davis 00:02:39 The first time is 17 months homes are now selling under asking price. Bill Fairman 00:02:43 It must be a crash. Jonathan Davis 00:02:45 That's what they would have you believe. Yeah. Bill Fairman 00:02:47 Do you remember back in the day when people actually negotiated price? Jonathan Davis 00:02:52 No one knows what negotiation means anymore. Wendy Sweet 00:02:54 Well, we do now and that's, you know, that's something that investors really need to, especially wholesalers. And rehabers really need to understand that because if you're using cops from six months ago, they're not real, are they? They're real. They're just not relevant. Yeah, that's right. You need to use the ones from, from very, very, you know, past 30 days or less, or from the future, you know, Jonathan Davis 00:03:15 You can do that, Wendy Sweet 00:03:17 Which is what we do Bill Fairman 00:03:19 Kind of our point here is that you don't wanna hear, you don't wanna listen to the noise. The noise is just that it's noise. We were not in a normal market. We haven't been in a normal market and several years. Yeah. It has been crazy out there. And all we're doing is we're coming back Wendy Sweet 00:03:34 To reality, Bill Fairman 00:03:35 To a normal market. And we're still above the, the normal market. Yeah. Yes. I mean, we really need 60 to 90 days on market for homes and we still don't have that yet. Jonathan Davis 00:03:46 I mean, the, the average home value, I think is like 3 75 now, which is way more than it was two years ago. Yeah. Bill Fairman 00:03:52 And listen, I don't see the days on market slowing down an awful lot. I mean, it's gonna come down. I get it. But we, we still, yeah, but Wendy Sweet 00:04:02 We change, sorry. We had this Jonathan Davis 00:04:04 Conversation the other day and it really got me Wendy Sweet 00:04:06 Stop limit me around. Bill Fairman 00:04:08 We still have a housing shortage out there. We're about 5 million behind on new homes. Yeah. And we still create households. People still need a place to live. Wendy Sweet 00:04:16 Rents are going up. Bill Fairman 00:04:17 All right. So I'm going to pause right now for another fancy David Phelps moment. Jonathan Davis 00:04:32 I just took a deep breath, man. That's how I feel when I'm around David. So yeah, that's really, really relevant. Bill Fairman 00:04:38 David has been gracious enough to give us two shows. He's an awesome guy, great friend of ours. Let's bring him on. Thank you so much for joining us. David David Phelps 00:04:49 Brush off the beach. I'm here. Wendy Sweet 00:04:51 You get a sunburn from that. Bill Fairman 00:04:56 So one of the great things that you do is you teach people, mainly private professionals, Wendy Sweet 00:05:05 Doctors, dentists, but, Bill Fairman 00:05:06 But anybody that wants to learn, cuz you have a lot of books out there about this too, is about being financially independent and, and free. So what does it mean to be financially free? David Phelps 00:05:20 It's to have enough income, enough cash flow that's produced by investments. I like, I like asset based investments. So asset based income that will produce the cash flow that you need for your essential lifestyle, whatever that lifestyle is to me, that's financial freedom. And we'll go into more depth on what that, what that allows people to have, why I think it's important, but essentially financial freedom gives you choices and options. If you don't have to go to work or keep the business running or operating the way you've been doing it or putting up with certain people or clients or whatever it is you think you have to do when you have, when you're financially free, you can change the model. You can try things, you can test things, you can take new ideas on it. And that's that's I think the, the real goal in being financially free, it's not to do nothing. David Phelps 00:06:11 It's not to be on that beach that you guys stuck me on for the last week. That was great. I don't, I don't, no, I can't live there forever, which is nice. I, I, I need to be doing something, but I wanna do it the way I wanna do it. I wanna work with people that I choose to work with that. I think we have some, some values in, in, in common that I can actually provide a service or a product that, that they actually appreciate. And there's an exchange for services. It's about the money, but it's at that point, not all about the money and that's what changes your whole mindset about always trying to, you know, eat out enough money to pay the bills and have a nice vacation. And maybe you get a better car. That's just the, the common we call the treadmill last week or the hamster wheel. Jonathan said that too many people are on. And it's just, it's just changing the mindset about how money works that can really change the lives of, of people at any, any dimension in their, their life, whether they're modest income earn, moving their way up or middle income or, or even higher income, which typically they have the hardest problem. High income actually have the harder problem with this than people that are a little bit lower on the scale. Bill Fairman 00:07:20 Hmm. Interesting. Is, is that, do you think that's because they had that mindset of, they don't know what enough is yet. David Phelps 00:07:28 Yeah, I think, I think, I think not knowing how much is enough. And then I think also there's that tendency to elevate one's lifestyle because as you earn more money, because you're more proficient efficient, better at what you do, better products or services. That's, that's great. We should all aspire to do that. As the income goes up, then typically it's like, well I need nicer things and there's nothing wrong with that. It's just, don't let that get out of hand. I, I, I'd rather see people make investments that can then provide for the nicer things that they choose to have. Wendy Sweet 00:07:59 Well, one of the things that, that I think is so important that you teach through freedom founders is you, you allow people to have the fear removed what's gonna happen. If I stop, if you know, highly paid professional is, you know, their business is running great, as long as they're there, but when you're no longer there what's gonna happen. If I stop, how can I stop? I have this great fear of doing that. And you have just done an incredible job of teaching people that they can throw that fear out the window because alternatives, right? David Phelps 00:08:41 Yeah. And it's, it's not even just to stop Wendy it's, it's just even to, to cut back a little bit or let's just be very pragmatic. It's getting home in time to actually have dinner and maybe go to your kids' soccer games. I hardworking people who just feel like they have to grind to your point. Don't know how much is enough. Feel like that they'll miss the opportunity. If they don't get all they can while they're young and energetic, but they miss out on the very thing that they can regret later in life. When they get to a point of quote retirement, don't like the word, but you know, retirement, but then where are the kids? Kids are gone. It's like, oh, but now I have the time I have some discretionary money. I could actually live my life that you missed out. And so giving permission back, removing the fear that people have by not having to grind and actually take some extra time off. David Phelps 00:09:32 That's the biggest thing that, that showing people, how investments in alternatives, particularly real estate provides that sustainable passive income that can start to replace the need for the person, the hard worker to have to grind as hard as they grind. So you can start to taper it back. I've got docs that are, you know, in their thirties and forties, you've met many of them. They don't have any, any idea of, of giving up, you know, what they do anytime soon. But they just like the fact that they can actually take, you know, a full day off during the week or maybe a day and a half, or, you know, get it down to three days a week and not feel compelled to have to keep at that grind because everybody else is. And that's like Harrison factor that doesn't serve. Absolutely. That's pretty well at all. Jonathan Davis 01:10:15 Yeah, no, you know, touch on, on financial freedom. It reminds me of a few episodes back. We had Chris miles on here and Dr. Phelps, I know you watched it, so I'm not gonna tell anything you don't know, but you know, he was on there. He's telling about, you know, the financial freedom model that everyone is prescribed in America. And the world abroad is invest, you know, put money into your 401k, you know, put money in savings. And he gave this, you know, description of his father retired and you know, was gonna draw on his 401k. And he wanted Chris to look at it. And Chris did and said, well, you're gonna have to die in about five years because that's all this is gonna last you. And like, and that was like the wake up point for him and, and his dad apparently too, but like that's not financially free. So, you know, that model of what we're prescribed, doesn't seem to work your model. David, can you kind of, I know you've kind of tiptoed around him, but can you kind of give us a little more of the nuts and bolts and the nuances of what you are telling your people, how to build this financial freedom and that, that maybe isn't 401k. David Phelps 01:11:27 Yeah. The 401k, the traditional financial retirement model, as you describe it, Jonathan is an accumulation model. It, it is about discipline and discipline's important. That's taking money and, and putting it in a vehicle, this, this case, an IRA or a 401k, that's basically invested by somebody else. Who's gonna choose stocks, mutual funds, bonds, whatever. It might be kind a mixed financial portfolio. And, and that's supposed to just, just, you know, sit in those accounts and, and grow over over the years. Well, they grow. And then of course, then we have a market downturn and, and it, and it drops back down and, and back to contribution level this up and down what retirement requires, or let's just say removing yourself from active income, what it requires is cash flow, not at accumulation. It requires cash flow. The traditional model that we're talking about, the 401k does not provide for cash flow. David Phelps 01:12:19 The, the whole game there is well build up as much as you can. And then you ask a financial advisor today. Well, how much should that be for, you know, any one person just, they can't give a really clear answer? Well, of course not because the, the, the variability in the economics today with inflation factors and, and all the volatility, they can't really. So what they tell people is just, well, as long as you can keep working, keep working, you know, well that's cause they wanna manage more, more the capital. There's a little bit of a incentive in there for, to keep, you know, keep managing their money. But the problem is they accumulation models based on you have so much. And they try to run these algorithms with this fancy software to say, okay, well, based on how much you've got here, we're trying to forecast, you know, another 25, 30 years down the road, how can they forecast the economic models? David Phelps 01:13:03 Could they, could they forecast COVID could they forecast all the helicopter money we've had? Can they forecast? No, they can't forecast any of that. How do we do it with cash flow? Well, it's the fundamentals of real estate. As we know them very well is in as real estate keeps pace with inflation. So I don't think it's very healthy for our economy to be running it eight and a half or 9% inflation. The CPA CBI rate that we have now, that's not healthy, but you know what our assets, and you've already talked about it earlier, reds, go up the values, go up. So at least we can keep pace financial model, not, not the case. You start having to deplete that financial model, that accumulation model depleted over time and try not to run out of money. Chris miles talking about his father was looking at that saying, yeah, dad, you, you need to take out this much every year or two pay for your burn rate because there's no cash flow in this model. David Phelps 01:13:50 It's just, you just stacked it up as high as you could get, but you only stacked up enough to last you five more years. You look at inflation rate today and let's just say, let's just, let's just P it at eight point half percent or even 8% to I do the math in my head, use the rule of cutting two every nine years with an 8% inflation rate, the purchasing power of your dollar or your a hundred thousand dollars or your million dollars, whatever you have is cut in half, cut in half. So you thought you had a million dollars. It was me. That's gonna work really well for me for the next next number of years. Oh, but gee, in nine years it's only gonna be worth half a million dollars. And then in another nine years, it's worth a quarter of a million dollars. How's that gonna work out when you've not attached your, your plan to a vehicle that actually keeps pace with inflation? Bill Fairman 01:14:35 Very well said very well said. Yeah. And when, when you, when you look at that model as well, it has a lot to do with timing. I, I know our mutual friend, Ryan Parsons and Chris miles. I, I had discussions about this when you use that accumulation model, when you're using the 401k, putting money in the stock market, especially with the 401k we have. And then this is anecdotally, I don't have actual statistics on this, but everyone that I've known that David Phelps 01:15:05 I'm surprised you don't, Bill Fairman 01:15:08 That I know that has had a 401k over a period of 20 years, they end up with about the same amount of money yeah. That they had for their contribution and their employer's contribution. They made no more or no less, pretty much in that same ballpark. So having it in the stock market, really, for the most part over that long period of time, all it did was hold it in place. David Phelps 01:15:32 Well, it's, it's, you know, it's it's wall street, wall street is a, you know, billions and billions of dollars, trillions of dollars platform, major marketing marketing platform, and essentially wall street indoctrinates the majority into thinking that's the plan. And so it's, it's just trying to change people's mindset to say, there is another way to do it, right? It's not as easy as cooking a mouse. It's not as easy as just, you know, having money pumped into your 401k. But if that plan's not gonna work, then I tell people, shouldn't you be considering something different, even if it means you have to do a little work and do get a little education to figure out how this is gonna happen. Doesn't that make sense for you? Otherwise, you're gonna be in a very nebulous place when you want to actually take your foot off the pedal of that active income and actually go into some transition to maybe some kind of retirement model. Whenever that might be, you can't do that with the accumulation model. It's just, it's not, not, it's not there. Wendy Sweet 01:16:28 Yeah. Well, and just as inflation changes, so does your financial number, you know, depending on what age you are and you know, what's happened all around you, you know, how do you keep up with that change in what your number is? How often should people reevaluate where they are and where they're going? David Phelps 01:16:52 Well, I think relatively often, and, and most people don't, you know, we talk about in businesses and I think you mentioned earlier, you know, Wendy about, about having, you know, a with, with a business, you know, you have a regular monthly, you know, financial meeting and you go through, you know, the expenses and, and the, the revenues and look at profit. And I think you've gotta do that on the personal side too, whether you do that yourself and you're using a QuickBooks, or you have a, you know, have a accountant or somebody can help you. But I think you've gotta look at it on a regular basis because there is creep even without high inflation there's creep. So you add inflation into the normal creep and, and, and things can get out of hand. So you've gotta keep a real eye on what that creep looks like and realize that, that it, it does increase over time, unless you really are judicious about, about removing the things that are no longer need to be part of that burn rate that we talked about Bill Fairman 01:17:46 Something you okay, you're always taking a breath. I'm not sure. Well, the good, the good news is I'm taking breaths. So I, I know we all preach diversification in our real estate portfolios, and everyone has different goals with their freedoms, freedom. Some of it is traveling a lot. Some of it is, you know, making sure I have a legacy that I can pass on spending time with the grandkids. Yeah. Good causes that you wanna participate in. Do you feel like it's more important to own actual assets or to be a part of more passive invested in investing syndications funds? Yeah. And again, I, I know it probably depends on, on each person and what their goals are, but we'll just talk about you in your opinion, because of your lifestyle, what you wanna do. Are, are you...
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238 What Is Your Burn Rate? | REI Show - Hard Money for Real Estate Investors
09/09/2022
238 What Is Your Burn Rate? | REI Show - Hard Money for Real Estate Investors
Bill Fairman 00:00:01 Hi folks greetings today. We're gonna talk about your burn rate. What's important about it. Does it change over time? We will get that and more with our special guest, Dr. David Phelps, right after this Wendy's Hasling me because I wasn't smiling enough. So I'm just gonna talk like this, the rest of the way. Greetings. I am bill Fairman Wendy sweet in the middle and Jonathan Davis, over there to the left. We are Carolina capital management. And thank you so much for joining us on the real estate investor show hard money for real estate investors. Like I said, we are Carolina capital management. We are a private lender in the Southeast for real estate professionals. Wendy Sweet 00:01:04 If you're unprofessional, won't, don't call us. Bill Fairman 00:01:07 If, 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, click on the accredited investor tab, don't forget to like share, subscribe and hit the bell. And don't forget about Wednesdays with Wendy, Wendy donates 30 minutes per person on Wednesdays to talk about anything real estate related or faith. If you'd like to discuss faith, she's really good about that. She only makes fun of you sometimes. Just kidding. She's always booked up though. So here's the link to get on her calendar. Wendy Sweet 00:01:58 Awesome. And what was really cool? The last Wednesday happened to fall on a couple months previous, I had done a special talking event with some of the kids from freedom founders. Oh cool. And I'm saying this cuz of course David is with us today and my calls all last Wednesday was all freedom. Founder, children of freedom, founder people. It was really cool. Bill Fairman 00:02:24 Nice. Yeah. Well we do have a question and comment section on the right hand side of your screen or the bottom, depending on the platform you're viewing us from, you can also get all the links that we're sharing over there as well. So we have, we don't have any, there's nothing breaking this week, right? Wendy Sweet 00:02:43 Broken. We had a little Jonathan Davis 00:02:44 Bit of commentary in before we go into the burner. Yeah. Bill Fairman 00:02:48 Okay. Well, in that case, I'm gonna surprise SHA cuz I said we had, no, Wendy Sweet 00:02:53 You should ask your cohos breaking Bill Fairman 00:02:55 News. So I'm gonna say I'm giving I'm talking over longer so she can have plenty of time to queue up the breaking news. When will it end? I feel like I'm on a mission and possible said anyway that awesome. Thank you SHA for jumping right in there and taking over. So yeah, Jonathan Davis 00:03:35 Well we're, we're gonna talk about burn Ray, which we're gonna let Dr. David Phillips explain exactly what that is, but kind of to build into that, you know, just last month we received reports that consumer spending and consumer debt rather is a lot higher than it has been in fact way higher in, in 20 years. Yeah. People Bill Fairman 00:03:56 Living off their credit card. Jonathan Davis 00:03:57 Yeah. Well that's, that's the thing. It, I think year over year rose a hundred billion dollars in credit card usage. Wow. A hundred billion dollars. So that is more people stacking up consumer debt and we can let Dr. David Phelps tell you how that'll affect your burn rate. Also we're seeing, you know, slowing down in the appreciation of homes, we're continu, I think we're four or six, four to six months of continual slow slowing down in that, which is good. We needed it. It's getting to normal. It's down to 18 now. Yeah. Woo. That's great. Down to 18, you're seeing more, you know, more inventory lingering on the market. Hopefully, you know, people will lower prices and we can start moving things and get a little bit back to normal, whatever that means for the time period that we're in. The only thing that is still rising are rents. Right? They are. Thank you Lord. Going up. Yes. That's great. Which it, it was, the report came out for the highest rent appreciation, I suppose, in the nation and by percentage. Right. Do you know what city that was? Hopefully Charlotte, no, no Lexington, Kentucky where I'm from really. Wow. Interesting is the highest I got, you know, Bill Fairman 00:05:21 Because it started off so low Jonathan Davis 00:05:22 It's exactly. Yeah, exactly. Yeah. Lexington, Kentucky is number one, followed up by Corpus Christi in Texas. Now on the list on the top declining markets in rents are Irving, Texas and Plano, Texas, really? And number four and five. Huh? Chicago's number three. Huh? Yeah. But interesting. So, you know, Corpus Christi, Cincinnati and Columbus, Ohio. So basically what you're seeing is affordable places that have been historically affordable yeah. Are rising again because people are seeking out that affordability. Yeah. That makes sense. Yeah. That makes sense. You know what I Wendy Sweet 00:05:57 Thought thought was really interesting too. You were talking about how, how sharply consumer debt has increased when, you know, two years ago, you know, COVID COVID time, you know, and, and as a, a, a friend of mine, who's speaking on sunrises tomorrow, Jordan Nabb, he's an attorney. He said when the helicopter was flying around dropping money on everybody, the not only was consumer debt really low, but savings was really, really high. Jonathan Davis 00:06:28 I, I didn't put the chart up and I'll, I'll make it available to everyone. But yeah, you can see in 2020, when you know, extra surplus money was made available to everyone, it was a negative 17% year over year. Wow. Wow. Which means people just crush their debt down just, and then now since then we're up at, oh gosh, where we're at. Nope. 12.6%. Wendy Sweet 00:06:53 Wow. Year over Bill Fairman 00:06:54 Years. And it's the fed continues to raise rates. Then those cards are costing you even Wendy Sweet 00:06:59 More that's right. That that's right. That's right. Exciting news. Bill Fairman 00:07:03 O okay. So that was some great breaking news. Jonathan Davis 00:07:05 Hey, you know, builds for Mr. David fell. Our Dr. David helps Rather's Bill Fairman 00:07:10 For sure. David's gonna get bored sitting over here in the green room. So I'm gonna bring him on in just a second, but we have a special visual treat for him first that that's where we all wanna be right now, David, Wendy Sweet 00:07:30 That you Bill Fairman 00:07:32 And David Phelps 00:07:37 The room looked like God, it was close. It was close. So thank you for that. Thank you for having a nice place for me to rest and relax before I on your, Bill Fairman 00:07:49 You left some snacks for others later David Phelps 00:07:52 With a little umbrella. Yeah. It's all there. Bill Fairman 00:07:56 So, so our, our first burning question for you is what is a burn rate, David Phelps 00:08:04 Burn rate? Yeah. That's, that's overhead, that's a cost of operations. And that can go for one's personal life, personal overhead, personal burn rate. Certainly if you have a business that you run, you've got an overhead or a burn rate in your business. And you know, within that, there's fixed in variable costs, but we all need to know what our burn rates are, you know, personal line business, because, well, I'm probably leading the witness here, but burn rate burn. Rate's very important. I'll let you get, let you take 'em there. I'm not interviewing you. You're interviewing me. So I'll give it back to Bill Fairman 00:08:33 You. No, listen, we love that. You can take a question and just go with it. We always love the interviews that we have with folks that will go yes. Wendy Sweet 00:08:42 That's it. Bill Fairman 00:08:45 Or no. Jonathan Davis 00:08:48 So David Phelps 00:08:49 You're gonna give like essay questions. Is that what you're saying? Wendy Sweet 00:08:53 Your own words? My Jonathan Davis 00:08:54 Own words. Bill Fairman 00:08:56 So what's, what's the importance of getting your burn rate and we'll say under control or at least knowing what it is. Jonathan Davis 00:09:03 Yeah. What does it even mean? It's just, what does it mean, basil? David Phelps 00:09:07 So, so, so I'm, I'm gonna focus on the personal side. Remember there's burn rate for personal and business. Both are important. I'm gonna focus on the personal side burn. Rate's important because I talk a lot as we all do, because we love real estate. As a vehicle, as an investment real estate provides, you know, cash flow. So if I want to gain freedom in my life, then I need to somewhere start replacing my burn, my personal burn rate with something else that doesn't require me to go to work now, nothing wrong with going to work. We all start there. We need to work. We get an education. We get training in something, get a career, or be an employee somewhere. We, we earn money to pay for our burn rate. But if our burn rate starts to escalate over time, which often it does, because the idea is is you travel through life, your education you're experience, your skillsets, allow you to earn more money. David Phelps 00:09:56 That's a good thing. But what happens to too many people is they let the lifestyle burn rate also escalate. Now I'm not saying it's bad to aspire to have a, a nicer home, bigger home, maybe a better car than which you started with when you were just getting outta school, which that's nothing wrong with that. But if we focus on what's my real burn rate and how quickly here's the question, how quickly with a plan in place, could I start to replace the cash flow? The income required to fund my burn rate with asset based income? How quickly could I do that? That's what I call a freedom number. And that's why it's important to understand what's my burn rate. Cause we don't have any goals set on that. It can continue to escalate forever. And that's where people get on that treadmill. The treadmill of I earn more, earn more. David Phelps 01:10:44 It's all good. It's all good. I'm living out a bigger life, a nice life, great life provide for my family, but I'm on this treadmill and where do I ever get up? Get the treadmill even a little bit, even drop the incline a little bit. Right? I mean, you guys go to the gym, you know what I'm talking about? You know, at some point you just can't keep that incline up here, running it in higher RPMs. You've gotta drop it down. Well, in real life, once you're on that trim, it's, it's hard to turn it back down again. Jonathan Davis 01:11:09 Yeah, yeah. You know, it's makes me think of hamster on the wheel. I mean, yeah. That will, can only go as long as that hamster's running and once you step off, it's done. So, you know, to kind of illustrate the point, you know, we need something that's moving that wheel even when we're not on it. Bill Fairman 01:11:27 And I don't wanna lead the question, but I'm going to already know the answer, but I'm gonna, I'm gonna ask it anyway. Jonathan Davis 01:11:39 You know, I've found that when people say that most often they don't know the answer. Bill Fairman 01:11:48 Is it easier to lower the burn rate than it is to increase the income? David Phelps 01:11:54 I think it's easier to increase the income personally. I, now you can do both. You can do both. And I think people should do some of both to look hard at the burn rate and say, where could I potentially cut back? But I would say it's easier or probably most focused should go on increasing the income, the cash flow. Bill Fairman 01:12:15 And, and, and that's something that, you know, we all want to do is take that active income and turn it into passive income. And we're gonna talk about that on our next week's show is about our freedom number and how to get there and the best way to get there. And the, in my opinion, the, the, the best class of assets to get there with. Jonathan Davis 01:12:37 Can I jump in real quick? Absolutely. So, you know, when you said increasing the income is the easier path, I would, I would probably assume that most people watching this would've thought decreasing your expenses, cuz it kind of like fits into that. Like, you know, Dave Ramsey mindset, like, like to be wealthier, to be successful, to be free, there has to be suffering involved. Like you have to, you have to take away. And I love that you came in and said, no, like it's easier to add income, right? I mean, when you, well, David Phelps 01:13:12 We're, we're all about suffering here. Are we not? We're we're suffering each other right now. No, we're not. We're enjoying this, but, but yes, Jonathan look, there's, there's a sacrifice period. Unless you were born with a silver spin in your mouth or a trust fund baby, there is a sacrifice period. We have to go through it. Working hard, being dedicated, persevering at whatever is in front of us, whatever our goals are, task career path business. Yes. We have to sacrifice to an extent. So if you wanna call that suffering, maybe there's a little bit of suffering. I think we all had jobs, you know, as we were growing up that maybe you look back, you know, that was suffering, but it was a good for our character building. All right. So get beyond the suffering though. And let's get to a place where we can be more strategic and leverage our experience, leverage collaboration with other people, which is a lot what we're doing right now today. David Phelps 01:13:59 What you, you all do so well, there's ways to enhance your income, even if it's it's part of your business plan or also as we'll talk about, I'm sure on the, on the passive side, you can do both more easily than you can on the quote suffering side. So I don't want people to think about suffering, but yes, I think I talked to young people and, and Wendy, you were talking about, I'm so glad you were able to connect with, with our, our, our young next, next gen from freedom founders and sewing to them. You know, if I could go back and, and talk to my younger self or talk to these kids as we do, it's, it's like, don't lift your lifestyle escalate too quickly. You know, stay in that mode where, you know, you, you've had to kind of, you know, eek it out and, and, and don't ramp it up. David Phelps 01:14:46 I was talking to a, a doctor just this last week, you know, he, he does quite well, but he's, he's kept his burn rate low. And I said, I said, how have you been able to do that? Because most people, as they escalate, their income goes right up. And he said, you know, my wife and I just got used to the fact that when we got outta school, we had student loans to pay off. And that required us to, you know, to live modestly. And he said, even after we got our student loans paid off, we decided to know happiness and joy doesn't come from necessarily elevating our, our lifestyle. So we've kept our burn rate low. Well, that doctor today has, has, has a son and a daughter ages four and eight. So he's, he's under 40 just giving you a little bit of character. He's under 40. And, and he's got a lot of flexibility in his life. A lot of flexibility to, to, to do different things. Even with his technical expertise in dentistry, he does different things. He's not, he's not anchored down to one schedule, one place to go, you know, four or five days a week, like so many are. And so he's built that freedom and by keeping his burn rate modest, Wendy Sweet 01:15:45 You know, it's funny when you're talking about that, it really reminds me of my two sons. I have a 19 year old son and a 21 year old son. And they are like rich, but dad, poor dad, you know, one is, is, you know, saves his money. He works hard. He, he, he almost bought himself a boat and he asked my opinion, mom, should I do this? When I I'm really interested in buying a house, that's my big goal. And he's 19. And I said, well, how does buying a boat help you get a house? And he said, that's all I needed to hear. And he walked away from that desire. Now had I said that to my, well, my 21 year old wouldn't have even asked me, but you know, had I said that to him, he'd be flying around in a boat. Yeah. Wendy Sweet 01:16:35 You know, as fast as he could on the lake. So, oh, I was getting ready to say, that's, that's pretty incredible that he could fly on the boat. Yeah. It's an near boat, but it's, it's, you know, I loved when we were at your last freedom founders event and you were talking about burn rate and you, you, with this group, you went through all the things you really need to look at. And question, is this something you really need now? Do you really need the big house? You know, do you really need the fanciest? You went down that list. And if you could talk just a little bit about just really giving people an idea of things they really should be looking at to decrease that burn rate. David Phelps 01:17:22 Well, house living quarters is certainly one of the big ones, whether you rent or, or own, you know, the larger, the square footage, the more utility cost you have just to heat and cool, right. Property taxes are higher. Insurance is higher, just maintaining a certain square footage, interior and exterior has a cost factor to it. So even if you have a free and clear house, which is a great goal to have, but if it's large, then it's gonna require a certain overhead or a burn rate just to sustain that large capacity house. If you rent, I mean, same thing. You're gonna pay proportionately for the size. So do you need all of that? Right? I think so that that's a big one. I think other aspects would be. And I, I just look at vehicles, I, for me, a vehicle or car is just something that will securely and reliably get me, you know, from here to there where whatever my, my transportation needs are, I'm not judging people who want to have nice cars at all. David Phelps 01:18:20 I'm just saying, it's just look at, I, I just always buy used cars and I just drive. 'em a lot of miles. That's just that's me. It is. It's like, it's almost like a badge of honor for me. And I think I got that from my dad. My dad was the same way. So like father, like son, you know, I just, I just drive. But you know, I just feel good about that because going back to your point, Wendy, about your two sons, I've always looked at the additional discretionary dollars I have by not having those, you know, inside of my burn rate, having to put fund my lifestyle. If I can cut that back, I've got more dollars I can put into investments. The ones I like that will produce, you know, additional income. So when I do want to enjoy something more, like rather than buy a boat, I would just tell your son rent, go rent the boat. David Phelps 01:19:03 You can rent a really nice boat for a weekend or a week or whatever you wanna do. And then just give it back. See, I think that's the way to do those nice things. People like to have vacation homes again, not judging, but I think it's better personally to, well, you'll like this Wendy rent, Airbnb, you go where you want to go rent the air and B for in the weekend, the week, whatever you can go to different places and people, oh, well you you're just wasting your money. No, actually I didn't have the extra expenses, the, and, and the hard costs and, and the mortgage and everything else on that. Airbnb. Now, if you run it as a business, different ballgame, but I'm just saying people that like a vacation home, why don't you just get the extra money, invest it in something, an asset they'll produce. And then you can go have, have vacations all over the place when you decide to do it. Wendy Sweet 01:19:46 That's right. And if you go to sweet spots, stay...
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237 How Do You Mitigate Risk? | Real Estate Investor Show - Hard Money for Real Estate Investors
09/02/2022
237 How Do You Mitigate Risk? | Real Estate Investor Show - Hard Money for Real Estate Investors
Jonathan Davis 00:00:01 Hi everyone today we're discussing risk mitigation. And what are some of the risks that you may not be thinking about while investing right after this? Jonathan Davis 00:00:35 So I'm stepping in for a bill today. He usually gets through the, the whole intro, but just, you know, bear with me here we are. This is the real estate investor show. We are Carolina capital management. We are investors and lenders for the real estate space. In the Southeast. We are private lenders for real estate professionals. And if you would like to invest into real estate or get a loan, go to Carolina, hard money.com and click on the apply. Now tab, we also have a fund for credited investors. So if you are interested in receiving passive returns and getting outsized passive returns, then go to the accredited investor tab. Don't forget to like share, subscribe and hit the bail. And then also Wednesday with Wendy, Wendy Sweet 00:01:42 They Jonathan Davis 00:01:43 Were quick. I like it. Yeah. I know Wednesday with Wendy, Wendy donates all of her Wednesdays to help you in anything to do with real estate or business. She's a great resource. She's booked out usually several months in advance, but go ahead and it's a Calendarly or it's a HubSpot meet up. There you go. Just click on that link and you can schedule a time to talk with her and, you know, just kind of dive into everything that is business and real estate. Wendy Sweet 00:02:10 You know, what was really cool this past Wednesday, which was yesterday as far far as I know, I do five calls a day and all five calls were faith-based. You know, how do you balance your business and your relationship with Christ? It was majorly cool that all five people, that was their intention. So it was kind of a Jesus best. It was neat. Jonathan Davis 00:02:37 That's awesome. That is awesome. Quick though. Before we bring on our guest today, I do want to just some quick news, Wendy Sweet 00:03:08 We're giving CNN a run for their money. Aren't we, Jonathan Davis 00:03:12 I know right before I get into the news, I just have to say how concise and moving forward this show seems to be compared to bill. Wendy Sweet 00:03:24 What do you mean? Jonathan Davis 00:03:25 Yeah, no. So, so I, I do wanna discuss a couple things. The first being, you know, mortgage applications, mortgage originations, the volume of mortgage is at a 22 year low, not, you know, anything groundbreaking. We know that when the rates have, you know, doubled in the last, you know, year and you know, housing prices haven't really come down. Yeah. It's, it's hard to afford a house and volumes will go down. So that's not terribly surprising, but it is a 22 year low. The other piece is BlackRock, I believe has just now finalized their 30 billion fund to take advantage of the upcoming months and years of what they anticipate to be a lot of opportunity in the real estate space to buy at, you know, high volume to get great discounts. Mm. So that is a signal I think, to everyone else, it's like be patient, keep some powder, dry, do your due diligence and also understand risk mitigation. Understand it. So without further ado, when we wanna talk about what is risk mitigation and what can we do about that? I want to bring on Rob Napolitano. He's a friend of ours and he has been working in the NPL space, which is the non-performing loan space, the insurance space, you know, gosh, pretty much everything that has to do with, with real estate. So I wanna go ahead and bring Rob on, Rob Napolitano 00:05:10 Hey guys. Thanks Wendy. Jonathan. Thanks for having me. I really appreciate the, the time we're spending together today. Jonathan Davis 00:05:18 Absolutely. No, we appreciate you being on. Yeah, Wendy Sweet 00:05:22 Billy's listening. So we can't make fun of him. We highly respect him. We love him. He's my brother. I have to love him. Rob Napolitano 00:05:31 What, what are the subtitles coming across saying? Don't believe anything Wendy is saying I'm Jonathan Davis 00:05:41 Oh yeah. That's good. Well, again, thanks for, for coming on. I you've just recently made a, a big move from the Northeast down to the Southeast, right? That's Wendy Sweet 00:05:53 Correct. To the dark side. Rob Napolitano 00:05:54 That's correct. Yeah. I, I, I, I not only am a man of many words, but I'm also a man of action and I voted this year with my feet and picked up my family and moved out of the Northeast where I was just tired of the, the loss of freedom that I was experiencing. Mm. Yeah. So yeah, I'm Wendy Sweet 00:06:17 Outta there. You less people there. Jonathan Davis 00:06:21 Excellent. Excellent. Yeah. Well, we're glad to have you down in the Southeast, you are one of the many who have, have made that move smartly. We like to think, but, but now Wendy Sweet 00:06:31 We, and you're like really a neighbor, like you're in our town and stuff like that. That's really cool. It's good to have you down here. Rob Napolitano 00:06:37 Yeah. I'm not officially anyone. Should I start talking and saying y'all, but I haven't gotten Wendy Sweet 00:06:41 Her yet. That too shall come. Or it'll Jonathan Davis 00:06:44 It'll sooner than you think Wendy Sweet 00:06:46 Sooner. Bless your heart. Yeah. Jonathan Davis 00:06:50 Well, I, I, I, I want to give you an opportunity, Rob, to kind of tell everyone a little bit about your, your background, how you got into the space and where you are now, before we start getting into, into the meat of what we wanna talk about. Rob Napolitano 00:07:05 Yeah. For great. And I, I appreciate you having me come on and talking about this, but I wanna say one thing first, what the hell is risk mitigation? Risk mitigation is the term that common people don't use. That's what big banks and, and people use. But although we do it every day and part of my story talks about risk mitigation and what risk mitigation is, is just keeping what's ours, right? It's what we accumulate. What's ours. And then kicking somebody's butt. If they try to take it, it's all it is. And coming from the Northeast of New Jersey, you know, actually that's part of where my story starts. I was always that kid in the, in, in, in grammar school, that was always in detention because I was always caught in a fight in the schoolyard because the bully was always beaten up on the kid that couldn't defend themselves. Rob Napolitano 00:07:46 So I ended up always being, you know, getting inside of a fight, defending somebody else who couldn't defend themselves. And there's some risk mitigation, right? Like me and it, it, it ended up, it ended up, you know, maturing throughout my career. As I started in real estate investing many years ago, 20 something years, I've been investing in real estate. And I went through the normal course that everybody does. You go take a course, you pay the money, you buy a couple properties. You, you, you get some mortgages and you take all the risks that you want. Then you don't know everything. And you learn as you go, it's a school of hard knocks. And I ended up getting caught up in the, the 2008, 2009 financial crisis. At that point, actually, I had gotten into the mortgage business a few years prior. I was doing writing loans, learning about the banking industry, started my own mortgage bank, doing some private lending. Rob Napolitano 00:08:41 The sub subprime mortgage crisis happened, caught me off guard as well. And so personally I went into a chapter 13 bankruptcy, and I had to learn how to get myself out. I, I, I actually hired an attorney. And at that point I was so interested in what was going on with the crisis that I actually went to law school, become a paralegal and learned more about how the mortgage backed securities and the securitization process all worked. And I started a legal litigation support services, where we were helping attorneys to help homeowners stay in their homes. Because a number of those foreclosures going on back then were being done illegally, hence forth the bully coming in on the homeowners, me stepping in trying to beat up on the bully. But I found that was a hard way to actually make a living. And at that point I had just started my new life as a new husband and father. Rob Napolitano 00:09:34 I need to actually make a living as well. And so we did that and I learned, learned the legal system, how it all worked, got involved, a number of, of, of cases. Matter of fact, one of my briefs decided in the state Supreme court of Massachusetts and, and what I've learned is taking on the bank's head on was a Herculean task. And what I wanted to do is, okay, so if these banks own these loans and you know, they have problems processing and paperwork, and they didn't want to do all the heavy lifting of trying to modify loans. I wanted to be in that business. So we started a fund in 2014, buying loans raised a bunch of money doing it. And one of the things that I found in my experience and going through what I went through is that all the banks were always covered. Rob Napolitano 01:10:22 And they always had this insurance on their bets that they made not to get too technical, but they were, you know, credit, default swaps and different ways that they covered their losses. And I said, wow, there's no real insurance for the risks that we take as actual real estate investors. How do we get that covered as well? And so I found another product and I started a second fund of, of, of buying life settlements with partners there as well. And we used the life settlements as a way to cover and, and absorb some of the risks that we take on the buying of the notes that we buy. So now we're buying notes, doing private lending and also buying distress life insurance policies as a suite to cover ourselves and mitigate simple, let's say keep a lot of the money that we're making through the insurance pot. Rob Napolitano 01:11:12 So we kind of self-insure ourselves, but that came through, you know, my experience of what I went through. I had to go through, you know, the doldrums and it was a very lonely place going through bankruptcy and long story short, I ended up coming outta that bankruptcy suing two of the big banks to the major institutions. They ended up paying off all my creditors, paid my bankruptcy state, paid all my attorneys, and I actually walked away with a profit outside of my bankruptcy. Wow. So it's a very rare case. And, but yeah, I had to go through all of it. So I, I, I learned how to get to the very bottom, find out how it all works and then build upon something upon that as well. And it's not, it's not nice what these banks and these financial institutions do to people. So I've always been now that advocate of helping people to generate their wealth. Rob Napolitano 01:12:02 However they choose to do it. I think real estate's one of the best ways to do it, but it doesn't come without risk without failure, without pitfalls. And you, you're never gonna know everything because there's always outside forces involved as well, but there are certainly ways to protect yourself. And, and, and I'll give you maybe as a, as, as, as, as an anecdote to it, it's like playing any professional sports. I mean, we're here in the United States. There are gonna be people elsewhere listening outside the United States, but let's use American football. As an example, we have an offensive team and we have a defensive team. So in that scenario, if we are playing in the super bowl and we're up by three points with two minutes left to go, how do we protect ourselves? How do we protect lead? How do we protect that trophy? Rob Napolitano 01:12:52 That's right in front of us all relies on the defense. And when we talk about this risk mitigation, it's just about financial defense. How do we protect ourselves from the risk and risk is nothing more than the potential of something going wrong. And the probability of that happening, we live in risk, right? So it's always there. So how do we protect that probability and work on the defense and nobody ever talks about defense, right? The super bowl it's, you know, the quarterback was great. And did you see that play, that wide receiver caught that not running back, did that great. Never talks about the defense. Right. And so it is in, in, in our financial side and no one talks about the defense, how do we protect ourselves? But it's important. It's important. Wendy Sweet 01:13:40 Yeah. You know, I think, I think that's probably the biggest mistake that people make is they don't put the defense into place. You know, the thing that I lo the part of your story that I love the most is the scars. Yeah. That, that you've acquired. And, and you're not afraid to tell people, Hey, here's what I went through. Yeah. And that's, I would much rather invest in people that have been up against the wall that have felt the pressure of, of being at the bottom that understand, because that makes you so much more risk aversive. I mean, you're, you're really looking, you're really looking to make sure that doesn't happen again. Rob Napolitano 01:14:26 Absolutely. No, I listen. It's absolutely. I mean, and I, I I've said that to people as well for too, you know, when they try to compare, well, you know, we like to see people's historical track record. Why that's gonna happen again? What do they always say after historical track record, past performance, not an indication of future future Wendy Sweet 01:14:44 That's right. Rob Napolitano 01:14:46 Basically saying, I'll show you the numbers, but don't believe any of this B BS that I'm about to show you because I may screw up moving forward. So it's, you know, it's, it's a forward looking thing, but you're absolutely right. No one knows it's gonna happen moving forward. It's a risk that we're taking, but don't, you want to be with those that have been through the DLL drums already so that no matter what comes forward, no matter what happens, no matter what's in front of us, we want to be with the people that have been there already, because it is scary. Right? We're not about this stuff. So having the right partners, having the right people, that's why I love doing stuff with you guys. Okay. You guys have been through the worst of the worst as well. You know, you guys understand this stuff. The, the three of us here, we don't know everything, but we know how to get through everything. Wendy Sweet 01:15:31 That's the key. Jonathan Davis 01:15:32 Well, and that's, you know, that, that's one of the things that talk to tons of people about, and it's, it's like, you know, everyone wants to say, you know, the, if we talk about real estate, it's, you know, it's cyclical things, you know, things keep happening over and over that are similar. Sometimes, almost exactly the same, but there are never caused by the same thing. And that's what risk mitigation is. It's knowing that there is going to be a loss of some kind. And the mitigation is how do I position myself in my investments, in a place that reduces the amount of loss for the unknown thing that's going to occur that I know is going to occur. I don't know when, and I don't know what it's gonna be, but it will occur. So how do I position myself in that best place? Rob Napolitano 01:16:22 Yeah. Absolutely. Jonathan Davis 01:16:23 Position the assets in the best place. So, yeah. I mean, that's, that's all we like, we know it's coming. We just don't know what it is. Rob Napolitano 01:16:30 Well, let's, let's look back at the football game. Right. Does anybody expect to win a super bowl without ever letting the opposition ever score any points against us? Wendy Sweet 01:16:41 That's Rob Napolitano 01:16:42 Right. No, that, that, that, that's just totally ludicrous to have that expectation. Of course the other team is gonna score. The idea is to obviously score more than them or slow down how potent their offense is. So they don't score more than us, but don't have the expectation they're not gonna score. Jonathan Davis 01:17:00 Yeah, exactly. Wendy Sweet 01:17:03 You know, the other thing too, I think that's really important for people to understand whether you are an investor or whether you are lending. You need to have a healthy fear, but you can't live in fear. No doubt finding that balance of, of, you know, here's your plan a, but here's my plan B my plan C and my plan D you know, you, you try to make sure that plan a is gonna work, but you have to have the risk mitigators in place to be able to follow up with plan B, C, and D, and make sure that what's the worst thing that can happen. Can you live with that? Rob Napolitano 01:17:52 So I call that awareness very simple, right. I have a 12 year old daughter, and we're in the conversations now of my 12 year old daughter and, and dealing with drugs, not that she's dealing with drugs, but we're making, we're telling her, she's Wendy Sweet 01:18:07 Dealing drugs again. Rob Napolitano 01:18:08 Yeah. You tell her, stop touching my drugs now. So we talk about, we talk about drugs and at, at her age at 12, and in the next couple of teen years, she's gonna be experiencing that and she's going to be exposed to that. Right. And we show her some of the things that can happen with drugs. We talk about it. We talk about things that, not that I'm trying to be doom and gloom, not that I'm trying to scare her. Cause some of these things are scary. And I tell her this, this is not to scare you. This is not to stay, stay away from people that you don't know or, or, or, or, or all your friends. Cause you can come from anywhere. Okay. But it's to make you aware that as you go out into the world, this exists, you can have friends relationships, you can go out and you know, other people's houses, parties, and, and other events and stuff and everything enjoy life, but be aware and be in tune that these risks are out there as well and act accordingly and be prepared for it. Rob Napolitano 01:19:04 So by being prepared, it's not necessarily a doom and gloom thing or out there to try and scare it. But it's a matter of awareness. And honestly, that's, that's, that's part of the distinction between winners and losers in this business, right? I mean, being aware, being able to absorb the risk, embrace the risk, embrace the loss, embrace the failures and know how to move forward from there is a key difference and anybody can do this. I mean, anybody can accept a failure. Anybody can, you know, take the right mindset and move forward and move through things. Anybody can do that. So anybody can make money in this business or any business really. There's no real secret to it. You can do it. That's Wendy Sweet 01:19:43 Right. Jonathan Davis 01:19:44 No, there's, there's, there's good risk mitigation and good timing. And that's, that's probably about it. Rob Napolitano 01:19:51 Timing. I think timing only really applies in, I forget what the second thing was, but the first thing was sex was timing. And the second thing I guess, was racing. I thought it was sports, sports and sex. And we know two things that timing was really important, but I don't know, someone else told me that earlier today and just stop whatever, but you can't time a market that you can't do. Jonathan Davis 02:20:15 No. It's it's time timing. Yeah. I mean, it's just coincidence. Rob Napolitano 02:20:20 Yeah. You know, you know what just, you said before Jonathan too, is that, you know, you see these things happening over and over again. This is so we're going through right now. And, and, and in not only here in our country, but in the world, we're going through one of the greatest...
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236 Cash Flow To Wealth: Stock Market vs Real Estate
08/26/2022
236 Cash Flow To Wealth: Stock Market vs Real Estate
Bill Fairman 00:00:02 Are continuing doing our of wall street versus real real estate. And we got a great Bill Fairman 00:00:23 Greetings it's bill it's bill and it's Jonathan and we are our Carolina management. Welcome so much to the what show again, the real estate, the real estate investor show char money for real estate investors, investors, Carolina, capital management. Once again, we are private lenders for real, for real estate professional, no east. If you have a, our project, rather that if you'd like USD like us to take Carolina hard money.com.com, click apply. Now tab. If, if you are a passive investor looking for passive returns, click on the credited and credited investor tab, don't forget to like share some, share, subscribe the bell. And, and don't forget about Wendy's with Wendy. Wow. That's new graphics. I like this because, because they always keep us on our, secondly, we devotes 30 minutes of her time per person, each Wednesday day that anything real estate related, there's a, there's a there to get on her calendar. She's usually a couple of months in advance. So good book now. And I'll talk about the upend upend coming expo. Bill Fairman 00:02:00 So it on the 20, the 25th, I believe no 23rd through the 25th, 5th of September. And the note speaker is Emett very cool. I've cool. I've got, got a chance before Emmett real estate entrepreneur after football. So he's got the really interesting story story. So you can get there. We have a code to get the percent off it's Fairman Fairman it will be over in the comment set comment section, from what I understand, stand our audio really freaking out. So out. So IMing on Chris really quick, because, because I don't have a better voice than, than the rest of rest of us. Yeah. He's not having, he's not having the technical days that we are having Chris miles with, with moneys. The what, what is your title? The anti, I think you're muted though. Let's let's let you, Chris Miles 00:03:11 Am I anti anti Financianal advisor? Right? Bill Fairman 00:03:13 Anti financial advisor. I, I don't know why I keep that, but, but welcome to the show went on again and I, I apologize for our audio. Chris Miles 00:03:23 No problem. It's issues. It's kinda like it's kinda listening to Max's headroom. You know, if you remember him from the 1980s, like Matt Max's headroom, you know, it's kinda like that. So it's kinda cool actually. Bill Fairman 00:03:34 Oh man. You back some not so fun memory, but I did love, ah, okay. So our theme this month been about being able to build able to build what in real, versus getting rich in the stock market, right? Jonathan Davis 00:03:58 Yeah. Yeah. The, the, the premise is what, what builds more wealth than when we say wealth, generational wealth, Bill Fairman 00:04:06 Cash flow, Jonathan Davis 00:04:06 Cash flow, everything. I mean like, like when, before it was, was, you know, you know, risk, you know, like, like the risk mitigation side of it, like you thought of it, like, you can get rich really quick in the stock market, but you can also lose, lose who's really stock market and knowing how to play that at whereas real estate, it's more of a long, long marathon and you know, marathon's appropriate I guess, for Chris, but, but Bill Fairman 00:04:37 Yeah, cuz he is running these marathons. All right, we're gonna stop and, and let you say something, but first of all, talk a bit about your story where you started and what you're doing and what you're doing now. Chris Miles 00:04:49 Yeah. You know, I, I started not learning about money, right? I was, I was raised by great parents. You know, it taught me good values, but the one thing they really didn't know a lot about was money. And, and when it did come to money, it was usually about scarcity. Right. I remember sitting around the table and you know, although my dad would say, Hey, you can be anything you wanna be right. But then he would also say, we can't afford this. Or what do you think I am made of money, money doesn't grow on trees. You know? And then even hearing things about his work saying I'm gonna work until I'm dead. I mean like that, that was like his outlook on life. You know, it was like he was gonna die working now understand he was like the quintessential saver. He was like the perfect saver. Chris Miles 00:05:31 In fact, he would be like, Dave, Ramsey's older brother. You know, that taught Dave everything. He knows cuz my dad was not just a big penny pincher. He saved everything. Although, you know, he did splurge every once in a while, but he pretty much was a big time saver paid off his house. Early. Very proud of that saved in his 401ks, did everything you're supposed to do. But again, he was always talking about money, being a scarce thing. And so like most kids, when they see their parents, they say I'm never gonna be, be like him. So as I became an adult after doing some college and everything, I decided to drop out, become an entrepreneur and I became a financial advisor. And so as a financial advisor started to learn the things, hoping that if I learned something different that I would be able to help give my dad some of his life back. Chris Miles 00:06:15 Now the problem with this is that after several years I sit down with my dad at his, at his kitchen table. This time he's asking me for advice. He says, Chris, I'm 61 years old. I wanna retire. What do you got for me? What can we do here? And I look at everything he's debt free. He's saved in his 401ks. And I said, dad, here's the deal. If you decide to retire today, you have to die in five years because you're gonna run outta money. Luckily you got a little bit of social security so they can help push you along a little bit longer. But if you didn't have social security, you'd have to die five years after retiring. And he said, okay, well what do I do? I said, I don't know. You've done everything right? Everything that I was taught as a financial advisor you've been doing. Chris Miles 00:07:03 And this really disturbed me because as I'm looking at this, I'm saying, wait a minute, he did everything right yet. He's still not financially free. And then I started looking at my own clients, even clients I inherited from decades of previous financial advisors, they were in the same boat. They weren't financially free. And then I started looking at the financial advisors around my office. Even the guys had been working there since the late 1970s. And they weren't financially free either unless they have commissions coming in. But without the commissions, just based on mutual fund investments, they wouldn't be financially free. And then I looked at my own life and realizing I was on the same exact path as my dad, even though I vowed never to do what he did, I was trying to be cheap. I was trying to save everything. Hopefully if I saved up a couple million dollars, by the time I was 40, I could live on a whopping $60,000 a year lifestyle, 5,000 a month, which I thought was amazing 20 years ago. Chris Miles 00:07:53 That's not the case today. And, and I realized there was a big problem. And, and of course when the students ready to teach our peers, that's about the time that my, you know, my, that I started to meet guys like you, you know, guys in the alternative for real estate space, people that were doing things in, in the real estate game that were retiring in like their twenties and thirties financially independent. And so I started to learn from them, started doing some of those same things, learning. It was about cash flow, not about accumulation of money. And the next day I know I'm able to become financially independent myself when I was 28 years old. And you know, and since then I've been teaching people how to do that today. You know, as like the anti Financianal advisor, telling people to go away from the stock market now understand even in my background, I mean this not only was I pro stock market pro mutual fund, I was also pro stock trading because I was also by the time that I was right about the transition between becoming financial, independent and quitting as a financial advisor, kind of in that middle section right there, I also became a stock coach. Chris Miles 00:08:54 I was teaching people how to trade stocks and options in the market. So they could be like George Soros, right? Or some people would claim Warren buffet, but Warren buffet doesn't trade stocks. You know, he buys companies it's different. And so I was teaching people how to do that stuff for a few years as well. So I trained about 200 people, just one on one, how to buy and sell stocks and options. And I'll tell you even being in that world, having been there, I can assure you that just like in the financial advisor world, although you have more hope if you do your own stock trading, the truth is that even the best traders in the stock market will not do much better than 20% a year. That's it now 20? Percent's nothing to, to shy at, right? But when you hear people out there saying, oh, I make hundreds of percent on my trades. Chris Miles 00:09:42 Or there's even people that try to raise capital and funds saying, I'm doing options trading. I'll pay you 10% a month, which is bull crap. They can never do that. Every time that's happened. Every single time I've seen somebody get shut down by the S sec because they can never sustain it unless new money's coming in. Cause it's basically like a Ponzi scheme, right? So you hear all this kind of crap out there. But the truth is that George Soros himself has only done about a 24% average over time. That's why he's in his really about 90 years old. And he's a billionaire still not the top of the list. He's up there, but it took him 50, 60 years of this Warren buffet. Same thing. His average has been about 24, 20 5% buying companies buying interest in those companies and watching his portfolio grow. Chris Miles 01:10:26 He's also nearing a hundred years old. And yet he's still about the richest guy in the world, right? So the truth is is that if you go with wall street, you're gonna have a much harder time of success because most people aren't investing like this. Most people are putting their money in mutual funds, which the S and P 500 for the last 30 years has only averaged. And I just updated it's about 7.7, 5%. That's without fees that's without taxes that's without anything going against it. Most people on mutual funds don't even get that high, cuz almost the vast majority of mutual funds never get the height of what the S and P 500 does. They usually do a lesser return. So think about that compared to a 401k fees, it's ridiculous. Bill Fairman 01:11:11 The S and P 500 hundred average was that inflation adjusted as well. Chris Miles 01:11:17 No, non inflation adjusted. That is the true actual yield of the S and P 500. So when people tell you 10 or 12%, that's bogus, it's bull. It. It's never been the way. And I was taught that as a financial advisor, and yet I found out that wasn't the case. Bill Fairman 01:11:34 Well, well, I know I've had conversations with others as well about 401ks and we, and we had a conversation of recently and anecdotal speaking, I don't know anyone that has made, and this will, and this will do another the week week, but anyone who has made more on their 401k, they than what they've and what their employer has, lawyer has con over say a 20 year period. And again, it's anecdotally, but the, really the gains I see to the 401k 401ks attritions and the, the free, free money you get lawyer. Yes. Not really from the market, Jonathan Davis 01:12:13 It's it boils down to, to a little better than bank saving account. Chris Miles 01:12:19 It's true. I mean, even if you, I mean, even the 20 year average of the market, it's even worse than that. It's, it's less than 7% in the S and P but you know, you're right, because 401ks the average fee, I mean, fees will vary in 401k. Some of the times, the larger corporations, if you have tens of thousands or hundreds of thousands of employees, sometimes they'll be between a half to 1% of a fee. Right. Which is good. But there are some 401ks out there that I've seen that are like between one and 2% a year that you're being charged, whether you make money or not, some are even over 2%. Right? So think about this. Even if you happen to get close to the S and P 500 returns, most likely because you have variety of mutual funds or you're in the, you know, whatever target age fund that you're in. Chris Miles 01:13:03 You're lucky to pull off 7%. But if you have a 1% fee coming outta your 401k, that means you only netting a 6% return. And of course you throw an inflation in there, which we all know is a lot higher than two or 3%. We're looking more like five to 7% minimum average. Right. You're you're right. Like you're maybe just keeping up with inflation inflation. Funny enough. It's it's I for, I didn't realize we'd be talking about 401ks cuz the argument everybody always talks about is the match, right? Like, yeah, but I get the match. Now, if you're your own employer, like you're a dentist or something like that, the match is really ridiculous because you pay your own match. You really don't get anything. Right. There's no real argument for that. In fact, you'd be better off just buying your own mutual funds outside of a 401k plan because it costs you more money than just investing yourself. Chris Miles 01:13:50 Yeah. But for those that have, that are employees, they'll say, yeah, but I get this a hundred percent or 50% match on my money for every 6% I put in, I get 3% in the rare few cases you might put in six and get six. And that's usually the best I ever see. So funny enough, I was actually just getting ready to record my own podcast to release about three weeks from now. So you guys are gonna get the sneak peek, but I ran those numbers because what people always say is, let's just say you get, you get that a hundred percent match. They'll say, but guys, this is a hundred percent rate of return. You can't beat that. That's free money. It's brainless and you're right. It is brainless. If you just think it's free money and you think it's a hundred percent return because you put in a hundred percent compounded return in a calculator, you can go to calculator.net and do this, go put in a savings. Chris Miles 01:14:39 You know, interest bearing calculator put in a hundred percent a year putting in say 6,000 a year. So you're putting in 6,000, get a hundred percent return. You'll find out you're gonna be richer than, than buffet or Bezos in the next 30 years, I can promise you at 6,000 a year, you will never be a billionaire multi billionaire. But that hundred percent return because it keeps doubling every year makes it look like it. What you're actually getting is a total, a hundred percent return. Whether you invest for one year or 40 years, you only double your money with the match. And so you run the numbers like you're putting in. Let's see. Actually I think I ran those numbers. Let's see. I put in yeah, 6,000. So I was doing one where I was putting in 6,000 a year, making six and a half percent. Chris Miles 01:15:22 I was being pretty, pretty generous for people that believe they get a higher return on their 401ks, six and a half percent for 30 years, you will have 1.1 million when you get the match. But the funny thing is, if you only put in the 6,000, not get the match, you have 550,000. So you have exactly half the money. So you only double it. And with the whole rule of 72, right that 72 says for every 72 years, whatever the interest rate is, it doubles. Well, if you save for 40 years, that means it really only adds a few percent return to that six and a half. In this case, when I ran it, because it was that full hundred percent return, it got you from a six and a half percent return to a 10% return. So it actually gave you a three and a half percent over 30 years, the shorter of the term, the better. Chris Miles 01:16:08 But you and I, we all know we, we could do way better in the alternative space. And it's not about accumulating that money cuz even if you got the same and I even showed earning 10%, for example, in alternative investments, you would have the exact same number as a 401k. If you only put 6,000 a year, you wouldn't have the match, but you would still match what they made. You'd have about 1.1 million. Here's the difference when you're in mutual funds, right? Obviously you're not earning those aggressive returns. When you hit retirement, when you hit retirement, you gotta start taking those conservative returns. So even wall street journal last October said, don't believe in the 4% rule anymore. That's too much money. You will run out of money with people living longer. You should only pull out 3% a year. So if you have 1.1 million, that means you're actually only pulling out $33,000 a year, where if you're earning 10% on 1.1 million, you're pulling out $110,000 a year. Chris Miles 01:17:06 Because if you're in alternative investments, just like you guys have with your fund, you got regular cash flow coming in, paying, you know that that's gonna pay way more than 3%, right? You're gonna pay more than that. And it's not even touching the principles where most people are pulling out 3% and they could very well be touching the principle depending on what's going on in the markets, pulling money out, hoping not to run outta money. By the time they die. It's a very different mentality that, you know, I didn't even understand as a financial advisor cuz I was in that accumulation mindset. But when I got on that cashflow mindset totally different. Jonathan Davis 01:17:38 Yeah. I mean, people are taught to, you know, like the biggest lie of, you know, of the finances put money in your savings, accountings account, like put all your money in the savings account. Please have some, but you know, like save it, just save it just then with the 401k, just, just put it there. And it's there. And it's like accumulation of money is, you know, if, if even the capitalist society with, with, with inflation, it's worthless. Chris Miles 01:18:02 Yeah. Put Jonathan Davis 01:18:03 It there. Like you can, you can put it into an asset, has a tax depreciate, appreciation it, cash flow and builds and builds. It's like, like people just don't know that you, you, you can lower your taxes CR well through appreciable appreciation that you can too later. And while having cash flow along the way, Chris Miles 01:18:27 Like that's right. Jonathan Davis 01:18:28 Yeah. 401k. Can't K can't do that. I mean, savings account can't do that. Bill Fairman 01:18:32 And the average person have the, the network in place to buy these properties and do this stuff on their own. So that's why there's different, different funds that you can get into and still achieve the same benefit. Because now you're an owner in a fund that owns properties and then yep. Or that's right. Lends me own property, that type of thing. So you're still getting all those the upside side. And then the, the time Jonathan Davis 01:19:00 Let's Chris, you wanna wanna take that? Chris Miles 01:19:03 Let's see, can you take the match and move the money outta the 401k into another retirement vehicle? I suppose maybe some want you to keep the money then there until you leave the company. Good question. Cuz the truth is of the 401k. If you're, if it's with a current employer, you can't get it out, right? Like it's locked up in prison. I actually tell the people that, that most of the time, what you're taught traditionally with money is to keep your money in prison, lock it up in home equity. Don't take it out, pay off that house. Right? Lock it up in...
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235 Building Wealth vs. Getting Rich | REI Show - Hard Money for Real Estate Investors
08/19/2022
235 Building Wealth vs. Getting Rich | REI Show - Hard Money for Real Estate Investors
Bill Fairman 00:00:02 Hi everyone. We are continuing this theme of how to build wealth, whether it's in the stock market or real estate. And we've got a wonderful guest right after this, Bill Fairman 00:00:37 Your eatings, once again, from the, I wanna say it's the capital of South Carolina, but it really isn't. It is not. No, yeah, we're just on top of the hill here. That's rock hill, South Carolina. Thank you so much for joining us on the real estate investors show hard money for real estate investors. We are Carolina capital management. We are private lenders and the Southeast for real estate professionals. If you're interested in having us look at one of your projects, go to Carolina, hard money.com and click on the apply out tab. If you're a passive investor, looking for passive returns, go to our accredited investor tab and click it on and get all the fine info there. Don't forget the like share subscribe, hit the bell. And don't forget about Wednesdays with Wendy when Wendy dedicates 30 minutes per person on Wednesdays to talk about anything real estate for free, even though it's free, it's it has value. Jonathan Davis 00:01:49 Oh, it's extremely valuable. Now, Bill Fairman 00:01:51 Especially if you're talking real estate, now you can talk anything you want, but you wouldn't be wasting your time if you didn't talk about real estate. So if she's usually booked out a couple of months in advance, there's the link to get on her calendar. And it's also in the chat section, which depending on the platform that you're viewing us from, it's either gonna be on the right hand set of your screen or underneath. Jonathan Davis 00:02:13 Yeah. Bill Fairman 00:02:14 Welcome. Jonathan Davis 00:02:15 Welcome. And on this show, we're excited. We have Dean Rogers with us. Former NFL player turned real estate investor. It's it's gonna be a great show and we're gonna kind of, you know, pick his brain on how to build wealth and you know what he's experienced over, over his tenure in, in investing before we get to that though, do you have any breaking news or Bill Fairman 00:02:39 Actually, I don't know if it's breaking news, but the president signed the bill that supposed to be lowering inflation, if not. So that was kind of anti-climatic. Yeah, Jonathan Davis 00:03:06 Well, you know, to, to build on that inflation is down in July from June from 9.1 to 8.5, right? It's flat month over month, I guess is the best way to describe that rents are still rising in a lot of metros. We are seeing decline in, in some, you know, namely Miami we're seeing the highest rent climbs in, well, Raleigh's in the top three, Bill Fairman 00:03:34 By the way, average median rent nationwide for the first time hit $2,000 a month. Jonathan Davis 00:03:43 Wow. Yep. Still going up, man. Yeah. So yeah. All that I think, yeah. I said for all these number three, I think San Francisco is number one, but I think they were hit the hardest. So, I mean, you expect the one that dropped the most would have the yeah. Hopefully have the highest appreciation. So yeah. Other than that, millennials now make up 43% of all home purchases in 2022. Bill Fairman 00:04:10 Good. Jonathan Davis 00:04:10 Look at that. Look at Bill Fairman 00:04:11 Them, go they're the largest population. They should be climbing even higher. Jonathan Davis 00:04:16 Yep. Absolutely. Well, without further ado, I guess we need to bring on our guests and we talk about building wealth. Bill Fairman 00:04:22 Yeah. So before I bring him on, you know, Dean played in the NFL with San Diego chargers, I, I don't know why he would've left other than what most people leave for worried about your, your health because your body is being brutalized in the NFL. Yeah. But he was, I'm not sure if he still lives there or not. And we will ask, but San Diego it's like room temperature all the time. Jonathan Davis 00:04:48 Yep. Bill Fairman 00:04:49 And they have some great food there too. Dean created a book, the wholesale playbook and provides resources to people that want to get into the real estate investing business. He owns an active seven figure business in real estate. And we want to talk to him about creating wealth. Yeah. Whether it's best through the stock market or real estate and you know, where our bias is. So without further ado, Dan, come on outta that green room. Dean Rogers 00:05:23 Well it's time guys. How you doing? Bill Fairman 00:05:25 I'm doing great. Thank you so much for joining us. Dean Rogers 00:05:28 Yeah. Thanks for having me. I mean, we we're, we're just meeting, but I, I can't help, but say I like you guys a lot already, not only the, the humor, but some, some implied opinions on some certain topics can't help, but, but like where you're, what, what you're thinking. Bill Fairman 00:05:47 Well, we are somewhat opinionated, Bill Fairman 00:05:53 You know, in, in my working career, I've either been self-employed or I've been commissioned only for the vast majority of my life. And I think when you're an entrepreneurial in the first place, and Jonathan's the same way you, you just have a different take it's about it. It's about hard work. It it's about working smart and you have to use common sense when you're talking about business. I have very little patience for people that expect to get handouts. Now there's nothing wrong with helping people that fall through the cracks and helping people that are needy. But if you're fully able and capable, I ain't got no time for you. Dean Rogers 00:06:40 I can't help. But agree with that. Jonathan Davis 00:06:43 Well, well, Dean tell, tell us about, you know, you know, first getting in, you know, in the NFL and then what made you wanna leave and then kind of, why did you choose real estate? Dean Rogers 00:06:55 Yeah. So let me, let me take you a trip down memory lane here. So, you know, going back to when I was a little kid, you know, I was, I was the sports guy. It's all I, all I did, right. Eat, sleep and breathe it. And, and, and class, when you fill out, what do you want to be when you grow up? I was almost embarrassed to write that I wanted to be a professional athlete and you know, every other year was, I want to be in the NFL or, you know, be in the NBA through high school. I finally realized that, you know, my best shot was probably playing in the NFL as opposed to the NBA, cuz you know, 6, 2, 6, 3, and, and, and didn't necessarily jump out the gym as I would've probably needed to. But that being said, that's, that's what my whole life was. Dean Rogers 00:07:44 You know? And for me, I also recognized me kind of like reflecting on, on my life and having different perspective. Now I always wanted to be that guy. I always wanted to be the provider. I always wanted to like put, put the family on my shoulders. And I grew up in a good family of entrepreneurs who provided everything that was needed. And, and I saw the ups and downs of that. And it actually funny enough convinced me by seeing the ups and downs, that when I was older, when I grew up, I wanted to go be a hard worker for a company and get paid a lot of money, but not have to take on the risk, which is interesting where I, where I wound up. But that being said, being the sports guy, you know, I was kind of under recruited my, my whole life. Dean Rogers 00:08:37 I always got stuff done, but maybe overlooked or maybe wasn't fast enough or whatever it was, but always, always showed up, put in the work and then got the results on the field. And, and that without question is translated to my professional working career now, but yeah, get getting through kind of the, the system of high school and, you know, excelling and, and doing great there being recruited by, by different colleges. And ultimately I went to UC Davis to play football there, a small school, not really on the radar, but had a history of quarterbacks and tight ends going to the NFL and I played tight end. And so, you know, my, my later seasons, I had Scouts coming to practices and, and watching me and, and some other people. And, and there, there it happened, you know, it came together was, was called and signed by the chargers. Dean Rogers 00:09:37 And, and all of a sudden my, my dreams became a reality and it was the most, you know, surreal experience ever. Now the, the thing that kind of led me to making the decision to walk away and hang up the cleats was not because I didn't like it. I loved it. It was, it was insane. You know, I had a locker, you know, four for lockers down from Phillip rivers and I'm one of the guys, right? I'm, I'm, you know, talking with Antonio gates and, and you know, these are my teammates, these are my peers. These are the people who I looked up to and played the video games, played as them on the video games. And now I'm, I'm one of them. Right. And it was, it was a dream come true. And I've got endless stories that could go down about what that experience was like. Dean Rogers 01:10:31 But it, it was without question that Hollywood first, you know, a class lifestyle, first class lifestyle kind of roll out the red carpet experience everywhere we went. And, you know, it was pretty wild. Now that being said that year 2011, when I, when I went into the NFL was the year that ESPN finally started talking about concussions. They never really talked about it before, but now all of a sudden they're talking about concussions and oh my God, they're bad for you. Well, no kidding. But, but now, now we're talking about it. Okay. Now that same year junior Sal kills himself. Right. And I'm now on the other side of the fence, seeing these veterans, seeing the, you know, alumni and seeing how some of these people are just beat to hell. And for me, what was the biggest shift and why I made the decision I did is they changed positions on me. Dean Rogers 01:11:34 So I went from tied end to full back. Okay. And as you can imagine at, at fullback, instead of being on a, let's say a running play, instead of being a tight end, then you're a yard or two yards away from, from the defensive end. And you gotta, you know, get 'em at a nine technique and block 'em and, and, and seal the edge there. Or you're, you're blocking with the tackle and, you know, rolling up to the, the linebacker, who's three or four more yards away. You're now running 10 yards, full speed, trying to kill each other. Right. And you're trying to run through a hole that's this narrow and the best way to do that because my shoulders are so wide is to lead with my head, right. If I want to be effective and I wanna block this guy effectively, I gotta lead with my head because that's, that's the first thing that's going through the hole. Dean Rogers 01:12:25 So I would literally go back from just practices and be icing my head thinking like, holy crap, I, I don't know how long I can do this. Because from the neck down, I felt amazing. Like, I felt like a superhero. I, I had the best nutrition, the Bo best vitamins, the best, you know, support team to, for physical therapy and everything. After every practice, every game, I felt amazing from the neck down. But from the, from the neck up, I was like, okay, I'm gonna be brain dead in, you know, 10 years from now when I'm done playing. And so it was hard now, what made it even harder? Okay. And, and probably what makes me sleep well at night and feel some somewhat fulfilled is I had north Turner stop me in the hallways, tell me I'm gonna have a long career. Just keep doing what you're doing. Dean Rogers 01:13:13 And I'm like, holy crap, man. Like, this is crazy. You know, I I've made it. I got this dude who I've been watching coaching, you know, winning teams telling me this, like this, this means something right. I'm onto something. I, I, I know I'm here and I've made it, but I had this terrible feeling inside. If I keep doing this, I'm gonna be dead in a vegetable. So there was only a handful of people that made the decision around this time. But people started to make the decision like, Hey, you know what? I got other things to live for. I got other skills. Right. I got other opportunities. So I made, you know, the hardest decision in my life to this day to walk away from the game I love from, from, you know, what the lifestyle provides, you know, millions of dollars, literally on the line to walk away from it. So I still have dreams, you know, I'll wake up and think I'm still there in the locker room playing, getting ready for a game. And you know, it makes me a little sad, but at the same time, I know if I would've stuck through and done it, I'd be in a world of pain right now, without question, Bill Fairman 01:14:18 Well, you, you made the right decision. It, it's nice to have those that, that adrenaline every week. Yeah. Not to mention the adrenaline after the game where the after parties, Dean Rogers 01:14:30 But, Bill Fairman 01:14:32 And, and it's, I know it, I don't know from experience, cuz I've never been at that level, but I can only imagine what it's like to, you know, not have the, we'll call it the adoring fans hanging around all the time. Yeah. So I know that's kind of, kind of tough to give up, but again, you have a lot, what's the average career in the NFL about three years or Dean Rogers 01:14:59 Something like three years. Yeah. Yeah. Bill Fairman 01:15:01 So you do, you do have life after football. Yeah. I was fortunate enough to be a, a colleague with Allen Vinegrad. He was a offensive tackle for the Cowboys during the Emmett Smith years won several super bowls. And when I first met him, I thought he was a basketball player because he was so skinny and I couldn't believe all that. He had to go through to maintain his weight as a offensive tackle. It's amazing. He looked completely different, but that said, so what got you into the, to the real estate business? Yeah. Jonathan Davis 01:15:40 You, you you're walk, you decide that you don't wanna do this. Yeah. What, what triggers you to, to say, okay, here's my path. Dean Rogers 01:15:47 Yep. So I walk away from football, right. And, and some close buddies, buddies of mine that I played college with. One, one in particular reached out and he said, Hey Dean, you know what, now you're done playing football, but I got a really great opportunity for you. I'm working for this corporation and San Francisco. So I'm thinking to myself, well, great. You know, he explained to me everything that was going on and it just seemed like the, exactly what I was dreaming of once I got into my professional working career. Right. So he basically walks me in the door. I, I join and start working for them and move to San Francisco. And after a year of busting my ass, doing what I always do, like I, I literally would be, you know, spinning in my, my seat thinking like, this is all it is like, I just gotta slap this keyboard around. This is the easiest thing I've ever done in my life. Like, this is a joke, you know? Right. Like I get paid to do this Bill Fairman 01:16:42 After two days Dean Rogers 01:16:44 After, after, you know, waking up at six and you know, practicing all day and then you you're in film and everything. You're, you're not getting outta there till 8:00 PM. You know, you're just doing it all day long. And, and this was just incredibly easy to me. So I, I worked my butt off. And at the end of the year, I'm thinking, well, surely they're gonna recognize how skilled I am and the value that I bring, like, I'm, I'm ready for the big pay raise right now, mind you, I went from signing a seven figure contract and walking away from it to signing a $65,000 annual salary. Right. So I kind of had to, to adjust to that, but I'm thinking, all right, I I'm ready to take it to the next level. I'm ready for the six figure, you know, pay, pay, increase, like, let's do this thing. Dean Rogers 01:17:34 And they're like, wow, you know, great work. We're gonna increase your salary by $2,000. You know, like, congratulations. I'm like, what now, mind you, I wasn't in a sales position where, you know, my effort could necessarily have those big jumps, but that being said, it really opened up my eyes like, holy crap. If, if I wanna have the lifestyle that I, that I had in my, my hands and my fingertips and, and I wanna be able to provide and live the lifestyle of, you know, abundance and freedom and, and create wealth. Like I wanna be that guy, remember I wanna be that guy that provides and, and generationally people are like, wow. He, he, he paved the way for all of us. And, and now we have this, this wealth and freedom. This was not the path, right. This was not the path. So I did the good old Google how to get started in real estate and found Sean, Terry don't know if you know Sean, Terry, but Sean Terry has the, the flip two freedom podcast. Dean Rogers 01:18:35 And all it was was a free podcast that I listened to and immediately was obsessed. Like as soon as the first episode I listened to, I was like, whoa, how to get started with little to no money, how to, you know, basically start a business from scratch without any prior experience. Like you can find deals, you know, by following these strategies, to me, it was, it was something that just, you know, drew me to it. So I became obsessed was listened to it all day, every day at every opportunity I could. And three months from that very first day, I found it. I did my first deal. Coincidentally, I actually did it by co wholesaling it with Sean Terry, because I was following what he was saying. So to the book that I was actually marketing in his market rather than my own in, in Phoenix. Dean Rogers 01:19:28 So that was the proof of concept. That's all it took for me to know, this is what I want to do after doing like a couple deals that first year I even told my wife, Hey, you know what, you, you could stop working. I got this thing figured out little little did I know that it definitely required a lot more effort, a lot more work to create that consistency and build the income, but yeah, flash forward to where I'm at today. You know, we have a, a seven figure a year business doing wholesale and flips, you know, kind of started out by wholesaling, single family houses. And then after a year found my business partner, we started flipping houses, which we've done, you know, hundreds of flips at this point. And, and for me, I realized that there was kind of a, a, a lot of de missioning returns. Dean Rogers 02:20:19 The more flips we did, right? The more cash was out. The more I was stressed out, the, the less money we were making per flip, but we were really good at finding deals. So in 2018, the, the, the light bulb went off. Well, dude, if I, if I wanna build wealth, I'm on the hamster wheel right now doing 20 flips at a time doing a hundred flips a year. And I, it is just a revolving door of cash and always feel like I have none. So in order for me to have that shift, we focused on more wholesale with the, you know, handful of flips at a time and buying rentals. Okay. So for me, I finally realized that to build wealth, the, the people who are truly wealthy, they own real estate, and they get all the benefits that we, we all know about the appreciation, the principle paydown the depreciation and the cash flow, right? Dean Rogers 02:21:16 So all four of those were all the areas that the light bulb went off. And for me, I was like, okay, I need to start buying. So to this day, we've, we've got a 63 doors or something like that, nothing too crazy, but it's, you know, $10 million worth of real estate that if I do nothing else, I don't buy another property, which I know I'll buy many, many more properties just...
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234 Who's Your Daddy?: Rich Dad or Wealthy Dad! | REI Show - Hard Money for Real Estate Investors
08/12/2022
234 Who's Your Daddy?: Rich Dad or Wealthy Dad! | REI Show - Hard Money for Real Estate Investors
Bill Fairman 00:00:01 Hi everyone. Bill Wendy and Jonathan here. We're gonna talk about rich dad. Poor dad. Who's your daddy. Once again, greetings. Thank you so much for joining us on the real estate investor show hard money for real estate investors. We are Carolina capital management lenders in the Southeast for real estate professionals. If you would like us to take a look at one of your projects, please 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 and Wendy Sweet 00:00:59 Send us some money. Bill Fairman 00:01:00 That's right. Don't forget to like share most importantly subscribe, and then you can hit a bell too. If there's one available Wednesdays with Wendy it's. So unlike me to be so busy talking, I forget about Wendy Sweet 00:01:26 The grand page. Yeah. Bill Fairman 00:01:28 Anyway, Wednesday with Wendy is a volunteer thing that Wendy does to donate her time to anybody who wants to talk about real estate. She gives everyone 30 minutes, but get on the list, her calendar she's booked out all the time. Wendy Sweet 00:01:47 Not all the time. Jonathan Davis 00:01:47 All there's times available. Wendy Sweet 00:01:49 Yeah. Bill Fairman 00:01:51 Get it while it's high. Wendy Sweet 00:01:52 Yeah, that's right. Bill Fairman 00:01:53 Am I leaving anything out? Quest expo? Wendy Sweet 00:01:56 Yeah, that's coming. Jonathan Davis 00:01:59 There's a graphic for that. Bill Fairman 00:02:14 It's coming up soon. Anyway. It is a great opportunity to meet like-minded people. You can get a 30% discount by using Fairman 30 and it's September the 23rd through the 25th. I highly recommend it. Wendy Sweet 00:02:30 Great networking opportunity. Absolutely great opportunity to learn about all the different opportunities to invest your money. Yep. Right? Absolutely. There's a lot of stuff. Bill Fairman 00:02:41 So do we have a, a question of the week by the week? Jonathan Davis 00:02:45 Yeah. So the question of the week, and we'll, we'll follow it up later in the show as well, but in your opinion, you know, what is the difference between being rich and being wealthy? Hmm. And, you know, kind of a, you know, a caveat off of that is what are some strategies that you employ to build wealth now we'd, we'd love to talk about those next week. So anyone that puts it in the comments, we will be discussing it. And Wendy Sweet 00:03:14 We'll actually be talking about that over the next few weeks. So yeah, there's, we've got a lot of great speakers and, and topics lined up to where we're really addressing building wealth versus getting rich because there's a big difference in the two and, and rich dad, poor dad is what came to mind when, when we were coming up with this and yep, absolutely great book. If you haven't read it and you've been living under a rock, if you haven't, but it's, it's a great book. Rich dad, poor dad by I think that's key. Bill Fairman 00:03:49 So for breaking Jonathan Davis 00:03:52 The news, Bill Fairman 00:03:53 Breaking news, Wendy Sweet 00:04:06 When was the last time your home was rated? Bill Fairman 00:04:10 Last time I used bug spray. Yeah, Wendy Sweet 00:04:13 That's good. Bill Fairman 00:04:14 So the producer price index came out today for the month of July. That's basically what manufacturers pay for their goods before they're manufactured and then passed on to the consumer. It was slightly below what expectations were. But when you strip out food and energy, food is way up there. Yeah. Energy dropped and we all know that gas prices oil came down. Wendy Sweet 00:04:48 Not much. We're still above where we should be. Bill Fairman 00:04:50 Right? No, I get that. Yeah. But the point to this is that it's still into 9%, almost. It was 9.8%. They were expecting 10 something. So it's still high. They're still gonna manufacturers still have to push their cost increases forward. So we're, we're gonna be in inflation territory for, for quite some time. And unfortunately, Wendy Sweet 00:05:14 If you wanna call it inflation Bill Fairman 00:05:17 And the fed don't Jonathan Davis 00:05:18 Call it recession. I mean, Wendy Sweet 00:05:19 We're not, Jonathan Davis 00:05:20 It is not a recession. Wendy Sweet 00:05:21 That's right. Jonathan Davis 00:05:22 Don't vote this November for not in a Wendy Sweet 00:05:25 Recession donation. That's right. Bill Fairman 00:05:28 So, you know, the fed is gonna continue to, to raise rates until they, I, I, I heard the chairman of the Minneapolis fed say that they're getting down to 2%, no matter what. So they will continue to raise rates until they get the inflation rate down to 2%, which means they're gonna continue to raise rates Wendy Sweet 00:05:49 For a while. Yeah. Yeah. Bill Fairman 00:05:51 I did wanna touch on the general mortgage outlook what's been going on. So I got this article from the mortgage news daily, and this is, this is based on refinancing. And I said last week it has picked up refinance index was up 3.5% from the previous week. It's largest gains it's June, but it was 82%, less than last June at this time. Just Wendy Sweet 00:06:22 A little bit different. Bill Fairman 00:06:25 We, we had Brian on a couple of weeks Wendy Sweet 00:06:28 Ago, Brian Maddox. Bill Fairman 00:06:29 And you know, if you're in the mortgage industry and you weren't paying attention to your purchase money business, you're in a world of hurt right now. Excuse me. I Jonathan Davis 00:06:40 Don't know. You're up three and a half percent. Bill Fairman 00:06:44 No, you're down Wendy Sweet 00:06:45 82%. It's all on how you look at it. I was, I was at the airport at 4:00 AM this morning. That's a whole nother story. But while I was sitting there, I was reading about loan Depot, big company. They had 11,500 employees. They've laid off almost half of 'em. Bill Fairman 00:07:08 Wow. Well, I didn't hear about half. Wendy Sweet 00:07:10 Yeah. And they expect 900 more. Yeah. I hear they're going to be laid off. Yeah. So they're and they're stopping their wholesaling, which I thought was interesting. Yeah. Bill Fairman 00:07:19 Well, they're not gonna have too many retail businesses that are gonna be using Wendy Sweet 00:07:25 Them. Yeah. That'll be selling 'em now, you know, they're finishing out their pipeline, right. They're not leaving anybody hanging. Like it happened back in, you know, oh eight. But, but they're making some big changes. Bill Fairman 00:07:36 Now, purchase applications decline 1% week over week, but they're, they're just down 19% from a year ago, which is still bad, but that's better than 82. If you're in the mortgage business, that's where you're gonna get your right. You know, your, your workflow from your cash flow. Now I thought was interesting was the size of the mortgages grew from now, these are refinances 378,000 to last, last week. It was 374 or no 374 7 is they've gone up, you know, $4,000. Almost obviously people are taking advantage of still having equity in their house. And in my opinion, if you're refinancing, now it's not rate and term it's, it's cash out. Refinances. People are hoarding a little bit of cash. Yeah. Or they're spending a bunch of their money with credit cards to pay for food and shelter and gas. Yeah. With their cards and they, they need more cash. Jonathan Davis 00:08:47 Well, I mean, it could be rate term, probably not. I mean, you probably have some five, one and seven one arms that are coming due that are, you know, people have Bill Fairman 00:08:54 To, if you, you had a five, one or a seven one arm in the last three or four years, you're on moron. Wendy Sweet 00:08:59 That's crazy. Yeah. Crazy. Jonathan Davis 00:09:01 Well, well, you wouldn't come due in the last three or four Wendy Sweet 00:09:03 Years. Yeah, that's right. You would've been, you would've five years ago. Jonathan Davis 00:09:06 Well, seven years ago. Bill Fairman 00:09:08 My point is, why wouldn't you have refinanced before then? I mean, you couldn't qualify Jonathan Davis 00:09:13 Well, remember in 2018, you know, mortgage rates were in the fives. Yeah. I mean, just that's four years. Guess Bill Fairman 00:09:19 What? I mean, as soon as they got down below three. Yeah. Why wouldn't you have been refining? Jonathan Davis 00:09:23 Well, I'm saying, so you'd be, you'd be refinancing from 2015 to 2018. Yeah. And yeah, I wouldn't, your rates would be pretty comparable to where they are now Bill Fairman 00:09:32 Or higher, but that just means they're, they're going to an adjustable and yeah. You might wanna go to a higher fixed rate and be stuck with a higher adjustable and not knowing where it's gonna go. I get that. But I think again, unless you couldn't qualify, you should have already done that. So you're still more on or not paying attention. Wendy Sweet 00:09:53 Do you have a graph that you wanted to show no online or that's just for us to look at. Okay. Bill Fairman 00:09:59 That's that's going into our next segment. Oh, gotcha. But thanks for reminding me purchase mortgages prices rose to 416,300 from four 13. So we still have prices that are going up Wendy Sweet 01:10:15 A little bit and that's nationwide too. So it's gonna be different depending on where you are located. Sure, Bill Fairman 01:10:22 Sure. So average interest rate for a conforming loan was, you know, between it was 5.47 compared to 5.43, which is not a big deal. Here's what really surprised me though. Jumbo 30 year fixed the rate was 5.9% since when is a jumbo more expensive than Jonathan Davis 01:10:45 5.09. Bill Fairman 01:10:47 Yeah. Yeah. Jonathan Davis 01:10:47 Okay. Yeah. 5.09. Bill Fairman 01:10:49 Yeah. What did I say? 5.9. Yeah. Okay. 5.09. So barely a tick above five. So since when is jumbo rates lower than conventional rates? Wendy Sweet 01:10:59 Yeah. Amazing. Huh? Jonathan Davis 01:11:00 Because most loans are jumbo now with, you know, 4, 4 16 being the average loan Wendy Sweet 01:11:05 Size. Bill Fairman 01:11:07 And that really shocked me. Yeah. That is that's crazy. And it, this, this article, and again, it was in mortgage news daily, yesterday, you can get the whole thing, but they were showing these rates with, you know, some points, a little bit of points, but the points were basically the same. Yeah. For all of these, I'm just, I'm just shocked that the jumbos Wendy Sweet 01:11:29 And the key to all this is how is that really going to affect real estate investors when they're trying to fix and flip properties, you know, how are the sales gonna change if they're, they're going to change. We still through all of this, have a shortage of housing. Yeah. You know, we're, we're still low on the housing. So, you know, things are still gonna be moving along. Bill Fairman 01:11:53 Well, the, the one thing I want to add to this is that unless you're in California or certain areas of the country bubble units, you're not gonna be getting, if, if you're an investor, you're not getting a jumbo. So if, if those houses are, are moving, it's gonna be for more than likely people that are owner occupied. Sure. Yeah. In smaller units that are gonna have a lot of investors in. So as people are getting priced out of the market, the market will come back to them. Eventually wages still aren't keeping up with inflation, but at some point wages will, as inflation starts to come down and then prices on, on homes will, I don't wanna say flatten, but they'll get more realistic. Jonathan Davis 01:12:42 Yeah. Yeah. Everything will adjust. Bill Fairman 01:12:43 You keep beating the same drum here that this appreciation rate is unsustainable Jonathan Davis 01:12:50 And it's a great time to be a landlord. Yeah. Yeah. That's a great job. Rent have never been higher. That's right. Rent's never been try. Bill Fairman 01:12:57 All right. So we are going to talk about wealthy versus rich, Jonathan Davis 01:13:05 Wealthy versus rich. Bill Fairman 01:13:07 So what I'd like to talk about is the difference between getting rich in the stock market and getting wealthy in real estate. You have any thoughts on that? Jonathan Davis 01:13:19 Do I have thoughts? I have a lot of thoughts on that. I mean, I'll focus more on the real estate size. That's more of my, my wheelhouse. There are so many different ways to invest in real estate and there's. And so you can be diverse between asset classes be between geography. You can, you know, have cash flow. You can have appreciation. We were just talking about unsustainable appreciation, but you can also have depreciation, which is a tax advantage. You can even hypothecate if you want. So, you know, it's just pledging an asset without conveying title. So there's all kinds of ways. And, and the thing to remember, I think for real estate is where the shiny object syndrome happens in, in stock market. My cousin put, you know, 10,000 in, on this stock and it blew up and he, now he's a millionaire that, you know, that's great. Jonathan Davis 01:14:24 But the chances of that occurring are so minimal. Like it it's, it's it? Yeah. It's so tiny, but in real estate, you don't get that quick fix that everyone like, you know, like, you know, it's a headline, everyone just wants the headline. I made a, I made $400,000 when I sold this house. It was fantastic. Like that's not typical. It's, it's, it's not, it's a, it's a long process. Yes. And it's a long game that you have to play and you have to diversify yourself. But that long process is the wealth. That is where the wealth is generated. In that process. You can, you can get, become a millionaire in stock market overnight from some anomaly happening that you had no control over. It could have gone a thousand different ways, but it went this way for you. Congratulations. Now, what do you do with it? I suggest take that money invested in real estate, but you Wendy Sweet 01:15:19 Know, yeah. Yeah. Plus, I mean, you talked about assets and all of that, you know, different classes, but not only that, but you can also choose to be active or passive in investing in real estate, whether you're funds syn syndications, or are you investing in individual people that, you know, are you buying notes? You know, there's Jonathan Davis 01:15:43 Yeah. Wendy Sweet 01:15:43 Are, are so many different things Jonathan Davis 01:15:45 You're buying and selling notes. Are you buying performing assets? Non-performing assets, reperforming assets, commercial, residential, you know, mixed use, raw land, whatever, you know, what have you, I mean, there's so many different avenues you could do. You can do seller financing, you can create a note and then sell that note or sell a portion of that note, sell the first half of it and retain that the second half. Like there's, there's so many options. And again, I'm only speaking from the real estate side that I know, but I don't think you have that many, well, you have options in, in stock market, but I don't think you have, it's not the control tied with an asset. Wendy Sweet 01:16:26 Right. Jonathan Davis 01:16:26 That's, that's what we Bill Fairman 01:16:27 Like. If you're confused about all the different ways and how to do this, how, how many people that are invested in the stock market know all the different ways to invest in the stock market. That's Jonathan Davis 01:16:39 Right. Probably none of them, Bill Fairman 01:16:41 Most of them just have money managers that they can say, okay, that sounds good to me. I did. I read an article yesterday from JP Morgan chase advisors and the, in the article, it was stating that the average investor after inflation ends up with about a 2.9 to 3.1% return. Wow. Over the 20 years, because they always buy it the wrong time. They sell it the wrong time. They pay too high of fees, all that stuff, taxes. Yeah. All, all that is involved because they, they don't know. They trust other people to manage it for 'em and if they try to do it themselves, they, they make even less money. Wendy Sweet 01:17:28 Yeah. They run scared. Bill Fairman 01:17:30 So through, if you'll put up that graph that shows the home prices versus the stock market since 1900. So it's the, here's the appreciation. And, and let's talk about, and, and I, I couldn't find one that went beyond 2010, really, that would show a long term in the market. So this is since the 1900 stock market versus home appreciation basically. So the red line is the stock market. And as you can see, they run fairly parallel through from 1900, all the way to 2010. So the values are basically the same. Yeah. The prices are basically, Jonathan Davis 01:18:20 The only difference is you don't have steep losses and gains in the housing. As you do in stock. Bill Fairman 01:18:27 Housing is, is pretty steady until you get to, you know, 2008 and eight where it went down, but it, you know, it recovered fairly well. Just like the snack market did in 2008. I mean, it dropped two. Yep. But here's a little difference in building wealth versus getting rich. Could you put that back up again, if you don't mind with that, the housing, those prices are the same, but the value is not in the price. The value is in the income that those properties pay. You let's switch over to that graph where I have the, there, there we go. And I know it's kind of hard to read this. This is the 30 year and the 20 year history of the S and P 500. And these are the returns for 30 years. The average return was nine point. I can't read Jonathan Davis 01:19:24 That 9.84. Bill Fairman 01:19:25 Yeah. 9.8, 4%. And then adjusted for inflation. It was 7.15. Now this is in price, right? If you're, if you own real estate and you're getting rental income from real estate, do you think you're gonna get somewhere in the seven to 9% return on those investments? Jonathan Davis 01:19:48 I think most people that we work with get somewhere between seven and 12% on their Bill Fairman 01:19:53 Investment. Okay. Now that's on the, we'll call it the dividend part on the real estate. Yeah. You're not gonna get a dividend like that in the stock market, your typical dividend paying stocks, number one are not going to follow that same trend line as far as pricing goes. And your dividend typically is gonna be between, depending on the company two and a half to 4% return. Yeah. Okay. With the housing market. We'll, we'll just say in single family, I'm not gonna talk about anything else right now, because the graph is based on single family housing, you are getting a seven to 9% increase over time, every single year with a few exceptions, but over time. Yeah. You're, you're getting that same appreciation as the stock market, but you don't get paid in the stock market until you sell. Right. Well, with real estate, you're getting seven to 9% returns. And then you get DEP profit. When you sell, if you decide to sell, plus you also get the tax advantages. Yep. With, with depreciation. Now, a lot of people are gonna say, well, yeah, that's fine and dandy, but I don't, I don't wanna be a landlord. That's a lot of trouble to get what Jonathan Davis 02:21:12 Property management companies Bill Fairman 02:21:14 Are for. That's right. You don't have to do it yourself. You can invest in funds that do the same thing that are that's right....
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233 Self-Storage: Lessons Learned So Far! | REI Show - Hard Money for Real Estate Investors
08/05/2022
233 Self-Storage: Lessons Learned So Far! | REI Show - Hard Money for Real Estate Investors
Bill Fairman 00:00:03 Greetings folks. So, you know, we love self storage. We love 'em so much. We ended up buying some. So in this episode, we're gonna talk about lessons learned right after this. Thank you for joining us on the real estate and investors show hard money for real estate investors. We are Carolina capital management, private lenders for real estate professionals. So if you're looking for us to take a look at one of your projects, go to Carolina, hard money.com. Click on apply. Now, if you're a passive investor looking for passive returns, click on the accredited investor tab, and don't forget to like share subscribe, hit the bell. And don't forget about Wednesdays with Wendy is just a shadow of herself. Apparently our lights are not focused in properly, but Wendy does, excuse me, 30 minutes per person on Wednesdays. Anything you wanna talk about real estate. She donates her time to do this. So sign up on this link and we have one over in the chat, which by the way, we have a chat, it's either gonna be on the right side of your screen or underneath, depending on the platform that you're viewing us from. So if you wanna leave any comments, nasty or not can put 'em there, Jonathan Davis 00:02:02 You know, bill, this is the most excited I've seen you in a lot. Yeah. Bill Fairman 00:02:05 I'm getting ready to leave. Wendy Sweet 00:02:06 Or I thought maybe it was cuz I was back. Yeah, Bill Fairman 00:02:08 That Wendy Sweet 00:02:08 Too. We had some great calls on Wednesday yesterday too. Wow. Five excellent, excellent calls. I just, I'm always amazed at the different topics and just really, really good stuff. Really good Bill Fairman 00:02:23 Stuff. That would be a good way to take a couple of questions and then we can yeah. Do 'em here on the show and answer them. You don't have to say who asked them, but yeah, it might be good topics for, Wendy Sweet 00:02:35 Well, I'm actually putting together a book from them that we'll talk about just all the different topics, cuz it's just so vast. It's, it's amazing all the, all the options in real estate. In fact, we talked about that yesterday. I, I don't remember which one I was talking to, but that, you know, you get into real estate and you think that it's, you know, fix and flip, right. You know, that's what you think it is. But my goodness, everything gets really broken down into a multitude of different options. And then when you choose that option, there's a multitude of different options for that. Right. You know, the layers are, are definitely, it just goes on and on doesn't it it's depending Bill Fairman 00:03:14 On market timing, there's all kind of different ways to, Wendy Sweet 00:03:18 And that's the key. My bro is figuring out what's going on. My green bro. That's and he is green today, but it's, it's, that's the key is really figuring out what's going on around you. And what can you do to go into that toolbox and use? What's gonna work for what's happening in that market. Bill Fairman 00:03:41 Neat keeps real estate so interesting is exciting, constantly changing and evolving, but you know what? It's still the same. It's all that's right about the numbers. It's just different ways of tackling it based on different right Wendy Sweet 00:03:54 Markets, basically the same, that's the Jonathan Davis 00:03:56 Similar conversation that we, we had, I think at the last employee luncheon learn or whatever that we had talking about, you were saying the market is cyclical and you know, it's just all these things. And while that's true, the things that throw it, the occurrences that throw it back into that cyclical motion are never the same, Wendy Sweet 00:04:18 Right? Like Jonathan Davis 00:04:19 So good point. It, it keeps happening, but it's never the same thing that, that Wendy Sweet 00:04:23 Pushes it over there. Trigger pushes Jonathan Davis 00:04:24 It back. So that's the exciting part is we know it's cyclical, but we never know what will cause that cyclical motion. Wendy Sweet 00:04:30 Yeah. Yeah. Great point. Bill Fairman 00:04:32 That is true. But the, the majority of the time it's rate related, Jonathan Davis 00:04:40 But what causes the, we had the same, but what causes the rate? It's never the same thing. Bill Fairman 00:04:45 That's Wendy Sweet 00:04:46 Right. Jonathan Davis 00:04:46 We don't say the fed or the fed responding. Bill Fairman 00:04:49 We, we know that the fed doesn't cons doesn't control Wendy Sweet 00:04:52 Mortgage rates. Bill Fairman 00:04:52 Yeah. The fed is always behind it's the market that controls rates. Wendy Sweet 00:04:56 Yeah. Bill Fairman 00:04:57 So Wendy Sweet 00:04:58 Really good stuff. We do Bill Fairman 00:04:59 Have a little bit of breaking news. Speaking of rates, breaking news, the average 30 year fixed rate mortgage dropped to 4.9, 9% for the week. Wendy Sweet 00:05:21 Really? I don't know Bill Fairman 00:05:22 That. Not from 5.3. Oh all the way down to 4 9, 9. Wow. Jonathan Davis 00:05:27 And it was at five, five. What didn't they? Yeah. Wendy Sweet 00:05:30 Brian Maddox said that would happen, Bill Fairman 00:05:32 You know, excuse me. Keep in mind. It's still gonna fluctuate for a while, depending on slow downs and that type of thing. But a lot of people were pulling money back over in stocks and it worked out well. Yeah. Wendy Sweet 00:05:46 Yeah. That's, that's Bill Fairman 00:05:47 Good. At least for some of those folks that have been kind of sitting on the fence and hoping that they wouldn't spend half their life paying their mortgage off. All right. So let's, let's get this show on the road. Yeah. So a while back we were fortunate enough to purchase some self storage. She hasn't told the story. So because it could be fortunate or unfortunate. I'm not sure yet because we, you know, we land in that space and we love the space, you know, why don't we own any yeah. You Wendy Sweet 00:06:23 Know what I mean? Why don't we own Bill Fairman 00:06:24 Everything? So we're, that was cause we couldn't afford it. We're we're dipping our toes always can and, and Wendy is taking the lead on Wendy Sweet 00:06:31 This. Yeah. Taking the lead and the middle and the behind on it. But you know, that's what I said I would do. And that's what I'm doing because the team here is so awesome that I don't even really have to do anything in the loan on the loan side of life anymore, which is sad, but also very exciting. But it opened me up to be able to do this. And you know, our mom, she might not be online now, but she will watch this. And she has seen me all my life. I don't just bite things off to chew. I bite them off bigger than they really need. It's an elephant at every opportunity for me. And, Bill Fairman 00:07:10 And we, we call that jumping in with both Wendy Sweet 00:07:12 Feet. Yeah. Yeah. And, and I always ask myself, why in the world are you doing this? And, but I always land on my feet, thanks to God. And you know, the same thing has happened here. We didn't just buy one storage facility. We had to buy two. And, and I'm so glad that we did though, because they've really been very different in the approach. The reason why we bought them were for really two different things. You know, one, one was a little bit bigger. One was, you know, that one's located closer to us. One's located farther away. It just, it's amazing how the two have reacted differently to what we're doing. And I'm kind of doing the same due diligence for both. But one came out to be a whole lot easier to work with, which is the one we didn't think would be than the one that we thought would be the breeze has turned out to be extremely challenging. Let's Bill Fairman 00:08:17 Let's, let's talk about two. One is more of a conventional way of looking at cell storage all in one Wendy Sweet 00:08:24 Land. Yeah. That's the one in Crossville, Tennessee. Bill Fairman 00:08:27 And then the other one in Mexico, Missouri. Wendy Sweet 00:08:29 Yes. Always wanted to go to Mexico, but not in Missouri, but is, Bill Fairman 00:08:33 Is several parcels, Wendy Sweet 00:08:35 Several parcels. And it's in a downtown neighborhood like it's downtown, but it's split up into four different parcels that are all within a block or two of each other. It didn't have a fence around it. They were painted brown and we'd gone in and were camouflaging them. They were camouflaging 'em they're, you know, not, no good lighting the weeds growing up everywhere. And, and so we we've done the rehab side of that almost complete for, for the most part, you know, with the new gravel and drainage and gutters and painting it. And it, it looks like a completely different place and it's now a hundred percent full. So now we're getting in starting to raise the rates and cuz you don't really wanna be a hundred percent full. You wanna be in the mid nineties Bill Fairman 00:09:33 When this is recorded, we'll leave a link through some before and after Wendy Sweet 00:09:37 Photo shots. Yeah. I forgot to send Scott some pictures of that and Jonathan Davis 00:09:41 You don't wanna be a hundred percent full because if you are, you're Wendy Sweet 00:09:43 Not charging enough. That's exactly right. I'm competitive in the market. Yeah, that's exactly right. It's, I'm glad that I have my hospitality background being in the hotel business and of course have a short term rentals as well because there's things about self storage that are really similar to the hospitality industry. D a little different than your regular long term rental, but very much like your short term, you care about occupancy, you know, driving up the rates on a daily, weekly or monthly basis based on what your occupancy is and what your competitors are doing. When I was in the hotel business, we had one particular hotel in Montgomery, Alabama and comfort in quality in there was a Marriott courtyard and a, a Fairfield all on different corners. And each, each, you know, we were the first ones comfort on that corner. And as everybody built a new hotel, you know, our occupancy was going down. Wendy Sweet 01:10:42 So we would send the other, we knew nights that that other people were gonna fill up first. So we started sending their front desk people pizzas and say, Hey, we have rooms. So I say that because it's important to understand your competition. Yeah. And what they're doing and be on a friendly basis with them because there are plenty of the newer self storage facilities out there that are full. They, or they don't have the sizes that people need and you want them to recommend, you know, us. Yep. You know, cuz I don't mind being number two. It's okay. You know, we can still number two yeah. Or walling in it. So, so that's been, it's been really unique to me in that it's so much like the hotel business and, and the automation from it is really exciting too, because self storage is exploding. So, so all of the vendors that have to do with self storage, you know, they too are exploding and growing and what they're doing, where, you know, you, you can book a unit on your phone and you're key to get in is on your phone. You tell Jonathan Davis 01:11:52 Like you can buy, buy like automated drones that when someone like security drones, when someone's on the property, they will circle and go to that's. Right. Like it, it gets Wendy Sweet 01:12:01 Pretty high tech that's right. It does. Now they're running about $32,000 a pop. So we probably won't be getting any of those anytime soon. Well, but some of the bigger storage, but if you're Bill Fairman 01:12:10 Hanging out around our facility for no reason, you never know, we may have Wendy Sweet 01:12:14 One, you hear that buzz above you. Yeah. That's what we're looking for. But it's, it's, it's just amazing how automated it is. And you know, and another thing too, in self storage, you definitely wanna do that. Cost segregation study and take advantage of the, the, you know, tax opportunities that you're gonna have to be able to do that. So, so it has, you know, sell storage has so many different real estate types that are related to other segments of real estate that you're in. And they kind of all come into this one spot, which is really, to me, it's really exciting. I think Bill Fairman 01:12:53 It's neat. So if you're doing fix and flip and other things and you're having trouble finding contractors and supplies, is it the same for self storage? Wendy Sweet 01:13:03 It's similar, but not as bad, you know, I'm looking for people who can install fences, I'm looking for a painter, I'm looking for masonry guy that can repair that roofers. Jonathan Davis 01:13:16 The things that are really like backed up are windows lumber, Wendy Sweet 01:13:20 Trusses appliance Jonathan Davis 01:13:22 Appliances. Right. Wendy Sweet 01:13:23 So I'm not feeling all that you Jonathan Davis 01:13:26 Concrete slab block and metal Wendy Sweet 01:13:27 That's right. That's exactly right. And even like, you know, our Crossville Tennessee property had T one 11 siding. I had Bill Fairman 01:13:37 No Wendy Sweet 01:13:37 Idea what that is. Well, it's like fake panel. It's like the paneling from the seventies, but it's for the outside of a building. So it's, it's on the, the, you know, where the Eves come to the end. So it's really just on the ends of the building and it's all rotten. It needs to be replaced. And my goal or thought pattern was just to replace it with the same thing. But you know, my roofer comes in and goes, you know, we can replace that siding with metal rather than T one 11. Well, heck yeah. I'd love to have it replaced in metal. It's custom cut. And it's actually a little bit cheaper for us to do it that way and it'll last a lot longer. So, so I'm really, really excited Bill Fairman 01:14:17 By that. So they using the same materials they would use for a metal roof. Wendy Sweet 01:14:19 That's exactly right. And we're getting roofs put on, on some of the Bill Fairman 01:14:23 Building. So corrosion resistant. Wendy Sweet 01:14:24 Exactly. Exactly. So it works. So, but you know, the first thing I did before we bought these is I immersed myself in first of all, the North Carolina self storage association, a dear friend of mine Wende long invited me to accompany him to go. And it was, you know, just one of the best things I ever did. I'm so grateful that he, he directed me to do do that. And then I went to a bigger self storage convention in Las Vegas. You know, my favorite town, everybody knows I hate Las Vegas, but it's called inside self storage. And that was, you know, really, really good with all of the, the classes, the seminars, the vendors, there were, I don't know, 3000, 4,000 people there. It was really big, but very, and it was interesting to see too, who, who, who, who the owners are, you know, who is it? 52% of the people that own self storage is mom and pop, you know, real, similar to single family, burnt out landlords, you know, and that's who you wanna buy your properties from. So Bill Fairman 01:15:34 Smaller multifamily too. Wendy Sweet 01:15:36 Exactly. Exactly. And then you've got, you know, a few co corporations that have, you know, hundreds of facilities and are just doing really, really well. Bill Fairman 01:15:47 And, and a lot of those are now developing new versus trying buy old. Cause it's cheaper to develop than it's to purchase. Wendy Sweet 01:15:54 That's exactly right. And what was, and it Bill Fairman 01:15:57 Functions more like they want it to Wendy Sweet 01:15:58 Function. That's right. And go ahead, Owen, Jonathan Davis 01:16:01 To build on that, you know, looking for, you know, those old box stores where they, you know, I think when we were talking with Fernando angel Luci, you know, they to self storage exclusively, I think you said it saves almost six up to 60% of build costs. If you can just get one of those shells at a decent price and go inside there. So you've seen a lot of people do that. Wendy Sweet 01:16:24 Well, and that's, what's another, you know, we Bill Fairman 01:16:26 Say, so start looking for coals. Yeah. Wendy Sweet 01:16:29 Because they're going down. I'm just kidding. No, no, we love go. Jonathan Davis 01:16:32 But I mean, like I swear, every Kmart is every old Kmart I think is Wendy Sweet 01:16:36 Yeah. Self support. That's so true. That's, that's very true. And the other thing that, that we talked about when we first started this conversation, excuse me, was we talked about how like, its, if you go into fix and flip now, you know, it can be, get broken down into so many different types of things that you're gonna focus on. Well, self storage is the same way you're gonna have, you know, the self storage that doesn't have the fence around it. It's located kind of in a neighborhood it's, you know, low key a C class is what I would call it. Right. Then you've got your self storage that are a little more uppity. They have the fencing and they're really nice. And that kind of thing. Then you go to your, a class, which is your, you know, five, six story, temperature control, you know, Bill Fairman 01:17:26 There's like an office building. Wendy Sweet 01:17:28 Yeah. Yeah. So, so there's variations of that. One of the things that we're really pushing though at this inside cell storage, they really were just starting to talk about RV and boat parking. And you know how you can, if you have solar on the top of your RV cover, you know, if you're gonna build a cover for it, you get a 30% tax abatement for that, that if you're not putting walls on that building, it's not really an improvement. Jonathan Davis 01:17:54 So it's not tax it doesn't add value to the assessment. Wendy Sweet 01:17:58 So you don't, don't have to pay more taxes for that. So there's all kinds of little things that you can look for there. But one of the things that I have really learned when I'm looking at new properties is to really search for properties that have land or, or space a certain amount of space. And you need to understand what you need. Like you're gonna have to have 30 feet all around that space for turnaround and back in and that kind of thing. So you wanna make sure that you have space to be able to add our van boat parking and you don't have to have a cover on it. You just, you know, show 'em where they can park and, and you have no overhead for that, but Bill Fairman 01:18:36 Gravel. Yeah. And that's one of the benefits of not having the big bucks, right. That you're doing or the new development, because they're paying a lot more for the land and they want to utilize it with we'll call it dwellings. Right. But if you're buying a, you know, a mom and pop that's out a little bit, the land was already cheaper. Right. And if they have land there, then you can either have portable units that you can put in there or you can turn it in the boat and RV and Wendy Sweet 01:19:03 Yeah. And the cool thing about the portable units is portables are just that they're portable. So you can put those units in places where your local zoning won't allow you to do any kind of a permanent structure. So you're allowed to add additional space by having those portable units. But really when you sit back and look at the cost of the portable unit, why not turn it into just parking Jonathan Davis 01:19:30 Spot? Yeah. The parking spot. I mean, yeah. It'd be beneficial if you have zoning that...
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232 Current Mortgage Market Opportunities! | REI Show - Hard Money for Real Estate Investors
07/29/2022
232 Current Mortgage Market Opportunities! | REI Show - Hard Money for Real Estate Investors
Bill Fairman 00:00:02 Welcome everyone. I'm supposed to do a short tease. So already off to that start, we'll be ranked back after this. Bill Fairman 00:00:32 Wow. And they told me there were no new graphics. Thank you. That was pretty interesting. Wasn't it? That was good. Yeah. All right. Well, thank you so much for joining us on the real estate investor show. What is it? Hard money for real estate investors. It's right there. Yeah. We are Carolina capital management, private lenders for real estate professionals in the Southeast. If you are a real estate investor and you would like us to take a look at one of your deals, go to Carolina, hard money.com. Click on applying. Now, if you're an accredited investor, looking for passive returns, click on the accredited investor tab, don't forget to like share subscribe, hit the bell. And definitely don't forget about signing up for Wednesdays with Wendy, Bill Fairman 00:01:28 As you know, Wendy devotes, 30 minutes per person on Wednesday afternoons, not this month, cuz she's on vacation to talk about anything real estate related. She's usually booked out a couple months in advance. So grab a spot. There's a link to her calendar and we will leave it over in the comment section which we have on the left side of the screen or underneath, depending on the platform you're viewing us from. We are excited today. We have Brian Maddox of Ameri first, first mortgage. He is an expert in the conforming and investment mortgage business. And I wanted to bring him in to have some discussions, Jonathan Davis, to my side. And like I said, Wendy is still vacationing. Of course it's not the vacation she was expecting towards the end as she ruined her transmission carrying around that RV. It's so listen, let's get started with some breaking news. All right. So if you see sweat dripping off of us, yes, it is summer. For what? Whatever reason. It's really stuffy in this room today. Hey Sue. Jonathan Davis 00:03:00 Thank you Susan. Bill Fairman 00:03:03 So breaking news yesterday, the fed announced another 75 basins point hike in their rate. That was not unexpected. Jonathan Davis 00:03:13 The good news is it was already priced in to most lenders. Yeah. Right. Bill Fairman 00:03:17 And, and investors liked it because of the language he used after he announced it. They're basically want doing a wait and see kind of an attitude, right? Jonathan Davis 00:03:26 Yeah. They anticipate they're at the top of the interest rate hike. Bill Fairman 00:03:31 They said they're gonna be data sensitive Jonathan Davis 00:03:34 Data Bill Fairman 00:03:35 Sensitive. They're gonna trust the science Jonathan Davis 00:03:36 Trust. The science man. I've heard that somewhere too. Before. I can't Bill Fairman 00:03:39 Remember where the other news we are technically in a recession officially, unless you've changed the language that we've always had today, the GDP was 0.93. What is it? Retraction subtraction. We were below par. Yeah. By 0.9, 3%. Again that wasn't unexpected either. We all know we're essentially in a recession right now. Job. Market's still good. Yes. Right? Jonathan Davis 00:04:18 Yep. And that's that that's leading to the, the kind of wait and see model is the, the jobs are saying strong right now that they feel like, okay, well maybe we can pause adding more. Right. Hikes down the way to see because cuz we do have such a strong job market. Bill Fairman 00:04:36 And in, in a few minutes we're actually gonna let Brian talk. We doesn't have to just sit here and smile. He Jonathan Davis 00:04:41 Will. Well, we're wait. He has the really interesting stuff. I'm just, this is just commentary. Bill Fairman 00:04:47 Now the job market is gonna be a little bit tough in the mortgage business and I'm gonna read off some stuff. I, I typically don't like just reading off a prompter, but I have a lot here to cover. So experts are forecasting, a 35, 50% drop in mortgage originations this year, 2021, there was $4 trillion in mortgages and they're expecting it to go down to 2 trillion in 2022. Most of the drop is due to a decrease in refinancing, which makes sense as rates go up. Meanwhile, mortgage refinance applications are down nearly 80% from a year ago. And that's according to the mortgage bankers association, Brian, isn't that typically what happens when rates start to go up? Bryan Maddex 00:05:35 Yeah. You get a lot of extra applications because I can't not refinance. The rates are so good. Well, everybody probably refinanced in 2020 and 2021. And we came into this year with rates in the threes. But by March they were in the fours and you know, pressing the fives right now. If you don't have great credit, you might be getting a 7% rate. Yeah. So if you've got a 3% mortgage, even if you've got some debt, sometimes it's not worth doing a refinance, but you want to talk to your mortgage person and look at your blended rate. And a lot of people don't look at what the blended rate is, but if you are Bill Fairman 00:06:11 Yeah. Explain the blended Bryan Maddex 00:06:13 Rate. Yeah. So let's, we'll use easy math. Let's say you have $60,000 in a mortgage at 3% and you have $60,000 on credit card debt, which sounds like a lot. But credit card debt just hit an all time high last month. So people are tapping into their, their credit much quicker than they have in the past. And if, if that credit card debt's at 19%, but it's half of your debt and then your mortgage is at 3%. It's half of your debt. If you blend those rates, you take three plus 19 is 22, your blended interest. Rate's 11% sure. Right? And so a 7% mortgage sounds horrible compared to a 3% mortgage, but it sounds great compared to 11% blended debt Bill Fairman 00:06:55 And that 11% is now tax deductible, Bryan Maddex 00:06:58 Possibly Bill Fairman 00:06:59 Mostly Bryan Maddex 00:07:01 Possibly they've changed a lot of those laws in the, in the Trump era. Bill Fairman 00:07:06 So you can't deduct Bryan Maddex 00:07:07 Just equity. You cannot deduct okay. Own equity. You used Bill Fairman 00:07:10 To, you can only deduct the interest from your original purchase. Is that basically what Bryan Maddex 00:07:15 Saying? I believe, yes. And then you may be able to deduct if there was some business expenses or some home improvement, but talk to your CPA Bill Fairman 00:07:23 Or financial planner. And, and we are, none of those Bryan Maddex 00:07:26 Bill is not a financial planner, Bill Fairman 00:07:28 CPA don't Bryan Maddex 00:07:29 Claim to be may maybe tax deductible. Bill Fairman 00:07:31 So the devil's advocate would say, yeah, if I take my credit card stuff and put it into my house, then now if I run into the worst case scenario, right. And I can't afford my payments, you know, they can foreclose on me. If I don't put my credit card debt in there and my payments stay low. Right. I can tell the credit card companies to take a hike. They're not gonna take my house. Bryan Maddex 00:07:59 This is true. And depending on the state, you know, some states offer more protection than others or your primary residents. But if your cash flow is so upside down that your credit card, debt's getting worse every month. Yeah. You're leading towards the inevitable. Right? Right. And so if I can refinance and save you 800 or a thousand dollars per month now, yes, the mortgage is larger and it is putting your, your home possibly at risk. But man, if you can reset your finances and now work within a budget that you're allowing, allowing you to add your savings instead of adding credit card debt every month, it really is. It's not a, for everybody, it just depends on your situation, but it could be appropriate still to do a refinance. I've got one closing today. She's going from a 3.2, five to seven. We're paying off $40,000 in debt. Wow. We're opening up four to $600 a month in her cash flow. She's also on a 40 year mortgage. She's not making headway, right. Her, she's got an equity line that she's been paying interest only on for 10 years. Wow. Right. So she's not G getting better financially. So yes, we're taking her rate up, but we're gonna massively change her situation. Now she's got debt being paid down and has extra money for savings. And, and Jonathan Davis 00:09:10 I just wanted to say, everyone's scared of 7% interest rate. Like we're gonna, I'm gonna beat it like a dead horse, the average rate over the course that we've been tracking this since we've been tracking, it is over 7%. Yeah. Like 7% is not a bad interest rate. Bryan Maddex 00:09:28 I've always used six and a half percent as the average. And so yes, we're on the high side of average, but these are average rates. Yeah. These aren't high. It only seems and feels high because we came from almost free money. Yeah. Jonathan Davis 00:09:40 Yeah. It was free money. 2% free. We Bill Fairman 00:09:42 Definitely have been living on, on free money for Bryan Maddex 00:09:44 A while. Yeah. And we don't want to go back to 2020 that economy sucked. Yeah. Right. So we don't want to see two and a half percent mortgages. That means the, the economy is so broken. It's nice when you're borrowing, if you're buying, but it really it's, it's, we're paying for that. Bill Fairman 00:09:59 So one last thing on that are, are you trying to keep lung values low? Yes. So people still have equity so they can get outta their house if they have Bryan Maddex 01:10:09 To. Yeah. Even FHA changed their guidelines in the last 12 months where you can only go up to 80% of the value of your home. It used to be FHA. You could get up to 95% on a cash out refinance and they've restricted that. So any loan program that I can do 80% is our max cash out. Unless there's like divorce or inheritance or death, there are ways to get above 80% if you're buying out somebody from the house. Right. But for the most part, 80% is the max. You can go, okay. Now equity lines of credit could be an option for some people. Their interest only payments can be bad. Yeah. It could be nice, but they can go higher. Some of them will go it a Bill Fairman 01:10:46 Hundred percent. Well, my concern is, and don't get me wrong. I'm not saying we're going into a 2008, but we have it in the back of our head. And we wanna make sure that there's enough space between what you owe and what your house is worth. Right. So you can liquidate without having to bring money to the table or walk away from the house. And we'd much rather if somebody is getting into trouble, be able to sell that house and get out from under it then to walk away from it. Right. Right. So we, we still need to keep that part of the problem that we had in 2008 was the hundred percent loan. The 1 25 loan. Bryan Maddex 01:11:22 Thank you. Ditech yes. Bill Fairman 01:11:25 The, you can buy this house fully, furnish it and build a pool all in the same loan. Bryan Maddex 01:11:30 You don't have to job a job. Right? You tell us that you make money and won't believe ya. It was, it was a wild times. That's not the underwriting case. No, no. It's, it's so far different from that Bill Fairman 01:11:39 Completely different. You, I think they have to do a blood test to get along anymore. Okay. Let's get to the good news. Wells Fargo laid off at least 114 employees in its mortgage lending team following a 33% drop in first quarter revenue, JP Morgan announced its most recent round of layoffs in its lending department on Wednesday affecting more than a thousand employees. The bank said, some employees will be let go. Others are moved to new teams. We're gonna talk about diversification in your business model. Yep. As an employee, you need to be multi-skilled. So when layoffs do come, if they have openings in other areas that you can move into, it's only gonna protect you. So don't be a one trick pony. So to speak layoffs are much worse at the non-bank lenders where less diversified business makes companies more susceptible to fluctuation and rates. That's what I'm talking about is having other verticals. Jonathan Davis 01:12:43 You're talking about mortgage originators, who, you know, use warehouse line and Bill Fairman 01:12:47 Just that's all they do. They're more likely to serve first time home buyers who are first get pushed out when rates go up as well. I wanna get back to that first time home buyer thing. When we're talking in a moment, the non-bank lenders also rely more heavily on refinance mortgages, which made up 63, 3% of all mortgages last year and obviously are expected to fall. I'm going to cover this real quick. Some of these non-bank lenders, better.com. They laid off 3,900 workers. Wow. And they started this back in December of last year. If you guys will remember the CEO, his name is Gar. I can't pronou. Yeah. Mission. He announced the first round of layoffs of 900 people in a zoom call. You might remember that classy. He said, if you're on this call, you were part of the unlucky group that is being laid off. Oops. Your employment here is terminated effective immediately. Now, in my opinion, this business was gonna go under sooner or later anyway, because better you have somebody. Yes. Because if you have somebody like this, leading your business, the culture, there is crap. Right? And eventually it would eat itself Bryan Maddex 01:14:11 Well. And they wanted to, they wanted to disrupt the market and do a business model where the consumer did everything online. Didn't have to talk to a loan officer and they really thought we're gonna change the world in the mortgage space. Right. They lost money quarter after quarter after quarter, they were trying to buy market share. And you can only lose money for so long. And then rates go up and your business model is completely destroyed. Bill Fairman 01:14:34 So they tried to get into the market as a FinTech, not as a mortgage company. Correct? Exactly. Yeah. Bryan Maddex 01:14:40 They, they took, Jonathan Davis 01:14:40 They took the Amazon model, but yeah. And they're getting break, spikes killed Bill Fairman 01:14:44 That and they're getting rounds and rounds of public money. And that's how they were able to do these mortgages in the first place. Right. So yeah. Jonathan Davis 01:14:53 What reminds me of that old saying, what is it? We, we, it costs us a dollar 25 to, to make these widgets and we sell 'em for, for a dollar. And it's like, how do you make money volume? It's like put, add up. Yeah. Bill Fairman 01:15:09 So they were another 2,500 laid off from about a half a dozen larger lenders. Plus numerous smaller lenders have made cuts as well. Real estate brokerage firms are starting to feel the heat. Redfin compass, both made headlines announcing more than 900 job cuts on June. The CEO of Redfin said we could be facing years and months of fewer home sales, which is, Jonathan Davis 01:15:40 I don't think is I think it's true. Yeah. Bill Fairman 01:15:42 I'm not arguing. Jonathan Davis 01:15:43 I mean, the inventory is just, Bill Fairman 01:15:44 But it's says they're laying off Redfin 780, I'm sorry. 470 employees, about 8% of their workforce because they don't have enough work for their agents and support staff. Now I get the support staff being laid off, but agents aren't, they supposed to be independent. Bryan Maddex 01:16:05 Redfin's another one of those companies that wanted to do things completely different. Yeah. Right. And so they would, they would pay agents. Like you wouldn't work with an agent through your home buying process. You would work with Redfin. And if you wanted to go see this house, they would've assign a agent to show you that house. Okay. That agent got paid a fee to take you and show you that Bill Fairman 01:16:24 House. Okay. So that agent didn't necessarily work for Redfin. They just got a fee from Redfin. Bryan Maddex 01:16:29 They were more of an employee model instead of the 10 99. Oh, okay. They're more salary based and makes sense. Comped based on activity instead of sales. So they just had a, again, it's a completely different business model they wanted to disrupt. And the traditional business model's, what's worked forever. Bill Fairman 01:16:46 Yeah. So if you're a realtor and you're not eating what you kill right. Then you're gonna be subject to this. Right. Bryan Maddex 01:16:53 The market's gonna hurt you a little more. Bill Fairman 01:16:54 Yeah, absolutely. And then Zillow announced 2000 employees layoff 25% of the company in late 2001, a lot of that was due to that wonderful home buying program that they had, that they weren't making any money in Jonathan Davis 01:17:11 Brian. So we talked about, you know, the CEO said that there was years of, you know, slower home sales. Right. Do you see that as well? I mean, cuz we see inventory. Yeah. We see, you know, how what's being put on the market, which everyone's talking about, but also what is even available and new construction, like do Bryan Maddex 01:17:29 You see? Well, that's the thing is what they don't really drill into is there is less inventory. If there's less inventory, you can't have as many sales. Right. And then you've got people who don't have to move right now that are in two and half, 3% mortgages. Yeah. And if they wanna move, they're going into a six or possibly a 7% mortgage. Why, why do I want to make that move if I don't have to, to right. So maybe I'm gonna say as, as the price of houses have gone up and as interest rates have gone up, maybe I, I wanna wait and I wanna sit this season out. So we're seeing inventory increase right now. The media they sell by fear. Yeah. They're gonna say inventory is going up. That proves the market's crashing. Every summer inventory goes up. Every winter inventory goes down, that's a normal cycle for real estate. So we're gonna see that. Yeah. And we need to get a little bit of normalcy in the market. We can't sustain 20% growth of housing pricing year over year, which we are yeah. For the second year, a row, almost a 20%. I think the official number is 19.3% increase. Yeah. I saw 19 something. Yeah. Mm Bill Fairman 01:18:31 It's crazy. It's crazy. The average has been three to three and a half percent since the fifties. Bryan Maddex 01:18:35 Yeah. And you know, mortgage production is down almost 50%. I I've seen a lot of numbers that say 35 to 40%. This will still be about the third best year in the last 15 years for mortgage production. It's just the mortgage production set records Bill Fairman 01:18:50 Had been so high. Bryan Maddex 01:18:51 Right. Right. And so I saw another headline that said, I don't remember who posted it. They said foreclosures are up 440%. Cause they were down a thousand. We had like 16,000 foreclosures and all of 21, which was ridiculous low. And now it's up to a hundred thousand. So yeah, Bill Fairman 01:19:09 It's up a lot. And why was, why was foreclosures down? Not necessarily because people could afford their homes, but they could sell 'em before they got in the foreclosure, they got equity were worth a lot. Right. They could, they weren't walking away from Bryan Maddex 01:19:21 'em and we haven't been doing lending to your point from 2008, we've not been doing a hundred percent financing. People have been committed into the home. Sure. And then equity has just exploded. Right. So yeah, if you're in a bad way sell, you don't have to foreclose right now you can sell 'em and take out some equity. Bill Fairman 01:19:36 So I, I wanna get back to the now to the opportunity that I see. And I wanna see...
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231 Zillow Confirms Housing Crash! | REI - Hard Money for Real Estate Investors
07/22/2022
231 Zillow Confirms Housing Crash! | REI - Hard Money for Real Estate Investors
Bill Fairman 00:00:00 On the other. Hello, welcome. Oh, look, Wendy has shown up out in the west somewhere. Oh, Jonathan Davis 00:00:10 Nice. Bill Fairman 00:00:12 Her campsite. So this is welcome to this week. And as the headlines say, Zillow reports, the sky is falling in well, right after this message. Bill Fairman 00:00:49 So looking for, I love it. It's like, did their algorithm tell them that? Yes. And we always believe what Zillows is. Excuse me. So thank you so much for joining us on the real estate investor show hard money for real estate investors. We are Carolina capital management. We are lenders in the Southeast for real estate professionals. If you have a project that you would like us to take a look at, go to Carolina, hard money.com and click on the applying out tab. If you are a passive investor, looking for passive returns, go to the accredited investor tab. Don't forget to like share subscribe, hit the bell, all that good stuff. And don't forget about Wednesdays with Wendy. Wow. That was quick. Okay. So Wendy books, 30 minutes per person on Wednesdays, there's a link to her calendar. Checking out. She's usually booked a couple of months in advance. Now it's three because she took a month off, sorta on a vacation. As you can see, she's at her, what do you call that? Campsite? This, Wendy Sweet 00:02:01 This is a campsite we're in just outside of Sedona, Arizona in a place called Jerome. Bill Fairman 00:02:08 Oh, I've heard of that. Wendy Sweet 00:02:10 Yeah. Bill Fairman 00:02:12 They not. Have have actual vegetation there and it's not desert. Like Wendy Sweet 00:02:15 It's just a little bit, most of it's, you know, rock and like that kind of thing. I don't know if you can see all that rock, but it's and it's between a hundred to 110. It's not bad. Bill Fairman 00:02:33 My first question is, does the air conditioner work Wendy Sweet 00:02:37 Inside? It does. Yes. It works well. Well, Bill Fairman 00:02:39 I'm assuming inside, well, let me finish this up. We are speaking at quest expo. So let's plug that real quick. Sounds like the music can't catch up with itself. So quest expo, it's a great place to be. If you wanna learn about self-directed IRAs and how to invest it, we have a, a code for discount firm and 30. And how I'm gonna say is you should go. You should go. You should go. Jonathan Davis 00:03:29 Yeah. Any kind of investing, note, investing, buying real estate. What have you, I mean, even if you wanna look, I think they even have crypto and gold Bill Fairman 00:03:39 And oil and gas, oil and gas. Of course it's under attack right now, but still oil and gas. If you wanna be in, you need to be in the energy sector right now. That's the one that's gonna have the most growth either way, whether it's clean renewables or awful fossil fuels that are the most efficient you need to be in energy. Okay. So Wendy, how's your vacation going? Can you hear me? Wendy Sweet 00:04:10 Yeah, you're kind of going in and out for me and I'm sure it's, it's probably my problem. Cause I'm out in the middle of nowhere. I told you. Bill Fairman 00:04:20 Okay. It's Wendy Sweet 00:04:21 It's a connection Bill Fairman 00:04:23 Stare at me. I'll just move on. Okay. Excuse me. So I, I know we did this last week. I, I I've got another person. I don't want, I, I get a lot of questions from our investors, worried about what's happening with the economy. And they keep seeing all these headlines that the sky has fallen in and you know, it, it bothers 'em and I, and I get that, but they need some help understanding what's really going on in the marketplace. Jonathan Davis 00:04:58 Yeah. We need to make sure we understand sensationalism and headlines and yeah. You know, like Zillow, the, you know, the housing market is crashing. That's a headline Bill Fairman 00:05:08 And, and, and don't get me wrong. It's a great way to get eyes on your, on your site. It's we call it click bait. Yeah. Cause you see those headlines, people are gonna click it on automatically. So somehow I ran across this particular video from Darrell minor. He's does a lot of videos on real estate investing real estate in general. And he has a, a course there's his YouTube channel. You can check it out for yourself. And while he's a nice guy, he, he does. If you look at his, what do you call 'em little splash images. It's always, the sky has falling in versus there are a few good points on some of them with some arrows going up, but most of 'em are going down. And, and I get that. He's trying to get eyes on the, on the channel, but I, I wanna help alleviate some folks' fear based on some of the data he's getting from Zillow. Okay. So let's, let's play the first clips Scott, Video Recording 00:06:13 “You waste it in the housing market is continuing, continuing to go down, down and down, but let's jump right into this. It says housing affordability hits 15 year low as prices. Mortgage rates rise May, 2022 market report. We've known that affordability when it comes to the housing situation is getting ridiculous. It's getting ridiculous. It's getting to a point where no one can afford a home because we have interest rates that are ridiculously high. And what is the number? One thing that I always say for every 2% that the interest rate goes up, you lose $200,000 of buying power. Just think of that. Currently you've lost $200,000 or more in buying power based on these interest rates. And no one wants to go down from a $300,000 home to a hundred thousand dollars home. No one wants that mortgage payments are higher than rent and 45 of the 50 largest us metros up from 22 and 2019. What did they just say?” Bill Fairman 00:07:17 All right. So we're gonna unpack a little bit of that. Mortgage rates are not ridiculously high. Jonathan Davis 00:07:24 If anything, they're still ridiculously low. I mean, what's, I think what is it? 7.9 is the historical average of mortgage rates and were at 5.5. Bill Fairman 00:07:35 Yeah. Now when he did this video in may, the rates had climbed up to in the sixes for a short period of time. So I get that, but they they've settled back down a little bit since then, but Jonathan Davis 00:07:49 Now comparatively, are they high from historic lows of 2.8? Yeah, yeah, yeah, yeah. Sure. But I mean you, if we only look at, at the market from a, a three year perspective, yeah. We can, we can lose sight really quickly of what's going on and we can get, you know, believing that we are in historical highs. But if you look back, I mean, anything under 8% is still on average low. Yeah. Bill Fairman 00:08:19 And, and we talked about this before, even if you're at 6% over time, you're, you're paying dollars back that are going down in value versus rents that are continued to go up. If you rent. Jonathan Davis 00:08:34 Yeah. See what he, you know, inflation, if it continues, you're using dollars today's dollars that stay consistent over the 30 year period to pay down. Bill Fairman 00:08:44 Yeah. And the last thing I'm gonna say about this is my interest rate was 14 and a half percent. I know I've said this before, when I bought my first house, that was the FHA going rate. So I would've been really happy at that rate now. Yes. Prices have gone up and we need that to try and lower the appreciation rates. Wendy, you got anything to add? Wendy Sweet 00:09:07 I, if I do, it's probably gonna be choppy. Can you hear me? Bill Fairman 00:09:11 I can hear you fine for now. Jonathan Davis 00:09:12 We just, I mean, we just love the background, stay there. Cause we just love the background. Wendy Sweet 00:09:16 Listen, I'd love to stay here. It's pretty awesome. I, I agree. I think that this guy's just way over the top with him talking about the mortgage rates being so high, cuz it really is. It's like 7.81 since 1971 has been our, our average and that's pretty, that's pretty incredible. And it's way lower than inflation, right? Bill Fairman 00:09:45 Yeah. Yeah. Currently. Jonathan Davis 00:09:47 Well, and also, so what, what do you all think about? He said he, I think he said, I always say this for every 2% interest rates rise, you lose $200,000 of buying power. Do you think that's true? Or Bill Fairman 01:10:04 I don't know. I'd have to calculate it. Jonathan Davis 01:10:06 I, so Wendy Sweet 01:10:07 I think that's too. Jonathan Davis 01:10:08 I think that's too simple of Bill Fairman 01:10:10 If, if it's 2% on this one and then another 2% on top of the 2%, then it went up now it's 4% higher. So Jonathan Davis 01:10:18 Well, so I, I think it's, that's too simplistic of a, of a, an explanation. I mean you have Wendy Sweet 01:10:25 Yeah. Jonathan Davis 01:10:26 Appreciation. So if, if, if interest rates go up 2% at the same time that you have appreciation at 20% on a house in a year that I think that statement might be true if you have, if you, if rates go up 2% and appreciation on homes are back at their average of, you know, one to 3%, I don't think that's true. Bill Fairman 01:10:50 Well, he's probably talking about a, a snapshot in time and that that's probably credible. All right, Scott, let's go to the next Jonathan Davis 01:11:00 One. Scott says we rates artificially low. Yes. Bill Fairman Yes. Video Recording 01:11:08 “Appreciation is finally starting to slow easing slightly from 20.9% annual growth in April to 20.7% in may. Yes. And why is that going to happen? Because we are inching closer and closer to a recession. And what you don't want is you don't wanna be left with the hot potato in your hand, ah, with a house that you overpaid for, with the high interest rate that is now worth less than what you bought it for. Hmm. So how does that look? You buy a house for 350,000. The recession hits and you overpaid 50,000 for, so it was really worth 300, but now it's only worth two 50. So now you're a hundred thousand dollars under now. We don't know inventory continues to recover from February lows, but it's still 50% below 2019 levels. Well, I expect that. But remember when everyone was saying inventory is so low, the housing market's gonna go 20, 30, 40%. Like it did year over year, over year, over year for the next five years, those people are crazy. There's no way that the housing market keep continued to go up that fast at that continued rate inventory is going to slow because people are” Bill Fairman 01:12:27 All right. So let's unpack a couple of this, these statements. I love this man. Have you noticed how he, he was concerned that the appreciation rate was dropping from 20.9% all the way down to 20.7? Wendy Sweet 01:12:44 Woo. Bill Fairman 01:12:47 Again, our, the average appreciation. Jonathan Davis 01:12:51 So Bill Fairman 01:12:51 He over property since the fifties has been like three and a half percent. Jonathan Davis 01:12:54 Yeah. So I need, I, I didn't watch these videos. I had no clue that he was, but so I, I nailed it 2% with 20% of Bill Fairman 01:13:01 Yeah, pretty much. Okay. Another thing was owning a home in a recession. It's gonna drop $50,000 or it's gonna drop in value at all. Scott put up that price draft for me. All right. So here's the us price index since 1900, the year 1900. If you look at this graph, you see one place in the entire history. Well maybe two or Jonathan Davis 01:13:33 Yeah, but a very major, major one Bill Fairman 01:13:35 Major in 1990, but there's basically only one place where historically dropped a punch. And that was, you know, the crash in 2008, which was caused by housing. This recession has nothing to do with housing. This recession has to do with policy and energy costs being too high, which is also caused by policy. Of course, some of it has to do with the pandemic. I'm gonna give him credit for that. And the what do you call it? The supply chain issues. Yeah. This is not a housing recession that is going to be coming up. And the, the fed really has no tools in their toolbox other than to raises rates. But this is not a housing recession. Your house is not gonna go down in value. It may be harder to afford a house. I agree. Yeah. Because everything else is costs more too. I, I don't argue with any of that stuff, but you're not gonna buy a house now and expect to have it go down in value. What do you guys think? Jonathan Davis 01:14:39 No, I mean, so there is yeah, one occurrence in 120 years of, of data where, where values went down, even close to $50,000, like his example one time. And like you said, it was due to what we had the subprime market. I mean, we had, you know, we had tranches of securitizations that were falsified or a lot of data. I mean, it was, it was a housing crisis. Yeah. This is not, I don't think that, I mean, will your home lose value? No. Will it, will it not be worth as much as fast as it has? Yeah. I mean, appreciation has to slow down and inventory is picking up for housing, which will hopefully help bring that, bring that down. Interest rates rising will help bring that down. But to, to say that we're gonna lose value at this point. I, I don't subscribe to that. I don't see any data that would point to that, to that result, Bill Fairman 01:15:47 Wendy. Wendy Sweet 01:15:48 Yeah. The thing, the thing that's gonna hurt people is the cost of everything else. That's, that's, what's fallen from the sky is right. The cost of everything else. You know, traveling out west, we've had to fill my car up at least twice a day at $125 a pop. Wow. Well Bill Fairman 01:16:11 That it costs a lot of money to tow your house around with you. Wendy Sweet 01:16:14 The, the large, that would be getting eight to nine miles a gallon per gallon. But the, the cost of gas that I've seen coming across the country, the lowest I saw, it was 3 86. Believe it or not. And I've seen it over $5 a gallon. So it's been it's those things that are gonna put the serious dent in everybody's wallets, everything else, food, everything. Jonathan Davis 01:16:41 Yeah. I mean, we, we said this before, I mean, goods and services and commodities like that, like they, they have to come down and value long before your house ever would. I mean, people, people are still like, I'll give you an example. My LLC bought a, bought a vehicle to buy that vehicle. It had to pay a premium over MSRP because you can't get vehicles right now. And they just increas the premium that they're charging for those vehicles over the MSRP. I think it's now like $10,000 over MSRP. Yeah. So those things have to stop occurring long before housing value will ever get touched because people will not buy cars or new cars long before they'll they'll ever say, I don't need a house. Bill Fairman 01:17:35 Right. People always need place to leave no matter what. Yeah. Okay. Let's move on to the next one. There Scott, Video Recording 01:17:42 “Go up guys. Incomes are lagging further behind fast rising mortgage costs leading to the most significant and affordable challenges. In the past 15 years, the latest affordability data available from April show's monthly payments taking about 28% of homeowner's monthly income dangerously close to the 30% threshold beyond which is considered a cost burden. Now we know that guys like we know that we, I did a video on that, where I talked about how close we're getting to individuals, getting to that burden cost. That point where we were in 2008, when people just gave up homes, we're 2% close to that number, guys that should scare you guys and know that something is coming around the corner. You see all of these red flags. There is no way that we're coming around the corner and you see 30,000 flags that are all red and they're all in the bucket of housing market. And you still don't think that there's gonna be a recession. Make it make sense. Although rents have soar since the start of 2021, the rapidly rising cost of a mortgage still make rent, a cheaper option. A typically monthly rent in the United States, basically $2,000. Monthly rents are up 15.9%. The pace of annual rent grows slowed for the third consecutive month. Whoa. Look at that. It's slow. Look at that. It's going down.” Bill Fairman 01:19:07 Okay. Bill Fairman 01:19:13 On that one. Okay. There's three things. Bill wants to talk about that one. Okay. Number one, he mentions. Damn I've already forgotten it. All right. So I'll go to number two. Wage Scott, pull up that wage graph I put on here. He is correct. Wages are not keeping up with inflation, but wages are not stagnant. Here's a graph right up through December 20, 21. Do you see any wages going down? No, they're all going up and they're actually going up more than the trend line. So they're actually going up higher than they had been previously. That little dotted line is the trend line from 2019. So they actually increased quite a bit in 2021. Same thing with 2022. I'm assuming, but I can't get the data, but they're still not keeping up with inflation. All right. You can drop that if you like Scott. Yeah. The here's the hyperbole. Bill Fairman 02:20:18 What do what you, he's talking about with getting up to that 30% of housing costs. This is for new buyers. This is not for people that are already in their houses. There's not gonna be a housing crash for people that currently own their house with the ridiculously low rates that we have. These are people that haven't bought the house yet. This is why it's not affordable. And I get it. There are gonna be people that can't afford houses, but that happens in every market cycle. There's people that are new, new home buyers in that range, they can't afford it. They're gonna have to get their debt down in order to do it. And E even if their debt is complete, their debt free and their housing costs are still at 30% of their total income. They're not gonna qualify for a house unless they borrow less money, put more money down, borrow less money, or find a less expensive home. All that said again, this guy is not falling in. Jonathan Davis 02:21:20 Yeah, no. I mean, I think did he, did he say that rents are higher than the average Bill Fairman 02:21:28 Mortgage? Oh yes. In a lot of these cities, Jonathan Davis 02:21:30 That's not true. Bill Fairman 02:21:31 Rent rent is higher. And then look all, let's talk about that. Well, if your mortgage is stagnant, but they're still higher than rents, do you think rents are going to go up or down over time? Jonathan Davis 02:21:43 Correct. They're gonna go up, but maybe I'm wrong here, but I'm pretty, I'm pulling from, from my, my brain here from something I read before, but I thought the average mortgage was $1,800. I don't in the United States. Yeah. I Bill Fairman 02:21:58 Don't know where he Jonathan Davis 02:21:59 Got. I'll have to go look that up because if he's saying the average rent is 1927, then the average mortgage is not over $2,000. Now, like the average mortgage in the Northeast probably is if you wanna break it down to regions. But I think if we wash it all together, that's that, I don't think that's a true statement, but let me, let me research that and we'll get back. Bill Fairman 02:22:22 But yeah, if you're telling people that rents are, it's better to rent because mortgage payments are too high. That's only temporary. If you still buy a house and your mortgage payment is slightly higher than the average rent for that area, eventually the rent is gonna be higher than the mortgage payment cuz the mortgage payment is fixed. Correct. All right, Wendy. Jonathan Davis 02:22:45 Yeah. Bill...
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230 Are Forced Liquidations Coming? | REI Show - Hard Money for Real Estate Investors
07/18/2022
230 Are Forced Liquidations Coming? | REI Show - Hard Money for Real Estate Investors
Bill Fairman 00:00:01 Hi, everyone. It's great to be back in this show. We're gonna answer this burning question. Greetings I'm bill Fairman I'm with Carolina capital management and welcome to the real estate investors. Show hard money for real estate investors. If you are in the market for a loan for one of your projects, go to Carolina, hard money.com and click on the applying L tab. If you're an investor looking for passive returns, go to Carolina, hard money.com and click on the accredited investor tab. Don't forget the like chair subscribe, hit the bell. And don't forget about Wednesdays with Wendy, Bill Fairman 00:01:07 Wendy devotes, 30 minutes per person on Wednesdays to talk about real estate. Well, she'll talk about anything, but you're smart if you'll choose the real estate thing, because that's where all the value is. Anyway, she's usually booked up a couple of months in advance. So go ahead and get on her calendar. It's also gonna be over in the comment section. Speaking of comments, sections, we have comments, questions that you can answer on the right side of your screen or underneath, depending on the platform that you're viewing us from. And one last little bit I want to talk about is the upcoming quest expo in September Bill Fairman 00:02:05 Quest expo is excellent event. It's all education on real estate and investing and how you can invest yourself directed to IRAs. We have a coupon code, Fairman 30, get you 30% off. It's like I said, it's an awesome event. It's three days wonderful place to network and learn about how to invest that self-directed IRA. I can tell you that most people go through the hard part of getting their money rolled over into a self-directed account, but they fail to invest enough of the money and it just sits there. That's not helping you at all. So it's a great place to go okay. To our show. Well, I have an investor that sent me a video a few weeks ago. His name is Steve. I'm not gonna tell you his last name, cuz I didn't get his permission, but he sent me a video of, of a fella. His name is Nick Joley. He runs Reveture consulting and he's a data guy. And the big headline was wall street, landlords taking huge, huge losses and is gonna be forced to do liquidation. So I wanna kinda go over his data and I'm not arguing with his data. I am just, I don't agree with his conclusions. So let's start with this first clip Video Clip 00:03:43 Market. Redfin just reported a couple days ago that investor home purchases crashed by 17%. In the first quarter of 2022, they quoted a realtor in Nashville who said that a few months ago, 95% of homes for sale in Nashville would get at least one cash offer from an investor, but not anymore folks because today most homes aren't getting any investor offers. The realtor went on to say that this is good news for regular home buyers, regular home buyers. Like you all watching this channel are gonna have more inventory and cheaper home prices to choose from. However you need to note this investor fire sale and crash is gonna be most severe and specific cities and neighborhoods around America in 2022 that I'm gonna reveal to you later in. Bill Fairman 00:04:26 Okay. So a couple of things I wanna address with that, yes, investor purchases have dropped and you know, for a couple of reasons, number one, lack of inventory, it it's harder and harder to find inventory out there. Another reason is the prices have gotten too high for investing numbers to make sense. So if the numbers don't work as investor, why are you gonna be buying properties? When Redfin is interviewing realtors about investor offers, I always take that with a grain of salt, most investors, professional investors, number one, they don't buy retail. They don't buy off the MLS. So let let's face it. Those Redfin and the realtors don't do anything about those purchases. They're they're buying off market properties. That the only way they would know about those purchases, if they did a search on title transfers in the area and yeah, the hotter markets are the ones that are gonna have investor purchases dropping the most. And because like I said, the prices are too high. Investor purchases are not emotional. They're they're about the numbers. And if the numbers don't work, they're not gonna purchase. Now. Of course he, he calls it crashing 17%, but they were all already way up there. Now the ones that bought early enough in a lot of these markets, when the prices were relatively low, they could still buy stuff off the MLS and still make the numbers work. But not anymore. The prices have just gotten too high. Scott let's do the next, but Video Clip 00:06:14 First I need to address a question that I think is already brewing on a lot of your minds. You guys are probably San to yourselves. Wait a minute. All we heard about for the last six to 12 months was that investors were taking over the housing market. Why are they now all of a sudden bailing out what's going on? Well, folks, the answer to this question has everything to do with two main trends that are developing right now in the housing market. Number one is increasing mortgage cost and cost of debt. Well, number two is declining profitability for landlord rentals. And that second point on declining profitability is a key one that a lot of people don't understand because if you look at the last eight years of data on investor cap rates, AKA the rental profit that comes from buying and renting outta house, we can see that the cap rate is all the way down to 4.4%. Video Clip 00:06:54 Meaning that if a wall street investor bought the typical priced home in America of 350, 2000, they would earn about 16,000 a year in net rental income. After deducting expensive. This cap rate in investor return has been on a consistent downward decline over the last eight years, forcing many investors to accept lower profits in order to buy into the housing market. Now here's, what's interesting, accepting lower profits made sense for a while because these wall street investors could borrow at very cheap costs of debt. Especially during the pandemic. You can see if we add the orange line to this graph 30 year mortgage rate in America during the pandemic that cost of debt went down to 2.7%. Meaning that even though the profitability of the rental was declining, the cost of debt was declining by more, which meant that there was still an incentive to buy. Video Clip 00:07:39 However, this incentive no longer exists today. As the mortgage rate has shot all the way up to 6% well above the income potential of the property. And this is a huge deal, everyone because the fact that the mortgage rate now the cost of debt is above the rental profit yield. That means that any investor buying into the 2022 housing market with debt is likely losing money after they rent the house out to a tenant and then pay their lender, which is why way fewer investors bought homes in the first quarter of 2022. And why fewer are buying homes this quarter and why by the end of the year, we're gonna see a big real estate investor sell off, especially in certain cities, cities. Bill Fairman 00:08:14 Okay, let yeah, let's stop there. All right. So there's a lot to unpack here. First of all, the big wall street landlords that you talked about earlier have less than a 7% market share on single family homes nationwide. So it's really the mom and pops investors. The PE the people that have probably five to seven houses are the ones that have most of the single family homes in the us as investment properties. By the way, they're not losing money because interest rates are going up. They're, they're not buying properties. You're not gonna sell off a bunch of properties because interest rates have gone up because you already have locked in the nice long, low rate mortgages, just because rates are going up. Doesn't mean your're losing money. You wouldn't buy. If your rates are too high, you'd have to buy at a, a lower price. Bill Fairman 00:09:16 I don't know anybody that is buying single family rental properties in a four cap, a four and a half cap. If, if you're investing in single family homes, you're gonna be at worst a seven or an eight. And again, you're buying off market properties. So in the end, you're probably more at the eight or a nine cap rate in those areas, the, the 4%, four and a half percent cap rates. Those are class, a apartment complexes and self storage type properties. Those are not single family homes. That makes no sense. And he is correct. Those cap rates are way too low, but in my opinion, it's not on single family homes. Okay. Now Brian is correct. One of the benefits of a 6% rate now is that we currently have a 9% inflation rate. So as you're paying these mortgages off over time, you're paying it with dollars that continue to be worth less and less and less. Bill Fairman 01:10:27 And then your values of these properties will continue to go up and then rents will continue to increase, but you're not gonna buy a property that you're losing money on. So yes, he's correct that the, the purchases are gonna slow down, but there's not gonna be a big giant sell off because those properties aren't losing money. Of course, I'm gonna address that later with some occupancy issues. But then again, there's a lot of tools in the toolbox for that. So the slow down and investor purchases, in my opinion, is not gonna be a crash. We actually need a slowdown in purchases overall, a normalized market. Since the fifties has been three to three and a half percent appreciation, we've been at 1720 or higher in some markets. And that is just not sustainable. Yes, things are slowing down. They should, they need to, in order to have a healthy market, it has to get lower because we can't sustain that type of appreciation. Scott, you wanna go to the next clip Video Clip 01:11:39 Where companies like progress, residential operate progress. Residential is the largest private landlord in America. They own over 80,000 housing units and they've been very active in buying up single family homes during the pandemic, and then trying to Jack up the rent on prospective tenants. You can see this very clearly on a property that progress residential owns in Phoenix. They bought it for $427,000 in early April paying 200% over the previous sales price. They then listed it at 24 50 a month for rent a sky high rental rate for this market. However, they haven't been able to find a renter and they've been having to cut the rent ever since. And it's likely that progress residential is gonna need to cut the rent even further on this house in Phoenix, in order to attract a tenant, which is gonna be an issue, cuz it means that their income yield and their return is gonna go even lower just as progress residentials cost of debt and borrowing is surging. Video Clip 01:12:30 Cuz over the last 12 months, we can see that the interest rate progress residential is having to pay on its mortgage back security issuances, which it uses to finance these acquisitions. Well, the interest rate's gone from a minuscule 2.2% in the summer and fall of 2021 all the way up to 5.3% in June of 2022. So this is the explanation for the data we looked at in the beginning of the video that 17% slump in investor home buying it's all related to increasing interest rates and declining profitability. And I believe when Redfin's second quarter investor home buying report comes out. We're gonna see an even bigger crash in purchases, which already is dramatically pushing inventory up in certain cities around America and pushing prices down, particularly in a Metro like Phoenix, where investors have purchased nearly 30% of all the homes on the market. In the last 12 months, I predict home values in Phoenix are going to plummet over the next six months as this investor fire sale takes hold, particularly in certain zip codes to the Southwest, into the west of the Metro where nearly 50% of all the homes in certain neighborhoods are being purchased by investors. Video Clip 01:13:29 We could see massive paying 20, 30, even 40% price decline. Another Metro that's in the crosshairs is Charlotte. North Carolina, over 30% of home sales in the last year were to an investor and amazingly there's certain zip codes were over 60% of sales were to investors and in just one second, I'm gonna reveal even more cities that investors are gonna crash cuz you folks need to understand. Bill Fairman 01:13:51 All right. Thank you Scott. So again, a lot here to unpack that specific example of a house in Phoenix is they obviously just paid too much for that house in the first place. And that market is, and I agree that market is slowing down and is overpriced. That's one of the markets where things are gonna slow down, but we need that additional inventory to bring the market back to normalcy again. Okay? Yes. They, they overpaid for that house. It has nothing to do with their, the financing or the leverage that they used. They just paid too much for that house based on the rents. As you can see it, they paid 20% more than it was worth a year earlier. So those are the markets that heated up too quickly. They own 80,000 units. They have, he showed one example of a house that was over bought at the wrong price and they're gonna have to lower the rents. Bill Fairman 01:14:54 That's what happens sometimes. So you gotta be smarter about your purchasing now on the Charlotte side of things. Yes. There's certain zip codes that have a really high investor percentage of ownership, but these are the markets that people are continuing to migrate to. So I'm not very, I'm not too concerned about that. We still have some upside in the Charlotte market. Now here's the other thing he's talking about a liquidate. These people are gonna be forced to liquidate again. I said that you've already got most of these in place at, at lower rates. You know, you have more tools in your toolbox than just dumping your properties. You don't have to continue to raise rates. You should have had enough margin in there where you can keep your rental rates at flat or even lower it in, in some cases, if you need to, you should have enough margin in there he's predicting and you, you didn't get that part of the, the clip, but he's predicting an inventory surge similar to the crash of 2008, with all these people getting rid of these rental properties. Bill Fairman 01:16:12 That's going a little over the top. I think because like I said, just now within the last probably six months or so is when the interest rates have gone up, that has nothing to do with the homes that have already been purchased and have already been priced appropriately. Your professional investor is not buying at retail. They're buying at wholesale. They're making sure that they're in it properly and they have good cash flow. The cash flow is going to continue no matter what the economy is, people always need a place to live. If anything would happen where they would have to get rid of some properties, it would be in the multi-family space because that's where most of the institutional investors own their rental properties is in the multifamily spaces, not the single family spaces. So in my personal opinion, I, I don't disagree with the data because he's just using raw data. I disagree with his conclusions. We are not gonna be into a crash. We do need some normality back into our market. What I said was earlier that what we had is unsustainable. It's gotta slow down at some point and it's, you know, market corrections, keep in mind if there's more inventory, anytime there's a downturn in the market, that is more opportunity for you to get properties at a lower price. At this point in the game, you guys should be holding onto your cash. Bill Fairman 01:17:59 So you can take advantage of these opportunities that come up. It doesn't mean you crawl into a hole and not buy anything. You just have to be. You just have to make sure that the numbers work that's all. And again, you have plenty of tools in the toolbox. You don't have to sell a house because your occupancy drops. You just lower the rents a little bit. Those values on those homes over time are gonna go up. If you're invested in real estate, it's not a short term thing. It's a long term thing. It's just like investing in the stock market. If you're investing into different types of funds, they're all gonna be five to 10 years maximum or minimum investments, rather because of the liquidity nature of real estate. This is not other than your fix and flip. These are long term investments. And over the long term, the history is you're always gonna end up with, with good value in real estate. So thank you guys so much. Bill Fairman 01:19:02 Lemme see. Do we have one other? No. All right. Thanks so much for, oh, our money is still a good source of funding deals. Yes, sir. Mr. J, that, that's another thing. If, and I'll, I'll leave you with this. When things start to tighten up, you need a network of people that you can get private capital from and it's getting more and more apparent right now as wall street is starting to get a little concerned. A lot of your short term bridge lenders are having a hard time getting securitizations now, and they're not offering the same deals that they did recently. And we'll, we'll do a show on that too. We had a big securitization that happened last week from some institutional lenders that are doing short term bridge loans, like what we do, but you know, they're selling it on wall street as securitizations and the securitization had failed. Bill Fairman 02:20:02 So when I get some more information on that, hopefully we can add that on the next week's show. Thank you so much for joining us on the real estate investor show hard money for real estate investors. We are Carolina capital management. We are lenders in the Southeast for real estate and investors. If you have a project that you'd like us to take a look at, go to Carolina, hardman.com and click on the apply. Now tab, if you are a passive investor looking for passive returns, click on the accredited investor tab, don't forget the like share, subscribe and hit the bell. Have a great week. Talk to you soon.
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229 Importance Of Due Diligence In Today's Market | REI Show - Hard Money for Real Estate Investors
07/01/2022
229 Importance Of Due Diligence In Today's Market | REI Show - Hard Money for Real Estate Investors
Visit our website: Rising rates? High Inflation? Now is the time to be doing the best due diligence of your life! Join the Carolina Capital Management team every Thursday at 12:00 PM Eastern for the Real Estate Investor Show - Hard Money for Real Estate Investors. In this episode, Wendy Sweet and Jonathan Davis shared their thoughts on what you should be doing to ensure that you are putting your best foot forward on your investments. Timestamps: - Introduction - - Wednesday with Wendy: - Bubble Market Might Lose 20% of their Value - Housing Completion Per Year - Fannie Mae Expects Housing Purchases To Drop - RE Market Is On Unchartered Waters - What Is Data Tape? - Importance of Due Diligence - What To Do As Investor - Are They Putting Bad And Good Mortgage Notes Together? - Apartment Complex In Detroit, Should We Invest? - An Example Of What Good Due Diligence Can Do For You - What Is Subordination And Non-Disclosure Agreement? - Carolina Capital Management Fund & Loan Programs - - The 3rd Annual Quest Expo - Sept 23, 24, & 25, 2022 - Promo Code: FAIRMAN30 - 30% discount Listen to our Podcast: YouTube Channel: Facebook:
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228 The Most Important Investment Ever! on REI Show - Hard Money for Real Estate Investors
06/20/2022
228 The Most Important Investment Ever! on REI Show - Hard Money for Real Estate Investors
Visit our website: The Most Important Investment Ever! Do you invest in yourself? Join the Carolina Capital Management team every Thursday at 12 PM Eastern for the Real Estate Investor Show - Hard Money For Real Estate Investors! In this episode, Bill Fairman and Wendy Sweet shared their biggest lessons learned from last week's Freedom Founders Mastermind event. Timestamps: - Introduction: Do You Invest In Yourself? - - Wednesday with Wendy: - - The 3rd Annual Quest Expo - Sept 23, 24, & 25, 2022 - - Promo Code: FAIRMAN30 - 30% discount - Freedom Founders Mastermind Event - “How Leadership Actually Works” by Larry Yatch - “Inflation” by David Phelps - “The Apprentice Model” by David Phelps - Entrepreneurialism: Things You Will Never Learn In School - What Is Your Freedom Number And How To Achieve It - Reduce Your Burn Rate - Reduce Your Debt or Mortgage - Look Into Your Investment Portfolio And What Kind Of Cash Flow You Are Getting Back - QJO Investment Tool - Identify The Three Most Important Things You Need To Do For The Day - Let The Professional Do It - Sonrisers Investment Group - Listen to our Podcast: YouTube Channel: Facebook: Wednesday’s With Wendy:
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227 The Future of Short Term Rentals | REI Show - Hard Money for Real Estate Investors
06/06/2022
227 The Future of Short Term Rentals | REI Show - Hard Money for Real Estate Investors
Visit our website: Join the Carolina Capital Management team every Thursday at 12:00 PM Eastern for the Real Estate Investor Show - Hard Money for Real Estate Investors. In this episode, Bill Fairman, Wendy Sweet, and Jonathan Davis will be discussing the latest breaking news in the real estate world and what might the future holds for short-term rentals. Timestamps: - Introduction - - Wednesday with Wendy: - The 3rd Annual Quest Expo - Sept 23, 24, & 25, 2022 - - Promo Code: FAIRMAN30 - 30% discount - How To Put Mobile Homes On Land - June 22 & 25, 2022 - - Breaking News - Unemployment and Labor News - - Free Management Software - Recession Red Flags - Top Ten Popular Markets - Place Where Home Price Drops In April 2022 - The Future of Short Term Rentals - Common Mistakes when Investing in Short-Term Rental Properties - It Always Comes Down To Buying It Right - Things To Keep In Mind - Most People Travel For Business Not For Fun Listen to our Podcast: YouTube Channel: Facebook:
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226 State of the Industry: Where is Real Estate Going From Here?
05/31/2022
226 State of the Industry: Where is Real Estate Going From Here?
Visit our website: Join the Carolina Capital Management team every Thursday at 12:00 PM Eastern for the Real Estate Investor Show - Hard Money for Real Estate Investors. In this episode, Bill Fairman & Wendy Sweet will be discussing the current state of the Real Estate Industry! What's going on? Houses sitting on the market longer? Interest rates rising in response to inflation? Timestamps: - Introduction: State of the RE Industry - - Wednesday with Wendy: - The 3rd Annual Quest Expo - Sept 23, 24, & 25, 2022 - - Promo Code: FAIRMAN30 - 30% discount - How To Put Mobile Homes On Land - June 22 & 25, 2022 - - 75% Off Code: puntagorda2022 - Breaking News - April Monthly Housing Sales For New Homes Drops! - Current State of Bubble Market Houses - Metroplolitan Statistical Area - Consumer Price Index Data For April - Hard Money Loans Are Picking Up Like Crazy - Watch Your Price Range (High-End Luxury Market) - The Recession-Resistant Housing Is The Best Position - What Size Loan Are You Staying Away From? - Carolina Capital Management’s Programs - Listen to our Podcast: YouTube Channel: Facebook:
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225 Benefits Of Adding Self-Storage To Your Retirement Portfolio | Hard Money for RE Investors
05/24/2022
225 Benefits Of Adding Self-Storage To Your Retirement Portfolio | Hard Money for RE Investors
Visit our website: In today's episode, the Carolina Capital Management team is joined by Fernando Angelucci to discuss the benefits of adding self-storage to your retirement portfolio, the current market, and any changes due to higher financing costs in underwriting. Fernando Angelucci started doing real estate on the residential side by wholesaling & acquiring residential rentals. Then went on to build a multi-family rental portfolio spanning the Midwest. To prepare for the next cycle, IMPACT now focuses on self-storage. Fernando worked at Dow Chemical, a Fortune 50 company, rolling out a flagship product estimated to gross $1B in global revenues. When he was 23, Fernando started doing real estate on the residential side by wholesaling and acquiring residential rentals. Fernando then went on to build a multi-family rental portfolio spanning the Midwest. In preparation for the next down cycle, Fernando and the team divested from residential real estate to focus on self-storage. Listen to our Podcast: https://thealternativeinvestor.libsyn.com/ YouTube Channel: https://www.youtube.com/channel/UCYzCFOvEt2n9TchgECLwpww/ Facebook: https://www.facebook.com/CarolinaHardMoney/
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224 Confessions of a Real Estate Deal Maker| REI Show- Hard Money For Real Estate Investor
05/17/2022
224 Confessions of a Real Estate Deal Maker| REI Show- Hard Money For Real Estate Investor
Confessions of a Real Estate Deal Maker| REI Show- Hard Money For Real Estate Investor Visit our website: Dave Payerchin joins Carolina Capital Management Team to share some of his Confessions as a Real Estate Deal Maker. Dave has been in real estate since 2005. He has bought/sold/fixed/rented over 1000 properties in his career. He actively owns/manages a portfolio of 100+ houses and flips 100+ houses per year! Timestamps: - Introduction: - - Wednesday with Wendy: - Today’s guest: Dave Payerchin - Massive Business Changes With Dave’s Real Estate Business - The Risk of Turnkey Business - People Are Major Investment For Your Business - How To Make Money In Real Estate - What’s Happening Now In The Real Estate Market - Area Where We Will See More Foreclosures - Connect with Dave Payerchin - - The 3rd Annual Quest Expo - Sept 23, 24, & 25, 2022 - - Promo Code: FAIRMAN30 - 30% discount Listen to our Podcast: YouTube Channel: Facebook:
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223 The Biggest Opportunities For Real Estate Investors In Today's Market!
05/09/2022
223 The Biggest Opportunities For Real Estate Investors In Today's Market!
The Biggest Opportunities For Real Estate Investors In Today's Market! Visit our website: Join the Carolina Capital team LIVE every Thursday at 12:00 PM Eastern for the Real Estate Investor Show - Hard Money For Real Estate Investors! In this episode, Bill Fairman and Jonathan Davis give additional insight into the current state of the real estate industry. What's going on? Will the housing market remains strong? What to do with the increasing short-term rates? Find out the biggest opportunities for real estate investors in today’s market! ****** Carolina Capital Management is partnering with Therapy Resource Group for the event called “Bourbon & Bubbles” on May 13, 2022 Carolina Capital Management believes in helping the community receive the mental health therapy that so many people need. If you are interested to attend you may email Jonathan Davis at Therapy Resource Group Event: Website: Timestamps: - Introduction: - - Wednesday with Wendy: - The 3rd Annual Quest Expo - Sept 23, 24, & 25, 2022 - - Promo Code: FAIRMAN30 - 30% discount - - Therapy Resource Group Event: - Breaking News - The Feds Are Raising Short Term Rates - The Housing Market Will Remain Strong - New Legislations Will Come In To Regulate The Real Estate Space - The Best Thing To Do If You Are A Wholesaler - We Will Not Do Business As a Lender To Any Blue States - Long-term Investor Loans Might Be In Trouble - What Are The Biggest Opportunities For Real Estate Investors - Carolina Capital Management’s Programs - Listen and subscribe to our Podcast: Visit our Website: Facebook:
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222 State of the Real Estate Industry! | REI Show - Hard Money for Real Estate Investors
05/02/2022
222 State of the Real Estate Industry! | REI Show - Hard Money for Real Estate Investors
State of the Real Estate Industry! | REI Show - Hard Money for Real Estate Investors Visit our website: Join the Carolina Capital team LIVE every Thursday at 12:00 PM Eastern for the Real Estate Investor Show - Hard Money For Real Estate Investors! This week Wendy Sweet & Jonathan Davis will be discussing the current State of the Real Estate Industry! What's going on? Houses sitting on the market longer? Interest rates rising in response to inflation? Timestamps: - Introduction: State of the Real Estate Industry! - - Wednesday with Wendy: - What is an Accredited Investor? - Everybody Wants To Know What’s Going On In The Market - Historical 30-Year Mortgage Rates: 1971-2022 - How can you keep on surviving in today’s market. - As a real estate investor, you need to make some changes. - It’s how you buy not when you buy a property. - Shortage of Housing and Inflation - Communal Housing Market - Rents vs. Wages - The 3rd Annual Quest Expo - Sept 23, 24, & 25, 2022 - - Promo Code: FAIRMAN30 - 30% discount - How To Put Mobile Homes On Land - - 75% Off Code: puntagorda2022 - Foreclosures Are On the Rise - Don’t Give Up Margin To Try To Be Competitive - Carolina Capital Management’s Programs - Listen to our Podcast: YouTube Channel: Facebook:
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