166 Lipstick On A Pig. Talking Renovations!! | REI Show – Hard Money for Real Estate Investors!
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To celebrate National Lipstick Day, Bill, Wendy & Jonathan are discussing Lipstick on a Pig Renovations!!
0:01 – Introduction
2:15 – Wednesday with Wendy: https://calendly.com/wendysweet/wednesdays-with-wendy
8:39 – People are not rehabbing as much as they used to
11:25 – What’s going on in your market? Are they cooling off?
13:46 – Affordable housing is what we want to focus on
15:05 – Is this a good time for new investors to invest in real estate?
15:31 – How can anyone say inflation is around 6%?
18:29 – The labor market is gone.
21:01 – The market cycle
Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the “Small Builder” borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and “Ground-up Construction Loans” for investors only in NC, SC, GA, VA, and TN (some areas of FL, as well).
As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.
Listen to our Podcast: https://thealternativeinvestor.libsyn.com/
Visit our website: https://carolinahardmoney.com
Bill Fairman (00:00):
Wendy Sweet (00:03):
You’re live and you’re shaking. Did you see that you’re live? Start talking
Bill Fairman (00:10):
Oh, my screen says scheduled. So sorry, folks. Bill Fairman here. I’m at the airport in case you’re wondering, so can we still do lipstick on a pig, revise or rehab? It’s a question that none of us have an answer that we agree on. So we’ll have our argument right after this
Jonathan Davis (00:51):
Man that was like watching the Blair witch project.
Wendy Sweet (00:57):
That’s the dream!
Jonathan Davis (00:57):
It was almost as clear, but
Wendy Sweet (00:59):
I was almost getting a headache. Get your hand out of the way.
Bill Fairman (01:03):
Sorry. I was getting notification of the YouTube channel that Lipstick on a Pig.
Wendy Sweet (01:10):
Hello! We’re on. And that’s great. That’s great. We are so glad to have you here today. I’m Wendy Sweet. This is Jonathan Davis and my big brother bill is at the airport getting ready to head out to Florida and then any event after that. So he’s at the airport today and you’re going to see him freeze and unfreeze as we go along. And he’s going to check out a little bit earlier, so welcome to the Real Estate Investor Show. Thanks for joining us today on this show. It’s hard money for real estate investors is what we do. We’re Carolina Capital Management. We are lenders for real estate investors in the Southeast. And if you are interested in borrowing money, you just go right to the CarolinaHardMoney tab or hard money page, click on the borrower tab. If you’re a past passive investor, you’re going to go to the same page Carolina Hard Money and click the accredited investor tab. Don’t forget to like share subscribe, hit the bell! And sign up for Wednesdays with Wendy.
Jonathan Davis (02:29):
All right. So Wendy gives her time away every Wednesday it’s a free 30 minute session and she, if you have anything real estate related, whether it’s, you know, fix and flipping, rehabbing, scaling your real estate business, whatever it may be, it’s worth your while to get them on her calendar. So you should go and do that
Wendy Sweet (02:47):
And I love doing it. I love doing. We’re booked out now through the third week in September.
Jonathan Davis (02:54):
Wendy Sweet (02:55):
So get on the calendar because you’ll only wait longer if you wait. Right? Right? So today is an interesting day. What were you gonna say, Bill? I’m sorry.
Bill Fairman (03:08):
I was gonna, I was gonna butt in. Don’t forget. We have a little chat section on the side or the bottom of your screen. And if you have any questions, just type them in there. And I do need to ask legal if I have to get all these people that keep walking past me to sign a release since they’re broadcast live.
Wendy Sweet (03:28):
That’s right. So we, I guess we should. So would you start doing that? That would be great.
Bill Fairman (03:36):
Right after that.
Wendy Sweet (03:39):
Go ahead. Go ahead.
Jonathan Davis (03:44):
I knew he was going to have,
Wendy Sweet (03:44):
That’s why we didn’t want to go to that first one.
Wendy Sweet (03:46):
Yeah, he’s saying hi, how are you? It’s good to see you. Today is a very interesting day for us. You want to try talking now?
Bill Fairman (03:54):
At once more.
Bill Fairman (03:54):
So, you know, we had this discussion yesterday about the current market and are you doing either more or less lipstick on a pig? In and out flips and all of us had a different answer. And the question that Scott brought up is what happens when there’s a disagreement at Carolina Capital Management. And the answer was you send Bill to the airport
Wendy Sweet (04:22):
And so far it’s working. Yeah.
Jonathan Davis (04:24):
Yeah. It’s paying, yeah.
Wendy Sweet (04:24):
You know, today is national lipstick on a pig day.
Wendy Sweet (04:30):
You brought lipstick
Wendy Sweet (04:33):
We decided we were going to change it to national lipstick on a pig day because that’s, you know, it’s different these days. So everything’s changing of course. And you know, we’re doing loans in the Southeast and, and we know people that are doing loans everywhere that are doing rehab lines and we’re getting different answers from different people about the rehab. Is it getting bigger, people doing more? Are people able to just, you know, sweep the house out and sell it? I know I recently did that with my partner, Darren and Bill, what was Bill saying yesterday?
Jonathan Davis (05:19):
Bill say it was more difficult to do a lipstick on a pig right now, which is you go in paint carpet appliances is typically to lipstick on a pig and you relist it for a margin. So that’s what Bill was saying. It’s more difficult. And it was because of the tightening up of the inventory.
Wendy Sweet (05:38):
Right. Right. So you want to talk about your thought, Bill?
Bill Fairman (05:43):
Well, it really wasn’t my fault. I was on a webinar with the American association of, did Iget blank out again?
Wendy Sweet (05:50):
No, we’re just laughing at you, it’s not your thought.
Bill Fairman (05:55):
Okay. I’m smart enough to listen to other people. So that said, I was on a webinar with some national lenders. And what they are seeing is an uptick in the amount of new construction and major rehab projects. A lot of the companies that traditionally just did the quick in and out fix and flip loans are now having to do more and more of the larger, more involved loans. And so they’re attributing this to the lack of inventory. They just have to go deeper in their market.
Wendy Sweet (06:34):
So, Jonathan, what are you thinking? Because you’re probably more in tuned to each loan that’s coming through here. You’re seeing our construction loans. You’re seeing the sizes of the rehab loans that are coming in, like the sizes of the rehab part.
Jonathan Davis (06:52):
Wendy Sweet (06:53):
So what would you say that you’re seeing?
Jonathan Davis (06:56):
Well, I would like to not just say I’d like to use actual data. So I had it from 20 19, 2020, and year to date this year. So what we’re seeing in our market and what we’re lending is echoing exactly what the national guys are seeing. So the average rehab budget, and when I say rehab that was new construction or fix and flip rehab, the average rehab budget in 2019 was 53,000 in 2020, it was 67.
Wendy Sweet (07:28):
And that has something to do with the price of the rehab costs?
Jonathan Davis (07:31):
Well, I’ll get to that too. So you have 53,019, 67 in 2020. This year, we’re at 101,000 on our average rehab budget.
Wendy Sweet (07:41):
Jonathan Davis (07:42):
So then you go back and you look, okay, well, what were the purchase prices on these? So in 2019 it was 86,000 was the average purchase price in 2020, it was 104,000. And then this year it’s 78,000. And you think, okay, when you look at it and you’re like, wow, we must be getting cheaper products or cheaper assets right now. No, we’re not, we’re buying more lots and we’re buying more two ones. And what’s happening is we’re having higher construction budgets for the lots. And we’re having higher rehab budgets for the two ones, because you’re either doing high-end finishes or you’re blowing out the square footage or both. So our data is showing right now that this year we’re doing more heavy construction or heavy rehab.
Wendy Sweet (08:33):
And it has to do with the borrowers that we have now as well. One of the things that I’m seeing with a lot of the investor groups that I’m involved with is that people are not rehabbing as much as they used to sell a property.
Jonathan Davis (08:52):
And, you know, what I attribute that to it’s so much easier.
Wendy Sweet (08:57):
The up market.
Jonathan Davis (08:57):
Well, not even that I think with the federal agencies declining on how much investor loans they’re doing, you’re seeing an uptick in private money coming into the investor loan space. So you have people just saying, okay, let me just sweep it out. Let me, you know, put in some new appliances and throw a tenant in there and I can cash out, refinance this thing. That’s true. The asset and get some cash out. So that’s one, I mean, I say that I’ve personally done that and I’ve seen a lot of other people do it. you’ve done that.
Wendy Sweet (09:28):
Yeah, yeah. I’m holding onto property, but we’re also able to just sweep out a property and sell it because investors, crazy investors are paying more for properties than they should. So they’re buying these houses that are basically swept out and back on the market. And then you’ve got a lot of owner occupied people that are willing to buy houses with work where previously they weren’t. So, you know, you get it livable and decent. And then they’re taking on the all the work of having to upfit it to what they really want to do. So I’m seeing all of this in the market.
Jonathan Davis (10:11):
Yeah. I mean, we all know that it’s localized. I mean, you know, are you able to find wholesale deals where you can sweep it out and relist it absolutely. Are you, is it easier to find them now. See you, Bill.
Bill Fairman (10:27):
Have a great week guys.
Wendy Sweet (10:30):
Thanks. You too. I’m not just on my phone. I’m actually looking for a Facebook post that I can share.
Jonathan Davis (10:36):
Is it easier to find those type of wholesale deals now than it was in 2019? No, I would. I would not say so. Just because the data is reflecting that it’s not, you know, can you still find them? Yes, absolutely. I wouldn’t say it’s as easy or easier. I would think it would be much more difficult to find those, those types of properties. I mean, but the thing is on the retail side, demand, isn’t down for buyers. However purchases are down.
Wendy Sweet (11:08):
How do you find saved messages on here? Like if you saved a post, do you know how to find it?
Jonathan Davis (11:13):
I don’t have Facebook. I don’t know.
Wendy Sweet (11:15):
Folks. I’m so disappointed in myself. I need a teenager to show me how to do that. I agree with you a hundred percent of what you’re saying. Cause we’ve been talking about how things are cooling off and that’s the Facebook post I really wanted to pull up because somebody in our collective genius group posted today that, you know, what what’s going on in your market basically are things really cooling off and it really was depending on where they were. Arizona said they started cooling off in May. Somebody in Chicago said they started cooling off the beginning of June. Then we’ve got people in Texas and some people in the Southeast were, you know, putting their 2 cents in there saying we’re still odd as we can be. And then there were other people too that were saying, it really depends upon the price point. And they started talking about anything over 300 is appearing to sit just a little bit longer. Yeah.
Jonathan Davis (12:14):
And I would a hundred percent agree with that. I mean, we have reached that.
Wendy Sweet (12:19):
Jonathan Davis (12:19):
Well buyer fatigue and, and just buyer ability. I mean, this was it 6% inflation is maybe a little higher that has occurred nationally. Locally it’s in some places it’s up to 20%, has priced a lot of guys or guys and gals out of homes. They want to buy a home. And then to couple with that, the rates have ticked up a quarter of a point. So if they could have afforded that house and it was really thin when the rates went up, I mean, it might just throw their DTI off and they can’t get it. So you’re seeing people. Like you said, like 3, 3 50 margin or they want to buy under that. There’s little to no inventory in that price range. And new construction, the permitting is down 5%, June over, over May. And, and you know, we have supply issues. They’re not finishing the homes. And then it’s costing more to finish them. So, you know, and there’s so many issues there
Wendy Sweet (13:25):
What would they do? How will it affect?
Jonathan Davis (13:27):
I mean, we don’t know who can still afford these homes. I mean, the argument is most people who can afford like the inventory that’s out there has already purchased. So the, one of the reports that I read.
Wendy Sweet (13:40):
And we’re still short on inventory.
Jonathan Davis (13:41):
We’re still short.
Wendy Sweet (13:42):
In every market
Jonathan Davis (13:44):
We’ve been saying this from day one, affordable housing. And that’s what we want to focus on. Like with the supply chain issues, I know lumber has come down significantly still. I think 70% higher than it was last year
Wendy Sweet (13:59):
It’s still crazy.
Jonathan Davis (14:01):
So those things are creating issues for housing and that’s one of the, you know, I would argue one of the biggest, like, we’re doing new construction, but man, it’s tough for those guys because of the costs. I know we’re, you know, what would have cost someone probably 200,000 to build two years ago is costing them 3, 320.
Wendy Sweet (14:25):
Yeah. And I don’t know how they’re doing it. I mean, up until recently, they’ve been able to push it along because the prices of the retail side have been increasing. But gosh, what if you’re a custom builder, you give somebody a price to build their house and you are, you are up the Creek. Being able to pay that. My other thought, when I’m thinking about how quickly the market is changing, how expensive even starter homes are and homes that you want to buy to rehab, or is this really a good time for a new investor to get into the business? You gotta have some pretty big, because I was going to say ambitions, but yeah, you gotta be, you gotta be really focused. And in my opinion, cash flush to be able to start as a new investor.
Jonathan Davis (15:25):
I mean, you really need to have the ability to cover any overages which will happen. It looks like Scott threw up, How can anyone say inflation is around 6%? Inflation? I mean, I mean, I can say inflation is 14%. Yeah. I mean, it really depends on what you factor into it. What you’re getting from the government would be monetary inflation that doesn’t include cost of goods or anything like that but we also, I mean, you just go to your locals supermarket, what milk is up? Is it up 60%? I think what was it like $4 a gallon when it’s normally like two something.
Wendy Sweet (16:04):
Jonathan Davis (16:05):
And so 299 or whatever it was. So I mean, inflation is depending on how you calculate it. And you know, where they say average is two, two and a half percent every year, which is just a monetary inflationary rate. But if you, if you calculate like domestic and imported goods, you also calculate the cost of utilities and energy gas, all those things. I mean, I think the argument can be made it’s, you know, somewhere between seven and 12%. Yeah.
Wendy Sweet (16:39):
It’s really, it’s crazy. It’s scary. I mean, and I keep going back to the people flipping hamburgers at McDonald’s making $15 an hour now, you know, how are you gonna, how are you going to afford a hamburger? How can you afford to own a McDonald’s? You know?
Jonathan Davis (16:55):
It’s such an interesting thing. Like if, we’re getting sidetracked,
Wendy Sweet (17:01):
Jonathan Davis (17:02):
But like I’m a hundred percent for like, you know, you can not raise a family on $7 and 50 cents an hour. You do it.
Wendy Sweet (17:10):
Those jobs are for teenagers.
Jonathan Davis (17:12):
I know it’s like, you can’t do it. So I’m all for a, you know, I guess the quote is living wage. We, you know, people have to be able to thrive. Like, yeah. I mean, as you know, when I got my first job as a teenager, I was 15 years old and I was paying, I was making $5 and 15 cents.
Wendy Sweet (17:29):
Well, that’s big money. I was 2.35. 2.35 an hour.
Jonathan Davis (17:36):
I mean, I guess I see it from both perspectives. It’s like, we need to, you know, have people have the ability to live, but also there is, you know, I don’t know, there’s a capitalism kind of state too. It’s like, you know, the market will dictate the value of a good and the value of the good dictates, the ability to, you know, give, I guess, a salary to the employees. So, I mean, it does trickle down. So, I mean, I think there’s a way to capture both.
Wendy Sweet (18:09):
So let’s take that to the real estate market and look at that same thing happening in the housing market. You know, I was talking to, I’m selling puppies. My great parents has had eight puppies. So I’m down to five boys. So in case you want a puppy call me.
Jonathan Davis (18:25):
Everybody wants females.
Wendy Sweet (18:26):
That’s right. Females are gone, but a guy that came and got one yesterday, he’s a contractor. And he was talking about the same thing that so many other contractors are talking about. And that is, I used to be able to do, you know, X number of jobs. At the same time, I had a crew here, crew here, a crew here, and they don’t have any crews anymore. The labor is gone. The labor market’s gone. I don’t know where they are. Where are they working now? They’re gone. And, you know, they’re the ones that they do have, they’re having to pay extra to keep up. So now the labor costs, they’re not only the construction costs are higher to do what we need to do, but the labor costs is, is again, just making it almost impossible to build new houses, to do the big rehabs. It’s tough out there.
Jonathan Davis (19:20):
Yeah. I mean, where, where is all the labor gone? I’m not sure. But yeah, I mean, it’s easy to point to like, oh, it’s, COVID related, you know, perhaps people are still flush with cash from there, from all the stimulants and all that. I don’t know the answer to that, but I mean, I know on my projects, I’ve had the exact same problem I can, or I used to be able to get, you know, five or six guys at but now who show up, it’s one or two.
Wendy Sweet (19:49):
Right. Yeah. It’s, crazy. And hard to deal with, but this too shall pass. Right?
Jonathan Davis (19:56):
I Hope so. I hope this isn’t the new norm.
Wendy Sweet (19:59):
Well, that’s what we love about real estate is that the market’s constantly changing. I really do love it. I, you know, the job that we do is, is called problem solving. That’s really what we do. It’s a different every day. And as soon as we learn one thing, it goes and changes into another. So that that’s normal and we love it. That’s why we’re all in this business.
Jonathan Davis (20:23):
One of the things that I love is I don’t, I, you know, I hate it too, but everything repeats itself, but not in the same way it did before the effect, the effect repeats itself, but the cause is always different. Yeah. So we keep learning from the past and applying it and then getting surprised that, oh, I didn’t even factor that in
Wendy Sweet (20:47):
Isn’t that called insanity, repeating the same thing?
Jonathan Davis (20:50):
These things keep happening and real estate’s, you know, not insulated from that anomaly as well. You know, it’s this when we say like market cycles, they do cycle and people are like, oh, the market’s going to cycle. It just does this every 10, 12, whatever years, it’s like, yes, it does. You know, give or take, but not for the same reason. Not for the same reasons. So everyone says, you know, like, oh 2008, and we’re using that data to, you know, kind of quantify and predict what’s happening here. Won’t work. Because if we knew that we would have already fixed it. So you can’t know the problem, the solution to the problem and to not know the problem. So like, you know, we don’t know the problem because it hasn’t presented it.
Wendy Sweet (21:40):
The only thing you can do is remember the sting from the last problem you had and put as much protection and due diligence around you, as you possibly can on that
Jonathan Davis (21:51):
You know, one of the best things to do, then it’s what we do. And we just do it by natural design of what we lend on you want to lend, or, you know, insulate your risk by not trying to find the investment that will make you the most money. If things go right, or whatever, you want to find the investment that will lose you the least amount of money.
Wendy Sweet (22:21):
That is well said.
Jonathan Davis (22:21):
That’s why we are in single family homes because every now and then we hit a home run. We don’t hit home runs every day, but man, we know when we, what we stand to lose and every now and then we strike out and, you know, we lose a little bit of money, but we know that loss, we know what that’s going to be. You know when you’re going for this high yield, you know, high reward kind of thing, you can’t like a flux in the market can take, oh, I’m going to make $40,000 on this. And an anomaly in the market occurs, and you didn’t know it was going to happen. And now you’ve lost $200,000. Whereas with what we do, it’s like, oh, the market turned, okay. We lost $10,000. Okay. Well, you know, we can stomach that. That’s right. So it’s just knowing what you’re willing to lose and being in those assets that, you know, they have the, they may make you money, but you know, they’re going to lose you the least amount of money.
Wendy Sweet (23:23):
That’s right. That’s right. And it’s a good point. I’m glad you’re bringing that up because we’re actually going to touch on that in our next show, which is the Passive Aggressive Show, that’s what Billy calls it. Out Passive Accredited Investor show, which is going to be coming on at 1:00 PM. The link forward is right there on your screen. We’d love to have you watch that, but we’re going to be talking about the market changes and exactly what Jonathan was just covering, because we do need to be prepared for what’s going on. So thank you for listening to this show. Again, this is the Real Estate Investor show. We are Carolina Capital Management, Carolina Hard Money. If you are an investor wanting to do a rehab loan, um, just go to our website, CarolinaHardMoney.com. Click on the borrower tab.
Jonathan Davis (24:09):
Borrower tab, yeah.
Wendy Sweet (24:09):
And if you are interested in investing, being a lender accredited investor, you just go and click on the accredited investor tab. Pretty simple, right?
Jonathan Davis (24:22):
Wendy Sweet (24:23):
So don’t forget to like share, subscribe, hit the bell, all those teenage things.
New Speaker (24:32):
And someone tell Wendy how to,
Jonathan Davis (24:32):
Let me figure out how to find my post Facebook. That’d be great. That’d be great. Thanks again. And, uh, we will see you in just a few minutes. I guess at to clock. I hope.