45 Freedom Warrior Financial Updates
Bill Fairman (00:04):
Hi, Freedom Warriors! Bill Fairman with Carolina Capital Management. Wendy Sweet, sister and partner. Jonathan Davis, also a partner. But he does all the work. We just hang out.
Wendy Sweet (00:15):
That’s right. He’s the new guy. We really wanted to introduce him to you. So, so why don’t you do that Bill?
Bill Fairman (00:20):
Warriors, meet Jonathan Davis.
Jonathan Davis (00:25):
Appreciate that. Yeah.
Wendy Sweet (00:27):
So, talk a little bit about what Jonathan brings to the table for us. Everything.
Bill Fairman (00:32):
Jonathan’s experienced with commercial properties, valuations, secondary marketing. What that means for us is that, when we get all our many used up in our funds,
Wendy Sweet (00:46):
Which is normally always.
Bill Fairman (00:48):
We sell off chunks of loans so we can recapitalize and make new loans, right. And Jonathan handles those sales. As well as personnel things as well. He has put together a really good team and they are extremely efficient and everybody has bought in. That’s even, that’s the biggest…
Wendy Sweet (01:13):
He snowed everybody.
Bill Fairman (01:17):
Jonathan came from a family office where they did a lot of note purchases initially and then he set up their loan origination side of things and we were very fortunate to meet him.
Wendy Sweet (01:30):
Stealing away with a smile.
Bill Fairman (01:39):
So that said, we want to talk about what’s going on in the market. It is fast and furious. It changes every day.
Wendy Sweet (01:47):
Is Craig gray out there?
Bill Fairman (01:50): So if you think about it, this past week or two, the stock market has lost all of its gains in the last three years. Yeah. Now you take funds like ours and I haven’t put the numbers together but we haven’t lost anything. And most other funds in our same space are going to have the same thing right now. We don’t go up and down and it’s not crazy. However you’re going to, there’s going to be concerns if you’re holding a commercial properties or commercial loans that have a large exposure to retail. So retail shopping centers, office buildings, those types of things. Yeah. Those things are going to be hit the hardest right now because you know, everything shutting down.
Wendy Sweet (02:49):
And the high end market too. That high end single families I think are likely to [inaudible]
Bill Fairman (02:57):
Right now in. Yeah. Hush.
Wendy Sweet (03:01):
Hush your mouth.
Bill Fairman (03:02):
You know, on the commercial side of things, it doesn’t mean self storage I don’t think is going to be an issue. And then you’re also considering commercial multifamily. And now that, the, hotel motels space to be heard. Yeah.
Wendy Sweet (03:22):
Yeah. If you’re investing in hotels, you might want to pull back on that.
Jonathan Davis (03:24):
Any hospitality. Yes.
Wendy Sweet (03:27):
Just for a while.
Bill Fairman (03:28):
Yeah. And it’s really, it’s a short term thing. We can already see it turning around in China. Singapore did an awesome job and then South Korea has, has been a good job. Now the difference in those societies is that they’re hovering over you. So they have some privacy issues with the….
Wendy Sweet (03:53):
No communism going on in there?
Bill Fairman (03:53):
The reason that they got a handle on it quickly is because they know where you’ve been. And they’re able to contact all these people that you are in contact with and to isolate those people. Well that’s very efficient, it’s hard for, you know, countries like Australia and America and Canada and Mexico, I would say, to do that kind of surveillance on them.
Wendy Sweet (04:17):
Yeah. Well, even in Africa, you know, we’ve been doing a lot of mission work over in Africa, Tanzania, and they’ve sent all the kids home from the schools back to the orphanages and there’s nobody on the streets and it’s a completely different situation there. So it’s, and, and you know, Scott, who does our recording for us is down in South America. He’s seeing the same thing there. So it’s just, you know, absolutely worldwide, what’s going on. But,
Bill Fairman (04:42):
And again, this isn’t a, a market induced downturn, right? This is a…
Wendy Sweet (04:47):
A Black Swan event.
Bill Fairman (04:48):
Yes that’s what we call a black Swan event. And essentially…
Wendy Sweet (04:52):
We’ve been preparing for.
Bill Fairman (04:54):
Essentially everything has shut down for couple of weeks to maybe a couple of months. Right? Now there’s going to be some short term pain. Right. Over a year ago, we saw that the real estate residential market was, had a lot more downside than it had upside potential because we thought that it was already at the peak. Now in the areas that we are in and we’re lending, those markets are still growing and they have upside, but there’s no better time than the prison to get conservative. And we changed our model to only go, or do loans for what we call affordable house.
Wendy Sweet (05:35):
Our bread and butter market. Right.
Bill Fairman (05:37):
And the reason for that is because that is the piece of real estate that is the most coveted. And why is it the most coveted? Because it’s the most liquid. Why is it the most liquid? Because it’s the most coveted.
Wendy Sweet (05:52):
It’s just a circle.
Bill Fairman (05:54):
You have first time home buyers that can afford the affordable housing. You have people that are downsizing. They’re going to go to the affordable housing, and then you have investors. They’re going to buy the smaller homes because, they can still buy those and rent them out and get a decent return on them. Correct. Does anybody like to talk other than me?
Wendy Sweet (06:16):
Well, you won’t take a breath.
Bill Fairman (06:19):
I’m going to pause right now and answer input.
Wendy Sweet (06:23):
Thank you so much. One of the things that I think, we even had a little meeting today. We’ve been having meetings every day about what’s going on cause it’s changing so much. And you know, we just got a letter from one of our large institutional lenders, someone that we sell a lot of loans to after we close them. That basically, and this is for the buy and hold the, the longer term loans, they basically shut it down that we’ve got 10 loans in our pipeline that, that we can’t close that are long term loans. So the short term loans are still being,
Jonathan Davis (06:57):
can I speak to that?
Wendy Sweet (06:57):
Absolutely. Yeah, I’ll take a breath now.
Jonathan Davis (07:03):
So, over the last few years and maybe even a little more than that, we are constantly asked by these institutional backed aggregators to well, you know, scale your business with us, scale your business with us. Here’s all the examples of everyone who has tenex their business back and forming to what we’re, what we do. Lend like we do and only to us, you know, make us your, your exit or your, your origination arm, whatever it may be to company. So we, with what we’re seeing right now, we’re really glad we were pretty smart. But the goal was from when we started all of this and when I came on to,
Wendy Sweet (07:51):
Which was two years ago now.
Jonathan Davis (07:52):
A little over two years ago. Yeah. To make us self-sufficient, to not go beyond our means to not create a machine that we can’t feed because if we had scaled our business to conform and to capture that extra, market share, we’d be laying off people right now because they have just shut down all originations.
Jonathan Davis (08:16):
And we’ve been sending them over the last few years, things that, you know, meet their guidelines that are just kind of spill over from what we do, right. We haven’t gotten out of what is our bread and butter and what makes us good and what makes us, our niche in our market and our niche. However you want to say.
Wendy Sweet (08:36):
We’ll be country and say niche.
Jonathan Davis (08:38):
Sometimes it comes out. I’m from Kentucky, so yeah.
Wendy Sweet (08:41):
Carolina we’re the same.
Jonathan Davis (08:43):
Yeah. So, so we’re, when I look at this, I get the letter from, from these institutional lenders for just like, Hey, we’re pressing polls on everything. And you know, not that, you know, I would actually send this, but my first response was, well, all those people that you told me to give me an example of who tenex their business off of you. How are they doing right now?
Wendy Sweet (09:04):
That’s right. They’re ahaking in their shoes.
Jonathan Davis (09:05):
And we know the answer to that. Which, you know, goes back to, we stay in our markets doing what we know works with the team that we have to not go beyond our means. That’s right. And that’s what’s so important to I think, what we bring to our investors. We, you know, we’re, we’re not trying to be national lenders trying to take all this money and take over the world. We’re trying to get solid returns for our investors.
Wendy Sweet (09:37):
And preserve capital.
Jonathan Davis (09:38):
And have principle preservation all along the way. That’s right. And I think…
Wendy Sweet (09:43):
We’re not sexy or Benella. We say that all the time.
Jonathan Davis (09:46):
But what we’re seeing right now is, is proof that discipline works. Discipline works. It’s not like, like when you said it’s not sexy, but it works.
Wendy Sweet (09:56):
This is where the turtle is getting ahead. Right?
Bill Fairman (09:59):
Well, with the institutional investors coming into the space, they tried to entice lenders like us by showing us a path that would be, the cost, our cost of capital would be much lower. And that means cutting out our investors, you guys, because we pay more for that capital because we’re all participating together. Yeah. Versus we’re, we’re essentially, like a line of credit where the bank has really low rates. Right. Yeah. Well, I’ve seen this story before. We went through 2008, and we know what happens with the larger financial institutions when…
Wendy Sweet (10:42):
They fall hard.
Bill Fairman (10:43):
Well, they don’t necessarily fall. They just stop. Pivot and go somewhere else.
Jonathan Davis (10:48):
Well, and to build off of that, it’s based on like our core values and what we want to do. Is it more imperative for us to capture a higher return for ourselves in the short term and line a billion dollar company with more money in their pocket? Or is it more important for us to say, how do we create wealth for those around us? You know, one of my favorite sayings is, you know, we rise by lifting others.
Wendy Sweet (11:19):
Jonathan Davis (11:20):
You know, we, you know, we rise because we’re lifting investors with us and investors are lifting us.
Wendy Sweet (11:26):
Jonathan Davis (11:27):
With them. So it kind of works all together. We’d rather help create wealth for, for an investor, for someone who’s, you know, worked hard than for this billion dollar corporation that is trying to get you to create a machine that you can’t feed.
Wendy Sweet (11:41):
Bill Fairman (11:41):
Yeah. And since we’ve been in business that has been the model, we are trying to benefit both the investor that is investing in our fund. And we’re trying to benefit the small business owner that’s borrowing the money from us. And if both of those sides win, then we will win in the long run. And the great thing about private capital is that we have the bandwidth to change and to pivot, as the market changes and pivots as well. The big companies, if there’s trouble making payments and there will be some trouble making payments by the way. Whether we own that property and we’re renting it out or it’s in the form of a mortgage payment, there’s going to be, some bumps in the road within the next, uh, probably six months. Yes. So how do you deal with that? Well, the bigger institutions, they only know one way of doing it is you’re in default and now you’re going to have to pay fees and penalties.
Bill Fairman (12:46):
With what we do is we can always do loan modifications, we can work with them.
Wendy Sweet (12:52):
We can rent the houses out.
Bill Fairman (12:54):
Is that return for a couple of quarters going to be as high as it was in previous quarters? Probably not. But we’re talking about a small dip and then a bigger upside. And why is it a bigger upside? Because we’ve worked with them and they will remember that when it’s time for them to do another loan. So keep that in mind. Excuse me. People need two things and I say this every time. Two things in any economy, they need food and they need shelter and we provide the shelter portion of it and we’re doing it in the space that is really geared towards that affordability. That’s right. And that’s the one that’s going to be the, if we ended up having to take back some properties and we can’t sell them for any reason, we can still rent them out for close to what our expected return.
Wendy Sweet (13:41):
Well, you know, another question we keep getting asked to, from other people, other lenders and and just people in general that are inquiring about what’s going on is you know, what if you can’t have gatherings of more than 10 people and that kind of thing? Well in our office we only have nine, but we can, we can operate virtually. But the people who are borrowing money to rehab these houses, the crews that are coming out to work, you’re looking at two or three people on a crew and there’s usually just one crew in a house at a time. So that’s not going to violate the, you know, 10 person gathering and, and they’re, you know, they’re, they’re coming and going, they’re going in and out. It’s not, you know, a big group of people all stuck in one house. So, so rehabs are still continuing. The supplies are all delivered, so that’s, that’s easily taken care of. Everything’s delivered from the store or from the supply house or wherever it’s coming from and all of the logistics are still going on. So, so they’re still in a position to be able to continue to rehab the house and get it finished up and even start rehab and get it on the market for sale. People can still look at houses for sale. They’re still doing that. There’s still….
Bill Fairman (14:56):
You can actually start putting virtual showings. I know a lot of realtors are doing that. Instead of having people grapes traipse through their homes. Now this was supposed to be like a little 10 minutes.
Wendy Sweet (15:09):
And we just go on and on and on.
Jonathan Davis (15:11):
You know what’s interesting? I’ll just, butt in real quick, I don’t know. I don’t have the data. I don’t know anything. I’m just posing this as a question on the eye buyers. Is that you think that’s increasing or decreasing right now?
Wendy Sweet (15:22):
Eye buyers, tell me what you mean.
Jonathan Davis (15:24):
So like open door or you know, all those like, you know, you get a letter from them about every week to buy a house.
Wendy Sweet (15:30):
That’s right. That’s a great thing to ask.
Jonathan Davis (15:32):
Is that increasing or decreasing?
Bill Fairman (15:33):
I Don’t know yet because all the data is always, yeah. So we, we don’t know that. However, we do know that cash is King and if in uncertain times people are willing to take the cash from the big companies that are willing to give it.
Wendy Sweet (15:48):
It should help them. You’re exactly right.
Bill Fairman (15:50):
Wendy Sweet (15:52):
We are still accepting money in our fund. Disclaimer. Disclaimer.
Bill Fairman (15:56):
It is a short term blip and we will all overcome this. Our particular market is not volatile. It is a needed service like the grocery chain.
Jonathan Davis (16:08):
Well, the most important thing is to remember to keep your humanity. To think of others in this time and to put others first. You know, just so before we, you know, we rise by lifting others. I mean, we had a meeting, I think it was yesterday, and the question was posed, how can we help our community right now? What can we do? And we put together several ideas to do so. But like what can we do to help people through this? Cause we all need help through this short period of time and the more we help, the faster we’re going to get through this.
Wendy Sweet (16:43):
Well, first of all, we all pray for each other. Yes, for sure.
Bill Fairman (16:46): So there you have it. The short 10 minute video that probably wouldn’t 15 or close to 20 because Billy talks a lot. If you have any questions, we’re available. CarolinaHardMoney.com CarolinaHardMoney.com it was great to talk to everyone. Thanks. Have a wonderful day.