The Ideal Borrower of Hard Money for Real Estate Deals
Bill Fairman (00:10):
Hi, we’re back. Welcome to the next show. I am Bill Fairman and Wendy Sweet my lovely, intelligent sister. So what we’re going to talk about in this show is our ideal borrower client. Who is the ideal borrower? My ideal client is someone who pays us back. I cause a lender that I believe that’s everyone. Okay, well then I’m like everyone else. No, we are unique of just a little, I don’t want to say avatar but, but who is our ideal borrower client? Who is our ideal borrower? Well you know that’s a great question cause it really depends on what the product is, doesn’t it? Whether it’s a single family property or if it’s somebody that’s doing multifamily or if it’s a commercial borrower that doing apartments or self storage or or that kind of thing. You know, my favorite person to work with, people who are in our different mastermind groups that we’re members of, they’re people that we already know, like and trust.
Wendy Sweet (01:14):
We see the business they’ve been doing and we know that they’re movers and shakers. We’d know, you know, they’re not the kind of person that if they’re running into a problem and they’re going to have trouble making a payment, that we’re not going to have to track them down. You know, that’s kind of person that would pick up the phone and call us and let us know, Hey, here’s what’s going on. Payment’s going to be about a week later, whatever the the case may be. That’s my favorite client to work with for sure in every kind of a lending situation. You know, when you’re dealing in a single family arena, that’s really where you deal with people who are a little bit newer at being investors and, and newer meaning a little less experience. And you know, that’s where I love the opportunity to be able to have them meet with me on my Wednesday with Wendy, that you know, the mentorship that we’re doing, get them plugged into their local real estate investor club or just hook them up, connect them with other investors that have been in the business that, that, that do similar things that they’re interested in doing so they can take them under their wings and teach them.
Wendy Sweet (02:19):
So the type of borrower I would say is my favorite would be somebody who really has a passion for real estate. Yes. But you can be brand new, not know what you’re doing.
Bill Fairman (02:32):
Yeah, so this is the perfect opportunity to get mentoring.
Bill Fairman (02:37):
It’s not exactly Our ideal client, not that we don’t have faith in you, but we also run a business. That’s right. And doing a fix and flip on a single family residence. There’s a lot of moving parts. Yes. Yes. You as the borrower are taking all the risks. Cause when we lend the money, we’re lending a percentage of the value. Yeah. Not just to throw out numbers. Let’s assume we’re doing 70% of the after repair Bay. That leaves us a 30% cushion. If we ended up having to take this property back because you failed and let me, let me say this, there is failure in every business there is in real estate, you’re going to lose money. We just don’t want it on your first half season. My point here is there are things that are out of your control and when I say you’re taking all the risk here, when you’ve decided to rehab or build a home, it’s going to take you between six and 12 months to complete the project and so many things can happen along the way that markets can change.
Bill Fairman (03:51):
The specific neighborhood may change, prices go up. There’s all kinds of stuff that they come out wrong. You don’t have x-ray vision. When you buy a house, you decide you want to take a wall out. You have no idea what’s inside that wall. I had no idea there were that many termites in there. So the the point is you need to get a little bit of an experience and with through mentorships and joint venturing with people who have been there and have done that, we’ll make you be a much more prepared borrower for us. But the people that we like to do business with, for the people that have done three or four deals already already got bruises and cuts on their elbows. They listen. Uh, and yeah, they’re, they’re very trainable. But the benefit of a hard money lender is that we are the Canary in the coal mine, so to speak.
Bill Fairman (04:47):
If we don’t want to do your project, it’s probably not a project that you want to do either. Because as lenders, and it’s not just us, it’s any lender out there, they’re always looking at a project that if I have to take this back, how quickly can I sell it, get the money back and get it reinvested because we’re in the business too. Yeah. Interest payments in return, that capital has to constantly be working. It’s not our capital. We have other investors that invest and they expect a return no longer that money is sitting out there and not being used. But the worse it is on the investors that put their money into the trial. So we’re all again. So we’re always looking at how long does it take us to get rid of it. The longer it’s going to take us to get rid of a property, the more we have to discount the price in order to sell it quickly.
Bill Fairman (05:41):
Speed is more important than price in almost every case. Our ideal borrower also is someone who is not just trying to cut corners. Now we all want to have a deal. We’re all looking for deal. Real estate investors look for deals. I have printed plenty of friends that I’ve called on the real estate investor community and ended up stuck calling on the real estate investor. Continue because we’re such cheapskates cause we’re always looking for a deal. So I have to tell a quick story about, a borrower who got apparently a really good deal on two by four and he didn’t call us to do draw inspections for a little while, which we kind of like if you have the funds to go ahead and do most of the house before we go out and do an inspection. Cause every time you go out and doing an inspection it costs you money. So he was going to save on the inspection fees. Plus he got apparently a really good deal on Two by fours and decided to floor the entire house with pine, two by fours. It’s doing using actual flooring is going to send off all the prints. So you had a gap. This one’s higher than the normal flooring would be [inaudible] and they were going to sand anyway. Nope, I had to rip it up. Start all over again. So how much money did that save them?
Wendy Sweet (07:14):
Do you have any borrow or stories you can share? Probably take us, I don’t know, hours to think of all the different things I can think of people who are, I’m just cutting crazy corners and just trying to find new ways to do things. Okay. I’ll give you another quick example and this is where Wendy comes in and she’s able to look at these properties. So it was a bungalow that was, they added a little extra square footage to it. But when you walked into the kitchen there was an L shape counter, which is pretty, it’s beautiful, nice and open except the pantry. It was to the back and where the refrigerator was going to go.
Bill Fairman (07:58):
If you open the door it was, let’s put it this way, it was going to hit the countertop. It looked good no matter what were shot, no matter what side you put the door on it, it was going to hit the countertop. So Wendy just made a suggestion, move the pantry over to here cause these doors are much smaller and then move the anyway so you can put the refrigerator where they are. Well they didn’t listen to them so they put the refrigerator in. Sure enough, it was hitting either side. So you know what their solution was. They took the refrigerator out and they told people to get their own appliances. They wanted to sell the house, but people thinking that they wouldn’t think about there being further refrigerated. That’s kind of cheating. So the next thing you learn is take advice from others, especially someone who has been through at least 500 this year.
Wendy Sweet (08:58):
well at least 500 fixing, um, has, has seen a lot of stuff and, and understand the design. Wendy is not just a mortgage person, she’s a licensed realtor on Tuesday’s [inaudible] don’t hold that against me and it’s done. So for [inaudible] 38 years, I was 12. I almost forgot again, CarolinaHardMoney.com for any new information or any additional information you’d like on us. Right? That’s right. So on our next show we’re going to talk about who are ideal investor client would be. So thanks again. We’ll see you on the next show. Correct? See you soon. So thank you so much for joining us. If you’re really like what you heard, you want to see some more switch over here or here or perhaps there. There’s more episodes, but there’s somewhere. Yeah. By the way, subscribe and like us as well. Please.