Wendy Sweet at Jim Ingersol’s Dealmaker 2021 – Carolina Hard Money for Real Estate Investors
Wendy Sweet talks at Jim Ingersol’s Dealmaker 2021 conference. How hard money loans work.
Private money lenders are worried about who they can trust with their money.
1) Types of properties, lenders prefer to loan to
2) Financing options
3) How to qualify
4) Short term rentals (AirBNBs)
0:01 – Let’s talk about Lending! – What Wendy Sweet is passionate about!
0:44 – Who is Wendy Sweet? – Carolina Capital Management
1:12 – How Wendy Sweet started lending money
4:11 – Wendy’s Short Term Rental Business
6:52 – Multiple Ways of Financing Your Properties
10:28 – 3 things to learn from Wendy Sweet
10:50 – Due Diligence Topics
21:38 – How To Qualify For Most Financing
35:18 – Fix and Refinance
44:40 – Long-Term Loans
53:07 – Things to be aware of as an investor
57:28 – The importance of appraisal
1:00:22 – How Wendy finds her private money lenders
1:01:38 – Wendy gives back – https://calendly.com/wendysweet/wednesdays-with-wendy?month=2021-10
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). North Carolina hard money lenders and South Carolina hard money lenders.
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. North Carolina hard money lenders and South Carolina hard money lenders.
Listen to our Podcast: https://thealternativeinvestor.libsyn.com/
Visit our website: https://carolinahardmoney.com
YouTube Channel: https://www.youtube.com/channel/UCYzCFOvEt2n9TchgECLwpww
Wendy Sweet (00:00:03):
Yeah. So we’re going to talk about lending. I’m telling you I’m so passionate about lending and money and notes and capital and funds, all of those great words, because it’s what you need to do this business, right? Everything revolves around your finances. So one of the things that you need to understand is that there is so much money out there so much money out there. That should never be the problem. That should never be an excuse for you not to do this business. It should never be excused. And I’m going to show you why today. So I am with a company called Carolina Capital Management, actually. Carolina Hard Money is how we do our business. We do raise money for funds, but we also put it out on the street. I am not here to raise money for funds today. So that’s my disclaimer. Anything you learn today is purely informational.
Wendy Sweet (00:01:04):
So all of those other disclaimers that you saw, just think of those when you’re listening to me. Okay. So I’ve been lending money since 2001. I started when I was 12, I started out as a recovering mortgage broker, anybody in here, recovering mortgage broker. You know what that is? Somebody who gave it up. So in the 2001, I was in business with somebody by the name of Larry Going. You may have heard of him. He’s pretty much an investor. He and I had a mortgage company together and we did conventional loans. We did any kind of investor, a conventional loan. So when 2008 rolled around, we were only doing conventional investor loans. Guess what happened to us? Nothing. Like there was nothing left. There was no, we couldn’t buy alone. I remember on, it was a Friday afternoon. We had just closed about 18 loans on the day before, Thursday. And then on Friday afternoon we had another 20 loans that had been closed. That’s how much business we were doing. And on Friday afternoon, our lender that we were sending all those loans to called me and said, oh, I’m so sorry, but we can’t fund any of those deals we’ve done over the past two days.
Wendy Sweet (00:02:36):
Things had changed a little bit. I saw Jeff ask everybody who’s been around a while. Who’s been through that crash and I’m telling you, it’s the best thing that ever happened to me because now I’m about as cautious as they come. I’m not gonna let it happen again. And you need to remember, it’s important that we remember history. History getting thrown out the window, whether it’s 200 years ago, 50 years ago, or five years ago, history repeats itself. Keep that in mind. You’ve got to remember what happens. So you don’t get caught up the next time it comes around. I got a lot of people going. Yeah. Yeah, yeah. Okay. So I’m in business with my brother Bill. Many of you know him, he’s a great guy. His job is to raise the funds. My job is to put it out on the street.
Wendy Sweet (00:03:28):
We lend all over the Southeast. We do commercial loans. We do single-family. We do fix and flip. We do self storage, all kinds of stuff. But what we really like to do is educate people and make sure that they’re successful in what they do. Jeff had said earlier too that he knows that he’s heard me say that we turn people down for loans every day and I hate to do it. But my goal is to get to a point where I don’t have to turn them down anymore. And that should be all of our goals. We should be operating from a sense of abundancy and not scarcity. There’s enough deal and enough love to go around for everybody. So I am not only in the hard money industry, but my side gig is short-term rentals. I love doing short-term rentals. It is so much fun.
Wendy Sweet (00:04:23):
And we’re getting kind of fancy. I’m now looking into communal housing. I’ll let you know how that goes. Once I’ve got it up and running. And we are also looking at doing some funky stuff, you know, being, listening to Lisa talk and listening to Mike talk about the shipping containers and things like that. It’s so exciting. I can’t wait to give it a shot. I do have a tiny house in my yard as well. So in the Airbnb business, the short-term rental business, I have, how many do I have up there? 14. I’m actually now, I just added four. Let’s see, within three miles of my office. So eight, with eight were within three miles off my office. I just added four more. So what’s really cool is that I can be at three or four properties in about 10 minutes and be back at the office.
Wendy Sweet (00:05:18):
It’s really cool to be able to do that. I don’t want to have to do that, but sometimes I do. The other day I had to roll up a trashcan. That was fun. But anyway, the point is, my office is located in a little town called Rock Hill, South Carolina. Anybody been there? Yeah. Oh, wow. So you drive by it on the interstate. Didn’t you? So we’re a bedroom community of Charlotte, North Carolina. So, you know, like everybody’s been saying it’s about 30 minutes to get into town. COVID was a great thing for us. We were booked when it happened, people canceled for about three weeks and then we were slammed again because of who we attract in our town. So it was a great thing for us because we had people that were coming in, doing construction work on highways, on power plants, football fields for the high schools, we were just slammed.
Wendy Sweet (00:06:12):
And as soon as that stuff started kind of wearing down. Now, all the vacationers were coming back. Family reunions, weddings, all of that stuff we’ve talked about. Also have one in Florida and one in the foot Hills of North Carolina. So we talk about who the heck comes to your town. There’s always reasons why people are coming and staying in Airbnbs. This isn’t an Airbnb talk, but we have so much, so many people here that are talking about doing this short-term housing that I want you to understand that anybody can do it, wherever you’re located. You just need to open up your mind about it a little bit. So the thing about whether it’s short-term financing or a fix and flip, there’s a multitude of ways that you can finance your properties and you need to open up your mind. Everybody thinks banks, everybody thinks hard money lenders.
Wendy Sweet (00:07:05):
That’s just a little tip of the iceberg. There are so many opportunities for you to hook up with some money. And we’re going to talk about all of that. So you see the conventional lending, creating a note. I know a lot of people here create notes. The new thing that I really like is the non-qualifying lender. Anybody hear of non-qualifying lenders, anybody really? Oh, yay! I get to really share something new with you. And it’s the fastest growing segment of the lending market right now. And you’re going to get to a point. So you know what it is. You’re going to get to a point where you won’t even think bank at all because the non-qualifying lender companies are actually offering such a better deal for you. Private money lenders, subject to hard money seller financing. So remember the private money lenders, Steve, and I’m not going to try to say his last name with Quest talked about how much money Quest has. That’s not placed or not invested. Do anybody remember that amount that he said?
Whole Crowd (00:08:16):
Wendy Sweet (00:08:16):
$400 million? That’s a lot of money. Did you say billion? Okay. Cause I was going to say, that’s scary, but it is. It’s for $400 million. That’s a lot of people that have money that haven’t invested it and you know why they haven’t done it?
Wendy Sweet (00:08:37):
They don’t know how to do it. They don’t know where to place it. They don’t know who they can trust. They’ve got this money in a self-direct. I have money in a self-directed IRA that I don’t have invested. And I loaned that money out every day. What’s wrong with me? There’s always an excuse to not do it, but I can you this, if you get on quest trust, IRA, if you get on their website, they have an event, an events page, they do a happy hour. Do they do it monthly? Or is it weekly that they’re doing it? Anybody doing it? It’s biweekly. And I’m telling you. It’s on zoom, so everybody can’t go to Houston. But if you go into that room, that zoom room and you attend that meeting, it’s like you’re there. And you’re going to get an opportunity to meet all of these people who are in, who have their money sitting at Quest. $400 million worth of people are sitting in front of you.
Wendy Sweet (00:09:36):
Would that be a good opportunity for you to meet some people, to be able to borrow some money from? Absolutely. That’s a great networking and that’s just one start. You need to attend those events. It’s really, really good stuff. They also have some great training. If you understand how to do self-directed loans, if you understand what you can and cannot do, when you’re lending self-directed IRA money or borrowing it you’re, you need to learn everything you can, because your goal is to teach the people that have the money that don’t know how, and you really need to understand what you’re doing because you want to protect their money. Do you want to just do one loan with them or do you want to do several loans with them? Protect the money that’s being given to you better than you went on your own. Okay. Today we’re going to have three, three things that I really want to make sure that you guys walk away with.
Wendy Sweet (00:10:33):
And that’s the types of properties that lenders like, cause there is one. The multitude of options for financing, of course, and what it will take for you to qualify. That’s really what I’m trying to make sure that you walk away with today. So maximum cashflow, we’re going to talk about due diligence. Maximum cashflow, long-term communal rents, student housing, international rentals. Have you done any student housing for international students? Did you know that’s out there? Do you know they pay a lot of money? That’s really good stuff. 30, 60, 90 day people who are renting your properties. So a lot of people think, ah, I don’t want to really do Airbnb or short-term stuff because there’s a lot of turnover and you have to, maybe my neighborhood won’t allow it or maybe your city won’t allow it. But if you have a 30 day minimum, your city changes their mind on that being a short term property, did you know that? Makes a big difference on what you can and cannot do. When you list properties on any of these platforms like Airbnb or VRVO or any of these other platforms that are out there, you can actually put a minimum up there. I learned this from Al Williamson, who is like Mr. Airbnb of all time. He puts a 30 day minimum. He, when he told me this, I thought, gosh, why would you want to do that? You’re cutting out all the people that want to look at your properties. Yeah, you are. You’re only attracting the people that are coming to stay for 30 days. Isn’t that what we’re trying to do? Is attract those people that are only going to stay for 30 days. And he’s just, he’s really rocking and rolling with that. Okay.
Wendy Sweet (00:12:23):
Locations are important. Jim talked about the traveling nurses and that they like to stay 30, 60, 90 days. I’ve had some stay longer than that. I’ve had some stay shorter than that, but being close to those facilities really, really make a difference in what you’re buying. And somebody else said yesterday. And I think it might’ve been you talking about making sure if you’re, if a female can get out of the car and unpack her luggage and feel safe, that’s a good place to be buying. Or if a female come walk down the street at 10 o’clock at night and not feel worried about where she’s going, that’s a good place to buy. So you gotta be careful about that. Zoning is so very important in what you’re buying and what you want to do with it. Everybody has these really cool ideas about the shipping containers, the tree houses, the yurts, glamping, like they’re doing whole neighborhoods now or, uh, a whole camp site.
Wendy Sweet (00:13:26):
That’s all tents. That’s what I want to do on my farm. I live way out in the middle of nowhere on 15 acres and I want to do tents. And as I was getting started, I called the city to make sure I could do that or the county actually to make sure that I could do that. And guess what? They said, no. They can tell me on my 15 acres that I can’t have campers? But they can. So that kind of killed my idea on that. But when you’re buying property like that, do your due diligence. On no matter what you want to do. If you want to take a single family home and turn it into a duplex, make sure you’re doing all of that due diligence. The more due diligence you do and the better prepared you are when you come to somebody to borrow money from the more likely they are to lend the money to you.
Wendy Sweet (00:14:16):
HOA. Who lives in an HOA neighborhood? I pitty the fool. That is so difficult. Gosh, they tell you, you can’t park your camper or you can’t have a doghouse in your driveway. You’re moving? It’s really, really tough, but understand that when you’re doing any kind of fix and flip property, a buy and hold property, understand that the HOA can determine everything. Some of them are really, really strict with colors and all kinds of stuff. And I’m telling you, it can totally change what you’re doing. It can put a huge block on the rehab that you’re working on and completely change your numbers on what you’re having to put into the property. So make sure you read those covenants and restrictions. Please, before you close, because it can change everything for you. Neighbors are always interesting. I think. Like if I’m going to do an Airbnb neighborhood or an Airbnb house in a neighborhood, I always take pizza coupons to the neighbors and introduce myself and tell them how excited I am to have them as a neighbor.
Wendy Sweet (00:15:35):
And that here’s a pizza coupon if you, and here’s my information. If there’s any issue going on over here, I want to know about it. And I’ve got a watch dog, a good watchdog, very, very important to understand your neighbors. These are the words that are really hate to see. Termites, moisture, rot. Are these things that we know about before we buy a house?
Whole Crowd (00:16:04):
Not all the time.
Wendy Sweet (00:16:05):
Not all the time. But do what you can, whether you’re lending or whether you’re borrowing, do what you can to make sure you’re inspecting these areas. I can’t tell you how many scopes of work that have been delivered to us from people that are buying houses, that the contractor never went under the house or in the attic. Never. You know where my biggest costs always are. If I’m rehabbing a house? It hits me underneath that house.
Wendy Sweet (00:16:37):
When I buy in a neighborhood, there’s one of the reasons why I really liked buying within three miles of my office, because I know that anything built within three miles of my office is old. Excuse me. And I know that I’m going to have to replace the plumbing from the house to the street. Every house. Tile doesn’t last a hundred years. And in every house I know I’m going to have to do that. So when I’m going to make an offer on a house, I already have a really good idea of what my surprises are going to be. I like sticking in a neighborhood for that, but you need to make sure you’re doing that due diligence. How much is an inspection on a house? Anybody got any idea?
Wendy Sweet (00:17:21):
I hear 450. I hear 300. I pay $150. You want to know why? I don’t care that the power is on or off. All I want to do is have a real inspection underneath the house and in the attic. I can eyeball everything else. I can look at the HVHC. I can have my HVC guy go out and tell me whether or not I’m going to have to replace it. Everything else, I can eyeball. But underneath that house and in the attic, I can’t. So I don’t go to the trouble of having the power turned on or the water turned on. I just want my guy to run through it. Tell me what’s happening underneath and above.
Wendy Sweet (00:18:06):
I’m sorry? I don’t worry about the air. I don’t worry about the air conditioning because I use my HPAC guy to tell me what’s going on there. Without electric. They’ll be able to tell you, usually. They’ll be able to tell you I haven’t run into any problems yet. I should knock on wood. The other thing that’s really, really hard to tell is what kind of damage is going on in the walls. You’re not going to know that until you start tearing it out, right? And it’s that reason alone that when we underwrite a deal, we make sure that you’ve got extra money outside of our rehab money. Because if you’ve ever rehabbed a house, I promise you you’ve run into stuff that you didn’t know was going to be there. And how many people come in under budget? Just to show a hands. Got a couple.
Wendy Sweet (00:19:01):
Yeah. It’s not often, is it? So you need to make sure you’ve got some money to handle that. Okay. When I’m buying any kind of a property, especially, especially a short-term rental or something that I think is going to get me more rent than ever, that property always has to stand on its own as a long-term rental, because I’d never know, never know when the city is going to come down and change their mind on my short term deal. You never know. You never know if they’re going to take that 30, 60, 90, and, and decide that that’s now a short-term rental.
Wendy Sweet (00:19:42):
So I always make sure that it stands alone as a rental. And the number that I use for my standalone is 1.25. That’s the response that I want to get back is 1.25. I don’t like the one, one. It’s a little bit too skim for me. So the other thing is I always want to make sure that in five years, my rent coming back, now, this is on my Airbnb stuff. On my five years on my rent coming back, I want to make sure that in five years, I’ve gotten all of my capital back in my pocket. That means I’ve paid for the house and paid for the rehab from the rents that I’m getting. So these are some of the guidelines I use when I’m looking. One of the things that I have also found is that when you are searching for property, that’s outside the big city.
Wendy Sweet (00:20:39):
You’re paying less for property. Yeah. The values aren’t as high, but you’re also paying less for the property. So you’ve got the cost. The competition is a little bit better. It’s just a little bit better when you’re outside the city. Especially if you’re in a third tier city, that makes a really big difference. Amenities matter when you’re doing short term rentals, it really does matter. And you’ve heard some great things coming from Alicia, and you’ll hear some other people talk about it too. Amenities really make a big difference. So when I’m looking at properties for myself, I want to make sure that after I’m all in costs and everything that I have at least an 80% equity in my property, did I say 80? I meant 20. 80 would be really jamming.
Wendy Sweet (00:21:35):
That would be really jamming. Okay. So let’s talk finance, and we’re going to stick with that right now. Credit scores matter. I know a lot of people think that they can borrow money and have a credit score that’s at 600 or 580. No. You’re going to have a tough time doing that, even with a private lender. If they’re smart enough to pull credit, you’re going to have a tough time doing that. And you’re setting yourself up to fail because there’s going to be a time when that private lender will want their money back and you’re going to have to refinance it. You’re not going to get it refinanced, not if your credit score is too low. And right now 680 is about as low as you want it to be. So if, if you’re below that credit score, it would be worth it for you to pay somebody to help you get it, not fixed, but to a point where it needs to be, because it’s not going to happen overnight.
Wendy Sweet (00:22:42):
If they’re trying to repair it correctly. It’s not going to happen overnight. So the other thing is, is you want to make sure that you have cash in the bank. I love being in the mortgage business because I can ask people how much money you got in the bank and not flinch at all. And they tell me, I wish I had that kind of nerve when I was single, what it helped a lot better, you know? And as people, what their credit score is, wouldn’t that be great. If when we go out on a date, how much money you got in the bank, which credit score that would solve a lot of problems, but you want to make sure you have enough money in the bank. Now for us, when we’re underwriting is we want to make sure you have enough money in the bank to be able to take care of all the crap that’s going to happen.
Wendy Sweet (00:23:35):
And I promise you, crap is going to happen. I’ve said it before. You will have things happen that you just don’t expect at every turn. Now, sometimes it turns out to be a good thing, like a fire, and you don’t have to pay for the apartment to be rebuilt like Jim did. That was really good. That’s kind of rare. That’s not something that happens on a common basis. However, people say, well, how much cash do I need? Well, that depends. What’s the price of the house that you’re investing in. What’s that loan amount that you’re going to have? So for us when we’re underwriting a loan, we want to make sure that that person is bringing 10% of the purchase price to the table. Why do we care about that? We want some skin in the game. We don’t want people to just, you know, bring the closing costs and run, but we also want to make sure that they have six months of payments in the bank. Why do we care about that? Because we want them to make at least the next six payments, right? We want to make sure that they have the ability to save money. Are they controlling their expenses? We don’t have them come to the table with that six months, but they need to verify that they have it in the bank. That’s really, really important to us. The next thing is, we want to make sure that they have enough money.
Wendy Sweet (00:25:05):
If the market changes, do you think that’s ever going to happen? It will happen. It we’re in my opinion, we’re sitting on a time bomb. And if you don’t think that you’re correct, Greg. It is taken every day. I’ve been through hell. From 2008. And then again, in 2018, we’ve been through it. And it’s really, really important that you understand that bad stuff’s coming down the pike. It is, you know, we’re all making hay while the Sunshine’s whew hew! But it’s not going to shine for much longer. Do we know what’s going to happen? No. My crystal ball broke in 2008 and it has not been repaired. And I can tell you this whole timeframe of what we’ve been going through from I’ll, let’s say since about 2011, up until now. And especially since COVID hit, I would have never predicted what has happened up until this point. Would you, Jeff? Even Jeff Watson, the almighty Jeff Watson and that chicken nugget looks really good.
Wendy Sweet (00:26:31):
I get it. I get it. But I’m not trying to scare you. That’s not what I’m trying to do. I want to open your eyes. I want to put a little bit of fear in everything that you do. I want you to look at everything as this as if it is a worst case scenario, because it very well could be. And when you’re getting ready to do some due diligence on a deal that you want to borrow money on, or that you want to lend money on, your question needs to be, what’s the worst thing that can happen. And can I live through this? Will I survive? Will my family survive this? Will I get to keep my house, not the one you’re buying, but the one you live in. Ask yourself those questions. They’re really, really important. Okay. Cash in the bank when people are again, when people are coming to me for, if you don’t have at least 20 to 30,000 in the bank, don’t come to me a hard money lender.
Wendy Sweet (00:27:34):
Your best bet is to go to a private money lender. How many people in this room have self-directed IRAs, raise your hand really high. Everybody else should be looking around really hard. This is who you need to network with. Here’s your future lenders. Raise them back up. Everybody puts them down like, oh no! These are your lenders. Get to know these people and let them get to know you because these are the people who will loan you money, who understand what you’re doing. It’s really, really important. So experience. I love it when somebody calls me and says, I’m trying to do my 12th rehab. And it’s actually going to be a ground up construction. Will you do the loan? Yeah. All day long. Why am I jumping all over that? Because they said the word 12 that’s experience that’s experience, but I can tell you, I love the slide that Jeff put up where he was talking about the due diligence questions that you need to ask. Every one of those questions I ask, except for who’s the attorney that you use. I do that at the end of my phone call, but through my phone call, and I’m telling you, it can be five minutes or less. I know the answers to all those questions.
Wendy Sweet (00:28:54):
And the reason why it’s important is because you really need to know who it is you’re working with. What is their experience? Who are they partnered with? That’s really, really important. The one thing I’m not doing that, Jeff gave me a great effect. I already texted it to my office is we need to start finding out what other entities people are involved in. That’s really, really important because most people don’t just have one, LLC. We have 11. I’m involved in 11 and hopefully every one of them are gonna make money. That’s the key. So experience is really, really important. The reason why experience important is because when things go bad, not if. When things go bad, someone who’s experienced has the wherewithal to pull themselves out of it. The other thing I want is that person knows that in dealing with hard money or private money that they can call me and say, Hey, here’s what we’re facing.
Wendy Sweet (00:30:03):
And I’ve been through a dealer too, in the past 20 years. I promise you. I’ve seen all the crap. I’ve usually been involved in a lot of it. I know ways of getting out of stuff. I can hook you up with people that can help you. Experience helps you get through that. So if you have no experience, then yes, I want to see that you’re a member of a local area. Are you partnering with someone that’s experienced? I’ve never done a deal myself, but my parents have been in real estate all my life. That’s a great statement. Cause I know mom and dad are going to be standing there, helping them. Experience is very important. Okay. We want to make sure that anybody who’s in an entity, LLC, we only lend to entities, whether it’s a trust, an LLC, a partnership, whatever it is. We only lend to entities. I want to make sure that everybody’s, that that is involved in that, that we’re pulling credit on them too. Because as a hard money lender, you know, we’ve got this fund, but we don’t keep everything in the fund. We’d like to take our portfolio and sell it to somebody who has a lot more money than us. And they’re pulling credit on everybody in an entity.
Wendy Sweet (00:31:23):
Plus you need to know what, any partner that you’re dealing with, you need to know what’s going on with them. You need to understand what their credit score is. And you need to know if there’s anything going on in their background, that they may have not shared with you. Even whether, even if it’s a foreclosure, a forbearance, all of those, any kind of financial fraud stuff, you want to know these things. I actually, we did a loan for somebody that had three other guys in the LLC. We’re still lending to them today, but one of the partners had financial fraud in their background and they didn’t know until we did a credit that we did a background check on them. They’re no longer in that LLC, obviously, but you need to know these things. I mean, it was a big financial fraud piece too. So you need to know these things about who you’re doing business with. Also, the numbers must work. Doesn’t this seem like it would be simple, right? You would not believe how many people call me. So if you’re going out to borrow money from a private lender, a hard money lender, a bank, I don’t care who it is. But if they ask you what’s the after repaired value of the house and the answer is, uh, or the answer is, you know what? I don’t know. I’m not sure. Great! Call someone else.
Wendy Sweet (00:32:57):
That’s the number we start off with, right? You need to make sure that they understand that these numbers work. I love it when somebody is trying to do. Let’s say a deal that’s a $400,000 loan, and they’re only going to walk away with $20,000 in their pocket. Do you know? I’ve had to talk people out of that? What’s your time worth? People don’t understand well, I’m going to start off with a really tiny house first. So I’m going to buy a house where the after repaired value is $80,000. And my idea is to fix and flip it. So I know that I’m going to get a 70% loan to value loan on this property. And if everything goes good, I’ll make $11,000. Does everything go good? If the same $5,000 mistake that’s made on a tiny house is the same one on a big house. It’s still $5,000. That just cut my $11,000 down to six. I won’t let people do that. Not with our company. Now they will call somebody and somebody will give them that loan. I pity that fool. It’s either that or they want the house.
Wendy Sweet (00:34:21):
And I forget who it was that said this. We’re not in the business lenders. We’re not in the business to build our portfolios. Did somebody say that yesterday? Tom. Yeah. We’re not in the business. We’re not in the business to build our portfolio. That’s we’re lenders. We suck at this other stuff. That’s why we lend. We know how to do it. We just don’t like to, because we’re good at lending and that’s what we want to do. We’re not interested in taking your property, but I will tell you this, everything we look at, we ask is this a house that I want in my portfolio? Do I want to lend money to this person? We look at it as if we have to take it back tomorrow, everybody. That’s how we do our due diligence on our properties. Okay. Fix and flip. Now whether you’re doing short term, whether you’re doing ground up construction, whether you’re doing the birth thing that I don’t know why it got that nickname, birth thing, it’s a fix and flip and hold.
Wendy Sweet (00:35:32):
Okay. But anyway, hard money is a great option to go with. There’s a lot of companies out there that lend hard money. There’s a lot of really good ones, and they’re easy to find, you Google them. If you Google hard money in the state that you’re doing business with, you’ll come up with a great choice of people to borrow from, normally. Especially the ones at the top, because they’ve paid for the ads. So they usually know what they’re doing. Private hard money. Also have a little bit more stringent guidelines than a private money lender does. They’re usually bigger. Hard money lending company is a full fledged business where many private lenders are exactly that they may have 300,000. They may have $3 million of their own money that they’re lending out. They can be a little more tailored to what it is that you need. Especially if you’re looking at a house that is unique in some way, it may be rural. It just may have some hair on it. Yeah, that’s scary. Isn’t it? But they may consider doing that loan. So don’t forget that there’s private money lenders out there. So the other option too, is seller finance. My goodness! I’m shocked at the amount of people who don’t ask for seller financing. That should be your second question after they’ve accepted your deal.
Wendy Sweet (00:37:01):
That should be a question every time you talk to anybody. And when they say no, ask them why? Because a lot of people don’t understand how seller financing works. They think, oh, I’m going to be a bank for 30 years. And it’s going to take me that long to get that money, or, um, there’s going to be all kinds of things that they’re going to come up with because they don’t understand how it works. Guess what? If you know this much about notes as a borrower, you can put any deal together that you have in front of you because you’re being a deal architect. That’s all it is. All you’re doing is putting together a term that works for the person that’s the seller and the person that’s the buyer. That’s all you’re doing. Everybody’s happy. You know, I’ve had people. Well, I, you know, I’m not interested in seller financing. Why? Well, because I need to put my son through college. Great. How much money do you need for the first year’s tuition? That’s my down payment.
Wendy Sweet (00:38:05):
And I make sure that every time I make a payment, it’s gonna pay for that quarter’s tuition. Is that solving a problem? Absolutely, it is. I got to put my mother in a assisted facility, assisted living facility. Great. How much money do you need every month for that? I’m going to find a way to make it work. I also will always, always offer people an easy out. Meaning, I’m going to set that term up as short as I can for them so that they know I can get it paid out in 12 months. I can get it paid out in 18 months. I can get it paid out in two years. Whatever it is that trips their trigger. I’m going to make them think about it a little bit. You have to ask, if you don’t ask the answer is always, that’s right. It’s always no.
Wendy Sweet (00:39:01):
So always ask that question. So here’s something that I’m really excited about coming up. Do you remember the big subject to boom? Anybody remember that? Yeah, it’s been a while. Guess what’s coming up? The big subject to boom. If I have a prediction, I think that’s what’s going to happen because there are a lot of people who have equity in their homes, but they don’t have jobs. They’re not making the income that they were making. And there’s no way they’re going to get caught up with their bank. There’s a lot of people coming out of forbearance. There’s a lot of people coming out of foreclosures that are going to be coming up and hopefully the hedge funds won’t get to them before you do, because there’s a lot of those out there too. Buying ridiculous priced houses. That’s our biggest competition right now and will be for awhile.
Wendy Sweet (00:39:56):
So the way to beat them, let’s get to the house first and then sell it to them. Become their solution. That’s a great way to tackle that, but understand that subject twos are just a great way for you to pick up not only long-term rent properties, but short-term rent properties. You’re providing a great solution. And there’s so many different ways of doing subject to. There are some states too that don’t allow it anymore. So you got to make sure that it’s something you can do, right? Jeff, any states that you know that aren’t doing subject tos that don’t allow subject to purchases anymore?
I’m not aware of any, you got to be more careful with it, but they’re all good to go.
Wendy Sweet (00:40:44):
I mean really careful out on the left coast.
Wendy Sweet (00:40:49):
Is that even a part of the country anymore? That’s the truth. Here’s what I really liked too, is about the equity offering and joint venturing. So one of the things I want everybody to think about when they think of their lender, whether they’re a private money lender, hard money lender, whatever it is. They’re your partner in your deal. They’re literally partnering with you in your deal. And if you think about them as a partner, what are some other ways that we can make these deals happen? How can I get my rate lower? If I really think of this person as a partner. Not really on paper partner, but getting the return of a partner. And what I mean by that is, do you think you can negotiate a lower interest rate if you allow your lender to participate in some of the profit for a certain period of time, what? I’m waiting for Jeff to just shoot me down.
The guys who sit near you is messing with me, but that’s okay.
Wendy Sweet (00:42:04):
Leave him alone. You always, always want to think about how that person that’s in that deal with. You can turn around and participate with you. So let’s say you’ve got a deal. You’re paying this person 5% interest rate on a term that might be three years. How are you going to get somebody to lend you money at 5%, for three years, somebody that’s sophisticated in lending. How are you going to do that? You offer them an opportunity to participate in your income off of that property. I like to set it up as a quarterly payment, but you can set it up however you want to. You can say Hey, I’m going to offer you four or four or 5% on your interest rate, but I can guarantee you at least another 5% in interest quarterly by allowing me to participate with you on this, you’ll get a lot of people that’ll jump on that. It’s relaxing. How many people in here are actually lending money to people? Do you like doing the due diligence on the properties? Do you like looking for new lenders? Do you like figuring out whether you can trust somebody or not? Wouldn’t you rather have a lender that, you know, like, and trust that or a bar where that, you know, like, and trust that has been lending, borrowing money from you, paying you on time and wouldn’t you rather make that investment a little bit longer. If you knew you were going to get about the same rate off of them? Absolutely. Absolutely. There is so much money out there. Do you remember how much quest has sitting still right now? $400 million. It is harder and harder for people who are lending money to put money out on the street in a safe loan.
Wendy Sweet (00:44:08):
Did I say safe and loan at the same time? In a safe loan, one that they won’t have to keep the house. There’s so hard. It’s harder for us to get money out on the street to people that will treat it right because there’s so much money out there. And there’s a lot of people lending money that have no idea what they’re doing and they’re going to lose a lot of their money. So if you’re lending money, think about being able to participate in something like that. So I flipped it, didn’t I? There we go. So let’s talk a little bit about loans and terms and all the things that are out there. Talk a little bit about the non-qualifying companies that are out there now. Non-qualifying means and we actually have a non-qualifying program for a long-term loan that it’s a, for a rental properties buy and hold up to 20 units.
Wendy Sweet (00:45:05):
And the interest rates are as low as 4%. In fact, we even got some down into the 3%. It’s a 30 and 20 year mortgage. There’s companies like that out there that are offering deals like that every day. And they’re getting better and better. See Frannie Mae, Fannie Mae. I Have a cousin named Franny. So Fannie Mae and Freddie Mac. Remember everybody, I’m sure everybody in here knows that they have pulled back on the investment loans that they’re doing. Have you noticed that they’ve done that? They cut it from about 15% of their portfolio down to 75% or I’m sorry. .75%. And now they’re, they we’re talking about cutting it in half again to even less, which means they’re only going to be Linden to people with absolute pristine credit on properties that are in this little tiny box that they love. So what they’ve done is they’ve made it really difficult for us investors to get out there and get long-term loans. Will these non-qualifying companies that have boatloads of money because they’ve got investors that they’ve got to pay are now in that business. And they’re, I mean, every day a new one comes across my desk. A new company comes across my desk. Non-qualifying means they are lending based on the property income based on your credit score as a borrower. And they don’t even want to see your tax returns. They don’t even want to see your tax returns.
Wendy Sweet (00:46:39):
Wouldn’t you like to do lines where you don’t have to show your tax returns? Those they want to see bank statements. They want to see your credit score. And there’s a ton of them out there. All you have to do is as Google non-qualifying lenders. There’s a bunch of them out there.
Speaker 1 (00:46:59):
We’ve got one in the room, did you know that?
Wendy Sweet (00:46:59):
Speaker 1 (00:47:03):
Mindy. Have you met Mindy? Or [Inaudible].
Wendy Sweet (00:47:03):
Mindy, is she, stand up Mindy.
Wendy Sweet (00:47:06):
Speaker 1 (00:47:10):
That’s what you do, right?
Speaker 2 (Mindy) (00:47:10):
Yes. She is absolutely right. It’s non QM. Fannie and Freddie absolutely tighten down. [inaudible] and if you guys are new borrowers, self employed borrowers aren’t going to qualify for Fannie and Freddie.
Wendy Sweet (00:47:26):
Speaker 2 (Mindy) (00:47:26):[Inaudible] Don’t stress out. I mean ask what you do. She’s absolutely right. The 30 year fixed rate three and a half to five and a half
Wendy Sweet (00:47:35):
Speaker 2 (Mindy) (00:47:35):
We are own by a huge corporation so you check all the classes and meet my guidelines, you’ll qualify. We work with a lot of the private lenders in the room because they don’t want to do what I can absolutely do. They don’t want the long-term 30 year fixed rate. I’ll do it all day long. So I actually partnered with a bunch of people in the room that I can help you [Inaudible]. One of them where they can choose so Wendy is absolutely right.
Wendy Sweet (00:48:04):
Awesome. Awesome. And they do offer ARMs too. 51 ARM and 71 ARMs. Are you doing 51 ARMs and 71 ARMs?
Speaker 2 (Windy) (00:48:16):
Wendy Sweet (00:48:16):
Okay, good. If somebody offers you an ARM right now, that’s an Adjustable Rate Mortgage in case you don’t know what it is. Don’t be stupid. Don’t be stupid. The rates are as low as they’re ever going to get. Don’t be stupid. Take the long-term loan. That’s, I don’t even know why they have that. That’s that’s like having written on the plastic bag. This is not a toy. Really? Don’t forget too, that as a borrower, you can create your own terms with a private money lender. Not all the time, not the ones that are sophisticated, but if you’re dealing with a newer, private money lender, you can actually create your terms with them. Sit down at the table face-to-face and talk about your needs.
Wendy Sweet (00:49:09):
Let them talk about their needs and come up with terms that work for both of you. You’ve got to give it a shot. You can also do the same thing, creating your own terms with equity and JV partners. I was talking to Michael about how he’s going to refinance his tree house. How are you going to do it? And then Michael told us yesterday, he’s going to go to a local bank. What are you going to do with the local bank? Doesn’t work. He’s got in private money now. They would be the first people I’d go to. I’d see if I couldn’t share some of my profit with them and keep them in the game and lower that rate, whatever rate he’s paying, lower it down. You don’t, don’t forget about who you’re already in business with. Okay. So we’re going to talk about some companies real quick.
Wendy Sweet (00:50:04):
If you are doing short-term rental properties, host financial will give you the best option right now, they do loans. And I think I wrote some notes on this. Let’s see. And then Alicia was talking about yesterday. If you go to their website and you, you get on their revenue calculator, it will tell you exactly what you should be doing in that area. And what’s going on in that area. It’s really amazing stuff to be able to take your right to air DNA and let you do that for free. Host financial uses the property income. They do the market rent, and they’ll also do a loan based on the past 12 months. Now, if they’re going to do projected market rent, of course, you’re probably gonna pay a higher rate than you would if you had a history to go there with, but they do 80% or 75% cash out on your short-term rental, no tax returns.
Wendy Sweet (00:51:00):
They don’t want to see your income, or they don’t care about the income rights are four to six and a half percent that does not suck. That’s a really good option. 30 to 45 days to close. The problem is it’s a hundred thousand dollar minimum. So depending on where you are, it might not work with you, but host financial, in my opinion, today is number one. And the reason why I say today is because it changes every day, but host financial has shown the best. This is another company called Socotra Capital. I have not used them. The problem with them is they like really big towns. They want it to fit in a nice little box. They love high-end property. So if you are on the left coast, it’s a great way to get a loan done or if you’re in any kind of a high-end area, that’s a great place to go.
Wendy Sweet (00:51:51):
They do use property income. They do the market rent. A lot of these short-term rental loans. We’ll use market rent, just like a long-term rental company will they’ll take it off of what the market rent. They don’t really care about what your income really is on it, but they’ll base it off of that market rent. Their minimum loan amount is 200,000. Cram Capital. What a great name, a really, really unusual. So their minimum can be tough to hit because it’s 200,000 to 300 million. So they liked the really high end stuff. The rates are a little bit higher. Their credit score is 680, which really isn’t bad at all. And they also base it on long-term rent. Notice none of these people are asking for tax returns, then we’ve got investor loan source, and I’m going to, I’m going to have Tom come in.
Wendy Sweet (00:52:50):
Do you mind having Tom come in for a second? I really want you to hear about I’m sorry. Yeah. It’s doc cash. And I forgot to change that. So his email, I mean, his website is ILS.cash, not.com. Here’s things before he gets in here. I want you to think about, be aware of your small loans. Okay. Not a whole lot of lenders, like small loans, a small loan is under $50,000. That’s a small loan. We don’t do them under 50,000 we will, but we’ll charge you like it’s 50. So that’s where you need to really use your private lender money. Mobile homes are really difficult to get financed. If you’ve got cash, mobile homes are a great cash cow. Great source of income, whether it’s short-term, long-term, they’re a great source of income, but understand as an investor, you’re going to have a really difficult time finding a loan for it.
Wendy Sweet (00:53:53):
So you’re going to need a private lender for that. Unique properties. Yorks. The shipping containers, glamping, Airstreams, log homes, even tiny houses. Especially with the wheels on them, not the teeny ones. Lisa’s talking about the ones with wheels on them. They’re the most difficult to get financed. You’ve got to really get creative. That’s why it’s so important for you to have a multitude of lenders in your pocket, private lenders, people that have self-directed IRA money. And here’s, what’s really cool. People think, well, I don’t know anybody that has $300,000 in the bank. Well, you know what? That’s okay. Maybe they have a hundred thousand in their self-directed IRA and their spouse has a hundred thousand in their self-directed IRA. And they might have a couple of kids that have money in their self-directed IRA. Or they may have friends and family that have money and their self-directed IRA, preferably friends, and all of these people can be in first position.
Wendy Sweet (00:55:01):
You write up the deed where all of these people are in first position. One person has to be in charge of really making all the decisions, but all of these people can be in first position. It’s a really, I hate to use the word safe. I’ve done that three times now. It’s a safer position for people to be in when they’re all in first position like that. I don’t like first loans, second loans and third lines. I don’t like those. Somebody has taken a hit down the line when you do that. So I don’t like them. People do them. So when you’re doing stuff, that’s funky, just understand your local bank is a good choice, but I doubt you’re going to get anywhere. The private lenders are the way to go. So the other thing is square foot does matter, especially when you’re doing a conventional loan, the square footage of the property.
Wendy Sweet (00:56:00):
There’s a lot of companies that won’t go below a thousand or go below 900. So you need to be careful and make sure you source people that do care about the square footage. The reason why I’m throwing these at you is because these are questions that you need to ask the people that you’re talking to about your borrowing. When you’re borrowing money, these are all questions you need to ask them because a mortgage brokers, oh yeah, we do log homes all the time. Oh yeah. I can do a small house for you. They don’t know.
Wendy Sweet (00:56:32):
You need to ask them specifically to find out those answers for you because you’ll get bad information. You’ll close on a house and then you’re stuck. Make sure you’re working with somebody that really understands what they’re doing. The other thing that you really need to be careful about is being in a flood zone. Has anybody in here own property where they had to pay flood insurance on the property? It sucks. It’s really, it’s hard. I mean, you’re, you can completely change your deal. If you’re paying $4,500 a month in flood insurance. Not a month, a year. A month of really do that. But you’re completely changing your deal. So make sure you look at that. And you know. Another thing that I really loved about Jeff’s video or Jeff’s slides when he was talking about the due diligence that you use, you’re wondering what’s the history on the neighborhood, the school system, um, you know, just what’s been going on with that deal. There’s one thing you can do where you can get all of that information. Anybody know what that is? It’s called an appraisal.
Wendy Sweet (00:57:38):
It’s pretty simple to get one. That’s right. And I’m sure Corey will back me up. Now, when people open up an appraisal, the first thing they do is they look at the price, right? If it’s a price you like, then it was good. If it’s a price you didn’t like, then it was awful. But did you know that there’s other things in an appraisal that can tell you whether or not this is a good deal even if the numbers work? Appraisals, tell you everything about a house. Is it on a septic? Is it on a well, is it on a dirt road? Uh, what’s been going on in the neighborhood buy and sell wise? If you’ve got a house on a dirt road and you’re trying to get a conventional loan on it. Did you know that you have to have a third party contractor that everybody’s agreed to, that’s actually taken care of that road on a regular basis, or they won’t do the loan?
Wendy Sweet (00:58:45):
Did you know that if you have a shared well with other people that own other property around you and you don’t have a third party company with an easement to be able to get to the well from everybody that you can’t close on that property? Did you know that if your heat source in your house is different from all the other comps that are on your appraisal, that that lender is going to have a problem with it? It’s little stuff that you don’t realize. You really need to understand how that works. You lenders have a problem with things. They want to make sure that when I take this house back, I can sell it just like this. So they’re going to pick it apart. You know how much an appraisal is? We’re getting them between 350 and a 550 for just about every property we’re doing. It’s the best insurance policy you can get other than insurance.
Wendy Sweet (00:59:46):
So make sure you get an appraisal. So easy to do. Flood zones. We talked about that off grid houses. They’re kind of new. If I’m running an appraisal, I’m looking for other off-grid houses. You think I’m going to have a whole bunch of them within three miles? Probably not. Be careful about that. Extreme rural is really tough to get a loan for. So these unusual properties, you have to have private money lenders, and there’s a ton of money out there, folks. And you know how I found my private money lenders, anytime somebody asks me, what do you do for a living? I help people build wealth.
Wendy Sweet (01:00:33):
I don’t say another word. Really? How do you do that? And then I tell them a little bit about what I do as a lender and how I can, I’m sorry?
Speaker 3 (01:00:46):
How much would you say in price?
Wendy Sweet (01:00:46):
Oh, well we have $23 million of self-directed IRA money. That’s not in the fund. That’s not in the fund. Thank you! And then we have the fund on top of that. So it’s so easy. You just have to ask and don’t be ashamed to ask. Don’t be, we were raised our whole lives to not ask people how much money they make or how much money they have in the bank. Weren’t we? It’s something that, you know, it’s taboo. You’re not supposed to ask. How are you going to know if you don’t ask?
Wendy Sweet (01:01:23):
Well, the way in is to get them to ask you questions first, what do you do for a living? I help people build wealth. Really? How do you do that? Your door is open to start telling them what you do. Okay. So, like I said, loans are getting better daily. One of the things that I do is, I’ve had so many people. I’ve been doing this over 20 years. I’ve had so many people just open the door and give me an opportunity to do what I do and teach me what I do. And, you know, it started out with Larry Going, has given me an opportunity to even speak in front of people. He was the first one that allowed me to get up and speak in front of people. People have shared so much information with me. I want to be able to give back.
Wendy Sweet (01:02:10):
And I would love to talk to everybody that wants to talk, but if I, you know, went and had coffee and had lunch, I’d weigh way more than I do today. And I just don’t have time. So I give my Wednesdays up. It’s called Wednesdays with Wendy. I tied my Wednesdays to set it up. I’ve got a four hour period, every 30 minutes that I’ll speak with people and, and help you. I can, I’m a member of a whole bunch of mastermind groups and I’ve been blessed to meet the coolest people in the world that are in this business. And I can hook you up with people that can help you if I can. And I’m happy to do it. So this address right here, if you’ll get on there, you can book a time with me and I’ll spend 30 minutes with you.
Wendy Sweet (01:02:57):
And I’ve got people who I’ve got people who book a 30 minute Wednesday with me every month. It’s free. Of course. You don’t give stuff away and charge for it, but I’m happy to help you anytime you want. I also want to make sure that I mentioned to you too. And Jim talked about it earlier today, every Friday for the past 19 years, faith-based investors have been meeting for breakfast at 7:30. Every Friday morning. Many of the people in this room have been speakers. It is killer. So we started off with a 10 minute devotional, and then we just let her rip about real estate. Our goal is to only the, is for it to be an hour, but many times it goes over. There are many people in this room and they’re laughing. We just let it go.
Wendy Sweet (01:03:50):
And we talk about real estate. I mean, it’s just, it’s amazing what you can learn, the connections that you can make. Sometimes it ends up being just a Jesus meeting. So be prepared for that. And that’s good too, but I would love to have you come and join us. It’s free. We’re doing it on zoom now because COVID took care of that for us and I will have it posted on Jim’s investor Facebook page this evening for tomorrow morning. You’re more than welcome to join any time. We’d love to have you, anytime you have questions, I’m happy to answer any that you have. I also want to plug our booth back there at the back. We are giving away a $50 Lowe’s gift certificate. So if you’ll put your name in our little bucket back there, you could be the winner. You can’t win if you don’t try, right? Just like the lottery, not quite as good, but just like it. Thank you so very, thank you so very much. I’ve really enjoyed that.