Latest / Own More Doors / #11 Building Wealth with Hard Money Loans: Insights from a Real Estate Investor (Mario Montecinos)

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#11 Building Wealth with Hard Money Loans: Insights from a Real Estate Investor (Mario Montecinos) · Own More Doors

0:00
SPEAKER_01: Sitting down with Mario Montecitos.
0:01
SPEAKER_01: Mario Montecitos is a dear friend of mine.
0:03
SPEAKER_01: We met when we were in college.
0:05
SPEAKER_01: Uh, we joined the same fraternity, we were part of the same pledge class, and um Mario Mario has quietly built a uh uh a large-size real estate portfolio.
0:17
SPEAKER_01: He's he's in his 40s, very knowledgeable.
0:21
SPEAKER_01: And today we're gonna talk to Mario about how he got started, where he learned, and also Mario is a is a lender.
0:29
SPEAKER_01: He does all types of loans, but one of the loans that we're gonna focus in on today is hard money loans or private loans.
0:36
SPEAKER_01: And we're gonna show you guys how investors are using private loans to build wealth.
0:42
SPEAKER_01: Mario's using them, all of his clients use them, and he's gonna tell us when is the right time and how you could take advantage of this.
0:50
SPEAKER_01: Mario, thank you so much for being here today.
0:52
SPEAKER_00: Well, and thank you so much for having me.
0:54
SPEAKER_00: Uh, it's a definitely an honor to be here and uh it's a wonderful space that you guys have created.
0:59
SPEAKER_00: Uh and I'm yeah, I've been a big fan of what you guys have been doing and building.
1:02
SPEAKER_00: And uh it's really cool to you know knowing you at an early age in college and uh seeing you grow your business and uh your brokerage, and it's awesome and the people you're helping and you know ultimately creating wealth and through you know real estate.
1:16
SPEAKER_00: So it's uh it's amazing.
1:17
SPEAKER_01: Awesome, Mario.
1:18
SPEAKER_01: Well, uh well, let's get started.
1:20
SPEAKER_01: Mario, so uh tell us about the first property.
1:22
SPEAKER_01: Your your first, well, I think your first condo was your first condo on Roswell.
1:27
SPEAKER_01: 1145 Rosalind.
1:28
SPEAKER_01: Okay, so I yeah, you're Mario's first condo.
1:32
SPEAKER_01: So um listen, Mario, a lot of times people are gonna ask me, they ask you, hey, our condo is a good investment.
1:39
SPEAKER_01: Let me start there with you.
1:41
SPEAKER_01: Was that a good investment for you?
1:42
SPEAKER_00: For me, it was.
1:43
SPEAKER_00: And it's a it's an interesting story because I I think getting in ownership, getting into wealth creation, um, you know, if a condo is is the way, the vehicle to get to your first piece of property, I don't think it's a bad idea at all.
1:57
SPEAKER_00: Um, and why I I talk about this before with people, and people are like, oh, timing and when do I buy real estate?
2:04
SPEAKER_00: When do I not?
2:05
SPEAKER_00: I think about when we bought that, I think it was 2004, I believe.
2:10
SPEAKER_00: And I thought it was the best idea, the greatest thing.
2:13
SPEAKER_00: There was uh appreciation.
2:15
SPEAKER_00: I look at this thing, I'm like, oh my gosh, there's$80,000 and in wealth created, and I'm like, I only own this thing for a year, two years.
2:21
SPEAKER_00: I was like, this is amazing, and I'm just paying, you know, my basic need, my shelter, right?
2:26
SPEAKER_00: And I had a at the time I had a a roommate, and then eventually a girlfriend or a fiance moved in and um I found a way to like you know offset the the monthly nut.
2:36
SPEAKER_00: Um so that was a cool thing.
2:38
SPEAKER_00: But then the market crashed, right?
2:40
SPEAKER_00: And then arguably for three to four years, it was like, this is a terrible idea, right?
2:46
SPEAKER_01: All right, well, listen, that's the purpose of this of this podcast is that we're not painting a picture that it's easy, that it's a slam dunk, that anyone could do it.
2:54
SPEAKER_01: Although I do believe it's easy, and I do believe that anyone can do it.
2:57
SPEAKER_01: And and when I say say anyone, I mean Mario, um, you come from Riverside, really good family.
3:04
SPEAKER_01: Thank you.
3:04
SPEAKER_01: Um, but I would say that um I don't know that your family were were uh at affluent apartment investors building wealth through apartment ownership.
3:15
SPEAKER_01: This was not something you'd learn from mom and dad.
3:16
SPEAKER_00: Not at all.
3:17
SPEAKER_01: Uh probably something you didn't learn from any of your friends.
3:20
SPEAKER_00: No.
3:20
SPEAKER_01: At what point, Mario, did you did you realize, oh, I I think this is the way to build wealth?
3:27
SPEAKER_01: Like who, who and when did that happen?
3:30
SPEAKER_00: Sure.
3:30
SPEAKER_00: Um, yeah, so to go direct to that.
3:33
SPEAKER_00: So a direct mentor was uh Mark Milan.
3:36
SPEAKER_01: Uh yeah, so we interviewed Mark earlier this week.
3:40
SPEAKER_01: And so yeah, yeah.
3:41
SPEAKER_01: So for for anyone who wants to know about Mark, uh we we interviewed him here.
3:47
SPEAKER_01: He's both of our mentors, and and it was interesting at that time.
3:51
SPEAKER_01: Mark is probably responsible for maybe 12 of us uh individuals, and he's really helped all of us kind of um uh maybe realize Mario that we could become millionaires through owning apartment buildings.
4:03
SPEAKER_01: I mean, is that what because that's kind of like what I like he he taught me that I could do it too, you know.
4:08
SPEAKER_01: So, okay, so then I'll let you go back to sure uh Mark.
4:11
SPEAKER_00: Yeah, so yeah, Mark uh he he exposed us, right?
4:15
SPEAKER_00: We we saw you know the good, the bad, the ugly, and the upside and and the wins and the excitement.
4:20
SPEAKER_00: Uh and I I was uh and it to me it looked doable, right?
4:24
SPEAKER_00: I was like, man, you don't have to be a rocket science to do this, right?
4:27
SPEAKER_00: You you can just have some disciplines and take on appropriate risk, right?
4:31
SPEAKER_00: And having an appetite for that.
4:33
SPEAKER_00: My father, my father was he is an entrepreneur, he did own his own business, he had a brokerage of of sorts in uh custom packaging.
4:40
SPEAKER_00: So I saw him being an entrepreneur from that part.
4:43
SPEAKER_00: So that came in later, but the exposure of owning real estate, uh ulting owning multifamily apartments, uh, and the opportunities that could come from that.
4:53
SPEAKER_00: I was exposed through Mark Milan, and then um, you know, and then we had a group of guys that were looking into this.
4:58
SPEAKER_00: And really, I remember uh graduating school in 2004 or 2003.
5:05
SPEAKER_01: 2003.
5:05
SPEAKER_01: 2003, yeah.
5:06
SPEAKER_00: And then um from there I went to Costa Rica for three months and I was reading Rich Dad, Poor Dad, and the millionaire next door, kind of like over and over and over again.
5:15
SPEAKER_00: I was sitting there on this beach and I was like, okay, it's it's time, it's time to get back and go to work and find a way to make revenue to be put me into income, right?
5:24
SPEAKER_00: Uh to put me in a position to buy my first piece of real estate.
5:27
SPEAKER_01: So you know it's interesting, Mario.
5:28
SPEAKER_01: They're you know, that they always say, Hey, like you're the um, you know, you're the equivalent of the five people that you hang out with, you know.
5:36
SPEAKER_01: And and so at that time, I would say, you know, it was me, it was you, it was Gavin, it was Andy, uh, there was Marcus.
5:42
SPEAKER_01: So there's like a bunch of us, you know, and then before us was was Tim Reese and and you know, and maybe there's a few others that were in there also just kind of learning and absorbing all this that Mark was teaching us.
5:52
SPEAKER_01: Sure.
5:53
SPEAKER_01: And we all we all kind of believed and we all did it.
5:58
SPEAKER_01: And now we're like, I don't want to say it's 20 years, maybe it has been 20 years since we met.
6:02
SPEAKER_01: Jeez, that's a long time.
6:04
SPEAKER_01: Okay, so but but it's interesting because I know, and you know, I want to talk to some of our listeners because maybe you're in a group of friends and they're saying uh it's the bad time to buy, there's no more good deals, all the wealth has been taken.
6:18
SPEAKER_01: This is only if you're rich, this is only if you come from money.
6:22
SPEAKER_01: Um, that's not for me.
6:23
SPEAKER_01: Like there's people out there, Mario.
6:25
SPEAKER_01: Now, we were fortunate that we didn't the group of friends that we had, we were like um, you know, we're more like the root, like the Rocky and the Rooties of the world, is that we, you know, we didn't come from a whole whole lot.
6:39
SPEAKER_01: I mean, yes, we had loving, supporting families, but when it came to asking mom and dad for for money for down payment, that was that that wasn't gonna happen for you, and it wasn't gonna happen for me.
6:48
SPEAKER_01: And so um the thing is is that we were fortunate, but I but I do want to tell people like you might be sitting around with a lot of friends who maybe don't have the same visions.
6:58
SPEAKER_01: And I don't want to say go get new friends, but maybe go find and join groups and uh meetups where people are like-minded, where people do believe it can't be done, where people believe that the American dream is not over.
7:10
SPEAKER_01: Because I do hear that, and I hate hearing that because I'm like, no, I could take a college-year-old, I could take two college kids, the the Mario and the wands of the world, and we can say this is what you got to do to build wealth, and 20 years later they're in another financial position, and and and it feels comfortable when when you're there, right?
7:27
SPEAKER_01: Yeah.
7:27
SPEAKER_01: Um, Mario, talk to us about your very first.
7:30
SPEAKER_01: I I want to say that your first fourplex was that on Gardena?
7:34
SPEAKER_00: Yep.
7:34
SPEAKER_01: Okay, talk to us about that.
7:35
SPEAKER_00: Um can can I circle back real quick to Roswell?
7:38
SPEAKER_00: Because I kind of ended it with like for three or four years about the place.
7:41
SPEAKER_00: There's a bunch of appreciation for three or four years.
7:43
SPEAKER_00: I was like, okay, what am I doing?
7:44
SPEAKER_00: Uh I was literally hanging on by a thread to to keep that property, was able to negotiate a modification.
7:50
SPEAKER_00: And then that property ended up turning into being a rental.
7:53
SPEAKER_00: Okay.
7:53
SPEAKER_00: Moved out of the property.
7:54
SPEAKER_00: Uh eventually was able to have a couple hundred bucks a month in the positive, which was amazing.
7:59
SPEAKER_00: And then eventually holding on to the real estate long term, I was able to sell it for a profit.
8:04
SPEAKER_00: Okay, there we go.
8:05
SPEAKER_00: So it was of course because I love talking about that because it's like people like can get concerned and people are super smart about time wanting to time the market, right?
8:13
SPEAKER_00: But I can, you know, I feel confident like you can buy even in arguably maybe not the best time and still come out ahead with a game plan and the ability to hold on to the property.
8:24
SPEAKER_01: No, and and thanks for sharing that, Mario, because it's not all blue skies, and what you just described is the ups and downs of old owning real estate, living in it, then renting it.
8:33
SPEAKER_01: And I'm sure you know, with with any rental, you're gonna have rental issues.
8:37
SPEAKER_01: And and but but it's good to hear that hey, you stuck with it, you didn't give up, and you uh um were kind of dedicated, I guess, to the process.
8:46
SPEAKER_01: And I think if you were to talk to Mark, and Mark would say, um, if you sell it, you lose.
8:50
SPEAKER_01: If you don't, you don't lose.
8:52
SPEAKER_01: You know, like and like the only people who lose are are ones who get scared during the down market, but no one's really forced to sell, right?
8:59
SPEAKER_00: Correct.
8:59
SPEAKER_01: And so that was well, that was well played.
9:03
SPEAKER_01: Talk to me about Gardena, what type of financing?
9:05
SPEAKER_01: I know you still own it.
9:06
SPEAKER_01: And um, you know what's interesting, Mario?
9:08
SPEAKER_01: So like I've had um Mark Milan on this week, his first triplex, he lived in it.
9:14
SPEAKER_01: Another really successful uh investor that that that's a friend of ours, someone that we work with, Brad Johnson, uh coming out of UCLA, his four fourplex, he lived in it.
9:24
SPEAKER_01: It's like this pattern.
9:25
SPEAKER_01: Sure.
9:26
SPEAKER_01: Was that your pattern?
9:27
SPEAKER_00: Correct.
9:27
SPEAKER_00: Okay, yeah.
9:28
SPEAKER_00: So the first fourplex, I mean I remember being in escrow on this and negotiating back and forth.
9:33
SPEAKER_00: And my agent at the time, which unfortunately it wasn't you, it should have been you on that one, but my agent at the time was like because we were doing the request for pairs and the property was beat up, you know, it was it's and he was like, Man, I don't know if I would buy this.
9:44
SPEAKER_00: I was like, Are you kidding me?
9:46
SPEAKER_00: Like you're my agent, you're telling me that.
9:47
SPEAKER_00: But for me, I saw it was uh FHA three and a half percent down at that time, it was uh price points and everything else, it was a lot easier to do.
9:55
SPEAKER_00: So you own a four-plex building with three and a half percent down.
9:58
SPEAKER_00: And for me, I was like, man, that's a beautiful leverage.
10:01
SPEAKER_00: And to get a 30-year fixed mortgage, hey, okay, well, hold on, hold on.
10:04
SPEAKER_01: When you say leverage, so like in your mind, you're saying, man, I'm only putting three and a half percent down.
10:09
SPEAKER_01: And I and and when we use the word leverage, what you're saying is essentially I'm putting very little down, and all the risk is on the bank who's gonna give me 97%.
10:17
SPEAKER_00: That is correct.
10:18
SPEAKER_00: Essentially, okay, cool.
10:19
SPEAKER_00: I was like$25,000 and I own a$530,000 income-producing property.
10:24
SPEAKER_00: I was like, I love that.
10:26
SPEAKER_00: I love that idea to have that, and there's already tenants in place.
10:29
SPEAKER_00: And the other thing where most people, or not most people, just it's a consideration is I'm buying this thing, but there's no cash flow, right?
10:37
SPEAKER_00: Yeah, like why why am I gonna why am I gonna do that?
10:40
SPEAKER_01: But okay, a couple questions.
10:42
SPEAKER_01: Okay, yeah.
10:42
SPEAKER_00: How old were you?
10:43
SPEAKER_00: I was at that time, so that was 2013.
10:47
SPEAKER_01: Okay, okay.
10:48
SPEAKER_01: So then, okay.
10:49
SPEAKER_01: So I mean 30?
10:51
SPEAKER_01: Yep.
10:51
SPEAKER_01: Okay.
10:52
SPEAKER_01: All right.
10:52
SPEAKER_01: So so so you're 30, you're 30 now.
10:56
SPEAKER_01: Yeah, yeah.
10:56
SPEAKER_01: And and then you come in with three and a half percent down.
10:59
SPEAKER_01: You brought up c cash flow, uh, which is obviously everyone.
11:03
SPEAKER_01: That's the first thing everyone that's the first thing that comes out of someone's mouth is uh, you know, does it cash flow?
11:07
SPEAKER_01: Does a pencil?
11:08
SPEAKER_01: And and so let me ask you, did Gardena, your year four unit, did it cash flow the day you bought it?
11:14
SPEAKER_00: No, it did not.
11:15
SPEAKER_01: Oh, it didn't?
11:16
SPEAKER_01: No.
11:17
SPEAKER_01: And you and you knew what you were doing because you were already a lender at that time.
11:21
SPEAKER_00: Yeah, yeah, I was a lender at the time.
11:22
SPEAKER_00: I mean, I understood financing a lot better because at that point, so I got in financing in 2004.
11:29
SPEAKER_00: So, you know, I had some time seeing that and more time exposed to you know other investors and whatnot.
11:34
SPEAKER_00: But I mean, I didn't, I mean that was my first four flex you know property at the time.
11:38
SPEAKER_00: But um, I I I understood and appreciated that there's a road to get to, right?
11:44
SPEAKER_00: And I see the plan of like, okay, you improve the property and you get to market rent, like at that time, like that was like it seemed it seemed like it was gonna be work, but it didn't seem like something I would be afraid of.
11:55
SPEAKER_01: You know, you know what's interesting is that the uh the same business model of 30 years ago, 20 years ago, 10 years ago, the same business model that you had was uh buy something with as much leverage, so with the biggest loan possible, and uh try to get the rents to come up.
12:17
SPEAKER_01: Did you know that that's the same game plan right now, today?
12:20
SPEAKER_01: That nothing has changed in the business model.
12:22
SPEAKER_01: So when you say that it's not rocket science, it's literally not rocket science.
12:26
SPEAKER_01: And so many people have done it before all of us, and nothing has changed.
12:31
SPEAKER_01: Like that night, the the exact same way that we analyzed properties 20 years ago when Mark taught us, is the exact same way we analyze now.
12:40
SPEAKER_01: And 20 years ago, the properties that I was buying and you were buying did not cash flow, they're not cash flowing now.
12:46
SPEAKER_01: So it's so interesting, and I know we tell people this, and you know, you're on the lending side, I'm on the brokerage side, and we're helping individuals build wealth, literally teaching them what Mark taught us, right?
12:57
SPEAKER_01: He was essentially our coach.
13:00
SPEAKER_01: And then they don't believe us, or they they think we're trying to sell them on something.
13:06
SPEAKER_01: But I'm I'm glad you said that Gardena didn't cash flow at first.
13:10
SPEAKER_01: And at what point do you believe that it started to cash flow?
13:15
SPEAKER_00: You actually helped me out with the management on that property initially, and it was pretty it it didn't take that long.
13:20
SPEAKER_00: I mean, it was probably under a year at that point, because it was only, I think, maybe you know, 500 or so under what the mortgage was with the principal interest, taxes, insurance, mortgage insurance, the whole, the whole monthly payment.
13:35
SPEAKER_00: Um, it was, you know, it wasn't, I mean, but still at that time to be four or five hundred, it's an investment.
13:41
SPEAKER_00: You're thinking like, oh, that's like a car payment.
13:43
SPEAKER_00: I could be rolling a BMW, right?
13:45
SPEAKER_00: Do I want to uh roll into BMW or do I want to buy an appreciating asset that very shortly is gonna actually start paying me versus me having to make a payment?
13:54
SPEAKER_01: That's a choice.
13:55
SPEAKER_01: So just to be clear, Mario bought this 29-year-old, 29 years old, and he's negative$500 a month.
14:04
SPEAKER_01: Because some people are like, I'm not buying anything that doesn't break even.
14:08
SPEAKER_01: I'm not gonna do it.
14:09
SPEAKER_01: Sorry, Juan.
14:12
SPEAKER_01: And here you you had the training for Mark, and you still signed up for something that was negative$500 a month.
14:21
SPEAKER_01: Now, I normally tell people, hey, let's give um, let's, let's, let's correct the property, let's, let's, let's make that gap of where the rents are today and where they should be.
14:32
SPEAKER_01: But let's give it 18, 24 months.
14:34
SPEAKER_01: You were able to do an under 12, which is great.
14:37
SPEAKER_01: You also were able to buy with uh three and a half percent down, which back then we did meet the self-sufficiency test, and you were able to do it.
14:46
SPEAKER_01: Now you know, and I know that's nearly impossible.
14:48
SPEAKER_01: Right.
14:49
SPEAKER_01: But there's also a new program.
14:50
SPEAKER_01: That's correct.
14:51
SPEAKER_01: Talk to us about the new program, and I know you just utilized it again because here's the other thing that I'm gonna ask you.
14:57
SPEAKER_01: Okay, you know what you're doing, you've you you now own a lot of properties, and and so talk to us about this new program and how someone could be someone could do what you did, you know, whatever, 15 years ago.
15:12
SPEAKER_00: Yeah, it's it's amazing.
15:13
SPEAKER_00: It just came out um, I think November 18th is one when it became available.
15:17
SPEAKER_00: So just of of last year in 2023.
15:20
SPEAKER_00: Um basically it's the three and a half percent down FHA program on conventional, so it's conventional financing, um, and you can do it with five percent down.
15:30
SPEAKER_00: It it does have to be a primary residence, right?
15:32
SPEAKER_00: Yeah.
15:33
SPEAKER_00: So there is, you know, the you know, the appropriate person that needs to have that be their primary residence and move into it, right?
15:40
SPEAKER_00: Uh, but it's the same idea, and actually I think it's a little superior versus the FHA deal because uh possibly it you know when it comes to a point where it has the appropriate uh equity into the property, it's either 20 or 22 percent equity in the property, then the um mortgage insurance can be removed versus FHA, it's it's a little trickier to do that.
15:59
SPEAKER_00: So there's even more hope to free up the cash flow.
16:02
SPEAKER_01: So so although getting a forplex under FHA is is not possible right now because the values are high, the interest rates are high, there is this alternative that that anyone could be using.
16:14
SPEAKER_01: So if anyone says, Well, um, you know, I can't pull that off, the answer is yes.
16:20
SPEAKER_01: And and something happened in November, right of uh uh November of 2023.
16:25
SPEAKER_01: And you were able to just utilize it recently, right?
16:28
SPEAKER_01: Because there's different ways now, because some people are gonna hear this and say, Well, I'm I already own a home.
16:33
SPEAKER_01: The bank is not gonna believe that I'm gonna live in a four-plex, but kind of tell us about the strategic way that you managed to buy another fourplex recently.
16:41
SPEAKER_01: I uh this year, right?
16:43
SPEAKER_01: Was it this year?
16:43
SPEAKER_01: Yeah, okay.
16:44
SPEAKER_01: So we're uh it's March 2024, and and and Mario continues to purchase kind of under the same business model from years ago.
16:54
SPEAKER_01: Talk to us about that.
16:55
SPEAKER_00: Yeah, so I'll be very clear.
16:56
SPEAKER_00: So the I I partnered with that property.
16:58
SPEAKER_00: So I partnered with um uh a gentleman that I I do a lot of business with, and there's a relationship there.
17:04
SPEAKER_00: Uh, we talk on a daily basis, and there's trust uh in that relationship, and he's the and he was the buyer, right?
17:11
SPEAKER_00: And then we outside of it have have an agreement from from that that perspective.
17:15
SPEAKER_00: So he is a buyer, he he does own any real estate, he's moving you moving in the property.
17:20
SPEAKER_00: Um, so that's why that that fit.
17:22
SPEAKER_00: If you owe the house, if you already own a house and you're looking to do that, it's a very it's really hard to do.
17:29
SPEAKER_00: Like it almost pretty much doesn't unless you know I I look back, I mean, I kind of was in that predicament with with uh Gardenia, the first four plex, and I had so I moved out, I rented out Roswell, and I was renting in another property.
17:42
SPEAKER_00: That's really the only um way if you already own real estate where that I think that's gonna like really be real, right?
17:50
SPEAKER_00: So yeah.
17:51
SPEAKER_01: So let me I guess let me give a little more information on on whether if if you're someone like Mario who says, Man, I want to take advantage of this five percent down, and and anyone who um everyone should be taking advantage of this.
18:04
SPEAKER_01: Now, if you're not in the position to be the one who occupies it, maybe you find someone.
18:09
SPEAKER_01: Maybe you find someone that's and that's what Mario did.
18:11
SPEAKER_01: He found someone that says, Yeah, because so in this situation, Mario says, Well, I can't own it 100%, but man, if I own 50%, which is which is the agreement that he did with his partner, it's perfectly fine.
18:25
SPEAKER_01: And I suggest um anyone who wants to get started, find either find a mentor or find someone you can partner with if you're afraid of doing this.
18:34
SPEAKER_01: Because I tell people I'd rather own uh you know 25, 33, 50 of something than 100% of nothing, right?
18:43
SPEAKER_01: And so um I love that program.
18:46
SPEAKER_01: Um, I think more and more people need to utilize it.
18:49
SPEAKER_01: I think that the biggest hiccups we have right now is that people say, Well, the payment's too big.
18:55
SPEAKER_01: And then I I'm sure that your same business plan is okay, the rents are low, let's find a way to get them to market.
19:01
SPEAKER_00: That's correct.
19:02
SPEAKER_00: And and I look at for you know, all the challenges of like, oh, it's so expensive to purchase a home.
19:09
SPEAKER_00: And I agree, it is like from where people's rents are to you know what their new mortgage payment, there, there is a big, there is a big step, there's a big leap.
19:16
SPEAKER_00: You know, just say for example, somebody's paying$3,000 in rent or$25,000 to$2,800 in rent right now, and then to own a home, they're gonna be at seven or eight thousand, right, in their in their monthly mortgage payment.
19:28
SPEAKER_00: Like that's a big leap.
19:30
SPEAKER_00: For me, uh a direct solution to that is to purchase units, right?
19:34
SPEAKER_00: If you're already in uh an apartment or a small house, or it it the transition from that to another um apartment in the forplex or the triplex or the duplex, uh the timing of it, the transition is is not too far out of whack, right?
19:49
SPEAKER_00: And then you move, you know, you move in, you rent the other units out, and then your actual monthly net is something maybe more like you know 4,500 or or something like that.
19:58
SPEAKER_00: So to compare to get in the home ownership game, uh, to own multiple units to where you're gonna have rental income down the road, uh, where your monthly payment is gonna be affordable because you have others offsetting the rent.
20:09
SPEAKER_00: And then eventually, maybe a year later, you move out and then you put yourself in a position to buy the next piece of real estate, right?
20:15
SPEAKER_00: And then you got you know units turned, uh, you have market rent that's starting to come in on that, and now you're in a position to move out.
20:22
SPEAKER_00: And I think a lot of what people think, they think everything, you know, whatever they're doing is forever, right?
20:27
SPEAKER_00: Moving into this pro.
20:28
SPEAKER_00: I don't want to live in a four-plex forever.
20:30
SPEAKER_00: Like you have to get over that, right?
20:32
SPEAKER_00: You have to understand that like a year comes and goes, right?
20:34
SPEAKER_00: And but a year down the road you put yourself in that position.
20:38
SPEAKER_00: Now you're controlling a$1.4 million property and it's you know on the road to getting cash flow on it, and then you you move out, and now you're in a position to buy the next piece of real estate.
20:47
SPEAKER_01: Got it, got it.
20:48
SPEAKER_01: Mario, talk to us right now.
20:51
SPEAKER_01: Um a lot of your investors are using um private loans, hard money loans.
20:57
SPEAKER_01: So these are loans that are um uh I guess out-of-the-box type financing.
21:03
SPEAKER_01: It's typically when when a property needs major work, and maybe sometimes an investor doesn't have the 50% down to buy an eight-unit building.
21:13
SPEAKER_01: Um there's there's pros and cons to these types of loans, but I I mean, Mario, you're in a position where you see a lot of successful people utilize these in the right way.
21:27
SPEAKER_01: So kind of give us some like high-level tips of hard money loans and how someone who's who's never done it, how they could get started.
21:36
SPEAKER_01: And yes, it costs more.
21:37
SPEAKER_01: I mean, let's just put that out on the table.
21:39
SPEAKER_01: Sure.
21:39
SPEAKER_01: I don't want to get a hard money loan, it costs too much.
21:41
SPEAKER_01: Okay, well, do you want to build wealth or you just want to sit on the sidelines and watch everyone else do it?
21:47
SPEAKER_00: Yeah, it's uh that that idea is yes, a hard money loan.
21:50
SPEAKER_00: So hard money loan is uh typically uh requires a lower down payment than uh traditional financing.
21:57
SPEAKER_00: Uh a hard money loan is a lot easier to qualify.
22:00
SPEAKER_00: For you don't necessarily need tax returns or W-2s or any traditional income documentation.
22:05
SPEAKER_00: Uh, the lender or the high net worth individual who's going to be lending this private money, this hard money or bridge loan, right?
22:12
SPEAKER_00: Let's let's just stop right there.
22:13
SPEAKER_00: So uh kind of synonyms here is the same kind of category.
22:18
SPEAKER_00: You have hard money, you have private money, and you have bridge loans.
22:21
SPEAKER_00: They are more along the same same idea, right?
22:24
SPEAKER_00: So whenever you hear that, it's we're talking about you know the same kind of same kind of financing for the program.
22:30
SPEAKER_00: So the whole idea of why do a hard money loan, one could be the condition of the property.
22:34
SPEAKER_00: A lot of times the banks on uh full doc traditional financing uh will not be in a position to lend on the property because of the current condition of the property, right?
22:43
SPEAKER_00: So then automatically that financing is out the door.
22:46
SPEAKER_00: That's number one.
22:47
SPEAKER_00: Uh, number two is if you're looking for leverage, that word again, the beautiful word of real estate leverage comes up again.
22:53
SPEAKER_00: If you're looking to control a property with the least of money, amount of money down, a private money could be a great tool.
22:59
SPEAKER_00: Uh, let me give you an example.
23:01
SPEAKER_00: So in residential one to four units, uh, they'll typically allow with a little bit of experience, they can you can go up to like 15% and sometimes 10% down, right?
23:12
SPEAKER_00: So a million dollar property, you put down$150,000 or maybe$100,000, right?
23:18
SPEAKER_00: If you're an experienced investor, you get a little bit higher leverage, um, which means a lower down payment.
23:23
SPEAKER_00: Um you compare that to traditional financing, um, if it's an investment property, the same million-dollar property you would need, you know, close to$250,000 down, right?
23:34
SPEAKER_00: So you keep more cash.
23:35
SPEAKER_00: The other beautiful thing um about a lot of private money loans, there's in that private money, there's fix and flip.
23:41
SPEAKER_00: You can get money to uh you can get money on a construction draw basis to help finance the the project.
23:48
SPEAKER_00: So let's say for every hundred thousand, you're able to recoup eighty-five thousand or sometimes even up to the whole um rehab budget to do that.
23:56
SPEAKER_00: So you buy a property, they give you the loan to close on the property, and then also you can you can draw on your construction budget uh to help finance that that uh that actual property and into re you know building value adding to the property, which is really, really cool because you know there's something that's very, very important when using private money.
24:19
SPEAKER_00: So private money terms are typically on most uh 12 months and they can go up to 36 months on most stuff, right?
24:26
SPEAKER_00: So that goes fast, right?
24:29
SPEAKER_00: So you need to have a strong exit strategy, right?
24:31
SPEAKER_00: And what is an exit strategy?
24:33
SPEAKER_00: Are you gonna be selling the property, right?
24:34
SPEAKER_00: Are you gonna fix it up, add value, and then sell the property?
24:37
SPEAKER_00: A lot due, or are you gonna be fixing it up, adding value, and then refinancing to long-term debt, right?
24:43
SPEAKER_00: Which I love that idea um as well, right?
24:47
SPEAKER_00: Both are strategies in place depending on what the investor is looking to accomplish and their goals.
24:52
SPEAKER_00: Um, but um adding the value, let's talk about um fixing and and renting out, right?
24:59
SPEAKER_00: You fix up the property, and now instead of the property worth$1 million, you drop to$150,000 into rehab the property.
25:06
SPEAKER_00: Maybe the property is worth$1.4 or$1.5.
25:09
SPEAKER_00: So now you can go and refinance, right?
25:11
SPEAKER_00: When you go to refinance, instead of getting financing where the properties are only worth a million, you're refinancing when the property is worth$1.4 or$1.5 million, right?
25:19
SPEAKER_00: And that puts you in a much greater equity position that takes risk off from the bank and they're much more willing to lend, right?
25:26
SPEAKER_00: Right.
25:27
SPEAKER_00: Because you've created that value, you've created that appreciation in the property because you've improved the property, and then also, you know, you move the income up.
25:34
SPEAKER_01: Mario, um for someone who's never done a hard money loan, but maybe they live in an area near their mom's house, and there's always this house that needs so much work, and they think they could get a good deal because they know the owner wants them to buy it, but maybe they've the the owner has let the property go.
25:54
SPEAKER_01: Um, you know, the roof is caving in, they've ripped out the flooring, financing doesn't seem possible.
26:01
SPEAKER_01: Um how does like, I guess what what would be someone's first step having never done it?
26:07
SPEAKER_01: Like, do they partner with someone, Mario, who has done it?
26:10
SPEAKER_01: Like, do you guys give loans to someone who's never done this?
26:13
SPEAKER_00: I yeah, I do have a capital partner that will do it with no experience, and they're heavily underwriting the the actual project, right?
26:20
SPEAKER_00: What they're buying for, what the after repair value is after they fix it up.
26:24
SPEAKER_00: Um, they will look at the borrower's credit score.
26:27
SPEAKER_00: Um, when there's no experience, ideally there's a minimum 650 credit score.
26:31
SPEAKER_00: Um, so that would be, you know, credit score is important.
26:35
SPEAKER_00: Uh the equity built in the property is is important.
26:37
SPEAKER_00: But to answer your question, yes.
26:39
SPEAKER_00: I mean, I do a fair amount of people that are doing that first.
26:41
SPEAKER_00: Yeah.
26:42
SPEAKER_01: Mario, for for someone who who's listening to this and would like to get a hold of you, I mean, I guess I have two questions.
26:49
SPEAKER_01: Obviously, we're in Southern California.
26:51
SPEAKER_01: Um, can you do nationwide loans?
26:54
SPEAKER_01: Yes.
26:55
SPEAKER_01: And um, what's the best way for them to contact you?
26:58
SPEAKER_01: We are gonna put your information in the show notes, but like, do you want people to email you?
27:02
SPEAKER_01: You want them to call you?
27:03
SPEAKER_01: Let's just say someone says, Man, I know of a house and it needs tons of work, and I thought I could never buy it.
27:08
SPEAKER_01: And you're gonna say, Yeah, you can.
27:10
SPEAKER_01: This is how investors do this.
27:12
SPEAKER_01: Um, because that's the benefit.
27:14
SPEAKER_01: And like the one thing that I want people to know is that Mario is not just a lender, he's an investor.
27:19
SPEAKER_01: He's utilized these these hard money loans for himself to build wealth.
27:23
SPEAKER_01: So that you're talking to someone who has the experience, who's walked the walk.
27:28
SPEAKER_01: And so best way to get a hold of you.
27:30
SPEAKER_00: Sure.
27:30
SPEAKER_00: Uh, I mean, simple.
27:31
SPEAKER_00: You can just send me a text, 562-787-8902.
27:36
SPEAKER_00: And then if you want to send an email as well, you can do Mario at MarioLoans dot com.
27:41
SPEAKER_00: And uh yeah, look forward to be a resource for you and give you whatever I can to help you.
27:45
SPEAKER_00: Um, and you know, just have a conversation, an honest conversation, and see what you're trying to do and see what I can do to help.
27:50
SPEAKER_01: Mario, I'm gonna give you the last word, but I um here's what I would like for you to maybe answer.
27:55
SPEAKER_01: What's the ultimate plan for you?
27:57
SPEAKER_01: Everyone has a different plan.
27:59
SPEAKER_01: You're your early 40s, you've built the wealth, you have a successful business, people trust you.
28:05
SPEAKER_01: You have I mean it's where do you go from here?
28:08
SPEAKER_00: I want to um, you know, continue, you know, continue rinse and repeat what I'm doing, but I also want to, you know, give be able to be in a position to give back more.
28:16
SPEAKER_00: Uh, I think serving serving communities is is is super important.
28:19
SPEAKER_00: Um, we got a lot of homelessness going on and it's continuing to grow.
28:22
SPEAKER_00: So I think that's important to me.
28:24
SPEAKER_00: Uh, but also from my wisdom that I've been building and and I have a lot more to to learn is just to pour back into people.
28:31
SPEAKER_00: And um, I believe in real estate long term and building well through real estate is amazing.
28:36
SPEAKER_00: Um, and you know, my my goal is to be, you know, have a uh have X amount of passive income.
28:42
SPEAKER_00: So, you know, um I could be even more available to help more people.
28:47
SPEAKER_01: I love it.
28:48
SPEAKER_01: Thank you guys so uh Mario, thank you so much uh to our listeners.
28:52
SPEAKER_01: Make sure to subscribe, make sure to like, make sure to comment.
28:55
SPEAKER_01: That's all for now.
28:56
SPEAKER_01: Until next time.