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#59 How Real Estate Investors Finance Fix & Flips (Mario Montecinos) · Own More Doors

0:00
SPEAKER_02: We're excited to have a repeat guest, Mario Monacitos.
0:04
SPEAKER_02: If you recall, Mario and I went to college together.
0:06
SPEAKER_02: You could go back and listen to our very first podcast interview, which was number 11 for our Own More Doors podcast.
0:13
SPEAKER_02: And also, if you're like to hear us on the podcast, great, but you can check us out on YouTube, Sage Real Estate.
0:21
SPEAKER_02: And that's where we have our largest um followers of a community, is at the YouTube level.
0:26
SPEAKER_02: But thank you guys for tuning in.
0:28
SPEAKER_02: Mario, great to have you back again.
0:30
SPEAKER_00: Hey, Juan.
0:31
SPEAKER_00: Uh thanks so much for inviting me back.
0:33
SPEAKER_00: It's an honor definitely to be back here and uh grateful for the friendship and the opportunity to share some words.
0:39
SPEAKER_02: Awesome, Mario.
0:40
SPEAKER_02: You know, um, we're gonna hop right into this, and and I'm gonna start with this.
0:44
SPEAKER_02: So so just so people know, Mario, you you own apartment buildings, you you continue, you continue to buy.
0:53
SPEAKER_02: So I kind of want to get your insights on what you see in the market.
0:57
SPEAKER_02: Um, you own property out of state, you do Airbnb.
1:02
SPEAKER_02: Um your point, your goal from my perspective, since since I since we were out of college and we we were fortunate enough, Mario, to to learn that you could build wealth through apartment ownership and through real estate.
1:16
SPEAKER_02: Like so you learned what I learned from the same person at the same time, and you did a good job of of kind of hopping in, taking the risk, investing, believing, saving, investing again, not being scared.
1:29
SPEAKER_02: And now I'm sure you have passive income, you know.
1:32
SPEAKER_02: Yeah, you still have to work, you got three young kids at home, but you're you're setting up the bricks and foundations for someday you could back off and not work.
1:41
SPEAKER_00: Yes, yeah, 100%.
1:42
SPEAKER_00: Uh yeah, we were very fortunate to to be exposed to that through through a mentorship.
1:47
SPEAKER_00: Uh, we're talking about Mr.
1:48
SPEAKER_00: Mark Milan and uh uh others along the way as well.
1:52
SPEAKER_00: But yeah, to see you know the reality to you know acquiring you know rental uh investment properties, it's like for me, and you didn't have to be a rocket science to do it.
2:03
SPEAKER_00: Uh you did have to understand the foundation and you had to take a leap, right?
2:07
SPEAKER_00: There's a there's always a gap uh and there's not 100% clarity on the other side.
2:12
SPEAKER_00: You have to be willing to jump in and and and go for it after you know, you know, under understanding the the numbers in the market.
2:19
SPEAKER_02: What are you seeing right now, Mario?
2:21
SPEAKER_02: Um both both from your end, but um I think because you do loans and you do different types of, I mean, you'll do a regular conventional loan, and and we could get into that.
2:32
SPEAKER_02: You do a lot of more, I would say, kind of out-of-the-box loans, uh, like fix and flip type loans.
2:38
SPEAKER_02: What what are you seeing right now?
2:40
SPEAKER_02: So it's it's July 2025, like from an and what's the investor mindset right now that you're seeing?
2:48
SPEAKER_00: Yeah, that's that's a great question because the the timing of the market is is definitely interesting.
2:54
SPEAKER_00: And what I see, you know, 90, maybe 95% of the business that I do right from a loan perspective is uh for an investment property and it's some sort of niche financing, whether it's ground-up construction, uh fix and flip financing, a bridge loan, uh, a second for an investor point on equity, shuffling equity around to either build on an existing portfolio or position themselves to acquire another investment property.
3:22
SPEAKER_00: And um, you know, so I've seen all sorts of things.
3:25
SPEAKER_00: I see people that have taken advantage of purchasing investment properties have the equity uh that gives them options, right?
3:33
SPEAKER_00: That gives them options to acquire more properties, to build more properties, and um new acquisition, what's interesting and a little different than markets uh a couple years ago.
3:45
SPEAKER_00: I see the first timer, right?
3:47
SPEAKER_00: So I see the guy that uh maybe runs a construction crew or somebody that owns a house and they're willing and they want it, they believe in it, right?
3:55
SPEAKER_00: They're like, okay, I see that the wealth is there, I see the connection.
3:59
SPEAKER_00: I'm right, I want to do it, right?
4:00
SPEAKER_00: They're just kind of like tired of waiting and they want to get into their first investment.
4:04
SPEAKER_00: So I see the first time investor, and then I also see the very savvy investor that is well connected uh after decades of building relationships and seeing opportunities to buy at the right price, and they find a way to cancel out the noise and they think ahead, right?
4:24
SPEAKER_00: And their foresight and their comfortability and the relationships that they built to buy at the right price, right?
4:30
SPEAKER_00: And they're buying into the noise.
4:34
SPEAKER_02: Those investors that are that are looking at properties to buy right now, are they not deater or like are they not concerned?
4:43
SPEAKER_02: I mean, so right now the narrative, Mario, is this interest rates are high.
4:49
SPEAKER_02: Why would I buy?
4:51
SPEAKER_02: Um some people are gonna say we're in a real estate bubble, things are about to crash.
4:55
SPEAKER_02: And by the way, for my my response to that, they've been saying that for uh 36 months now.
5:00
SPEAKER_02: So for 36 months, I've been waiting for the bubble, right?
5:04
SPEAKER_02: And and I find myself still investing and and I should know what I'm doing.
5:08
SPEAKER_02: Um, a lot of people are gonna say, hey, values are still high.
5:12
SPEAKER_02: Like, does it make sense to buy?
5:14
SPEAKER_02: And you know, can you still make a profit margin off of fix and flips?
5:19
SPEAKER_02: Is that still happening?
5:20
SPEAKER_02: So those would be some of the concerns that I would that I that I that I've heard.
5:25
SPEAKER_02: I'm sure there's others that you've heard, but how is it that even with that with that narrative, with those headlines that that these investors, whether you're you're a first timer or you're a savvy person, and this is what you do for a living now, is fix and flip.
5:39
SPEAKER_02: How is it that they're they're not bothered by what everyone else is saying?
5:45
SPEAKER_00: They they have a clear vision and a focus of what they want to do, right?
5:48
SPEAKER_00: And they want um in the fix and flip scenario, it's a value add scenario, right?
5:53
SPEAKER_00: So they're um they're buying a property at a discount and they understand where the market is, and maybe the underwrites a little bit different where they're saying, hey, we think the after repair value, we when the property's fixed up is gonna be here, maybe they take that to a 5%, 10% cut just to make sure, just to be safe.
6:11
SPEAKER_00: And if the number's still pencil at that point in time, it's go, right?
6:15
SPEAKER_00: So they're confident in how what their price, you know, what they're buying the property at.
6:20
SPEAKER_00: So getting really good at buying properties and looking at and analyzing deals, and then also just understanding that like they believe in the whole real estate picture, right?
6:29
SPEAKER_00: And and long term.
6:30
SPEAKER_00: And do they have exit strategies, right?
6:33
SPEAKER_00: An exit strategy could be to sell, an exit strategy could be to refinance and go into you know some kind of longer term um mortgage, right, to to hold a property and sell at a different time, or actually just you know, recoup the rents on the property.
6:47
SPEAKER_00: Is there a value appointment with an ADU, right?
6:50
SPEAKER_00: Building additional rental income.
6:51
SPEAKER_00: So there's there's plans on exit strategies, right?
6:54
SPEAKER_00: So I think that is important.
6:56
SPEAKER_00: You know, what is your exit strategy, right?
6:57
SPEAKER_00: Are you looking to fix and flip the property and take the profit and roll it into the next?
7:01
SPEAKER_00: Or can you hold the property and refinance into long-term debt and and you know, wait for the the property to go up in value?
7:09
SPEAKER_02: You know, I'm glad you brought up exit uh the exit strategy.
7:12
SPEAKER_02: We um years ago, uh probably six years ago, we we wanted to simplify kind of the we wanted to have a simple thing to remember.
7:23
SPEAKER_02: And and we called it the uh six two one sage formula.
7:26
SPEAKER_02: And and and the sixth component was um six ways to come up with valuation for a property cap rate, gross rate multiplier, return on equity, cash on cash, and you know, so that kind of thing.
7:38
SPEAKER_02: Because I wanted to make it simpler for the for the person trying to learn on how to look at real estate.
7:46
SPEAKER_02: So that so that part made the six.
7:48
SPEAKER_02: The two was um, hey, are you buying for cash flow or appreciation?
7:54
SPEAKER_02: The one was what's your exit plan?
7:58
SPEAKER_02: And I and I had learned, I I've learned the hard way is like if we're looking at buying something, and if I'm gonna partner up, or even if I'm buying it by myself, the question is, what is my exit plan?
8:10
SPEAKER_02: Before I do anything, is what is my exit plan?
8:12
SPEAKER_01: Yeah.
8:14
SPEAKER_02: Um, because I realized like one time I bought a small little duplex and I was, you know, the market had dropped and I knew that was the time to get it, which reminds me of today's market.
8:24
SPEAKER_02: You know, the market in uh in certain parts of the market, it's it's down by 25%.
8:30
SPEAKER_02: Well, last time that it was down, I saw it, and as young as I was, I realized, man, I got to buy as much as possible.
8:36
SPEAKER_02: So back then I was like partnering up with people buying duplexes.
8:39
SPEAKER_02: So I bought a duplex with a friend, he got the loan, we put up the money, fixed it up, had tenants in it.
8:45
SPEAKER_02: It was great.
8:46
SPEAKER_02: Then three years into it, he wants to sell.
8:48
SPEAKER_02: I'm like, dude, we're just getting started.
8:50
SPEAKER_02: Like, sell now and do what?
8:52
SPEAKER_02: Pay our taxes?
8:54
SPEAKER_02: Because he didn't want to sell and like go bigger, which I would have been okay with.
8:56
SPEAKER_02: Okay.
8:57
SPEAKER_02: He wanted to sell, and then I it it freaking dawned on me.
9:00
SPEAKER_02: I'm like, I was not clear about my expectations.
9:04
SPEAKER_02: Like, I was excited to go buy something, and at the end of the day, it worked out fine.
9:08
SPEAKER_02: We did make some money and I was able to go buy something else, but I felt like we had not not gotten uh, I guess the full, you know, we didn't squeeze all you know, all the juice out of the deal.
9:20
SPEAKER_02: And we could have held on, and it was a fine property.
9:22
SPEAKER_02: And so to me, the exit, the exit strategy is is the where I start actually.
9:29
SPEAKER_02: I find a deal and I'm like, okay, what's Max's plan?
9:31
SPEAKER_02: Thinking about the end in mind.
9:32
SPEAKER_02: You have to like, hey man, am I gonna keep it for 10 years, seven years, 15 years, or is this um get in and get out as soon as soon as as soon as you can?
9:40
SPEAKER_02: Now, and when someone does a fix and flip, the the the experienced people, you're right.
9:46
SPEAKER_02: If they miss time it, and sometimes you don't know timing, you don't know what's gonna happen six months from now.
9:51
SPEAKER_02: And so something could happen, all of a sudden you can't sell it at the price you thought.
9:56
SPEAKER_02: So now you're stuck with it.
9:57
SPEAKER_02: So now you're but if if you knew, if I'm stuck with it, can I afford to keep it or can I refinance it?
10:02
SPEAKER_02: Yeah, and so that what you're saying is the people that you work with are well, hopefully most of them are thinking that way.
10:08
SPEAKER_02: Well, certainly the experienced ones, because the experienced ones will know we're not always gonna get a home run out of this, correct?
10:15
SPEAKER_00: Yeah, yeah, and on that note, um uh something new that I'm also seeing too, because of the you know, where the market is right now, I'll see people looking to do a lot of them looking to do quicker flips, right?
10:28
SPEAKER_00: Uh to have eyes on like, all right, it can I refine uh can I rehab the property in 45 to 60 days, a cosmetic rehab, get in and get out.
10:36
SPEAKER_00: Um it gives them a little bit more peace of mind of like, all right, so if I look at the the runway of three to four months now and I'm on the market, like I feel a little bit more comfortable versus maybe a larger project that's gonna roll me a year, 18 months.
10:50
SPEAKER_00: Um, so I see a little bit more of that uh due to the the the noise out there.
10:55
SPEAKER_00: So some people are choosing to do that when it's only a quick flip, right?
10:59
SPEAKER_00: And typically when you're just doing a cosmetic rehab and there's not like a large, large amount of value add uh through square footage and additional units, uh, I think that is prudent, right?
11:11
SPEAKER_00: To to have a little shorter runway of exposure, basically.
11:15
SPEAKER_02: Mario, I know you see some numbers, but like with the quick cosmetic fix and flip, more or less, what are people just so that our listeners like how much money are they trying to make?
11:27
SPEAKER_02: And I know it's different on every house, but like on average, is it like, hey man, if I make 50,000, I'm happy?
11:31
SPEAKER_02: Or dude, I have to make a hundred thousand or else I'm not gonna do this.
11:34
SPEAKER_00: Yeah.
11:34
SPEAKER_02: Like what's what's the like what do you see?
11:37
SPEAKER_00: Man, it varies so much because some people are scaling and they're okay with like 25,000, 30,000.
11:42
SPEAKER_00: Like I see it that razor thing.
11:44
SPEAKER_00: No, which is which is which is less, I see less of that, right?
11:47
SPEAKER_00: Because of where we're at, because there's not there's not a lot of room for error there, right?
11:51
SPEAKER_00: Uh then I have other guys that might really experienced guys, and they're you know, their goal is six figures.
11:56
SPEAKER_00: And what's interesting to me is I see them uh at the first time home buyer level, like purchasing properties on the cheap, cheap, and they're still able to, you know, net uh six figures, which is pretty wild, right?
12:07
SPEAKER_00: So that goes a lot to uh relationships, right?
12:10
SPEAKER_00: Identifying the deal.
12:12
SPEAKER_00: These are high high distress properties.
12:14
SPEAKER_00: Um, so there's you know, there's more to take on there.
12:18
SPEAKER_00: Um so to answer your question, it's across the board.
12:21
SPEAKER_00: Um, you know, from somebody looking that's fine with sub 30,000 on the on a flip versus 100,000, right?
12:28
SPEAKER_00: It's you know, so I don't know if that helps.
12:31
SPEAKER_02: Yeah, no, I get it.
12:32
SPEAKER_00: Well, I mean, I just want across the board.
12:33
SPEAKER_02: Well, you know, when we talk about fix and flips, and obviously we're in southern California, so to somebody, 30,000 might be a lot.
12:39
SPEAKER_02: To us, you and I are not gonna do a fix and flip for 30 grand.
12:42
SPEAKER_02: You could call us and we're like, no, we're not interested.
12:44
SPEAKER_00: Yeah, because it's more for the for me, like that type of project, that's more bandwidth, right?
12:49
SPEAKER_00: My my main way that I'm I generate revenue and and run my business is is loan origination, right?
12:54
SPEAKER_00: And yeah, gratefully, after 20 plus years of doing this, you know, I've scaled the business where there's you know, I have a lot of loans to write.
13:00
SPEAKER_00: Um, and that's you know, that's where my primary my focus is.
13:05
SPEAKER_00: And then alongside I'm building and collecting, you know, collecting real estate.
13:09
SPEAKER_02: No, so yeah, so you're doing what what what what what we were taught to do is is find a way to produce income, support the family, leave enough to save, accumulate that, and then now go invest it.
13:26
SPEAKER_02: And that's what you've been doing.
13:27
SPEAKER_02: Um two things.
13:30
SPEAKER_02: One, the you get to see, you know, it's it's interesting, Mario, like with what you do, you get to see how people finance deals and also how they find them.
13:41
SPEAKER_02: So I guess that that's two parts, you know.
13:44
SPEAKER_02: So you work with people uh who get a good deal.
13:47
SPEAKER_02: Do you ask them, hey, how'd you get this?
13:49
SPEAKER_02: And and and is there like a common theme, just so that like our listeners, like if someone's like wanting to do this, yeah, maybe they could learn something, okay?
13:56
SPEAKER_02: Because that's what I want.
13:57
SPEAKER_02: And then the other part is walk us through how an investor buys a fix and flip and and how they utilize, correct?
14:06
SPEAKER_02: Correct.
14:06
SPEAKER_02: And then how they utilize your type of financing because your type of financing is not like going to a traditional bank.
14:12
SPEAKER_00: Correct.
14:12
SPEAKER_02: This is this is different.
14:13
SPEAKER_02: It's more, we'll call it private, private.
14:16
SPEAKER_02: It comes that it it what's the catch?
14:18
SPEAKER_02: It's gonna be more expensive because it's riskier, but the bank, your regular bank is not gonna do this kind of loan on a distressed property.
14:25
SPEAKER_02: You're gonna need, you're gonna need in some cases, an investor may want to borrow the construction cost from you as well.
14:33
SPEAKER_02: So they don't have to pull it out of their own wallet or bank account.
14:36
SPEAKER_02: So, so first, so so let's answer the first question is the investors that you work with, how are they finding their deals?
14:43
SPEAKER_00: All right, source and deals.
14:44
SPEAKER_00: So uh there's multiple ways that uh I see deals being found.
14:48
SPEAKER_00: Um, let's start with one common one is through a wholesaler, right?
14:52
SPEAKER_00: So wholesale companies will be direct to the set the home seller, and they get a property that's basically off market for a discount because the seller, for one of many reasons, wants a quick sale, right?
15:06
SPEAKER_00: Um, so the wholesaler get it get a deal locked up in contract for a discount and then sell it to the investor that's gonna actually improve the property and take it to fruition.
15:16
SPEAKER_00: So wholesalers have a whole team, they're calling out, they're marketing, they're spending thousands and thousands of dollars to get these opportunities and they bring them to investors, right?
15:25
SPEAKER_00: Uh so that's a that's a main one.
15:27
SPEAKER_00: Uh others are gonna be through realtor relationships, right?
15:30
SPEAKER_00: Uh realtors that are pounding the the payment and they get access to properties to that people want to sell, and uh the investor has a relationship with the realtors that are in contact with the sellers.
15:41
SPEAKER_00: Uh so that's another big one.
15:43
SPEAKER_00: Uh the probate, right?
15:45
SPEAKER_00: Attorneys, uh, that's uh an opportunity as well there.
15:49
SPEAKER_00: Um, and I mean those are kind of some some main ones, and then also sleepers that have been on the market for a long time, right?
15:57
SPEAKER_00: And maybe they're on the market and they haven't sold, so that obviously there's a an issue with the price that they're trying to sell it and timing changes, right?
16:05
SPEAKER_00: Now it's 90 days, 120 days on the market, and somebody comes in there and they're just ready to get get rid of it, right?
16:12
SPEAKER_00: So um I think that's you know some examples of a full circle where there's opportunity for we investors again.
16:19
SPEAKER_02: We um we uh Jack Patel, another broker here in the office, and I bought uh laundromat.
16:28
SPEAKER_01: Yep.
16:29
SPEAKER_02: And that was one that was on the market, it fell out of escrow, and we were able to get it at a very favorable price.
16:34
SPEAKER_02: And so people are like, How do you know about it?
16:36
SPEAKER_02: Like it's this like black magic.
16:39
SPEAKER_02: Right, it was on the market, anyone could have seen it, anyone could have gone and chased it.
16:43
SPEAKER_02: But to your point, it was it was a timing thing.
16:45
SPEAKER_02: Yeah, it was in escrow for a long time, it fell out of escrow and it just started getting stale, and then all of a sudden the owners' expectations of like, well, maybe it's not worth what we thought it was worth.
16:55
SPEAKER_02: And then and so, yeah, so some deals are there.
16:58
SPEAKER_02: Um, okay, so we talked about wholesaling, which um we had uh Matthew Miller on the podcast, I guess twice now, uh, to talk about wholesaling.
17:07
SPEAKER_02: And so check their company out.
17:08
SPEAKER_02: But there's a they're out there, and believe me, that they want to meet you.
17:12
SPEAKER_02: Like if you're an investor, they want they want they want to be sending you deals.
17:16
SPEAKER_02: Sure.
17:16
SPEAKER_02: And um, and and that's what I've heard too, is that the that you know, some people want to find these deals on their own, and I could tell you it's a full-time job.
17:25
SPEAKER_02: Like once you realize what a professional wholesaling company is doing, it is next level what they're trying to uh to like really dig these deals up.
17:35
SPEAKER_02: So they're doing the work, they're gonna get a piece of the pie, you get the other piece, okay?
17:38
SPEAKER_02: Everyone who has, okay.
17:40
SPEAKER_02: Uh realtor relationships, yeah.
17:42
SPEAKER_02: Um, that one, you know, when you talk about relationships just in general, you know, it's uh it's um, you know, we always talk about compounding interest.
17:52
SPEAKER_02: Uh, but one of the guys that I follow, uh, Naval, um, he he's uh, you know, so he's a thinker, but what he says is like people always talk about compounding uh interest, but they don't talk about compounding relationships.
18:04
SPEAKER_02: And so you said you've been in he, you know, you've been in real estate for over 20 years, I've been in real estate for over 20 years.
18:10
SPEAKER_02: And so now it's easier for us to do deals and for a couple of reasons.
18:14
SPEAKER_02: One, um people get used to you being in the industry, you build more relationships, and then someone else could someone could call and say, Hey, have you worked with Mario?
18:24
SPEAKER_02: Yeah, I've worked with him 10 years ago, 15 years ago, yeah.
18:26
SPEAKER_02: I've been working with him this long, he works with so and so, and all of a sudden that gives you the okay to versus like someone who just comes out of the blue and quits a different industry and is trying to get in, it's harder for them.
18:37
SPEAKER_02: Yeah, and so um relationships, yeah, of course, with realtors, but just in general, if I think if you're if you're in an industry for kind of uh long term, you you're gonna win.
18:51
SPEAKER_02: And and some of that is just being in it longer.
18:54
SPEAKER_02: And if you're in an industry and you're not a good business person or people don't trust you, then that's gonna cost you.
19:01
SPEAKER_01: Right.
19:02
SPEAKER_02: But if you're doing good business and then it and then through years, people are used to you doing good business and people working with you, that's gonna benefit you.
19:09
SPEAKER_02: And so that's kind of like the realtor relationship thing is that um there's a lot of good realtors out there, and and a lot of them sometimes will see deals before they ever hit.
19:20
SPEAKER_02: And realtors, uh, and shame on them, they they're they the majority of them, and it's and listen, and I'm one of them too, but 80% of them will think of the commission first versus buying it themselves.
19:31
SPEAKER_02: And so they will easily settle for a$20,000 commission versus getting$150,000 on this flip that they're gonna give you.
19:40
SPEAKER_02: Right.
19:40
SPEAKER_02: Which, but you know, listen, I just realtors think commission and and um, you know, I've always been on the other end where I more think of the investment side.
19:48
SPEAKER_02: Well, how much more can we do?
19:51
SPEAKER_02: Um, and obviously probate having relationship with attorneys and seeing what's out there and then just watching the MLS, uh, things that fall out of escrow.
19:59
SPEAKER_02: Anytime someone does a price reduction, if something's been sitting on the market a long time, maybe at first when you gave them a lowball offer, they hung up on you, but uh you fast forward through three, four months, they might be calling you back.
20:10
SPEAKER_02: Hey, are you still interested?
20:12
SPEAKER_00: Yeah, persistence, yes, uh where's the resistance?
20:14
SPEAKER_02: Okay, so that's so that's okay, so those are some ways that people could um could definitely um try to find some deals.
20:21
SPEAKER_02: Um, walk us through, Mario, a real life case scenario.
20:26
SPEAKER_02: Okay.
20:27
SPEAKER_02: Uh give us the purchase price, um and just try to simplify it.
20:33
SPEAKER_02: Like, this is how much money they put in, and this is how much money they borrowed from us, just so someone could say, Man, I have that much money.
20:40
SPEAKER_02: Like I I could maybe do this.
20:42
SPEAKER_02: I think a lot of times, I a lot of times, Mario is um if people knew the amount of money that it took to do something, I think that they would be more willing to do it.
20:54
SPEAKER_02: I just think sometimes they don't know what they don't know and they're afraid.
20:59
SPEAKER_02: And that's why, you know, through through our YouTube channel, you know, through education, through through what we're trying to provide, we're teaching people like, man, if we could just help you do one deal, you're gonna be uncontrollable because then you're gonna want to do more deals because now you know how to do them.
21:14
SPEAKER_02: Like, like in your scenario, Mark, because you get to see and talk to investors every single day, and you're like, you see how they're thinking, you see how they're financing, you're like, dude, I could do that.
21:25
SPEAKER_00: Right.
21:25
SPEAKER_02: And all of a sudden, then you're like, I'm gonna go do it too.
21:28
SPEAKER_00: Correct.
21:29
SPEAKER_02: And so um, let that be a note for anyone who listens to us is that maybe some of you know because you're in the industry, but some of you don't know.
21:38
SPEAKER_02: And so we're gonna try to simplify it today.
21:40
SPEAKER_02: Again, this is this is out of the box financing, fix and flip type person um situations.
21:46
SPEAKER_02: Um, Mario does do regular loans.
21:48
SPEAKER_02: And so please feel free to call him just on like, hey, you know, you're a W2 employee, great salary, and you're looking to buy a house, you like um, you like what you're hearing from Mario, feel free to reach out to him.
21:58
SPEAKER_02: But if you're looking at fix and flip, Mario could be a great resource because not only has he personally done them, but a lot of his clients, that's that's who he deals with.
22:06
SPEAKER_02: So he's gonna be able to point things out, even if you don't know yet.
22:10
SPEAKER_02: You know, sometimes you don't know what you don't know, and so he'll be able to help you.
22:13
SPEAKER_02: So Mario, give us a give us a scenario.
22:16
SPEAKER_02: Where's the property located and how did that deal go down?
22:18
SPEAKER_00: Yeah, great.
22:19
SPEAKER_00: All right.
22:20
SPEAKER_00: So this uh I'm gonna go over the D the deal details, like purchase price, down payment, um, what kind of budget we actually lent them to for the rehab.
22:30
SPEAKER_00: And then after we'll uh we'll go over like who the actual borrower is, like who is the buyer, like how they do that.
22:35
SPEAKER_02: Perfect.
22:36
SPEAKER_02: Um, for anyone listening to this, we're gonna go through some numbers.
22:39
SPEAKER_02: Uh, if it's easier on you to see it visually, I'm gonna say pause the podcast, go over to the YouTube channel, find this specific one, and uh so that you could follow along with the numbers.
22:51
SPEAKER_00: Yep.
22:52
SPEAKER_00: Cool.
22:52
SPEAKER_00: Let's do it.
22:53
SPEAKER_00: All right.
22:53
SPEAKER_00: So this is a purchase price is$385,000.
22:57
SPEAKER_00: Uh this is in Corona, California.
23:00
SPEAKER_00: And uh the So this is a house.
23:02
SPEAKER_00: This is a house, a single family residence.
23:04
SPEAKER_02: So, so so one of your investors calls you and says, Mario, I got a good deal on a house.
23:11
SPEAKER_00: Nope.
23:11
SPEAKER_00: Yes.
23:12
SPEAKER_02: And what do you ask them?
23:14
SPEAKER_00: Right.
23:14
SPEAKER_00: So then I I I run through it's like I run through uh my I have a scenario sheet every time I go to it because there's you can imagine there's so many different scenarios to go out there.
23:23
SPEAKER_00: So in order to like understand and digest the conversation, I ask the deal points, I get through the deal points, have a conversation, understand their goals, and then I can analyze a deal and say, like, okay, yeah, this is gonna work, and this is gonna work at this kind of leverage, meaning like this loan amount, you can borrow this amount, this is what your payment's gonna be.
23:41
SPEAKER_00: Um, do you think it's believable that the after repair value is gonna be here?
23:45
SPEAKER_00: And then we research and I, you know, we dig in on some comps.
23:48
SPEAKER_00: And then we also, whoever is involved, if you have a realtor involved, how do they firm up the value on what the property is gonna sell for when it's fixed up?
23:56
SPEAKER_00: So this one in particular was a house at 385,000.
23:59
SPEAKER_00: Uh their down payment was only 15%.
24:02
SPEAKER_00: Uh so that was$67,500.
24:05
SPEAKER_02: Okay, so okay, so it sounds I okay, if if you're not in Southern California, three$385,000 may sound like a lot.
24:14
SPEAKER_02: To us, uh in cheap.
24:17
SPEAKER_02: It's it's I I mean, I would say that probably the in uh LA County or Long Beach, the median home price has to be like$775,000.
24:27
SPEAKER_02: So$350 uh$385,000 corona sounds awfully affordable.
24:32
SPEAKER_02: Okay.
24:32
SPEAKER_02: And then$67,000 for a down payment.
24:37
SPEAKER_02: That doesn't seem crazy.
24:39
SPEAKER_02: Okay.
24:39
SPEAKER_02: All right.
24:39
SPEAKER_02: So then so okay, so right now, if anyone's listening, if you know, if you had sixty-seven thousand dollars, I I I think someone might be asking, well, but then that's all I have.
24:50
SPEAKER_02: Like, where do I get my rehab money?
24:52
SPEAKER_00: Along with this loan, they were rehabbing and they had a cleanup small cosmetic rehab budget, which was sixty-five thousand dollars.
25:00
SPEAKER_00: So we actually they have access to all that sixty-five thousand.
25:03
SPEAKER_00: So in addition to um the loan to buy the property, we also are giving them a sixty-five thousand dollar rehab budget.
25:11
SPEAKER_00: So they're able to draw on that as they improve the property, right?
25:14
SPEAKER_00: So they front load it, they do the demo for a line item.
25:17
SPEAKER_00: Let's say they're demoing for$5,000, they're putting a new roof on for$10,000.
25:22
SPEAKER_00: They want to draw, they can draw on that$15,000 and recoup the funds, right?
25:26
SPEAKER_00: And the draw process is anywhere from five to seven days.
25:28
SPEAKER_02: So you guys are going to give them um 85% of the the purchase value for the house.
25:34
SPEAKER_02: And then together, you you and them come up with a rehab budget.
25:41
SPEAKER_02: Did they want more?
25:42
SPEAKER_02: Or did you guys realize, like, hey, this is all they're asking for?
25:45
SPEAKER_00: They their expectation initially, they didn't know they had access to a rehab budget.
25:49
SPEAKER_00: They're like, I could, I'm gonna, you know, fund it myself.
25:52
SPEAKER_00: I in in for the loan purposes, in order to have the higher leverage, the lower down payment, uh, we need to have a rehab budget because we need to know funds are available to rehab the property, right?
26:03
SPEAKER_02: Because you don't want them to run out of money.
26:05
SPEAKER_00: Exactly.
26:06
SPEAKER_02: Okay.
26:06
SPEAKER_00: Yep, exactly.
26:07
SPEAKER_00: We don't want that.
26:08
SPEAKER_00: We need we have comfort in and understanding that there's funds to rehab the property to improve it and to increase the value.
26:14
SPEAKER_00: So the after repair value on that came in at 625, and we end up our total loan amount was 382,500.
26:24
SPEAKER_00: And I just like to stop there for when I when I give a total loan amount.
26:28
SPEAKER_00: So that's with your money to buy the property and then also money to fix it up.
26:32
SPEAKER_00: Their total loan amount is 382,500 and they bought the property for 385,000.
26:38
SPEAKER_00: That is leverage, that's amazing leverage, right?
26:41
SPEAKER_00: And they're they bought a property at 385 and they have the opportunity to make this property worth 625,000 home run.
26:49
SPEAKER_02: So the the 625,000 was the number that they had projected with their real estate agent, and then even you, Mario, I mean, you're you you you're an investor, you're not just the lender.
27:01
SPEAKER_02: And so when you looked at this, you're like, you also thought that the 625,000 was achievable?
27:08
SPEAKER_00: Very achievable, yeah.
27:09
SPEAKER_00: Based off the comms.
27:10
SPEAKER_02: Has it been sold?
27:12
SPEAKER_00: They're in the middle of the rehab right now.
27:14
SPEAKER_00: Okay, so this is so this is a recent, yeah.
27:16
SPEAKER_02: So this is a recent loan.
27:17
SPEAKER_00: 30, 40 days ago.
27:18
SPEAKER_02: Okay, so their their total investment into the property right now, less cut fees and all these other additional little small stuff, is sixty-seven thousand dollars.
27:30
SPEAKER_00: That was yeah, the down payment.
27:31
SPEAKER_02: And and they're so this one here would be like if someone called me with this deal, then I'm interested.
27:36
SPEAKER_02: Both Mario and I would say we're interested in partnering up on things that make a lot of money.
27:42
SPEAKER_00: And how this deal came to me, um, a loan officer, somebody else was trying to was working on the deal.
27:47
SPEAKER_00: Yeah, and initially what they were they were trying to do conventional financing, right, on this property.
27:52
SPEAKER_00: And with because of there was a lack of knowledge or access to to programs and pricing, um, they were basically trying to, you know, had the wrong program for the wrong house, right?
28:03
SPEAKER_00: A couple of reasons.
28:04
SPEAKER_00: One, the condition of the property wasn't financiable, and then the the qualifications for the bar were were too tight as well, right?
28:10
SPEAKER_00: So it was a wrong, wrong type of loan for it.
28:14
SPEAKER_00: The deal was falling out, and they brought it to me, and I said, okay, if we look at it this way, if we if is there a value add component, yes, there's there's a lot of value add component, then let's let's look at it this way on a fix and flip financing loan.
28:26
SPEAKER_00: So that's how it came across my desk is you know, I work with a lot with other loan officers, I work with real estate agents, I work direct with investors.
28:35
SPEAKER_00: So the relationship piece for me is paramount.
28:37
SPEAKER_00: Like my business has been built on relationships and working by referral that you mentioned earlier.
28:42
SPEAKER_00: And uh, you know, I love it.
28:43
SPEAKER_00: I love that opportunity to, you know, be exposed to more and and partner up with people.
28:48
SPEAKER_02: Yeah, no, this is a great example.
28:50
SPEAKER_02: Um, on, you know, and obviously this just is just one, and obviously you do things that are probably smaller and much, much larger.
28:59
SPEAKER_02: Is there is there another example you want to walk us through?
29:02
SPEAKER_00: So I wanted to go.
29:03
SPEAKER_00: So in the payment on that, by the way, was$27.75 a month.
29:08
SPEAKER_00: Uh so the the holding cost was was pretty reasonable on that as well.
29:11
SPEAKER_02: So let's just do this because I don't want someone to say, hey Juan, you specifically glossed over what the interest rate was.
29:17
SPEAKER_02: And I don't know what you're able to share or not share.
29:19
SPEAKER_02: But this guy, folks, this is higher than what it would be if you go to the bank.
29:23
SPEAKER_02: But don't forget, the bank wasn't gonna finance it anyways.
29:26
SPEAKER_02: And so you could say, Well, hey, that's too much.
29:28
SPEAKER_02: I'm like, yeah, but where were you gonna do do the loan anyways?
29:31
SPEAKER_02: And and then also don't forget there's lots of money that's gonna be made here by the by the investor.
29:35
SPEAKER_00: Yeah.
29:36
SPEAKER_00: You know, quick thing just to do on the fly, like if we compare it, like even if it was financeable, um, let's see.
29:43
SPEAKER_00: So right now we have 60 basically the down payment is 607,500.
29:48
SPEAKER_00: Uh, plus you they're able to pull 65,000 to rehab the property.
29:52
SPEAKER_00: So let's just go with 67,500.
29:54
SPEAKER_00: If you were to do this with conventional financing, if that was an opportunity on an investment property, you typically need 20% down, plus you're gonna be funding uh the rehab budget.
30:04
SPEAKER_00: So three eight, if I do real quick here, 385 times 0.2.
30:09
SPEAKER_00: So that's$77,000 plus your rehab budget of$65,000.
30:13
SPEAKER_00: So you're looking at$142,000 to do that same exact project, right?
30:18
SPEAKER_00: Versus$67,500.
30:21
SPEAKER_00: So that's the difference in, you know, especially if it's a shorter period of time where you're gonna, so you're gonna be paying higher a higher interest rate.
30:27
SPEAKER_00: So traditional financing on an investment property, let's just call it somewhere around 7%.
30:32
SPEAKER_00: Uh private money financing uh is anywhere from I would call it$899 to probably um low tens, right?
30:39
SPEAKER_00: Uh on this type of fix and flip financing.
30:42
SPEAKER_00: So that there is a premium that you're paying, but the leverage is is superior, right?
30:46
SPEAKER_00: And especially if there's an exit strategy, like what is your plan?
30:49
SPEAKER_00: Are you selling this property and there's no prepayment penalty on these types of loans?
30:53
SPEAKER_00: Uh, are you selling these properties on, you know, the plan is to sell on the quick, then you're not holding that for very long.
30:59
SPEAKER_00: Number one.
31:00
SPEAKER_00: Uh, number two, um, it is on there, like just the difference for the down payment piece, right?
31:05
SPEAKER_00: It's super powerful.
31:07
SPEAKER_02: Okay, so so what we're comparing right now is um, hey, you could buy this with uh$67,000, or if you went the traditional route, if it was even possible, but in this case it wasn't, you would need$142,000 down.
31:22
SPEAKER_02: So there's your answer.
31:23
SPEAKER_02: If you have the money, then maybe you decide to do that.
31:26
SPEAKER_02: But I'll tell you this working with investors for over 20 years, um, investors will always try to put the least amount possible, the minimum.
31:35
SPEAKER_02: They don't want to do anymore.
31:36
SPEAKER_02: In some cases, they will, if it's the right trophy property and they're gonna live in it, and it's it and there's other motivations behind it.
31:43
SPEAKER_02: But most times, sure, the decision making for the investor is what's the minimum amount that I could put down.
31:49
SPEAKER_02: And and and if there, and if there's two options, they want the lowest option.
31:53
SPEAKER_01: Yep.
31:54
SPEAKER_02: And so in this case, that rationale works.
31:57
SPEAKER_02: Uh, what's the catch?
31:58
SPEAKER_02: The catch is that the interest rate will be higher.
32:01
SPEAKER_02: Um, but what you're saying is like, hey, there's not a prepayment amount.
32:04
SPEAKER_02: So if they're able to get in within, say, four, six months, so you got four, six months of payments, and then there's and then you're able to to sell it and then get get out of that.
32:15
SPEAKER_02: But but the way that investors would would would look at this is kind of the time value of money is um, how much money do you need up front?
32:23
SPEAKER_02: How long do you need it for?
32:24
SPEAKER_02: When do I get it back?
32:26
SPEAKER_02: And that is very important.
32:28
SPEAKER_02: And if you need more money, then in some cases you might want a bigger return.
32:32
SPEAKER_02: Um, but in most cases, what you want is as little money as possible for the short period of time with the maximum profit margins would be like the best case scenario.
32:40
SPEAKER_02: And and I think with this case, kind of based on where uh they're expecting the value to go, they're gonna be in a good, um, really good situation there.
32:49
SPEAKER_02: Uh, what's what's exact the second example?
32:52
SPEAKER_00: So I just wanted to go in like who who that borrower was.
32:54
SPEAKER_00: Like this is this guy bought 10 properties.
32:57
SPEAKER_00: This was actually this investor's first investment property, right?
33:00
SPEAKER_00: Uh they did and he's gonna be hooked.
33:02
SPEAKER_00: I can walk into something like that.
33:04
SPEAKER_00: Yeah, it was a a good one.
33:06
SPEAKER_00: They actually found it was a property in the neighborhood, you know, interesting enough.
33:09
SPEAKER_00: So it's like there's opportunities everywhere, right?
33:12
SPEAKER_00: So they they weren't like a traditional investor that got a deal from they they came across a deal probably through a relationship, right, on the property that was in their actual neighborhood.
33:21
SPEAKER_02: How were they able?
33:23
SPEAKER_02: Um, I know that when when someone comes to you, you you as a private lender, or probably the actual private lender wants them to have experience.
33:34
SPEAKER_02: How do you guys get around that in this specific case?
33:37
SPEAKER_02: I mean, i if if if this was maybe the first time they did it, like how do you guys get around that?
33:41
SPEAKER_00: Yeah, because a lot of um private money companies, it's trickier to do finance people on their first one because it's it's riskier, right?
33:48
SPEAKER_00: If they don't have a tracker career experience, that's a big thing that we we look at.
33:52
SPEAKER_00: But I have a program that um access to a program that that allows that.
33:55
SPEAKER_00: And they look at other, I mean, they look at all characters.
33:58
SPEAKER_00: I'll go through here.
33:59
SPEAKER_00: So this person's um credit score was 710, which is good.
34:03
SPEAKER_00: Uh the program actually goes down to 650, right?
34:06
SPEAKER_00: There's a lot of uh you know there's a lot more options if you're 650 and above.
34:10
SPEAKER_00: This person uh was actually a 710 credit score.
34:13
SPEAKER_00: Uh so that was good.
34:14
SPEAKER_00: They were a U.S.
34:15
SPEAKER_00: citizen.
34:15
SPEAKER_00: I have financed uh multiple times with people that are not U.S.
34:18
SPEAKER_00: citizens, uh, so they have a permanent resident card, ITIN numbers, you know, all sorts of various items that you can still get financing for and similar kind of leverage.
34:28
SPEAKER_00: Um, they didn't have to be self-employed.
34:30
SPEAKER_00: This this uh individual was a wage earner, and um they actually pulled cash out from a home equity line of credit on their primary residence, right?
34:38
SPEAKER_00: So they bought real estate years ago, uh, the property went up in value.
34:42
SPEAKER_00: They decided that I want to tap into that equity, right?
34:45
SPEAKER_00: I want to use that equity to create more wealth, right?
34:48
SPEAKER_00: To to buy another investment or an investment property.
34:51
SPEAKER_00: So that's how they were able to get the down payment together.
34:54
SPEAKER_00: Um so yeah, they were a home homeowner, they were a first-time investor, uh, and they were not a general contractor.
35:00
SPEAKER_00: So okay.
35:01
SPEAKER_02: So it is possible.
35:02
SPEAKER_02: There's there's programs out there for the first person who hasn't done it.
35:04
SPEAKER_02: Now, now this person did own a house and did have some level of equity.
35:08
SPEAKER_02: So um for someone who doesn't, but you come across a deal, you there's there's people out there.
35:16
SPEAKER_02: I mean, I tell people probably partner, I would say partner with someone that you know like and trust at first.
35:22
SPEAKER_02: Yep.
35:23
SPEAKER_02: Uh family, friend, someone that, you know, someone that you already know, not some random person.
35:29
SPEAKER_02: It's probably not the best case, I think.
35:31
SPEAKER_02: But even if you say, I don't have the$67,000, but I have the deal.
35:37
SPEAKER_02: Believe me, if the deal looks like this, where there's money on the table and and um it's more of a cosmetic rehab, you could find someone that that that says, I'll put up the money, and then you know, you come up with whatever's fair and what duties are out there for the people.
35:53
SPEAKER_02: But um it's it's you know, I and I've said this before, but you know, 30 or 50 percent of uh of of a deal is better than 100 of nothing.
36:06
SPEAKER_02: And if you and if you're waiting to do it all by yourself, then you'll be you might be waiting a long time.
36:11
SPEAKER_00: Yeah, my a lot of my real estate that I own is is with partners and uh I enjoy it because having a partner along it allows you, I think it allows you to do more and go further, right?
36:20
SPEAKER_00: Um, you like you said, you have to know, like, and trust these and these individuals, right?
36:24
SPEAKER_00: And there has to be that connection there, right?
36:26
SPEAKER_00: You gotta do your due diligence on that front.
36:28
SPEAKER_00: But once you're past that point, man, to have partners, it's powerful, right?
36:32
SPEAKER_00: Because you guys learn off each other and you don't have to carry the weight all by yourself, right?
36:35
SPEAKER_00: Because uh owning real estate, it's it's not easy, but it's not like not doable, right?
36:41
SPEAKER_00: But if you have a partner to do it to help you carry it together and and roll it, you know, keep it moving forward, it's you know, then you get to the other side and a lot of good things happen.
36:49
SPEAKER_02: No, that's awesome.
36:50
SPEAKER_02: And I agree, and I agree.
36:51
SPEAKER_02: And then stuff that I own as well.
36:52
SPEAKER_02: I also have partners because then you don't have to put up all the money yourself, and someone hopefully they they bring experience to the table that they're able to do some of the work when you can't.
37:01
SPEAKER_02: So it's like, you know.
37:03
SPEAKER_02: Yep.
37:04
SPEAKER_02: So that's great.
37:05
SPEAKER_02: Um, you want to go over to the second property?
37:07
SPEAKER_00: Uh it depends on, I mean, how you your time then yeah, let's go.
37:10
SPEAKER_00: Okay, cool.
37:11
SPEAKER_00: So the next one was uh uh debt service coverage ratio loan.
37:15
SPEAKER_02: Yes, okay.
37:16
SPEAKER_02: So these are so these are DSCR loans, they're well, I'll let you explain.
37:21
SPEAKER_02: Okay, sure.
37:22
SPEAKER_02: They're very popular.
37:23
SPEAKER_00: Yep.
37:23
SPEAKER_02: Why are they popular now?
37:25
SPEAKER_00: Oh man, it's it's a phenomenal loan because traditionally to to get financing on a 30-year fix, you need to have tax returns and W-2s and pay steps and all that income needs to line up.
37:37
SPEAKER_00: And as property values have risen, interest rates have risen, it's been harder and harder to qualify, right?
37:43
SPEAKER_00: People talk about home affordability, right?
37:45
SPEAKER_00: So the beauty of a debt service coverage ratio loan is you still get a 30-year fix, uh, but you do not have to have uh tax returns and W-2s to qualify.
37:55
SPEAKER_00: The property itself will qualify based off their income, right?
37:59
SPEAKER_00: And uh interesting enough, uh traditional loans, Fannie Mae, Freddie Mac, and versus these debt service coverage ratio loans, which were we'll call it alternative financing, the interest rates are trading very, very close right now, which is which is you know not nor you know not normal in uh how how these loans have priced uh in the past.
38:23
SPEAKER_00: But they've still been great loans, and I've seen investors take advantage of them for years, right?
38:28
SPEAKER_00: And um, yeah, so in this instance, this property was appraised for$660, and um they're pulling cash out on the property, and they did a 306 loan amount, and um the rent on the property was four thousand six hundred.
38:44
SPEAKER_02: Mario, so just to be clear, so they're so they already own this property.
38:47
SPEAKER_00: Correct.
38:48
SPEAKER_02: They own the property as a refinance, and they want to pull money out for what reason?
38:52
SPEAKER_00: Purchase more real estate.
38:53
SPEAKER_02: Okay, so they're saying, hey, there's some good deals out there.
38:57
SPEAKER_02: I own this property, it's gone up in value, there's money in it, and I'm trying to access that money.
39:04
SPEAKER_02: Yep.
39:04
SPEAKER_02: And so then they came to you.
39:06
SPEAKER_02: Okay.
39:07
SPEAKER_00: Yep.
39:08
SPEAKER_00: So this one that was a loan amount of$306,000.
39:11
SPEAKER_00: The rents on the property was$4,600.
39:14
SPEAKER_00: Uh the new mortgage payment was$3,827.
39:18
SPEAKER_00: So you got rents of$4,600, you got the mortgage payment of$38.27.
39:23
SPEAKER_00: That's including principal, interest, taxes, and insurance.
39:27
SPEAKER_00: So the whole game.
39:28
SPEAKER_00: Yeah, everything.
39:29
SPEAKER_00: And another, I think, awesome part of the debt service coverage ratio loans is you can do an interest-only um piece of it as well.
39:38
SPEAKER_00: So it the interest only period is typically 10 years, and then uh it's a 30-year fixed loan.
39:43
SPEAKER_00: You have the first 10 years are interest only, right?
39:46
SPEAKER_00: So, what does that do?
39:47
SPEAKER_00: So it becomes one, is it just an option?
39:50
SPEAKER_00: And then two, it allows you to get the payment low enough to, if you need that, to lower the payment to have the right debt coverage, right?
39:57
SPEAKER_00: To lower the payment so the the rent is higher than the actual monthly payment.
40:01
SPEAKER_00: So it's a tool for that as well.
40:03
SPEAKER_00: Um, this one, the debt service coverage ratio was 1.2, which was um it's really good.
40:10
SPEAKER_00: That's a really good uh debt coverage.
40:12
SPEAKER_00: Now, these types of loans, you can actually go under one.
40:14
SPEAKER_00: Uh some, you know, you get decent pricing if it's a 0.75 ratio.
40:20
SPEAKER_00: Um, so for example, if you're getting$750 in rent uh and the mortgage payment was a thousand, like you could still get a deal, right?
40:27
SPEAKER_00: You can still get a 30-year fixed loan.
40:29
SPEAKER_00: Um, it's not priced as as good of a as if it was over one.
40:33
SPEAKER_00: Uh, and then they also have with lower um with more equity in the property, you can even go lower than that, right?
40:39
SPEAKER_02: Are these investor loans only?
40:41
SPEAKER_00: Yes.
40:41
SPEAKER_02: Yeah.
40:42
SPEAKER_00: 100%.
40:43
SPEAKER_00: Okay.
40:43
SPEAKER_00: Because that's a business purpose loan, and that's why they're you're able to get a loan without having uh traditional income documentation because it's an investment property business purpose.
40:51
SPEAKER_00: That's why that's how it's compliant.
40:55
SPEAKER_02: And how do you see people use it?
40:57
SPEAKER_02: Are they using like in this case you gave us an example of like, hey, they're gonna use this type of loan to be able to do a refi, so that's great.
41:04
SPEAKER_02: What what what are the most popular ways?
41:06
SPEAKER_02: Are are they doing them to buy apartment buildings, single-family homes?
41:10
SPEAKER_02: Um, I guess it'd be an investment single family home, but like, what are you seeing?
41:14
SPEAKER_02: Like, I'm just I I want people to take away, like, okay, experienced investors are using the DSCR loan to buy this type of property.
41:21
SPEAKER_00: Yep.
41:22
SPEAKER_00: You just think about it, because it's an income, it's a loan based off the income of the property.
41:27
SPEAKER_00: Uh, you know, uh you have a lot more luck with units, right?
41:31
SPEAKER_00: So this one is actually a duplex um on there, and the the loan amount was 495 and the praised value was 660.
41:38
SPEAKER_00: But I see the debt service coverage ratio working better when there's opportunity for more income.
41:42
SPEAKER_00: So when you have more units, the there's typically you know more income on it.
41:46
SPEAKER_00: So I see it on income on units.
41:49
SPEAKER_00: I really love the combo here.
41:50
SPEAKER_00: Let me lay it out.
41:52
SPEAKER_00: You high leverage in with the fix and flip financing, you fix up a property, you add an ADU, or maybe it's already already a duplex or a triplex or a four unit.
42:02
SPEAKER_00: And these you know, you can do five plus on these as as well.
42:05
SPEAKER_00: Um, and then you take out once the equity and the value is there, and then you do a takeout loan into a debt service coverage ratio loan.
42:12
SPEAKER_00: I love that idea because you're leveraging in with 15% down.
42:16
SPEAKER_00: Now you're refinancing in the property because you have improved it, it has 25% equity, and now you're doing a refinance based off of that, right?
42:24
SPEAKER_00: And uh, you know, that's an exit strategy when you're looking to hold a debt service coverage ratio loan is a great uh avenue and a segue into holding the real estate um for investors.
42:34
SPEAKER_02: And then taking out your money, your initial money on the initial fixed float.
42:38
SPEAKER_00: Yeah, if you need to, but also remember if you're doing a fix and float financing, you're leveraging in pretty good already, right?
42:43
SPEAKER_00: When you know that other scenario we talked about, that was you know 160,000 or whatever it was exactly versus 67,000.
42:50
SPEAKER_00: Like you're already kind of leveraging in into that on the buy, and then you're refinancing at that point, you're refinancing typically what they call a rate and term refinance, and now you have all the equity and you get better terms, right?
43:01
SPEAKER_02: For your for your you know, so so this example is step one, step two.
43:07
SPEAKER_02: So the step one would be doing the the fix and flip financing that you talked to us on the very first example.
43:13
SPEAKER_02: And so this could be like the backup plan.
43:15
SPEAKER_02: Hey, the home doesn't sell, or maybe it it doesn't hit the numbers, or or after you finished it, you guys decide this is beautiful, and you know, we're gonna save this for our kids once they're old enough.
43:24
SPEAKER_02: In the meantime, we're gonna put a tenant in there.
43:26
SPEAKER_02: Yep.
43:27
SPEAKER_02: And so they go from a fix and flip loan to a DSCR loan, lowers the interest rate.
43:32
SPEAKER_02: Now they could keep it, uh, and then decide what to do with it next.
43:35
SPEAKER_02: Yep.
43:36
SPEAKER_02: Okay.
43:36
SPEAKER_02: So investors are doing that right now.
43:38
SPEAKER_02: Yes.
43:38
SPEAKER_02: All right.
43:38
SPEAKER_02: So, folks, pay attention to that.
43:41
SPEAKER_02: This is when it comes to assets that that don't qualify or you don't qualify.
43:45
SPEAKER_02: It's not always it's it's not always the property.
43:47
SPEAKER_02: Sometimes it's you, and it's okay if it's you.
43:49
SPEAKER_02: Right.
43:49
SPEAKER_02: You know, maybe you're self employed or for whatever reason you can you don't show taxes.
43:53
SPEAKER_02: I don't know.
43:54
SPEAKER_02: I'm not here to judge, but there's options out there for you.
43:58
SPEAKER_02: And and this is what savvy.
44:00
SPEAKER_02: Experienced investors are doing.
44:02
SPEAKER_02: Yep.
44:02
SPEAKER_02: Okay.
44:04
SPEAKER_02: Mario, um, I'm going to give you the final word.
44:06
SPEAKER_02: Anything that you uh want to let us know.
44:09
SPEAKER_02: Um, I know you've been having webinars, and if people want to get a hold of you, like what's the best way to connect with you?
44:16
SPEAKER_02: If if someone says, you know what, I like that Mario's an investor, that he's out there doing it.
44:21
SPEAKER_02: And I like that too.
44:22
SPEAKER_02: Like, I'm not gonna be interviewing folks who talk about things and that they're risk adverse.
44:27
SPEAKER_02: That's not who really, if you're risk adverse, I I that's not who I hang with.
44:32
SPEAKER_02: Like, because then I'm I'm wondering what, like, you know, no pain, no gain.
44:38
SPEAKER_02: Like, you have to take risks.
44:40
SPEAKER_02: And so I surround myself around risk takers.
44:43
unknown: Yeah.
44:43
SPEAKER_00: Yeah.
44:44
SPEAKER_00: I mean, and levy leverage responsibly, right?
44:47
SPEAKER_00: You have to have a game plan and an exit strategy.
44:49
SPEAKER_00: And um, myself, I would love to be a resource for you guys.
44:51
SPEAKER_00: You could reach out to me, uh, 562-787-8902, or you can email me Mario at MarioLoans.com.
45:01
SPEAKER_00: Um, and yeah, I mean, surround yourself and I'll give you my best of what my take on on the you know the investment property that you're analyzing.
45:08
SPEAKER_00: Um, I could be a resource for you there.
45:10
SPEAKER_00: And yeah, there's a lot of noise out there, right?
45:13
SPEAKER_00: And you know, what do you want?
45:14
SPEAKER_00: What are your goals?
45:15
SPEAKER_00: Are you investing for you know the next six months or are you trying to build wealth over the next you know in the decades to come, right?
45:21
SPEAKER_00: And to keep I love how you talked about one keeping the end in mind, right?
45:24
SPEAKER_00: Um, you know, forward thinking from that aspect, and um, you know, and then you gotta you gotta take the step next step, and there is a leap of faith, right?
45:32
SPEAKER_00: And um you can do that and you you are not gonna have 100% clarity on anything a hundred percent of the time, right?
45:39
SPEAKER_00: But you gotta take it, right?
45:40
SPEAKER_00: You get you do gotta take the risk, right?
45:41
SPEAKER_00: But you gotta you do the work and do your homework and consult with the right individuals like yourself, Juan.
45:47
SPEAKER_00: I think you you know the knowledge that you're putting out there is is is super, super valuable, right?
45:51
SPEAKER_00: And uh you guys gotta take advantage.
45:54
SPEAKER_02: So I'll give you guys an example.
45:57
SPEAKER_02: Um, when when we were trying to buy the laundromat, um I called Mark, you know.
46:04
SPEAKER_02: I mean, I called Mark Milan.
46:06
SPEAKER_02: I said, Mark, uh, I'm thinking about doing this.
46:08
SPEAKER_02: And there were concerns that I had.
46:10
SPEAKER_02: I'm like, we don't know this, we don't know this, we don't know this, uh, we don't know if the equipment works.
46:14
SPEAKER_02: There was no profit and loss statements on the business.
46:16
SPEAKER_02: So we don't know that the business was profitable.
46:19
SPEAKER_02: Why did the the owner of the laundromat just close it up and leave?
46:23
SPEAKER_02: Like, did they know something that we don't know?
46:25
SPEAKER_00: Sure.
46:26
SPEAKER_02: And I and and I and I called Mark.
46:28
SPEAKER_02: And folks, I mean, I have the experience, but even, but you know, even when I'm looking at buying something, I'm gonna run it by someone who knows more than me, right?
46:36
SPEAKER_02: Absolutely.
46:36
SPEAKER_02: Everyone's gonna do that.
46:37
SPEAKER_02: People call me all the time.
46:38
SPEAKER_02: Even when they're not using me as the real estate broker, they're gonna call me and say, Hey, I'm I'm buying this.
46:42
SPEAKER_02: What do you think?
46:43
SPEAKER_02: So I call Mark, and Mark said this.
46:46
SPEAKER_02: He said, Juan, you're never gonna have 100% of the answers.
46:51
SPEAKER_02: And if you have 70, I said, I have 70.
46:53
SPEAKER_02: He says, then that's it.
46:54
SPEAKER_02: And that's all you need.
46:56
SPEAKER_02: That's all you need.
46:57
SPEAKER_02: So he didn't say yes or no, but he's like, if you have 70% and if you're happy with the 70, then you got to go through with it.
47:03
SPEAKER_02: He also said, he also said, I want you to know this, and because this is important.
47:09
SPEAKER_02: He said, uh, you doing this and seeing it all the way through, you're paying for your education in this type of business.
47:16
SPEAKER_02: Like he's he's like, so do you believe in education?
47:18
SPEAKER_02: I'm like, yeah, I believe in education.
47:19
SPEAKER_02: He's like, well, then you're gonna be paying for it.
47:21
SPEAKER_02: And uh like that.
47:23
SPEAKER_02: But but but like, okay, so let's just fast forward, let's just say six.
47:26
SPEAKER_02: So our timeline is to is to have the new sewer line, the laundromat, um, all new appliances, and and in fact, we're breaking ground today on the actual cement because we have to dig in all the put new um new cement, new sewer line.
47:41
SPEAKER_02: And so it's gonna be like a brand new building.
47:42
SPEAKER_02: And so our goals um six six months from now to have this grand opening there.
47:47
SPEAKER_02: And so my goal is that we learned the business and that this is one of many.
47:53
SPEAKER_02: Or I realized, oh my god, I'm in over my head.
47:56
SPEAKER_02: Now we got to sell the building.
47:57
SPEAKER_02: But so what's my exit plan?
47:59
SPEAKER_01: Yeah.
47:59
SPEAKER_02: From the very beginning was well, if I screw up on the business, um, I could sell the business and I could just be the landlord of the and I could just lease it out, yeah, or I could sell both.
48:08
SPEAKER_02: But but like my exit plan was I I there's always a buyer for the laundromat business.
48:14
SPEAKER_02: People just want to do it.
48:16
SPEAKER_02: That there's this perception that they're money makers, and maybe it is, maybe it's not.
48:19
SPEAKER_02: I don't know.
48:19
SPEAKER_02: I mean, you don't you don't know until you're in it.
48:22
SPEAKER_02: And so um even on myself, I'm thinking the exit plan, but even on myself, I'm actually picking up the phone, calling someone and saying, here's what, here's what I'm about to do.
48:33
SPEAKER_02: What do you think?
48:34
SPEAKER_02: And that was the advice that I got.
48:35
SPEAKER_02: So nice.
48:36
SPEAKER_02: Mario, we're gonna continue having you come back in.
48:39
SPEAKER_02: Um I know we're we're we're helping Mario um launch his YouTube channel.
48:44
SPEAKER_02: So make sure to find him on YouTube.
48:46
SPEAKER_02: He's breaking these deals down on his show, which I think is important.
48:50
SPEAKER_02: I think once you realize how investors are borrowing as much as possible, that this is how you're gonna learn.
48:59
SPEAKER_02: It's just by watching is is by watching Mario go through one by one on the different types of loans that he's doing for people that know what they're doing.
49:05
SPEAKER_02: And then you apply that to your scenario.
49:07
SPEAKER_02: And then when it's time, give Mario a call.
49:10
SPEAKER_02: My other question to you, Mario, because I think people need to know are you like, do you only do California?
49:15
SPEAKER_02: Can you do Texas, Ohio, Arizona, Nevada?
49:17
SPEAKER_02: Like how far do you go?
49:19
SPEAKER_02: Nation.
49:19
SPEAKER_02: So so for the for the out of the box, you could go nationwide.
49:23
SPEAKER_00: Yep.
49:24
SPEAKER_00: Okay, yeah, business purpose loans nationwide.
49:26
SPEAKER_00: So DSCR nationwide, fix and flip, fix and friends, construction, okay, bridge loans.
49:31
SPEAKER_02: Okay, so if if someone's looking for that type of financing, reach out to Mario.
49:36
SPEAKER_02: Um, if you guys like this, make sure to like, comment, and subscribe.
49:41
SPEAKER_02: If you're watching this on YouTube, if you're hearing this on the podcast, uh, make sure to download, make sure to comment, send us any questions, or if there's a topic that you want us to cover.
49:51
SPEAKER_02: Heck, if you're looking at buying something and you want to do kind of like run the scenario through us, and if it's interesting enough, Mario and I could sit down and and do kind of like an underwriting on that property live.
50:03
SPEAKER_02: Yeah, I think that'd be fun.
50:04
SPEAKER_02: So I'll do it.
50:05
SPEAKER_02: Folks, we need your help.
50:07
SPEAKER_02: We need uh if you like what we're doing, let us know so that we could keep doing it.
50:11
SPEAKER_02: If there's something that I haven't yet to cover, send me a message.
50:16
SPEAKER_02: And uh, if I don't know it, I'll do some research or I'll bring someone who knows it and we'd be would uh love to dive into it.
50:22
SPEAKER_02: So that's all for now.
50:23
SPEAKER_02: Until next time.
50:24
SPEAKER_00: Thank you.
50:25
SPEAKER_02: Bye.