Latest / The Academy Presents podcast / Navigating Today's Lending Market with Julie Anne Peterson

Transcript

Navigating Today's Lending Market with Julie Anne Peterson · The Academy Presents podcast

• 0:01
  Did you know that 90 % of the world's millionaires
• 0:05
  invest in real estate? Well, I'm Angel with the
• 0:09
  Academy Presents Real Estate Investing Rocks,
• 0:11
  and I'm here to help you if you want to go for
• 0:15
  your piece of that pie. Are you new? Are you
• 0:19
  new to this and you just don't know where to
• 0:20
  start? It's okay. Are you someone that has invested,
• 0:25
  but you feel stuck, you feel like you've lost
• 0:27
  momentum, you don't know where to really head
• 0:30
  from here? Are you a seasoned real estate investor
• 0:33
  who is doing great but maybe you just want to
• 0:35
  hone a few skills here and there? This is the
• 0:38
  place for you. The Academy Presents Real Estate
• 0:41
  Investing Rocks podcast will connect you with
• 0:44
  industry experts so that you can save time, avoid
• 0:48
  costly mistakes, and begin living the life you've
• 0:52
  dreamed of all through real estate investing.
• 0:56
  You're already taking the first step. just by
• 1:00
  joining us here today. So, you know, let's talk
• 1:04
  a little bit about today. What is happening in
• 1:08
  debt? It is really affecting these deals. Are
• 1:13
  they, do they work? Are they, are they, can we
• 1:18
  get deals done today? We did a bank loan for
• 1:23
  Angel and you know, when we're looking at agency
• 1:27
  debt, Historically, before the pandemic, it was
• 1:33
  75, 80 in a lot of markets at a debt service
• 1:36
  of 120, 125. Pandemic hits, we all go to bridge,
• 1:42
  everybody jumps in, we make tons of money. And
• 1:46
  then the government jumps in and says, sorry,
• 1:48
  we're raising rates and everything shuts down
• 1:51
  in March of 2022. So what do we do? We scramble.
• 1:58
  And a lot of people went to, maybe we're gonna
• 2:01
  go into agency. Agency is now leveraging at 50,
• 2:06
  55, 60, 65, okay? A lot of people are saying,
• 2:13
  I wanna see what kind of leverage I can do with
• 2:15
  banks. That's why we looked at the bank deal
• 2:18
  with Angel and her team. We went with a bank
• 2:26
  loan, we could get up to almost 70%. I think
• 2:29
  we're 70, a little over 75. It's good. Yeah,
• 2:34
  70. We looked at, especially even with Thousand
• 2:37
  Mary, we looked at a lot of different options.
• 2:39
  And we looked at an assumption. And I know there
• 2:42
  are people out there looking at assumptions right
• 2:44
  now. Number one, assumptions take like 120 days
• 2:48
  minimum. They are taking a long time. You're
• 2:51
  going to have to have an agreement with the seller
• 2:54
  that, hey, this is just going to take longer.
• 2:57
  and are you willing to wait for me? Now, at the
• 3:00
  end of a year, they're going to be willing to
• 3:02
  wait for you because Duke and Kelly told me something
• 3:04
  a long time ago when I was having my nervous
• 3:06
  breakdown during Thousand Mary. He said, Angel,
• 3:10
  number one, at the end of the day, nobody cares
• 3:12
  that you have a nervous breakdown. They care.
• 3:13
  Did you close or did you not close? But number
• 3:16
  two, you are the best bet for this person closing
• 3:19
  before the end of the year. And so when you come
• 3:23
  in on those end of the year items, and you're
• 3:26
  pretty far along, you are their best bet. But
• 3:29
  that assumption, if that's what you're counting
• 3:32
  on, man, you might, if you start it in August,
• 3:37
  you might not get done till February. And you
• 3:40
  missed closing at the end of the year. And if
• 3:43
  your seller has to wait until the next year,
• 3:46
  I don't know if they're gonna wait for you. Hopefully
• 3:49
  you have a good relationship with the broker.
• 3:51
  Hopefully you've created a relationship with
• 3:53
  the seller, but I mean, We have yet to create
• 3:56
  a relationship with a seller because those brokers
• 3:58
  don't let go. They really make sure there's a
• 4:03
  boundary there. And when you're buying, you kind
• 4:05
  of hate that. You're like, dang it, I wish I
• 4:07
  could just talk to the seller. But at the same
• 4:09
  time, when the tables are turned, I'm going to
• 4:13
  be really happy that I have a broker that's standing
• 4:15
  between me and the buyer. So I kind of have to
• 4:18
  keep that in mind. That's true, very true. Yeah,
• 4:22
  let's talk about that. Assumptions, we are seeing
• 4:25
  a lot of assumptions right now. Some work, some
• 4:29
  don't, right? I'm working on one right now, 369,
• 4:35
  3 .69. And, you know, when they bought it back
• 4:42
  before the pandemic, probably right at the pandemic,
• 4:48
  you know, that was a great rate rate and you
• 4:52
  know they've done some and uh increasing of the
• 4:55
  no i so we're probably going to be able to and
• 4:58
  and fanny here's the thing it is a fanny loan
• 5:02
  so what we can do is we can put a supplemental
• 5:05
  that's kind of like a second loan okay it's called
• 5:09
  supplemental so that's only fanny and not freddy
• 5:11
  only fanny that's right and you have to have
• 5:15
  five years left on the loan and so we would go
• 5:19
  back we call it like a second bite of the apple,
• 5:23
  and you can put a second loan on it and they
• 5:27
  go together. It's called coterminous. So the
• 5:31
  first loan, let's say, and you get up to 70%.
• 5:36
  So let's say they took it out back 2021, 2020,
• 5:42
  they took it out, it was a 70 % loan. Now it's
• 5:47
  maybe only 50. We can add another one. Let's
• 5:51
  say they've got enough NOI and debt service,
• 5:54
  we can get it up to 70%. So we're adding another
• 5:58
  20%. They're gonna go along for five years, or
• 6:03
  actually it would be another eight years, however
• 6:07
  many years are left, and together. And now you
• 6:13
  got two. Now listen. you could actually go and
• 6:17
  sell it in a couple years, and the next person
• 6:20
  could actually put another one on there, believe
• 6:23
  it or not. So you could actually have two supplementals
• 6:28
  on that loan. So they could do another assumption.
• 6:34
  Let me just think about that. Yeah, you could
• 6:37
  assume it. Is that right? So assumption one,
• 6:40
  add a supplemental. Then at the end of three,
• 6:43
  say, Three years, because it had to be before
• 6:45
  five. Yeah. So they have the supplemental, it's
• 6:48
  got a piece of the. Yeah, I'd have to think about
• 6:50
  that. Assumption with a piece of the supplemental
• 6:52
  and they can stack another one on top. Yeah.
• 6:56
  I think so. Okay. So then I've recently heard
• 7:02
  about the world of Mezde. Like I knew it existed,
• 7:05
  but I didn't really understand it. And so I was
• 7:08
  in this meeting the other day and I was like,
• 7:10
  I'm calling my husband, I'm like, Jason, you've
• 7:13
  got to be here. I'm not understanding this fully.
• 7:16
  Like I think I understand it, but I'm pretty
• 7:18
  sure I'm not understanding it. I need you in
• 7:20
  here. I need another set of ears. And so Jason
• 7:22
  comes in and the sky is basically telling us
• 7:25
  you can meds debt. So it takes a second position,
• 7:29
  but it can take you 85 % plus of leverage. And
• 7:35
  it was just like, wait a second. Yeah. We do
• 7:39
  that on top of agency. And he was like, absolutely.
• 7:42
  He's like, we just have to know who it's through
• 7:44
  so that we can talk with them. And we've talked
• 7:46
  to plenty of people. And it seems so far fetched
• 7:49
  to me that I was like, and this was before we
• 7:52
  did this last deal. And it sounded so far fetched
• 7:56
  to me that I didn't even pitch it. I was like,
• 7:58
  there's no way. Yeah, I would say I would challenge
• 8:02
  that. I'd be curious to see how many of those
• 8:05
  have gotten done. We hear of them. but I haven't
• 8:10
  seen a lot done. Okay, so I'm not crazy because
• 8:14
  I was like, something's, there's something going
• 8:17
  on here. Yeah, I think if they're really big
• 8:21
  deals, I think that there's a possibility of
• 8:24
  that getting done, but I honestly I've not seen,
• 8:29
  I haven't seen it get done. Okay, so I'm not
• 8:34
  crazy. You make me feel really good right now.
• 8:36
  Yeah, no, I haven't seen it get done. I've heard
• 8:40
  it being talked about. And I think it's possible.
• 8:44
  It's just finding the right agent, the right
• 8:47
  dust lender to do it. So I don't, and personally,
• 8:52
  I don't think it could be done with an agency
• 8:54
  alone because they're going to be super fussy,
• 8:58
  right? They are going to be fussy. So it's finding
• 9:00
  the right, the right dust lender who is open
• 9:04
  to doing that. And I've heard, but I haven't
• 9:10
  seen it. So I guess, really, if you're going
• 9:15
  to do something where you're trying to pull in
• 9:18
  Mezdeb, it would have to be with, number one,
• 9:23
  a bank. It has to be a local bank. And possibly
• 9:27
  even like a super local bank that they're not
• 9:31
  willing to put up that kind of risk, but they're
• 9:34
  willing to let somebody else come in and stack
• 9:35
  on it. Yeah, I mean I've seen it on on bridge
• 9:39
  lending as well See it just I mean I'm talking
• 9:45
  to this guy this guy I mean that what he's saying
• 9:47
  sounds amazing He's like, yeah, you know, you
• 9:49
  don't have to put all your capital in it. You
• 9:51
  can redeploy it You don't have to put it all
• 9:53
  in this thing and I'm like Well, I mean the capital
• 9:56
  stack can have all a whole bunch of different
• 9:59
  right? Yeah, and I don't know this kid looks
• 10:02
  super young So I mean, there is a great resource.
• 10:08
  Rob Beardsley put the little book out on the
• 10:13
  different capital stacks. I can't remember the
• 10:17
  name of the book, but you did a great job. I
• 10:19
  can't think of it right now either. We know Rob.
• 10:24
  and we've actually invested with him before.
• 10:26
  He's doing amazing things and he's another one
• 10:29
  of those guys super young. Like I was talking
• 10:32
  to him at Best Ever and I was like, he was like,
• 10:34
  I can't believe people are here and they're not
• 10:36
  in three -piece suits as I'm sitting in my Jaguars
• 10:38
  and my t -shirt and I'm like, we invested in
• 10:41
  your deal. He's very talented. He's super smart
• 10:47
  about what he's doing and the way that he is
• 10:51
  like the way that he is creating his deals. Jason
• 10:56
  did some of some underwriting to match what he's
• 10:58
  doing with the dual tranche but he's got some
• 11:01
  really creative ways to get people into his deals.
• 11:06
  It's lots of different classes so it's harder
• 11:08
  to do say like in a fund but he's got all of
• 11:12
  these different ways that people can come in
• 11:14
  to get what they want to get out of a deal and
• 11:17
  that's pretty cool. Yeah, and you know what I
• 11:20
  really liked? He did come on ZumaDate and you
• 11:23
  know, he really is talking about keeping his
• 11:28
  investors feeling secure in his deals, right?
• 11:33
  So he's taking himself on his deals, taking them
• 11:38
  out of bridge and putting them into agency debt.
• 11:42
  Now, he said that they don't necessarily have
• 11:45
  to be. but it's investor confidence, what is
• 11:50
  most important to him. And right now with SOFR
• 11:55
  continuing to be rising, we're doing this a little
• 12:02
  early in the year. We just don't know when that's
• 12:07
  gonna continue to stop. So I think that's a good
• 12:13
  move. Yeah, well, you know, Rob is like, he was
• 12:16
  the guy that really got me thinking about HUD.
• 12:19
  Because we were in a deal with him in Houston.
• 12:22
  And the idea was, hey, we're going to hold this
• 12:24
  thing for 12 months, and then we're going to
• 12:26
  move to HUD. And so I looked at that, and I think
• 12:32
  they may have just sold that deal. But actually,
• 12:35
  they did, because I remember who bought it. But
• 12:37
  I remember when we got into that deal, I was
• 12:39
  like, HUD. My grandparents did HUD. And my grandparents,
• 12:43
  when they were doing HUD, it was local because
• 12:46
  that's the urban development group, right? And
• 12:49
  so my grandparents did HUD because they had section
• 12:51
  or they had government assistance. And so when
• 12:54
  I heard HUD, I was like, what the heck? You're
• 12:57
  doing an apartment loan with HUD? Why would you
• 12:59
  be wanting to do that? And so then I was learning
• 13:01
  more about it. And so as I learned more about
• 13:04
  it, it got us into the situation where with our
• 13:06
  first project and with our first property, I
• 13:08
  was like, I wonder what HUD would look like,
• 13:11
  because HUD is a whole different kind of loan.
• 13:14
  It really is. You've got agency, you've got bank,
• 13:17
  you've got assumptions, you've got bridge, and
• 13:19
  then you have HUD. Yeah, and HUD is showing up
• 13:23
  right now because it allows people to get out
• 13:27
  of some of these bridge loans, right? And it's
• 13:33
  giving them an opportunity and holding longer.
• 13:37
  That's what it's gonna take holding these assets
• 13:41
  longer. This whole fix and flip model that came
• 13:44
  in like a lion is gonna need to be addressed.
• 13:50
  That's not this model. Historically, it wasn't.
• 13:55
  We had so much influx of single family folks
• 13:58
  that came in in the COVID era. And so we need
• 14:03
  to go back to that. And this certainly will help
• 14:07
  those folks get out of this bridge situation
• 14:12
  that we're in, in 35 years, holding onto an asset
• 14:16
  for very low interest rates. I mean, it's great.
• 14:22
  And after 10 years, you start to see a step down
• 14:26
  prepayment penalty. However, There's nothing
• 14:31
  wrong with that. The only side effect is the
• 14:36
  time it takes to get these deals done. It can
• 14:41
  be a year, it can be 18 months, depending on
• 14:45
  how many people are at the bakery in line and
• 14:49
  their number gets called. If you're at 98 and
• 14:53
  they're calling number 12, it can be a long line.