BiggerPockets Real Estate Podcast - 55: The Five Steps Needed to Get Any Lender to Say “Yes” with Jimmy Moncrief

Episode Date: January 30, 2014

Simply put – this podcast could change your financial life. You see, a banker can be your best friend or your worst enemy when trying to invest in real estate, as a great loan can mean the difference between long term success and failure. This is why we are super excited to introduce you to Jimmy Moncrief (your new best friend!) on the BiggerPockets Podcast today. Jimmy is a commercial bank underwriter as well as a real estate investor, so he has a unique insight into the mind of a bank – especially involving real estate investing. . Jimmy is going to share some incredible, actionable tips that any investor can start using today to get your bank to say “Yes” to your next financing request. In addition, Jimmy offers some unique tips for finding great FSBO deals and getting into your first deal. This show contains so many tips and ideas to help you do more deals, get better financing, and change your future – so grab your pen and paper and set aside the next hour for a truly remarkable show. Read the transcript for episode 55 wth Jimmy Moncrief here. In This Show, We Cover: Turning your own home into a rental Buying a cash flow crazy triplex Jimmy’s “lucky” method of finding properties FSBO How real estate investors do everything backwards Jimmy’s awesome “Quick Tip” about interviewing a bank An insider look at the Five “Cs” for getting a loan Why Jimmy hates credit scores How to turn around a loan denial Getting commercial “HUD” loans Tips for refinancing your investment properties Using cross collateralization to secure financing No money down… is it possible? And LOTS more… Books Mentioned in this Show The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime by MJ DeMarco The Four Hour Workweek by Timothy Ferriss 80/20 Sales and Marketing: The Definitive Guide to Working Less and Making More by Perry Marshall Links from the Show:  BP Podcast 052: Buying Apartment Complexes, Raising Millions, and Building a Profitable Business with Ken McElroy BP Podcast 014 : Cash Flow, Creative Finance, and Life with Ben Leybovich Blackstone B2R Financing Smart Passive Income Podcast with Pat Flynn – Episode 18 with MJ DeMarco Pareto’s Principle- the 80/20 Rule – Wikipedia Post Tweetable Topics HUD loans are like a pregnancy: fun at the beginning, painful at the end! (Click to Tweet!) If you are serious about investing in real estate – you need to know the 5 Cs. (Click to Tweet!) If you take a proactive approach to lending, everything works out better. (Click to Tweet!) If you want to be a serious real estate investor – treat it like a business. (Click to Tweet!) Connect with Jimmy Jimmy’s BiggerPockets Profile Jimmy’s BiggerPockets Blog Posts Jimmy’s Blog: RealEstateFinanceHQ.com Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 55. Take 27. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. What's going on, everybody?

this is Josh Dorkin, host of the Bigger Pockets podcast, here with my co-host, Brandon Turner. Hey, Brandon, you realize this is like our 28th take of this intro. This is, I think it's like our 50th take of this intro. That's all right. Now people know our secrets that we actually suck at this. Maybe that wasn't a secret. Suck.

Anyway, big day today. Big day. It is a big day. You know why it's a big day? It's a big day because the Bigger Pockets podcast has reached a pretty cool milestone. One million, one million listens. Yeah, that's awesome.

One million. That's a huge number. I can't even fathom that number. Okay, I can. It's amazing, man. I mean, 54 shows, we hit a million listens. I don't know. I'm pretty proud.

I'm pretty proud of that. I think we've brought tons of really good information to people through the show, and I think the 54 preceding shows to this one have just been of incredible value. So thank you to everybody for listening. We definitely appreciate you guys. Yeah, you guys rock.

Trust in us. Yeah, you do rock. And if you think we rock, come leave us a review in iTunes. There you go. Yeah, actually, I wasn't going to tell them that. I was going to say, spread the word, let other people know about the show.

Tell other people to come check it out. BiggerPockets.com slash podcast. put it on your Facebook pages in that little share link, put in www. HTTP culling slash slash www. www. www. Biggerpockets.com slash podcast. Share that link with your friends, your family, with everybody.

Help educate them in real estate investing. Help us help them. Help us help you help you. Nice. Yeah, you like that. You like that. There you go. Jerry McGuire of you.

That was me, man. That was me. Show me the money. All right. Well, moving on. Yes, moving on. So today we are going to skip our quick tip. And the reason we're going to skip our quick tip is we have a couple really, really good ones in this coming show. So pay very close attention. With that, why don't we just kind of dive in here? So this show is featuring Mr. Jimmy Mone Kreef.

And Jimmy is a real estate investor in the Tennessee area who also has a day job working. as a real estate investment underwriter. So basically, Jimmy's the guy ultimately responsible for saying yes or no on loans, which is why we wanted to have him on the show today. What we're going to do, we're going to pull back the curtain for you guys on the lending industry and show you exactly how you can get loans for your real estate deals. If you don't think it's that big a deal, this is a huge deal. This guy is going to give you insight that you may not have ever gotten before

talking to these underwriters is a rare privilege. So we're especially excited. I know I know I am. Yeah, me too. This is going to be an awesome show. Yeah. So of course, the show notes for today's episode can be found on BiggerPockets.com slash show 55. That's show 55. And we invite you to come leave comments or ask questions if you've got them. Jimmy will be participating and will be answering your questions for you. So definitely be sure to ask them on the show notes. Have you ever lost a DSCR deal because the financing just took too long? Red flags popped up late. The lender needed more time.

The deal fell apart. Well, our friends at Dominion Financial just launched a program to help prevent that. With their new express rental loan, you can close in 10 days or less. And they still offer their price beat guarantee so you can get great pricing and a timeline you can count on. Fast, simple, reliable. That's Dominion Financial. Check them out at BiggerPockets. That's biggerpockets.com slash dominion.

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Anyway, with that, Matt, why don't we get to the show and get this thing started? So, Jimmy, welcome to the show. Good to have you here. Thanks for having me, guys. Yeah, yeah. We're happy to have you on here. You know, I've always, I'm always really, I always really look forward to your post every week on the Bigger Pocket's blog.

And they're always entertaining and informative. So hopefully we can bring out some of that today on the podcast. Sounds good. All right. All right. Josh, you want to ask the first question or do you want me to do it? I think I think I could manage, Brandon. Thanks for asking.

Yeah, I'll be a gentleman. Take it. Do I need permission to scratch my nose too? You might. Go ahead. All right, Jimmy. So tell us about how you got started in real estate. All right.

Well, let me back up. I got started by accident, but I kind of got started in investing when I was 12. Wow. Nice. Yeah, I wasn't good at sports. So, you know, for the international bigger pockets members, that's very bad in America. If you're bad at sports, you're pretty much just put away locked in a closet. I'm raising my hand as well.

Yeah. So when I was 12, I won a stock market competition. So my parents were like, yes, he's good at something. Nice. So I started to be. So they strap you to a computer and force you to figure out the buys and sales. and they're totally rich and retired now, right? Thanks to 12-year-old Jimmy.

This was like pre-computer, showing my age a little bit, but they did pretty much lock me in a library for the summer after that. And then I, so what did I do? I want to start a work competition. So then I started reading Warren Buffett books and Peter Lynch books, and that kind of got me into stock investing. And then I got a job at a head. fund after college and became a partner there. But in between, you know, buying my first house

and moving, we just, it was so much easier just to rent our house out and then move. So we just tried that. And then, you know, a couple years later after analyzing my investments, I realized that, you know, my, this little rental property that we really didn't think anything about was doing better than, you know, my stock market portfolio. So that's when I really started focusing on real estate. Well, hey, I actually have a question about that. We've never really talked about this with any guest yet. And that's the idea of, I know we're kind of interrupting in your story, but, you know, the idea of- The only we would be you, Brandon, by the way. I'm listening and paying attention. I am paying attention. Well, I want to know more about the idea of, you know, you rented out your

first house. I mean, you lived in a house, you moved because it was easier to rent it. And then that's how you got started. That's also kind of, I guess, how I got started in a way. And a lot of people do. maybe we can just, I don't know, touch on that for a minute. What made you actually think, you know, like this was a good idea? Did you actually look at like the cash flow or was it really just the market's bad? I can't sell or how did that kind of decision play into that? Yeah, great question. It wasn't, I should come up with a really sophisticated answer.

But like when you were asking that question, I was like, oh, man, I should right now have a very sophisticated answer for them. But it was honestly just like it looked so much easier than just rent it and then like sell it and have two mortgage payments while you're trying to sell it. And we knew we could rent it out for a couple hundred extra bucks over our mortgage payment. So, you know, my wife and I were just like, hey, you know, we didn't have kids at the time. And we were like, you know, worst case scenario, this is an awful experience. And we sell it after the we try the rental thing. So it wasn't a sophisticated analysis like it maybe should have been. I don't know. Well, I don't even think so.

That's fine. You don't know what you don't know when you're starting out. But I think that's in a really, really good way for people to get started with real estate is just turning their own homes into properties. Especially, you know, you can get homeowner loans for a lot cheaper than you can usually get investment loans. And the rates are usually better. And you can just move and keep doing that, you know, up to a certain number of properties. So it's cool to hear you say that. Cool.

All right. Well, anyway, moving on. Back to your story. So what happened next? Yeah. Well, so then that worked out okay. And then I, so then I got involved and I found a multifamily, a traplex that went, that was empty. And it was just a great investment.

I thought by the numbers anyway. We got it for 80. And we all three. Sods could rent out for $5.50 a sod at the time. And so the cash flow was pretty awesome with that. So that is what really got me into multifamily where I'm at now. But feel free to interrupt if you have any questions, obviously. But during that question, we're polite. We don't interrupt. Okay. I'm going to interrupt. I do have a question. So, 80,000, 550 a side. You said 550 aside? Yeah, 550 unit

Okay, yeah, 550 per unit So you're bringing in my math homework 1650 a month on an 80,000 investment That's better than the 2% rule. That's great. That is awesome. How did you find that good deal?

It was, I've had the best luck in not doing anything. I'm with the MLS and just finding those like for sale by owner signs that are, this was like a class It was some sign stuck in a yard in a street that nobody goes down. It was like, yeah, not the best move if you're the seller, but it was a good move for us. Because I don't know, it was a really great area of town, but it was just not a through street.

Nobody went down the street, but the three people that lived on it. And I don't know. So it was, that's how I've found stuff. Just unfortunately, I don't have a systemized, like, process online. but I've found my best deals like that. Was it an MLS deal? Was it listed? No.

And that's my thing. I've only bought one house, the one I'm in now, and it was an MLS, but it was very exogenous circumstances, how I got a good deal on my current house I'm living in. But normally I just don't have, I don't know,

it's just a waste of time dealing with the MLS. And I'm just speaking of me and I'm probably not doing, I'm sure there's like 100,000 realtors listen to this podcast. It was like, well, that's because you're doing it wrong. And you're probably right. I'm sure I am. I'm doing everything wrong. I'm sure.

But yeah, that's just worked for me. Well, so, Jimmy, first of all, can you please define exogenous a word I've never heard in that life? Just very extraordinary circumstances. So, yeah. Okay. Okay. Nice.

All right. No, it's good. It's just a word I've never heard. I assume it was something like that. But we're here to learn and I'm learning. So it sounds to me like your method, your technique, is to go on the map,

find every dead end street in your area and then basically circle those dead ends once a week, once every two weeks, hoping that somebody on those streets is doing a FISBO and knowing that no one else is going to ever see that property and grabbing it and getting a great deal. By the way, which,

if that was what you're doing, it's kind of a good idea, very labor intensive, but a very cool strategy. That's, that's pretty much it. I mean, I love for serious. Yeah, I mean, I'll love it. Like, it just, because I have a defined area. I'm not driving around the state of Tennessee. You know, look, I have a defined area that I like and just the side streets, dead in streets, and people just throw like these for sale by owner signs out to get stolen and you know so most of the time it's interesting with these for sale by owners they the seller doesn't think it's um it's moving fast but in reality their signs are getting stolen so that's really the reason now are you the guy who's stealing this time is confession i i'm I can see that being the next big, you know, 997 training course on how to get a good deal. Just go steal all the signs. Yeah.

That actually worked. Extra cash flow. Yes. There you go. There you go. Wow, that's impressive. So, Jimmy, how did you actually finance that triplex then? Did you pay all cash for that or did you get a loan?

Okay. Great question. And that is, that's exactly, this transaction is why I got really interested. in real estate finance. Because just for a backstory, at the time, I was a partner at a hedge fund. I was a, I was buying it with a business partner, and he was an executive and an insurance company. So at the time, like, you know, we both had 800 plus credit scores. We had over $100,000 in liquidity.

We, you know, made great money. We no real debt. And we couldn't get a loan. It was crazy. We called like 10 different bank. Like I was in charge of getting us financing and he was in charge of like we were going to fix it up. So he was in charge of dealing with the contractors. And I called him after like the 10th bank. I was like, man, we're having a problem.

Like we can't get a loan. He was like, you can buy the bank. Yeah. He was like, what are you talking about? I'm going to pay cash for the bank, but I can't get a loan from the bank, right? Yeah. Yeah. I was like, what are you talking about having trouble getting a loan?

We don't even need a loan. I was like, I know. This is like the craziest thing I've ever seen. I've ever experienced. When people complain about bankers and banks, I completely understand. Like, it's crazy. So what do you think you're like maybe mistake or maybe it was just the times or what, what happened?

Why was it so bad? Why are we getting turned down? And I know that probably leads us into our next, you know, conversation about what you do nowadays. But I'm just curious, what was it that was wrong? Well, I was, yeah, I mean, that's my big platform as like, you know, what I like to, like talk about on the bigger pockets blog is, you know, it's just, I was just going about the process the completely wrong way. So this is my big platform, okay, Brandon, is that people go, generally, investors go about financing and even investing, I would say, the exact backwards way. You know,

everybody goes and hunts for a deal and they spend all this time analyzing and looking at deals, but they spend very little time looking at looking and figure. out a good financing structure and developing financing contacts and banker contacts. So that's my big platform is, you know, I was just going about the process the completely wrong way. You know, I was, it was during the, you know, this was the fall of 2008. You know, the world is coming to an end. And of course, I'm calling all these banks that they don't know me. I don't really know them. And I'm asking for a loan. And even though it was just like, you know, 60, 70,000 bucks, it was still like there was no.

relationship there. There was no, they didn't know my finances. I don't know. They didn't know my story, my business partner story. So that's my big platform and what I like to teach people. Yeah. Nice. That's great. Yeah. That's really great. So you ultimately, I'm guessing you then went and transitioned from this guy who didn't know the banks to somebody who went out and it's really started to get to know all these guys. And how do you do that? I mean, what's it about? What do I do when I show up the bank or when I call them and say, hey, I'm, you know, I'm Josh. I want to, you know, I found this great deal and I, you know, I'm doing this professionally now. I'd love to start working with your company. What does that conversation look like for the typical person? And what does it look

like for somebody like you who's getting them to say, yeah, you know, things are good or Brandon, you know, hey, we want to extend you a new line of credit or, you know, any of the guys who are out there really killing it. Yeah, great question. Let me take a step back from that. Josh, here's what you really want to do is treat this like a sales process. Okay. So instead of, you know, most people come in and just, you know, they already have their tax returns and they're just ready to like, you know, throw up on a banker, you know, with all their tax returns. And instead of doing that, reverse the process and you be the prize. Okay. So when you go into a banker's office, don't just tell him your deal and, you know, this is what you want. Reverse the process. And you tell him, or you interview the banker and you

ask them, like, what kind of loans are you looking for? You know, I would reverse the entire process that most people do. And that's like what I like to teach on the bigger pockets blog and all kinds of places. So essentially you're going from, well, you know, please, please give me a loan to, listen, we're interviewing a lot of banks. We're looking at various products to see what you're best for us. I'd like to hear from you what you can offer to me, not, oh, please give me money. What can you offer me? Is that kind of what you're doing? That's exactly it.

And I know you guys haven't done your quick tip yet. but like write it but write that if you're listening to this and you're in your office uh i want you i want your listeners to wipe this down uh right now this is something you can do if you're listening to this on a monday this is something you can do this week that takes less than an hour that can have a dramatic difference in your real estate investing uh write down to community banks okay and then write down, you know, preferably the small, two smaller community banks. Then write down two small credit unions and then two maybe regional banks. And so now you've got six contacts.

Go on LinkedIn, try to find a commercial banker at those financial institutions, and call them and try to meet face-to-face if you can, and do exactly that, interview them and ask them, you know, before you just, you know, present yourself and it's like, hey, I'm Brandon Turner, I'll invest some multifamily properties. Don't tell me, you know, ask them, what kind of loans are they looking for? And if they're not looking for multifamily properties to finance, ask, well, who is? And they'll give you referrals. That's a good idea. It's a good tip.

I can actually, I mean, kind of testify to that. I think I mentioned a month ago or so here on the podcast about, for the first time ever, I had a banker actually called me and wanted to develop a relationship. And I felt totally on the other end of that thing. Like they were trying to get me to come in and I was the prize. Just like you said, for the first time, I never felt like that before. And that was a fundamental shift in the way that I think in terms of before it was always, I was begging for things that I needed things.

Granted, I still need things. But it became kind of a cool fundamental shift that I encourage people to do as well. start thinking of yourself as the prize. So very cool. Yeah. Yeah. I mean, I think there's a definitive distinction there, you know, in just the thought process. I mean, bottom line is you're not begging. You're not saying, hey, you know, come on, you know, this is a great deal. And they're like, well, no, no, it's not that great a deal. It's not about the deal anymore. It's about, you know, I say the same thing when it comes to property management. Most people, you know, especially when they start, we'll go and they'll meet a property manager, and they're kind of trying to sell their

property to the property manager. And you can't do that. It's the total opposite. You're interviewing them. They work for you, and you have to understand that. And the same thing I think goes with the banker. They work for you. I mean, in many ways. And if you can shift the thinking to they work for me, they're providing my loan. I'm granted, I'm servicing it. I'm paying it. I'm taking care of, you know, via this property, suddenly you're in a whole different ballgame. You're no longer like, oh, you know, I'm desperate for money. Now it's, you're competing against four, five, seven other companies who have the potential to get in on this opportunity. Absolutely. Yeah, it's all about if you can take one thing away from this podcast. I mean, I would say that would be it,

is reverse the podcast with whoever you're getting alone from, you know, because in reality, there's, you know, lending money is a commodity, you know, I mean, it's so it's, you should work that to your advantage. Yeah, yeah, I agree. Hey, hey, let's talk about real quick. What do you, because a lot of this hinges on what you do for a living now, what your career is. What, what exactly do you do? And can you kind of tell us about that? Okay, great question. So I'm a bank credit officer. So I'm, you know, when you're like, you go in and like you were saying, I guess a loan officer took you out to lunch or something, Brandon, you know, and that's like the sales guy and he's wanting to, you know, close loans. I'm the opposite of that.

I'm the guy who says yes or no. So I'm like, you know, when they're like, oh, I want to do your deal, Brandon, but the underwriter says, no, you know, I'm like the bad guy. You know, they blame. So I'm the guy that, yeah, like the risk management. I hate that guy. I know. Everybody hates that guy, Brandon.

Except for when he says yes, then everyone loves that guy. Yeah. But they don't really love him because he may say no the next time. Right. That's the reason they keep you hidden. Like, you never meet the underwriter, right? You just always just say, oh, and underwriting. And it's never like, oh, Jimmy said no.

It's always just like, oh, the underwriter said no. Otherwise, they come to your house. Exactly, exactly. He's the little guy they hide in the back closet. So being, yeah. So being an under, so being an underwriter and a real estate investor is like being an IRS agent and doing your taxes at the same time. It's a little weird. that makes sense.

That's great. That's great. So then what is it, you know, other than what we just talked about, as the underwriter, I mean, this is a pretty unique opportunity for us and for the listeners to kind of learn a little bit more on the inside. What is it that you're looking for? You know, as an underwriter, I come, you know, we already talk to your bank. Your bank wants my business. Your bank being everybody, but you so far, the little nasty, angry guy in the back room. What do you want? What are you looking for? Yeah, great question, Josh. And so all banks have credit policies.

So before I put anybody to sleep, I'm not going to talk like numbers and exact credit policies. But I will talk about like all underwriting, whether it's with a community bank credit union. I've been an underwriter at a Fortune 500 company. But even a hard money lender, we all have a. a 5C foundation framework, which all lending pretty much goes through. So I'll talk about that if you want me to, the five Cs. Okay. So if, again, if your listeners are like at an office, you know, write it, you know, it might behoove of you to write this down.

Okay, so the five Cs are character, capacity, capital, conditions, and collateral. Okay. So the first one character, that kind of goes back to what we were talking about before about relationships and just, you know, developing that, you know, relationship with your banker. What kind of, you know, character, reputation do you have in the community? You know, you obviously don't want to do make a loan to a convict or whatever. So that's that. That's pretty straight. Dang, Josh, you're out.

Yeah. He's giving me the stink eye into the camera. All right. Speaking of convicts, by the way, just to interrupt, my next door neighbor's house was broken into last night. And I'm like, God, man, what's wrong with people? Hey, Jimmy, I think I know who broke into his house. Oh, man.

Oh, shut up. He was looking for some new clothes or something. Oh, God. All right. Back to character. Yeah, back to character. Sorry, I had to digress there, Jimmy. Speaking of character, obviously.

I need to find a co-host with better character. Ouch. Anyway, so, okay. All right, character. Let's get back to character. All right, character. So we've got character covered. Okay, capacity is the next one.

So this is where the analytics really come in. So your capacity as a borrower, it's basically like, you know, my name is Jimmy Moncrief. I'm the borrower. How much debt can I personally handle? Or, you know, my company is called. let's say Moncrief Incorporated. How much debt can Moncrief incorporated with a personal guarantee?

How much can that cover? How much debt service can he cover? What's his liquidity situation like? So that's really where the analytics come into play. Okay. So the next one is capital. And again, that's a very analytical see on, you know, how well capitalized are you,

how much money have you personally invested in the business, what's your balance sheet looking like, things like that. Conditions is another C, and that's basically, you know, that was, you know, in the fall of 2008, I bought this multifamily property. It was like, obviously, it was a horrible economic conditions, you know, but, you know, now it's not a good time. Banks look at land, you know, raw land is very bad. You know, it's a bad time to buy a land, I guess.

So, you know, to kind of look at that. And I know, and you guys have been talking a lot about distressed areas. You know, I know that's a hot subject in the forums like Detroit, right? So obviously the conditions in Detroit aren't great. So you have to just take that into effect when you're underwriting. And the last one's collateral. Hey, Jimmy, really quick. Yeah.

Jimmy? Yeah. Yeah. Can you not bash on Detroit, please? I'm not bashing anything. Uh-huh. Yeah, we don't ever bash Detroit on the show. No, we love

Detroit, right? Yeah, whatever. Okay, right, back to it. All right, so the last C is collateral and that's the hot topic. That's what a lot of, the vast majority of people that

like email me on my blog or whatever, or ask me in the forums are like, how do I get around this 80% LTV rule? you know, on the collateral and things like that. So, you know, and that's why appraisals are required and things like that, but they want to look at, you know, the, obviously the appraised value and just however else they can get a good collateral value for your lending capacity.

So, all right, so the five Cs are character, capacity, capital, conditions, and collateral. I actually would love if we can just dive into each one of those just a little bit more. Absolutely. Would my assumption be correct that you would say if a person can master all five of these, then alone would be no problem. I mean, is that kind of the ideal? That's absolutely correct, yes. All right, so that's what I was thinking.

If we talk about each one of these a little bit more detail, how can a person improve each one of these? So we'll just start at the top. Yeah, character. It's a great idea. Thanks. Well, you could stop being such a...

Thanks. How do I improve my character, Jimmy? I mean, like, I'm going to show up to the bank. As it regards to the bank, of course. Okay, I was about to say, Brandon. I don't know. I think you might have been... you're gone too far.

I think it might be able to be. I'm gone. It wouldn't be hard. A step up wouldn't be difficult. Right. But for the other, for the rest of the bigger pockets listeners. Thank you.

What you can do character-wise, several things. One, you want to be, well, the best thing you can do from a lending perspective is, lending perspective, is just get, not just to walk into a blank, a bank not knowing anybody, but just get referrals. So from, you know, for me, I'm even for me,

I mean, I'm a banker, but when I go to the RIA, every time I go to a, I'm actually organizing a bigger pockets meet up and we've met a little bit here in Chattanooga. And we talk about that every meeting. We talk about who are you guys getting a loan from, you know, like who's lending? How's that going? And in turn, they not only just tell me who, what banker they're dealing with, but I will ask them. I go, you know, my friend Thomas, who I met on Bigger Pockets, I was like, hey, can you let John Smith at ABC Bank, let him know I'm going to call and, you know, just like to talk. And because he gives that referral, my character is already in good, in a better standing than if I was just a cold call, you know, John Smith at ABC Bank.

That is such a good tip. That's such a good tip because, and I don't think a lot of people do, that, right? Like we, I get together with other landlords and we talk about, you know, I don't know, our latest landlording story or horror tenant story or whatever. Or I'll share like my maintenance guy, you know, hey, you should use this guy. But I don't think I've ever asked one of my landlord friends, you know, hey, who are you getting your loans from these days? Who can you introduce me to? That is an excellent idea. Yeah. Well, now, now my thought on that is this. And I'm curious if you've run across this. My thought is, A, a lot of people are going to be stingy about that. Like, oh, I'm not going to share that.

There's only so much money and you're not going to get, you know, they talk like that too, by the way, when they do it. No, but, you know, it's, you know, the whole idea, even a bigger pocket, like, I'm going to digress for a second. Like when I first started bigger pockets, a lot of people were like, well, why would I go on the site and help other people in my area? Why would I provide my secrets? You know, well, there's no secrets.

But, you know, I think people still have that mentality. So my question is, you know, has that been something you've run across? And if so, how do you kind of get around it? Man, it's, that's an interesting, that's an interesting issue. I've never ran into that, especially all the people I've met on Bigger Pockets locally here in Chattanooga, that, you know, that's never been an issue. It's, we're always helping each other out. Yeah, and it's, what I will say, and I know that it's, we don't have enough time on this podcast forever

to talk about complaints about banks. But one big complaint that I see that's false is, you know, all banks aren't lending. Okay, well, obviously, that's like, you know, that's just like saying I own rental property. I don't rent anymore. You know what I mean? I'll just like to keep my houses empty. Like, what that really is is like, you know, banks aren't making like that type of loan. So like in my situation, in the fall of 08, they weren't making multifamily property loans.

loans across a ton of banks weren't making that type of loan. So that's, so when you hear that a complaint from somebody like, oh, I love my banker, but they don't make hotel loans. Well, ask that's, and that's again going back previously in the podcast is why it's important to go interview banks and go interview bankers to see what type of loans they're looking for. So you don't waste your time. Yeah. Yeah.

Good advice. A ton of sense. Yeah. Oh, very cool. All right. Next one. So we talked about character a little bit. and improving that capacity.

So let's talk a little bit more about that. How does somebody improve their capacity? Okay. So this is really driven a lot by your history. You're borrowing history. So this is, I hate credit scores. You know, I'll have a big tangent on credit scores. I can go off on that tangent if you guys want me to.

But, but. Yeah, sure. Okay. Well, I mean, and the reason I say yes is this. I mean, you've got a unique perspective as somebody. Again, you know, it's rare that we get to talk to somebody in your position, in your shoes. And I think for me, I'm fascinated. You know, I know a credit score isn't, you know, it's just a number, right?

It's an algorithm. Exactly right. The credit score was developed for like the lowest common denominator in lending, right? Like when you go in and you ask like whoever is at the teller line, like, can I get a loan? And she's like, you know, what's your credit score? And it's like, oh, it's below 800. No, you can't get a loan. It's like a credit score doesn't give any value to your liquidity, to your income, to your, you know,

I have seen the craziest circumstances. I've seen people with $8 million of cash, no personal debt, and a 480 credit score. you know i've seen the craziest of circumstances um that uh you know but mortgage people just they just rely on them as like a foundational element of their underwriting but i'm a commercial underwriter and uh and so i just think they're ridiculous because you know i've seen just last week i saw where somebody paid off a million dollar line of credit and their credit score went down so their cash was up. Their cash last year was around 50,000. Their cash position now is around 300,000. And they paid off a million dollar line of credits. They have less debt. And their credit score went down about 100 points. So I mean, it's like it's ridiculous, you know, to rely on a credit score. So that's another quick tip, as you guys like to call it. So when you got like, so write this down if you're listening to this in an office. If you, you know, if someone, you know, if someone, you guys like to call it. Like, so when you got, you know, if someone. turns you down for a loan for a credit score, just at, don't just hang up and get mad. I know that's

easy to do, but at, here's the question to ask specifically what in the credit score concerned you. Okay. So then that forces the issue of they actually have to read the credit score and figure out what's going on. Because a lot of times it's, uh, well, okay, I saw this three weeks ago. This guy had a low credit score because he had a maxed out lot of credit on his helot. His helic was maxed out. Well, he didn't have a first mortgage and it was like a million dollar property

and his helock was 300 grand. So the credit score is saying, oh, this guy's maxed out. It's like, no, that's not the case at all. You got a 3% helock and of course, you know, that's a good deal. So, you know, so ask specifically

what concerns them about their credit score. And a lot of that's, that will open up the conversation to where it's a fixable problem. Yeah, that's great advice. I'm glad you went on the tangent, man. That's really,

really good advice. Okay, great. So that's capacity. A lot of that deals with, like I said, you're borrowing history. And unfortunately, man,

like those annual fees on credit cards and all that stuff, like, I mean, that'll just tear you up. So just, you know, get,

you know, whatever, you know, try to get, that fixed up and get a free credit report if you can. It also, like, you really want to, that's where the ratios depend on like your liquidity ratios, you know, and you really want to have, you know, a fair amount of cash. So when we were getting that loan for the triplex, you know, was like, they did the analysis of how, you know, how long can I go with this triplex being

completely empty before, you know, stress starts to happen. So you want to position yourself. for more capacity for your debt. Yeah. Well, what about then? That's great. Let's say I wanted to go out and buy an apartment complex, let's just say,

or, I mean, like a large one. Let's say, you know, 100 units, maybe, you know,

$5, $10 million. There's no possible way that me, as a single borrower could ever pay that mortgage, right? I mean, like, there's no way I will personally

ever have the capacity to do it. So how much does that play a role into things, into the property itself being able to hold the capacity versus me personally holding it. It's a great question. Thank you.

Awesome. Yeah, awesome question, Brandon. And that's the very ironic thing. I know in the, well, I don't know when this podcast is getting scheduled, but who is the previous, the McElroy? Yeah, Ken McElroy.

Okay. Like, he, man, he has this quote, and I will be misquoting this, but it was something to the effect of like, why he focuses strictly on bigger developments. It's like it takes the same amount of time and it's more money. So I have been thinking that too because it's very ironically, it's almost easier to get a bigger loan like that than it is a smaller loan. Because that's exactly right, Brandon.

You're not on any kind of $5, $10 million loan like a big $100 plus you know apart. The lender already knows there's no, I mean, there's honestly no point in you being a guarantee. I mean, you're going to be a guarantor on the loan if it's, you know, with a bank usually, but it's not going to constrict you to not getting that loan. So, yeah, this is a great question, though. Thanks. Hey, Jimmy, let me follow up on that. Yeah.

So, I mean, are you saying, you know, the average guy, you know, take an average middle class person making, I don't know, you know, family making six plus figures. They've, you know, got a couple of rental properties. Things are going well. Could, could one of those people then essentially go out, find a deal, you know, on a, on a big multifamily like Brandon suggested, a hundred unit at 10 million bucks, say, and essentially present that to you and say, listen, I know the guy who's selling it. We've talked to him. Here are the numbers. It looks like a good deal. you know, would you guys consider, I mean, would you consider that average Joe, given all the other Cs, you know, if everybody's kind of straight, you know, pretty much on the up and up, but nothing

spectacular beyond just the deal itself? So if the, you know, where would that come into play? And because it seems like that really has to be the most important factor, given everything else. Great question, Josh. And full disclosure, at the bank I was at before, it was a top 10 bank and I made $10, $20 million loans all the time. And I don't, at the bank I'm at now, I don't. Our max legal lending limit is $3 million.

But one of my neighbors is a, he's head of multifamily lending at Wells Fargo and his minimum loan amounts, $5 million. So we actually just talked about this a couple months ago. And so I'll just tell you what he told me. and that was his deals are evaluated strictly on the deal. However, from an underwriting perspective, what's important for the personal guarantee is, obviously, you can't be in financial stress, okay, personally. That's one, but two, maybe even more importantly,

is your experience in that. So, like me, I've never owned a hotel in my life, you know so it's like if i wanted a 20 million dollar line for a hotel that that probably wouldn't be and i was going to run it you know that probably wouldn't be approved because i don't know anything about the hotel industry so a lot of what he does is helps you know if like brandon is actually a good example because you've got some experience in multifamily is people that continue to do well in multifamily and just scale up then they will because you've got that experience in multifamily and you're just operating, one to operate on a larger scale, then it's really that

operational experience that matters more than the financial. Gotcha. Yeah. And that's actually a good reason why people often say, should I start, should I start with a large multifamily or start with a small one? And we asked that question to Ken McElroy on show 52, I think it was. And he said, he actually thinks you should start with a single family. And I was actually surprised and kind of taken aback when he said that. Because, you know, a guy who does only apartment buildings, that's all he does, why he would recommend that. But I think that's exactly why.

You start with one house, so you go with another house, then maybe a duplex, then a fourplex, and you get a 20-unit apartment. And by that time, each step adds to that capacity aspect we're talking about and the reputation. And then if I were to go in right now, try to go get 100-unit, you know, apartment complex, I probably would have a lot easier time than most people because I've got that built up reputation. Yeah. Have you ever looked at a HUD one, Brendan? A large. Not a large one, no. And actually curious about that. Do you know anything about that?

Well, I don't, but going back to my neighbor, it's very interesting because it's, he, again, he's had a multifamily for Wells Fargo in this area, in this region. And he came from California. And these HUD loans, he said it's like a pregnancy. It's like it sounds, it's fun in the beginning. It's not so, and it's painful. But he, you know, doing loans, these $5 million loans. So these are 100 plus unit, you know, apartments that he's doing. And three, he's doing 35 year AMs at three and a half percent interest rates, you know,

with five, five percent down. It's like, how do you? You're just funny at that. So, and like that's crazy. Yeah, yeah. But again, now it takes about not, it's not easy. It's a lot of paperwork, a lot of government, you know, like, it's not easy to get them. But, you know, what is easy, right?

And it takes nine months. But if you can get that type of financing structure, a 35-year-old. I mean, and it's government-guaranteed mortgage. I mean, that's a good one. I mean, that's a good structure. Yeah. That's awesome. I was actually just talking with Ben Leavovich about that the other day, how he mentioned

he wanted to buy like a large property. I said, well, we need a loan. He's like, oh, a HUD loan. And I never even really considered that before. You know, you hear about HUD for, you know, the small 3.5% down single family homes or, you know, small multifamilies. But there is a whole world out there of FHA or whatever loans for these large properties.

So, you know, someday we'll have to actually talk to a, you know, a, you know, a, a, a major, you know, apartment guy that uses them. That'd be really a fascinating show. Yeah. If there's somebody who's listening who actually uses these hud loans, we'd love to talk to you. Yeah, hit us up for sure. Cool. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead list. such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast.

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We talked about character and capacity. It's like about capital. And that was, if I remember, right, my memory is terrible. But that's like how much money you have, right? I mean, essentially. Yeah. And, you know, what they want to see is, especially with, you know, as I said, a form of commercial underwriter.

So they want to, you know, what I want to see is, are we on the same side of this? You know, or is the bank a true stakeholder in your company? You know, are we both positioned for benefit? Are you at risk in this as well as I am, right? So, you know, have you put money into this company and left it? What's the equity position like of your balance sheet? What is, you know, what you don't want to see is a company that's just every year. It's in the overdraft and it's drain it.

You know, the owner drains the cash out of the company and, you know, there's nothing left. and it's just a very weak balance sheet. So that's very balanced sheet-driven issue right there. Okay. Gotcha. Gotcha. And obviously to improve that, you draw less of the money out of the company. You leave cash in there and make smart decisions for your company, not just yourself.

Yeah. And that's the 80% LTV. I mean, that's a regulatory-driven number. But, you know, there's all kinds of ratios in there. If, like, let's say you get a loan on some equipment and it's a sales. and it's a 70% LTV. I mean, all that's regulatory driven and credit policy driven,

but it's really look at what's behind the scenes of like, you know, the banks are just wanting to see, make sure that y'all are on the same page and both of you guys are at risk, you know? So that's what you're looking for? Yeah. Well, so what about specifics?

How much money? I know that you can't really answer this directly. But let's just say I'm looking to refinance a half a million dollar apartment complex, you know, a small apartment. How much cash? Just hypothetically. Hypothetically. Yeah.

Hypothetically. Of course. If I needed to refinance my apartment complex, do I need $100 grand in the bank? Do I need $500,000 or do I need $1,000? I mean, what would you feel comfortable as an underwriter scene? You know, the, well, the cash in the bank isn't that, that important as the appraisal of the, of the property. and to making sure, like, you know, I would be happy to give you a $400,000 loan. You know, and let's say you don't have, you know, because you've invested in some refurnishing

and, you know, maybe your cash position's a little low. I mean, that's fine to even do a cash out refinance and maybe pull it up to 85% LTV. So that's not as important as just making sure the appraise value of the apartment complex is fine. Okay. And I do. I mean, I am self-serving in that. because I do need to refinance my apartment. And I've been talking with this local bank, which to bring us back to earlier, I was talking to the guy who refinanced my personal house.

And then he's refinancing two of my small multifamilies. And I mentioned to him one day I got an apartment I needed to do. So he said, hey, let me introduce you to our lead commercial lender in the company. So the three of us are sitting down for like coffee next week sometime or the week after when I get back from vacation. And we're going to talk about that. And that's exactly what you're talking about there, the introduce scene and relationships. Yep.

Okay, let me, and we'll get back to the season, but I want to tell you two things, Brandon. Yeah. Okay. One, try to find another bank of that size, okay, that's a direct competitor to that bank that's courting you right now for a loan, okay? And then ask to speak with their commercial banker

and tell them the situation and get a rough approximate for range, okay? And so then when you go back and then there's a way to do it very artfully, so what you don't want is to make both parties mad and not want to deal with you, obviously. But there's a skillful way to be like, I just did this actually. I just got an unsecured line of credit. And I said, and, you know, it took a little while. And I said, are we still good?

Because this other bank is, they're asking for my business as well. And I can just go there if that would be easier. for you guys and they were oh no no no no do you need like what do you need what do you need you know so they so okay so that's the first thing to do um and the second thing i was going to mention and this isn't necessarily uh for you but like before when i talked about how i called 10 banks and i couldn't get a loan and i was just doing everything the wrong way uh you know that uh what people do like when that happens a lot when people call around and they get a contract like sound a duplex And this happens a lot with duplexes and triplexes.

They'll call and they'll get a hold of somebody that works on the front line and they'll be like, oh, we don't make those type of loans. And then they'll just hang up. Well, that's not true at all. Like, your bank makes those type of loans. You're just talking to the wrong person. So I have to speak with the small business banker or the commercial banker, you know, something of that effect.

And even it's very interesting. If you're dealing with a big megabank, don't ask. asked to speak with the commercial real estate department because they just deal with like the mega type. If you're a full-time professional, the Ken McElroyce of the world, right? And the big publicly traded, you know, they just deal with that. So don't call and act like you're, you know, you're the man and you're about to go public next year. But, you know, if you're just needing a loan on a duplex, ask to speak with a small business banker or like a commercial banker. So those are just awesome.

Yeah. All right. So we talked about character compatibility. capacity, capital, and why don't we jump into conditions here? So can you expound upon conditions a little bit more so we can kind of get a deeper look? Conditions is what you have the least control over, and that's just like your general economic climate. But here's the important thing to remember when you're writing a letter or putting together a presentation for a lender, which I think is a great thing. if you're serious about developing a lending relationship.

So the conditions. Okay. So I think what the lender wants to see is they are lending on a productive asset. Okay. So that's the important thing. So, you know, the current condition, that's why like you have a tough time getting loans in the war zone of your, you know, Detroit or whatever. It's because the conditions are bad, right? It's why you have a tough time getting a loan on raw land.

it's an unproductive asset. It's not producing it. So that's what the bank wants to see is, are you improving this asset? It's a good asset. Yeah. Gotcha. All right.

Okay. So is there, is there anything beyond just the simple improvement of the asset? I mean, ultimately it sounds like this is the one that's mostly out of your hands. It really is. And it really, you know, conditions is, it's more, again, this is all lending.

It's not just real estate, but what they want to see, well, let's say this is, you've got some bigger pocket listeners that own some high-end hotels. So they're very sensitive economically to the economic downturn, you know, because it's very cyclical. So that's what, you know, okay. So that's conditions. All right. Yeah, so conditions are pretty much out of your hands, but let's jump into collateral and maybe how we can improve that. All right, great. And collateral is maybe the most important. So that's cash flow, of course, service in the loan. Because with, you know, banks, and I'm just speaking for banks here, you know, they want to have cash flow paying back the loan, obviously. So that's what you need to show your lenders. But your collateral, you know, they want to make sure it's good collateral. But they also want to make sure that it's enough to, you know, if the loan goes bad, that, you know, they'll have enough collateral in a stressful situation to liquidate that collateral.

But here's a tip that your listeners can utilize because this happens a lot. People get turned down because their appraisal is bad, right? I mean, that happens all the time. And it's happened to me, right? But here's what you can do is if you have like an investment account somewhere or something else you can pledge, or let's say maybe a better example is if you want a lot of credit, because a lot of people want lines of credit. And unsecured lines of credit are really hard to get.

Is pledge an investment account or some other kind of collateral? Like maybe if you have a car paid off or whatever. So you can pledge that as collateral. So for your line of credit or for any kind of loan that you want approved if you get a bad appraisal or something like that happens. Jimmy, I got a question. Yeah. sounds kind of like what Brandon does is at the poker table.

I mean, isn't that what that is? Isn't that like, hey, we're all playing poker and he's run out of cash so he throws his car keys down? I mean, isn't that what it is? I mean, I almost took his car a couple times. You got it. You got it. But it works. I mean, what do they call it, like cross collateralization or whatever?

Yep, that's it. I mean, obviously that increases the risk quite a bit, quite a bit because you'll lose it all, you lose it all. Yep. And another problem, another problem from the Linde perspective, if something gets cross-collateralized, is it's very hard, like you were talking about refinancing your apartments, Brandon. It's like, let's say you're, you know, to get this awesome rate, you've got to pledge this other little single family home that you own free and clear and you, you just cross-collateralize

of no big deal. Well, it's a really big deal if you want to sell or refinance again. because you can't split up those assets. Or there's usually a big, you can, but there, I mean, you always can do, you know, you can do anything, but there's going to be a big fee involved. There's, it's like a big headache. A lot of lenders don't want to deal with it, you know, so there might be a prepayment penalty. So that's another issue.

Yeah. Okay. Yeah, that makes, what do you recommend? Sorry. I was going to say, what do you recommend when it comes to cross-collateralizing? You know, obviously, we're not going to think. throw down your big fuzzy dice or your diamond ring. I mean, you know, we're talking about something more substantial.

You know, is it typically a smaller rental property or something like that? Obviously, it depends on the situation. But what I personally am looking to do this year is to utilize my, I have like a small little investment account with, you know, stocks and stuff. And just to pledge that because here's the, the thing. And I, like, you know, I know the previous guest talked a lot about, you know, having, like, an investment account for diversification. But if those stocks in that bond portfolio, you know, is throwing off, you know, a dividend yield or something around 5%. And you get a lot of

credit around that same range. I mean, it's, it's almost like a 0% loan, right? Yes. okay so like you're not I mean and the if it stocks hopefully you know I know they crash and burn sometimes but hopefully they in the long term they go up a little bit so you know you're not

here's and this is all driven by a mistake I made it's like I've made like every mistake in the book probably you know and so like you know the first first house we bought you know I like sold off all my stocks even in my like some IRAs I had right and I paid all these fees and

penalties. Well, now I know that you don't have to do that. All you have to do is pledge those and use that. You don't have to sell them. You just pledge that so the lender is in a good position collateral loss to make you a loan. Yeah, that's great. That's great. Is that answer your question, Josh? Yeah. Yeah, it does. It does. Well, so I'm going to kind of take it, I guess, one step past the collateral. I think we pretty much covered that. And I, I think, I think these five Cs are fantastic. I know Brandon and I didn't intend on having this entire show surround the five Cs. But I think, I mean, I think this is superb information.

And I'm sure very few investors know about all this, especially the newer guys. So thank you. But really quickly, how important are financial statements, business plans? Do underwriters care? Do those come into play? or are they just kind of tools for supplying the other information? Yep. Great, great simple question.

Here's my not-so-simple answer. If you want to really establish yourself as, you know, if you're serious about real estate investing and you're serious about wanting to develop relationships with your bankers, you know, this is what the professional real estate investors do, right? And is they make me a presentation that goes all through all the Cs that we just mentioned. Okay. With the, like, this is the deal.

This is my personal financial statement. This is my tax returns, you know. And ironically, the bigger deals that I underwrite, they get done faster because these professional investors, they're, it's very organized and it's, it's, I don't have to dig. I don't, you know, it's, it's, so they get done faster than these little $30,000, $50,000 loans because they don't have to go hunt around from information. They don't email in the right tax return. You know, everybody gets stuck in email hell and, you know, nobody likes that, you know. So that's, so if you're serious, I mean, it doesn't take that much time at all to develop a presentation and of all your tax returns, PFS, blah, blah, blah, a little banker's book.

and take it around. Yes. So ultimately what you're doing is handing on a silver platter all the information that the banker needs. And by doing that, if they're looking at you versus the other guy, that competitor that may not have wanted to share the banker with you, they're going to lose no matter what because frankly, you're organized, you're showing your level of professionalism.

You're actually, I think by doing so, improving your character by saying, hey, I'm a professional. I know what you guys need. I know what you want. Absolutely. And that's the, you know, that's the thing with the reality is, is that, you know, bankers are, you know, going back to what we were saying earlier in the podcast about reversing this process and making it like a sales process, you're just making it easier. Because if you're dealing with a larger loan, right, for a larger apartment complex, they're going to have to take this to a loan committee, maybe the board of directors. And the loan officer is going to have to sell you, right? to me, the underwriter, the credit officer. And if you've just got a bunch of random tax returns and stuff, I'm like, eh, he's not, you know, he doesn't look serious. He doesn't look like he has stuff together. And I don't want to loan money to people who don't have their stuff together, right?

That is, that's a great. That's great. Actually, like, I just feel totally like bad now. Like, I just hated my, you know, banker a few weeks ago, like just a pile of stuff. And I'm like, right now, right now. I know. And I'm like, man, I am so going to change that right now. I mean, if I could like summarize, like, what kind of this whole show has been about.

It's like if you just take a proactive approach to lending, the way that we might make a proactive approach to our investing strategy. Yeah. Everything just works out better. It's the same roadmap kind of, what do you call that? I always talk about a roadmap, right? You just plot things out ahead of time. Then you just follow your own map. The same thing works for lending, it sounds like.

Yeah. And no one thinks that it that way. No, but, you know, I tell people to like, you know, shoot the moon. go listen to publicly traded conference calls on publicly traded home builders or publicly traded apartment complex. What do they talk about for half the conference call? Their financing strategy, you know, what are they going to use? Are they going to issue equity? Are they going to get more loans? What's their balance sheet looking like? So, you know, obviously they're serious. They're publicly traded. Like, you know, get if you want to be a serious real estate investor,

treat it like that. Yeah. Yeah. That's awesome. No, that was, that was incredible. Really, really great stuff. We need to move on. And with that, we are going to move to the... It's time for the fire round. Fire! All right. The fire round. 30-year fixed mortgage or a 5-1 arm,

or let's just say, you know, I'll add to that, any kind of variable rate mortgage. What are your thoughts on that? from a completely opposite, depending on who you're asking. Me, the real estate investor, I go with the 30 year all day, every day. It's pretty much all my loans. As a lender, I structure it a 5-1, a 3-1 if I can get away with it. So it's a bank's interest to try to get the lowest possible, you know,

term that's fixed and then go to variable. But it's in our interest to go the longest possible. Yeah. Okay. And so somewhere in the middle probably is where possibly you're going to end up meeting if you negotiate of some kind. Yep. And speaking to negotiation, if you want to get negotiate a really low rate right now, just, and you're okay with the risk. I mean, just ask what the rate would be on a completely variable loan. I've had several hotel investors do this because,

you know, they've, their LTV is at a great position. They're okay with the risk. They've got the cash. And they're just like, give me a completely variable rate. I don't, I'm fine with it. And they, and man, they've gotten some extraordinary. deals. Interesting. Yeah, I mean, it's risky, but it's definitely risky. It's a strategy, especially if you have the cash and you can handle the risk. That's great. Cool. Yep. Yeah. Right on. All right. So, hmm, no money down. It's one of those phrases that that people like to pitch and sell as a way to make things happen. So is there any way that you can see no money down deal happening with a traditional loan? No. I mean, it happens if you want to use

collateral, like I was talking about other, like pledge and investment account, like cross-collateralize it with another piece of property that you have paid off, something like that. But a lot of the financing strategies that, you know, the gurus talk about and people ask about on the forums, you know, I know that they work and they're out there, but generally speaking, I mean, it's just you're looking for a needle in a haystack. And, you know, it's just, I don't, for me personally, if you've got a structure in place that can work around that, it'd be best just to go with that versus just trying to find no money down. Yeah. No, that's great. How about this then? Next question. Somebody outside of the U.S. Can they still get a loan, a commercial loan? Are they still, are you working with these people? No.

Here's the reason, here's the primary problem with that is they have foreign tax returns. And so that's impossible to underwrite for somebody like me who, you know, I don't deal with, even if Canadian tax returns, I mean, you need to deal with a Canadian bank because they're, they know how to underwrite a Canadian, you know. So that's the primary problem. with that. Okay. All right. And there probably are some banks out there somebody that does it. Oh, absolutely. Oh, yeah, absolutely. Yeah. Okay. Cool. Right on. Right on. All right on. So can somebody go and get a commercial loan on multiple single family houses or do they have to, because we're dealing with single family houses, do they have to go through a traditional? Yeah. Portfolio loans are, uh, it's really interesting. People talk about it in the Bigger Pockets Forum like it's this unicorn, you know? And, uh, and it's really,

not, I mean, a big deal. I mean, I do them all underwrite and loan, you know, make them all the time. It's not that, you have to have a proper presentation for your, you know, your lender, and you obviously have to have equity and, you know, it has to be a good position from a portfolio perspective, but they're not, they're not that hard to get for community banks and even credit unions, yeah. Yeah, that makes sense. Okay. And I know there's, there's a bunch of players who started to really jump into the space, particularly like Blackstone with their B2R finance and others who are really targeting people specifically for these types of loans as well. Yeah.

Yeah. And that's going to be probably bigger in the future. I think that's probably how lending is going. Because I know a lot of my friends that do that. They put all their, they have equity investors and then they put up all cash up front and then they get a portfolio and then they do a cash out to grow or to. pay themselves back or something like that. Yeah. Interesting.

Yeah, I think things are definitely changing right now. It'll be kind of fascinating to see where it all ends up. Yeah. All right. Well, suddenly there's a lot of interest in single family space, which hasn't really had interest for a long time. But, you know, there's the wolves are starting to come in, so to speak. Well, cool.

All right. Hey, let's move on to our final round of the show. this would be our What is your favorite real estate book? I've thought about this for a while and I'm actually going to give one that's, it talks a little bit about real estate but I don't think anybody's recommended it

on the podcast before, but it's M.J. DeMarco's Fastlane book, Millionaire Fastlane. It sounds like a cheesy title, but he talks about building systems around real estate in the end part of the book And it's like Tim Ferriss is for our work week. But I think it's just different. I like it more because it's more granular and it just gives more details about building systems for your business.

Yeah, cool. I think I remember he was over on, I think, Pat Flynn's podcast a while back. Yep. Yeah, so I've heard the name. I'll check that book out. Right on, right on. All right. How about your favorite business book?

What is it? Favorite business book? I'm going to go with 80, 80, 20 sales and marketing. But, you know, I'm big into like 80, 20, you know, just how to figure out, like, how to scale a business and things like that. So I'm all just, I'm completely focused on, you know, Perto's principles.

So I'll just go with that. Okay. Cool. And I'll link to those in the show notes also. All right. What about hobbies? Any type of things that you do for fun outside of real estate? Yeah, I actually like to hunt and fish and do that here in the South.

I like to ski in the winter. So that's my hobbies, yeah. Right on. Do you guys have skiing down there in Tennessee? We do, but it's a little embarrassing. I usually actually like that. I don't like to tell people. Like 18 of your mountains and one of ours, right?

Yeah, it's pretty embarrassing, especially for you guys out west. But I'm going a couple weeks out west. So, yeah. That's cool. All right. Last question of the famous four. What do you believe sets apart successful investors from those who are not? One word, organization.

And so I would just, you. Again, like I was talking about the presentation and things like that. You know, if you want to just email in all your tax returns and whatever somebody's asking you, or you want to have like a comprehensive plan presentation book, whatever you want to call it, and then hand that out. I mean, you're at such a better advantage strategically to negotiate, to get the loan you want. It's just a better position to be in. Awesome.

I love it. I love it. That is great. All right. Well, Jimmy, listen, man, it's been a real pleasure. We definitely appreciate having you on the show. I want to thank you for taking the time. And where can people find out more about you? Yeah, hit me up on bigger pockets. I have a negotiating guide. I have linked in my bio for everybody.

And then I have a personal blog as real estate financehq.com. Awesome. Awesome. All right, man. Well, thank you so much for being on the show and we'll see you around. Thanks, guys. Have a good one. All right, thank you. All right, everybody. That was our show, show 55 of the Bigger Pockets podcast. You can check out the show notes at biggerpockets.com slash show 55.

I don't know, man. I know I said it during the show a couple times, but that was awesome. What do you think, Brandon? That was awesome. I learned probably like a thousand new things that I had no idea about. So hopefully everyone else out there feels the same way. Yeah, and we all learn that you're quite disorganized. I'm so unorganized.

I'm glad to know that. I'm glad you've been working for me, and I'm just figuring that out. Yeah, I'm completely a mess. Ah, man, it's all good. No, that was great. That was great. Well, listen, hopefully you guys enjoyed the show. Again, I know I'm super proud that we crossed our million-listen milestone.

So thanks again for those of you who, are regulars. And if you're new to the show, get back there and check out our previous 54 shows. There's something to learn in every single one of them. So definitely make sure to do that. Otherwise, thanks for listening. Check us out on Facebook.

Facebook.com slash biggerpockets. Twitter, Twitter.com slash bigger pockets. If you're not following this on those places, you know, if for nothing else, it's a great place to kind of keep up to date on new content that we're sharing. But we also share news. If ever there's a problem with the site or anything,

else, you know, it's a good channel to turn to, to find out about what's going on. Otherwise, if you're not active on bigger pockets, get active on bigger pockets, jump in, get a profile created, and don't just sit there with an empty profile, introduce yourself to the community, get involved, ask questions, help people out, connect, communicate with your peers, participate. Because what happens when you participate, Brandon? You make money. I mean, I think that's pretty fair. I mean, I think that's pretty fair. I mean, those people who are engaging, connecting, participating are getting to know their peers and their peers are getting to know them. It's invaluable.

So do it. Get in there and make it happen. That's about it. That's all I got for you. Thank you so much for putting up with Brandon. And, you know, hopefully we'll see you for the next one. Are you not going to take us out? Okay, fine.

I give them the opportunity. He chose not to. This is Josh Dorkin. Signing off. Damn it! You're listening to Bigger Pockets Radio. Simplify Real Estate for investors large and small. If you're here looking to learn about real estate investing without all the hype,

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