Business Innovators Radio - Episode 41: Financing the Dream: A Remodeler’s Guide to Renovation Loans with Jennifer Goldsby

Episode Date: April 4, 2025

Part of the Construction Executives Live Series As demands for a higher standard of living increase and costs for labor and materials continue to rise, more homeowners are turning to financing to pay for major home improvements. Remodelers know the key to a successful project often lies in the client’s ability to secure the right financing. In this episode, we’re joined by Jennifer ‘The Reno Gal®’ Goldsby, VP of Renovation Lending for Diamond Residential Mortgage Corporation and renovation mortgage expert, as she introduces the concept of financing home improvements by leveraging future home equity. We’ll explore how remodelers can better support their clients in navigating funding options, and what they need to know when working with mortgage lenders. Packed with actionable insights and real-world examples, this episode is a must-listen for any remodeler looking to improve their bid-to-project conversion ratio by recommending alternative sources of funding to their clients.In The Zonehttps://businessinnovatorsradio.com/in-the-zone/Source: https://businessinnovatorsradio.com/episode-41-financing-the-dream-a-remodelers-guide-to-renovation-loans-with-jennifer-goldsby

Welcome to In The Zone and Construction Executives Live, brought to you by U.S. Construction Zone, bringing you strategies for success with construction innovators and change makers, including In The Zone peer-nominated national award winners. Here's your host, Jeremy Owens. Welcome back to Construction Executives Live. I'm your host, Jeremy Owens, owner and founder of U.S. Construction Zone and three generations improvements out here in sunny Northern California. Thanks for being here. We have another great show, action-packed, lots of content to get to. Before we get into that, I have kind of a fortuitous U.S. Construction Zone platform update.

We just launched our payment platform called Builder PayPro. And let me paint you a quick picture for you. contractors out there. You know, you do a project, you do it well. There's some change order things that come up. You know how change orders are. They tend to beat up your margins a little bit. Homeowners sometimes don't like the change order. Don't want to pay it. You end up doing a bunch of extra work for free just to, you know, to get the project done the right way. At the end of the job, everyone's happy. You're ready to go. And now you have to collect payment. And when you, you send them invoice, they say, I would like to pay with a credit card. And you're like,

crap, there goes another three and a half percent. So what we did is we built a very intuitive platform called Builder Pay Pro that allows you to give them two options to pay. One, cash, ACH, no charge, one credit card where they pay the fees. So it's a very transparent way of billing and not having to eat the fees. And it really connects to QuickBooks online. So automatically would, you know, have double work. So as soon as you collect and receive that payment, it automatically goes into your QuickBooks account. So check out Builderpaypro.com.

If you want a free demo, reach out to me info at builder paypro.com, and we can show it to you. We are currently giving the platform kind of an upgrade right now. So it's a good time to take a look at it to be kind of first up in taking a look at that platform. So thank you so much. We're also sponsored by the great team over at Build12, Build12.com. Automate your marketing team and a marketing system into a renovating machine. If you have the Build 12 system like I do, along with Builder Pay Pro, you're cooking with some fire.

So feel free to reach out to Les over there at Build12.com and he'll do a free demo for you. Today's show is Financing the Dream, a remodeler's guide to renovation loans. As demands for a higher standard of living increase and costs for labor and materials continue to rise, more homeowners are turning to financing to pay for major home improvements. Remoddlers know that the key to successful project often lies in the client's ability to secure the right financing. In this episode, we're joined by a mortgage expert as she introduces the concept of financing home improvements by leveraging future home equity. We'll explore how remoders can better support their clients in navigating funding options, and what they need to know when working with mortgage lenders. Packed with actionable insights and real-world examples,

this episode is a must listen for any remoder looking to improve their bid to project conversion ratio by recommending alternative sources of funding to their clients. We are fortunate enough to have a 20-year mortgage veteran on the show today to help us wade through all of this. Jennifer, the Renogal Goldsby, specializes in renovation financing during her 20-year, year plus career, Jennifer traveled the nation helping big name mortgage lenders build renovation lending platforms. In recent years, Jennifer returned to her roots and she took and she can work directly with homeowners and buyers struggling because of a lack of housing inventory and affordable housing options. She teaches homeowners and buyers how to leverage renovation financing to

purchase fixer up her homes for their families or renovate the home they already live in to better meet their family's needs. Please help me welcome. Jennifer Goldsby. Jennifer, thank you for being here. Thank you for having me. That was a mouthful. That was a lot of information. I just had to spit out there. I don't like to talk that much,

so I prefer that you do most of the talking the rest of the way. How does that sound? Sounds fair. So how did you get the, coined the term Renogal? How did you get that nickname? I, it actually didn't start out as the Renno Gal.

I actually was known as the rehab lady. So I got into mortgage lending after, a particularly awful time trying to purchase my first home with my husband. And I wanted to learn the business myself and really struggled those first couple of years. It was very difficult to just to originate enough to feed us. So out of sheer desperation, I tried something new, something that others weren't doing, which is dipping, you know, dipping my toe into the waters of renovation lending. And before I knew it, other lenders were sending me deals that were falling apart on their desks.

And they just say, hey, call the rehab lady. Call the rehab lady. And so, you know, 20 years later, we live in the land of branding, right? Right. 20 some years later. And I told my mom a few years ago, like, I'm going to start branding myself. I'm going to, you know, run with this reno or this rehab lady. And she said, Jennifer, they're not going to think that you're working with rehabilitation

loans and houses. They're going to think you're working with substance abuse problems. It's a tricky. Yes. Yeah. So I met with a friend who's a designer. and we collaborated and she came up with an alternative, the reno gal, and a beautiful logo, and it's just stock and it's been very well received.

Awesome. Yeah, I like it. It definitely fits. So, yeah, what kind of a wild ride you've had just to kind of enter in the industry. Did you always start out in the renovation side, or were you kind of in other aspects of the financial market before them? I actually started out in computer programming, and then my husband and I wanted to buy a house, And that first attempt did not go very well at all. And I said, look, this is going to be the largest investment we make. I want to understand more about it.

What do you think if I switch careers? And he said, do whatever makes you happy. And like I said, my first year in origination, my W2 came in and it was like $11,000. And I cried. And I felt really sad for myself. And I thought, I'm going to have to do something different. And so I knew about these rehab loans. nobody else was doing them. I was I was really intrigued. I was very interested. I studied and I got my

hands on whatever kind of learning material I could. There wasn't much. So I almost kind of had to teach myself the products. And the rest is history. I did that first rehab loan and and it just spun out from there. Yeah, the power of motivation, right? I mean, in entrepreneurship, you had a little bit of that to kind of fuel that. So I wanted to get into a little bit about kind of where we are. So obviously that there's there's kind of news that inflation is easing, although very slightly, right? You know, some cost of goods have come down. There's still stuff that are very high. Remodeling costs are still extremely high. I don't feel that those are those are coming down. Who knows what's going to happen with tariffs and supply chains and things that happen down the line.

But we're definitely feeling that our costs are very high. And obviously that means homeowners or our clients are the ones that are going to have to pay for that. So do you see the need for financing increasing year over year or what should we kind of expect going forward? I do. And if inflation is decreasing, I'm not seeing it. I'm not feeling it. What I'm seeing, what I'm observing is that that gap between the haves and haf knots is widening. Maybe that's just me, but that's, you know, in my little corner of the mortgage world, that's what I'm seeing. And we're starting to see, I don't even want to say we're starting to see. We're pretty well into an era where people are pretty heavily relying on their credit cards.

So that suggests that they've whittled through their savings. You know, you've got the higher-end buyers that are paying cash, right? And there are plenty of those. But then you've got the average consumer, the average American, and they've got a lot of credit card debt, little savings. It's tough for them to come to closing with the cash that they need. So I just, I don't see a decline for the need for financing in the near future, if anything, I would say that that need is going to increase. And then when you think about now remember, and I understand that I'm talking to a group of remodels, but remember, they can use this financing not only to remodel the home they have, but they can use it to purchase the house as well. So when you think about the low inventory that's out there and folks that are struggling to find affordable housing, we really have one of two options.

either we're building new housing or we're renovating the existing housing that's out there that isn't habitable at this point. So I see that, I see the need for financing increasing for that reason as well. And we live in a changing world. You've talked about it, the politics, the tariffs, and who knows what else is coming down the pipe. But we're seeing on the political landscape, we're seeing changes with FIFA, which oversees Fannie and Freddie. And those things are already hitting us. So who knows what's to come? You know, we live in a changing world. we're going to have to embrace new ways of doing business. And I think this is all part of that. We also live in a really exciting time with AI and VR and smart homes. And how are people going to afford to upgrade their homes? This is a means to an end. And maybe lastly, I could add the

influx of natural disasters. And not everybody is covered by homeowners insurance or flood insurance. So what happens when you don't have coverage? I think for all of those reasons, we're just going to see a continued increase in the need for financing. Yeah, no, I agree. I mean, like I said, we're feeling the rise in prices. We're always kind of wondering, you know, is there top to this? You know, when we get increases from our manufacturers, we don't get a decrease. You know, we get an increase saying because of X, Y, or Z.

It could be fuel. It could be whatever. But they don't hit us the next year when those costs come down. So I'm just kind of curious where we're at from a cost standpoint, because you're right, It just feels like everything's coming out, especially the middle class. You know, we're kind of hammered with with costs. And then because we're, a lot of us are entering homes or we have a home, you know, remodeling a home is like, what's, you know, that is a lot of money to do anything.

Kitchen. It is. You know, we do siding windows decking. None of those things are cheap. So I feel it from from a homeowner standpoint that, hey, look, this is just, this is kind of our landscape right now. Unfortunately, I don't see it going down. So if you want to do this, you kind of have to, you know, pay less now or pay more later kind of thing. So kind of describe to us in detail what is renovation lending?

Because when we first chatted, I didn't, I never heard of it. So I know there's a lot of people on this that are kind of in that same, same boat. Why isn't it mainstream? Why have we not heard of it? Well, let me tell you what it is. So we're talking about first lien mortgages that can be used in one of two ways, either it's a buyer who's looking to purchase a house. And for whatever reason, maybe that house isn't going to pass an appraisal, it would allow them to purchase the house and include the costs

for financing the home repairs into their new mortgage. So that's one road you could take. The other would be, I already own a house and I need to do some remodeling or updating. I don't have, you know, the money that it's going to take to get this job done. So we could refinance their existing mortgage and take out additional cash to do the renovations. In either case, the money is held back in a renovation escrow account. So we're not just cutting a $100,000 check to the homeowner and letting them go on their merry little way, hoping that the work gets done. Buy a boat. Yeah, we keep those funds. We manage those through a draw process. But it's a neat suite of programs that are available to homebuyers and homeowners. And as far as why,

it's not more readily known. Your guess is as good as mine. I wish, I always say that this is the mortgage industry's best kept secret. I wish we could blow the lid off of this and people would know this is one other option of buying a house or refinancing and remodeling a home. Are there a lot of banks that just don't get into this? Like, is there that too? Is the barrier of entry very high?

I don't know that I would say the barrier of entry is high. What I would say is these are more complex loans to originate. And so most people, especially during the feast times, you know, we've got these feast and famine periods in our industry just like many others. And usually loan officers and lenders are going for the low-hanging fruits. So they're more focused on your conventional deals, your FHA deals, the easy stuff. It does take quite a bit of work to build a renovation platform. And it really does impact every part of an organization, a lending organization.

So it requires a little bit of work, but it's nothing that you can't overcome. I know some other hurdles that lenders have is that there are more parties involved on these loans than there are in traditional loans. So you're going to have obviously contractors involved, right? And a homeowner may shop the job. So there may be two, three different contractors that they're shopping with, right? And we've got to wait for that contractor selection to happen and a bid to come in. So that adds a level of complexity. And then in some cases we have consultants.

We'll chat more about consultants later. But in some cases, we have consultants that are required by, let's say, HUD for an FHA renovation loan. And that adds a level of complexity. So there are certainly some extra steps that need to be taken with the right training, with the right guidance. Any lender can do that. But to your point, I mean, there are tens of thousands of lenders nationwide and probably less than 200 that do more than one of these a year. So there are very few lenders considering, you know, who offer this program. No wonder why I've never heard of it, right?

Yeah. Yeah. So describe the difference between the renovation financing and consumer financing. What are the kind of the advantages of one or the other? Yeah. I think there's a place for everything. So if a homeowner is taking on a small project, especially if it's an urgent one, their furnace goes out, it's a dead of winter. They need, they have no money.

They need quick financing. you know, maybe consumer financing is the go-to for something like that. And I've chatted, now, mind you, I'm not in the consumer financing world, so I don't know everything there is to know about that. But I've chatted with contractors and the gist that I'm getting, and you correct me if I'm wrong, is that most of those consumer lines, they have a relatively short payback period, maybe six, 12, 18 months is what I hear, 12 to 18 months. Yeah, a lot of them.

Okay. And usually they have a cap on how much the homeowner can borrow. I've heard 50,000, I've heard 75,000. I don't know what the average is, but am I spot on there? Yeah, I mean, there are some that have gone up to 100 or so, but, you know, for the most part, yeah, all depending on credit, right? So, you know, they could say you have access to 100 grand, but once they fill it out, they have 30. So 100,000 and paying that back over 18 months? Yeah, those ones would have longer terms.

Those would be 5 to 10. Okay. I've seen that extend out a little bit more, but the interest rates are pretty high right now, right? So, you know, when it gets that back and they're like, crap. And the other challenge that we have, again, is contractors getting beat up is that they have high dealer fees, right? So if you're doing a green sky or you're doing a synchrony or and they want this special 12 months, no interest, well, you know, you're going to pay a, you know, a big hefty 10% dealer fee on that. And, you know, the ones that aren't so great, you know, that are in the teens, you know, maybe you only pay a three. percent or something like that. So it's like it's all it's difficult for us to manage because

again, it's hard to it's hard to pack in at the beginning of a job a huge financing fee. If we don't even know they, A, we don't even know they need it at this point. And B, that makes it not competitive, right? And they just say, build it into the cost of the project. Well, we're contractors. We're, we're pretty tight sometimes, you know, and to do that, you're going to miss out on a lot of jobs. So it's kind of a difficult thing. And the other component that maybe you can answer too is that people don't want to talk about their finances as much anymore. They used to be like, hey, Mr. Mrs. Jones, do you need financing or part of it? Have you saved for it? And it's just like a no-go. Like you can tell they don't want to talk

about it. It's none of your business, that kind of thing where maybe it's like they're afraid to show their cards, you know, like they don't want to say like I've saved 30 and, you know, we're going to need to finance the rest. They don't want to say it. So, it's difficult because we can help them with things, but we need to be able to get to, you know, how much they saved or nothing, then we can help you with that, you know. Yeah. So I knew some of that, but I didn't know that some of the terms could be extended out five to 10 years. And I didn't know that your fees could be as high as 10%. I had been hearing around the 3% range here in my backyard in Indianapolis. So it's interesting to get some of that feedback. I appreciate that.

The advantage of renovation lending over that would be that the costs are amortized. over oftentimes a 30-year term. A 30-year mortgage is what we see most often. So a six-figure job, and we're seeing more and more six-figure jobs. I've got one right now in the pipeline for $250,000, and we've got others that are higher than that. So, you know, we're seeing more, we're seeing those costs go up. They're not coming down.

You know, they're going up. To be able to amortize that over a 30-year term makes it much more affordable for a homeowner. And then the interest rate is, whatever it is. let's call it, you know, we'll call it something in the six or sevens maybe. That's far more appealing than maybe some of the consumer financing options. You mentioned the teens. Some of those rates would be in the teens. And then finally, what I would say is the interest that is paid on a mortgage oftentimes is tax deductible. So a homeowner can get that benefit to. I think at the end of the day, what it boils down to is, you know, if you've got a smaller project urgent, like I said,

consumer financing may make sense. But if you've got a larger project and you've got a homeowner, would be willing to do more if they could get their hands on enough. If they could get financing for a higher budget, I think what you'll find, what I see, and you're probably going to laugh when I say this is that, you know, nine times out of ten, they come to you and they say, I want X, Y. And then when you're there, they're like, oh, and by the way, can we add this and this and this, you know, not realizing how those costs are going to increase. So when you get access to financing that will allow you to borrow more, your projects will increase as well. Oh, definitely for sure. Yeah. And let's talk a little bit about equity lines, you know, the HELOC kind of situation. You know, obviously those come and go, right, depending on the market, depending on interest rates, you know, back a couple years ago, when the interest rates were so low, everyone was dipping into their house to go to go help with that home. That's not quite as common now. So let's talk about that a little bit.

Sure. Home equity lines of credit or helocks, you're right. The market has, uh, an appetite for them and then they don't you know it changes depending on risk appetite i think like i said with the consumer financing there's a time and a place for everything personally i keep a he lock open on my home for emergency situations always i always have one open now whether or not i use it is another story but i always have it there for an emergency but some helocks are going to be capped at say 80% of the value of your home 90% of the value of your home if you're fortunate you could find one that would allow you to use 100% of the value of your home on that second line, that second lien, but they're going to be based on the as-as value of your home. So you're going

to be limited as to how much that you can borrow. And then you've got some other caveats, too. Every line is going to be different, by the way. None of these look and feel the same. They're all different. So most of them, they're only going to charge you interest-only payments, at least for a draw period, if not the whole line, term of the line. And so you've got to be disciplined enough to make a principal payment. Otherwise, you're paying interest for 10 years. And before you know it, they're either saying, hey, it's time for you to pay principal in interest or at the end of the term, it's a balloon payment. So you've got to be a disciplined homeowner to use those effectively, I think, you know, just based on what I see with homeowners. If you're not disciplined to pay more than the

interest only every month, then a home equity line of credit is probably not for you. And then let's go back to that cap of the as-is value. With a renovation loan, honestly, we don't care what your house is worth today. We don't care what kind of condition it's in today. We only care what is this house going to be worth after the home improvements have been made and what kind of, you know, what's it going to look like? What is it going to appraise out for? And we're building or structuring your loan based on that future value. So you actually get to tap into the future equity of your home to finance your home improvement project, which is very unique. Yeah.

Yeah. I mean, back to kind of what you said, you have to be a very, you know, disciplined homeowner. I don't know. There's a lot of not a lot of great financing sense out there. So usually when you get a payment, you're always paying the lowest, right? So, I mean, you're right. All these things are tricky and you can get tripped up pretty easily. And before you know it, you're paying way too much for what you got.

So it's very tricky. So on the, I'll let us to take the renovation mortgages to close. What is the typical timeframe there? I typically set the expectation at 60 days, and it may not require that long. As a lender, I probably only need about 30 days to close the long. But I build in that extra 30 day cushion to give a homeowner enough time to find a contractor and get a bid. So I would say if the contractor is cooperative and they get us their credentials in a bid quickly,

then we can close much sooner. my career average is 42 days. So I've had some where we're ready to go in 30 days and we're waiting on a contractor to pay their workers' compensation policy. Right. Or we're waiting for them to pay their liability because it's expired. And, you know, so we're just sitting and waiting and waiting. Yeah. So what are the benefits from a remodeleder, you know, construction company standpoint?

What are our benefits for getting into something like this? I'm going to tell you the ones that I think, but I would love to hear the audience's comments on this. I would just love to tap into their brains and see if they can come up with some other ideas too. So I think the obvious answer is being able to offer financing for customers who don't have the cash to get their project done. And I have to imagine you see the same thing I see, which is, you know, when people come to me and they are asking for financing, I ask them the same questions all the time. you know, what is your health, if it's a purchase, you know, how much are you paying? What's a purchase price? What kind of work needs to be done?

How much is that work going to cost? What do you think the house is going to be worth after it's been renovated? And when we start talking about the scope of the work, you know, what kind of work needs to be done and they're rattling off their punch list. And then I asked that question, how much do you think it's going to cost? I mean, I'm not a contractor. Right. I don't do bidding, but I look at bids on the daily.

And a lot of times these folks, they have. have such a misconception as to the reality of costs and their quote in prices that we haven't seen in 15, 20 years. So, you know, like a $30,000 kitchen remodel. That's going to be tough, right? So depending on what you're doing, I mean, you know, of course, but I'll get like, you know, I need a new roof. I think it'll cost three or four thousand dollars. Like, oh. Nope. Yeah. Yeah. Wow. You know, we wish. So the obvious benefit to contractors is being able to capture this audience of homeowners who thought their project was going to cost X, but it's going to cost Y.

And they just don't have that kind of cash to get the project done. And then to your point, I'm really glad that you mentioned the consumer financing and the cost to you. Another benefit is this doesn't cost a contractor anything. We're not skimming off the top. Your profit is your profit. We're not trying to dip into that. So no expense to the contractor to suggest this type of financing. And I think that it creates a new market.

So maybe there are contractors out there who are accustomed to working with cash only customers. And I don't know what that looks like, but I have to imagine that they're pretty picky. And I don't know. Do you guys run into a lot of pricing competition? Yeah. I pretty much all industries in remodeling and construction in general is very competitive. And most, when they feel the competition, they do one thing and they lower prices.

And which isn't a great strategy, you know, it's a, it's usually lacking confidence as a company. But that's what I typically see is like, oh, man, they're getting a lot of bids. Oh, crap. We don't have anything sold lately. Let's lower our price. And the margins keep kind of going down. That's why, you know, things like credit cards and, you know, getting charged for financing and all these things, they matter to us. And, you know, we don't want to just be a cash flow business, but so many contractors are.

It's just job to job. And you don't even job cost it sometimes. You don't even know how much you made on that job. You know that you got to check and you're ready for the next job. And at the end of the year, we'll see how it shakes out. But unfortunately, that's kind of a lot of contract. I would say the majority of them don't even job costs, don't even know. Yeah.

So I would say if you're willing to work with a renovation mortgage, then that puts you in a pretty elite group, a small group of contractors that are willing to do that. So you're no longer working with customers who can shop you merely as much as they would otherwise because their options are few. So I think that carves out a segment of the market that's underserved. And then you get shopped a whole lot less. At least that's what I see on my end. And even as an originator, and I do originate some still just to kind of stay fresh. but mostly I manage our renovation pipeline. And I'll tell you that I learned really early on in my career.

I could do a cookie cutter loan. I could do it quickly with the best customer service. I wouldn't even get so much as a thank you. Or I could do a renovation loan. They can't go out and shop me because you can't find that on every corner. And at the end of the deal, people were so excited just to get into a house that they didn't think they could get into that they will tell everybody.

So that's another benefit too to contractors. This spreads. You know, people talk. They're excited. As long as you go out and do your job and everything's done satisfactorily, they're going to tell everybody they know. So I'd get lots of referrals out of this business rather than traditional business. Yeah, that makes sense.

You're right. There's a lot of mortgage companies. It seems like, you know, just like real estate agents, right? They're kind of on every corner. So it does kind of come down to a kind of transactional type of look and feel to it. Whereas with this one, I mean, I think the real good point here is, you know, I got. I have a nephew that's getting married and they're talking about, okay, so how are we going to buy a house? And they're kind of going like, crap, this is going to be really, really, really, really hard.

And that younger generation, we did not leave them a very easy path to homeownership. Like, you know, it seems like we say that every generation, but it feels like it's very difficult to get into home, especially a starter home. So for someone like that, it just makes so much sense because they're able to get that fixer-upper. you know, he's a little bit handy to get some of the bulk stuff done, but also you're able to feel like you're making progress in this so-called life that we have, right? In the American dream that we used to have of homeownership. So it's a really cool feature for younger families. It is. And I can think of a couple more benefits to contractors too. Yeah. Homeowners who use this kind of financing, they can't cancel the job. It's a part of

their note, their mortgage. They must complete the job. So, you have that job, you don't have to worry about somebody backing out because they ran out of funds. You're going to see it through to completion. Payment is guaranteed as long as the work is done satisfactorily. It's held back in that renovation escrow account, like I said. And then you can build a network too, not just with the referrals that you would get for that homeowner, but realtors may be involved. Home inspectors may be involved. Consultants may be involved.

So you're going to get some exposure to other networking opportunities that you maybe wouldn't have gotten otherwise. Nice. Yeah. So if we want to get involved in something like this as a remodeled contractor, you know, where do we find? Is there a list somewhere? Where do we go about funding this? Because like you said, this isn't like we just go to a bank and they have a specialist there. You know, we got to uncover this rock. Where is that rock found? And how do we pick it up? Yes. I wish there was a list of lenders that originated renovation loans. Go here. Pick one. It doesn't exist, really. And so, unfortunately, you kind of have to do a little bit of shopping. If you're looking at local lenders, go to their website. And they always have a product or programs tab. So just look and see, you know, do they do any renovation lending? Maybe start asking around. Honestly, I would say if you drop me a line, give me a call, I'd be happy to look. I've got some access that isn't easy for the general populace to get to. And I can tell you who's doing renovation loans in a certain area. And because I've been doing this for so long, I kind of know the who's who in renovation lending. So I

may even be able to give you some introductions. If you guys are interested, reach out and I'll be happy to help. Definitely. We'll get all that contact info at the end because I think that's huge. That's just knowing people that are doing them, not just that they have that product or service that they're actually doing them, right? Because you want someone that's with it and can go and not like it's part of their other services. So that would be kind of a key thing. Someone who's experienced. Exactly. So as the, But let's say the other component is how does a contractor get vetted? How do we become part of this program with this particular lender?

What kind of credentials do we need to have? We obviously can't just be a chuck-in-the-truck guy. So let's talk about that a little bit. Sure. Every lender is probably going to have a vetting process that looks and feels a little differently. It's not, you know, one-size-fits-all. But they're all going to ask for the same basic things.

usually a contractor profile form. It's typically a one page or just a little bit of basic information about your company. How long have you been in business? How is your company structured legally? How many employees do you have? A lot of times they'll ask for three references. So that sort of thing. And then if licensing is required where the property is located, then we'll want to see licensing and a registration, a copy of your certificate of liability insurance, proof of workers' compensation. Some states, they don't require a cert, a WERT, a Workers' Comp, cert or a waiver if you aren't required to carry it. Other states do.

So whatever the state guidelines are for Workers' Comp, we're going to want you to follow through on that and assign W-9. And that wraps up the basics. Now, if a project includes any kind of lead-based paint remediation, mold remediation, asbestos radon, those things require certifications. So we will want to see certifications on top of that. And then every once in a while, we get a lender. who just overdoes it.

And they want a social security number. They're going to do a credit check and a background check. So you may run into that. Usually if they approve you, you're good for a year. And then you just renew after a year. Okay. Got it. Yeah.

I mean, for some folks, like, they just don't want any, they just want to be able to just do it without going through that process. But like you said, if you want to differentiate yourself and be able to offer this to clients, then you got to jump through a couple hoops. That's totally terrible. It's not like we're lending to you, the contractor. So I don't personally get it. You know, I don't, I know they do it for risk mitigation,

but I don't see a benefit after all these years. So, you know. Yeah. And then do the programs work, you know, the same with all mortgage lenders or are there nuances depending on which lender the homeowner decides to work with? You know, so we might be used to one. And then, you know, we kind of mentioned this to a homeowner. they go shopping and find somebody else, and then we're like, oh, crap.

You know, is that a case? It will be. Yeah. So you've got your, the different types of loans that are available, they're backed by Fannie Mae, Freddie Mac, HUD, USDA VA. So you've got those agency guidelines, right? And a lot of times, lenders, they'll add their own guidelines on top of that. So for example, maybe they add minimum credit score, 620, or we're not going to allow any self-help or DIY, which is great for you guys.

Or maybe they enforce the need for a consultant. You know, those are some of the typical ones that we see, overlays that we see. There are occasionally some, there's one investor. So as lenders, we originate loans in the primary market, and some of us will sell our loans in the secondary market. Those lending institutions we sell our loans to, those are called investors. And there are some investors that, again, they overdo it. I know one in particular that says, I want contractors to use my bid form. And it's like, really?

Really? Don't make it hard for us. We don't want it. I know. We need to be making this easier, not harder. So you may run into some of that. I'd like to think most of us are pretty common sense and flexible. So hopefully not much overlay is the hope.

But yeah, you may see some nuances lender to lender. Okay. And then let's get into the bid requirement. So what does a typical one look like? and then maybe what does that worst case scenario look like? So we're going to want a bid that is inclusive of the homeowner's name and the subject property on contractor letterhead. It sounds like simple stuff. You'd be surprised what we see Excel spreadsheets with no identifying information whatsoever on them.

So it behooves me to say, you know, take care of the simple stuff, the branding, tell us who you're doing business with, tell us where you're doing your business. And then from there, you know, fully describe the work that's being done. We hate to see the bids that say kitchen remodel, $55,000. What business card? Yeah, what does that include? Flooring cabinets, cabinet, counter-actures. So, you know, be detailed as to what that includes. Basically, what we're going at there is if there's a dispute once this project is underway,

anybody should be able to pick up that bid and understand you've agreed to perform this amount of work for this price. You know, anybody should be able to look at that and see that. Now, a lot of the programs, they do require. a labor and materials breakdown per line item. And that's where I get the pushback from contractors. That's where I see the most pushback. And I got to tell you, I'm with you guys all the way, 100%. I don't understand why we make them break it down that way. But, you know, HUD, for example, that's what they want. Fannie, that's what they want. So, you know, I know it's a pain in the tush, but if we're getting more jobs, if we're building a business, you know, maybe it's worth the effort.

I'll let you guys decide that. I would recommend that you blend. And here's another one. That's a little little tricky too, but I recommend that you blend your overhead and profit and taxes into the other line items because of a lot of lenders, if you itemize that separately, they won't pay it until the final draw. So you're not going to get, you know, your margin until the final draw. Put a little bit of your profit in each of the labor. And yeah, that makes sense. That's when I've asked, that's typically what we do. It's not like we typically have to show how much we're planning on making, even though it's not what we'll make. Trust me. That's funny.

Yeah. Okay. So what happens if like the contractors, you know, they have a particular bidding software, you know, it doesn't meet the requirements. So let's talk about that. You know, maybe they kind of roll out that do it on this bid form, right? Is that what it all do? Yeah. I think that's probably, those are going to be lenders in the minority so that you're probably going to see that less often.

But if you do, if you do have limitations on your software and you can't break a bid down into labor and material. I mean, I've been known a time or two to go ahead and just do it. I'll just throw it in Excel and do it. I've got a little format ready to go and have everybody initial it and move on. So now I've got your bid and then I've got the breakdown and we just move on. So hopefully you're working with a lender who's flexible enough to be able to do that. Sometimes what we'll see is a processor, a loan processor will get on the phone and just take it verbally. And then she'll type in the changes on the bid and then have everybody initial the changes.

So there's usually a way around it is the point. Okay. Got it. And then let's talk about the payments. So a lot of contractors, we, you know, especially if you get into some of the smaller ones, they need some cash flow, right? Yes. So is there upfront? Is there progress to describe how that works? Yes. Most of the programs are going to allow us to give a contractor a little bit of something at loan closing. So that might look like half the bid in some cases. It may look like 50% of the materials costs in other cases. There's one loan. program in particular that really doesn't allow us to give anything to the contractor, but what we could do is we could do maybe a 50% deposit with your suppliers or your manufacturers for materials that are going to be used later. So usually we can do a little something to kill the pain, you know, to get that project started. And then after that, if it's one of the programs where they do 50-50, we'll give you 50% of your bid at closing and then when the job's done, we'll give you the rest of your bid. That's easy enough. But the other programs, they do more of a draw process. And so it works like a reimbursement.

You go out, you do some work, you request a draw, your work is inspected, then you get paid. You go out and do more work, you request to draw, your work is inspected, then you get paid, and so on. Usually there's a limit as to how many draws you can have. It might be five for some programs. Other programs don't have a limit. So it kind of depends. Every program is a little different. And I'm sure you'll find a little bit of lender overlay in there too. But we want to be flexible. We want more contractors to take on these jobs.

So we're going to try to get you money up front if we can. Okay. And describe the inspection process. So how does that, you know, you say, like, we need to get this inspected. Who's inspecting it? How is that process? Usually it's a consultant. It could be an appraiser that comes out and do the work. I prefer a consultant or some sort of a fee inspector, somebody who's familiar with construction rather than an appraiser. They seem to know how to handle the draw paperwork better. So that makes sense, right? But I, I, I, I, I, should probably tell you that on a lot of those programs where they have a draw process,

when they're issuing out the draw payments, the progress draws, they're also enacting a 10% holdback or retainage. So that's something to be aware of. And then in that final draw, we pay out all of, you know, obviously the final draw in full and all of the previously withheld holdbacks and any outstanding change orders or contingency requests. Okay. I imagine with some of those consultants and that might be part of the reason you don't see a lot more of these type this type of lending out there right is that you have to have your ducks in a row you have to have a team of people whether those consultants or appraisers to be able to go and service this type of loan right that might be partly yes I've heard about you talking

about building relationships and other podcasts and I love that approach and it's no different in lending a good loan officer a good renovation lender they're going to have their network. They're going to know who to call and various different marketplaces wherever they're licensed. Right. They've got their network of consultants and their network of even possibly realtors, you know, who understand the business. A lot of realtors, they laugh at me.

For example, if I'm driving down the road and I see a fixer up and call listing agent and tell them, hey, you don't need a cash offer on that. You know, a lot of times they think I'm joking or it's some sort of con and they'll hang up on me. It's like, I've been doing this for 20-some years. I'm telling the truth. Yeah, the good lenders, they're going to have a great network. They're going to know who to call. Great.

Yeah, that's a good thought, you know, like make sure they have their ducks in a row. And maybe there's an interviewing process about that for us as well. So is there any, so, you know, during the project that, you know, we're coming to the end, are there any deadlines or how does the wrap up of the project? I assume there's a completion form and, you know, there's one last big inspection. So how does that process work? Yep. So the runway that you have to complete the project is going to vary loan to loan. I would say in a very general sense, your Govy loans, your FHA, USDA, VA, no more than six months from loan closing. That project should be completed. But some of them will go up to 12 months, maybe even nine months, nine months, 12 months. And then on your conventional loans, you'd have 12 months to 15 months, depending on the lender. So there's a program for every project, I say. So you tell us how long it's going to take and we'll find a program. that's going to work for that project.

And let's face it, stuff happens. We're not building houses. Even when you're building houses, stuff happens, but we're not building houses, we're renovating houses. So you crack open a wall, you rip up a floor, you find something you weren't expecting.

That's going to delay project completion. And so what I like to do is a 30-day rolling extension. So I'll do a 30-day extension, and I'll roll that out another 30 days or so, if necessary. We don't see that a lot anymore. We saw a lot of that during the pandemic for obvious reasons. Right, right. But usually projects are getting completed on time now, thank goodness.

And if we need to, maybe there's inclement weather or something that would demand a need for an extension, but we can certainly do that. Okay, that makes sense. And then you mentioned the consultant word, which is a scary word for us sometimes. I'm sure. So when is that required? Is it complexity based or like when would someone say, all right, we're going to need to bring in a consultant here? Because I think a lot of contractors, you hear that word, they're going to run through the hills. It's like that just sounds like time.

and energy. And if that's something that they can just run with and we're doing our own thing, that's fine. But if we're wrapped into a situation where we have to be heavily involved, we didn't charge for that, you know, so tell me a little bit about that. Yeah. So they're really only required on one or two loan programs, FHA 203K standard and maybe the USDA for structural repairs. I know that's probably more technical than you needed. But there are six, seven or so renovation programs, one or two of them need, require a consultant. It's kind of a mixed bag with consultants. You get some that are super hands off and hard to get a hold of when you need them, you know, and you get others that are more diligent. I would say if you're partnering with a

quality lender, then they usually have a quality consultant or two in their back pocket, right? So I have mixed feelings about the use of consultants. I mean, they're there for a reason. One of the benefits that I see with them is that sometimes there'll be some disputes between homeowners and contractors during that renovation phase. And I would say 99.999% of the time it all boils down to communication. I call it marriage counseling. We have to do it sometimes in the draw admin phase. But a good consultant will go out there and explain to the homeowner, this is why. This is why this has to happen. This is why it didn't work out the way. And a lot of times they'll smooth things over. So they could be actually an asset to the project.

If you got a good one, and that's the key, is working with a good consultant. Yeah. Yeah, I think the ones that were always afraid of, that's just like that building inspector that knows it all, right? That shows up at the job and says like, ah, you guys did that wrong or, you know, it's just, you know, that's not going to be these consultants.

I can tell you right now. In fact, I have one on my desk where the consultant signed off on the final inspection and I asked for, you know, proof the permits had been closed out. a copy of the certificate of occupancy. And it was like, whoops, forgot to do that. So the building inspector had to come back out. But the consultants already signed off on the deal. Now we're just waiting for the building inspector.

But I'll tell you, consultants are not going to be like building inspectors if that was your concern. Yeah, no big time. So does the need for the consultant usually come from the lender or the homeowner? Because the homeowner doesn't probably necessarily know that those people exist, right? Yeah. It should be the lender that is selecting the consultant. They should identify. In fact, they should interview consultants.

They need to know who they're working with. Once in a while, I'll get somebody who comes to me who already has a consultant picked out. Usually it's because they started the process with another lender. It didn't work out. That lender didn't know what they were doing. And then now we're rescuing the deal. But the lender should be the one to pick out the consultant. Okay.

Got it. So as I kind of mentioned in the beginning, you know, financing is becoming a difficult subject for us. And I think for two reasons. One, our literacy of what's out there is going down. You know, if you have a big sales team, maybe, you know, that process of training them to ask the right questions to get the right information. I think that's down. But like I said, also homeowners don't want to, you know, disclose that part of it. They want to, that's pretty close to the best.

You know, me being a third generation, I remember going with my dad on sales calls and it was all about a payment. You weren't even selling the number. You were selling this is going to cost $334 a month. Like, that's how often it was discussed. It was like, that was normal. Everything was going to be a payment. But that's kind of gone away. And I think, so thinking of my fellow contractors, how do we have the conversation about this?

And then also, you know, maybe after that we can talk about, you know, literature, things for our website. how do we go ahead and promote that we have this too? So kind of let's talk about both of those things. Yeah. I'm really surprised that homeowners aren't going to talk to you or are reluctant to talk to you about finances. That really surprises me only because I work in an industry where we probably. They have to talk to you.

Yeah. We pry. I mean, we're asking, what do you do for a living? Who do you work for? How long have you worked for them? How do you get paid? How do you get paid? Are you salaried commission?

do you get bonuses? Do you get overtime? You know, like we're asking some pretty detailed questions. Yeah, I think that you have that, A, that they have to answer for you. Right. Right, right. There's already a lack of trust.

We're a contractor, right? Yes. Who knows? So there's going to be a long leeway for us to get trust. Yep. And I would never, I kind of tell this to realtors to. Like, don't try to coach your buyers into what type of financing they need. I would never try to write a contract for.

you, you know, swim in your own lane. So my advice would be if you feel uncomfortable talking about it, they're going to be uncomfortable talking about it. So, you know, maybe the answer to this question is you don't, you don't ask them. Maybe instead you proactively say something like, you know, I don't know if you plan to pay this in cash or if you need financing. Here's some information for a company that does a good job with financing if you need to go that route and just leave it at that. You know, could just be something as simple as that. And then let's, the lender have the tough conversation. Might even be an opportunity.

Go ahead. I'm sorry. Yeah, no, that's that's very wise. I mean, I think if we have somebody that can help us with that, I think that's always a huge challenge for us, right? It's finding the person that can pick up the phone, you know, call this person and we know that they'll just handle that, you know, as opposed to us when we have to be heavily involved in the process, you know, chasing down the credit out, like anything like that,

I think that's a huge barrier for us. I think that's definitely a good, it would be a good service to have. It's like, hey, just call them. They can help guide you in a couple of the products they have. And if it doesn't work great, it's at least it's information and they,

for some reason, they trust it because that's not the contractor. That's somebody else. We don't make money on it. It's just the service we're offering. It's people that we've met. Like I said, it's the relationship we have.

That's it. You know, I think it's a real, it's a real easy conversation to have, I think. Nice warm handoff, easy handoff. And it's real passive too, no pressure. Yeah. No, if you want to go, go to your own bank, that's fine.

You know, whatever, however you want to get it, it's just that we have a couple of people that are in this base that can help you with it. And I think a lot of people do ask us for it. We have a leave behind for stuff that we have. So I think that's the other component. So, you know, when we meet this lender that can help us with this, come up with some sort of branded where we both have some branding on some literature, a nice leave behind.

Because again, these homeowners, I've never heard of this either. So there's going to need to be some education there. It's going to be some links. So making sure that's got to be part of this relationship, right? Yep. Yeah. I would say if you're trying to work with a banker, credit union, it's going to be more difficult to get that co-branded marketing material.

That would be my experience. But if you're working with an independent mortgage banker, which most of the lenders, the community lenders are. Then they've got a marketing department and they can come up with some collateral, co-branded collateral. Here with the company that I work with, they do co-branded webpages. So there's a link there and it asks some very simple questions just to get the conversation started and we take it from there.

So certainly there should be some options for marketing this type of financing. That's great. That would be super helpful. So because you've been in this space for a while now, do you have some success stories of contractors that have done this well? You know, maybe some that I've not done it well, you know, because that would be kind of, we want to make sure we're using it the right way. So let's talk about some of the success stories. Yeah. I belong to the Local Builders Association here in Indianapolis.

It's called Baggy. And a lot of the remodelers that are involved there, we've got a relationship, right? We've been going to these networking meetings for years. We know one another. And it's a very easy handoff. I actually don't see from them troubles sending me a referral. And maybe I should pick their brains and ask how they're doing it, what I probably should do. But we know each other.

It's old school, relationship building, right? So it's super easy to say, hey, I'm in the Builders Association with this gal and she can help you with your financing if you need help with that. I think that conversation goes real smooth. you have those sorts of relationships. Right. But there was one, now this is going a few years back, and this was when I was working in the secondary market. We had this lender who partnered with a contractor in the New Jersey area.

I still remember their name all these many years later. I won't out them, but they did an excellent job of promoting this financing. They worked primarily with 203K loans, which is the FHA version of a renovation loan. And they did so many of them that they were on the news, all the time. They used to send me the links. Hey, look, check this out. And I get so excited for them. And the realtors in the area knew them. So they just did a marvelous job of letting people know that they were working with mortgage financing to help more homeowners. I think that's one of my

favorite success stories. Yeah, no, I like that because, again, it's back to that. You know, you're getting someone in a home that maybe would not have been able to get there. You know, You have all these, especially the flipper. Every market has a huge flipper market, right? It's always a wealthy in either investment companies or just individuals that swoop in and buy that for cash. And you have like a whole drove of people who are upset because they didn't get a chance at it. So it's like kind of offering the opportunity of like, okay, you're able to get in the home, but also you're able to walk up the stairs of the deck without it falling through.

You know, like that, you know, so it's, it'll feel like a home from day one as opposed to it feel like, oh, we have a long ways to go to fix this thing up. Yeah. And then they start getting the quotes and they're like, oh, crap. How are we going to do any of them? Yeah. I think that's the bigger challenge is that, like you said, people do not know the cost. You can't go to Google to find costs. You really have to have those contractors come out and give you pricing.

otherwise you're really just lost in the woods. So I'm liking that this is like an access point to people who maybe otherwise were like just, I'm done looking, you know. I'm glad you brought that up because I have seen some contractors that partner with realtors and they'll go out and they'll bid a project before the house even hits the market. So now the realtor has like a package for a potential buyer, not just a listing flyer, but they've got their listing flyer. They've got a contractor's bid.

And then the lender provides a payment flyer. And so now they know exactly what work needs to be done. They know how much it's going to cost. And they already know how much their payment is going to be just when they first step in the door and look at this property. And that's worked out really well too. I don't know how feasible it is, you know, to do that on a large scale. But it's worked out well for some contractors and realtors. Yeah.

I mean, again, back to that relationship piece, maybe it's good to have that real estate agent and knows what this is about too. And, you know, having a team of people that work well together. and, you know, it's kind of, it always comes down to that, right? If you want things to run smoothly, you've got to have relationships. If you don't want things to run smoothly, then try just one-off phone calls to random people. It always goes well. Agreed. Relationships are everything.

Yeah, yeah. Well, that's very cool. I really liked all the information. So with all of us wanting to go out and find more information, how do we get in touch with you? Well, if you want to do it the old-fashioned way, just give me a call, 844 RennoGal. And I'm on LinkedIn and I do a couple social media outlets, usually at the RennoGal. Okay. You know, so that would be a couple of ways to find me or the website, the renogal.com.

Okay. Great. And then if, are usually these lenders state by state or do you do some like, you know, travel several states or, you know, how does that typically work? Are we looking for our state that does this, right? I think you're going to find a little of everything, but most independent mortgage bankers, they have. licenses in many states. So you're likely to find somebody who can cover a wide area. Okay, but you still don't do California, right? We do, yeah. You do? Yeah.

I mean, I personally don't know, but I, but some in my company do. Okay. Got it. Got it. All right. Well, we're going to go down that rabbit hole together. So thank you so much for being here, Jennifer. And like I said, I'm going to leave the link to her website in the notes on the live show.

So you guys have it. so that you can go to our website and find out more information. But thank you so much for being here. Thank you for having me. You're so welcome. All right, guys. Thank you so much for joining me on another episode of Construction Executives Live. We'll see you next month.

We always have great topics, but the main thing is I want to introduce you to great folks. And Jennifer is one of those. And you will see her on our service page where we'll have links to what she does. So make sure that you connect with her and find out how you can start doing renovation loans in your business. Thank you guys so much and we'll see you next time. Bye. You've been listening to In The Zone and Construction Executives Live with Jeremy Owens. Be sure to subscribe to In The Zone and stay in the know with the best minds in the construction industry. To nominate an innovator or change maker in the construction industry,

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