Epic Real Estate Investing - Golden Ticket Loans While Rates Raise | 543

Episode Date: December 15, 2018

Meet Caeli Ridge, a President of Ridge Lending Group and a fellow real estate investor. Today, she is giving you some advice that she shares with her clients and is telling you more about the golden ticket loans that will help you become a successful investor. Learn how to deal with the effects of a rising interest rate, what the 3 layers of golden ticket loans are and what people appreciate about her team and her company. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Saturday on the Epic Real Estate Investing show for Turnkey Saturdays, with your host, Mercedes-Torres. Hello and welcome. Welcome to the Turnkey portion of Epic Real Estate Investing. My name is Mercedes-Torres, and I'm lucky.

enough to be partners in crime with Mr. Matt Terrio, the guy behind the epic real estate empire. So as most of you know, we are now on a daily release in Saturdays is an episode where we're focusing on turnkey real estate investing, mainly because we see that there's a total demand in this changing market for turnkey real estate. My goal is to really help busy professionals who understand the importance of real estate, but just don't have the time to do it all themselves. My goal is to simplify it and to help you see that turn-key real estate investing is also a great option for you.

So for those of you that are new to the program, welcome on board. Hope you enjoy the listening journey. For those of you who are back for yet another week of Turnkey Saturdays, welcome back. So first and foremost, allow me to apologize. I know that you hear in my voice a little bit different. Believe it or not, I am still sick. I have been sick for two weeks, and I just can't get rid of this cold. But I didn't want to miss an episode because today I have something really special.

I have a special guest. And, you know, I often talk about the importance of having a good team on yourself. side, someone that is knowledgeable and experienced and really walk the track that you want to potentially walk yourself. Well, this lady that I have joining us today is by far one of the most powerhouse women in the industry that is an absolute wealth of knowledge and just an amazing fellow real estate investor. She spent over 18 years as a nationwide lender, a loan officer and a real estate investor herself in both residential and commercial properties. Now, her personal portfolio at one time held 42 properties across the United States,

so she's very well versed and understands what it is to be an out-of-state investor, but most of all, she's worked with thousands of investors to help them acquire investment properties, not necessarily in their own backyard, but across the nation. She's huge on educating people on how to become a real estate investor and not doing all of the work yourself. She spends lots of times with our potential clients, with our students, and most of all with her clients. She's done over 60,000 investment loans in her lifetimes.

And I am thrilled to call her a personal friend, a colleague. So, ladies and gentlemen, please help me welcome Ms. Chaley Ridge to our podcast. Chaley, welcome to the turnkey portion of Epic Real Estate. How are you? I am so great. Thank you for having me, Mercedes, my dearest. I love spending time with you. and I'm very excited to share with your listeners some of the economic changes and comings of events,

I think, for 2019. So, yeah, thanks for having me. I love it. That is exactly why I invited you back to the show. It's been several years since we've had you on. And I don't know why. We do business every single day almost. And I haven't had you on the show for quite some time.

So thank you for joining us. And so for those listeners that don't know, who Ms. Chaley Ridge of Ridge Lending is. Tell me who you are. Yes, high level 30,000 foot view. Ridge Lending Group. We are a second generation company that focuses almost exclusively

in the non-owner-occupied side of lending. We're fully functional. We can do it all, you know, the VA, the FHA, owner-occupied, etc. But our special skill sets have really been carved for investors and their lending needs. We're licensed nationwide, so we have a nice broad footnote.

I've been working with investors for a little over 20 years now, but I think that the one thing that probably sets us apart, in particular to me and what I do, is that I'm a fellow real estate investor, which is always kind of interesting to people, that I'm a lender that focuses on investors, but I also have held up to 42 properties at any one time across the United States. So that unique perspective, I hope, lends a little bit of credibility.

But more than that, I think that it's the education, that we're known for as a company. And having the experiences that I do, I've worked really hard to leverage them. I've got lots of experience, good and bad, plenty of both, but to try and find unique ways to help educate the investor because you will agree. It is the leverage of the real estate investing

that gives us the greatest rate of return, right? Using other people's money exponentially increases ROI. So for that reason, I think it's really, crucial for the individual to have a baseline understanding about what's going on on the other end from an underwriter's perspective. What are the guidelines? How does it apply to me and my qualifications? How do I optimize that? So if we have a value out as a company, it's probably that. Our education kind of like epic, which is why I think we resonate and do so well together, education is key. Knowledge is power. Yeah. You know, I often talk about aligning yourself in real estate with the

people that are, first and foremost, doing what you want to do, but more importantly, they've already done it. I know that I have worked with you exclusively, not only on my personal portfolio, but I have hand-delivered clients to you where you've walked them through building their portfolio. And I'm talking about small portfolios, like three or four properties, and then larger portfolios. I find that when our clients go to you, when they come back to me, they're much more enlightened, so to speak, because we, you, your team has walked them through step by step, and it makes a huge difference when you yourself have gone through the same tracks, so to speak, that you're guiding our investors to. So whenever I talk about, you know, who do I refer our clients to

to build that, to learn, that's going to hold your hand. I always think Chaley Ridge and the Ridge Lending team. So thank you for being a part of our team. Chaley, I have a question to ask because I always hear from our clients, oh, the market is changing. Oh, Freddie and Fannie is limiting. Oh, rates are increasing. Speak to that and speak to how that's really impacting our turnkey clients and what a benefit it is to them. Sure about that. So I think that the market's always changing. Always.

I mean, real estate is very cyclical. We all know that. And there's always changes to the different markets. I don't think that we can use that as a blanket statement for the whole of the United States where the market is changing. I think first and foremost, we need to focus on the individual markets and what's doing well, what's slowing down. And you guys are really good about identifying that.

But from a lending perspective, you know, conventional financing, we'll focus on that. For those of you that may not know what that means, conventional financing is that Fannie Mae Freddie Mac loan. This is the highest leverage at the lowest interest rate you will find literally on the planet. We call those the golden tickets. We'll maybe talk a little bit more about that later. But the financing end of this very detailed process is a moving target. It's constantly changing, you know, at what time. is it as it is today. Right. We could expect one thing to be the reality and how we navigate

the battleship and accrete, which is how I describe lending. And then five minutes from now, they may release some update. I think that a lot of people, when we start talking about, let's focus on interest rates because I think most people that I talk to and maybe a large percentage of your listeners, interest rates is a focal point. So if I can't, I'll touch on that. It's true. Interest rates are on the rise. It's true. Interest rates will continue to rise. But one of the things I think investors miss,

in particular maybe newer investors that aren't as familiar with the cyclical or the ebbin flow, is that what happens when we see rates rise? Anybody? Rents rise, right? So we are a little bit as investors of residential real estate, and even commercial real estate, insulated from the effects of a rising interest rate, versus a homeowner that's purchasing a property, they have to be a little bit more cautious

because they don't have somebody else making their mortgage payment the way investors do. So once again, just to reiterate, when interest rates rise, and they are on the rise and they will continue to rise, by how much we'll talk about a little bit further, remember that the rents that are associated with the properties you're going to be buying will also increase.

Now, it's not simultaneous, right? It's going to take us three, six, nine months for it to catch, but they always do. So just keep that in mind. Let's talk about the trajectory. So this year, the feds have raised the Fed fund rate three different times. Wow. Yeah, three different times at a quarter point each time.

Now, let's clarify the Fed fund rate is a barometer. It's kind of a baseline. It's not necessarily the only variable that can change the long-term mortgage rates that we are locking in. But it's one of the pieces to that puzzle. There's a whole variety of variables. that play into that. In any case, so the feds have eight regularly scheduled meetings a year. So far, they've raised the Fed Fundrate three times.

Their next meeting is on the 18th and 19th of this year. They're going to close out 2018 in just about a week and a half or a week, whatever it is. And up until recently, I think that the message that we've been getting pretty clearly is that they're probably going to raise again at the end of the year. However, over the last couple of weeks, I'm starting to... to kind of get the sense in their cryptic way that they're softening that position. So those that were over here saying, yes, they're absolutely going to raise the Fed fund rate. I think a lot of people are kind of switching their outlook or their prediction of that.

And I think they're going to leave it. My prediction is they're going to leave it. I don't see that they're going to raise again this year. So that's good news for us and how interest rates will end for 2018. So I'm excited to deliver that news. 2019, yeah, man, rates are going to go up a little bit. But let me offer one other thing. Let's talk about the average price point for investor purchases,

single-family residents across the United States. Right now, depending on the market, it's what, between 90, 120, maybe as high as 150. Do you agree? Okay. So let's put this perspective, you guys. I mean, an interest rate at 6%, for example, with 20% down, is going to yield X principal and interest payment. even if the interest rates go up by a half a point, on $100,000, the price differential or the monthly

payment differential is what, $18, 19 bucks a month? Yeah. Long-term big-picture stuff, it's inconsequential. So I think sometimes people just miss putting those dots together. It's on the loan amounts that we're talking about, it's relatively inconsequential, like I said. Yeah, you know, Chaley, I have to agree with that. So many people focus on what it means to their cash. flow, but they don't stop to think about cash flow is just one nugget of this whole equation.

We still have the tax benefit, the tax deduction, the appreciation, the depreciation. Then we have the return on equity. And in addition, we purposely do one-year leases so that when the lease is up next year to re-up, we increase the rent by what the market allows us to increase. if it's $25 a month, even $50 more a month, that's huge. So at the end of the day, I spend so much time, you know, sharing with my clients, it went up a quarter. Maybe it went up a half. At the end of the day, it's really not much in the grand scheme of things. What I wanted to say earlier, Chaley, is you and I have been in this industry for a long time. Let's say 15 years plus, so we don't age ourselves. But

I know I've been in it and you've been in a little longer than I have. But when you and I started, I remember rates being at a 12, 13%. I mean, it was out of this world. And at that time, they thought rates were amazing. And then we had the crash. And then people started doing their modification of their loans. And rates were like at a 3% because our market was in such shambles. We got used to the 3%.

we got used to the 4%. And what the market is doing now is it's going back to normal. And yeah. And so people are so focused on, oh, my God, it's 6%. It's going to get to 15%, perhaps. But if you can get them in now at 6%, why not? And so I love the idea that you just shared. Yeah, a half a percent may mean $18 to your cash flow.

Don't focus on that. focus on the other things that it brings to you. So I love that you shared that because it is so important. Feds do get together more than twice a year and this changes. So perfect. So Shaley, you touched on something that's really important that I often get questions about is the golden ticket. Tell me about the golden ticket.

So these, again, folks, Fannie Mae Freddie MacLone's, the golden tickets. There are 10 of these golden tickets per qualified. individual. So for example, we'll often see a husband and wife team come to us and say, okay, Ridge, we want to get qualified for conventional financing. We know that our greatest leverage, our greatest returns are going to be based on those particular loans. So we always want to start there by exhausting as many of those golden tickets as we can. So Mr. Smith and Mrs. Smith come and we pre-qualify them individually. So now instead of 10, between the two, we've got 20 available golden tickets. It's important to look at that from that point of view if you have

that as a viable option. Got it, got it. And so for those clients, that that's not a viable option, how do you suggest that they jump into a turnkey property if they're not your typical cookie cut or conventional borrower? So assuming, I think I'm, I think what you're saying is if they can't qualify within the confines of the Fannie Freddie box, loan box, then Ridge Landing. And one of the things I probably failed to mention is that as a company focusing on investors, we've got four sort of prongs or products that we have for our investors, one of which is a short-term fix and flip. We've kind of touched on conventional.

We also have specialty, and that's what I'm going to talk about here, and then commercial, which probably not for this conversation, but if you're interested, I can touch on that too, but our specialty loan products. This is for those individuals that have, A, exhausted or maximize their 10 golden tickets, or B, maybe like we were talking, don't fit inside the box of guidelines that Fannie and Freddie put out there. We can have short sales from two years ago versus the four years that's required for Fannie Freddie. Credit score requirements are going to be a little bit less, et cetera. etc. Now, beyond that, the other nice thing about specialty is that there's a few layers to what the

specialty products will allow. So you've got the standard specialty loan product, which is very similar for all intents and purposes to Fannie Freddie, with the exception of the interest rate. So the leverage is the same 80-ish percent, 75, 80 percent, 30-year-fixed, et cetera, et cetera. It's really the interest rate that you're going to find is going to be different between that of conventional and specialty. On average, you can expect the increasing rate on specialty as compared to the Fannie Freddie for the standard specialty to be a half upwards of a point and a half higher. Now beyond that, specialty also provides us for an asset based underwrite. So this is for those individuals, maybe similar to myself, who are self-employed, and they have decided that they want to pay less to Uncle Sam,

and it's not as important to them to qualify for conventional or standard specialty financing. So this is called the DSR debt service ratio where the underwriting is focused on our property. We're not as interested anymore about you and your debt to income ratio, but now what we want to see is a debt service ratio of the property. The formula for calculating this is very simple. All you need to do is take the gross rents and divide that number by the PITI, principal, interest, taxes and insurance, HOA if it applies, divide that by the PITI, and if you have a 1.15 factor from that division, the property qualifies. Now, you still need to show decent credit

and assets, but you're no longer confined to 50% DTI that the Fannie Freddie or the standard specialty would apply. And what would be the LTV on a loan life app? 80%. Still. So, yeah, that's a sweet product. I have so many. I have so many. clients that are self-employed and that is a perfect segue for them to actually jump into into this. I'm going to clarify. So we've got three layers there. We've got conventional best rates. We've got standard specialty second best rates. And then the DSR that I just mentioned are going to be higher than in that level. So the variables that dictate what the actual interest rate are going to be vary based largely on loan-sized property type, credit

more plays a big role. But for the DSR, I would expect to share with the individual, your rate's going to be in the high sevens. Yes. I'm glad you clarified that because that's important. As of today, rates would be in the high sevens. Let's clarify that. Chaley, you mentioned something back to the conventional and I don't mean to backtrack, but this is important because I get this question often, is when there is a Huff's Been and Wife team, you shared, you know, let's split them up. Tell me why it's okay. pay to split up a husband and wife in your terms? Well, obviously, based on my commentary a second ago, we want to maximize those conventional loan spots, but it's not, as long as the individual

can qualify on their own merits, right? The income versus the debt monthly, the credit, the assets, it's perfectly feasible. Even if you've got a husband and wife that file a joint tax return, it may not seem obvious to you, but it's very easy to look at the return and their income documentation and piece it out and give her credit for income, his, his, and then they have their individual liabilities. It's a simple process, actually. Yeah. No, it is very simple. I've seen you do it. It's really not simple. Your team has done an amazing job at making it seem simple, but I will commend you guys because, you know, you give us an amazing service, but within 72 hours, our borrowers sent to you, they send you

all the information, and long behold, you guys have an approval or a compass, I like to call it, that allows the individual to see exactly where they stand financially and what buying power they have. I love that you really break that down and help them understand these are the options that you have available to you once they're pre-qualified. And based on their goals, right? So we do that fact-finding too. And important to mention, we're not going to be the kind of lender that is going to say, sorry, you don't qualify good luck and whatever your pursuits are.

One of two things. We're going to provide, like you said, that compass, the options. Here's what you have access to today. I think more importantly and what people really appreciate about us is that if they want this particular product, we're going to give them the roadmap. Here's how you get there. Now, it'll be up to them, whether or not they want to follow. you know, the A to Z, but we are able to display for them exactly what it will take to get

the Fannie, for example, if they didn't start by qualifying with that. Yeah, no, it's very cool. And just touched briefly, what does it take for an individual to pre-qualify for, let's just say, a standard conventional loan? I love this question because I get to make my one token mortgage joke. So our pre-qualification process is intensive. I really ambivalrous. I really ambivalrous. I'm on setting the right expectation, you can attest to this, Mercedes. We call it the godlet of pre-qualification. And in addition to a very substantial list or checklist of items that we're going to be asking of them, we're also probably going to need a few piles of blood and some DNA samples to go along

with everything that we've collected. That's it, folks. That's all you need. I'm thinking I need to come up with some new material. That means getting old. I just don't think it's funny, Taley. So, no, but I love it because it's true. I always share with my clients, look, once I make the introduction to Ridge Lending, the ball is in your court, and it's your responsibility to submit everything under the sun when it comes to your finances, your pay stubs, your W2s, your bank statements.

But you only have to do it once to get prequalified. And then once you do it, it's just a matter of updating the information. And so that one painful experience at the beginning of the process is so much easier than going through this when you're in the midst of acquiring your asset, which is why I make it a point that all of my potential clients have to become pre-qualified before they even start seeing our inventory, only because it eliminates so much of the headaches beforehand. So I'm glad that you're having them submit a sample of their DNA because we joke about it, but it really is a tedious process, but you only have to go through it once. Right. And the other thing, too, I always like to mention some of the method to the madness is that now that we've taken you through this crazy, overwhelming, sometimes intimidating process,

it's a foregone conclusion. We know exactly how that loan is going to go. we don't have any fail transactions that can't close because we didn't do enough due diligence on the front end. So that's helpful to everybody. Once you've shelled out $5, $600 for an appraisal and then you find out, oh, sorry, you can't qualify because X, Y, and Z and we didn't know to ask you for this. That doesn't happen here.

Exactly. Exactly. And, you know, I think you and I have done enough loans and we have transacted many clients to know that our closing ratio is above. 95% because we eliminate what we can't do before you even get there. And I know from experience with our clients, Chaley, when someone doesn't qualify, I have personally heard you say, this is what you need to do to qualify. And in three months, our client comes back and they're qualified. And that doesn't happen very often in the world of lending, Chaley, which is why we

work with you. Awesome, Chaley. So what is that word? of advice that you can give to a new investor that is considering a turnkey investment property in another state. The first thing I would say is choose the right team. You've got to have the right support team on your side to be successful in turnkey. Now, if you're going to try and go out there and do this yourself straight out the gate, God bless you. More power to you. I'm there cheerleading for you. But if you have a full-time job, I just would warn you, that it's not quite what you think it's going to be. And that's why I think using a turnkey for most people is paramount to hitting the road

and running just straight out the gates, the right people. So turnkey property management, which will be supplied by your term key. Epic, I have to compliment you just for a second. We'll go tit for tat with that on the complimenting. Let me start by saying, I've been doing this for a very, very long time. I have paid some significant dues, and I feel very grateful that I can be very selective, or Ridge Lundy can be very selective on the different turnkeys that we will associate ourselves with. It's not a free-for-all. I get to choose.

And Epic is at the very top of a short list of the best of the best. So in terms of a support team and a group that has done the work that has spent ungodly amounts of manpower and time and money and research to find the appropriate markets with the best returns to vet the property managers for these investment properties. It's exhaustive. And you get much you pay for. And I'm telling you, I'm telling you. So the right team, I went off on a tangent or rant there, the right team for sure. And that includes lender, hopefully. We know it's not a foregone conclusion. We have to earn the business. But we are very good at what we do. And hopefully we'll get an opportunity to earn that business.

And then I think beyond that, the pre-qualification man is so important to really have that piece dialed and finished up front so that you know exactly what your buying power is. And I think I mentioned earlier, maybe even more important than that for the big picture stuff, is understanding how to optimize the base criteria for qualifying. And that's what we do. We teach our clients how to do that. So the answer to your question is the right support team in every facet. of this and there's a lot of moving parts, a lot of people that are going to deal with,

you want to have the group that you trust and that knows how to advise you appropriately. I'm honored, I'm humbled, and your words are so, so much, they mean so much to us because we the same. We align ourselves with the best and that's why we've aligned ourselves with each other. So thank you for the kind words. Jaley, for those listeners out there that want me to connect you to Chaley. I will be more than happy to make the introduction. However, Chaley, if someone wanted to reach out to you directly, how do they reach out to you and your team? A few ways that they can reach us. Website, obviously, is an easy way. www. www. ridg lending group.com. You can click on our getting started. There's all kinds of

information on there. Toll free 8557474343-855-74 Ridge is the easy way to remember that. and then if you want to just shoot us a quick email, simply info at rich lending group.com. And I get all of that. I see all of that. I get all of that. So I'm a little bit of a control freak. Yes, you are.

Yes, you are. But you know what? You're just like me because, you know, I often share in our podcast, you know, people email me, they reach out to me. And then they're surprised that I reached back out. Well, then why the heck are you emailing me If you do that I'm not going to reach back out.

So it's funny, you and I are control freaks that way, but it makes our investors smile at the end of the day. So that's perfect. Shaley, thank you so much for your time. And more importantly, your wisdom, I always learn something from you. I mean, we've been working together for, I don't know what, six, seven years. And I still learn from you. You still do my personal portfolio stuff, and that's not going to change.

and I hope to send clients your way, not because I love the way you guys work, but because you spend so much time educating our client. And that, to me, is priceless. So thank you for coming on board. Thank you for being my teammate. And really, thank you for doing so much to help create financial freedom. It is our pleasure. Love you, lady. Love you, too.

Have a great day. And for those of you who do want to reach out to me, my email. email is Mercedes at epic real estate.com. You can go on to our website, cashflow savvy.com. That's savvy with two bees. And reach out to me, the contact me, or download our free PDF that helps you escape the rat race. Ladies and gentlemen, for another episode of Epic Turnkey Real Estate Investing. Until next week. Bye. Bye.

Your portfolio has seen better days. But this two shall pass. And the best for you is yet to come. Together, we'll get you there faster. We're cash flow savvy. And we'd like to share some information with you that will show you how you can take control of your financial future and accelerate its arrival.

Go to cashflowsavvy.com. More building, less waiting. Cashflow savvy.com. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com.