KGCI: Real Estate on Air - How to Prepare for the Market Shift - Part 2 - Financing

Episode Date: September 25, 2025

SummaryIn the second installment of our series on market shifts, we tackle the crucial topic of financing. This episode provides essential strategies for real estate agents and investors to navigate a changing market by focusing on financial readiness. Learn how to advise clients on leveraging different types of loans, the importance of being debt-free, and why conservative financing is key to thriving through a market correction.Key TakeawaysDebt-Free is the New Gold Standard: In a market with rising interest rates, being debt-free allows for more flexibility and a stronger financial position, enabling you to acquire properties at a lower risk.Leverage Your Equity: For agents, understanding how clients can use their existing home equity, or even sell their current property to go all-cash, can be a winning strategy in a shifting market.Conservative Financing: Avoid over-leveraging and focus on securing financing with favorable terms, as lenders may become more risk-averse during a market correction.Creative Financing: Be aware of and understand alternative financing options like seller financing, LLC-based mortgages, and hard money loans that can provide a competitive edge.Keywords/PhrasesReal Estate Financing, Market Shift, Market Correction, Real Estate Investing, Mortgage, Debt Management, Creative Financing, Real Estate StrategyCall-to-ActionDon't let a market shift catch you off guard. Listen to the full episode on your favorite podcast platform to learn how to prepare your finances and your clients for any market condition!

You're listening to the Investor Agent Nation podcast, empowering agents and investors to collaborate effectively and grow their businesses symbiotically. Your host, Randy Zemnock and Eric Gross, share real-life case studies, trending tactics, and expert strategies that have helped them to accomplish over $1 billion in sales volume. Whether you're a seasoned agent looking to expand your business or an investor seeking to optimize your returns, you're in the right place. This is the Investor Agent Nation podcast. So one of the biggest reasons I see investors come to me for non-QM loans would be taxes. I mean, you can pay Uncle Sam a bucket load of money every year if you're an investor and try and keep your balance sheet looking good on your tax returns. Or it's kind of what's the greater of the two evils.

you can do a non-QM product for all your investment properties, which even more so than not having to give all your money in Uncle Sam, there's some other benefits to that. So with these non-QM, DSCR loans, bank statement loans, 1099 only loans, fix and flips, they get very creative with how they're structured. And they're not, they don't ask for an overcome or some amount of documents like Fannie or Freddie. They're not selling these loans in the secondary markets. They don't have to be packaged perfect. it's a little bit more of the Wild West with these non-QM worms. So a lot of what I've been seeing is I have people come to me for a traditional loan. They don't even know what a non-QM loan is.

They apply. Their credit looks great. They have great assets. They obviously make a lot of money, but on paper, it's not really showing it. A lot of the times, I mean, I even have friends, you know, I know are very successful, but on their tax returns, so they come and apply with me, they're showing negative $40, $60,000, sometimes or they're just breaking even on those tax returns. So what I'll suggest to them, since they don't qualify through Fannie or Freddie,

is they go for the non-QM style product, like the DSCR, if they're trying to buy an investment product, or if it's a business owner trying to buy their family, their next house, their forever home, or trying to upgrade. You have the bank statement programs, the 1099 programs, where they will not actually look at any of your tax returns. They don't care what's on there, what's written off. it doesn't matter to them. They will go off either solely if it's an investment product where you're doing the DSCR,

they're going to go solely off what is the ratio of what you're paying a month to what it's rented out for. And they don't use the lease that's set up on it. They'll have an appraiser go out and do what's called a 1007B rent girl. And what that is, it's the appraisers basically fair market analysis for the rate in the area. They're not just going to base it off just that building. They're going to look at the area it's in and give you a fair market rental analysis on that 10.07 with comparables to it, just like a regular apprais. With it, I've seen most of them come in buying even with these higher interest rates. Obviously, we all know of rents been going up over the past few years.

As long as you have a one-to-one ratio, meaning the lease amount is the same as what your monthly payment is. they'll do the loan if you have the down payment and credit and everything looks good. They also don't require an overcomersome amount of documents, as I said. They're not going to be going through all your personal stuff as much as a Fannie and Freddie loan would be. So that is also another benefit if you're very busy. You're not constantly getting asked for more documents from an underwriter or a processor. So it's a little bit more streamlining quicker. Yeah. Before we continue on, I'm going to ask, was anybody stuck in a waiting room before the meeting started?

Yeah, my fault. It's never, that's Kevin saying, yeah. So it's never had a, we've never had a waiting room before. I'm not Randy, so I got to redo my feel. Randy did not die his hair. And he did not, he's not in Florida. He's on a plane right now. So I'm like, I'm sitting here and like this says like everybody's in the waiting room. So we had wins. We're going to restart a little What wins does anybody want to start with? Addison saved the loan. Quick, as quick as we can, does anybody have any wins they want to talk about?

We're going to get this back on track. Randy's going to, he's going to, what are you doing? I just did a bank statement loan last week and it went pretty smooth. Good. There are a few issues. 75% LTV. It's a quick process.

Good. Crappy rate. It's definitely one. Good. Good. Two clap. Any other wins? Those bank statement loans are nice, especially for, you know, just, you know, self-employed and stuff like that. It's great. Any other wins?

Hopefully a win in the making. I'm in talks with a seller for an off-market property. We got this based on just posting stuff on next door. Good. Yeah. Just saying that, you know, we're cash buyers looking for fixers. and you know if you're interesting selling your home or and then we also said you know if if you know of someone who could benefit from this you know we'll give you a referral fee if we close on the deal um anyhow some lady reached out to my dad who's my business partner and she's like yeah my sister's living in this uh one-bedroom condo she's having health troubles she needs

to move out of there. So we've been in talks with her. And this lady has flipped properties herself before, so she knows how the game works. I've had a couple conversations with her. She's like, yeah, I know you guys are trying to make money. We're not, we don't want to do the renovations ourselves. So, you know, we'll work something out.

So trying to try and get in to see it. Her sister just went in for surgery the other day. So kind of giving her. little bit of space, but I'm going to try touch with base with her in the next day or two over the weekend. So I'll keep you guys up to date. It's too clapped out. Ready? Good. Nice. It's so funny that like when you start to do some just unique ways to get like properties, like just, you know, nobody would probably think of posting on next door or something like that. Just those small little things, like those

small little tweaks and you find a deal from it. So that's awesome. Anybody else have anything? Sorry you guys are in the waiting room. kill me. I have one, Eric. Okay. I'm glad to be out of the waiting room. I text Randy, hey, did I have the wrong date? No, you're good.

No. Anyways, I had a property in Westminster that we listed a week ago, two weeks ago, Monday. And I had the first open houses weekend, a week ago this last weekend. I had 25 groups on Saturday. I had an agent hold it for me on Sunday. They had a bunch of people in. And we got five offers and opened us on Monday with an offer over asking. So no contingency and no appraisal contingency.

Yeah. Let's two-clock that. Yeah, thanks. Why does market slowing down too? I don't know if it's the same for you, but a lot of the people I've talked to are starting to see a little bit of a slowdown. So that's awesome. That's really good. Yeah. Thanks.

Awesome. All right. Anybody else? And then if not, I'll kind of go, I'll re-go back to this field since I had everybody in a waiting room. I just testing you guys with patience. I want to see who was committed to come into this meeting today. Awesome. So again, not Randy taking over for Randy. Obviously, Randy lets people in the waiting room while I do not. So as the market started a shift, last week we did talking about, you know, how the market's starting to change, how we can take advantage of that for our business. We have Addison on As you're probably going to have to go through a little bit of what you went through before.

But I do want to, I think I'm going to go about it with questions to start out for you. So me and Randy always trying to come up with some, like when we're talking about what topic to come up with, what's going to be most useful for everybody's business as the weeks come up. So two weeks ago, rates were starting to climb up a little bit. Apparently we're really good at like fortune telling because rates are just like bonkers. that the highest since 2000. I was talking before the meeting with Addison. An article I read this morning was September was the slowest month in terms of transactional

volume since 2011. And it's not a scare tactic. It's just stuff that's going to start to happen. A lot of buyers are very interest, rate weary. And I think also just some geopolitical tensions are kind of also playing in this as well. So that's stuff we heard buyers talk about. So we wanted to set up the meeting this week talking about just more traditional. financing. We know hard money. You're typically going to have points. You're going to have

interest rate. But what can we do on the investor and the agent side with traditional lending in terms of what should we keep an eye on with financing? What questions should we be asking loan officers? What programs should we be looking into? What are some things that might benefit us and our clients? So we brought Addison on. And the whole point, I want this to be a very open discussion. I thought it was an open discussion when you guys were in the waiting room. I was like, everybody asked questions. Nobody said anything. I was like, okay, like, why crowd today? So I want there to be open questions. Any questions that you guys want to ask Addison while he's talking about this? Any questions that you might have about maybe a client situation? This is kind of meant

to be more of an open forum today discussing the financing products. So, Addison, one of the first things that I wanted to ask was when you're working with, let's see, I was sitting in the way room and miss the type of loan, Addison was talking about it's getting. Yeah, we'll talk about that he was talking about a DSCR loan who is going into some bank statement loans with DSCR loans. One of the first questions I want to ask Addison would be like what as an agent or an investor

what questions should we be asking you as a loan officer to make sure that we're keeping in touch with not just rates, not just points, but like what are some good questions you think we can be asking you to keep a good pulse on like our business, especially on the investor side of things like with the products

you guys are constantly releasing. thing. So one thing I'm definitely seeing come out as this market slowing is all of these banks, non-QM and traditional. They're coming out with niche products. So you're seeing one place. Non-QM, just in case anybody doesn't know it, what's non-QM? Just we're agents.

We're agents. Yeah. So non-qualified mortgage is a non-QM loan. It's anything that doesn't go through Fannie and Freddie. So it's a little more wild west. They're not selling these on the secondary market per se like they would, alone through Fannie or Freddie and FHA conventional USDA VA. So these lenders kind of allow their own consipulations,

and every non-QM lender is kind of a little bit different in their end. So some questions I would always ask. The first one is Eric said is, how many points are my bank charged? That's a big one because that's an upfront cost that you're going to have on these deals, whether you're an agent or a borrower, you want to know how much points your clients being charged or how much points you're being charged. So that's a pretty significant deal.

And points being, I'll just jump on the page on, like points being one point is 1% of the purchase price. Of the loan amount. So if the purchase price is 200 grand and you have an 80% LTV, one point would be $1,600 since your loan amount is 160 grand. So if you're getting charged two points up front before you even get an underwriting fee, title fees, your down payment, you're already off the bat around $3,200 on cost. Now, that may sound like a lot, but I mean, if you're a self-employed individual, you know that Uncle Sam also wants to collect a lot from you at the end of the year if you show a lot to get away from those loans. So it's kind of figuring out what's the worst of the two evils for yourself. paying Uncle Sam and showing a whole bunch of income, making your balance sheet look great. Or if you're an investor buying a whole bunch of properties, not worrying about that, keeping the money in your pocket, keeping your cash flow strong, not giving your money to Uncle Sam, and just paying a little bit more points up front and a little bit higher interest rate.

That's the other thing. Non-qualified mortgages are always, always, always going to have a higher rate. They are more risky to the lender who's holding them because they're not underwrittenest thoroughly. as a traditional land would be that has been proven for times to tell now that does not fail except in 2008 um so that's that's a big question to ask so many points another question i would ask is how long is it going to take for it to close some non-qm lenders can move very very quickly as he just said in his win some of them are very seamless smooth 15 days start to finish i've dealt with some lenders in the past that I won't use again that have taken 45 days on transactions.

So that's a big thing to ask is how long do you think it's going to close? Obviously, no one has a crystal ball to tell you exactly, but they should have a good timeline if they close a lot of them. I'm reading your question. I don't like giving Uncle Sam any extra money. I agree with you on that. Exactly. So it's kind of like you can pay Uncle Sam,

it obviously depends on how much you make and how it's set up and how you have your taxes. I mean, if you're 1099 or your schedule C, they typically take a pretty big chunk if you don't have some sort of S or C corp set up. So, I mean, if you're going to pay Uncle Sam 30, 40, 50 grand just to show that you made 100 grand, I'd rather keep that in my pocket and pay the discount points and have a little bit higher interest rate that I'm going to write off anyways on my next set of taxes. Because the points are tax deductible and interest is tax deductible. We know that when we go to do our taxes. So that's all stuff that can play back on the write-offs if you have income coming in on your balance sheet for your taxes. I also do want to preface this. We're not we're not tax experts.

So just so none of us can't. I mean to CPA. I look at a lot of people's taxes and I can tell when someone doesn't show a lot of income. But I know by no means do taxes for people. You know all the means and ounce of that, just the actual program. As interest rates go up, what do you think are like some good programs? keep an eye on. Maybe just for the investors.

Like you were talking about at the beginning, bank statement DSCR loan. Like what are some products that, you know, we can tell our investor clients to look for and stuff like that as well? I would say, depending on your situation, the three biggest non-QM products I'm asked about is bank statement loan. That's a loan for an individual who wants to buy a home for their family per se. You want to buy your next, you know, big house for your family.

You've owned your business for a while, but like I said, maybe you're not showing quite enough income to get that $6,000, $800,000 house. But realistically, you're making plenty of money a month to afford that house. So what they'll do is there's two different ways to do it. One, you can do a 12-month bank statement program, which you can use even more than one bank account. They'll use up to two or three, and they'll look at your income from over 12 months, what's going into those accounts. And they'll do an income calculation based on what's going into those accounts to give you your income per se. So one of my best ones I did was at the very beginning of my career when non-QM first became a thing in 2020, 2019 is when I started hearing about them.

I did a loan for a real estate broker. She'd owned her company for 15 years. I got her tax returns. Her tax returns showed $2,400 a month in income. I sent her a bank statement route. I didn't even ask what the income was. I saw it on the on the on the 10.3, which is the loan application.

Her income was up to $46,000 a month off the bank statement program. So that is an astronomical difference. She went to not being able to buy a $60,000 house to she landed herself a $700,000 house. At the time, interest rates were, you know, 3% for Fannie Freddie. She got a four and a quarter on that one. Now that is a fantastic loan. She didn't feel like that at the time, but that is a great rate looking back at it.

She even calls me to this day when we talk. And she's like, yeah, didn't like the rate at the time. But now I'm really digging it. I can't even refinance into a better rate. One other thing I want to note, too, is the non-QM rates are a little bit higher. But as I'm seeing the volatility swings and interest rates, I'm noticing interest rates for even through Fannie and Freddie on conventional. They're up to almost in the mid-eighths.

And if you don't have great credit score, putting down 25 plus percent, you're even paying more than two points on almost every single one. Very rarely right now my pricing out an investment loan even through Fannie or Freddie where I'm not charging at least two points unless they're putting over that minimum required down payment, maybe 30% on a multi, 25% on a single bail. That gives a big break I've noticed in the points and rate. But even right now, it's kind of they're not too far off unless you just have a really low credit score going into those DSCR loans. Yeah, and two things, because I don't want to take up all the questions. I do want everybody to ask questions.

One, one they made ask and talk about a lot with all of our clients is like 1% increase in interest rate. It's typically going to be about 10% of your purchasing power. So if rates go up 1%, you're typically, if you were pre-approved for 800,000 before, it's now 720. So when these rates swing seven and a half to eight and a half percent in two weeks, those are conversations you should be having. And then as an investor on the back end, if you're flipping a property with these rates

kind of going like that, I know me and Randy talked about it. when you're underwriting a flip, just assume that there's going to be a lot of swings in those interest rates and therefore going to be a lot of swing in demand. And then the other thing that I wanted you to talk about, this is coming down the pipeline mid-November, two to four units being able to do 5% down payment. I know that's something that for everybody in here, that's going to be huge. So I want you to talk a little bit about that. So I just had a consultation earlier today with someone who was looking to go FHA on one. and I was able to bring this up to them. So starting November, I think it's 17th.

Don't quote me on that. It's right around the middle of November. They're going to start allowing 5% LTV, or 95% LTV, 5% down on multi-units, three units and above, even two units for conventional runs. This is pretty huge because even in the past I'd have clients with 800 FICO scores come to me, wanting a conventional loan so they can get something that needs a little bit more work to it, a little bit more rehab work. Maybe it's really dated, has that peeling paint, maybe something some windows are cracked. The FHA just won't let go and it's being sold as is.

No one's moving on it. No one will go in and do the fixes. So they need a conventional loan and they don't want to put down 25%. This is huge because it's never been allowed before. It's only been FHA. So you can now get away with even sometimes 97% LTV on a two unit with this on a conventional and if you go home ready or home possible. And the interest rates will be very good for it as well, better than FHA even if you have a good credit score for convention. Awesome. Yeah.

Yeah, I get a question. So there's new programs coming out. Is that for non-to-m loans as well or just FHA? Just for the Fannie and Freddie. So that's just a Fannie and Freddie rule coming out to where you can now do that with conventional, just put down 5%, even 3%. on the team. Got it.

One of the question on the non-2M, if you don't mind. Is there a DTI ratio for that? I mean, can you continue to pull, you know, bank statement loans and different entities? Yeah. What is the cap on that? So with the bank statement loan, I think we lost you for a second.

Can you guys hear me? Yeah, we lost you for a second. So with the bank statement the loan is 50% DTI is the max DTI. And with DFCR, there really is no such thing as a DTI because they just base it off rent. So they based it off a ratio. 1-1 would be it's equal to the lease or greater than anything under one.

They typically will still do. They might discharge a higher rate or they may have one better LTEB. They may want you to put down more money. So it's not doable even if it doesn't meet the criteria. I would say it's the same with 1099 only loans as well, 50% cutoff is typically what I've seen. And I haven't really seen a front end cutoff. Like with FHA, I see a front end cutoff on debt to income ratio of 47% even though you can push the backend to 56. I've never had a non-QM lender tell me, hey, the front end's too high on this.

It's always just a back end is what they're looking at. It seems like even if it's an even 49-49 front-end back-end. Yeah, the DSCR loans, I know we've done a couple of Addison. They're really good. The house doesn't have to be rented out at the time. We run into some like appraisal things and stuff like that where, you know, it's going to come up to the appraiser in terms of what they think that it's going to rent out for and it's going to be market rent.

So even if that unit is renting out for $3,000 and market rent is $2,500, they're going to use $2,500. If it's rented out for $2,000, and market rent is $2,500, they're going to use $2,500. So that's a big thing when you're talking to investors. if you have a property that you know is under rented compared to what it should be, you could still go DSCR if that market rent, if the appraisers are going to come out and say market rents higher. So I know I've run into that with some of my investors where they're interested in a property. They wanted to go DSCR, but they were freaked out.

They're like, hey, these rents are really low. So we ended up, you know, going through with it anyways because we knew market rent was going to come in significantly higher. So definitely something to consider as well. Anybody have what other questions? do we have for Addison? This is the time to try and, you know, call Addison out, guys, for everything you got, Adam.

Ask away. What's some other stuff? Until we get some questions, maybe talk about some, like, other programs you're seeing investors take advantage of right now. How are these rates going up? How do you think it's going to affect it? I think what you said about Fannie and Freddie not being that far off from non-QM, I think that's going to be really big.

I think there's usually supposed to be a wide gap in between that. because non-QM, there's usually it doesn't fit into the normal box. There's more risk. So the fact that they're kind of coming in closer, just interesting. So maybe talk about some other programs you guys are seeing used quite often. So some other programs I'm seeing used. I'm seeing the 2-1 buy-down come into play with regular lens. Do you want to just quick overview what a 2-1 buy-down is?

Because this will be really big, too. So what a 2-1 buy-down is, is let's say your lender can lock a rate at 7% interest rate, right? You can have the seller, even advertise this on your listing, that you're willing to pay this buy-down. And when the new buyer comes in, instead of having a 7% interest rate that first year, their interest rate's going to be reduced by 2% for that first year. So they'll actually be paying a 5% interest rate the first year. The second year, it goes down 1%. So you'll be paying a 6% rate the second year. And then year 3 to 30, you're locked in at that 7% rate.

So it allows basically the buyer to come in, build up some money, and hopefully be able to refinance is the hope. That's what the hope is down the road. Refinance before you ever see that 7%. So I'm seeing that advertised on a lot of properties. I'm having a lot of realtors reach out and ask me to make them flyers for it. So that's something you should definitely ask your lender if they can do for you, see if they can do. do a two one buy down. I haven't seen that too much in the non-QM field, but I've seen that a lot just on listings in general. What's the cost? I'm sorry, somebody that's going to ask it.

What's the cost? Yeah. There we go. Basically, you have to calculate how I calculate the cost is I look at what the difference is in the payment. So all is the seller is really doing is they're prepaying that interest for the first two years. So the loan officer will calculate how much extra interest, like for the, they'll pay year one and two. They'll combine it. And then there'll be a separate agreement outside of closing that they sign. It's not part of the purchase contract. It's not part of the regular net proceeds that go to the buyer for closing costs. So you could still max out your 3% or 6% on conventional or govy with seller paid closing cost. And then even on top of that offer this. And it's allowed in the guidelines. So let's say, the cost varies depending on purchase

price, to be honest with you. If it's a four or five, six, thousand dollar house it may be you know 10 to 14 thousand dollars they're paying up front if it's a two hundred thousand dollar house you may be looking at three to five thousand dollars so i was gonna say like the way to think about essentially is the seller is paying 10 000 for the buyer that's prorated over that with points essentially yeah i mean i was okay cool and then so we have the two one buy down what there was something else you were going on after that. And I cut you off.

My back. So another thing I want to bring up is this, the 10-year T bill in itself. So I was on a meeting last week with the, essentially the owner of all of NRL nationwide for all hands-on meeting. And he said something I'd never really heard before. So typically, you see the 10-year T bill right. Right now it's almost at 5%. We're seeing rates almost at 8%.

So what he's been saying is historically, mortgages and interest rates are priced at 150 basis points to 200, maybe even 250 at the extreme times in the past above that 10-year T bill. So if your 10-year T-bills three, you're maybe seeing a 5%, 4.5% in a normal market, right? Right now, we're seeing 300 basis points almost it looks like. You know, rates, it's at the 10-year-at-to-5 interest rates are almost at a eight. That's a larger gap he's saying than he's almost ever seen it in his career. He's been doing this 30, 40 years. So that's something very interesting that I heard that I'd never heard before that

I'd just like to share with everyone. I don't know if anyone else has heard that fact. But I thought that was pretty interesting to hear just how big of a margin there is right now for these lenders. Yeah, and I was going to say for anybody that's wondering what that means in general, and that means there's not a lot of demand on the secondary market to purchase mortgages. So something to keep in mind as an investor, there was something I wanted to add a 2-1 buy-downs. So now that you said that makes me feel better because I remember two-one buy-downs,

I think are going to get really interesting on the third year for investors because you might see a wave of foreclosures come after that. And my thinking, my reasoning, this is just strictly opinion, it has nothing to do with fact, if I have a buyer that's doing a 2-1 buy-down and they get really comfortable at the lower payment and they can't refinance. It was a job, get a car or something like that. The second year, it might be in a little bit more pain. That just rate goes up another percent.

That third year, if they still can't refinance, and it's something where they weren't really comfortable with the payment before, and they've now kind of up their spending or inflation's gone up or somebody's taking a job cut or something like that, to me it just kind of spells not great. It just seems like it's not the best decision that we're doing

because typically, as an agent, the way I'm going to tell the buyer is buy something you're comfortable with. If you're not comfortable with it, don't purchase it. So if I'm asking a seller to kind of offer some relief to the buyer because you're uncomfortable with that payment, if anything changes, it'll be some stuff. So foreclosures are going up. So that was one of the things. And then so if the secondary market, if there's less demand for mortgages, that's where we see

that gap widened the way we have to 300 basis points. And it's really, it's partially just because you, you know, You know, there's a lot of people I think that are starting to see like maybe mortgages. Mortgages are usually considered a safe investment for a bank because they're asset backed. If I put all of my money into a stock, if I bought a thousand shares of Tesla tomorrow, Tesla could go bankrupt tomorrow and I lose all of my money. They'll sell off office chairs and I'll get whatever pennies on the dollar I get for that. If a bank is buying a mortgage on a secondary market, and for whatever reason that person stops paying,

I still have a hard asset that's in place. I still have something that I can recoup. So for a lot of people on the secondary market, it's a very safe place to be. When we see that that secondary market starts to dry up, which is what we're seeing, that's where you'll start to see that gap in the treasury. And that always gives me a little bit of,

it hasn't happened since I've been in real estate. But that gives me a pause. That tells me that there's something that's causing the secondary market to say, hey, maybe not. Maybe there's other stuff. And part of that is, too, just like the government-backed bonds are like one of the highest rates they've been at. So there's other safe things.

You're always going to get paid back by government-back bond. So I think that's part of it. But I'm glad you brought that up, Addison, because I think that's kind of telling, like you said, a normal market, 150 basis point. And that's a conversation you can have with an investor or a client, or even as an investor to an agent. 150 basis points, maybe 200, 250 on the very extreme side.

And we're at 300. that hasn't been seen in quite a while. One other thing, too, I want to bring up about the 2-1 buy-down. Do you see someone offering it? Understand that the price reduction can be done, too, if they don't want that. Because if the seller is willing to pay $5,000 towards that, if the buyer doesn't really care about it and they see it advertise that, use that as a negotiating tool.

Say, hey, I see you're offering this 2-1 buy-down. What would it have cost, have that lender calculate, what it would a cost come back to you and ask them to drop the price if that's more important to your client. Something too. So this is, and this part's not like a pitch towards Addison, but finding a, and this is big for investors too, as much as agents, finding a lender that you can kind of partner with on this kind of stuff that offers a ton of new programs.

One of the things that Addison is going to have starting in December is buyers can lock rates. They have been able to for years where you can lock a rate and shop. one of the things that they're going to have is you can lock a rate as a seller. So if you list a house as an investor, you've got to flip and you list the house in December and we're still kind of like, hey, rates might go up higher. They'll be able to do a lock on the listing so that if somebody a month later buys and interest rates went up half a percent or a percent, that lower interest rate sticks with that property and the buyer can use NRL to get it.

That's a huge benefit to sellers. That's also going to help you be able to get the largest amount. when you're going to sell it. So I did want to bring that up. Yeah, we got that school in the chat. That's the kind of stuff that as interest rates get higher, I think getting creative. I think,

and we've talked about in a previous meeting, like sub two deals or assumable I had Dylan on when we talked about some of that. That's huge. I've had so many people reach out to me about sub two or an assumable loan. These kind of loan products, these kind of just creative solutions

are going to be what people lean towards, especially investors. We're going to start seeing a lot. You're going to start seeing a lot of advertising come out for niche products with every single bank out there. As demand slows, they're going to start getting more and more aggressive with their marketing dollars and coming up with programs that have never been came up before, trying to make things work, bending the rules with Fannie and Freddie guidelines. I don't think anyone had ever heard of a 3-2-1-by-down or a 2-1-by-down or 1-1-by-down.

ever before 2020, 2020. I don't think it was ever a thing, even back when rates were 7% in the year 2000. So that's very interesting to see how much effort is going into all these niche products. And some of them really are pretty spectacular, honestly, for the buyers and the sellers to help stuff move. Any what other questions do we have for us?

I want to make sure you guys are asking questions. I want to be the one that does. I'll be talking if I don't have to Do anybody have anything? It can also be like if you're going through something right now like with a buyer or have a creative solution that you need to find maybe Kevin, you got any questions for Asson? I've got a quick question, Madison.

What is the LTV or loan to purchase value for DSCR loan right now? We're looking at some multi-units out of state and how do they determine that ratio? So it depends what type of prop If it's a multi-unit, like you said, the least I've seen being able to put down is 15% if you have a great FICO score. Typically, I see 20%. And then if obviously, if you fall into that category of being under 680 or 700 FICO score, they're wanting that 25. And then even if you're down to 620, I have one non-QM lender that'll do them down to 620, but they want 70% LTV.

I think the last one I did It was two months ago It was a 12.625 rate Rate was astronomical But there was no one Who could approve him Yeah there is no one who could approve him I mean it was astronomical what the rate was

But there wasn't another lender out there that would take it I asked six different lenders to do it All of them said no except this one Yeah that was one I think me and Addison did together They were asking like four points I had the seller on it. They were asking four points, and I think the interest rate,

by the time it was all said and done, it was like 13.5%. So it was more expensive than him going to get hard money. So, yeah, he ended up buying cash. I'm just like, dude, like we found out through a previous lender that it failed,

Addison was going to save the deal. I was even telling him to buy cash myself, trying to talk myself out of the deal. Yeah, Addison was like, do buy cash. And we just like, we kept going. And then finally he's like, oh, this is too much.

Like I'm going to. So, and they actually required a second appraisal. on that too. Yeah, because it was a short sale. I'd never done a short sale non-QM lend before, and it's weird that they go more so the FHA route when looking at it.

They wanted a second appraisal done. I don't know if it was just that lender that I was using or if it was just such a low FICO score they wanted it, but because it was a short sale, they needed the second appraisal. When Addison says short sale, it's not that they were a traditional short sale where they were short on funds.

My buyer bought it and flipped it in three weeks. So somebody was, purchasing it on the fourth week and i think the price would it increased by 90 or 120 it was like it might have been over 100% price increase so i think that's also one we know what triggered it Kevin it looked like you were going to ask a question where you're about to ask a question previously yeah um as far as like just regular buyers go uh i've been hearing some stuff about uh down payment assistance programs um could you touch on that like what are you saying like what's sort of programs are available out there?

So depending on your state, your state almost always has a down payment assistance program. The best one I've personally seen is in Tennessee. Tennessee has the THDA. I do very few loans in Tennessee. I have one real estate agent. I work with it down there. But it blew everything out of the water I've ever seen. It was a 5% rate when rates for 7% locked in on a 30 year.

And they gave the borrower 5% of it. of the purchase price. So they were giving them a huge amount. In Ohio, we have something called OFA. Well, they'll give 5% the first time homebuyers, right? Now, with that, it's considered a bond loan, and the interest rate is the same for every single lender that can offer it. And there's no way of really buying it down. It's the same across the board. I think last time I looked last week, it was like 7.875 with that 5% assistance. But that's huge. Huge. If you're buying FHA, you're putting down three and a half percent. You get five percent. You have one and a half percent covering your closing cost. You get some closing costs from the seller on top of it. You can come to the, me and Eric had one. You can come to the table with literally $1,000, sometimes even less on a three, four hundred thousand dollars, sometimes even less on a three, four hundred and four hundred and dollars. Now, keep in mind, there's normally income restrictions on these. In Ohio, I think it's a hundred and eighteen grand or 120 grand. Obviously, if you're in California, Florida, states where incomes a little, yeah, it's going to be. significantly higher for that for that

income cutoff. Now there's other things lenders have too. So I've seen a lot of lenders come out with it. We came out with it a few months ago is 100% financing for FHA. It's good for the borrowers

who can't get the DPA from the state institutions because the state institutions do have overlays. For example, in Ohio, if you don't have a 650, they won't even look at you. They won't even consider. for the down payment assistance. The 100% financing we have goes down to 600. Most lenders go

down to 600 on the 100% finance. Now, the 100% financing is not free money like OFA or these other institutions. You're financing it in. You're not actually getting the money. So that's a big difference as well. But I have a lot of people asking me about down payment assistance. It's not just for first-time homebuyers. If you're not a first-time home buyer in Ohio, you can still get two and a half percent assistance. And I'm sure it's the same in California. I'd have to look up and see exactly what the DPA is for California. But I can put a note down and try and figure that out.

Or I'm sure if you call any lender that you work with in California, they should be able to give you a list of institutions. There should be more than one too. Like we have communities first, Chenoa and OFA in Ohio. We use all three of those. There's my three go-toes. If I can't use those, then I go to the 100% financing now. And out of the 100% financing setup, just to kind of dive a little bit deeper on that, is you're still setting it up as a 96.5% LTV loan, 3.5% down.

The 3.5% is coming from a bond. And they're actually paying 2% interest for 10 years on a second on that 3.5%. So like I said, it's not free money like the other ones. There's some constipulations in it. But at least you're not paying 7% on the 100% financing. and it is only for 10 years with no prepayment penalty on that 10-year second lien. Yeah, something else to consider to Kevin. I don't know if every state has this, but we have like the springtime in Ohio.

We always have a buyer grant. And it's like that I think that is free money, right? Or is it? That is 100% free money. You can apply and I think it's like up to $10,000 per buyer. And it's just like a state fund. It's first come first serve. So like for states and your state, I would check to see.

talk to a lender in your state that works a lot there because I've used that for a ton of my buyers and they love it and if you're a seller or if you just you know finished an investment like this is kind of how it ties back into the investment side is like if you have a property you're listing that's why listing in the spring is so great because we get there's a huge windfall tax returns and then you're getting that free $10,000 Ohio grant if you're one of the first people to jump into it you're getting a large amount that goes towards buying a property um so talk to the lenders in your state get to know that kind of stuff as well as you can because they make a huge difference.

You know, small things like that make a huge difference when you're selling a property, especially as we get more interest sensitive. Two years ago when interest rates were 2%, buyers didn't care. Like, I don't think I had a single conversation. Like people just like sign me up. Like now that they're getting higher, we have to get creative. The sad thing was when interest rates were still 2%, people wanted them in the ones. They're like, oh, can you get any lower?

that 2.625. Do you do any better than that? Yeah. What other questions we have? We have about 10 minutes. Go ahead. One more quick question. I know it's not your state, but being out in California, you guys like neighbors to us. So what kind of programs do you have in West Virginia for, say, a multi-unit DSDR kind of loans? You aware of anything?

You're asking about down payment assistance in West Virginia? Any kind of loan programs that you might be aware about there? Most people out here just look at me and they shake their heads and go, no, we don't do West Virginia. I know I can do West Virginia. I know for a fact I can do West Virginia. I've never closed a loan in West Virginia. People in my company having in my office.

So I don't know of any sort of special down payment assistance from West Virginia. I would assume they have to happen. West Virginia is a lower income. state if I remember correctly. So I would assume they have some sort of assistance for borrowers to help get into a home. And another thing is it kind of attracts people too to move to that state when you have a great incentive like that. Like when I heard the one for Tennessee, I was like, wow. Yeah. And that's something to where if you want, I can, Addison, if you want to drop your information in the chat, if you want to take it or we can

definitely find out for you. If you guys want me to take some takeaways, I can find this stuff out for you guys. No problem. It's just something I would have to call. someone in my office who's closed a couple of these in West Virginia and figure out the basics of it. That'd be awesome. Yeah. So we have about 10 more minutes. Yeah, I have a quick question. Addison, for all the programs that you have for investors, are they allowing, like, for hard money, I mean, private lenders to come in in second position or no?

I haven't ran into a scenario like that before, to be honest with you. So I don't have a 100% answer. I would think that there is a non-QM lender out there that would. I would think there is. Some of them are a little bit more nitpicky than others. For instance, I had one where a guy had all his properties and his IRA. They were actually owned by his IRA. I'd never seen that before.

I guess it's a really good for his taxes. I've had the hardest time finding anyone wanting to do it. And I finally found some little bank out in Kansas that would do it. So I'm sure there is someone who will do it. I'm sure it can be found. I don't know what the terms would. be or the consipulations of the rate, but I'm sure there's one out there that would be willing to come in on a second position, depending on the risk factor and everything of the land.

Well, I'm saying they are in first position. I was just wondering if they have some sometimes lenders, hard money lenders have a problem with you bringing a private lender in second position. The problem with the second position is if you're in a second position and anything happens, a little bit riskier, but if for whatever reason the property is foreclosed, the first position has to clear out the second position and other stuff. So if you're going to get into that, I think, because non-QM is going to be something where it's risk-fast factor-based and there's no like real, like what you're talking about just like a normal like

Fannie Freddie loan, like it has to fit in a box. These non-QMs, like the one me and Addison did, like we shopped into like 10 different people and everybody was like absolutely not. And we just found one random person who was like, yeah, we'll take it. And then it was like, like he said, it's the Wild West. They're like, we want four points and 13 percent. I have literally a hard money lender where he could buy this for a year on two points and 12 percent.

So anytime you're going to increase that risk for any of the borrowers, the interest rate's going to be up there. But maybe it's something where they could do like a 203K loan. I don't know if this would work or not. Addison, like if it's a flip property, do a 203K loan and see if you can do like 100% financing or do one of these down payment programs that he's talking about or something and be able to do draws. So there's always creative solution.

Yeah. And then for the non-QM loans, can you use those for personal purchases or is it only for investment properties? Personal. So the DSCR is what's gauged towards investors. That's what they use the rental income for. Anything personal, like say you want to actually live in it, you would use, if you're 1099, let's say you receive a 1099, I could collect your two years of 1099, almost as if they're W-2s. and they'll use 75 to 80% of your 1099 income, not your after-tax income on your actual tax returns. Same if you are like a business owner and you write a lot off on your taxes, but your bank account and your business account shows, you know, $50, $60,000 a month coming in. You're just not wanting to pay Uncle Sam that. You would use that to buy a personal home for yourself. And obviously that's going to show astronomically more income than your tax returns would.

Wow, that's awesome. Thank you. I had a question, guys. Do you have any experience working with or maybe have a comment on the Pace Morby style of those sub-two loans that you're hearing a lot about and or maybe some wholesalers? Yeah, I'll speak on this. I don't think Addison has had a time. I said it when you guys were in the waiting room, ironically enough.

One of the things I was talking about was subject two is becoming very big. Subject to and assumables are becoming huge. So I work with a couple of people who are in Pace's group. Subject to it's a great way. Like there's going to be, that's another thing where it's going to be different avenues where, you know, if something doesn't work because the interest rates, if nothing, cash flow right now is almost impossible on rental properties, unless you're getting some killer deal because prices are stupid and interest rates are stupid.

So like barring you owning the property outright, you're not. going to cash flow. You might get a good cash on cash. We just purchase it out. So subject two is great. Assumable loans are huge. Me and Randy actually found a website that they're doing, they're shopping, assumable loans. So it's like a realtor.com, but I guess they know that the seller will do an assumable loan and they'll tell you how much is needed. So like they'll say, hey, you can buy this property at a 3% interest rate with 115,000 down. It makes your payment this. So I'm assuming I don't want to plug it too much because me, him are still talking about like whether like how they do it but you know there's going to be stuff

like that um and then working with an agent that's going to understand you know those kind of things helps i will say most agents it's going to be like talking to a wall if you bring up subject to or a lot of times it's because we're not going to be collecting our commission so we're going to be like yeah cool i'd love to work for free um so offer and yeah so jena even said i'm in paces group sub two so offer up maybe something or or tell them like you'll help them in the future or something when you're talking to an agent. It's a good thing to kind of interview wise, but definitely great. Did you have any direct questions or more? Well, yeah, it seems like Pace Morby Group doesn't really include the buyer's side agent.

You know, right? They work the deal with that. They can pay the selling agent because they need to, right, if the seller is working with an agent. And they'll look into structure the terms in a way that, you know, everybody wins is kind of the. their philosophy, I guess. And if the rates are stupid, the DSCR rates are stupid plus one or two, right? Yeah, yeah. It's an interesting way to kind of get through this loophole, like you said, to make things cash flow, because things are just not cash flow.

One of the three places I'm looking at in this country is in Ohio. It's interesting you guys. If I can help, man, I'd be glad. But yeah, so like land contracts are going to be big again. We're going to see a lot of stuff like that. Like, we're just going to see a lot of creativity. because um and i wanted to talk to us about this a little bit the the going if there's any lenders in here i'm sorry but the going saying is like you know uh date the rate marry the house there's

me a lot of people are getting in trouble for that because rates are not going to go back down to three percent like all these lenders are going around flowing their trumpets saying it's just not not at least for the next couple of years um the fed is pretty firm on keeping rates elevated until we see inflation slow down and there's so many other factors that aren't just tied into of that. So I just, I don't see it happening. And if it does, it's going to be a not good economic situation. So it may not be popular. I hope they don't go to 3% again. I'd like to see him maybe settle back down on 5 or 6. But yeah, it's probably where we'll end up. But yeah, I do think the creativity and Gina said she, she pays the commission. So as long as you

do that, I think you can explain it to agents and have them. But I think, again, Randy says if you're in a situation where you're going to shop something creative, I would just call a listing agent. I don't know if having a buyer's agent and there is going to help as much. Even my guy that is down here looking for a sub two, I've told him, I'm like, hey, you might want to just contact the listing agent. Throw me in.

It's just going to make an extra variable. It doesn't make anything much easier. For more insights and to join the Investor Agent Nation community, visit Investoragentnation.com. If you like this episode, please subscribe to the podcast. and leave a five-star rating to help Randy and Eric continue delivering valuable content that resonates with you. Thanks for listening to the Investor Agent Nation podcast.