The Science of Flipping - Banks Are (almost) Useless For Real Estate Investors

Episode Date: October 18, 2021

The #1 training and coaching system to launch, grow, and scale your investing business!𝐋𝐞𝐚𝐫𝐧 𝐌𝐨𝐫𝐞: http://www.thescienceofflipping.com Become a 𝐓𝐒𝐎𝐅 𝐈𝐍��𝐈𝐃𝐄𝐑 and get access to exclusive training and resources:https://insider.thescienceofflipping.com 𝐈𝐍𝐒𝐈𝐃𝐄𝐑𝐒 𝐆𝐄𝐓 𝐅𝐑𝐄𝐄 𝐀𝐂𝐂𝐄𝐒𝐒 𝐓𝐎: ✔️ Science of Flipping Academy  ✔️ All the systems and software I use in my business✔️ All the tools you need to run your business ✔️ All my Scripts, Contracts, Spreadsheets✔️ Special Discounts✔️ And Much More... 𝐇𝐚𝐯𝐞 𝐚 𝐪𝐮𝐞𝐬𝐭𝐢𝐨𝐧?Get immediately connected with a team member on messenger:http://split.to/tsof-messenger 𝐁𝐞𝐬𝐭 𝐑𝐞𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐅𝐨𝐫 𝐖𝐡𝐨𝐥𝐞𝐬𝐚𝐥𝐞𝐫𝐬✅ 𝐁𝐞𝐬𝐭 𝐑𝐞𝐚𝐥 𝐄𝐬𝐭𝐚𝐭𝐞 𝐒𝐨𝐟𝐭𝐰𝐚𝐫𝐞: http://bit.ly/tsofsoftware✅ 𝐁𝐞𝐬𝐭 𝐃𝐫𝐢𝐯𝐢𝐧𝐠 𝐟𝐨𝐫 𝐃𝐨𝐥𝐥𝐚𝐫𝐬 𝐀𝐩𝐩: http://bit.ly/tsofd4d✅ 𝐁𝐞𝐬𝐭 𝐒𝐤𝐢𝐩 𝐓𝐫𝐚𝐜𝐢𝐧𝐠 𝐒𝐞𝐫𝐯𝐢𝐜𝐞: http://bit.ly/tsofskiptrace✅ 𝐁𝐞𝐬𝐭 𝐓𝐞𝐱𝐭 𝐁𝐥𝐚𝐬𝐭𝐢𝐧𝐠: http://bit.ly/tsoftext✅ 𝐁𝐞𝐬𝐭 𝐃𝐢𝐫𝐞𝐜𝐭 𝐌𝐚𝐢𝐥 𝐒𝐞𝐫𝐯𝐢𝐜𝐞:: http://bit.ly/tsofmail✅ 𝐁𝐞𝐬𝐭 𝐃𝐚𝐭𝐚 𝐏𝐫𝐨𝐯𝐢𝐝𝐞𝐫: http://bit.ly/tsofdata 𝑾𝒉𝒂𝒕 𝒕𝒉𝒆 𝑷𝒓𝒐𝒔 𝑯𝒂𝒗𝒆 𝑻𝒐 𝑺𝒂𝒚 𝑨𝒃𝒐𝒖𝒕 𝑱𝒖𝒔𝒕𝒊𝒏: “Justin is one of the best trainers in this space. He really gives everything to his tribe.”– Brent Daniels (TTP) “Justin’s ability to connect with people and help them understand what he is teaching, is unparallelled”– Kent Clothier (REWW) “We have been in the trenches flipping homes in Phoenix for over a decade, he is one of the best to do it.”– Sean Terry (Flip2Freedom) 𝐀𝐛𝐨𝐮𝐭 𝐉𝐮𝐬𝐭𝐢𝐧:Justin Colby is the founder of The Science of Flipping Podcast and The Science of Flipping Coaching Program and is an active Real Estate investor having flipped over 1500 homes in multiple markets across the U.S. Justin runs an 8-figure real estate wholesaling business that closes 20+ deals each month in multiple markets across the U.S and has helped 1000s of clients learn how to become successful real estate investors. Justin subscribes to the philosophy of "Wholesaling To Wealth" and is the foundation of his coaching program which teaches you how to get started wholesaling or streamline and scale an existing wholesaling business as well as build long term wealth through wholesaling, flipping, and building a rental portfolio. Subscribe To Justin Colby:http://youtube.com/justincolby View All My Videos:https://www.youtube.com/c/JustinColby/videos    

Yo, what is up everybody? Welcome back to the Science of Flipping podcast. I'm your host Justin Colby. This podcast is all about real estate investing, tactics, tools, training systems, people hiring, scaling for you to become not just incredibly rich but incredibly wealthy. And so if you are listening to this on iTunes, I encourage you to do one thing. I say it every time. Make sure you are actually watching it also on YouTube. YouTube.com forward slash Justin Colby. Make sure you are subscribing.

And if you are on iTunes, I really encourage you and ask, give me a five-star review. I would love that. So I actually had a great call yesterday with one of my lenders who does a lot of my lending on my rental portfolio, as well as any flips that I'm looking to buy and flip. And to be honest honest after doing 600 plus rehab flips I'm slowing down flips are not my favorite thing and quite honestly it's because the the brain power and you know the time suck and energy suck of contractors now if you're a contractor I love you I appreciate it but rehabbing is always the biggest headache of this business. So if I can give you guys any advice, become better business people,

create line item bids where you're literally showing the cost of material and the cost of labor. Make sure you are gonna be very clear on what this is and don't just give a cheap rehab bid just to get the job and then all of a sudden it gets inflated while the job is going. So with that said, I am still remodeling a lot of my rentals and job and then all of a sudden it gets inflated while the job is going so

with that said i am still remodeling a lot of my rentals and flipping homes and all of that but anyways let's get to the point justin i had a great conversation with my lenders again they lend on remodels they lend on my long-term holds here's what i will tell you banks at this point for us real estate investors almost are useless. The only reason why I could see using a bank now is if I need a massive portfolio loan. Otherwise, my lender, Lima One Capital, and if you guys do want my resource, I'm happy to introduce you. All I ask is give me a five-star review on iTunes and like this video

on YouTube. Make sure you are subscribed and I will give you my lender. I will give you my resource for you to be able to buy more long-term rentals and for you to be able to buy more flips. Happy to do that. All you have to do is like the video, subscribe to my YouTube channel, and five-star review on iTunes. So with with that said I had a great conversation about the difference in their lending criteria and on long-term rentals they will lend as long as they see the ARV right after I do the rehab as long as they project the air to be to be north of a hundred thousand dollars so if I'm buying a home for $20,000 and the ARV is 70, they won't lend long-term on that property. Would they consider maybe lending short-term?

Maybe, but even then, they won't do it. And so what I will tell you is the next conversation I had with them is where is their barometer for the short-term rental? In the short-term, I'm sorry, not short-term rental, short-term hold, meaning it's gonna be a flip, right? I'm gonna hold it at 90 days, 120 days, 150 days, et cetera. At that point, they're willing to lend

no less than $75,000 on a short-term flip. So the minimum I can borrow on a long-term hold is going to be 50 000 that's the minimum i can borrow right so i can't buy the home for 20 grand and get a loan for that they won't do it right at that point you should really be using private money anyways whether it's your money friends' money, et cetera. On the short-term flip money, they won't lend less than $75,000. Now, here's the really cool part. Will they reimburse me for the remodel? So there are homes that I actually pay more for the remodel than I do the home, right? I'm essentially almost just buying the land, but they will reimburse me for those remodels. So I don't need a huge amount of capital

if it doesn't fit the under $75,000 rule for the short term. If it doesn't fit the $50,000 for the long term, again, they will reimburse me my remodeling budget. And the key here, guys, is you can get a long-term 30-year loan with this group at 5% interest. Now, banks might give you a 4% interest, but now you have to go through the banks and all the headaches. These guys can fund in like two weeks, right? The game has really, really changed.

And yes, I am buying homes at sometimes $20,000 and have to put $60,000 into it. But what they will likely do is they will refi 100% of my own dollars out once I get this thing rented. Again, it's the burn method. Buy it, rehab it, rent it, refinance. If you want to add that fifth R or the fourth R, repeat, right? So I would tell you guys, if you can find the personal money, if you can find friends or family member that can give you a short-term loan just to get it to the point of rented and then have the bank refi all of their money out that's the game plan now

here's what we're going to do i'm looking at buying another home uh today or tomorrow in oklahoma city i think the buy price is going to be roughly 125 000 so that hits the criteria for the short term and the long term now i'm going to keep this this is not going to be a flip so i'm going to go straight for the long term. And then I am going to actually, you know, remodel it myself. And then they will reimburse me my remodeling budget. I could also technically do the short term, but the short term loan is, I think 7.9% interest. The long term loan is 5%. And I don't want two sets of fees so I could technically do it in the short term right and then refi out to the long term but then I have two sets of loan fees if I can save an extra couple grand I'd like to so I'm gonna put the file into them today I'm gonna choose my best

option I think I'll just go with the long term, right? Because the home doesn't need a lot. It only needs about $25,000 or so. I'm having my contractor walk it today or tomorrow, depends on how busy he is with my other project. But it's going to all be virtual. I've never set foot inside Oklahoma, the state, let alone I'm buying flips, I'm buying rentals in Oklahoma City and Tulsa, right? And so my business is running virtually and these lenders are making that business run very easily. So I'm gonna put the property into the file. My girl is gonna look at it and she kind of say, hey, maybe just do the short term because of this reason,

or maybe do the long term because of this reason. I think I'm just gonna go long term out of the gate, save myself a couple dollars. But once the file is reviewed i will make that decision the point of this is using banks is getting to the point of not necessary at all it used to be really important to have bank relationships again i use lima one capital if you want my personal resource the girl that does all of my stuff i will give her to you. Like the video. Subscribe to my channel.

Give me a five-star review. That's what this is all about. I'm happy to give you guys my resources. Banks are becoming irrelevant. In fact, I just did another YouTube video about fractional banking. If you don't know what that is, basically the banks are ripping us all off. Why do we even use banks?

At this point, the Federal Reserve has allowed them to essentially keep none of our money in the bank and they can lend 100% out, which means that even if they're lending at three or 4% interest, they keep all of that. We get none of it. It's a racket, guys. I love Lima One Capital.

I'll give you the contact um with all that said hopefully you guys are having a great day i'll see you guys and talk to you guys on the next podcast episode peace