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The Private Lender Podcast
43 minutes | 7 days ago
PLP – 124 Private Lending With FlipCo Financial And Kayla Wojcik
Because of COVID-19, those in the real estate industry had to pivot in a huge way to survive and find ways to thrive with the ongoing deurbanization. Keith Baker explores how people in this sector hone their strategies, particularly in private lending, by sitting with Kayla Wojcik. She explains their work at FlipCo Financial, a team of forward-thinking individuals in the real estate investing sector focused on bringing a better financing product to the Houston market and soon nationally. She dives deep into the type of loans they offer, why they don't charge appraisal fees, what a typical bridge loan looks like, and their most common borrowers. Kayla also shares their strategy when it comes to bread and butter houses, which experienced a huge decrease in February.---Private Lending With FlipCo Financial And Kayla WojcikBringing Better Financing Products To The Houston MarketI'd like to thank you for sharing your time with me. If you're looking for practical tips and advice on private lending and how to keep your money safe, then you are in the right place. If you want to learn from my mistakes so that you can both avoid and profit from them, pull up a chair and pour yourself a drink because this show is for you. This show is dedicated to giving people like you and I the knowledge and the confidence to participate in the most passive form of real estate investing known to man, private lending. If you're looking for a shortcut to begin private lending, then head over to the PrivateLenderPodcast.com/Ink to learn how you can put your money to work for you by investing in real estate backed loans right here in the Houston area with my friend, Paul Lamnatos over at Blink Lending. Make sure to join the show's Facebook Group in order to connect with other private lenders and to be part of the ever-growing community.I'm excited to get to the interview with our guest, Kayla Wojcik, who's the Founder and Director of Sales and Operations at FlipCo Financial, which opened their doors and started lending in November 2020. FlipCo is a team of forward-thinking individuals in the single-family real estate investing sector focused on bringing a better financing product to the Houston market and nationally. What makes FlipCo private lender a little different is they were funded and started with one person's capital who wanted to put it to work or a handful of it. It was a private capital that was put to work just like me. The Angel investor that started it had a lot more money to get started with first and was smart enough to hire Kayla to run the business for him. Let's get down to the brass tacks of the show and listen to the interview with Kayla Wojcik as she discusses her lending criteria.---I'm honored to have Kayla Wojcik from FlipCo Financial. Welcome, Kayla.Thanks for having me.Thanks for coming on. You have an interesting story and background that I'm a fan of. You're in Houston area providing flips and money for investments. Let's start back, not the very beginning but how did you get into the real estate space. Tell us a little bit about yourself.A little towards the background around eighteen years old, I worked for an attorney. He wanted to get into the tax foreclosure market. He would throw down the list on my desk. He would say, "I need you to circle the ones that you like." He didn't give me any direction. "I'm going to need you to go knock on those guys' doors and offer them whatever amount I tell you for those deals." I did. I went out there. I door knocked a few times. I got a lot of door slams and people all around not answering. It was the good old-school way of doing it. It scared the crap out of me.That's a lot for someone so young who doesn't know much about how that works that's my introduction to that. It lit a fire under me. I wanted to learn more about that. There’s something about when people door slam. You're missing something because other than that, they would have stayed and talked to you for a minute. I did set out to learn more about it. Fast forward, I came to the Houston market a few years ago. The opportunity for real estate flipping was a lot more attractive than where I was at, which was in San Antonio, Texas. It’s not a bad market area, but it's still a little bit slower moving, especially when you're looking at Houston. It's almost like you're looking at something that you want to get at that, whatever that is.I came to the market as a wholesaler. I connected with a high volume wholesaler to help kickstart myself and give myself all the tools that I needed in order to be successful at that. Within my first two weeks of being there, I made my first acquisitions and sold them. They had told me all throughout, "You're not going to do anything for the next 3 to 4 months. Don't expect to get paid, in other words." I hit the ground running with that. I did well with doing wholesaling. A lot of it came from being an honest person and understanding the investor. I know a lot of wholesalers are taught, “Chase the deal, who cares. Make an offer. Go out and find someone. Someone will buy it.”That wasn't my mantra. It made those people that had hired me mad. They were like, "We need you to work. Stop asking so many questions, just work." I would go to networking events with my little clipboard, "I'm looking to build my buyers list." Everyone was like, "Get away." I did my hardest to learn the most and get out there. I did well. At one point, I sold sixteen properties in one week. It was quite fun. Part of my success was because I found a better lender. What that means is at the time, my deals were falling through. The lenders were not being completely honest. Towards the closing table, my investors were falling out because there are too many surprises. A lot of weird stuff are going on.I set out to find a better lender and I did. They were based out of Arizona. I started funneling all my business through to them. It was able to make me scale as well as them scale. They asked to recruit me onto the lending side. I took it. I was like, "I would love to get away from this and start learning more about that." I opened up their Houston office and focused solely on the Texas market. I enjoyed it. I've learned a lot. The way that their company was structured was not as creative for what the demand in our market is. It's ever changing. I see a lot of lenders are beginning to change their terms as well to stay relevant. I hit a wall. I hit a ceiling and the next thing I know, FlipCo was born. That's the background story there before FlipCo became a thing.I'd love to go back and unpack a few things that you said there. San Antonio and Houston are different markets. San Antonio is a major market, don't get me wrong, but compared to Houston, it's a different industry and different drivers. You said that lenders are changing their terms to stay relevant. What do you see in your field of those changes?I don't want to speak too confidently, but myself and my entire team set out to research the market. We've done some rigorous research for the past few months. I know that doesn't seem like a long timeline, but it was a good amount of people. We've got a lot of good information. I am seeing a lot of new lenders coming to the market. Some of the data that we've pulled in conversations we've had with the older guys that have been in the market for ten-plus years. Back then, their terms were all day long 14% interest in 3 points. That was the bread and butter right there. That wouldn't fly now in the Houston market. I could not speak on other markets but for the most part in Texas, we're competitive.[bctt tweet="The market is changing, and people are realizing private money is more interesting than conventional lending." username=""]There are so many new lenders coming to the market. These prices are being driven down. We got started on this research months ago. You go back to those same guys, everyone's vague about this because everything's a case by case scenario, but they seem to have driven down their vague terms into something a little bit lower. You're looking at not usually anything more than 2 to 3 points, whereas before people were confident with saying there would be four points upfront, plus a bunch of other stuff. The market is changing. People are realizing private money is more interesting than conventional lending.With interest rates and depending on who you listen to, what side of the aisle is going to be great or we got inflation coming. As a private lender myself, I can't wait for interest rates to rise. It's my money generating that cash so the better. I have noticed with some of the lenders around town that I've spoken to, the money that they're lending out have to come down. Therefore, where they're getting their money, they have to give them less as well. A lot of players are hitting the markets. Every time I talked to an appraiser, it seems like there's a new hard money company coming in from someplace else.Tell me about FlipCo. You found it in November 2020. Your team's been doing a lot of research. I saw from the photos that there are a couple of guys, but you're predominantly a female-based team. The reason I wanted you on this show is I'm a daughter daddy. I love stories like yours. Mike Tyson said it best, “Everyone has a plan until they get punched in the mouth.” I was going to go to college and that has changed. That's a big pivot in COVID 2020. Tell us about that.It is a risky time to say, "Let's throw pasta at the wall and see if it sticks with this idea." To be honest with you, I was lending even during COVID. I know for March 2020, we settled down a little bit. Everyone was weary of what was going to happen, but I never stopped lending with the company that I was with. What happened with FlipCo was quite an interesting story. I found an Angel investor that listens to the business model and to me. I had already known and realize that business model was still working throughout COVID situation. Real estate was still going. Investors still needed funds. Private money is something that is becoming more and more attractive to a lot of the bigger type of investor.I call mine an Angel investor. I got lucky with them. I gave them the business model and showed them the track record. They went for it. They did initially put in their personal funds for it, but quickly we found out that wasn't going to be enough. In the first week, we're projected to clear about a little over $1 million and they were putting in $5 million of their funds. There was no way we would be able to scale. However, I was strategic with this one. They have unlimited amount of funds that they're able to use through their bank contacts. They're a large company. They opened a lot of companies underneath. The way that they structure these companies and these models to be attractive to these banks is something that I hope to get involved within 2021 starting with them. It’s already at the beginning stages because that's a whole other animal.On my team, we have one guy that's solely dedicated to working with the banks that they already do, projecting our business and what would be our scenarios. In that way, we're attracting more and more funds. We now have $10 million to work with. We got started in November 2020. Banks liked the idea especially when it comes to real estate. It hasn't been that hard for them to convince banks to give us money for this lending on these deals. FlipCo immediately gave me everything I needed from IT to attorney, to marketing people, anything that I needed, anyone I wanted to hire. We took off with it. That's why we've been able to go so quickly. When I initially gave it to them I said, "By the 120th day, we would be ready to start looking at deals." We were already funding within 45 days. That's how quickly everyone jumped on board for this. It's exciting.There was a little chatter on social media where your profile didn't go away but it went dark. It came back quick with FlipCo. We’re talking prior to this interview the speed at which everything came together. What happens when you get everything you've ever asked for?It never happens like that for me.In 120 days and funding within 45 days, which is your average bank time of purchase for your personal residence anyway. To go from idea inception to the mechanics of money flowing, that's quite impressive.I would've never thought it was going to turn into this. At least we know there's a high interest for this kind of business if someone was ever interested in taking this business model over to someone else who was an Angel investor like myself. There are people out there that want to jump into this.It's hard assets. Things can happen. No investment is 100% safe. No one's going to short a house and drive up the price like they did with GameStop. Things couldn't get manipulated but that's not going to happen. People say, "How many points do you charge?" They always want to know what are your points, what's your interest rate. It depends on the project. I've lowered my rates for some passion projects for people. I've raised it. I don't want to chase risk but if I'm going to do this, you're going to have to pay me some more. Average foreclosure in Texas is about $1,500. The borrower has to come with that fee. They have to pay for their foreclosure to me upfront. I put it away. God forbid if I have to foreclose, the money's there. I send it over to the attorney and I'm done. You got FlipCo. They didn't land in your lap. There was a lot of hard work that went through it, but it came to fruition a lot quicker.It's almost like the Angel investor fell into my lap. It was in conversation. That conversation was told to someone else who they knew had been working on this model but didn't have anyone to fill in the blanks. I don't know if you believe in the power of manifestation and hard work but it's a real thing.[caption id="attachment_3087" align="aligncenter" width="600"] Private Lending: Investors financing should be the first thing, but it is an afterthought for most people.[/caption] I'm a firm believer that everything we want is on the other side of hard work. Talking about the model, what is the model? What type of loans are you putting out there for investors?We're focusing on fix-and-flip and bridge loans. It’s mainly fix-and-flip loans. The bank likes to see that. That's how we're building our portfolio, our rapport with the bank. What we're offering is 10% interest and 2.5 points. It's case by case scenario. A lot of guys might be in and out of the loan. We are requiring guaranteed interest rate is what we're calling it. At least 4 months on a 6-month loan. That's usually fair because if guys are still trying to get in and out of it, it still takes about four months anyway. It's not like we're saying we're guaranteeing your entire loan of interest. It was a lot of back and forth.The team was like, "I think that we're a little too competitive with our pricing." We're the new guys on the block. We're trying to scale. We're trying to go national. No one's going to recognize us or pay attention to us unless we look attractive. That's why I would say our terms are where they are at because we also don't charge any other fees. There's nothing. We're collecting that 2.5 and the 10% interest but mostly fix-and-flip. We're still working slow. We're not quite ready to release the dragon.The fix-and-flip that you mentioned, you don't charge any fees. No appraisal fees.We don't. We do in-house underwriting.Let's get into that.People get nervous, especially lenders. They’re like, "You do what." Our idea is we're not trying to be the lender for everyone. We do want to work with quality borrowers. We want to work with mostly repeat clients. We're not trying to be your next big hard money lender. Quality borrower means that those people have done more due diligence. It says in the background, "Never trust, always verify.” Our job is to pull that thing apart and look under rocks. We do have an in-house attorney that does a search of title. I know title companies are already supposed to handle that, but we have our guy immediately doing that in case there's something that won't be cleared and we won't find that out until last minute.We do have a good team that has a lot of experience in our market, appraiser or underwriter. If you're licensed for it or not, it's an opinion and value. For us with our knowledge, that's more than enough for us to feel confident on a deal. If it's something that's a little bit more different or it's out of the box, we would hire a third-party appraisal for that. Other than that, we do our underwriting in-house. The idea is for us to be competitive in our market. That would mean that we need to streamline the process. If we say we can fund within 48 hours, we need to be able to do that if all parties are ready to go. We're trying to look attractive.Are you funding within 48 hours of acceptance of application?We can approve a borrower within 24 hours. We want to keep it that way. Part of the ability to keep it that way is we will have to hire on more people as we scale. We have enough. We're not moving quite as quickly as we should be. It gives us the ability to approve someone within 24 hours. We're not doing credit checks. We're doing financial statements. We're doing bank statements. We're doing experience. We're doing conversations with these people. I was having this meeting. A lot of it has to do with a borrower's character.For example, I'm almost to the end of an option period with one of my flips. I've got to change all of the piping. It's a whole mess. A lot of people can't handle that kind of stress. They won't be able to take that to the finish line. This is the fifth extended option period that I've had on this property, but I don't give up. If you have a good feel for a borrower that gives you that mentality, has the experience, has the funds, has the financial statement, that should be enough at least for now. We do plan on pulling credit in the future though like a soft one.I don't myself, but I make sure that the borrower knows that I can and will if need be. At the end of the day, I'm worried about more of the asset or I break it down. I want to know the person. To your point, know their character. I want to know the process that they're coming to. Is this flip that his doing his 30th flip? That makes me feel a lot better than somebody with three rental properties going, "I'm going to start flipping." There's a process. At the end of the day, it's the property. If the worst comes to worst, I have to take this thing back and foreclose. Are the numbers there? Is the margin there? Is it going to be worth my while?[bctt tweet="Lenders are set up to...
11 minutes | 13 days ago
PLP-123 Compound Interest – the 8th Wonder of the World
Hello Private Lender nation and welcome to episode 123 of the Private Lender Podcast, I’m your host, Keith Baker and I’d like to thank you for sharing your time with me today. If you’re looking for practical tips and advice on Private Lending and how to keep your money safe as a Private Lender, then you are in the right place. But if you want to learn from my mistakes so you can avoid them, well then pull up a chair and pour yourself a drink my friend, because this podcast is just for you!If you’re looking for practical tips and advice on Private Lending and how to keep your money safe as a Private Lender, then you are in the right place. But if you want to learn from my mistakes so you can avoid them, well then pull up a chair and pour yourself a drink my friend, because this podcast is just for you!Before I jump into today’s episode, I want to give a shout-out to Blake who sat next to me on a flight to Nashville recently. He’s a young man who is leaving the world of commercial real estate to go back to school to follow his passion. And he has a great outlook on money and not wasting it just because you have it. Blake, hold on to both your passion and your outlook on money and wealth – they will serve you well and I wish you all the best!In today’s episode, we will continue to explore the lessons found in the book “The Richest Man in Babylon”. Today we will be discussing the 3rd cure for a lean account: Make your money multiply with compound interest.But first, a little housekeeping. . . . .The Private Lender Podcast Facebook GroupClick the Easy button below to begin your Private Lending journey. . . Let's get down to the Brass TacksToday’s topic is another lesson from the Richest Man in Babylon written by George Samuel Clason. Today is the fifth installment where we will be discussing the 3rd cure for a lean purse, or as I like to think about it, a cure for a low account balance. And like so many lessons in life that we should heed, the principle is quite simple, but we humans seem to have trouble with the execution. If you would like, you can go back and catch up on the first four installments in the following episodes:Episode 114: First Cure for a lean account – save 10% of everything you earn for the futureEpisode 116: First Law of Wealth - Wealth comes to those who reserve AT LEAST 10% of their total earnings towards building their future financial independence/fortune.Episode 118: Second cure for a lean account – control thy expensesEpisode 120: Second Law of Wealth - “work hard for your money, but then make your money work harder for youSo, let’s discuss the 3rd cure for a lean accountSo if you follow the lesson sequence from the book, you are beginning to increase your account value- and this is no doubt very satisfying to see it grow. However, if your money is in a savings account then you are not earning very much. According to Bankrate.com, at the end of March 2021, the national average for savings accounts was 0.07%.While earning cash flow and saving a portion of it is but the first step to generating wealth, the 3rd cure is to put each dollar that you have saved to work for you so that it will generate more money and wealth. Then, take the earnings and add them back into the account such that your earning will compound. I am a firm believer that this process should begin as soon we begin to earn money and should continue until the day we leave this earth.This is the essence of compound interest.For simple math, let’s say you start with 100k and receive 10%, or 110k when the loan is paid off. Then you incorporate the 10k earned in interest into the next loan so that you can earn interest off your interest. So your next loan amount would be 110k. Make 1 loan at 10% every year and the original 100k will be worth $672,750 after 20 years – and that is if you don’t add any more moneyCompound interest is the 8th wonder of the world. He who understands it earns it; he who doesn't pays it.Here’s the deal, I don’t charge money for this show, but there is a cost and I would be extremely grateful if you would help drive awareness to the show, to get the word out by leaving me an honest rating and review over at iTunes, Google Podcast or whatever platform you are using to hear my voice. It doesn’t take that long and it’s a small price for the value I try to provide. And if you are looking to create your stable of private lenders, or know people who have money but don’t realize the power of private lending, please, please send them a text, an email, a DM, and introduce them to the PLP. That’s gonna do it for Episode 123 and just a few final thoughts:1 – please join the Private Lender Podcast Facebook Group to connect, learn, inspiration and discussion2 - Remember, the EASY button to lending in the Houston, TX market can be found at www.PrivateLenderPodcast.com/inkSo, as I sign off I’d like to say in addition to mindfulness and self-awareness, I wish you safe and prosperous Private Lending.I’ll catch you on the next episode.-kLove the show? Subscribe, rate, review, and share!Here’s How »Join the Private Lender Podcast community today:PrivateLenderPodcast.comPrivate Lender Podcast Facebook GroupPrivate Lender Podcast FacebookKeith Baker on LinkedInPrivate Lender Podcast TwitterPrivate Lender Podcast YouTube
38 minutes | 21 days ago
PLP-122 Rod Khleif: Why Achieving Personal Growth Is More Important Than Goal-Setting
Many people believe that achieving your goals is the epitome of success. However, what makes it more worthwhile is gaining personal growth along the way. Multifamily master Rod Khleif joins Keith Baker to tell his inspiring story of finding success and failure in real estate, teaching him to live larger than life and become strong whatever happens. He shares how writing down your specific goals helps a lot in gearing up for the challenges of life and how the feeling of gratitude allows you to manifest every goal you may have. Above all, Rod talks about finding a high level of self-fulfillment in giving back to society, sharing how he found a deeper purpose in feeding families every time the holiday season comes. ---Rod Khleif: Why Achieving Personal Growth Is More Important Than Goal-SettingI Finally Got To Interview Rod Khleif!I’m pumped up for this interview with Rod Khleif. He is a multiple business owner and philanthropist who is passionate about real estate, business and giving back. As one of the country’s top business, real estate and peak performance luminaries, Rod has owned over 2,000 homes and apartment buildings and has built over 24 businesses in his 40-year business career, several of which have been worth tens of millions of dollars. That’s just a few of the reasons I sought out Rod to be on the show. As you read on, you’ll understand why. Out of 120-plus episodes, this is the episode in which I say the least. Rod is captivating and inspirational, at least for me. I sat back and started taking notes because I forgot that I was conducting an interview. Rod’s podcast, The Lifetime CashFlow Through Real Estate is one of the first shows I listened to way back years ago. It inspired me to do my own. His show inspired me to also begin seeking knowledge and to understand multifamily investing, which is Rod’s specialty. Let’s go ahead and get down to the brass text of this show and to the interview with Rod Khleif.---It’s my distinct honor to welcome Mr. Rod Khleif to the show. Rod, welcome.Thanks. Let’s have some fun, Keith.I know full well who you are. I want my audience to know who you are. I listened to Rod’s podcast years ago as I’m coming up in my morning commute and it inspired me to do my show. Rod’s podcast is The Lifetime CashFlow Through Real Estate. There’s a lot of great information there. I’m excited and nervous. Rod, thank you so much. You honor me by coming on here.Thank you for your kind words. That means a lot to me. For those of you that don’t know who I am, let me give you a little background on me and a story because it might help and inspire you. I immigrated to this country when I was six years old. I was born in the Netherlands, in Holland, wooden shoes and windmills. We ended up in Denver, Colorado. We didn’t have much. I worked close in the Goodwill and the Salvation Army all the way through junior high school until I lied about my age to work at Burger King when I was fourteen, so I could buy my clothes. I remember growing up, we ate expired food and drank powdered milk because that’s all we could afford.Luckily, my mom had an incredible work ethic. She babysat kids so we’d have enough money to eat and have a decent life. She was a bit of an entrepreneur as well. She invested in the stock market with her babysitting money. She also bought the house across the street from us when I was about fourteen. When I was seventeen, three years later, she told me she’d made $20,000 in her sleep. I’m like, “You made $20,000, it went up in value and you didn’t do anything? Forget college. I’m getting into real estate.” I became a real estate broker when I turned eighteen. I’m an agent. I was a broker, which you could do back then with education. Now they got smart and you need some experience, but I was a real estate broker. I was going to be rich in real estate.In my first year in real estate, I made about $8,000. This is 1978. In my second year, maybe $10,000 or $12,000, but in my third year, I made over $100,000, which back in 1981 was some decent change. What happened between year 2 and 3? I met a guy that taught me about the importance of mindset and psychology, and how your success in anything relates to your mindset and psychology. It’s 80% to 90% of your success in anything. Only 10% to 20% is the mechanics, be it in private lending and in multifamily real estate, which is what I teach. Whatever the vehicle is, it’s the smallest percentage. If it was knowledge, there would be much wealthy librarians and college professors out there. It’s the do and keep doing.[caption id="attachment_3062" align="aligncenter" width="600"] Personal Growth: Whatever you focus on is going to get larger, both positive and negative.[/caption] Fast forward now, I’ve owned over 2,000 houses that I’ve rented long-term and thousands of apartment units. In 2006, my net worth went up to $17 million while I slept. It’s a little more than my mom’s $20,000. I thought I was a real estate god. If you do Math on it, it’s $8,300 an hour over a 40-hour workweek, which I did. I could barely fit my head through a door. I thought I could do no wrong. When that happens, sometimes when people get like that, God or the universe will give them a nice little smack down. That was in 2008. I lost that $17 million and a lot more. I lost $50 million in 2008. I thought that was it for life. One of the things I enjoy talking about or drilling down on is the mindset it took to have $50 million and to lose in the first place, but then the mindset it took to get back to the success that I enjoy now. If you want me to drill down, I can go a little deeper on how that happened.I want you to tell your story because I can regurgitate and it’s not going to be the same side of the impact that it has coming from you. I love the fact about what it took to get to that. How do you get the ability to lose $50 million? I love how you said you couldn’t get your head through the door, the hubris of youth. Getting back to do that, bouncing back, getting back up after that and returning. Please dive in.How I was able to do it is re-associating with exactly what I wanted and more importantly, why I wanted it. I used to do these live bootcamps. I did sold-out live events for 2.5 to 3 years. I was supposed to have 800 people in Orlando in May 2020 and we all know what happened with that. I was freaking out. I was like, “We had hundreds of people that already paid. What are we going to do?” If you go to MultifamilyVirtualBootcamp.com, you’ll see me with my phone in the backyard shooting the video because we had to get the website up in two days. We did and we’ve now had thousands of people attending my live stream events. I had to innovate and pivot. Let me mention something. If you’re reading this, I know you’re a leader. Now more than ever, the world needs leaders. Back then, I had to innovate and pivot. Maybe you do as well. Maybe you’re going through a tough time and you need to re-invent yourself. We all go through these periods in our lives and don’t fear it, deal with it. Do it, innovate, pivot, whatever you have to do to make it happen. Some of the biggest companies in history were built when times were tough. Keep that in mind. One other thing on that note as it relates to leaders is as a leader, you have to pay very close attention to what you focus on. Whatever you focus on is going to get larger, both positive and negative.[bctt tweet="Some of the biggest companies in history were built when times were tough. " via="no"]Be very careful and don’t get sucked into the news. The news isn’t out there to inform us. It’s there to startle and scare us. Don’t get me started on politics. Don’t get sucked into that crap. Focus on bringing in the good stuff. The bottom line is how I was able to recover was re-associating with what I wanted. I do these live events. One of the first things I do is this session. I’ll give you a high-level overview of what I do. I call it goal setting on steroids. This is how I had $50 million to lose and how I got back to the success that I have through this process. There are a few steps. I’ll go through it very quickly. The first thing you need to do is to pick an hour when you have a lot of energy. Don’t do it after a meal. Sit down and write down everything you could ever possibly want in life. All the stuff, there’s nothing wrong with stuff. The houses, cars, boats, jet skis, planes, write it down. Write down how much money you want in the bank in 3 or 10 years. Write down how much cashflow you want from your investments in 3 or 10 years. Write down all the places that you want to visit. Write down all the things you want to do. It’s not just the stuff. Dig deep and write down everything. The little things and the big things. Everything you could ever possibly want, the jewelry and clothes.Also, write down the things you want to do. Maybe you want to climb all the mountains over 15,000 feet or jump out of a perfectly good airplane. I did that in 2020 and I’ll never do it again, but it’s off the list. Write down what you want to do. Where do you want to travel? I’ve got a travel vision board. Also, write down what you want to learn in your lifetime, the skills you want to learn. If you want to be a private lender, I know Keith’s got some stuff coming out to teach you how to do that. If it’s multifamily, come and see me. I’ll tell you how you can spend a couple of days with me. It’s $97 and I don’t send to sell anything there. I teach for eighteen hours and I don’t sell anything for under $100.The point is if you want to learn something, write it down, a skill, maybe a foreign language or you want to write a book. Whatever you want to do, be or have, you need to write it down, little things, big things, everything and dig deep. Also, write down who you want to help. We’ll do more for others than we’ll ever do for ourselves. You want to use this. This is the fuel that’s going to get your butt out of bed early, stay up late, work on a Saturday. Do whatever you got to do to live the life of your dreams. If you’re willing to work like most people won’t for a few years, you’ll live the rest of your life like most people can’t. This is the fuel that’ll get you to that. Don’t let the pen leave the paper. Write it all down. Write down who you are going to help. I bought my parents a house when my dad was alive here on a canal in Florida. I bought him a car, took them on cruises. Who do you want to do things for? Write that down because that’ll juice you. It’ll motivate you. I’m sure there are quite a few analytical people reading this, Keith. If you’re analytical, don’t stop and analyze your answers. Keep writing. You can always scratch them out later. Don’t let the pen leave the paper. Once you can’t think of another thing, put a time limit on each goal. That’s the next step. Put how many years you think it’ll take you to achieve it, 1, 3, 5, even 10 or 20, recognizing that as human beings, we will overestimate what we can do in a year, and massively underestimate what we can do in 5, 10, 20 years. [caption id="attachment_3063" align="aligncenter" width="600"] Personal Growth: If you want to learn something, write it down.[/caption] I’m going to give you some examples for me. This is not me bragging. I’m hoping to inspire you. Most of these examples don’t even interest me anymore, but I’m hoping they’ll inspire you. When I lived in Denver, I always knew I wanted to live on the beach. There was no beach in Denver. I would visualize the palm trees, sand, surf and all of that stuff. Twenty years later, I built this incredible mansion on the beach. It was unthinkable when I was eighteen. Take the lid off your brain. I own the beach on one side. I had my boats on the backside. It was an $8 million, 10,000 square-foot mansion. If you can imagine it, you can do it. There’s nothing you can’t do. Put a time limit on each goal. Once you’ve done that, you need to pick your number one goal. If you’ve got 2 or 3 that are equally exciting, just pick one. When you get that goal, you’re like, “This is amazing.” That goal that you know you’ve arrived at when you’ve achieved it.Put that on a separate sheet of paper. I want you to pick your top three one-year goals and put those on that separate sheet of paper. Leave some room in between them. Don’t overthink this. Don’t kill yourself trying to pick the number one goal. If you’ve got 2 or 3 that are equally exciting, just pick one. It won’t matter for this, but your number one goal and your top three one-year goals. At this point, you’re ahead of 99.9% of the people on the planet that do a new year’s resolution that’s forgotten by February. There are two more steps. The goals are important. You got to have them. That’s how you create what Napoleon Hill calls a burning desire in his book, Think and Grow Rich. You got to have a burning desire.You got to want it but, “Why the goals are an absolute must?” is the real fuel. You need to write a paragraph under each goal why you have to achieve it. There’s no 50/50. It has to happen. Use emotionally charged words when you’re writing your description. Words are powerful. Words like amazing, incredible and beautiful. Use these words because they’ll juice you. You might say, “I can show my kids what incredible success looks like. I can show my wife or husband what it means to be free and live an amazing life of success. We can have the freedom to do whatever we want, whenever we want, go wherever we want, bring whoever we want.” Whatever is going to juice you, write it down. Put a positive reason why it has to happen under each goal. One little tiny step further. You need to put some pain in there if you don’t achieve the goal. Make it freaking painful, “So I don’t feel like a failure, so I don’t fail my kids, so I don’t fail my wife or husband, so I don’t live a life of regret.” There was this nurse in Australia named Bronnie Ware. She was a hospice nurse. She dealt with patients when they were about to die. She asked them a question. The question was, “Do you have any regrets?” She even wrote a book about it’s called The Top Five Regrets of the Dying. Do you know what the number one regret was? It was, “Not living the life I could have lived but living someone else’s life. Not doing what I know I’m capable of.” We do not want that. If you’re sitting here and you’re afraid of failure, fear regret. It’s much worse. Fear being in the same place that you are a year from now unless you love where you are now. That’s what you fear. Fear regret, not failure. We fail our way to success. As a side note, I call them seminars. That $50-million thing was a seminar. It wasn’t a failure. I learned that it’s only a failure if you don’t get back up, and you don’t learn the lesson. I’ve built 24 businesses. Several have been worth tens of millions of dollars. Most have been spectacular flaming seminars, but we fail our way to success. I met the billionaire owner of SPANX, the women’s undergarments. Her name is Sara Blakely, a beautiful human being. I met her at her mastermind. She told me that her dad used to ask her and her brother once a week, “What have you failed at this week?” What an awesome question to not fear failure. You’ve got your negative reason why you cannot fail in getting that goal. The next thing you must do is you must get pictures of your goals. This is how you manifest this stuff. Back years ago, I used to have a sign above my bed. When I laid in bed, I could see it. It said, “$100,000 a month.” Now I have 10X that. It says $1 million a month above my bed. I’ll reach it and that’s not ego. I will. There’s no question in my mind. That’s a big piece as well. You’ve got to know you can do this. You got to believe in yourself. The power of belief is incredibly powerful. You’ve got to believe it, even if you don’t have it and you know what to pee in. [bctt tweet="Everything you want to manifest in life starts from a foundation of gratitude. " via="no"]Get pictures of your goals. Let me give you some examples of manifesting. I’ll give you a couple of public examples. Jim Carrey wrote himself a check for $10 million when he was flat broke. He carried it in his wallet. He used to go up by the Hollywood sign. He would look at it and visualize cashing it. That’s how much money he made for Dumb and Dumber. Demi Lovato posted on social media, “I’m going to sing in the Super Bowl,” when she was unknown years ago. In 2020, go see who sang in it.I’ll give you some personal examples for me. When I was eighteen, I figured I had to have a four-door car to show houses because I was going to be rich in other people’s houses. I bought this four-door Ford Granada, bench seat in the front, the ugliest piece of crap you’ve ever seen. I figured that’s what I had to have. I worked with a guy and he had Corvette. He let me drive one. That’s an important piece. If you want something, experience and test drive the car, go to the open house of the houses that you want. Experience it as much as you can. I drove this Corvette and I’m like, “This is freaking awesome.” It’s sleek and you sit back like you own the world. I got a picture of a Corvette out of a magazine. This is before the internet. I glued it or taped it to the visor of that bone ugly Granada. Every time I sat in it, it was right there in front of me, then a year I had a Corvette. I’ll give you a couple more examples. This is back when the TV show Magnum P.I. was out. The actor’s name was Tom Selleck. He was this detective in Hawaii. It was the first time I’d seen an exotic car. He drove this Ferrari 308. I’m like, “Look at that thing. Look how low, beautiful and sleek it is. I got to have one.” I got a picture of that actual car. I put on the visor of my Corvette. Within a year or two, I have a Maserati that looked like it. The last example, I always wanted a Lamborghini. When I saw those, I’m like, “These are amazing.” I got pictures of them, posters in my room. What’s interesting is my son collected exotic cars. He had a model of the exact same color that I ended up getting. A color and style of Lamborghini that I ended up getting. None of this stuff may interest you. Maybe it does, maybe it doesn’t, but the message here is to get pictures of what does juice you and put them around you because they work.I have a paper planner. In the back of this thing, I’ve got pictures that have been in here for twenty...
10 minutes | a month ago
PLP - 121 Lending to an entity
Greetings from the laughingstock of the professional sports world – Houston, TX. And welcome to episode 121 of the Private Lender Podcast, I’m your host, Keith Baker and I’d like to thank you for sharing your time with me today. If you’re looking for practical tips and advice on Private Lending and how to keep your money safe, then you are in the right place. But if you want to learn from my mistakes so you can both avoid and profit from them, well then pull up a chair and pour yourself a stiff drink my friend, because this podcast is just for you!The PLP is dedicated to giving people just like you and me the knowledge and confidence to participate in the most passive form of real estate investing known to man: Private Lending.And if you are looking for a shortcut to begin Private Lending then head over to PrivateLenderPodcast.com/ink to learn how you can put your money to work for you by investing in private and hard money loans around Houston. Also, make sure to join the Private Lender Podcast Facebook group to connect with other private lenders and be a part of the community.Are you ready to get down to the brass tacks of today’s episode? – Cuz I know I am!Today’s topic is about lending to an entity instead of a person, and what you need to do in order to protect your money. So let’s dive in, shall we??!!A retail loan to an individual Retail bank (as well as SDIRA custodian) will require the borrower’s name, address, contact info, driver’s license, and social security number.In the case of a loan or mortgage, the borrower’s social security number is important for 2 reasons:allows the lender to perform a credit report to help underwrite the loanallows the lender to report the borrower to credit bureaus in case of default or delinquency. This is how banks can keep some of the borrower’s skin in the game with a conventional or FHA mortgage – especially in a low or no money down scenario.The same principles apply to Private Lending. While I don’t actually pull a credit report for a borrower, I require the same info as the bank, especially the social security number. If my borrower defaults, I can seek legal remedies against them with their social security number in civil court. And I can put a bruise on their credit report if I decide it is worth it to pay the money.Now let’s look at what happens when Fraudulent House Flippers, LLC applies for a loan at the bank:First off, besides requiring 20% of the purchase price at the closing table for an investment property purchase, they want to see the formation documents for the entity and who are the members and managers, and the LLC’s EIN or federal tax ID number, bank statements, etc.They also require a personal guarantee, unless your LLC has a substantial amount of money deposited with said bank.Why would they require a personal guarantee for a business loan? That’s a good question. But a better question is why should every Private Lender require a personal guarantee when lending to an entity such as an LLC?I’ll walk you through the answer because it can ruin your day.Let’s say I loan 100k to Fraudulent House Flippers, LLC to purchase and renovate a property. For three months I am paid as agreed, but in month 4 Fraudulent House Flippers LLC stops paying their note, and after the loan goes into default, let’s assume two things happen: 1 – I foreclose on the property – a hassle I don’t want but have accepted the risk2 – Fraudulent House Flippers, LLC dissolves the entity and now you don’t have anyone to sue in civil court or receive a deficiency judgment.However, if you require a personal guarantee from every member of the LLC, you now have a means by which you ensure the borrower keeps their skin in the game, and their butt on the line. Because they can’t just walk away as if nothing happened. Remember, you upheld and honored your half of the agreement by putting up your money. You should not feel bad for making the borrower live up and honor their half of the agreement, to the fullest extent allowed by your state law and loan documents.A personal guarantee is a no-brainer and it is non-negotiable. Most heavy hitter RE investors won’t blink an eye at the personal guarantee – they see it as a cost of doing business. Except Ray Sasser of Episode 26 and 93 fame. Ray will try to negotiate for anything. It’s not that he is opposed to a personal guarantee, cuz he can back it up. But he loves to negotiate ANYTHING, just for the sake of negotiating, and nothing more. Remember: it's your money and your terms! Well, that’s gonna do it for Episode 121 and now I will give you my parting thoughts, which are:I don’t charge money to produce this show, but I would be extremely grateful if you would help get the word out and increase awareness for the show by leaving me an honest rating and review over at iTunes, Google Podcast, Spotify, or whatever platform you are using to hear my voice. That is a small but quick request that will pay us both dividends. And to be honest I believe it is a small price for the value you hear on the PLP. And that’s the truth!If you would like to get started on your Private Lender career but don’t know where to start, head over to PLP.com/ink to learn more about how you can begin Private Lending in the Houston area with friends of the show.And don’t forget to join the Private Lender Podcast Facebook group And as we close I want to thank you for your time and for listening. So besides self-awareness, I wish you safe and prosperous Private Lending.I’ll catch you on the next episode.-kLove the show? Subscribe, rate, review, and share!Here’s How »Join the Private Lender Podcast community today:PrivateLenderPodcast.comPrivate Lender Podcast FacebookKeith Baker on LinkedInPrivate Lender Podcast TwitterPrivate Lender Podcast YouTube
9 minutes | a month ago
PLP – 120 The Second Law of Wealth (Gold)
The Second Law of WealthHello Lender nation and welcome to episode 120 of the Private Lender Podcast! I’m your host, Keith Baker and I’d like to thank you for sharing your time with me today. If you’re looking for practical tips and advice on Private Lending and how to keep your money safe, then you are in the right place. But if you want to learn from my mistakes so you can both avoid and profit from them, well then pull up a chair and pour yourself a drink my friend, because this podcast is just for you!In today’s episode, we continue the lessons taken from the book The Richest Man in Babylon: the second law of Gold. These are old-world principles that have remained relevant and true through the centuries, no matter the currency, and no matter the politics.But before we dive into the Second Law of Gold, I need to perform a little housekeeping: Private Lender Podcast Facebook group CLICK HERE2 – Are you interested in doing your own Private Lending but feel like you need a little help to get you through your first handful of loans?Then head over to PLP.com/INK and learn how you can get started in lending with my friend Paul over at Ink lending and fund their loans on properties right here in the Houston area, in one of the most lender-friendly states in this great country of ours! That’s right, Paul Lamnatos and his team vet the deals, underwrite the loan, and put your money to work for you. They even service the loan on your behalf - that’s about as passive as you can get.CLICK HERE or on the image below to learn more!!“Let’s get down to the Brass Tacks”In the book, the RMiB, there are 7 cures for a lean purse, and 5 laws of Gold and today we will discuss the 2nd law of gold, which is simply: Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field. “Gold, indeed, is a willing worker. It is ever eager to multiply when opportunity presents itself. To every man who has a store of gold set aside, opportunity comes for its most profitable use. As the years pass, it multiplies itself in surprising fashion.”There is an old cliché that says: “work hard for your money, but then make your money work harder for you”.I like to think along the lines of the flocks in the field or even raising children. There is usually a great deal of labor to bring your savings to life (see what I did there?) and to give your money the ability to multiply and bring more savings into the world and into your account. Or your savings are like widgets or little robots that make money and produce more robots to make you money – but you have to oversee all of this. This goes back to you taking control of you money, your finances, your future, your family legacy.Don’t let complacency creep up on you, and never trust your money is working for you – you must verify that it is working hard for you.You are shepherd of your money – a steward if you likeYou are the CEO of your money – act like it!!Work hard for your money but make your money work harder for you!Teach this mantra to your children. Teach them how to raise their wealth, and the position of their family.Ok, my sermon is over. Thank you for listening.Here’s the deal, I don’t charge money for this show, but there is a cost and I would be extremely grateful if you would help drive awareness to the show, to get the word out by leaving me an honest rating and review over at Google Podcast, Spotify or whatever platform you are using to hear my voice. But it would mean the world to me if you could leave an honest rating and review over at iTunes because it's apple and they're still the benchmark.It doesn’t take that long and it’s a small price for the value I try to provide. And if you are looking to create your stable of private lenders, or know people who have money but don’t realize the power of private lending, please, please send them a text, an email, a DM, and introduce them to me and the PLP. That’s gonna do it for Episode 120 and just a few final thoughts:1 – please join the Private Lender Podcast Facebook Group to connect, learn, inspiration and discussion2 - Remember, the easy button to lending in the Houston, TX market can be found at www.PrivateLenderPodcast.com/INKSo, as I sign off I’d like to say in addition to self-awareness, I wish you safe and prosperous Private Lending.I’ll catch you on the next episode.-k Love the show? Subscribe, rate, review, and share!Here’s How »Join the Private Lender Podcast community today:PrivateLenderPodcast.comPrivate Lender Podcast FacebookKeith Baker on LinkedInPrivate Lender Podcast TwitterPrivate Lender Podcast YouTube
14 minutes | 2 months ago
PLP-119 March Due Diligence for Private Lenders
Hello Lender nation and welcome to episode 119 of the Private Lender Podcast, I’m your host, Keith Baker and I’d like to thank you for sharing your time with me today. If you’re looking for practical tips and advice on Private Lending and how to keep your money safe as a Private Lender, then you are in the right place. But if you want to learn from my mistakes so you can avoid them, well then pull up a chair and pour yourself a drink my friend, because this podcast is just for you!In today’s episode, we will cover a few items of due diligence every Private Lender should perform if they do not utilize the services of an escrow or loan servicing company. But before we launch full speed into today’s episode, I need to perform a little housekeeping of my own. Guys, I have not been producing much content lately. I mean, I’ve been quiet over the last 12 months - I didn’t produce one episode in February of 2021.I could blame a lot of things such as Covid, kids, divorce, death in the family, additional family drama, anxiety, depressive episodes and let’s not forget Texas became an ice cube for a few days recently.But the truth is this: I chose not to produce episodes, or content, or the Private Lender Academy that I’ve been threatening you with, since forever.I didn’t consciously choose NOT to do anything, but I now see that I chose to stay with the familiar feeling of procrastination due to a failed sense of perfectionism. Meaning I chose to stay in my comfort zone and watch the world go by as I wondered why I wasn’t making any progress toward my goals. Well, I hope I can say I’ve finally gotten off my ass and put that mindset behind me. So let’s gets going and do some housekeeping: PLP Facebook group: Private Lender Podcast (public)https://www.facebook.com/groups/674936429994760Are you interested in doing your own Private Lending but feel like you need a little help to get you through your first handful of loans?Then head over to PrivateLenderPodcast.com/ink and learn how you can get started in lending with my friend Paul over at Ink lending and fund their loans on properties right here in the Houston area, in one of the most lender-friendly states in this great country of ours! That’s right, Paul Lamnatos and his team vet the deals, underwrite the loan, and put your money to work for you. They even service the loan on your behalf - that’s about as passive as you can getIf you would like to learn more go to PrivateLenderPodcast.com/inkOk, let's get down to the brass tacks -t is now March, and time for us Private Lenders to perform a little due diligence.1- Did you send out 1098’s or mortgage interest statements in January?2- Were the property taxes paid by the end of January? Public record, so you can confirm this via the web in most counties in the US.3- Insurance premiums paid?:a. Propertyb. Windstormc. Floodd. Seismic4- HOA dues paid? The 4 previous points are performed on your behalf if you use an escrow or loan servicing company. This is why I suggest as a private lender you should utilize these services because they make your life easier and the borrower pays for the service!It is a condition of retail mortgages and all my Private Loans that the borrower stays current and pays the insurance premiums and taxes. If your borrower is not paying these on time it could mean they are in trouble or quickly arriving at trouble, or perhaps cashflow is being delayed. Your job is not to ask “why?”5 - The last thing I like to do at least once a year is to drive by the properties on which I have a lien and assess the condition of the property. Obviously, I want any property I lend upon to be in good condition, but it depends on the property and my Private Loan’s use.A - So if I have a loan on a rental property, I want to see that the borrower and tenant are both maintaining the property’s condition and appearance. Curb appeal is very important to me even with the lower value rentals and required with nicer properties.B – If I’m loaning to an investor who has sold the property with owner financing (beneath my lien) I want to see the buyer is performing the needed repairs. C – this does not apply to flips or new construction, obviously. You will want weekly inspections/updates to ensure the project is moving ahead and the borrower is not getting into trouble. To recap the Private Lender’s due diligence to-do list:1- Did you send out 1098’s/mortgage interest statements?2- Did your borrower pay the property taxes?3- Did your borrower pay the required insurance premiums?4- Have the HOA dues been paid?5- Drive by the propertyWe all intrinsically know that no investment is 100% safe, but with a little effort, you can help secure and ensure the safety of your money and investments. And that’s the moral of today’s episode. I would like to thank you for playing!Here’s the deal, I don’t charge money for this show, but there is a cost and I would be extremely grateful if you would help drive awareness to the show, to get the word out by leaving me an honest rating and review over at Google Podcast, Spotify or whatever platform you are using to hear my voice. But it would mean the world to me if you could leave an honest rating and review over at iTunes because it's apple and they're still the benchmark.It doesn’t take that long and it’s a small price for the value I try to provide. And if you are looking to create your stable of private lenders, or know people who have money but don’t realize the power of private lending, please, please send them a text, an email, a DM, and introduce them to me and the PLP. That’s gonna do it for Episode 119 and just a few final thoughts:1 – please join the Private Lender Podcast Facebook group to connect, learn, inspiration and discussion2 - Remember, the easy button to lending in the Houston, TX market can be found at PrivateLenderPodcast.com/inkSo, as I sign off I’d like to say in addition to self-awareness, I wish you safe and prosperous Private Lending.I’ll catch you on the next episode.-k
26 minutes | 3 months ago
PLP-118 Defense Wins Championships - Control Expenses
"let thy motto be 100% of appreciated value demanded for each coin spent"Click here for the Private Lender Podcast Facebook Group
14 minutes | 3 months ago
PLP-117 New Year Obligations and House Keeping for Private Lenders
Hello Private Lender Nation and welcome to episode 117 of the Private Lender Podcast and the first episode of the year 2021. I’m your host, Keith Baker and I’d like to thank you for sharing your time with me today, and I hope my voice finds you doing more than well. If you’re looking for practical tips and advice on Private Lending and how to keep your money safe then you are in the right place. But if you want to learn from my mistakes so you can avoid them, well then pull up a chair and pour yourself a drink my friend, because this podcast is just for you!This will be the first episode of 2021, and probably one of the least controversial. But before I say something to get me canceled, I would like to take a minute for some housekeeping:Private Lender Podcast Facebook Group If you like the idea of private lending but find yourself a little hesitant to begin then click HERE to get your feet wet with the help of a professional Hard Money and Mortgage lender.www.privatelenderpodcast.com/inkMy friend Paul Lamnatos is ready to answer any questions you may have and help you get started on your Private Lending journey. Click the link on the webpage and provide your email address and Paul will reach out to confirm a time when you can speak to him about Ink’s lending criteria, their loan process, and how you can begin profiting from loans on properties located in the greater Houston area – in a very lender-friendly state! 2020 is now over, and we Private Lenders have some of our own housekeeping to perform. The 1098Even though the private loans I speak about are business loans, they are still considered a mortgage. Thus the lender is required to file IRS form 1098 and provide it to the borrower, indicating the amount of interest paid on the note over the course of the previous year. · $600 or more of interest collected (including points charged).· Remember, points count towards the Usury limit in your state. 18% in TX· Must file and provide to the borrower no later than 31 January 2021If you have your private loan serviced, which I strongly recommend you do, the note servicer/escrow company with do this for you and mail and/or electronically deliver the forms to you borrower.I personally have one legacy loan with my partner Landon that I didn’t demand the use of an escrow/servicing company.Here are some options if you don’t use a note servicer/escrow company:· Your CPA· Accounting software· Quickbooks or TurboTax· Online servicesI just found 8 websites from a Google search (excluding Quickbooks and TurboTax)The second order of housekeeping is the Fair Market Valuation for any investments, including notes, private entities, and real estate in your Self-Directed IRA. 1. Real Estate – Appraisal, Broker’s Price Opinion (BPO), County Appraisal Value.2. Note – If amortized, attach the amortization schedule. If interest only, simply state the current principal value in the “EOY 2020 Market Value” box and that the note is interest only in the “Comments” area.3. Private Entity – A letter from a managing member on letterhead stating the value or a balance sheet reflecting the value of the partner’s value.4. Personal Property – Third-party valuation from a qualified professional.In my case, I logged on and was able to quickly provide the fair market value of my loans and my investments in the commercial and multi-family deals I recently invested in. Notes/Private LoansThe only loan that I don’t use a note servicing/escrow service is an interest only loan. Therefore, the principal balance is never reduced so the fair market value is always the original loan amount. I provide this amount and a note stating the loan is interest only, and I’m done for the next 12 months.I do have 1 amortizing loan currently, but I use a note servicer who performs the calculation for an accurate remaining loan value. I simply provide an amortization schedule or my annual account statement to my custodian.Commercial Building & ApartmentsSince these Limited Partnerships just recently closed and acquired the properties there has been no change as concerns capital accounts or annual valuations. I have reached out to the sponsor and confirmed this, for 2020. Next year I anticipate a different story and will report back to you guys as things move forward and I learn something new.EPISODE RECAP:Here’s the deal: I don’t charge money for this show, but there is a cost and I would be extremely grateful if you would help drive awareness, to get the word out by leaving me an honest rating and review over at iTunes, Google Podcast, Spotify, iHeartRadio or whatever platform you are using to hear my voice. It doesn’t take that long and I believe it’s a small price for to pay for the value I try to provide. And if you are looking to create your stable of private lenders, or know people who have money but don’t realize the power of private lending, please, please send them a text, an email, a DM, and introduce them to the PLP.Next week we’ll continue with a lesson from the book The Richest Man in BabylonThat’s gonna do it for Episode 117 and just a few final thoughts:1 – please join the Private Lender Podcast Facebook Group to connect, learn, inspiration and discussion2 - Remember, the easy button to lending in the Houston, TX market can be found herewww.privatelenderpodcast.com/inkSo, as I sign off I’d like to say besides self-awareness, I wish you safe and prosperous Private Lending.I’ll catch you on the next episode. . . .
12 minutes | 4 months ago
If you’re looking for practical tips and advice on Private Lending and how to build and maintain wealth outside of banks or wall street, then you are in the right place. And if want to put the power of a bank in your retirement account, you should probably pull up a chair. But if you want to learn from my mistakes so you can avoid them, well then pour yourself a drink my friend, because this podcast is just for you!Love the show? Subscribe, rate, review, and share!Here’s How »This episode is going live on December 21st, 2020 – the longest day of the strangest year I’ve seen in my few orbits around the sun.Before I get to the housekeeping, I would like to take a moment and say thank you. Thanks for sticking with me this far, and I hope you stick with me even further as we boldly go into 2021. Housekeeping:Join the Private Lender Podcast Facebook Grouphttps://www.facebook.com/groups/674936429994760Did you know there is an easy button to start your private lending journey? If you are a bit unsure of making your first private loan, you can partner with my friends over at Ink lending and fund their loans on properties right here in the Houston area, in one of the most lender-friendly states in this great country of ours! That’s right, Paul Lamnatos and his team vet the deals, underwrite the loan, and put your money to work for you. It’s about as passive as you can get!!If you would like to learn more go to PrivateLenderPodcast.com/INK, click the link, enter your info and Paul will reach out to confirm a time when you can speak to him about Ink’s lending criteria, their loan process, and how you can begin profiting from loans on properties located in the greater Houston area – in a very lender-friendly state.OK, let’s get down to the brass tacks, right to the heart of today’s topic which is another lesson taken from the book The Richest Man In Babylon. Why am I doing this you might ask? Because there is no secret to building wealth, but there is a price that I believe very few of us are willing to pay, which includes hard work, unwavering determination, no guarantees, and nothing but uncertainty.You can see examples of not paying the price for that which we so desperately desire. I’ve seen it in my family, my friends and sadly I’ve seen it in myself. Remember ya’ll, my truck was repossessed when my wife (at the time) was 3 months pregnant with our first child.That’s why I love the book the Richest Man in Babylon and the lessons found within it. These are time tested principles for building wealth. They are not get-rich-quick schemes. They are not “hacks” for you to avoid putting in the work and developing the discipline necessary to build your estate, your wealth. There is no cheat code to working for it – and nor should there be!These principles and lessons are quite simple, but that doesn’t mean they are easy to implement or to continue for your entire money-earning life. But if you start good habits now, you will have a strong financial base from which to make future decisions. And you will build the discipline necessary to reach your goals and then some!Last month we began with the first of 7 cures for a lean purse, or small savings/investment account/wealth. And today we will discuss the first of 5 laws of gold, which fits hand in hand with the first cure for a lean account.The First Law of Gold. The First Law of Wealth.Original:Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.Wealth comes to those who reserve AT LEAST 10% of their total earnings towards building their future financial independence/fortune.Pothead Explanation: Start providing yourself and your family with security by paying yourself first, at least 10% of your earnings to be invested in your future.Out of everything you earn, everything (salary, side hustle, inheritance, online bookie.com, lotto winnings, etc., take no less than 10% every payday/week/month/etc., and put it away, save it to begin, and then to continue growing your estate for the future. If you make 1,000 dollars, think I only made 900!!! You find 10 bucks on the street, put 1 away for a rainy day (old age). Why? Cuz the best time to plant a tree was 20 years ago, the second-best time is right now!!! So start digging and planting baby!If you are contributing to a company-sponsored retirement plan, my suggestion is this:1 – don’t leave money on the table. Whatever your company is willing to match then you should contribute at least this minimum.2 – strive to get to a point where you are maxing out you retirement plan contributions.3 – DO NOT include retirement plans in your 10% calculationCOLD HARD FACTS: Nobody will lend you money when you are desperate, nor should they!Start saving any percentage you can. And slowly increase the amount you put away as new money finds its way to you.Here’s the deal: I don’t charge money for this show, but there is a cost and I would be extremely grateful if you would help drive awareness, to get the word out by leaving me an honest rating and review over at iTunes, Google Podcast, Spotify, iHeartRadio or whatever platform you are using to hear my voice. It doesn’t take that long and it’s a small price to pay for the value I try to provide. And if you are looking to create your stable of private lenders, or know people who have money but don’t realize the power of private lending, please, please send them a text, an email, a DM, and introduce them to the PLP.That’s gonna do it for Episode 116. Remember, please 1 - Join the Private Lender Podcast Facebook Group2 - Remember, the easy button to becoming a private lender is at www.privatelenderpodcast.com/inkSo, as I sign off I’d like to say besides self-awareness and a Merry Christmasw, I wish you safe and prosperous Private Lending.I’ll catch you on the next episode.Love the show? Subscribe, rate, review, and share!Here’s How »Join the Private Lender Podcast community today:PrivateLenderPodcast.comPrivate Lender Podcast FacebookKeith Baker on LinkedInPrivate Lender Podcast TwitterPrivate Lender Podcast YouTube
18 minutes | 5 months ago
PLP-115 What is the pulse of your local market?
Join the Private Lender Podcast Facebook group and get real time answers to your questions as you build your network!:https://www.facebook.com/groups/674936429994760Also, did you know there is an easy button to becoming a Private Lender? Just CLICK HERE to learn more about lending your money on deals right here in the Houston area,OK, let’s get down to the brass tacks, right to the heart of today’s topic: the pulse of your local real estate market. 2020 has been just a little crazy, no?I personally know people who were optionally unemployed - WTF?Eviction moratoriumsForeclosure moratoriumsA new spike in Covid cases and restrictionsWall St is thrivingMain street is dyingREITs took it on the chin and haven’t returned to pre-covid pricesNationwide housing market are showing bulls and bearsI suggest we all pause for a few seconds and stop what we’re doing to look around us. To observe the current market trends and signs. What does your local market look like? Perhaps you live near a major city and are experiencing urban flight.Maybe you’re more coastal and have seen a staggering amount of vacation home construction and development. We certainly have in the Gulf Coast.The city of Lake Charles – hit with 2 hurricanes (first Laura then Delta). I’ve had conversations with locals who work in the petro-chem plants and are looking to have their homes repaired or rebuilt and the prices are through the roof. Admittedly this is anecdotal hearsay at best, but when you hear enough strangers say the same thing in a matter of hours, I tend to put some credence to their words.My neighbor down the street is currently on contract number 5 to sell his house. We’ll see if it actually closes before the end of 2020.Saw an article in WSJ stating home sales set a 14 year high (2006)What am I looking at to get the pulse on the Houston market?HAR.com (local MLS) Monthly press releases that show month over month statistics. Total SalesAverage SFR sales priceMedian SFR sales priceNumber of listingsPending salesMonths of inventoryNovember 2020· $1 – $99,999: decreased 23.1 percent· $100,000 – $149,999: decreased 22.3 percent· $150,000 – $249,999: increased 18.2 percent· $250,000 – $499,999: increased 46.7 percent· $500,000 – $749,999: increased 58.1 percent· $750,000 and above: increased 81.5 percentHere’s what I know:Interest rates are the lowest ever since Freddie and Fannie began tracking them in 1971.Stimulus plan and moratoriums running out, is another round coming?Lockdowns?This bull market is long in the toothHere’s the deal: I don’t charge money for this show, but there is a cost and I would be extremely grateful if you would help drive awareness to the show, to get the word out by leaving me an honest rating and review over at iTunes, Google Podcast or whatever platform you are using to hear my voice. It doesn’t take that long and it’s a small price for the value I try to provide. And if you are looking to create your stable of private lenders, or know people who have money but don’t realize the power of private lending, please, please send them a text, an email, a DM, and introduce them to the PLP.That’s gonna do it for Episode 115 and just a few final thoughts:1 – please join the PLP Facebook group to connect, learn, inspiration and discussion2 - Remember, the easy button to lending in the Houston, TX market can be found at PLP.com/INK.So, as I sign off I’d like to say besides self-awareness, I wish you safe and prosperous Private Lending.
21 minutes | 5 months ago
PLP-114 Lessons from the Richest Man in Babylon
Hello Private Lender nation and greetings from what used to be the energy capital of the world – Houston, TX. And welcome to episode 114 of the Private Lender Podcast, I’m your host, Keith Baker and I’d like to thank you for sharing your time with me today. If you’re looking for practical tips and advice on Private Lending and how to build and maintain wealth without banks or wall street, then you are in the right place. And if want to put the power of a bank in your retirement account, you should probably pull up a chair. But if you want to learn from my mistakes so you can avoid them, and save yourself thousands of dollars and heartache in the process – well then pour yourself a drink my friend, because this podcast is just for you!Let’s start with 400lbs gorilla in the room – where have I been? Well, let’s just say that while mother nature has not been kind to the united states this year , she’s been kind to my wallet! Let me just say that business is booming!Which is great for me, but when you pray for rain, you have to deal with the mud. So that means I’ve been on the road traveling more, seeing my kids less, and sitting elbow to elbow with people on airplanes, all while maintaining proper social distancing, as mandated by the airlines!Happy to be back home, and get back behind the mic, and back into the episode groove! And I’m happy to say motivation is flowing back and work on the PLA continues – albeit slower than I would prefer! I think I might drop a surprise episode into the mix soon so keep listening for more info.Housekeeping:1 – PLP Facebook group: Private Lender Podcast (public)Go to Facebook and search for the Private Lender Podcast group and click thehttps://www.facebook.com/groups/674936429994760Show notes page for the link2 – did you know there is an easy button when it comes to starting your journey to becoming a kick-ass Private Lender? Yep – there is. You can partner with my friends over at Ink lending and fund their loans on properties right here in the Houston area, in one of the most lender-friendly states in this great country of ours! That’s right, Paul Lamnatos and his team vet the deals, underwrite the loan and put your money to work for you – about as passively as you can get – they even service the loan on your behalf! You don’t have to be like me rushing to file 1098’s and other tax documents on January 31st at 11pm. . . .every year! If you would like to learn more go to PLP.com/INK, click the link, enter your info and Paul will reach out to confirm a time when you can speak to him about Ink’s lending criteria, their loan process, and how you can begin profiting from loans on properties located in the greater Houston area – in a very lender-friendly state. How’s that you ask?Texas Foreclosure Facts: · Non-Judicial· 2-3 month process· NO redemption period· Deficiency Judgements are allowedOnce again go to PLP.com/INKOK, so here we go! Today marks the first in a series of episodes that are based upon the lessons found in the book The Richest Man in Babylon written by George Samuel Clason. If you haven’t read this book, then as your presumptive power of attorney I suggest you get a copy and read it immediately. Purchase or go to your local library and check it out today!I was given a copy when I joined a 2-day REI mastermind about 6 or 7 years ago. Steven Kaufman of episode no’s 1 and 100 fame led the mastermind, and it changed my world – the very way I began to think about money, investing, and things like forgiveness and integrity. I read the book within a day, and so I began to challenge my definitions of things like family, success, achievement, duty and purpose. And now I have this podcast, I have a mission to teach 1 million of you how to safely lend your money to others, and I have the honor of being on the amazing journey of raising 2 happy, healthy, prosperous, fulfilled and above all, decent and kind young ladies.So here is my plan: one episode per month will focus on one of the 12 lessons from TRMiB. Within the pages you will find 7 cures for a lean purse and the 5 laws of gold, as told by the character Arkad (a poor scribe who becomes the TRMiB) and so today I will begin with the first of seven cures for a lean purse and next month we will discuss the first law of gold.Want to get something clear before I start – I am not bringing this topic up on the show just to give you some rah rah, you can do – because you already know you can do it. But in order for you or I to gain from the lessons, we must take action towards what you want to gain from the lesson. So please don’t just write this down on something and forget about it. Start thinking of ways you can implement these time-tested strategies in today’s world because methods are many and principles are few, as methods may change but principles never do. would like you to go through these lessons and I hope you get gain as much as I have from them. There – I’ve given you my dad speechThe first cure for a lean purse or skinny bank account: Start thy purse to fatten How do you start to fatten-up/increase my account value?“For every ten coins you put into your purse/account, only take out 9 for use: Take 10% of your earnings and put into savings before you spend your budget.Pay yourself firstThis lesson is helpful and needed to become an investor in general, let alone to be private lender – you have to save up a sum of money in order to invest it and/or to lend it out. But this lesson is needed even more to continue, to learn more and to grow as a private lender and an investor. Never stop paying yourself first and do what you can to increase the percentage from 10 to 15 or 20% over the course of years.You might say that you can’t afford to take 10% out of your paychecks, there is no money for savings. This was a response I would often hear from my dad when the topic of saving up for a family vacation was brought up. You might feel like you’re caught in a similar situation – I know I sure was.But to this excuse I say bullshit. I used to think the same thing before my truck was repossessed when my wife was 6 months pregnant with our first kid. That really changed my perspective and fast.I only saved $20 in the first week, but then slowly added more each week that began to boost my confidence and form the habit of regularly saving and paying myself first. I continued to gain momentum and began maxing out my 401(k) contributions- mind you this took years, it did not happen overnight, and you have to be committed to finding a more elite version of yourself and that starts between your ears. That horribly paralyzing, shitty voice that you hear in your head that only provides doubt, uncertainty, anger, shame, etc.It’s the voice that tells you that you are an idiot, and not worth much.So let’s take a page from Robert Kiyosaki and determine your first step is to stop saying “I can’t save anything”, or “we can’t afford this or that/to save” or “I can’t save anymore, there’s nothing left over to save” or continue to look at money from a place of lack, of not having enough. Stop that stinking negative thinking. Start asking “how can I begin to save something?” , what changes are within my control that would allow me to save“, “what else can I do in order to make and save more money?” and you say there is nothing else you can do then stop listening right now and find yourself a podcast that is a better fit for what you’re looking for because this on certainly is right for you. Not be a jerk, but let’s get expectations out of the way. I will give you the first quote from the great philosopher and Jedi Master, Yoda, and say “Always with you what can not be done.And if you come back with “Ok, I’ll give it a try” I will continue to quote Yoda:“No. Do or do not. There is no try”Remember, when it comes to saving, whether you’re just starting off or have been doing it for a while, this is a case of the tortoise versus the hare – slow and consistent action will win every time. Don’t care if you can save 10 bucks or 1k – just start. And once you’ve started, don’t stop. Continue to increase your contributions, take less money out of your account and watch it grow.Now that you’re starting to get your mind right, let’s figure out some areas where you might pick up some quick savings wins.1. 401(k) match – don’t leave free money on the table2. Rollover old 401 or other savings plans to SDIRA3. Sell old clothes, memorabilia, records, VHS tapes, kids’ stuff, garage sales4. Look to cut out unnecessary luxuries like a daily latte/scotch or weekly spa treatment/round of golf. (I guess I could start drinking blended. . . . )5. Monetize your hobby - Etsy6. Create a side hustle (with your kids = even better)7. Blog/podcast – but make it profitable, not like me 😉I don’t charge money for this show, but there is a cost and I would be extremely grateful if you would help drive awareness to the show, to get the word out by leaving me an honest rating and review over at iTunes, Google Podcast or whatever platform you are using to hear my voice. It doesn’t take that long and it’s a small price for the value I try to provide. And if you are looking to create your stable of private lenders, or know people who have money but don’t realize the power of private lending, please, please send them a text, an email, a DM, and introduce them to the PLP.That’s gonna do it for Episode 114 and just a few final thoughts:1 – please join the PLP Facebook group to connect, learn, inspiration and discussion2 - Remember, the easy button to lending in the Houston, TX market can be found at PLP.com/INK.So, as I sign off I’d like to say besides self-awareness, I wish you safe and prosperous Private Lending.I’ll catch you on the next episode.Love the show? Subscribe, rate, review, and share!Here’s How »Join the Private Lender Podcast community today:PrivateLenderPodcast.comPrivate Lender Podcast FacebookKeith Baker on LinkedInPrivate Lender Podcast TwitterPrivate Lender Podcast YouTube
16 minutes | 6 months ago
PLP-113 The 6 Pillars of Private Lending
The 6 Pillars of Private LendingClick Here to join the Private Lender Podcast Facebook GroupHello everyone and Greetings from the energy capital of the world – Houston, TX. And welcome to episode 113 of the Private Lender Podcast, I’m your host, Keith Baker and I’d like to thank you for sharing your time with me today. If you’re looking for practical tips and advice on Private Lending and how to build and maintain wealth without banks or wall street, then you are in the right place. And if want to put the power of a bank in your retirement account, you should probably pull up a chair. But if you want to learn from my mistakes so you can avoid them, and save yourself thousands of dollars and heartache in the process – well then pour yourself a drink my friend, because this podcast is just for you!How’s it going Lender Nation? Wow, here we are at the beginning of the fourth quarter 2020, which has been arguably the most bizarre year in recent memory. I hope you are well and that you are doing more than just surviving in this Coronavirus universe that’s filled with pandemic fear, politics, and sensational media coverage because even the Weather Channel had to go really sensational to compete with the shit going down in this great country of ours.OK, back to drinking – so after you’ve pulled up your chair and had a drink, I want you to set it down on the easy button to beginning your private lending journey. What’s so great about that?A seasoned professional lender vets the loans for you, who only lends in their backyard (the greater Houston, TX area). Fun Texas Foreclosure Facts:Non-Judicial2-3 month processNO redemption periodDeficiency Judgements are allowedGo to PrivateLenderPodcast.com/ink to learn more about how you can hit the easy button and begin your private lending journey by letting Paul and folks at INK Lending vet the loan for you, on a property in a lender-friendly state.I have a bit of an announcement, or perhaps a re-announcement.I’m finally stepping into the 21st century – excited to say! After being asked by a few listeners including Steve Hiltabiddle (thank you guys) I am embarrassed to announce that I forgot I had previously created a Facebook group for the Private Lender Podcast but haven’t pushed it forward and have seemingly left it to die. I just admitted a guy who applied 6 weeks ago – that’s my Homer Simpson moment – DOH!But now I am bringing it back, pushing awareness for the Private Lender Podcast FB Group and hoping you will join me there if you haven’t already. This is a public group but You will need to answer a few questions before being granted access.However, once you are in you will be in a community of private lenders and other like-minded people, and your popularity is guaranteed to increase immediately. Once your membership is approved you will be able to ask questions, bounce ideas off other lenders, ask for references for service providers, vendors, etc. And I will be posting more useful things hopefully a little more often – well that’s my plan!Go to Facebook and search for the Private Lender Podcast group and joinhttps://www.facebook.com/groups/674936429994760OK, let’s get down to the brass tacks of episode 113.In Episode 111 we began building your foundation of successful private lending by discussing the 7 core values, that will help give you a touchstone for when you are uncertain. To give you a place to collect your thoughts when you are in doubt.Well in this episode we are going to discuss the pillars of private lending. Your decisions will stand on these pillars, which stand upon your core values. Some of you will recognize them in the hashtags on my social media posts.So let’s get to itTHE 6 PILLARS OF PRIVATE LENDINGPillar No. 1: My Money My TermsPillar No. 2: Never Trust, Always VerifyPillar No. 3: ROIsPillar No. 4: WIN-WIN-WIN ONLY: Always Full DisclosurePillar No. 5: Never lend to friends or family members in need. Rather give them what you are able to give without the expectation of being paid backPillar No. 6: Honor the contract, but DO NOT hesitate to begin foreclosure. It can be easily stopped in case the borrower makes goodWell, that’s gonna do it for Episode 113, so let’s quickly recap the components of your private lending foundation:The Core Values:1 – ROI OF2 – ROI (Profit) ON3 – Integrity4 – Discipline5 – Creative Initiative6 – Take responsibility for everything7 – Always Learn More And upon these values stand the following pillars of private lending: Pillar No. 1: My Money My TermsPillar No. 2: Never Trust, Always VerifyPillar No. 3: ROIsPillar No. 4: WIN-WIN-WIN ONLY: Always Full DisclosurePillar No. 5: Never lend to friends or family in need. Remember: If you want to lend money the easy way, go to PrivateLenderPodcast.com/ink to learn more. And join the Private Lender Podcast Facebook group to connect, learn, receive encouragement and inspiration, and to get into the discussionsClick here to join the Private Lender Podcast Facebook GroupI don’t charge money for this show, but there is a cost and I would be extremely grateful if you would help drive awareness to the show, to get the word out by leaving me an honest rating and review over at iTunes, Google Podcast or whatever platform you are using to hear my voice. That is a fast and simple task, and a small price for the value you heard here today. And that’s the truth – I mean you have the foundation laid out in front of you!And if you are looking to create your stable of private lenders, or know people who have money but don’t realize the power of private lending, please, please send them a text, an email, a DM, and introduce them to the PLP. Besides self-awareness, I wish you safe and successful Private Lending. I’ll catch you on the next episode.-k
59 minutes | 7 months ago
PLP 112 – Lending On Properties 2,000 Miles Away With Jaspreet Baveja
Since quitting his healthcare job after 8+ years, Jaspreet Baveja has been helping others achieve the dream of passive income through private lending. Jaspreet is the CEO of JGB, LLC and has built a business that allows him to pursue his passions of travel and spending time with his family while generating income on his terms. Today, he chats with Keith Baker to explain his process, lending methods, and habits and how he's able to lend on properties over 2000 miles away from his home.Listen to the podcast here:[smart_track_player url="" title="PLP 112 - Lending On Properties 2,000 Miles Away With Jaspreet Baveja" ]Lending On Properties 2,000 Miles Away With Jaspreet BavejaLender Nation, greetings from the energy capital of the world, the last time I checked, it’s Houston, Texas. I'd like to thank you for sharing your time with me. If you're looking for practical tips and advice on private lending and how to build and maintain wealth without banks or Wall Street, then you're in the right place. If you want to learn from my mistakes so that you can avoid them, well then pull up a chair and pour yourself a stiff drink because this show is for you. This is dedicated to giving people just like you and me, the knowledge and confidence to participate in the most passive form of real estate investing known to man, private lending.If you're looking for the easy button or a shortcut to beginning your private lending, then head over to PrivateLenderPodcast.com/ink to learn how you can put your money to work for you by investing in private and hard money loans in and around the Houston area. In case you haven't heard me say it before, Texas is a very lender friendly state with a relatively short foreclosure period. That's why we private lenders like lending here so much. As this episode is being released, it is Labor Day in the United States. To be specific, this episode is dropping on Monday, September 7th, in this dreadful year of our Lord, 2020.I'm going to go off the ranch here, but I noticed earlier that the acorns had started the fall from an oak tree in my backyard and the squirrels are beginning to hoard their stash for the winter. It was quite fun to watch them not fight but scurry around. They were very excited about the fresh acorns that had fallen. Given the year it has been thus far and not knowing what the next four months are going to bring, not that January 1 is going to suddenly make our lives any better, but I’ve adopted a mantra and motto which is a very determined and emphatic plea to you, dear reader, and that is this. Three simple words. Prepare for winter. It's coming. The squirrels know it. If you haven't seen like something's coming, I don't know how much crazier things can get, but I don't want to ask.I think it's a good time to prepare for winter. Start putting those acorns back, start not spending so much. Maybe get a little more conservative in the fiscal side of things. I'm trying to do that. At the same time, I'm trying to also become more liberal on the giving and the tithing and whatnot. As they say, the more you give, the more you get back. I'm trying that myself. I'm not suggesting you necessarily do that, but just saying that's where I'm at. We've had a hell of a nice long run on this bull market. We'll see what happens, but okay. Our topic is one for which I receive quite a few questions, and that is how to lend beyond your own backyard. I always say people tell people to start in their backyard before they move out and lend out of town or even across state lines.It's something that I don't do myself because I don't need to leave Texas. It's fairly secure and safe for me and I can go still see the properties. However, I have the privilege of speaking with Jaspreet Baveja, a private lender in the San Francisco Bay area who's going to talk about how he generates positive ROI through private lending on properties that are over 2,000 miles away. In fact, I owe him a big, huge debt of gratitude because I was trying to wholesale some properties, some land in central Texas. It’s my guest Jaspreet who suggested I take down the deal myself and then that he would be a private lender.Unfortunately, the deal fell through, but I'm really looking forward to the next one, knowing that I have a lender who's willing to finance development deals in a very hot spot of Texas. All he did was ask me one simple question and it got me out of a mental rut and it got me out of my own way. It gave me another option that had been kept hidden by my own limiting beliefs. I'm very grateful he made the suggestion. I want to say thanks, but let's go ahead and get down to the brass tacks and into the interview with Jaspreet Baveja.---Lender Nation, I'm honored to have with us on the show, Jaspreet Baveja. Jaspreet, welcome to the show.Thank you very much.Give us a quick background. I know you live in the San Francisco area, but where did your family come from?We came from India. I was born and raised in India for almost fifteen years. We moved to New York for a couple of years down to Florida, Miami for ten years. I’ve been in the Bay Area now for over ten years as well. I met my wife here and she was also born and raised in India, New Delhi, like me. We've been married for several years. We have two girls. My parents live in Florida but are here at my house visiting in this COVID insanity. They said, “We waited long enough. We want to see our grandkids.” They came out and my youngest one had her birthday and the older one's going to have a birthday soon, so they're spending the time.That's one of the things that most Americans, or certainly my American family didn't understand was the concept of family is a lot different from Indians. It's not better, not worse, but an old Indian grandmother trying to feed you when you're full and don't want to eat is the same as my grandmother was trying to feed me. It’s the same thing. The reason I wanted to bring Jaspreet on for you, Lender Nation, is I always say I only talk about things that I do. I lend in Texas and in my backyard, but Jaspreet goes across state lines.I wanted to bring him on and turn the show over to you, Jaspreet, and say, how did you get into this private lending thing? You do it more for cashflow whereas I do it for my retirement. I found your story very intriguing. Obviously, we've spoken a few times and you were graciously kind enough to come on the show. I'm going to shut up and start taking notes here in a minute. If you could, how did you become a private lender? Were you a wholesaler or rehabber? Walk us through how you got to that?I was working a full-time job at a healthcare company. I had been at that healthcare company at least six years when I got started in real estate. I had a rental property out here that became a rental because we moved out of a condo and we said, “We can rent it out for the same amount of money that we have to pay our lender.” That's all that mattered. A net-zero was all I was looking for because I was not an investor. I was not in that mindset at all. It was, “I can have two properties for the price of one and leave there and it will pay for itself and that'd be great.” It never works out that easily. It sounded great on paper, but luckily enough, it appreciated enough that we were able to get out of it for net-zero at the end, even after six-plus months of no rent from a tenant in California. It was normal. The eviction process is 6 to 9 months. Nobody even blinks an eye on that one. It's insane.I said, “I’ll never do that again.” Lo and behold, two years later, I did that again. This time the rent was like time and a half of what it was before, but amazing tenants. They were making more in retirement than I was making with my wife's income combined as active employees. I was like, “I can trust these guys. They are pretty savvy.” It worked out well and it appreciated again. That one appreciated probably almost 50% in the 3 to 5 years that we held it. That was one of the biggest boosts for the cash influx to our family. It gives us a little bit of a nest egg to go ahead and do what I did. I quit my job.[caption id="attachment_3002" align="aligncenter" width="600"] Private Money Lending: It’s a lot easier to lend to an established entity at a term of six to twelve months at double-digit returns with a first position lien guarantee, knowing that your money is secure in that asset.[/caption] In 2017, I got started in real estate. My friend said, “You already got this one rental property in the Bay Area. Forget all that. That's not cashflowing at all. Let's look at cashflowing markets.” They dragged me over to Indianapolis from the Bay Area. Sight unseen and without flying out there ever, I bought two duplexes and relied on a network that my friends and investor buddies had already built. I got the broker, handyman, GCs, electrician guy and a flooring guy and slowly started building the network and a property manager. Soon enough, it went to crap. I fired the property manager and I got another one. Soon thereafter, it went to crap and I fired them.You mean you have to manage the property manager?You get the property out of state. You give it to a property manager. They hire everybody they need to. You make 8%, 10%, 12% a year and everything goes happy, go lucky. What are you talking about? Nothing ever goes wrong. You get a check in the mail, mailbox money. That’s ideal. It doesn't always work that way, unfortunately.You’ve got to manage the managers and you get the easy mailbox money. You had bumps and bruises. Your friend, was he on the ground there in Indianapolis? No. He was here and he has probably still had about 60-plus units out of there in Indy. They're powering through. The scale matters. The more invested you are and the more scale you have, the easier it is to handle those bumps and bruises. Let's say if even 50% of your portfolio goes away and you still got 40 paying tenants, it's a lot easier to manage those other 20, 30, 40 that are not, and get them rented and get them managed and all that stuff. That's where scale comes in, but I was barely at 2 or 4 duplexes. During this process of building my portfolio up is when I started networking with wholesalers and property managers like I said, and other flippers, other out-of-state investors that were investing in the out of California, whether SoCal or NorCal or whatever and talking to people.One of the investors said, “Would you mind lending me money to buy this property in Indy? I’ll pay you X percent interest rate and you'll be the first position in the lien.” I said, “I heard that percentage return when I first was buying properties. I haven't seen it in the last eighteen months that I’ve been holding them. Maybe this will work out better.” That's how I started the process. I did some research, talked to a lawyer, looked at the contracts, and note and mortgage. I understood this is pretty similar to what my bank gave me when I was buying the property. They were giving me the loan and the documents look pretty similar. I figured out what it takes to get them. I don't think I spent months and trying to figure that out.It was more like two weeks in to from when they asked me, I went and said, “Yes, let's go ahead and get started.” On the third weekend, I'd already funded the deal and it was close to $250,000. It was still something that I was comfortable taking the risk on because of that first position lien equity in the deal. The property was probably worth $500,000 and they were buying it for $290,000 or $300,000. I said, “There's enough equity that if everything goes south, I should be able to recoup my investment and still be able to make money.” I took that risk and it paid off pretty well. That was probably in June 2018. By the end of 2018, I'd done six more. It’s not even with that same guy but different people. Just word of mouth. I literally never advertised, never said to anything and talked about how I’ve done it. People came up and asked. I vetted them and off it went.I want to unpack a few things there, if you don't mind. First off, you said you had a house in California that appreciate 50%. God bless the California real estate market because when it's good for people, it's good. When it sucks, it sucks. That's great that you were able to take advantage of that. I also love the fact that I wouldn't call it speculation per se, but for an outsider looking in California would probably consider speculation. You're able to profit and then put it into something very conservative like private lending, which is great. You should always have some spec money. You always have a little blackjack money, little roulette money. Some for the craps table, just to have a little fun, or for the stock market, if that's your casino, whatever. I do like that. The other thing I wanted to ask is what was the term of that first note that within three weeks that you had funded $250,000?It was a 6 or 12-month loan. It was going to be personal guarantee to an LLC that had existed for a while and they were going to buy it. They were going to wholesale this one. They were going to buy it at a discount and then put maybe $1,000 to $5,000 in to clean it up. Not do a full-blown flip, but presentable and then market it. They have their own brokerage too. There's a pretty well-established team of investors. They got wholesaling, flipping, buy and hold and all that under their umbrella. They've got all these different components of their business that they utilize. It was pretty easy to figure out. They've done a lot of deals. They are open to the market. They have a huge podcast following. They have a huge investor following. It was a lot easier to lend to an established entity in terms of 6 to 12 months at double-digit returns with a first position lien guarantee, knowing that your money is secure in that asset.You touched on one of my favorite things. When lending to people I say, “Who do I lend to?” I always tell people to be extremely discriminatory in this case. That's not for me to do the protected classes. I want to see a lot of gray hair. I like to see age when I lend to people, people that have been through it. This reminds me of the savings and loan crash of ‘88, or when this turned. I love that. The other thing I like is I always required people to have skin in the game, which usually means the money in the deal, but there's also reputational risk. I’ve turned a lot of newbies and first-timers away. However, if they have a coach or a mentor that is earning or had their shingles out and they have students and they have a reputation risk. If there's reputational risk, I like those too. It sounds like with this team, they've been around long enough. It wasn't like your friend's cousin Jimmy found a flip. This is a business deal.A legitimate business that has been operating for years. Even on my website, I did the same thing. I put a link to one of the biggest counties in Indiana, which is Marion County. I put Marion County’s online website on my website that says, “Click here.” You put in any entities name or a person's name and you will see a release of mortgage. You see those deeds going in their name or the entity's name going back years. When you see 100-plus of those transactions, you know that they're active in the market and how long are they active. You can see the addresses and you can see dollar amounts. It's a free, simple resource to do a background check and you know you can't go wrong. This is literally the county's website. This is a recorded deed that they can't lie about. You go straight to the horse's mouth to hear, “Yes, they've done this deal.” You go down the list and it’s 100-plus of them.How quick is that comfort level? That warm and fuzzy?It overtakes you. You're like, “This is pretty good.” You get their LLC. You can go and save the information on the website, the state’s registrar website and you go take a look and say, “They've been there. They've registered 8 or 10 years ago or whatever. They've done hundreds of deals and they've got all these people investing.” Clearly, they're doing something right.You also touched on something that is a deal-breaker. A lot of people want to have the loan to the LLC so if it goes tits up, they can walk away. They close down the LLC and there's no personal liability. Not in my world and it doesn't sound like that happens in your world either. You get the personal guarantee for everybody listed on that LLC. I know a couple of lawyers that insist not for LLCs because that's a whole different thing together, but a loan to an individual, especially in Texas. They put the name of their wife as well because we're community property. They could make the argument. “No, only half that loan.” If I loan out $100,000, only $50,000 of it is tied to him.I have never lent to a person's name ever. I have been involved with at least 60 of my own loans so far, and I have helped get about 40 or more other people's loans into place to help connect the dots, and not once has it been in a person’s name. It's always been an entity name and the entity has to have existed for a while, seasoned guys, and that's it.[bctt tweet="You can protect yourself in so many other ways than just worrying about entity creation." username=""]That's how you stay safe. Your background is not in money or finance, is it? You said you've worked for a healthcare company.I was doing healthcare regulatory compliance. I was doing documentation for physicians and surgeons and matching the dots for state regulations and doing data analytics, but it was never around finance and dollars and liens and figuring out mortgages. None of that. The only time I'd ever dealt with a mortgage, it was when I was buying my own primary residences. That's it. That speculative money that you're talking about, it was a primary residence that I got from my family. We moved in and a couple of years later we said, “The family is growing. This is too small. Let's go to a different house and we’ll rent this one out.” That's how it happened. Luckily enough, we stayed in it for at least 2 out of the 5 years. It’s tax-free. We take that money and run.This is also another interesting point is that this is not in your retirement account. This is cash money out upfront. Is it taxed as ordinary income for you? Yes. I’ve switched over to having an S corp election. We'll see dividends and salary and self-employment tax and all that stuff. We'll see how that works out, but I did it out of my own name for the first twenty deals at least. That was my name lending to an LLC. I eventually set up the LLC and then I said, “Maybe the LLCs hit its quota. Let's go over to an S corp. You grow, there's no need to have everything ready and everything figured out day one. A lot of people get held back in this scenario of, “I want to have all my ducks in a row.” You should focus on the deal and the stability and the verification of that
13 minutes | 8 months ago
PLP 111 – Core Values for Private Lending
Seven Core ValuesROI - Return OF Investment ROI - Return ON Investment (Profit)IntegrityDisciplineCreative InitiativeTake responsibility and be accountable for everythingAlways Learn More" And you who philosophize disgrace and criticize all fears Take the rag away from your face. Now ain't the time for your tears."from "The Lonesome Death of Hattie Carroll" - Bob DylanStay safe out there!-k
39 minutes | 8 months ago
PLP 110 – The Fastest Way To Start Private Lending With Paul Lamnatos
What is the easiest way to start private lending? We have learned from one of our previous episodes that the most passive way to do this is to lend your money to other lenders and let them do all the hard work for you. While this lending to lenders scheme certainly is an easy button, you still have to perform your own due diligence when doing deals. In this episode, Paul Lamnatos, Chief Lending Concierge and Managing Partner at BlinkLending, joins Keith Baker and gives us a ton of tips and advice on how to proceed in these deals. Make sure you settle down, take notes and learn how to make money in private lending – in a blink.---The Fastest Way To Start Private Lending With Paul LamnatosI'd like to thank you for sharing your time with me. I hope everyone is doing well out there in this COVID. This is going out sometime in August 2020 and I'm already getting ready for my kids not going to school at least until January. Poor me. In episode 108, we had Jason DeBono on from NuView Trust. He discussed the most passive form of private lending and that is lending your money to brokers or hard money lenders and let them do all the heavy lifting. I call it the easy button as if there was such a thing. As a private lender, you still need to perform your own due diligence, but you don't have to worry about finding the borrowers. You don't have to worry about finding the deals. They facilitate that for you.I had the privilege of speaking with Paul Lamnatos from Blink Lending, who delivers a ton of value. Read this when you're sitting down because he drops a lot of great value nuggets, knowledge nuggets, bombs, whatever you want to call it. He funds his own "hard money loans," but then he sells the notes to private lenders, like you and me. Get this, he guarantees his loans, which is something I never do. Enough of my jaw wagon, let's get down to the brass tacks into the interview with Paul Lamnatos.---I am stoked to have Paul Lamnatos from Blink Lending with us on the show. Paul, welcome to the show.Keith, I'm happy to be here. Thank you for having me.The pleasure is mine. Full disclosure, Paul and I have known each other around the Houston real estate investing community for a few years. I met him when he was over at with Zeus and readers know that. Paul has done something rather interesting and spectacular and he's gone off, got his own, he's got BlinkLending.com, where if you need a mortgage, a refi, the conventional, give them a look. There's also Ink Lending and that is what I want to talk to you about and the model that you have, because you're not a hard money lender, you loan out funds and then sell the loans to private investors, private lenders. Is that correct? Yeah, that's right. You'll often hear private money, hard money lending. What's the difference between the two? Depending on who you ask one might say 6 and 1/2 it does or the other or tomato or tomato. At the end of it, I define it as where are you getting your capital from? Are you getting it from financial institutions like hedge funds, banks do lines of credits, or are you raising the money privately through your own funds and through your network of funds? Meaning people that have money sitting in an IRA account or a 401(k) or idle checking, savings account money. All of our funds are privately raised funds and because of that, we hang our hat on the private lending side of things like that better than hard money lending sounds better.The easy button for becoming a private lender is to loan your money to someone who's already loaning it out a hard money lender or like yourself you're funding loans and then selling the loans to the private investors. You're doing all the hard work. For me, having someone else doing the work, you might become skeptical, but this is what you do. This is your day in and this is your day out. You’re not accounting for the oil and gas company and then flipping houses on the night. This is your gig. I'm happy you came on because I want to talk about your process. When you're looking at a deal, someone says, "I've got this awesome flip. I can be all-in for only 80% LTV." Walk me through that.First, when you win, “I’ve got this awesome deal,” my brain went to, "I don’t want to hear about it. What's your credit score? How much money do you make? How much money do you have in the bank?" I like to say I'm a private lending investigator. I've even given myself an acronym, a CIA private lending agent. A CIA that has been on our federal guys, but I feel that at the same time we investigate as they do as private lenders. The acronym, CIA, is a reminder to me to always ask about Credit, Income and Assets. There's not one that's going to be an absolute crusher. If let's say credit's bad or income's bad, if you don't have assets, you're not a client for us. That 80% deal you're talking about, even if it's 60%, 50%, and the client has less than $20,000 in their checking savings account, accessible money, they're not a client for us. The reason for that is I want to prepare before things go bad. Why do things go bad in loans? People don't have funds to pay them back. Before I'm lending my money, I have the ability to look at their bank statements, not ask them how much money they have, but to request their actual bank statements. When I get their bank statements, they’re not just looking at the first page and how much money is in there. Let's go through and say, "How's your money coming in and out?"You might have $80,000 in your bank account, but if you had a $78,000 deposit from PPP, that tells me that you're running a business with a $2,000 average balance. What is the average balance of your bank account? CIA is always check Credit, Income. Those two won't give me a note, they'll adjust my terms. Credit to me is someone's numeric representation of their ability to do what they say they're going to do. When I'm negotiating terms or discussing a transaction with someone, as a private lender, my number one concern is getting my money back. It's not the return on my money I'm interested in, it's the return of my money. That's a famous Mark Twain quote. At least that's where I found who said it or maybe it was somebody else, but the point is I want my money back. When I've eaten off the left side of the menu, when I haven't bought a new pair of shoes that I wanted, when I didn't get the tie clip or the cufflinks or the car, whatever sacrifices that I've made along the way to save every nickel and dime I have. When I go and lend it out, I love that sign you have behind you, "My money, my terms." I'd be shocked if next time you're looking in the back here, you don't see something like that because that's it, it's mine. I get to lend it out. Income, the reason I look at that, Keith, is because what's an exit strategy?[caption id="attachment_2974" align="aligncenter" width="600"] Private Lending: Credit is someone's numeric representation of their ability to do what they say they're going to do.[/caption] If there's someone who is a W-2 engineer, W-2 CPA or they're self-employed but have conventional qualified tax returns, meaning I can refinance them into a conventional loan, I love that. That tells me if they're wanting to sell the house and the market doesn't go as they like, I have a safe gap, exit strategy, and then I can refinance them out into a conventional loan. Being a fully licensed insured and bonded mortgage company, we have access to the same loans the big banks do, we do them at lower rates, much faster turn times and we don't charge their junk fees. Another program that we have access to is for the real estate investor who takes advantage of all of his God-given American tax write-offs as he should and is coming and saying, “Paul, I've got an 800-credit score. I’ve got a property that's cashflowing. Don't penalize me because I take advantage of my tax write-offs. What other programs do you have?” If we have an exit strategy to get them out, then that makes us feel good too.It all starts with credit and then it loops around to the assets. I'm big fans of skin in the game. Our process, "Keith, you've got an 80% deal. That's great. We're going to lend up to 70% of this transaction. We need you to bring 10% of the cost of closing." For the person that qualifies for conventional financing, we'll go up to 75% of the after-repair value. The reason for that is terms are based on risk. If the risk is high, the terms are high. If the risk is low, we can get lower terms. When someone qualifies for that, we can give 75% because we have the ability to refinance date. Not to go into all these numbers back and forth, but that's where we would have started bringing cash and skin in the game.Let's unpack a few things. Number one, you mentioned my number one pillar on the show is a return of investment. That is my primary concern. If I loan $100, I want to make sure I'm getting that $100 back before I get the 105 or the 110 or anything else. That's my pillar. I love that. I love the fact that you said that to skin in the game. That's where the, "My money, my terms," comes into play because we've seen people at Expos and whatnot, I'll teach you how to get private money. You don't have to put any money into the end of the deal. I'm always shaking my head. I'm like, "No." I have done deals like that. When I've loaned at 25% loan-to-value, all day long I was like, "You need closing costs? You’ve got them." I will do it but I would consider a normal 60%, 70% LTV deal. I want to make sure you can float that loan for 90 days and pay the first, draw yourself for the repairs before we started coming back. A lot of similarities and because I copied mortgage, hard money, and private lenders. It's all the same game with the different flavors, but I love your acronym of CIA, Credit, Income and Assets. If you ever see Paul speak, he has a presentation on the CIA. It's a lot of fun to go through because let's face it, money, insurance and lending, those things are boring. When you find somebody who has to have some passion about it and some energy to it, one, it helps pass the time. Two, it also helps your learning process, the enjoyment. I'm being entertained. I'm not learning. That you're going to retain a lot more coming through that. Return of investment all the way skin in the game. We're going to set up a link later on for the show. I'm going to put and give it PrivateLenderPodcast.com/ink. If you would like to learn more about the private lending side and how you can get involved with Ink Lending. I know Paul a while he's quite active. If there is an easy button, this is it. I know COVID and everything else is going crazy, but your business is plugging along. Let's try to connect some people and hopefully you’ve got the Lender Nation that can learn something and it will be mutually beneficial for everyone. I was stubborn and talked to a lot of hard money lenders and mortgage people before I started private lending. I was one of them.Let's say someone like me who’s stubborn, I'm going to do it my way. I know you're an investor and a lender yourself. How do you go and look for borrowers as a private lender? I don't know if you'd call it old school, new school, it seems to recycle itself. I enjoy getting to meet somebody face-to-face. I like paying attention to the mannerisms, how are they carrying themselves? How are they talking? As a potential client, someone I'm lending money to, feel how they carry themselves as to how they're going to manage the funds that I'm releasing to them. It's going to show the judgment of who are they going to hire for their contract, which that's a big thing for me blatantly. We changed something in that any client that we're going to lend to, we want to meet face-to-face coming to our office, even though it's COVID going on. If someone may be against it, let's do a Zoom as you and I have, but we want to meet our borrowers and clients. The other part is if they don't have the experience, we're okay letting first-time investors, whether they're fixing and flipping or buying and holding, but we want to see what their contractor’s experience is. What's the relationship with the contractors? Is the contractor insured, bonded?Do they have a business phone number? Do they have a website? How can we verify the contractor? What I've noticed is first and foremost, the reason you have defaults, in 2008 when I was around, there were a lot of bad loans done, but here's the bad loan that was done. It had nothing to do with the 580-credit score or the adjustable-rate mortgages. No one put any money down. You don't put any money down, you don't have any skin in the game you can walk away from. We didn't talk about the theme of this but what's coming clear from it is the verifying the skin in the game and asking the questions. Getting them to bring money to the table takes care of foreclosures. The other part is bad contractors. If I could have skin in the game and verify their contractor, I feel safe and I sleep well at night with my money being lent out. Also in Houston, we require all of our houses, all of our loans to carry flood insurance. You don't know. When we're doing private money loans and we're not getting our money from banks and hedge funds, we don't have to lend our money based on somebody's opinion of value because that blows my mind.It blows my mind how people will lend money on a third party a payment to value. It's your $100,000. You're going to hire that guy to tell you what the house is worth. You better get good at running comps yourself or get good at getting a team that can do it for you. At 1:00 we do the final pre-funding walkthrough. Before we fund a loan, we walk through the house. I used to look at houses two weeks before closing. You get the contract, then you go out to it the next day. I realized that when I went there, the people that were selling the house are moving out. They've been out of the house for ten days. The air conditioning units are gone. Let's look at the property right before closing to make sure that nothing has changed.Another thing I did that saved my time. I realized when I was looking at deals early, if we have a title issue, if we have insurance issues, the client changed their mind. Here I am spinning my wheels at the time. I have been going out and looking at the property myself, and it gets me familiar with it. When you're asking a question of, “How to get involved?” Get out there. I know it's difficult with the events, but there are tons of Facebook groups. The 713Houston Facebook page is awesome. Landon has done an amazing job with that page. I know you're on the page. I'm on the page. There's been real estate. The point is even though we can't go to a Quest Trust and do a live event, we can still meet people online with it. I'm sorry I don't want to go off on a tangent with skin in the game, flood insurance, verify. I want our insurance policies for twelve months. In God we trust and everyone else you verify.[bctt tweet="When you're doing private money loans, you don't have to lend your money based on somebody's opinion of value." username=""]In God, we trust all of this has to pay in certified funds. On draw process. I want to mention that because I came across a cool little trick about private lenders I like to pass on. We put a minimum. You have to be $15,000 work in rehab before you request the draw. Why I like that is because, from a safety standpoint, we’re doing 70% of the ARV or 75% if you qualify for long-term conventional financing, the first three deals, you're bringing 10% of the cost to closing. I love how as lenders, we have all these rules and all these exceptions that go in there. My rules are this, my exception is for the first three deals, you’ve got to bring 10% of the cost to closing. We do things that other private lenders don't do. We're not charging interest on money they haven't gotten. The rehab budget, we don't charge them money on that. We also don't charge them money for drawer inspections. When we go out to inspect to release funds, we're not charging $125 or $250 for that. We're also not charging wire fees, when we wire clients' money. We're also not charging them payoff fees to generate a document that tells them how much they owe us. That's asinine. Something else, we're not charging them extensions. All of our clients get two free 30-day extensions. We don't have any pre-payment penalties or minimum interest. If you get in and out of a deal in seventeen days, you pay us seventeen days of interest. That's it. I hate the two-story bill.The story you get at the beginning of what your bill's going to be? The second story you get when you get your bill like Sprint. I hate them. $69.99 a month should be $69.99, not $82.17 or whatever they get me with. We stay away from that. Because we stay away from that, we attract the client that is okay bringing 10% to closing. After all, if I'm going after someone who’s got 720 credit scores, $100,000 in the bank, which there are many clients out there. By the way, let me backtrack. I'm debating on staying in Harris County, I see these other guys, they want to open sixteen offices in another state, we have almost five million people in Harris County. How many loans can you do? Your geography and in that five million people, you have many great borrowers. When there are only many loans to do, why not do it with great borrowers? They recognize bringing money to closing gets the better terms because if their risk is lower, they can turn to me and say, "Paul, you're asking me to bring you money to closing. Why don't you charge me less interest in points?" I get that. That's a valid request and it makes sense on both our part. They brought 10% to the closing, here's the cool trick on the rehab. We have them and all of this, as it's called upfront, is you have to do $15,000 of rehab work before making your first draw.I did that because I started getting phone calls after they do $4,000 worth of work or they do the electrical rough, or they do the plumbing rough. I don't want to make time for all that. Because we don't charge interest until they've received the money, you can get an accounting nightmare, $4,000 on Tuesday, $6,000 on a Wednesday. The $15,000 helps us selfishly, but when they've put 10% of costs down and they've coughed up $15,000 of their own money before I give them any funds, how likely are they going to walk away from that deal? We're close to 200 transactions and we've only had one foreclosure. That foreclosure I know what I did wrong...
18 minutes | 9 months ago
PLP-109 Fear Setting: Meditatio Malorum – the pre-mediation of evils
Episode 109Dear Lender Nation,Here are the links for Episode 109:Tim Ferris' TED TalkFear Setting WorksheetLove the show? Subscribe, rate, review, and share!Here’s How »Join the Private Lender Podcast community today:PrivateLenderPodcast.comPrivate Lender Podcast FacebookKeith Baker on LinkedInPrivate Lender Podcast TwitterPrivate Lender Podcast YouTube
37 minutes | 9 months ago
PLP-108: Passive Investing: Private Lending Through Brokers And Hard Money Lenders With Jason DeBono
Perhaps nothing could be as passive as letting others do the work for you. When it comes to passive investing, the easiest way to get into private lending is to loan your money to a hard money lender and allow them to do their magic. Guest, Jason DeBono from NuView Trust Company, is someone who uses this as his own personal strategy, and he sits down with host, Keith Baker, to share his whys and hows with us. He explains his process from having the money in a self-directed IRA to making contact with the hard money lender or brokers, as well as some of his investment strategies in terms of self-directed IRA and cryptocurrencies. Plus, Jason then provides a couple of great wisdom and advice on working with lenders and borrowers and how to have more skin in the game.---Listen to the podcast here: Passive Investing: Private Lending Through Brokers And Hard Money Lenders With Jason DeBonoOur topic is one that I'm ashamed to say I haven't covered in the last hundred episodes or so, but that gets changed. I've often said the easiest way to get into private lending is to loan your money to a hard money lender. Let them do all the work, find the borrowers, vet the deals, look at the numbers, look at the properties, service the loans, make the payments. You're not going to get as much interest or points. You're not going to make as much but then at the same time, this is getting passive because you're not doing as much either. You're letting that hard money lender make the decisions, do those works, vet the deals, and tell the borrower, “No,” or “We'll do the deal, but you’ve got to have more money and more skin in the game.” I interview Jason DeBono from NuView Trust Company and this is exactly his own personal strategy. I'm going to let him discuss it but it's like the truncated version of what I've been spitting out for the last hundred episodes. Without further ado, let's go ahead and get into the interview with Jason DeBono.---Jason, welcome to the show. It’s good to be here.How are you? How's it over in Florida?As everyone else, we're all adjusting and adapting to the new normal but all is well, thankfully.I hope you guys are staying safe. How is NuView Trust handling Corona? Are you allowing people and customers into the office? How's that working? Is it all online? Our business is nationwide. A fair bit of business comes into our office. It's a small amount. Even before the state shutdown, we had already closed our office to visitors. I've been working through getting people working from home. In our business, because of the line of work that we're in, there are too many things. We can't let the whole office go home. There are unfortunately too many things that come into our office like checks, mail, and stuff that has sensitive client information. We want to make sure that we're protecting our clients. We've got a good office building here that we can space out in. We’re taking all the recommended precautions and then a little bit more to try to keep the place spread out.I love using self-directed IRAs for private lending. I do a lot of it myself. You let someone else do the legwork for you which I want to hear about. Please explain how your process goes from having the money in your self-directed IRA or making contact with that hard money lender, looking at the deal and flowing through the transaction. If you can start with that. My time is spent overseeing the business and that takes a significant chunk of my time. I don't always have time to go out and pound the pavement and be out in the marketplace to find deals directly. I've done this for many years. I've got about 6 or 8 different groups that are in the lending business that are bright and do what they say they're going to do. I let them source the deals for me. I make it known that, “I've got retirement money. If you've got a deal that you don't have the funds for, but you still want to broker it and make the money off of it, I'm happy to be a lender.” My approach, and I can't speak to everyone that this is the best approach, but I trade interest for points.Anytime there's a loan that exists out there, either it's been written and they want to sell it and recoup the cash or it hasn’t been written and they want to originate it and they need someone to have the money to do that. I have no problem giving up any of the points upfront for the right to own the loan and own the interest. It keeps me from having to go out and do the legwork. It cost me a few percentage points of potential value upfront. In my IRA, if I can have someone TIMI up loans at 8% to 14% time and time again, I can cherry-pick out the ones I want to do and say no to the ones I don't easily. I find it to be an effective strategy.[bctt tweet="There's a lot of money that you can sock away. Many people miss opportunities because they don't look for it." username=""]You're getting between 8% and 14% on your interest rates. Rarely, I've done under 8%. It's a strong deal, shorter-term and there may be some additional value like an equity kicker at the end or something. I'm a believer in making the deal work. While about 80% of the deals I've done are all through a broker. About 20% of the loans that I've done have been direct. If the deal works better at 5% interest, I don’t want to make 5%, but I don't mind 5% interest if I'm getting 10% of the deal on the backend or some equity kicker participation. There's always a way to structure a deal. At the end of the day, if we can't structure it, we'll move on and find another deal. We're flexible in the way that we participate. I like to keep the risk low and I like to keep the opportunity as steady as possible.How long are your notes normally when you loan out?It’s almost always a year. I don't know if this is the right approach but anytime that the loans extend, I do offer an extension and add a clause. Even if it's someone else's loan that I'm purchasing and I keep the points on any extension. If you want to extend for at the same terms. I usually do extensions in 3 to 6 months tranches. I'll do them at 1% for each extension. If you want to extend for three more months, it's 1% and then I get to keep that point.Your hard money lenders, do you know what their points are? You said you let them have the points because that's how they're going to make their money in the churn of turning the deals through of the points you're going to get the interest. Do you know how they're getting paid or how much percentage-wise? Typically, 3% to 5% is what I see. As the world gets a little bit more competitive, in 2010, 2011, 2012, we’re here in Florida. We were writing loans at 3 to 5 points and 14% interest regularly because the deals were cheap and the numbers worked. As these deals get more expensive and there's more money out in the marketplace to lend, terms naturally compress a little bit. We're seeing regularly 2 and 10 down the middle of the plate deals. That's what I've seen. There are still some 3 to 4-point deals and 11% to 12% interest deals out there. It depends on the nature of the deal or the background of the investor.These year-long notes, are these rehab loans or acquisition and seasoning? What type of the use of property are you loaning on? Almost always rehab properties. Probably 90% fall into that category because they tend to be shorter-term in nature and there tends to be a higher opportunity. I did a loan and I wish I could go back and write about twenty of these. It was in the year 2010. It was a loan that someone kept for five years and they paid 14%. It was unbelievable, but they bought this property at a steal. The rent was through the roof and they figured, "Even at 14%, I might as well keep renting this thing.” They were making a premium even after paying me. I love that deal. The only reason that it ended was the individual that bought it got caught in the market and they had terrible credit. They had to give back some properties. They had to wait this five-year period to finance the property out, where they were willing to give them a loan. They refinance out. They made a ton of money. I made a ton of money over it. I was getting a point every year in between and I was getting 14%. The borrower never missed a payment. It was a unicorn of a deal without a doubt.You’ve got to love that. You keep getting 14% and pull some points here and there at the same time. I could see why you'd want a ton of those notes sitting into your portfolio. Especially a tax evading account like an IRA.[caption id="attachment_2958" align="aligncenter" width="600"] Hard Money Lenders: There's nothing that prevents you from making international investments. Sky's the limit in this self-directed account.[/caption] Especially with the Corona, COVID and everything, and the $3 trillion that got pumped. It is my mission in life to convert everything over to my Roth IRA. I'm of the mind tax my seeds, not my crop because my crop will be much bigger in the future if I do my due diligence properly in all that stuff. I'm on board with you 100% with that. I am self-employed but I'm doing it through an LLC. I'm going to set up a C corp or an S corp and then pay myself and my kids. If my kids have earned income, what can I do? Add it to your Roth IRA.They're up to the same amount. I told my kids, “I'll pay you minimum wage for internet research and do some mailers and stuff. I will match whatever you earn. I'll put it into your IRA because that’s legally what you can do.”That’s a fantastic plan. I'd even take it a step further to say you could even look at potentially some health savings accounts, Coverdell Education Savings Accounts for those kids or health savings account for the family. There's a lot of money that you can suck away. Many people miss opportunities because they don't look for it. You're doing a fantastic job. You're going to help your kids. Forget about the money they have. You're going to teach them the power of compound growth and that's what keeps the wealthy more wealthy.Was it Einstein who said that compound interest was the eighth wonder of the world? Leave it alone and watch it grow. That's my strategy. That's what I suggest people do if they can. If they're in a tax situation, to go ahead and start moving everything over little by little into Roth, pay a little now. I've been making my conversions little by little as the deals come through. It's not a huge tax burden. It will take me a little while to switch it all over. Hopefully, I'll get to enjoy that money someday but if not, then it will be passed down to the kids. That’s how the wealthy stay wealthy. That's the whole point. You're doing mostly flips. You're out in Florida. Is that a deed of trust or a mortgage state? It is a mortgage state.My understanding with a deed of trust is there are three parties. There's the lender, the borrower, and then there's the trustee that holds title until the contract is complete. There's no third party in Florida with the mortgage state then. It's just the borrower and the lender. Does the lender retain title until the loan is paid off? No. The title is held by the property owner which would be the borrower, but there's a lien on that title until it's satisfied. Once it's satisfied, satisfaction of mortgage is sent over to the County and then the lien itself is removed from that property.It's similar then. It's just the terminology and semantics. You are nationwide.We have clients in all 50 states. We've got international clients that live internationally and clients that even invest internationally. An IRA is a domestic product but there's nothing that prevents you from making international investments. Sky's the limit in the self-directed account.[bctt tweet="Quality goes out the window when they're free. We care about quality when we pay for them." username=""]There's something else. I know we didn't speak about this but you allow investments in cryptocurrency. We do. We're not the facilitator of the crypto investment. We're just the custodian of the entity that owns the crypto. What we do in that manner is customers come to us. They say, “I want to invest in crypto.” We'll work with them to set up an entity and LLC. The IRA will invest into the LLC, then the LLC will participate in whatever crypto platforms, storage, wallet that they choose. They'll keep track of everything. It gives the most flexibility. You're not limited to what our platform offers. Anywhere you can go to open an account, you can go set up a crypto trading platform.Do you dabble in crypto? I do not personally dabble. I did own some of the GBTC which is almost like a Bitcoin mutual fund type of investment. It’s publicly traded. I did buy some of that and I was fortunate to buy it at a decent price and run the wave up and then part of the way back but it was good. It's funny if you invited me to Vegas, I'd grab my wallet and you wouldn't have to even finish the sentence. I'd be on the next plane. I enjoy going and gambling, but that's where I keep my gambling. I limit it to that. If I'm there for 48 hours, I'll hit the blackjack table. I'm all about getting rich quick in that environment. Once I leave Vegas, it's not gambling anymore for me.I'm not trashing Bitcoin or any other crypto by any stretch of the imagination. There may be a place for crypto in the long-term holding sense, but I don't like to play the short game. I know a lot of people have made a ton of money in the stock market. I'm embarrassed when I tell this story but I rarely owned stocks. When I do buy companies that have a good fundamental business. I am the guy that if you look at the COVID related drop and rise, I sold Apple, Amazon and Netflix at the very low of the market. All three are at record highs. They've all significantly blown away where they were even pre-COVID. I don't buy stocks for that reason because I don't know how to tie them up. I don't know how to tie them down.What I do know is if I buy a loan or I invest in a loan and it's a good quality property, that's got good financial backing, and it's a good quality borrower that has a high likelihood of being successful with the deal. I'm happy to take my 8%, 10%, 12% and sometimes 14%. I leave the gambling stuff to Vegas. Even though looking back in hindsight, I'd love to still own those stocks, knowing what I know. I haven’t had to watch this game. I don't have to wake up with the stress. I'm happy with that stress and with the blackjack table. I don't need that in my everyday life. For me, it's tried and true. Private lending and passive investing are the only way that I put money to work.I'm in line with you on the whole Vegas thing. A couple of years ago was the last time I went and for the first time in my life, I did not gamble. I walked through both the Luxor and Mandalay Bay Casinos daily and never cashed in anything. I kept walking and that was a big win for me. I'm still riding that win because normally I'm penniless. I'm asking people for money so that I can have a sandwich from friends or whatever.Vegas will eat you alive. Everything in moderation has its point but good for you. That's a strong sense of willpower.That's not going to happen the next time I go. I'm going to make up for the lost time. I usually start at the blackjack table, get down and then throw Hail Mary at the craps table and try to get back up. For me, it's an entertainment blowing off stress and drinking what I think is high-quality liquor when they're watering down the well stuff. Quality goes out the window when they're free. We care about quality when we pay for them. Vegas has it figured out if they don't take your money at the tables, they'll take more else. My philosophy is simple. In 48 hours, there's only so much damage I can do. It satisfies and scratches that itch. For most people they're scratching that itch on the Robinhood app, trying to get rich overnight because they somehow think they understand why Tesla went from being valued at $80 billion to $250 billion overnight. Somehow, they are smart enough to understand it and they're going to get rich as a result. They're all welcome to play that game. I'll take my 48 to 72-hour, lumping every now and then in Vegas and the rest of the year. Tried, true and steady is the best way to go.[caption id="attachment_2959" align="aligncenter" width="600"] Hard Money Lenders: The eviction and foreclosure process are not about who's right. It's about following a series of bureaucratic red tape to try to get back what is rightfully yours.[/caption] That's the beauty of private lending. You got a piece of property that if this thing goes tits up, there's a piece of property that you can go get and you're not going to lose everything. My first pillar of private lending is the ROI, Return Of Investment. If I'm giving out $50,000 or $100,000, first point, I want to make sure that's coming back. What's the return on the investment after that? That’s my thing and that's why I like private lending. I also like passive because you are a full-time employee of NuView Trust Company. That's your day job. The last thing you want to do is another day job flipping or running the contractors. You've got a good source of income. You maximize that and passively on the side, you take your self-directed IRA, put it into the private loans, asset-backed lending. Private lending is one of the few investment vehicles that the common man can participate in, which you can get insurance policies to protect the property. Being here from Houston, I don't know if you've heard about this little storm called Harvey. You guys being in Florida, hanging out there in the water. Hurricanes happen. I always require flood insurance even if it's $400 or $500 a year. I always tell borrowers and flippers, “If $400 is going to break your deal, it's not a deal and I don't want to lend to you anyway.” When Harvey hit, it wasn't a typical storm like you get this massive cyclone coming up in Florida with winds. Harvey for us was tons of rain. Twenty percent of the homes affected had flood insurance. That immediately went into my criteria that day when I heard that on the local news. On that note, I preach due diligence being that we're in the self-directed account space, especially in private lending, title insurance is required. I have many times that people have said, “I know this deal. Do you care if I don't get title insurance?” I said, “That depends. Do you care if I don't write the loan?” It protects us all: title insurance, hazard
23 minutes | 9 months ago
PLP-107: The Tipping Point of this Private Lender
What can I say - I've hit my tipping point. I would categorize today's episode as a therapy session for me, so thanks for hanging in there. I hope you find some value in there. . . .If you want to find out more about how our federal representatives are compensated then start here:How Congress Retirement Pay Compares to the Overall AverageI'll be back next week with the an interview with Jason DeBono who discusses the most passive form of private lending there is.If you want to fact check the story I told, then please send an email to email@example.com and state Fact Check in the subject line.Love the show? Subscribe, rate, review, and share!Here’s How »Join the Private Lender Podcast community today:PrivateLenderPodcast.comPrivate Lender Podcast FacebookKeith Baker on LinkedInPrivate Lender Podcast TwitterPrivate Lender Podcast YouTube
45 minutes | 10 months ago
PLP-106: What You Don’t Know About Subordinate Lien Investing With Jim Maffuccio
The number one rule in real estate investing is return of investment. That is, for every dollar that goes out, you want to get it back, if not, more. That is why people just starting with real estate investing stay away from subordinate liens. But what really are subordinate liens? On today’s show, Keith Baker talks to Jim Maffuccio about subordinate liens and how he got started in this world of distressed second liens. The Founder and Principal of Aspen Funds, Jim’s role includes identifying and developing key investment opportunities currently focused on distressed residential real estate debt, as well as leading efforts in business development, building and maintaining key relationships with hedge funds, note buyers, and sellers, and key service providers in the mortgage note industry. If you want to know if investing in subordinate liens is the right path for you, you wouldn’t want to miss this episode.---What You Don’t Know About Subordinate Lien Investing With Jim MaffuccioThis is the only show that's dedicated to teaching everyday people, like you and me, how to prosper with the most passive form of real estate investing known to humankind, while giving tips and ideas that can help keep your money safe with private mortgage lending. It's just as simple. If you're looking for practical tips and advice on being a successful private lender and on how to create wealth without banks or Wall Street, then you're in the right place. If you want to learn from my mistakes so that you can avoid them, jump around them and prosper much quicker, then pull up a chair and pour yourself a stiff drink and get ready to take notes because this show is made just for you. The show does not constitute an offer to sell, a solicitation of an offer to buy or recommendation of any security or any other product service or investment.We're only talking here and rapping out loud. Do your own due diligence and make sure you stay compliant. Having said that, let's get into the heart of the matter. I've got the good fortune of talking with Jim Maffuccio from Aspen Funds. Not long ago, I decided that I was going to no longer interview real estate fund managers for various reasons. Mostly, because I had locked onto some green fund managers and they didn't exactly succeed. Knowing that I wanted to be conscious of who I led on the show, what we talked about, so on and so forth so I say, “No fund managers for a while, except those few crowdfunding, and things like that.” One of Jim Maffuccio of Aspen Funds’ assistant reached out to me and said, “Would you consider interviewing Jim on the show?” I immediately said, “No. Thank you, but I can't recommend anyone invest in subordinate liens and especially nonperforming subordinate liens.”[bctt tweet="There are no bad notes, only bad prices." username=""]I didn't feel like it was a good fit, but the more I thought about it, I was thinking, “Who’s better to speak about such a topic on this show?” It is a topic I'd like to cover, but it's one that I don't feel like I have much authority on. I have done some lien lending in the second position, but I don't feel like I have done it enough to talk confidently on it. I decided, “Probably, it wouldn't be a bad idea to have someone like Jim to come on and talk about the ins and the outs.” Just because I don't do something, it doesn't mean that I can't interview someone who does it. It doesn't mean that I can't learn from Jim's process to help you do the same. That's the whole purpose of this platform. At the end of the day, here we go interview with Jim Maffuccio of Aspen Funds. Let's get down to the brass tacks in his interview.---Everyone, thanks for joining me. I want us to give a special thanks to Jim Maffuccio, who has come on to talk about his Aspen Funds and the particular niche that they've carved out for themselves in second lien notes. Jim, welcome to the show.It is great to be here with you, Keith.I'm excited because as everyone knows ad nauseam that I tell them, especially the people starting off that got their first self-directed IRA, “Stay away from second liens. Get good loan-to-value. Stay safe.” The number one rule is the return of investment before we talk about the return on it. For every dollar that goes out, you want to get it back. How did you get started in this crazy world of distressed second liens? That it's not even good ones, but distressed.In a nutshell, I'll give you a quick background. I was a civil engineer. I graduated from LSU Go Tigers in 1979. I did go into the oil field. I went to work for Exxon in 1980. I did the corporate engineer thing for about 5.5 years. The entrepreneurship turned on in me and I got my real estate license in 1986. I jumped out into transactional real estate and then I got involved in development. I was developing small residential infill projects in Ventura County Coast, California. I went through the S&L crisis and lost everything. By 1995, 1996, I was tanked, broke, underwater, having a seven-figure net worth going into that and all kinds of projects went dumped and went South. It was because of a mortgage-related crisis. I got back into the game and in 1999, I started back in. From 2005 to 2006, there I was again. A bunch of leveraged real estate development deals is doing great and killing it. The market was on fire. I even had focused on affordable housing thinking that there was going to be some correction because values had ratcheted up in that timeframe.The 2008 mortgage crisis took everything so deep and fast. For so long, nothing could stay underwater that long and survive. Once again, around the 2010 timeframe, I was completely broke with a negative net worth in Kansas City, a new city. I'd lived in Ventura County for many years and here I am, 55 years old with five teenagers, two of them are adopted internationally. I literally have no immediate source of income and no investors to speak of. I could probably go back to California at that point and raise money again, but when you're beaten down, that's not the thing you're after. I was flipping homes because every other home was boarded up and it was a heyday.I was flipping homes and put some people to work doing that. At the same time, studying the market because whenever there's a crisis, there's always opportunity. I had an epiphany in 2010. I saw the place to get in involved in the rebound, in the coming recovery was the distressed debt. Everybody was going after the REOs, further downstream, foreclosure auctions, and then further upstream from that, the pre-foreclosures and I worked in short sales. I did some of all of that, but I thought, “At the end of the day, where the distress starts is when a loan goes into default.” These institutions have to get rid of this paper before they go off a cliff.I started looking into that. In 2010, I went to a note investing conference in Denver and 95% of the content was about senior liens. Buying the defaulted first mortgage and then running through. It's a checker’s game figuring out, “Are you going to exit through the property or are you going to exit through the borrower or making some modification with the borrower?” There was one guy off to the side and in one of the breakout rooms talking about second liens. As soon as I saw what he was doing, the lights went on and I went, “This is where I'm sticking my fork into because I needed something that I could come into with minimal investment, most multiplier effect, and the greatest leverage.” Buying the seconds, particularly when the first mortgage is performing was genius.When I saw it, I was like, “This makes all kinds of sense.” Whereas hard dollar equity is super important in anything real estate related. What we learned was we could make more money in terms of multiple on the loans where there wasn't so much equity above our position. If any, it is because there's this thing called emotional equity. These are people that are paying their first mortgage so you know they have an income. They want to stay in their home and we've bought this nagging second lien that's on their property for pennies on the dollar. We have a whole lot of room to work things out with the borrower, whether it's a onetime fast settlement or a loan modification. That's on the ones where we have very little to no equity.We make our best multiples on those, but they're low numbers. We may buy a loan, for instance, for $50,000. That's the payoff balance that the borrower owes, but we may pay $5,000 for that loan. Maybe the first $10,000 of our position is covered with equity, but everything beyond that is blue sky. We can go to that borrower and enter into a loan mod or settle that loan and make it 2X, 3X on our money pretty quickly if we have a reasonable and cooperative borrower. The good, the bad and the ugly of this thing are we've been doing it several years full-time.We've built a company, we have twenty people and we're focused on second mortgages. After doing thousands of these, we made between 2.3X and 2.5X on our purchase price. If we buy $1 million worth of these defaulted second mortgages, we will pull in $2.5 million of revenue. It typically takes anywhere. We start getting exits in six months and typically out to three years. It's patient money because there's an elaborate workout process we go through, but it's pretty good multipliers. I wish there was more of the product. That's a nutshell of what we do on that side of our business.We then do have another side of the business, which is an income fund where we are buying re-platforming mortgages, whether they're seconds or firsts, and we buy some hard money loans from other originators as well. That's the way we can keep our truly passive investors that want mailbox money. We can keep them happy with a nice preferred return. We do all the brain damage of keeping the loans on track. When they break, we fix them. Since that's our core competency if we have a default rate of 10% to 12% in our income fund, we know how to do workouts. We know how to get that thing back to performing status. I'm going to back up a little bit. Is your fund for accredited investors only?At this time, it is accredited only.For education, you run through the SEC Code 506(c).That’s where our funds are. That's the particular exemption that we fall under.Are you buying tapes of houses of seconds? Is it a cherry-pick piecemeal? How do you get your deal flow?It's everything from buying one-offs, but more typical for us because of our size is we are buying larger pools. In the second’s world, you're not going to find a lot of quality products like on the note exchanges. It's a relationship-based deal. It's not a normalized market. A lot of the institutions that generated this paper, they charge it off their books typically after 90 days. It's treated differently than a first mortgage. It's almost treated like consumer debt. I don't fully get that end of it, but it's charged-off and it's worthless to the institution. A lot of them won't even sell that paper, it'll just expire. The statute of limitations will time it out.It'll never see the light of day because they have higher priorities. Some of them look at the political cost of selling this paper out on the street and then ending up with some cowboy that's mistreating the precious consumers and that's happened. We're very compliance minded. We have a great reputation. We've been vetted at a pretty deep level by a government entity that we bought some paper from through an intermediary. We have the FDIC looking into our processes. We came out with an unofficial report, but got the thumbs up, like what we were doing was good because we're not out to take people's homes.We have to start foreclosure probably 65% of the time, but we only end up foreclosing less than 2% of the time. Most of the time, it's agreeable at that point in time the borrower realizes, “I can't afford this house.” We're people-oriented and minded. To us, a win-win is when we can cancel a whole bunch of debt for a borrower, keep them in their home, create a reperforming asset that we can then 2.5X or 3X of what we paid for it. That's very typical. Those are our numbers. It's a wonderful thing. It is a win-win, truly.The bigger the risk, the bigger the reward, but it sounds like if you're paying pennies on the dollar, you are a couple of things. One, you're setting yourself up properly. Two, if anyone's out there reading, originating their own private loans, you don't want to sell a loan to Jim. You want to avoid selling the loan to him, especially if he reads my show and take any of my advice. Don't use this as an exit strategy, but it's always good to know it's there if you need it. You mentioned something that I liked. You said that these people have emotional equity in the property. They're performing on the first lien. I'm curious, are these usually like home equity lines?They could be. I'd say probably 30% or 40% of our home equity lines. Others are fixed rates seconds that people took out whenever they took them out. There are two components, emotional equity and pragmatic equity. Emotional equity is, “We've bought this home. We put our own finishes into it. We've lived here to 10 to 15 years. We know our neighbors. We like the school. Our kids have friends. We're not going anywhere if we can afford the monthly payment. If we can afford to stay, we're going to stay.” People or your typical household don't wake up in the morning and look at Zillow and say, “Look at this, honey, our equity has gone down $5,000. Maybe we should sell this asset.”It's a home sweet home. Most of our assets are across the middle of the country. We have some on the coast, but we're in 38 states with our portfolio. I ran the numbers on the pool of seconds that we bought and it was an average of 32 loan pools. The average FMV or home value was $250,000. You can see it right in the median pricing for the nation. This is a bread and butter housing. It's more or less workforce housing and people don't want to leave. They're not going to leave because they're upside down $20,000 or $30,000. They're going to leave because they can't afford the monthly nuts.The other thing is, “What are their alternatives if they do leave or if we do end up having to foreclose?” In a lot of cases, the homes that are securing our position would rent for more money than what their mortgage payment is first and second combined. If you think about where are they going to go, if they've been through the 2008 to 2014 cycle, there's a good chance they've modified their first because when they had trouble paying our loan, they also had trouble typically paying the first. Some of these people are still sitting on 2%, 3%, 4% money on their first. The best alternative financially, even for them is to stay home or stay in their house. We have a lot of tools to help them because of the discounts we buy.Most of the loans we buy these days, we're buying in the 20% to 25% of the unpaid principal balance range. Those loans would typically be ones where the seniors performing and we have enough equity to cover our investment. We've paid all the way up to in the 60% range of UPB if we have a loan that we pay $40,000 but it's an $80,000 balance. Even above our $80,000 balance, there's another $150,000 in equity. You tell me where the risk is in that. I would rather own that second than the underlying first. If you think about it, I've leveraged my position. The first mortgage is like my financing, but I don't have to pay.It's a crazy sub-to.That's exactly what it is. That's one of the reasons this is a pretty lucrative game because many people, including a lot of institutional players, either don't realize that you can or aren't willing to foreclose from the second position. When we foreclose from the second position, there's a false narrative out there that says, “We have to pay off the first.” That's not the case. In most states, we have the right to reinstate the first and keep it current. Even though it's not our loan, we're not the borrower on the loan. We foreclose from a second, we get the deed to the property and it's a sub-to deal. It's exactly what you said. There are states where the first does not have to let us reinstate and they can pursue foreclosure. Those are typically the states that take a couple of years to foreclose.That gives us plenty of time to clean the property up and sell it. We've made some incredible profits on the handful alone ones that we did foreclose and where we flip the property. We've foreclosed from second and then turned around and resold the property back to the borrower because it took that to wake them up to realize that we were serious about securing our position. Those have ended up being wonderful stories because you got the original borrower. That's back in place on their property and they're performing again. We had to put $200,000 down, which got us back our investment plus some, and then they're making us do monthly payments. They've been great borrowers ever since. We have all kinds of stories as you can imagine in this business.I did not do this so this is one of my tales of woe. What I tell people is if you're going to lay a second on a property, you want to talk to whoever owns the first position. I did not contact them[caption id="attachment_2935" align="aligncenter" width="600"] Subordinate Liens: When we foreclose from a second position, there's a false narrative out there that says we have to pay off the first. That's absolutely not the case.[/caption] first and put the second on the property. Lo and behold, the first is the one to foreclose and then wiped me out and I said, “Don't call the attorney representing them. Is there something we can do here?” The guy who had the first position was even more fed up with the borrower than I was trying to track money. He's like, “You want to make it whole. It will be $47,000 and it's yours.” I was like, “The property is not even worth that. Fine, done.” It's automatic that you're taking it over, you foreclosed out the second position, but the first lien is superior, therefore, it stays in place. Do you have conversations with any when you purchase the seconds? Do you say, “We've bought this, here's our plan if we have to foreclose,” or is it all in the paperwork?Typically not because the first is serviced by the major and national servicers. They won't give you the time of day. These loans are owned in trust. There's not like a single investor they can go talk to. Their servicing agreement tells them what they can and can't do. The handful of times that this happens, we just make the payment. We send them the check or in most cases, pay online. I don't even know if they know where the money's coming from. They don't care. By the way, you touched on something super important. When we buy these...
12 minutes | 10 months ago
PLP-105: Humility. Honesty. Vulnerability
What is up Lender Nation?Greetings and welcome to the Private Lender Podcast, I’m your host Keith Baker and you are listening to episode 105.This podcast is the only one of its kind dedicated to teaching everyday people (just like you and me) how to prosper with the most passive form of real estate investing known to humankind, while giving tips and ideas that can help keep your money safe – with Private Lending.Look, it’s just this simple: If you’re looking for practical tips and advice on being a successful Private Lender, on how to create wealth without banks or wall street, then you are in the right place. But if want to learn from my mistakes so you can avoid them and prosper much quicker - well then pull up a chair and pour yourself a drink and get ready to take notes my friend, because the Private Lender Podcast is made just for you!Let just start by saying I’m not sure where today’s episode will end up, but I need to produce an episode – I’ve been stuck in the creation process recently and I think I know why:I don’t want to talk about private lending – with all the shit going on in the world, I’m not really in the mood. I’d honestly rather talk about current events other things that don’t fit the scope of this podcast – but these topics are not my expertise, so I prefer to look to others for inspiration. Last episode I played John Coltrane’s Alabama on the podcast and Youtube + Facebook flagged it for having a copyright. So this time I’ll just put the links up on the show notes page so I don’t get censored.So let me run down my recent list of people I have relied upon for perspective:[caption id="attachment_2917" align="aligncenter" width="300"] John Coltrane[/caption]1 – John Coltrane – even if you don’t know what the song Alabama is about, it is extremely haunting.Alabama [caption id="attachment_2926" align="aligncenter" width="201"] Billie Holiday[/caption]2 – Just like Lady Day (Billie Holiday) and her song Strange Fruit. Listen to it and tell me it doesn’t screw with your head: Strange FruitThese two musicians wrote and performed the truth with humility, honesty and vulnerability.The remaining two individuals are still alive and working in America. I follow both of these men because they are outspoken, and I don’t always like or agree with what they say – but I always respect what they say, and I will make the time to listen to them. Through their content they have insured that I respect them as people – people who work hard, who have opinions and emotions. No different than me and you. The first person whose content I would like to share with you is from the great Dave Chapelle and his Youtube recording entitled “8:46”. I don’t recommend this to you for the laughter, because there are only a couple of belly-jiggling funny parts. This is real. Watch it.I recommend 8:46 in order to provoke thought. Thoughts and beliefs for and against what you are about to hear, either way – it’s thought provoking because I believe Dave Chapelle presents the truth with humility, honesty and vulnerability.Just like businessman Andy Frisella, and his REAL AF podcast episode 46. I provide the link to this episode because whether I agree with him or not – I believe he presents the truth with humility, honesty and vulnerability. Real AF Episode 46 Look folks, as I keep walking down my path on this planet I want to express what I believe to be laws of truth:1 – real wealth has nothing to do with how much money you have2 – financial wealth that you keep and pass along to future generations is a marathon, not a sprint#You are the CEO fo your family's money. Act like it!#Never Trust. Always Verify.#My Money. My Terms.That’s gonna do it for episode 105, I want to thank you the listener, for sharing your ears and your time with me. Because I sure do appreciate it.And now is the part where I ask for an honest rating and review at iTunes, Google Podcasts, Spotify or whatever platform you are using to hear my voice right now.Ok. Adios. Ya’ll stay safe. Take care. And besides self-awareness, I wish you all safe and prosperous Private Lending.I’ll catch you on the next episode.
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