[00:00:00] Speaker A: Well, what are your typical terms now?
[00:00:02] Speaker B: We try and be with the market on this. You know, we're up to 80% of the purchase price. We don't lend on repair money. And it's for a couple reasons. One, we want to keep our exposure a little bit lower than if we were to include the rehab money because obviously that increases the loan amount and, you know, we just never know where the market's going. We'd rather be more right than wrong. Also, at the same time, you know, every lender that does lend on the rehab component, their underwriting process is far longer and far more stringent. They want to see bank statements making sure you got enough money for the down payment and to cover the first draw of the repairs. We don't require bank statements. They want to vet your contractor and they want to make sure that you have legitimate fix and flip experience. We don't care if this is your first deal or your tenth deal. We'll lend you the same based on the same, you know, underwriting requirements as if you're a seasoned investor.
[00:01:06] Speaker A: Potatoes of the whole thing. So, so here we go.
Hey everybody, and welcome back to Trust this. I am Joe Siegel, your real estate asset protection lawyer here in Orlando, Florida. We work with real estate entrepreneurs across the state of Florida to help them protect their assets and pass them on to the next generation. We also own the largest land trustee, third party land trustee company in the state of Florida, holding over 2,000 properties in trust at any time, keeping your name off the title. And this is Trust this. Today we're going to do a tactics and tips kind of podcast where we're going to be talking with Gregory Emmer of Equity Max. And Gregory, why don't you just tell us a little bit about yourself and Equity Max and what you guys do.
[00:02:05] Speaker B: Sure. Thanks for having me. Obviously, Joe, I know we go way back from the Florida real estate investor circle, so it's always good to see you. And thanks for having me in advance. Our company is equitymax. I'm one of the principal owners. We're a family business along with my father who runs it with me. And we've been in business since 1990. So I don't know how many of you were not around either investing or even born 1990. This is the podcast era, so we have a lot of younger listeners, I'm sure, but we've been around going on nearly 40 years now, lending money exclusively for real estate investors.
At first we started off in our own backyard in South Florida where we're located. Slowly expanded up to, up to other parts of the state. And currently we're in 47 states lending strictly our own family money. So while we are a fund, I suppose you can say we're a fund of our own funds, meaning we only lend our own personal family money. I'd say, you know, in lieu of maybe being a fund, I'd say we're more of a small family office that strictly invests in mortgages, the origination of them and servicing of them.
[00:03:26] Speaker A: Well, and that takes me to. We were talking before we started here of what's the difference between hard money lending and private lending? And I think you recently wrote about that. How do you define those two things?
[00:03:37] Speaker B: Sure, yeah. I was doing some updates on our site and I think it's just a very common question that whether you're new or you're a seasoned investor, there's some gray area involved because for instance, when we started our company, we were what's known as a hard equity lender. We lent mainly based on the equity in the home, the asset, asset based lending.
But then what happened during the Great Recession was a lot of these businesses, which were mainly geographically focused on lending in their own local backyards, they went out of business. We did not. We stuck around. We, we were very much solvent throughout the Great Recession. But you know, Wall street and big banks saw an opportunity to take advantage of that. So they started institutionalizing the hard equity industry. And by that I mean similar to what we do when we originate a loan, we hold the paper, we hold the note, we collect the payments, and then when the loan is ready to get paid off, the borrower calls us and, and we give them the figure. Whereas these days in the institutional realm, a lot of lenders originate the loan and instead of servicing them, they get sold off, just like a home mortgage that I have to a third party servicer. And these hard money lenders then package hundreds of millions of dollars worth of these investor loans and sell them off to individuals that will make that return. So it's very similar, just a different bucket, if you will. Very similar to how traditional home mortgages are sold off, obviously with different rates of return, promise to investors and that kind of thing. But so the point is, is that in this evolution of our industry, private money really corresponds to local homegrown lending.
Lower volume, more personalized relationship. Whereas hard money lending is definitely, think about it more of, I wouldn't say traditional banking relationships, but definitely more in the institutional. And you're dealing with an account executive.
Again, your loan is sold off and it's more of, I want to say, an assembly line operation than a private money, personalized approach.
[00:06:09] Speaker A: Yeah, I know a lot of those big fund lenders, they just turn around, they sell their loans off to insurance, life insurance companies and other, you know, other investors on the back end, hedge.
[00:06:22] Speaker B: Funds, private equity companies even, I mean, not largely, but they will then have investors that they will then sell them off to piecemeal. There's software out there that can literally compartmentalize a loan amongst a variety of investors across one loan and it'll tranch out the returns.
[00:06:49] Speaker A: So if you're a hard money asset lender, that means you're looking just at the asset that's being secured, that's securing payments. You don't really look at the borrower. Or do you really. What, what kind of, what are some of the things you're looking for when somebody comes to you and says they want to borrow?
[00:07:04] Speaker B: Certainly, truthfully, I think there's very few lenders out there and in today's space that strictly, unequivocally lend only on the asset, that they don't look at anything else. They only lend on the property. I know maybe I don't. I can't say that I know one. And if they do, it's at a sub 50% loan to value, which kind of defeats the purpose and it really pigeonholes you into a very small box of potential loan opportunities.
But most lenders out there will overwhelmingly look at the asset, what you're buying the asset for, or if you already own it, the equity that you currently have in the asset, and look at that as the main procuring cause, if you will, for their decision that they're going to make on your loan and whether to give you the money and if so, how much to give you. Secondarily, they'll look at your credit history.
In some regards, they'll look at a background check. We look at credit. We do not look as strongly at credit as other lenders do. The only thing we are mainly concerned about and would be a deal breaker for a particular loan is if you have some sort of priority lien on the property. And that's mainly a personal financial lien, like a tax lien, a property tax lien on the property, or a personal income tax lien, either with the state, obviously not in Florida, but in other parts of the country, or federal income tax lien.
[00:08:43] Speaker A: Okay, okay.
So do you find that people, borrowers, potential and real estate investors, or do they come to you before they've ever found properties and Say, hey, I just want to get to know you so that, and have everything lined up at least on my side so that if I find something I can come to you and borrow quickly. Or do people just come to you out of the blue?
[00:09:06] Speaker B: Yeah, I think it just depends on the scenario I always suggest to investors. And you can, you know, you've invested and you know, investors and if you come and bid on a property and you already have the money lined up, it's a lot easier to leverage that and get the property if you, most of the contracts these days, if it's a true bona fide bidding process, they're going to want to see what's called proof of funds. They're going to want to see that if they accept your offer, you're going to be able to come through with the financing, with the money to close. And if you're not a cash buyer, how are you going to do that? You know, you go in advance.
My suggestion would be to a lender or any lenders that you're vetting and see what the process is to get what's called a proof of funds letter or pre qualification letter from them.
You know, legitimize how good your lender is by their proof of funds letter. You know, if it's a boilerplate letter which doesn't have any specifics to your property, maybe your company name, your land trust name, I wouldn't put much stock into the, into the benefit of having such a letter.
You want to make sure that it holds weight.
On the contrary, you can get your proof of funds letter or pre qualification after you found the property. However, I wouldn't suggest it. We live in a very quick, fast paced market for real estate properties and it is so hard finding a good deal. If you wait even one iota and do not have a letter ready to go, you risk losing the property. So when you see a property, you want to be able to pounce. And if you need that letter to be able to pounce, you want that letter in advance. Because if you wait an hour, 24 hours to get that letter from your lender after you found a property like it's probably already going to be sold.
[00:11:05] Speaker A: Right? Well, and speaking of properties, what kind of properties, what kind of projects do you find that you're typically lending on?
[00:11:12] Speaker B: Mainly on residential. Residential, which is single family homes, one to four multi units. We lend on condos, high rise or low rise townhomes.
What I'm finding in the overall marketplace is commercial lending is a lot more stringent, a lot More, a lot higher rates, a lot lower loan to values. And the genesis and reasoning behind this is because they can't get sold off on the secondary market. Okay, Fannie Mac, Freddie Mae. These are huge, huge marketplaces that are backed by government guarantees that will basically buy home loans that bank of America, Wells Fargo, you know, originate. So it extends the marketplace and the amount of activity that can take place for home loans. But when it comes to commercial, there aren't these government backed entities.
So the individuals buying these loans, these commercial loans are investors, they're not government backed entities. So the rate of return that these investors are going to require for these types of notes and these investments are going to be higher. And that's why you're ultimately going to get that higher rate requirement on a commercial loan and a safer loan, higher rate of higher return, lower loan to value.
And by safer, I mean safer for the investor that's going to buy this loan after it's originated.
We find there's really no right or wrong as to why we do more residential than commercial. Our maximum loan amounts a million bucks, but 500,000 before we start getting really, really picky. And you'll just find that that fits a lot more residential opportunities than it does commercial when you're talking about 500, a million dollars and less so.
[00:13:12] Speaker A: And do you typically avoid lending to human beings? Does it always have to be an entity or a land trust?
[00:13:19] Speaker B: It does not. It doesn't matter to us.
I always suggest to your point, I always suggest where it's possible to buy in a land trust and where you can't buy in a land trust, buying an entity. I'm sure you've gone over this several times in your podcast. The benefits to that.
Yeah, but you know, if you're hell bent on buying in a personal name, we will, so long as you know it's very clear from an underwriting perspective that's a bona fide investment purchase. We can track your primary residence somewhere else. You know, you're a prominent real estate investor and you don't intend on living in this property. Why is that important? Because RESPA and Truth in Lending Compliance comes into play when you deal with owner occupied primary residence loans. And that's not to say that they're difficult, they just take longer and they require more box checking. And in the real estate investment space, one of the key attributes, both from a lender perspective and from an investor perspective, one of the key attributes to success is speed.
And I think everyone would agree with me that government compliance and speed are not one in the same.
[00:14:36] Speaker A: Yeah, yeah. And I always tell people, I always tell that when they're looking at borrowing hard money or private money, that it is best also from asset protection, of course, to have it in a land trust or in an LLC to separate away from them and away from all the other properties they have. But it does also make that argument off the bat that, well, it's clearly not my primary residence, especially if it's an LLC and it's easier.
Yeah, yeah, it just makes it a lot easier.
[00:15:07] Speaker B: You can't legally homestead if it's in an llc. So, yes, it's, I mean, right off the bat, if you have it in a land trust or have it in an llc, you know, it's an investment property, makes things easier. But we're not going to preclude someone from investing in their personal name. And if we can verify that's for investment, we'll do it.
[00:15:29] Speaker A: Okay, so, so we made it clear that you're looking first at the property and after repair value and then you're looking at the borrower too. You're not, not exclusively looking at the property. What, what are some of the things you're looking at at the property whenever you're determining whether you're going to make this loan or not?
[00:15:47] Speaker B: Well, we want to see what, what the purchase price is relative to its value. We want to make sure that it makes sense for the borrower. If it makes sense for the borrower, it makes sense for us. And if it doesn't make sense for the borrower, you know, there's a higher chance of default and you know that the borrower is not going to make money. And at the end of the day, for all our investors out there watching, I will unequivocally tell you that, you know, lenders don't want to take back properties, lenders don't want to file foreclosure with properties. You know, the argument on the, on the other side, if you're an investor says, oh, well, you know, if I don't pay, you'll just take the property back. But at the end of the day, we're lenders, we're in the lending business, we underwrite loan opportunities, we originate them and then we collect the payments. Okay, we're not in the property management business, we're not in the fix up business, we're not in the landlording business. So to say that, oh, it's easy to just take back a property, it's not our daily routine. So we have to revert and do something. That's not in our wheelhouse. So we want to make every effort possible we can not to take a property back. So to your question of what else do we look at, we want to make sure that it's a good deal, okay? We want to make sure that if your intent is, for instance, to fix it up, that you're buying it at a low enough price where that withholding costs, fix up costs, and then obviously selling costs, okay? Because, you know, you're going to have to pay that commission, you're going to have to pay doc stamps on the deed if you're here in Florida, that you're going to make some money and it's going to be a profitable endeavor for you.
On top of that, you know, we want to make sure that what needs to be done with the property is representative of what you told us. And I know this sounds crazy, back prior to 2008, we never took a look at our properties. We never did appraisals. We still don't. We do local BPOs, but, you know, we never had our own eyes on the property. So if somebody said, hey, it didn't need a new roof, we take their word for it. Now, I know it sounds crazy and foolish to think that we underwrote like that back then, but, you know, you could do no wrong. Now, obviously, we take a look at the properties, and one thing we want to do is make sure that what the borrower tells us about the property is true. If they say, hey, it doesn't need a new roof, and we go take a look at the property, it's got five separate roof leaks. That tells us, hey, maybe it does need a new roof. So again, representation of the property is important because that then aligns with what potentially needs to be done to make it in saleable condition, which then aligns with, you know, is this a good investment opportunity based on where they're buying it at?
So those are things we look at.
Obviously, we want to make sure they're there, you know, in an area that matches the comps that we're going by.
There are little pockets, for instance, in Coconut Grove, Florida, here, okay, which is like a little subdivision, sort of quasi municipality of Miami. And, you know, you go across, you know, you go two blocks in an opposite direction. And while you're still in Coconut Grove and those comps are technically valid on an appraisal, it's. It's miles apart in terms of the types of homes that are in that area. So, you know, you just want to make sure that whatever you're using to value the property to make that underwriting decision is a true, verifiable and you know, comparable property.
So those are just some of the things. And at the end of the day it just, I can only say that there's a sixth sense to underwriting.
If the deal makes sense and it smells right, it, you know, it'll probably be a good deal. But if you raise an eyebrow over one too many things about a deal, then it's probably one that you'd pass on as a lender. So make sure it sounds legit to all your. To all the investors out there looking, make sure it's believable. I mean, you don't know how many.
I just got a loan request today, actually this, I think broker came to me and he said, hey, my, my clients looking to buy a property. And he sent attached to the email a quick claim deed. And I said, is this a purchase or a refi? Because you're sending me a quick claim deed. And they're like, well, depending on whether or what it is, how much will you lend? So that's a red flag to me where a broker is trying to frame a deal based on how much you lend and immediately you're going to look very, very closely at this deal closer than you were before to make sure it makes sense.
[00:20:52] Speaker A: Well, speaking of red flags, I mean, have you seen it seems to me that since 2001, the number of.
[00:21:01] Speaker B: Let me interject, let me interject. Sorry, Joe. So the funny part is I responded to that guy. I never heard back. He didn't email.
Yeah, yeah, sorry.
[00:21:12] Speaker A: Yeah, they ghost you. But no. Well, and that does take me to, I mean one of the red flags. I know a lot of my private lenders, hard money lenders I represent over the years that they've started watching for are the wholesale or assignments of contract prior to the closing. And then they used to have a rule and I do not lend on assignment fees, period.
And then over time they said, well okay, I'll lend, but I'm still going to look at overall what you are paying for this property versus what the after repair value is going to be and if it's going to work. And they didn't care about the assignment fees.
Have you seen that? And do wholesale assignment fees or anything like that raise any red flags for.
[00:21:57] Speaker B: You raising red flags? No.
And it's completely subjective. I remember technically we do look at that as a lender and I know a lot of lenders didn't in the past and now they do Is that because this led to too high of exposure? They'll never tell us, but that's probably why.
And again, it comes back to this sixth sense and feel decision, if you will. We had this deal, I always remember in Sarasota, I think it was being double or triple wholesaled, if that makes sense. And the spread from what someone was buying it for to the ultimate price that we are lending against was over a hundred thousand. I think it was like 120. And you know what? We still did the deal at that inflated price. Why? Because it made sense. Now I would say that's generally an outlier. Probably today we wouldn't do it like that, but I can't recall. Maybe we are in a position where we wanted to be a little bit more aggressive. Maybe we had a little bit more money to lend out. Maybe the borrower had great credit and you know, could do no wrong in our eyes.
Today it really comes down to what does that do to the deal.
So many times I see wholesalers making a lot of money on these transactions and God bless them, but it leads the C party, the person buying it, to ultimately flip it with less and less of a spread. So I don't feel bad for the investor that's buying it at that inflated price. I look at it from an underwriting perspective and does it still make sense?
And I'm just finding now more than ever that wholesale profits are making spreads thinner and thinner and making deals less viable and less viable.
[00:23:57] Speaker A: It still makes sense.
[00:23:58] Speaker B: And if it does make sense, we won't, you know, we, we won't consider that spread. We'll, we'll lend based on, on the inflated price. But you know, borrower has to have solid credentials. They have to know what they're doing.
And it can't be egregious. It can't be to the point, you know, then there's a knock. Oh well, the wholesaler found it, I got it. So there's someone out there that can finance it then. But you know, I don't want to put my business on the line and put the investor at a detriment if it doesn't make sense. Does the deal make sense is what it all comes down to. And I'm finding some of these wholesale profits make them less and less feasible, but the ones where they are will do them.
[00:24:39] Speaker A: Yeah, and I think that's where a lot of private lenders get in trouble, is they don't really underwrite the deal well. And then when it does go sideways or goes into default at the end, they're screaming going, well, wait, I didn't know that there were two other assignment fees ahead of it. And I'm sitting there going, well, that shouldn't matter anyway. You still should be looking at what you're lending versus what it's really worth or what you think it's worth not taking a contract and going, well, it must be worth this much because they're willing to pay that much for it.
[00:25:11] Speaker B: The thing that I'm finding with private lenders these days, and it's not us because we always require skin in the game, but it's just, you know, there's, there's too much leverage being offered to borrowers and that's irrespective of it being a wholesale deal or not wholesale deal. I just find private lenders are putting too much stock into. And I'm not saying you don't want to trust the borrower, but, you know, putting too much stock in that it's a local property, they know the borrower. And I just don't agree wholeheartedly. And I'm sorry if you guys out there are getting 100%, but I just don't agree with it. I mean, a borrower is going to be more invested in a transaction if they have their own money involved from the date of closing. And that's our, that's our thesis, by the way, because, you know, prior to two, and it all goes back to experience and some of these hard money lenders, these larger national lenders were not around prior to 2008 and didn't know what happens when shit hits the fan. And you overextend investors because we were lending 120% of the purchase price. We weren't doing rehab money. But we are lending so much money, we're at the date of closing. You know, you look at that bottom line on the hud and it said cash to borrower. Didn't say cash from borrower, cash to borrower. They were leaving these closings with checks and easy example, let's say, you know, a home was worth 150 and you lent them, what, 175. Okay. And they leave with a check of, let's say, 15 grand after closing costs. All right, and then what happened? If you originated that in 2007 and then 2008, that property was then worth $75,000. In 2009 it was worth $50,000. If someone that has net $15,000 profit but the property underlying collateral is dropped in half, what's their incentive to continue on with the Transaction up, so they'll have a foreclosure on their record, no big deal. You know, I mean, a lot of people have foreclosures and blemish credit, but, you know, I'd say a lot more people would be concerned about losing 20, 50, 30 grand that they had of their own money in the property. And that's what matters to us. And I think it's. And you know, a lot of the right lenders out there, it matters to the smarter lenders. And I think, I think that cannot be overlooked. Skin in the game and what a borrower has invested, not just from an equity perspective, not once he or she starts repairing the property, but from the date of closing.
[00:27:49] Speaker A: Now, you hit on something there. We, you and I, we survived The Great Recession 2007, late 2007 through 2012, in Florida at least, and it was horrible. It was a very expensive lesson for anybody who touched real estate in Florida, period, or in America. Now, did any of those lessons that you learned there, did they help you at all in 2022 when interest rates went from on the back end for the, the end buyer, when they went from 3% to 7% in a matter of months? Did, did that help you avoid problems during that period?
[00:28:37] Speaker B: It didn't.
It didn't affect us then what I think it affected us, on the contrary, when rates were really low and lending got berserk, I think there was a stabilization in the marketplace actually, as interest rates went up.
You know, I wrote about this on a separate article today, and that is, you know, 2021 to maybe early 2023, prices were trading at list or higher than list. You'd have a property on the MLS, there'd be 10 offers within 24 hours. Now, I am actively seeing properties trading for 10, sometimes 20% last list price.
So I think the key for us was when prices kept on rising, rising, rising, rising, rising.
Not to follow that wave and just continue to increase our loan to values, you know, beyond what seemed reasonable to us. And again, there's some subjectivity involved there. And I can't say we were right or wrong. I can say that we've minimized default.
And I just, I see it's public data. It's very much public data. List pendants, documents and filings. And you see what the competitors are doing and how many refi requests we get from competitor lenders.
Well, not competitor lenders, from brokers. And we see that there's an active loan from a competitor lender, and we just wonder why it's so high. It includes rehab money, but the refi request is a rehab completion. And I mean, we just know it's going to get foreclosed on. And, you know, it just comes down to being at the right loan amount, a comfortable loan amount. And I would be lying if I said we do every deal we get.
We're very selective. And we, you know, we're constantly in a loss mitigation business. As much as we are trying to make money, it's always making as much money as possible while having as few headaches as possible. I joke with my father. I'd say about 50% of our day gets taken up by the 5% of defaulted loans that we have. And that 50% prevents us from originating a new business, finding new ways to make money, because we're trying to prevent losses on the other front. So that's always a balance. But if you make good loans to begin with, that's the key.
[00:31:20] Speaker A: Well, what are your typical terms now, whenever you're making a loan?
[00:31:24] Speaker B: Typical terms, you know, we try and be with the market on this. You know, we're up to 80% of the purchase price. We don't lend on repair money, actually.
And it's for a couple reasons. One, we want to keep our exposure a little bit lower than if we were to include the rehab money, because obviously that increases the loan amount, and we just never know where the market's going. We don't want to be.
We rather be more right than wrong.
And also, at the same time, every lender that does lend on the rehab component, their underwriting process is far longer and far more stringent. They want to see bank statements making sure you got enough money for the down payment and to cover the first draw of the repairs. We don't. We don't require bank statements. They want to vet your contractor, okay.
They want to make sure that this person has plentiful contractor experience, that they're licensed, that they're not some carpenter, you know, who's doing this as a side hustle. And they want to make sure that you have legitimate fix and flip experience. We don't care if this is your first deal or your tenth deal. We'll lend you the same based on the same underwriting requirements as if you're a seasoned investor. Obviously, if you borrow from us multiple times, we can give you up to 100%. We do for a handful of our very preferred borrowers that have been with us through thick and thin, but generally up to 80% of the purchase price rates, starting at 10%, they can go all the way up to 15%, anywhere from 2 points all the way up to 4 points.
The lower rates aren't necessarily, necessarily conducive to the best borrowers and the highest rates aren't necessarily conducive to the worst borrowers.
One thing in particular that we do that a lot of other lenders do not do are a lot of niche loans. We do a lot of rural property residential loans. We do loans on modular manufactured and mobile home properties and we do a lot of smaller loans as well. Under 50,000. I don't know if you'll find another lender out there that does loans under 50,000. Our minimum loan amount is 15,000. So on these small loans under 15,000 we have to underwrite or under 50,000 rather we underwrite them the same way that we do a two hundred thousand dollar loan. You know, unfortunately or fortunately we can't underwrite them easier just because they're a smaller loan. If we did that for, you know, we, we'd go belly up on them. So nevertheless, on, on those deals that we put the same amount of effort in, but it's a smaller loan, we charge a little bit higher of a rate because the difference between 10% and 15% on a $20,000 loan is, is, is pen, is pennies, it's peanuts. It's maybe like 25 bucks a month.
So you know, for the, for the same amount of work we want to be able to get a little bit more return on the smaller loans.
[00:34:29] Speaker A: Are your payments interest only or is it principal and interest interest only.
[00:34:33] Speaker B: Another unique classification or term of our loan is that it's 17 years with no prepayment penalty. So what we were finding a lot with our refi requests that these, these borrowers were up against a balloon and they kept on extending, extending, extending. And what happens when a lender extends you? He's going to charge you more fees.
So what we did was we built in the extension into our loan. It's just a one time fee if they keep it longer than a year. And that's when you pay off the loan. Not immediately starting in the second year. But if you keep it longer than the year, there's a one time fee and there's no prepayment penalty. So you can pay off the loan whenever you want and you don't have a balloon payoff maturity date hanging over your head. And we found that to be beneficial for a lot of borrowers. It didn't give them this, this end date that they had to make something happen.
And you Know, if you're rehabbing a property and it's extensive, you know, you don't want to shortcut that project just to pay off your loan.
[00:35:33] Speaker A: You said 17 years.
[00:35:35] Speaker B: 17 years. So first two years are interest only. And then if you still haven't paid off the loan, then it becomes a 15 year fully amortized loan.
[00:35:46] Speaker A: Okay. Okay. I was trying to think where you got it. Where'd you guys go? That makes sense.
[00:35:52] Speaker B: Pull the number out of my hat.
What is 400 loans? I'd say, I don't know, maybe like 100 are in their second year. So again, you know, it's, it's, it's purposeful, it's, it's not, it's not there for no reason. We used to have a one year loan and we found that.
The funny story behind that is back in 2008, we had these one year loans and they were all maturing. And then when we tried contacting people to modify their mortgages, which we had to do, and extend it, we couldn't find them.
They had either left their property, abandoned their properties, canceled their numbers, we just could not reach them. This puts everything in place from day one. So you don't have to, you have to go chasing people after the fact.
[00:36:44] Speaker A: Yeah. You know, it's a smart way to do it.
What's the process if somebody does want to do a new loan with you guys? What's their process? To get started with y'all call us.
[00:36:54] Speaker B: Our number is 954-267-9103. That's step number one. Or you can visit our website, equitymax.com but very simple. If it's a purchase, we're going to need two things, or actually the contract, if you have it. If not the contract, we're going to need the property address and the purchase price. Okay. In lieu of that, and in addition to that, we're going to need a representation of your credit score, just to give us an idea. We don't have a minimum credit score, Joe, by the way. We don't. But I think you'd agree with me in saying, you know, it's not wise to give the same terms to someone with scores in the 500s as someone with scores in the 700s. It's not fair. And I wouldn't call it the best business decision either. On a refi.
What we asked for is property information, obviously, and, you know, what's owed on it when you bought it and what you bought it for, and that's important along with the stated credit. And that's important to us because there's only a certain level of a credit card that we want to be to investors. If they bought something, you know, at a great deal two years ago for 50 grand, and now it's worth 200 or 150. And yeah, that happened. I mean, that happened. That's real.
You know, 65, 70% of the ARV, which we're at, would be an astronomically higher number than their exposure. So unless they went down to the studs on the rehab and just completely transformed the property, we don't necessarily meet that ARV cap all the time. On refis, we're willing to give cash out, but not enough cash out. That completely negates a borrower's incentive to maintain a positive payment history. Does that make sense?
[00:38:48] Speaker A: Yeah.
[00:38:49] Speaker B: Yeah. So we just. We want to keep them honest. We don't mind giving them working capital. We don't mind giving them a loan on a refi above their exposure, but we don't want it to be so egregious where they don't maintain an incentive to ultimately pay off the loan. We don't want just it to be used as this continual revolving credit facility.
[00:39:09] Speaker A: Once they've made their application, typically, because I know a lot of borrowers, they wait or another lender falls through at the last minute. How fast, how much time do you all need?
[00:39:25] Speaker B: We don't like being sloppy seconds, but we will, like I said, we don't do an appraisal. We'll do a local BPO. And most, I'd say because we've expanded to 47 states, I'd say there's at least a 75% chance that if we get a loan request, we already have a BPO agent lined up. And this is not done through an AMC, an appraisal management company. These BPOs are all directly ordered in house with brokers that we've worked with before. So they know us, we know them. That way, they'll give it priority when we give them an assignment.
So, you know, BPOs will usually be turned around, I'd say, in two to three business days. And so long as title's back, which, if we're a second option it should be, we can generally close in a week or less.
I always say three days from when title is back and the BPO is back, we can get our docs out. All right? And once that takes place, obviously they sign and we can fund. If it's a morning closing, generally the same day, if it's an afternoon closing, it's probably Going to be the morning after, but three days from title and bpo.
[00:40:39] Speaker A: Okay, that's pretty quick.
[00:40:41] Speaker B: Yeah, I don't know any. I don't know anyone that closes quicker than us. Our record is like, I think 36 hours.
That was good. We've done that quite a few times. Generally happens only on local properties that I can run over to or, you know, somewhere in Florida where I know someone can get to it, where one of our agents get there the same day. Really, the wheels have to be in motion and be in motion very quickly to make that happen. But we have.
[00:41:07] Speaker A: I heard you say you, you like to get some credit score indication from them. Do. Do most of the borrowers go just to their online banking? Because I know a lot of credit cards and a lot of banks offer your FICO score to you for free. Is that how most of them get that for you?
[00:41:23] Speaker B: Yeah. You know, first off, again, it's stated, and this is a loose term to your point, A lot of borrowers these days, you know, are striving for financial independence as, as you preach on this podcast and, you know, wealth management. And most of them, through their credit cards, have some sort of credit monitoring tool. If not, then they actually proactively pay for, you know, what is it, credit score or whatever that lets you see all three bureaus at any given time. And then, you know, and then loosely, you'll have some less sophisticated investors have an app as simple as credit Karma, you know, just to see their vanguard scoring, which is different from fico. So a lot of different ways that you can check the health of your credit and arrange is really all we ask for, at least to make a decision. We find that more often than not, a range is typically the old. We do a soft pull pull ultimately, and that soft pull almost always falls within the range of what a borrower tells us.
And, and it's, it's fairly accurate. So, yeah, you know, we asked for just a representation and then we verify it with a soft pull.
[00:42:39] Speaker A: Now, getting back to interest rates, you. You let us know what your interest rates run are. Do you tie your interest rates in any way to the general market for residential?
[00:42:50] Speaker B: We do not. And, you know, we want to stay competitive with the market. Thankfully, you know, we do have the flexibility to adjust our rate to meet the demands of our clients. If most lenders out there are at 12%, for instance, we can unilaterally be at 11%. A lot of hard money lenders out there, Hard money, not private money. We act as a private money lender. In that regard we can pretty much name our that we want to get a return on.
However hard money lenders backed by institutionals, you know, they're tied to the rate because it involves borrowing costs and whatever they're able to borrow against, they at least have to, you know, charge a rate higher than that so they're not in the red, whereas we do not have to do that.
Now obviously there's a general market range of where the rates are and we want to stay competitive and healthy in that regard so we're able to conduct business and also not cannibalize our returns. Sure. If rates are at 12% we could be at 8% but is 8% reasonable? And we could probably get 9% or 10%. So there's always a balance and it depends on borrower to borrower, property to property, scenario to scenario.
[00:44:13] Speaker A: What's your advice if you have a borrower who may be getting into trouble, maybe they've overextended themselves or interest rates start rising quickly and they can't find buyers at the price that they thought they were going to get because the interest rates rise quickly. What's your advice between them and a hard money lender like you?
[00:44:32] Speaker B: Yeah, I actually have this conversation quite frequently and it takes different forms but the most common one is a property that's been rehabbed for instance and, or it's in the midst of rehab and an investor is unsure of whether to refinance and have a buy and hold or flip it. And there was an investor who actually had a property in her IRA, believe it or not. And we lent self directed IRAs and she was running really thin on her IRA reserves.
And the trouble with IRA loans as you know, is you can't commingle funds. So you know, if you run out of money in your ira, you can't go to your checking account for your LLC and, or your personal and just you know, take some money and use it to fix up the place. You know, it's against the law. So this is a situation where she was trying to refi and, and you know, the DSCR rates were favorable and she would debt service at 1.0, which was, you know, which is the typical benchmark for DSCR loans. But the problem was is that the loan amount was not going to be more than what she owed on it. She was going to have to bring a little bit of money to closing. So you know, long term it would be great but she could not get over that hump to refi and come with cash to close and to get to that long term rate so she could start positive cash flow. So this investor was in a position where I advised her, I said it may not be the best 10 year outcome for you, but sell the property, okay, you'll probably make 20 to 30 grand on it, replenish your IRA and move on to the next property.
And I hope that's what this investor is doing. I think it's the right move. I think it was the only move because she was in a no win situation. I mean if she rented it out, she couldn't get out of a loan that was maturing and she would have been stuck.
[00:46:49] Speaker A: When I think that goes, you know, to going to a hard money lender who has experience like you do, you can't actually give advice like that. You can go, okay, here's, I've seen this happen a thousand times. This is what you're going to end up. Unfortunately, you're not going to make as much money, but you're going to get out and you're going to get at least most your money back and maybe a little bit more just based on experience.
[00:47:13] Speaker B: Yeah, and it's, it's, you know, Joe, it's tough because we live, we live in an, we're in an industry right now, unfortunately, where, you know, the hard money institutional lenders there are a lot of good ones. I'd say for the most part they're all, they're all good, but within them, you know, they're, they're not run by, but they're, you have these account executives that are, that are pushing their pipelines with potentially bad loans. And I think these people don't have the insight to give investors what they need to hear sometimes.
And you know, you could promise someone that a loan is good, you know, charge them an application fee. We don't charge an application fee. But the ones that do charge appraisals, appraisals now are what, 700 bucks? All the while knowing that this deal had, you know, maybe a 10 to 20% chance of surviving.
You know, I'd rather tell that borrower that at the onset than going through the whole rigamaroar of underwriting the whole loan only to see a die at the end. Because that does no one any papers. And I think that's all too common when you're dealing with hard money lenders. You know, they'll have a pipeline bursting, maybe 100 leads and 10 of those will close and half of the ones that don't. You probably could have predicted that they weren't going to close from the beginning. And I just. I feel that's insensitive and not right to the borrower when they're trusting you to try and get them out of a pickle.
[00:48:44] Speaker A: Exactly. Well, Greg, I'm going to wrap it up. I want to thank you so much for coming on. But before we go, one of the things our mission is to help people aspire to a better life. So one of the questions I always ask all of our guests before we leave for the day is, who is a person who has helped you aspire to a better life?
[00:49:05] Speaker B: I'm only allowed to choose one person.
[00:49:08] Speaker A: Yep.
[00:49:09] Speaker B: Okay. I would say has to be my wife.
[00:49:12] Speaker A: There you go.
[00:49:14] Speaker B: My wife. If she wasn't here, Alexia, I love you. She wasn't here.
And not just any wife, because, you know, you can marry anyone. But this particular woman that I married, she's great. She has helped me be the best person I could be, and that has led to success from a business standpoint, from a personal standpoint, from a mental and emotional standpoint. So there are. There's a lot of components that. That encompass success. And I think she's helped me achieve my best in all of those realms. So thank you.
[00:49:52] Speaker A: Wonderful. Well, I've always said spouses can you.
[00:49:57] Speaker B: People have to ask you. So I haven't. I haven't heard you. You tell me who's hers? Who's your numero uno?
[00:50:05] Speaker A: I write about a lot. I think it would be my dad. My dad taught me longer. I mean, I truly was rich dad, poor dad. I mean, my. My dad wasn't poor, but he.
He often pointed to my uncle who had always owned his own business. And my dad told me my whole life, he said, you will never get rich working for someone else. You get wealthy working for yourself.
And he said, just look at your uncle. Look at your uncle. So he was always pointing to the rich dad in my life, but my dad, I mean. And throughout my newsletter postings and videos, I'll often go back to sayings that he has because he ran business very well for his whole life, and I learned a lot from him. So I look back to a lot of what I got from him, definitely to. To put me where I am today. So I'd say probably my dad, starting when I was in my preteen years, he started telling me what to do and how to do.
[00:51:05] Speaker B: Just one person, though, right?
[00:51:07] Speaker A: It is. Oh, and I could go through life. I mean, I could go all the way through my life and just name different people throughout my life for different things. But setting that on that course to start, definitely dad started it. So yeah, yeah, he got it.
[00:51:20] Speaker B: God bless. That's great.
[00:51:22] Speaker A: Well, that's a great question. Thank you.
[00:51:24] Speaker B: Just so I do work with him and I don't want to throw him completely under the bus. He's like 1B, wife, 1A, dad 1B.
[00:51:33] Speaker A: There you go. That's great. Well, that's great to hear and thanks for asking me. Greg, Greg has been great to talk with you today and, and get all these tricks and everybody will put Greg's contact information down in the show notes, so be sure to, to look for those if you want to get in touch with him. And we'll have equitymax.com we'll have all that down there as well. And if you ever need anything or if you want to try out our Land Trust book, Land Trust in Florida, 11th edition. We're up to the 11th edition now. Is
[email protected] I encourage you to please go there, buy it and review us on Amazon if you like it. If you don't like it, just keep your mouth shut. Thank you very much.
But with that, we'll go ahead and sign off for today. And until then, just trust this. Thanks thanks for listening to this edition of Trust this. If you got something out of it, please press like and subscribe and give us a five star review to help us reach others who can benefit from this series. Until next time, keep aspiring to a better life.
