Old Capital Lending

Old Capital Lending


Your Multifamily Lending Experts. A Trusted Source to get Your Apartment Loans Funded 

What we like best about the Old Capital Lending team is that they do one main thing … and they do it REALLY well. 

That’s Commercial Loans on Multifamily Apartment Buildings! 

They’ve been the go-to provider for real estate investors looking for apartment loans for over 20 years … Have we mentioned they do this really, really well? 

You can tap into their extensive network of equity and lending sources …Fannie Mae & Freddie Mac agencies, life companies, conduits, wealthy individuals, family offices, institutional investors, and even hard money lenders. 

Their sources trust their underwriting practices and decades of experience … That means YOUR DEAL gets FUNDED. 

Syndicators can benefit from the Old Capital Lending team’s experience funding apartment projects for syndicators … helping you structure your “capital stack” just right. 

Their prudent advice and proactive transaction management drives investors to come back to them again and again for deal after deal. 

The Old Capital Lending team regularly contributes to our Secrets of Successful Syndication event! 

Simply fill out the form below to discuss your Apartment Loan questions with their expert team …



Here’s what your fellow investors are saying …

“Once again Old Capital came through on their word and executed flawlessly. I always trust your professional opinion and feel confident when you’re on the deal. I would be glad to recommend you to any brokers or investors looking for a trustworthy debt source. Thanks again for your work, I am looking forward to the next one.”  – Michael W., Dallas, TX

“We want to thank you so much for getting this refinance done. Not only was it pretty quick, but painless to boot. If we need any assistance, you’ll be the first one we’ll call. Thank you again, for all the effort and energy that help make this finally happen.”  – Bill K., Santa Barbara, CA

“Old Capital was great to work with. They were able to help secure the financing needed for my first multi-family purchase and get started off on the right foot. It was a pleasure working with Old Capital on this transaction and they guided me through a smooth purchase.”  – Al M., Phoenix, AZ

Adding fuel to the high housing price fire …

High housing prices continue to be a concern in many major markets.

While there are varying opinions on how to solve the problem, history says … and recent headlines concur … that adding fuel to the fire will be the likely “solution.”

Here’s how it works and why it’s likely to create a lot of equity right up until it doesn’t …

First, it’s important to remember prices are “discovered” when willing buyers and sellers meet in the marketplace and cut a deal.

Buyers want the lowest price and sellers want the highest. They meet somewhere in the middle based on the supply and demand dynamic.

When there are lots of buyers for every deal and a seller has the ability to wait for the best price, buyers compete with each other and bid the price up.

When there are lots of sellers relative to buyers, sellers compete with each other by dropping the price or offering more favorable terms and concessions.

Duh. That’s real estate deal making 101.

Of course, the real world is a little more complex … especially when you have powerful wizards working to manipulate the market for whatever reasons.

To our way of thinking, “capacity to pay” needs to be broken out of “demand” when looking at the supply and demand dynamic.

After all, if you’re crawling through the desert dying of thirst and you come across a vending machine with bottled water for sale at $100 per bottle, you’re probably willing to pay.

But if you don’t have any money in your pocket, limited supply and high demand alone don’t matter. You have no capacity to pay.

When it comes to housingcapacity to pay is a combination of income, interest rates, and mortgage availability.

To empower purchasers with more capacity to pay, you need higher real incomes, lower interest rates, money to lend, and looser lending guidelines.

Of course, these do NOTHING to help make housing less expensive.

In fact, they actually make housing more expensive because they simply increase the buyers’ ability to pay MORE.

Yet, this is where the wizards focus their attention. And to no surprise, they have an excellent track record of creating real estate equity (inflating real estate bubbles).

And that’s exactly why real estate is such a fabulous hedge against inflation.

While renters watch prices run away from them, owners ride the equity wave up … and up … and up.

And when paired with debt, real estate becomes a super-charged wealth builder … growing equity much faster than inflation, while still hedging against deflation.

After all, if you put $20,000 down on a $100,000 property and the price falls to $80,000 and NEVER recovers … eventually the tenants pay the property off.

Now your $20,000 investment has grown to $80,000 … even though the property deflated 20 percent.

But it’s hard to imagine any serious sustained deflation will hit real estate absent a catastrophic sustained economic collapse.

Of course, it’s probably smart to have some cash, gold, and debt free real estate as a hedge against catastrophe … but probably not the lion’s share of your portfolio.

That’s because the history and headlines favor higher prices over the long haul.

This brings up a very important point for every serious student of real estate investing …

The ONLY real way to truly lower housing prices in the face of growing population is to increase supply.

But there’s NO motivation for the wizards to reduce housing prices.

They’ll SAY they want to, but they can’t deliver.

Think about it …

No politician wants to face home-owning voters who are watching their home values fall.

No banker wants to have a portfolio of loans secured by homes whose values are falling.

And in spite of their sometimes-public spats, politicians and bankers have a long track history of working together to enrich and empower themselves.

So does it make sense that politicians and bankers are really going to do anything meaningful to cause housing prices to fall?

We don’t think so. All the motivation is to cause housing prices to rise.

And as we saw in 2008, on those rare occasions where housing prices fall, bankers and politicians rally to revive them as quickly as possible.

Your mission is to structure your holdings to maintain control if prices take a temporary dip. And of course, positive cash flow is the key.

Meanwhile, the Wizards are hard at work to make expensive housing more affordable …

This means fostering an environment to increase jobs and real wageslower interest ratesloosen lending guidelines, and get more money flowing into funding mortgages.

Are these acts of frantic Wizards desperate to keep the equity rally going into an election year? Maybe.

But until and if a total financial crisis happens again (which you should be diligently prepared for) …

… we think the bubbliest markets will see softness, even as nearby affordable markets increase as priced out home-buyers migrate.

Nonetheless, keep in mind that real estate is not an asset class … even a singular niche like housing. Every market, property, and deal is unique.

So it’s possible to find deals in hot markets, and it’s possible to overpay in a depressed market. Think big, but work small.

And while the financial media complains about over-priced housing and rings the bubble bell, consider that if housing remains unaffordable to buyers, it only creates more demand for rentals.

The properties you lose the most on are the good deals you pass on because you’re focused on price and not cash flow.

Is the housing boom … like the stock market boom … late in the cycle? Probably. But that doesn’t mean there’s not a lot of opportunity out there right now.

Unconventional Funding Solutions for Real Estate Investors

Lending is a big part of real estate investing … but sometimes your situation doesn’t fit the traditional lending mold. 

If you … or your deals … require out-of-the-box funding … have no fear!

There is a great, big, wide world of alternative funding solutions just waiting to be discovered. And the payoff can be just as big. 

Today, we’re sitting down with a veteran loan broker who is here to share the details of some of the creative loan products available for unconventional real estate investors. 

It’s time to optimize your portfolio … and find new ways to claim needed capital. 

In this episode of The Real Estate Guys™ show, hear from:

  • Your fund-finding host, Robert Helms
  • His fun-loving co-host, Russell Gray 
  • Investor and financing strategist, Billy Brown



Broadcasting since 1997 with over 300 episodes on iTunes!

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Locating leverage and getting cash for deals

One of the most important questions in real estate is … where do you get the money?

Great news! Things have changed in the lending world … and today, there are opportunities like never before … all while protecting your equity. 

One of the first challenges many investors have to figure out is leverage. Leverage is what helps us magnify returns. 

In a nutshell … it means the bank loans you money so you don’t have to come up with all the money to buy real estate. 

Leverage is like a chainsaw. It’s a great tool … but if you use it wrong, it can cut you. 

So, today we’re going to focus on alternative funding solutions. 

True investing is about focusing on cash flow. If you do that, then you can weather pretty much any storm. 

Right now, the market is pretty hot. There are people out there who have wisely built a nice portfolio … but now they have five, six, seven, or more loans and they can’t get any more. 

And yet the rates are down. That leaves those investors staring at a lot of cheap money that they can’t get their hands on. 

So, those investors look at the equity they have in their current properties … and they want to get at that equity. 

If you’re not liquid … you’re going to be like a kid locked out of the candy store. 

If the credit markets seize up … all that fabulous equity that you have disappears. But if you have strong cash flow … you’ll weather it. 

How can you liquefy equity? How can you take advantage of lower rates in your portfolio and free up money so you can continue to invest? 

Loans designed for investors

Billy Brown is a seasoned investor and loan officer who specializes in helping investors and syndicators figure out the finances of investing. 

One of the big problems Billy sees is that investors get successful, start to build their portfolios … and then get what we call Fannie-d and Freddie-d out. 

They no longer conform to those guidelines Russ was talking about. They suddenly have a hard time getting a loan. 

Billy has the ability to sit down with these people and help them be able to take individual loans and restructure that in a way that frees up their qualification. 

“I love infinite returns,” Bill says, “so that’s how I wear my hat. I focus on how we can use the tools available to us inside lending and our lending partners to go create infinite returns.”

Billy has a few different strategies in place to help people access equity. 

The first is portfolio lending. 

There are a lot of portfolio lenders out there. Banks and non-banks will do it. The idea is to take everything and put it together as an investor loan. 

The rates might be a little bit higher … but what it buys you back is the qualification of those loans. Plus, you get the option of one loan servicing multiple properties. 

This type of loan is better than going through Fannie Mae or Freddie Mac because it is designed for the job you are trying to do. 

You go from 9 or 10 loans with 9 or 10 mortgage payments that may or may not be escrowed down to one mortgage with escrow … and a whole bunch of cash. 

Billy says that if you have a simple written rule or schedule of real estate owned and your personal financial statement, he can come up with a plan fairly quickly. 

“Usually within 48 hours I have a pretty good idea of whether I can get you a recourse or non-recourse option and set out the strategy,” Billy says. 

Billy also says that these portfolio loan options are fun because they are designed for investors and have a cash flow of their own. 

Special considerations for special loans

What happens if you want to sell one of your properties?

Billy says that is one of the first questions he asks when he consults with investors. “Are there any ugly children in this portfolio that you want to get rid of? If so, leave them out of the loan.”

This type of lending option is really designed for the investor that wants to buy and hold a portfolio and keep hanging on to it for at least 3 to 5 years.

The reason there is a prepayment penalty is that lenders put a certain amount of resources, time, effort, and capital to be in a position to collect the interest rate from you. 

Lenders want to make sure they’re making a return … so you can’t use this type of portfolio strategy and then turn around in 10 days and sell it without paying a heavy fee. 

So if you’ve spent the last several years acquiring a portfolio of single family homes that are working for you … but you would like to have access to the capital … this is probably a great tool. 

Each lender has their own set of circumstances … and most require you to have property management. 

The property manager is the least respected and most important person on your team. 

If you have commercial properties, you probably already have management in place … but if you have single family homes, you could still be managing yourself. 

“That’s a great way to learn for the first couple of years, but eventually you want to hand that job off,” Billy says.

Discover the method that works for you

No matter what your circumstance is, Billy and his lending network can help. 

“We can do anything from $100,000 cash out refinance of a single family rental up to a $100 million CMBS loan,” Billy says. 

To learn more about unconventional funding solutions for investors like YOU, listen in to the full episode!

More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.

Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Billy Brown

Billy Brown

If your banker says it’s a no-go on your loan … You’ve still got options!

Real estate investors seek infinite returns using money to make money … but how do you get your hands on OPM?  (that’s short for “Other People’s Money”)

What do you do if your banker says no … And you don’t want to give away equity in your deal?

That’s where Billy Brown comes in.

They can help you with both Bridge and Permanent lending solutions for your SFR portfolios, multi-family, self-storage, mobile homes, hospitality, retail, and office deals in most states in the U.S. … and have solutions for foreign investors as well!

As a real estate investor himself, Billy Brown knows the importance of creative and reliable lending.

Billy educates other realtor and investor groups throughout the country on how to become more profitable using the right lending tools and works hard to help investors like YOU make deals happen.

Billy and his team underwrite in-house and outsources funding through its network of bank and non-bank lenders … to speed up your approval process.

And when they deliver the funding request, it is completely packaged up with a credit memo … so there are few, if any, questions before the lender delivers OPM to your escrow.

Loans available range from $200,000 and can go up to $50 million … so get started on the path to capital for your next deal.

Whether you want a thorough financing and leverage check-up on your entire portfolio … or to cash out some equity to re-invest for more profits … or just want a peek into the possibilities for financing a current deal …

Simply fill out the form below to get your financing questions answered … Billy and his team will reach out to discuss all the possibilities!

“... Billy was a top notch but down to earth guy. He provided me with some great information and I’m sure we will keep in touch. Thank you guys for all that you do!!”  – Dusty W., Listener

Easy money is both a symptom and a sickness …

As of this writing, we’re not sure what the Fed will do with interest rates, though it’s widely expected they’ll cut.

So as much as we’d like to talk about what it means to real estate investors, we’ll wait to see what happens.

And even though mainstream financial media are finally paying attention to gold and the future of the dollar … these are topics we’ve been covering for some time.

But if you’re new to all this, consider gorging on our past blog posts

… and be sure to download the Real Asset Investing report

… and for the uber-inquisitive, check out the Future of Money and Wealth video series.

After all, this is your financial future … and there’s a LOT going on.

In fact, today there’s a somewhat esoteric and anecdotal sign the world might be on the precipice of its next major financial earthquake.

But before you go full-fetal, this isn’t doom and gloom. We’re too happy-go-lucky for that.

It’s more an adaptation of a principle from Jim Collins’ classic business book, Good to Great

Confront the brutal clues.

Of course, the original phrase is “Confront the brutal facts.” But as great as data is, sometimes data shows up too late to help.

So, while facts may confirm or deny a conclusion … clues provide awareness and advance warning.

But just like with facts, you must be willing to go where the clues lead.

In this case, we’re just going to look at one clue which has a history of presaging a crack up boom.

For those unfamiliar, a crack up boom is the asset price flare up and flame out that occurs at the end of an excessive and unsustainable credit expansion.

In other words, before everything goes down, they go UP … in spectacular fashion.

Here’s a chart of the housing boom that eventually busted in 2008 …

See the bubble that peaked in 2007? It’s hard to miss … in hindsight. It’s hard to see when you’re in the middle of it.

Peter Schiff saw it in 2005 and published his book, Crash Proof, in 2006 to warn everyone. Few listened. Some mocked.

In 2008 it became painfully obvious to everyone.

Of course, for true real estate investors … those busy accumulating tenants and focusing on the long-term collection of rental income …

asset prices are only interesting when you buy, refinance, or sell.

As long as you stay in control of when you buy, refinance, or sell … you can largely ride out the bust which often occurs on the back end of a boom.

And if you’re paying attention, you use boom time as prime time to prep … and the bust as the best time to buy.

Today it’s safe to say, just based on asset prices alone, we’re probably closer to a bust than another big boom.

But the current run-up could still have more room to boom. As we said, it’s hard to tell when you’re in the middle of it.

Shrinking cap rates are one of the most followed metrics for measuring a boom.

Cap rates compress when investors are willing to pay more for the same income. That is, they pay more (bid up the asset price) for the same income.

But when the Fed says low-interest rates are the new normal, maybe it means so are low cap rates.

It’s one of MANY ways Fed policy ripples through the economy … even real estate.

But there’s another sign that’s hard to see unless you’re an industry insider, and while not scientific or statistical, it still makes a compelling argument the end is nearing …

Lending guidelines.

Think about it … booms are fueled by credit. It’s like the explosive fuel which propels rising asset prices.

The only way to keep the boom going is to continually expand credit.

But any responsible head of household knows you can’t expand credit indefinitely … and certainly not in excess of your capacity to debt service.

At some point, the best borrowers are tapped out. So to keep the party going, lenders need to let more people in. That means lowering their standards.

We still have a “backstage pass” to the mortgage industry and see insider communications about lenders and loan programs.

When this subject line popped up in our inbox, we took notice …

24 Months of Bank Statements NO LONGER REQUIRED

To a mortgage industry outsider that seems like a lame subject line. But to a mortgage broker trying to find loans for marginal borrowers, it’s seductive.

It suggests less stringent lending criteria. Easier money.

Sure, the rates are certainly higher than prime money. But with all interest rates so low, they’re probably still pretty good.

And these are loans with down payments as low as 10% for borrowers just 2 years out of foreclosure or short-sale. Hardly a low risk borrower.

Usually, lenders want to see TWO years of tax returns and a P&L for self-employed borrowers. They’re looking for proof of real and durable income.

Not these guys. Just deposits from the last 12 months banks statements. And they’ll count 100% of the deposits as income, and won’t look at withdrawals.

So a borrower could just recycle money through an account to show “income” based solely on deposits.

The lender is making it STUPID EASY for marginal borrowers to qualify.

All of this begs two questions:

First, why would a lender do this?

And second, why would a borrower fabricate income to leverage into a house they may not be able to afford?

We think it’s because they both expect the house to go UP in value and the lender is growing increasingly desperate to put money to work at a decent yield.

Pursuit of yield is the the same reason money is flowing into junk bonds.

And if the Fed drops rates as expected, it’s likely even more money will move to marginal borrowers in search of yield.

Today, MANY things could ignite the debt bomb the way sub-prime did in 2008. Consumer, corporate, and government debt are at all-time highs.

Paradoxically, lower interest rates take pressure off marginal borrowers … while adding to their ranks.

It’s hard to perfectly time the boom-bust cycle.

But careful attention to cash-flow protects you … whether structuring a new purchase or refinance. It means you can ride out the storm.

Meanwhile, it’s smart to prepare … from liquefying equity to building your credit profile to building a network of prospective investors …

… so if the bust happens, you have resources ready to “clean up” in a way that’s positive for both you and the market.

No one knows for sure what’s around the corner … but there are signs flashing “opportunity” or “hazard”.

Both are present, but what happens to you depends on whether you’re aware and prepared … or not.

Until next time … good investing!

More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.

Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Billy Brown

Billy Brown


If your banker says it’s a no-go on your loan … You’ve still got options!

Real estate investors seek infinite returns using money to make money … but how do you get your hands on OPM?  (that’s short for “Other People’s Money”)

What do you do if your banker says no … And you don’t want to give away equity in your deal? 

That’s where Billy Brown comes in.

They can help you with both Bridge and Permanent lending solutions for your SFR portfolios, multi-family, self-storage, mobile homes, hospitality, retail, and office deals in most states in the U.S. … and have solutions for foreign investors as well! 

As a real estate investor himself, Billy Brown knows the importance of creative and reliable lending. 

Billy educates other realtor and investor groups throughout the country on how to become more profitable using the right lending tools and works hard to help investors like YOU make deals happen. 

Billy and his team underwrite in-house and outsources funding through its network of bank and non-bank lenders … to speed up your approval process.  

And when they deliver the funding request, it is completely packaged up with a credit memo … so there are few, if any, questions before the lender delivers OPM to your escrow. 

Loans available range from $200,000 and can go up to $50 million … so get started on the path to capital for your next deal. 

Whether you want a thorough financing and leverage check-up on your entire portfolio … or to cash out some equity to re-invest for more profits … or just want a peek into the possibilities for financing a current deal … 

Simply fill out the form below to get your financing questions answered … Billy and his team will reach out to discuss all the possibilities!

Disruption in the Real Estate Industry

These days, it seems like industry and social changes are happening at a faster pace than ever before.

Take the emergence of companies like Uber and Lyft. Unheard of just a few years ago, these businesses allow everyday drivers to repurpose their cars and moonlight as freelance drivers to earn some extra change.

While the rise of ride-sharing companies has been great for people who want to put their cars to use, as well as people who need a convenient, affordable ride, it’s been a major disruption to the taxi industry.

In this episode of The Real Estate Guys™ show, we’ll examine nine major disruptions to the traditional real estate industry and discuss the way these changes affect YOU.

On the show, you’ll hear from:

  • Your champion-of-change host, Robert Helms
  • His right-hand man, Russell Gray



Broadcasting since 1997 with over 300 episodes on iTunes!

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When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).


Major disruptions to traditional industries

Most disruptions don’t appear out of nowhere … even if it seems like they do.

Major trends tend to evolve slowly.

The upside? You have time to react and get in on the game before you’re left behind.

The downside? If you aren’t keeping your eyes wide open, it’s easy to miss what’s going on.

Our first major trend is one that gained popularity quickly over the past few years … and is now on the tip of every vacationer’s tongue.

  • Trend #1: Short-term vacation rentals

Airbnb. Everyone’s heard of this company, and for good reason.

Companies like Airbnb allow homeowners to rent their homes to vacationers for a night or a fortnight.

For regular homeowners, say a person who’s purchased a vacation rental they only use two months out of the year, short-term vacation rentals offer a way to make money in today’s sharing economy.

And for real estate investors, Airbnb offers a completely new model for hospitality … and often, a drastically higher rate of return.

But for competitors in the traditional hospitality industry, Airbnb presents an unwelcome disruption to an established market.

After all, hotels can’t usually match the amenities, home-like ambiance, or affordable rates of Airbnb options.

So the hotel industry is responding … often by attempting to quash short-term vacation rentals in a given area.

  • Trend #2: Modular housing

When modular housing first appeared, it was synonymous with “shoddy.”

Today, modular housing means something totally different.

In fact, in many ways modular housing has become the best option for low-cost, high-quality homes.

New technology has allowed modular building companies to become hyper efficient, producing consistent results with less overhead than traditional building methods.

Obviously, this trend is also disrupting a big industry … traditional building and construction businesses.

These companies know what they’ll do about this trend… try to stop or circumvent it. The real question is, do you know what you’ll do?

  • Trend #3: Worker housing

In some cases, it isn’t a new technology that’s disruptive … it’s the economy. Consider overcrowded, high-priced areas booming with new companies like San Francisco and Vail, Colorado.

In these markets, the demand for housing is there … but the market isn’t responding (or can’t respond, due to geographic barriers).

In some cases, this has opened up a new industry … worker-specific housing, created solely to provide homes for workers flocking to burgeoning technology markets.

In the most extreme cases, however, no one is stepping up to the table. Take Google, for example.

The company recently installed modular homes near their Silicon Valley campus to provide temporary, affordable housing to new employees.

But Google’s solution isn’t permanent … it’s a patch on a problem that will only get worse.

The real solution? Either someone has to figure out a way to add affordable housing to already packed markets … or companies have to make the move to more affordable markets.

As with any trend, we want you to take note … and look for the opportunity in the situation.

Changing technology tools offer new techniques

Although in many ways, the real estate industry hasn’t changed significantly compared to years past, technology tools for homebuyers have expanded dramatically in the Internet age.

First, it was online MLS programs that expanded access to home listings. Today, technology is racing to fill needs and wants as they arise, changing the way real estate works every day.

  • Trend #4: Online property analysis and walkthroughs

It’s easier than ever before to buy a property without ever stepping foot in it.

Advances in technology, like virtual reality programs that let potential buyers examine homes from a distance, have made physical walkthroughs unnecessary.

Buyers also have a vast array of constantly improving data available to them online.

Sites like Zillow show home values, and it only takes a push of a button to find an area’s crime rates and school statistics.

  • Trend #5: Social media marketing

While online technology rapidly increases the information available to potential homebuyers, some sellers are taking advantage of Internet trends to get a competitive edge.

Real estate professionals like our friend Ken McElroy use popular social media sites to create interest instead of relying on traditional advertising techniques.

This approach allows sellers to reach key audiences … while driving the costs out of marketing and acquisition.

What’s the benefit of being able to cut edges this way? Well, we hope it’s obvious … finding ways to cut overhead only increases your bottom line … and will help you stay above water if and when we hit a tight market.

Financing, lending, and brokering like never before

Along with new ways to research and market homes come new ways to buy and sell them.

  • Trend #6: Online brokerages

The online-only trend doesn’t just stop at walkthroughs … these days, companies like Reali operate real estate brokerages entirely online.

As technology advances have made information more readily available to the interested public, traditional realties have seen an overall decrease in commissions.

There are two things real estate agents can do … find a way to redefine their role in the market, and/or find a way to do more transactions.

As new business models facilitated by technology emerge, it’s your job to consider how you’ll re-position yourself to maintain your value proposition.

Although your position and tasks may change over time, your income doesn’t have to change if you adapt.

  • Trend #7: Crowdfunding

When it comes to buying and financing real estate, new lending models have proved a big disruption to a major industry … the banking world.

In particular, crowdfunding and peer-to-peer marketing allow people to exchange money without utilizing banks at all.

Instead, buyers and sellers can come together without a middleman.

Refiguring traditional ‘rules’ for a changing world

It’s easy to fall asleep and miss the little ripples technology makes in the real estate world … but we think it’s more fun to stay awake and watch them turn into waves.

If you want to be active and efficient in a slow market, NOW is the time to make your move.

That way, you’ll have a competitive advantage when you really need it.

In a constantly changing world, it’s YOUR job to rework the rules.

  • Trend #8: Nomadic workers

While workers are still flocking to big companies in overcrowded cities, on the other end of the spectrum, technology has enabled many folks to work nomadically.

For more people than ever before, it’s possible to work wherever the heck you want.

How is this trend a disruption? It forces sellers to look beyond local buyers and consider the amenities that will draw nomadic workers to an area.

If investors take this trend into account, they may find demand in places they never would have suspected otherwise.

A changing world requires you to consider so much more than just the roof you put over tenants’ heads. You have to look at the bigger picture.

  • Trend #9: Cryptocurrencies

Last, but not least, we find the rising cryptocurrency trend of the past few decades intriguing.

There are over 2,000 cryptocurrencies … and in markets with unstable (or even potentially unstable) currency, investors often find cryptocurrencies a logical option.

In our constantly evolving world, there’s so much to think about!

It’s YOUR job as investor to avoid being complacent … to stay aware so you can counter disturbances before they arise … or even better, turn them to your advantage.

Coming up on the radio show, our best ideas on how to navigate when there are storm clouds on the horizon.

Until then, go out and make some equity happen!

More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Ask The Guys – Markets, Mentors and Kissing Frogs

In the Ask The Guys episodes The Real Estate Guys answer listeners questions about how to make money investing in real estate


In another intriguing rendition of Ask The Guys,  we dig deep into the email grab bag and pull out another great batch of listener questions.

Behind the mics but ahead of the times for this Ask The Guys edition of The Real Estate Guys™ radio show:

  • Your Answer Man host, Robert Helms
  • His questionable co-host, Russell Gray







Broadcasting since 1997 with over 300 episodes on iTunes!

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How to Invest in Out of Area Real Estate


This questions comes up ALL the time….especially from people living in high cost, low rent areas like California.

We always say, “Live where you want to live, but invest where the numbers make sense.”

Easy to say.  But how?

The answer isn’t complicated, but it does take some work.

First, get in touch with your inner investor.  That is, decide what you want your real estate investing to do for you…and what you’re willing to do to get it.

Sometimes travel’s involved.  You’ll definitely need a team.

Next, pick a market that is likely to provide the kind of real estate opportunities you’re looking for.

Some areas are tight supply relative to high demand.  That means they’re expensive and likely to increase.  But they probably won’t cash flow.

Other markets provide solid cash flows and abundance of working class jobs.  But don’t hold your breath for huge equity gains…unless you force it through adding value.

Once you have a market, it’s CRITICAL to build a TEAM.  And the most important, yet most unappreciated and overlooked team member is the lowly property manager.  This is the MOST important person on your team.

After all, your property manager is the primary person responsible for managing income and expenses.  But your property manager can also help you identify prospective properties to purchase.  It’s something we put a big emphasis on in all our market field trips.

Sadly, most newbie investors get excited about the property and pro-forma financials…and then figure out the market and management later.  BIG mistake…and one you should avoid.


What’s the Best Investment for a Sixty-Something Passive Investor?


That’s like asking what’s the best medicine.  It really depends on what’s ailing you!

With that said, we think the first and best initial investment for ANY investor is in education.

As Ben Franklin said, “An investment in knowledge pays the best interest.”

But as much as love books, podcasts, webinars, seminars, summits and field trips…sometimes a great way to learn is simply to talk with some experienced investors.  Especially those who don’t have anything to sell you.

Generally speaking, “best” is really a matter of suitability.  The goal is to pick an investment vehicle and strategy which is most likely to produce a desired outcome with minimal risk.

With that said, ALL investing decisions have risk….including a decision not to invest…or a default decision not to invest by not deciding anything at all.  In other words, inaction is an action by default.

So when you know you need to do something, the trick is to think about what you’re really aiming at.

In financial planning, it usually comes down to the following categories:

  • Preservation of Purchasing Power (some call it Preservation of Principal, but we think that’s a misnomer.  Because if you’re sitting in a currency which fails, or a bond or note which pays in a currency that fails, you may get paid back, but you won’t be able to buy anything)
  • Income (interest, dividends or profits from ongoing operations…like rent)
  • Capital Appreciation (equity from buy low, sell high)
  • Growth and Income (a balance between growth and income…something income producing real estate does quite well).

Then you have to look at time frames and liquidity.  How long can you leave the money in the investment?  What if you have an emergency and need the money out sooner than expected?

If not being able to get to the money creates a unbearable hardship, you can only choose investments which can be quickly sold or otherwise converted to cash.

Typically, the more liquid an investment is, the lower the return (think savings account)…or the more volatile the pricing (think stocks).

Real estate is relatively stable, but not very liquid.

This a bigger topic than a blog or a broadcast, but an important one.

Basically, it comes down to knowing your needs and understanding your options.  Both require asking good questions, verifying the answers, and thoughtfully considering how to best select the investment choices whose features most align with the needs you’re trying to meet.


Where to Get Money for Building and Investing?


Another common and popular question.  The great news is there are LOTS of options!

Typically when people ask this question, it’s because they aren’t lendable or banks aren’t lending.

So aside from traditional loans where you need to qualify based on your credit, income, net worth and (sometimes) your investing experience, private money is a place many investors are turning to these days.

In our Secrets of Successful Syndication Seminar we talk about how private investors can serves as lenders or as equity partners, or as both.

And with interest rates so low and the stock market so volatile, many people are looking at private placements back by real estate as a great place to invest their savings.

Many of these private investors are discovering they can use funds from their self-directed IRA, in additional to their other savings and investments, and enjoy the benefits of real estate without the hands on hassle.

So if you have investing expertise and can show a private investor how you can put their money to work in your deal and pay a good return, you’ll probably get some takers.

You still need to “qualify”, but it’s personal based on the relationship, the deal, and your’s and your team’s ability to execute.


Where Can I Find an Experienced Investor to Mentor Me?


This is a GREAT question for several reasons.  First, it implies the need to learn from someone more experienced.  Real estate investing attracts a lot of mavericks and they naively dive in because it looks easy.

Then, when they get in trouble, they don’t have anyone to turn to for help.  Or they’re embarrassed and just try to figure it out on their own.

If you push your limits (and you should), you’re bound to get stuck at the upper limits of your ability.  This is where your mentor can help you break through.

They key is to have the right mentor with the right access and relationship.

This is a TALL order because most successful people are very busy.  So when you find a prospective mentor, you’ll need to provide something of value.

So the first thing is to decide what kind of investor YOU want to be.  Then go look for someone who’s been successful doing what you want to do.

Next, figure out a way to get close.  You want to learn as much as you can, so you can look for ways to add value.

Obviously, sometimes people who love to teach create mentoring programs.  And if they’re credible and qualified, these can be great investments.

Other times, you might find someone to mentor you in exchange for your helping them.  For example, you could volunteer time to do research, vet deals, inspect properties or assist an active investor in some way.

A GREAT way, if you have the ability, is to help an expert investor write a books, create a seminar or develop a training program.  Now you’re on the inside, and you get a front row seat for all the best ideas.


You’re Just One Good Idea or Relationship Away from a New Success


While it’s true you need to kiss a lot of frogs to find the Prince Charming real estate market, team member, deal, investor or mentor…when you find that winner, it suddenly all becomes worth it.

And because most people don’t have the fortitude to keep pressing forward, you’ll find the longer you stay in the game, the less crowded it is.

So keep on kissing those frogs and it won’t be long before you leap frog to the top!


More From The Real Estate Guys™…


The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Finding, Financing and Syndicating Multi-Family Properties

Michael Becker from Old Capital explain how to invest in apartment buildings from the perspective of a lender, an investor and a syndicator


Apartment buildings are the logical step up for most single-family home investors. And apartments are where many of the “big boys” play.

In a low interest rate world, the cash flows on multi-family properties has attracted gobs of capital…creating a many funding options, but also a lot of competition for viable deals.

In this episode, we visit with a multi-family lender, investor and syndicator to discover what he sees…and what he’s doing…in one of the hottest apartment markets in the U.S.

Taking part in this apparition of The Real Estate Guys™ radio show:

  • Your A-class host, Robert Helms
  • His C-class co-host, Russell Gray
  • Our multi-faceted special guest, Michael Becker







Broadcasting since 1997 with over 300 episodes on iTunes!

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Apparently Apartment are Appealing


Except for an under cheek sneak rate hike of 25 basis points back in December, the Fed hasn’t been able to pry interest rates off the floor in nearly 8 years.

Since the depths of the Great Recession, investors have been faced with taking their hard earned funds into the Wall Street casinos…OR…putting them into hardly earning savings accounts and bonds.

Once the dust settled after the mortgage bomb went off, apartments emerged as one of the most appealing asset classes…for lenders, investors and institutions.  So much so that gazillions of dollars poured into the space…pushing prices UP and cap rates (yield on capital) DOWN.

In spite of that, apartments remain a VERY high demand product type….especially in the right markets.


Apartment Lending Today is as Good as It Gets


Assuming your definition of “good” isn’t indiscriminately lending to unqualified borrowers against poorly performing over-priced properties in pathetic markets (say that fast 10 times…that, that, that, that, that, that…..)

Michael Becker says lending today is as good as you can get.  And that’s GREAT news for serious investors.

Becker reminds us that 8 years ago, in the wake of the meltdown, banks were effectively in the fetal position licking their wounds.  They weren’t interested in lending.  They just wanted to survive.

Today, regional and community banks are actively engaged in commercial real estate lending.  Fannie and Freddie have HUGE bucket of over $30 billion to place this year.  And even paper asset investors are beginning to have an appetite for CMBS (Commercial Mortgage Backed Securities) again.

That’s all AWESOME…because funding is the fuel that powers your portfolio.  It’s hard to go very fast without it.


How To Qualify for an Apartment Loan


The first thing to understand when it comes to apartment loans is that it’s all about the DEAL.  Well, at least mostly.

The lender knows the payments are coming from the operations and not from your personal paycheck.  Whew!

So the lender will take a good look at the property and especially the income and expenses.  If there’s plenty there, getting the loan will be a LOT easier.

But YOU still matter.

The lender wants to know you know how to operate an apartment building.  So EXPERIENCE really matters.

Now, just like your first job, you may wonder how do your get your first deal if you have to be experienced.  After all, if this is your first deal, then by definition you have no experience.

Sounds like a Catch-22.  And it is.  Sort of.

The secret is to partner with someone experienced so you get a deal on your resume.  Then, “Voila!”…you’re experienced.

It’s not rocket surgery.  But you do have to know someone who’ll help you lose your apartment investing virginity.


What Are the Risks of Investing in Apartments?


Big question.  The short answer is not knowing what you’re doing.  That’s why the lenders want to see experience.

But even when you KNOW what you’re doing as an “operator”, you also need to make sure you’re structured to weather stormy weather.  And we’re not talking monsoons or hailstorms.  More like financial earthquakes.

So our chat with Becker reminded us of some brilliance we penned in Equity Happens

“Cash Flow Controls and Reserves Preserve”

It’s really common sense.  But when an asset class gets hot, price speculation is SO much more exciting than boring cash flow.  And who likes to sit on piles of idle cash for a rainy day?

But sufficient “debt coverage ratio”…a fancy term for Net Operating Income (Gross Rents less Operating Expenses before Debt Service) being MORE than the mortgage payment is not just required…but a good idea.  Lenders usually want about 20% more…or more.  And so should you.

But besides having enough cash flow to comfortably pay the mortgage, it’s important to have enough cash reserves to handle unexpected capital expenses…like a new roof, sewer or parking lot.

After all, if you can’t maintain the property, you’ll lose tenants…and income.  And if you REALLY neglect the property, the regulators might come shut you down completely.  That would be bad.


Always Have a Plan A, B and C


Real estate investors tend to be optimists.  We buy properties because we expect things to go well.  Otherwise, why would we bother?

And most of the time, most things go pretty well.  At least well enough to manage.  And many of the problems are things we can control…or substantially influence.

But sometimes stuff just happens that’s hard to deal with and outside our control.  So in addition to adequate cash flow and reserves, it’s a smart idea to have more than one plan for the property.

As a rule of thumb, you should never get into a deal…or structure a deal…so you don’t have at LEAST two ways out.  Call them Plan A and Plan B.  And tossing in a Plan C is usually a good idea too.

For example…since we’re on the topic of financing…based on today’s climate (stupid low interest rates) it’s wise to lock in as LONG as possible.  Even if you’re plan is to pump up the rents and refinance out all your new equity or sell to the highest bidder in a couple of years.

What if interest rates rise and there are no good loans available to both you or your potential buyer?  Are you prepared (Plan B) to stay in the deal and ride out the storm?  You should be.

And if you’re syndicating (raising money from private investors) and the property’s doing great (good job!), it can be REALLY tempting to highlight your brilliant investing skills and cut all your investors big, fat checks.

But this drains your cash reserves, and if you fit a speed bump on that rocky road to riches, a little cash can smooth things out.  If you don’t have it, then you might need to make a dreaded “cash call” on your investors.  Yuck.  That’s no fun.

What IS fun is listening to a smart and accomplished guy like Michael Becker talk about how he went from small time to medium large time in just a few years.  Over 3,000 doors and counting.

Now THAT sounds like a good plan!


More From The Real Estate Guys™…


The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Big Investors Impact on Investing in Single Family Homes

investing in single family homes


The world of investing in single family homes changed after the Great Recession. Once the sole purview of Mom & Pop investors, today huge hedge funds like Blackstone own tens of thousands of houses.

In this episode, broadcast from the 4th annual Single Family Residential Investment Forum in Scottsdale Arizona, we interview several of the many interesting folks we met there…and discuss how the new level of sophistication is changing the way the single family game is played.

Discussing how the recent changes impact investing in single family homes:

  • Your host who has seen a market change or two, Robert Helms
  • His single family minded, co-host, Russell Gray
  • Managing Director at FirstKey Lending and chair of event panel, Dennis Cisterna
  • SVP of Acquisitions & Underwriting at Patch of Land, Doug Cochrane
  • CEO, Real Wealth Network and Talk Show Host, Kathy Fettke
  • Long time listener and Real Estate Syndicator, Sep Bekam




Broadcasting since 1997 with over 300 episodes on iTunes!

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(Show Transcript)


Robert Helms: Welcome to the Real Estate Guys Radio Program. Lots of ways to invest in real estate. Lots of styles of real estate investing. We’re going to talk today about the basic real estate investment: the single family house. It’s not what it always was. Things are changing, and a lot of great news. We’re at an amazing conference. We’re going to share a lot of guests with you today and a lot of great thoughts today on the Real Estate Guys Radio Program.

Single Family Home Market Changes

Welcome to the Real Estate Guys Radio Show. I’m your host, Robert Helms, from Phoenix, Arizona this week. Let’s say hello to co-host financial strategist Russell Gray.

Russell Gray: Hey, Robert.

Robert Helms: We’re at the Fourth Annual Single Family Rental Investment Conference put on by IMN. This is a group that we’ve been to some conferences of over the years. They do a bunch of great events and a whole bunch of different areas. About half of what they do is in real estate, and then they do continual education for attorneys and all kinds of different great stuff. Very, very interesting event. It’s single-family based. We’re talking about single family assets, but 80% of the room are in suits and ties.

Russell Gray: Yeah, I think obviously the Fourth Annual, right? Single family homes have been around for a very, very, very long time.

Robert Helms: Longer than four years.

Russell Gray: This is the fourth annual. What you see, the first thing you recognize, you talk about the suits and ties, but you just recognize that there has been a major shift in the single family home market. We’ve watched it happen. We went through the meltdown. There was a lot of mom and pop investors in the space in the run up. It was the hot commodity. Everybody and their brother and their mother and their sister was out there buying single family homes, bidding it up to whatever, holding it, hoping that they could sell it a year later for $50,000 or $100,000 more. Of course, we all know what happened.

In the wake of that, the prices dropped. It was a huge correction, to use a Wall Street term, and then a guy named Warren Buffet comes out and goes, “Hey, you know what? If I could go buy 200,000 family homes right now, I would.” The problem is it’s not a well-organized industry. It’s a mom and pop industry. Little by little, companies like Blackstone and big hedge funds aggregated capital, they went out there and painstakingly, property at a time … They were also able to buy groups of properties out of distress, foreclosure, from banks, and buying what they call tapes. Then they get rid of the garbage, they clean up the other stuff, then they get it tenanted, and they hold it for the production of income until some future date in time.

Around this has evolved this entire industry now that is creating software products and analytical products and all kinds of ancillary services so that that portfolio manager who is sitting there on 1,000 properties or 2,000 properties, or in some cases 10 and 20,000 single family properties, has a whole host of services that didn’t exist. Now a conference that is not completely dedicated to that, because there’s a lot of mom and pop investors here, too, but there’s a lot of people here that … Industries that did not even exist 10 years ago to service this particular niche. Of course with the big decline in home ownership in the United States and the big increase in rental, not just the number of renters, but the price that people are willing to pay to rent, it has really attracted a lot of attention.

It’s an interesting place to be, four years into the conference, especially talking to the people that have been here for a little while that are saying, “This is what I’ve seen the changes.” Of course, for us it’s just a point on the curve, but a lot of interesting things here.

Robert Helms: We’re going to meet many of the folks that are speakers and attendees, a lot of listeners that we’ve been able to say hello to here. It’s going to be a great show. You’re going to learn a lot, I’m sure.

You’re tuned to the Real Estate Guys Radio Program. I’m your host, Robert Helms.

Update On The Single Family Rental Industry

Welcome back to the Real Estate Guys Radio Program. We are in Phoenix, Arizona talking single family houses. Let’s say hello to a gentleman who chaired the first event yesterday, Mr. Dennis Cisterna. Dennis, you were the first guy out of the gate yesterday. You had a great panel. You were talking about kind of the big picture of where we are in the single family world. Give us the high notes.

Dennis Cisterna: Sure. We like to start off this event by really covering what’s going on in the macro economy, how that impacts the housing markets, and more particularly, how that impacts the single family rental industry. We cover a lot of the basic topics: GDP growth, employment growth, unemployment, the unemployment rate. There’s a lot of different factors going on right now that are contributing to a greater opportunity within the single family rental industry.

I think if you talk to most people on the street or you read any of the conventional wisdom about the economy, it still feels spongy. People don’t think we’re doing bad, but they certainly don’t think we’re doing good yet.

Robert Helms: Right.

Dennis Cisterna: One of the reasons for that is really the housing market. Although people think it has recovered, there’s really a lot of fragmentation and misinformation in the market right now.

For example, housing starts, building permit issuance is down 75% from the highs of the pre-recession, and about half of what they are historically. If you think about it, the population of the US is much larger now than it was in 1960-

Robert Helms: And increasing.

Dennis Cisterna: And increasing every year, and yet we’re only issuing half a million permits.

You haven’t had a real recovery in the owner occupied mortgage market. Even though the population is growing and growing, and there’s a need for a larger housing stock, we’re not building more homes and most of these people can’t afford or qualify to get a mortgage. You’re seeing some stagnation when it comes to existing home sales and new home sales. When you look at the price appreciation, a lot of it has been fueled by investor demand more than traditional demand from a consumer.

As it relates to the single family industry, it’s not a new market. I know a lot of people read in Bloomberg or the Wall Street Journal that Wall Street is taking over Main Street.

Robert Helms: Right.

Dennis Cisterna: That’s a great headline. There are 15 million single family homes in this country that are rented out right now.

Robert Helms: Okay.

Dennis Cisterna: Less than 200,000 of them are owned by institutional Wall Street firms, 1.3% of the market.

Robert Helms: One of the most amazing slides you showed was the number of people who just own a single house are by far the majority owners.

Dennis Cisterna: That’s right. One owner, one property, one rental property, is 48% of the market. It’s 11 million different people that own one rental property. A lot of that has been financed historically by Fannie Mae, Freddie Mac kind of investor loans, one to four units. What’s also interesting about this is because your audience doesn’t do just single family houses, the larger market considers plex product, duplex, triplex, condo, townhome, all that. When you’re looking at that, the market is actually 22 million homes, so it’s even bigger.

Robert Helms: Wow.

Dennis Cisterna: It is all related to the same. It is taking advantage of a decline in home ownership in the United States, which has steadily gone done since the recession hit. Because of a number of different forces, most economists project it’s going to continue to slide down. It’s kind of a perfect storm for people who want to invest in renters because you have a surging amount of demand. You have increased rental rates. You have a consumer base that can’t buy a home right now.

The personal savings rate in this country is declining so it’s making it harder and harder for people to even come up with the 3% they need for an agency backed loan, never mind 20% if they’re going to get a jumbo loan or nonconforming loan. It’s made a real struggle for people to increase that home ownership rate.

As a result, you’ve seen not only a tremendous amount of demand for rental housing, but some really incredible yields for folks that are investing in the space.

What used to be the norm was, okay, I’d get a Fannie or Freddie loan and I’d buy up to the amount of properties that my personal income allows. One of the real big benefits of the Wall Street firms coming in is they shook up the capital markets here where banks and private equity groups are saying, “Well, I’ll lend on those kind of homes. This seems like a safe bet. We expect housing to continue to appreciate. We expect there to be demand. This feels like a safe asset class to lend on.”

Starting in 2011 and 12 you had companies that started entering the space as lenders, instead of you, the smaller investor, being constrained by your personal income. You’re a dentist, great, if you’re a school teacher, you’re never getting past one investment property. Hence the 11 million people.

As these lenders entered the market, it let you stretch your dollar further. It also, because the debt was reasonably priced, these aren’t hard money loans that people are providing. These are more term loans, five, 10, even 30 year fixed rate loans that are generally priced more affordably than what the yield is on the property so the debt is accretive.

Not only is it letting you stretch your dollar further, but you’re able to get higher leveraged profits on top of that. Instead of buying one property with your $100,000, you’re buying 3 or 4 properties. Instead of making cash on cash return of 11%, you’re making 17%.

I’m sure a lot of your listeners look at all types of different asset classes and different investment objectives. 17% anywhere you’re going is pretty darn good. That doesn’t even factor in the potential appreciation for housing, right?

If you look at where home prices are right now, we’ve kind of righted the ship where pricing right now is kind of where it should have been if it’s been at it’s historical appreciation rate of 3% or so. There’s still a lot of markets that are undervalued.

There is some feeling that eventually the mortgage markets will begin to thaw, and what a great treat that is for someone that’s owning an income property that’s appreciated over time. If they need some additional liquidity they can sell part of their portfolio. It’s really just a very dynamic market right now.

It’s not really different than what happened in the, speaking of other asset classes, self-storage, multifamily, just normal big apartments. In the 1960s, the numbers weren’t that dissimilar. There was one owner, one apartment complex, that’s it. It wasn’t until REITs started being formed and people started aggregating we started to see the scale.

The good news is this industry’s taking off a lot of the efficiencies that those sectors have already created, so you’re seeing the maturity of this market happen at a pace I haven’t seen with any other asset class.

Because of the sheer size of it, 22 million units, there is opportunity out there whether you live in California or Texas or Florida or New York. You just have to be diligent about what you’re doing, as you should with any kind of investment.

Robert Helms: Whether you’re interested in acquiring two or 300 houses or just a couple of houses.

A Look at FirstKey Lending

Dennis Cisterna: That’s right. It’s been really interesting for me at FirstKey Lending, we’re one of the specialty finance companies in this space that we were created to help the smaller and middle market investors grow. I’m never going to have one of these publicly traded companies come to me because they can go directly to Wall Street and get their own bonds issued.

Robert Helms: Sure.

investing in single family homes with firstkey lending

Dennis Cisterna: But, a guy comes to us with five properties and he wants to own 50? Great. We’re going to provide him the leverage to increase his liquidity to keep buying more houses. There’s other lenders that do that same thing.

It’s really interesting. We’ve only been around for about three years. We’ve done a little over a billion dollars worth of loans over that time. The smallest loan we’ve done is one property, $75,000, and the biggest loan we’ve done is an acquisition line for over 100 million.

It’s really interesting when you have a good operator, a good investor. Once you unlock the power of debt, and again, reasonably priced debt with good terms, it’s amazing how quickly they’re able to scale their company.

I think if you took a survey of these big Wall Street guys, these guys must be the most efficient operators of all, they have the scalability. There should be economies of scale. I could bring out a parade of midsize investors that own between 50 and 500 homes and they blow those yields through the roof.

Robert Helms: That’s one of the recurring themes here, right? We’re seeing these mid-level guys. There were folks who have 3000 houses, 200 houses, all over the map. A lot of folks looking to get more, right? That’s a big theme here. You don’t see … There’s a lot more acquisition than you see divestitures it seems right now.

The Current Status of Financing

Robert Helms: The person that you deal with on a lending basis is a pretty wide range. It’s not just any one type of investor. Financing is critical for single family homes. We heard folks on different various panels who were putting together portfolios for cash, but our typical investor, listener, is probably somebody who wants to use leverage. The way that loans have changed over the last several years has been crazy. There’s so many changes, regulations, and so forth. What do you see? Is there going to be more availability of financing? On your panel there was the talk about nobody can qualify. What’s that look like?

Dennis Cisterna: Those are really two different types of lending, right? Getting an owner-occupied mortgage for the house you want to live in, that’s consumer financing, and that is the most regulated industry you could think about. I don’t do that personally. FirstKey doesn’t originate-

Robert Helms: That explains why you still have hair.

Dennis Cisterna: Right.

That industry is a tough nut to crack. If you look at a lot of what’s going on in that industry, it’s ripe for disruption. You’ve probably read a decent amount about these venture capital online crowdfunding kind of places where you apply in 15 minutes and you get your loan.

Getting any kind of consumer loan and following all the rules, there are not loans like that that take 15 minutes. That being said, what they do is they look at the qualifying metrics of a borrower much different. Whereas if you are going through a traditional mortgage for a home you want to buy, they’re looking at your income, your taxes for the last couple years.

They’re looking at your credit score. It doesn’t matter if you had one blip on your radar. The recession damaged the credit score for millions upon millions of people. There are a great percentage of those people that have then rectified. They haven’t missed a payment on anything since then. They just … The economy collapsed. There’s not much you can do, so why take these people out of the ball game?

Some of these new lenders in the space are saying, “This guy’s got a good job, he makes a lot of money, he can afford this mortgage. He’s paying this much in rent, if not more, already. Why not give this guy a reasonably priced loan?” That’s happening in the market right now. I think it’ll continue to happen.

With that side of the space you’re going to need the old guards of traditional mortgage finance to kind of pick up on the technology slant and pick up on a new way of underwriting their borrowers. The tried and true method obviously didn’t work before because everything still exploded anyway.

When it comes to these investor loans, these are business purpose loans, right? They’re not subject to the same amount of regulation that a traditional mortgage for an owner occupied unit would be. The big difference is, if any of your listeners before have done a Fannie or Freddie investor loan, it’s really all about the income of you as the borrower, not anything about the property. It’s silly when you’re buying an income producing property to not consider that.

One of the things that FirstKey has done, whether you’re the borrower of one property or 1,000 properties, we’re looking at the income on the property level. Of course we want you to be a respectable, solvent, smart business person, but we don’t expect everyone to be a multi-millionaire that wants to borrow to expand their real estate portfolio. Because we’re looking at the income of the property, then that goes back to, “Well, you need to become an efficient operator.”

Opportunity for Investing in the Single Family Homes Market

Dennis Cisterna: What’s great about this market is because it’s so fragmented right now, the yields are there. There’s the benefit of the technological advances in property management and rent collection.

Ten years ago there was only one way to collect rent, and that was by banging on the guy’s door for a check if he didn’t pay. Now, one of the big advancements that you’ve seen on the multifamily sector that certain operators are using on the single family side is, “Well, we’re going to do ACH debit and automatic payment with our tenants.” A. It’s less work for them. B. It reduces our collection loss tremendously.

This is all about effecting the bottom line, right? Even if you buy something at the right price, you want to make your yields even better by being a better operator. There are so many tools available to the average investor that weren’t there just two or three years ago.

This industry is piggybacking off all the work the multifamily sector has done. It’s piggybacking off all the work the big Wall Street guys have done when they acme into play. It’s basically rolling downhill for all the individual investors. They’re getting the benefit of technology, capital markets. It’s really interesting what’s going on in this sector right now.

I myself am an investor as well, right? Even though I do these loans, I’ve studied the housing markets for 15 years, and I haven’t really seen this kind of an opportunity for investors, big or small.

I think those don’t come along very often. If you had a ton of capital when the recession came, yes, you could have made a ton of money. If you were like most people, you were scrapping together and you didn’t know what to do. Now, with the advent of attractive financing and the fact that you’ve had appreciations in certain markets and still more room to grow, as well as increasing rents. That’s another great thing about it. Because there’s so much demand for rental properties, it keeps pushing rents up in a lot of different markets. It’s really an attractive space right now, and we’re still in the second inning of it.

Robert Helms: Yeah. All right, good stuff. I know we’re going to have folks that are interested in finding out how they can get ahold of you guys and learn more about your loan programs. What’s the easiest way to do that, Dennis?

Dennis Cisterna: The easiest way is to visit our website, which is FirstKeyLending.com. F-I-R-S-T K-E-Y lending dot com.

Robert Helms: All right, good stuff. Thanks for your time and a great contribution to the conference.

Dennis Cisterna: Thanks so much, appreciate it.

Robert Helms: You’re tuned to the Real Estate Guys Radio Program. More when we come back from Phoenix, Arizona. I’m your host, Robert Helms.

Crowdfunding with Patch Of Land

Robert Helms: Welcome back to the show. I’m your host, Robert Helms. We’re talking single family investment and very happy to have Doug Cochrane with us from Patch of Land. How are you, sir?

Doug Cochrane: I’m doing well. Thanks for having me on, Robert.

Investing in single family homes with patch of land crowdfunding

Robert Helms: Absolutely. Let’s talk about what you guys do. We’ve spent some time in the last couple weeks talking about crowdfunding and in fact you are hot and heavy into that. Tell us about Patch of Land.

Doug Cochrane: Sure. We are a real estate crowdfunding company that deals strictly with debt. There’s other companies out there that work in equity. We’re strictly a debt lender. We’re nationwide. We work with developers around the country, anything from single family homes, multifamily homes, hotels, all sorts of asset classes in the commercial range as well.

Robert Helms: This is fascinating because a lot of portals out there are all about a deal that gets split into pieces and investors can invest in it. What you guys do is pretty unique, though. You provide funding to a developer, to a syndicator, to put together a deal, and then you go out and piecemeal out the debt. Is that a way to explain it?

Doug Cochrane: Yeah, that’s a way to explain it. What we do, the elevator speech is we originate the loans, we underwrite them in house, and then we pre-fund the deal, meaning that we bring our own money into the deal, so we can get to the closing table quickly and so our borrowers can get on with their projects. Then what we do is we open it up to the crowd.

We put it up on our site, we give it a full property profile, the borrower profile. We’re very transparent. We put up everything on the site so that our investors, our accredited investors, who are our crowd, they come in, they can read about the project, see if that’s something that they want to add into their portfolio. It’s fractionalized. We have anything from one guy might take out the whole deal or we might have 20 or 30 people who put in smaller pieces.

Robert Helms: Of course you’ve already done all the underwriting, so you have the reports, disclosures, information about the property and I would also imagine, the sponsor.

Doug Cochrane: Exactly. What we do and part of the pre-funding that’s a benefit to both our borrowers and our investors is we’re willing to put our own money into the deal. Even if our crowd decides not to fill up the deal, we’re still confident of the project. We’ve done our underwriting and our due diligence, and we believe in the property and the sponsor that we’re willing to keep our own money into the deal as well.

Details of the Loans thru Patch of Land

Robert Helms: Let’s talk about, there’s kind of two angles of this. One is, “I’m a accredited investor. I want to put money at work. You guys have vetted deals. I’d like to be on the lending side. I could diversify by product type and market by investing in several deals.” What does it look like from that investor’s perspective? How do they sign up for the sight? What is it that they do? What are the minimums and range of investment and that kind of stuff?

Doug Cochrane: Sure. Our minimum per deal is $5,000. Typical loan size, we have a minimum loan amount that we do is $100,000. We go up to about 10 million. I think our biggest deal so far has been about 3.2 million on a hotel.

To get involved, I encourage everybody to go to the site, PatchofLand.com. Sign up as an investor if you’re an investor. Fill out some forms. Somebody from our IR team will contact them and bring you through the process. We ensure that everybody is accredited before they can invest in a project. If you’re a borrower, the same thing. You go to our site, you fill out a simple form, a loan officer will contact you and get you through the process and get you to the closing table as quickly as possible.

Robert Helms: What some of the critics say about crowdfunding is a lot of the deals don’t happen. In this case, the deal has happened. You guys have already funded it. It’s not a matter of, “I pledge $5,000 or $100,000 if the loan happens.” It’s already happened. I guess by the time that they see it on your site, it’s a done deal.

Doug Cochrane: It’s a done deal. The minute that they invest in the project, their money is working right away. We pay out dividends every month. They’re based off of borrower payment dependent notes. The second that you’re investing, your money’s at work.

Robert Helms: Can people invest with their IRAs?

Doug Cochrane: Yes.

Robert Helms: Okay. That’s pretty common today that people with self directed IRAs are looking for this kind of investment.

Doug Cochrane: Exactly.

Robert Helms: Let’s talk about the timeline. What’s the typical underwriting look like for on the developer side? I come to you with a project. I’m looking for funding. What’s that time period like?

Doug Cochrane: On the residential side, one to fours, we can typically close a loan within two weeks. We move pretty quickly. We’ve done it in five days, which is moving boulders. Honestly for our developers, the guys who are really organized and professional, those are the ones that we can get done very quickly. They know what they’re doing and it’s a pretty simple process.

Robert Helms: How does the loan compare on a competitive basis with some other loan they might get from a local bank or a lender?

Doug Cochrane: It’s very competitive. We, again, we’re a nationwide lender and we stay competitive within regions. Different regions have different pricing scales. Loans are priced based on the inherent risks, LTVs and experience and where it’s located, is it judicial, non-judicial. We have a whole proprietary scoring model when we’re pricing out loans that take into account all these different data points. We’re very competitive in that respect.

For our borrowers, our borrowers are guys who are getting great deals. Part of getting a great deal is being able to move quickly. That’s part of our biggest benefit is, like I said, we were able to close a deal in five days, which was pretty impressive and got us a borrower for life I think.

Robert Helms: Oh, wow. That’s awesome.

Doug Cochrane: On our commercial deals, we typically can close those out in about three to four weeks. They take a little longer. It’s a little more intense.

Robert Helms: What kind of loan to values?

Doug Cochrane: Loan to values on commercial deals it’s typically about 65%, maybe 70, depending on mitigating circumstances. On the residential side of things, if it’s a straight purchase, no renovations, typically about 75%. If there’s renovations involved, which is most of the time, it’s the majority of the kind of deals that we do, we look at a combined loan to value of 80%. What we’ll do is we’ll help finance the purchase of the property and the renovations as well.

Robert Helms: If you are looking at a deal and it’s passed muster for you guys, you make the loan, now you go out and look for the crowd. How long does it typically take for a loan to fund?

Doug Cochrane: That’s a great question. We’ve had loans … Our fastest loan filled up in about nine minutes.

Robert Helms: Okay, that’s pretty fast.

Doug Cochrane: I think that was about $200, $250,000 loan. Our average loan size is about 375. On average our loans close out in about 24 hours. For the larger ones it might take a little longer. Maybe a week.

Robert Helms: What kind of terms are these loans. Is this long-term financing? Is it more construction financing? Or is it all of the above?

Doug Cochrane: It’s short-term, typically 12 months. Interest only, no pre-paid penalties. We can go out as far as 18 months. We work with our developers. If we know that the renovation’s going to take a little bit longer, it’s up in Minnesota, it’s up in the northern regions and it’s wintertime, we kind of help take that into consideration that they might need a little extra time. We’ll give them an 18 month loan. We’re not trying to restrict anyone in their deals. We’re trying to work with our borrowers and individual circumstances. For the most part they’re 12 month, interest only, no pre-paid penalties.

Robert Helms: Doug, let’s talk geography. What kind of range of area do you guys work in?

Doug Cochrane: We’re nationwide. We’re currently in 20 states. We’re always looking to open up a new state. We have a high concentration in, I’d say, New Jersey, North Carolina, Florida, California. We’re, like I said, I Chicago. We do definitely like the Chicago area a lot as well, or I guess our borrowers like us there.

Robert Helms: All right, so whether or not you’re looking for a loan or you’re looking to invest in part of a loan, just go to the website at PatchofLand.com.

Doug Cochrane: Exactly.

Robert Helms: All right, good stuff. Thanks, Doug. Appreciate it.

Doug Cochrane: Thank you, Robert. Thanks for having me on.

Robert Helms: You’re tuned to the Real Estate Guys Radio Program. More when we come back from Phoenix, Arizona. I’m your host, Robert Helms.

Talking Single Family Home History with Kathy Fettke

Welcome back to the Real Estate Guys Radio Program. We’re talking single family houses. We’re in Phoenix, Arizona at the IMN Single Family Rental Investment Forum, and it’s a great pleasure to say hello to a long-term friend and fellow broadcaster, the amazing Kathy Fettke is with us. Hi, Kathy.

Kathy Fettke: Hi.

Robert Helms: It’s been too long.

Kathy Fettke: It has been way too long. It’s so fun to see you here at this amazing conference.

Robert Helms: Absolutely. We like to say that you’re one of the good gals out there educating and sharing ideas and all that kind of stuff. How long have you had your radio show.

Kathy Fettke: So long, it feels like. I started in, I think, 2000.

investing in single family homes - interview with kathy fettke from real wealth network

Robert Helms: Okay, so been doing it quite a while. Tell us today what you see as opportunity in the marketplace and what are you sharing with your students.

Kathy Fettke: I’m really just excited to see that I’m right. I’m around, we’re sitting here with these, the largest institutional investors in the world right here at this event and they’re copying us.

Robert Helms: Isn’t that something?

Kathy Fettke: Isn’t that interesting? Everything that comes out of their mouth, I think you and I said first. Don’t you think?

Robert Helms: Yeah, that’s pretty funny that that’s the case.

Kathy Fettke: Do you think they listen to us?

Robert Helms: I’m guessing maybe so. What’s funny, I don’t know if you track your broadcast listenership, we learned that our number one listener market is Washington DC.

Kathy Fettke: They are listening.

Robert Helms: I never would have guessed that, but I think maybe they are listening. It is, it’s validation.

Kathy Fettke: Yeah.

Robert Helms: Ten years ago a conference like this wouldn’t be attended by so many suits and ties, right?

Kathy Fettke: Of course, it would be mom and pops.

Robert Helms: It is very interesting the first day one of the slides was up it was the majority of single family homes are owned by mom and pops, by a person who owns one rental house.

Kathy Fettke: Right, right.

Robert Helms: There aren’t that many big institutions, but there’s more and more.

Kathy Fettke: It’s very interesting to see how they’re trying to make this into an industry, and they’re here to stay. Probably the biggest thing I got from this event is that they see the rental market growing, which you and I both know is happening.

All the reasons and the data behind that why people are leaning towards renting or they just can’t buy, although I’m going to constantly be encouraging them to do it. They should be buying. That is just an incredible … I thought we had the best opportunity in 2008, 2009, and I, you know, sometimes wish we could turn back the clock. Then to see these big players jumping in now? You got to know it’s not too late.

Robert Helms: Right, exactly.

Kathy Fettke: I remember when I first got into real estate, I would look at people who bought long ago and be a little jealous, you know. Just a little envious. You got in at the right time. You know, the same thing in looking back at 2009. It’s like, you could buy a house in Riverside for $65,0000. Why didn’t I buy 1,000?

Again, to see so much hype over what you and I and many of our listeners have been doing forever is really interesting. I’m a little fearful, tiny bit, that they’re going to just completely take it over. But like you said, nah, that can’t happen.

Robert Helms: Well yeah. A couple things that have happened about that, right? The first big groups that came in after the carnage and bought stuff in a lot of the markets that we have experience in, we thought that was going to be a game changer. It was for a little while.

To me, this new crop of folks seems to be a little better funded, a little more sophisticated. They’re buying better. They are taking some of the things that you’ve been teaching for a long time and following that, where before it was just hot money chasing whatever deals. Because the pricing was low, and we’ve had now home price appreciation, then it looks like they did well.

Today it seems like you’ve got to still sharpen your pencil. You’ve got to be careful of market selection. You’ve certainly got to be careful of tenant screening. All the basics of our business. It’s going to continue to be important.

Kathy Fettke: What I love about what I’m seeing here is it really truly is turning into a viable industry. I just walked down the aisles and you’ve got all these companies who are wanting to profit on this new thing. You’ve got these carpet companies that are offering cheaper discounts, and roofing and so forth.

In some ways I think it will become easier for the mom and pop, because they’ll just be better property managers out there and they’ll be better screening process and there’s all this software’s out there now that’s helping us do our research more. I think for me, again, it’s just really interesting to see. I feel a little old. Like, “Back in the day we used to have to do all this ourselves.” It’s becoming institutionalized.

Robert Helms: You know some of these … One of the panels yesterday where the eldest company was touting the fact that we were formed way back in 2008. Oh, wow, since the dawn of time. We had real estate before that, right?

It is changed. The very nature of the single family asset class now is different. A tenanted house is a different asset than an empty house, than an owner occupied house. Even though you’ve got multiple exit strategies, it’s one of the strengths of single family, and on our show we spend a lot more time on broader economics and we look at a lot of different stuff. We don’t spend as much time on single family as we certainly used to. This has been a really great thing for us to get our minds back into the single family home space.

Kathy Fettke: Yeah, I bet. Some of the most brilliant minds are here. Hearing their enthusiasm … Just hearing them talk about the stuff we have been, or at least I for sure have been talking about for years, which is cash flow, cash flow, cash flow, and then to have them basically say the market only wants cash flow, they don’t even care about the equity.

There doesn’t seem to be value on it on the market. They’re just trying to build these cash flow portfolios that then they can sell, which is kind of … I know there’s an appetite on Wall Street for that in anything. The software companies, the friends I know who own software companies, they’re just looking to create the membership sites and so forth. It’s all about cash flow. Again, it’s such an opportunity now to hopefully maybe even train the tenant. As standards rise, tenants may not be able to get away with some of the things they’ve been doing.

Robert Helms: Yeah. In the age of information, more information available than ever, even the whole tenant screening process has changed.

I remember certainly right after the big ugliness of the crash, your tenant had no credit score. You could no longer even use, it was no longer valid to even ask because everyone had lost a home, lost a job, lost their credit. Today they’re looking at different things, technology. Just walk into the exhibit hall here, all kinds of ways to make our lives easier as investors. That’s exciting.

Kathy Fettke: Yeah.

Robert Helms: At the same time, any time the big boys and girls start to get in it does make you pause and go, “Hmm, I was in the right place but can I maintain my edge?”

Your listeners, our listeners, can be very nimble. They can move quicker. That’s the other thing. The bigger the industry gets, the more there are chances to exploit those little unique opportunities, some of the smaller markets that you might favor as opposed to a larger market and looking for where there is opportunities, the market shifts. It changes. Today’s great market wasn’t great 10 years ago necessarily.

Kathy Fettke: No, no. Again, that’s how I got started. That’s again why I find this all really fascinating because back in 2004, 2005, I was doing loans. No matter what the headline news said, no matter what the chief economist of whatever came out with, I knew something was wrong. None of it made sense.

What was the book? There’s No Housing Bubble? That came out from David Lee Ray from NAR came out. I forget what it was, but basically saying there’s no housing boom. He came out with it in 2006. These top economists were saying one thing, but your gut, all you had to do was listen to your gut and say, “Why can I give someone up to five million dollars, a NINA loan, no income, no assets? Who would do that?”

Robert Helms: Something has to be wrong here.

Kathy Fettke: Who sat in a board room in a suit going, “This is a good idea. Let’s just give money away to anyone.”

Robert Helms: Of course now we know how that turned out.

Kathy Fettke: Right.

Robert Helms: Yet it does seem like there’s liquidity back in the lending side of the business again. We’re starting, I don’t know if it’s the same path or not. Don’t have a crystal ball. There was a period of time where you couldn’t get a loan and now there is.

What’s really interesting, I’ve discovered it here, I don’t know if you’ve seen it, but the lenders that are showing up that are specifically lending to investors, not any interest in loaning to an owner occupant, they’re just investor lenders from one to 100 units. That’s pretty good stuff.

Kathy Fettke: Yeah, it’s amazing. Back then when I was seeing the problem and we knew that there was, that California was over inflated, I got to have Robert Kiyosaki on the show and just like you and some people who had been around enough to know that something was wrong. They weren’t listening to the economists either. They were the ones that told me they were investing in Dallas.

We rapidly urged people to sell, sell, sell California and exchange it for Texas. I can’t tell you, you probably experienced this too, how many people would look down their nose at me and say, “Nothing happens in Texas.”

Robert Helms: Right.

Kathy Fettke: I’m going, “Maybe that’s a good thing, because something is about to happen here.”

Robert Helms: All the markets that were the high run of markets were the worst when it came to the exits and Texas was pretty slow and steady. Today there are Texas markets appreciating 12 and 15% a year. Is it time to be wary of Texas? I don’t know.

Tell us how we can listen to the podcast and get involved with the Real Wealth network.

Kathy Fettke: Wonderful. You can look at RealWealthShow.com or Real Wealth Show on iTunes, and then Real Wealth Network is how you find us. Membership is free and we just do a lot of education on how to be a smart real estate investor.

Robert Helms: That’s what we love about you.

Kathy Fettke: Yeah, thanks.

Robert Helms: Thanks for being on the show.

Kathy Fettke: Thanks so much.

Robert Helms: There’s Kathy Fettke. More when we come back. I am your host Robert Helms. We’re the Real Estate Guys.

Listener Guest and Real Estate Syndicator, Sep Bekam

Welcome back to the Real Estate Guys Radio Program. We’re in Phoenix, Arizona this week at the single family expo. This has been a pretty amazing event and one of the greatest things for us is when we run into listeners. Let’s welcome one of our long-term listeners and successful students, Sep Bekam. How are you, Sep?

Sep: Good, Robert. How are you?

real estate syndicator, sep bekam

Robert Helms: I’m great. First of all, thanks for reminding us about this event. I had been to a couple of the IMN shows over the years and I’ve been on their mailing list, but you reached out and said, “You guys ought to consider coming to this.” This has been a great event.

Sep: Yeah, glad to hear that.

Robert Helms: Let’s talk about your story a little bit. I think when we first met you were still active as an engineer and you got the real estate bug. Tell us your story.

Sep: Sure. So I am a long-time listener. I’ve been listening to you guys since, I think it was 2010. Bought a couple properties, just two four-plexes and came to the first syndication event that was in 2011.

Since then, with the tools that you guys have provided me and taught me over the years, I’ve been able to scale that up. I quit the rat race last year and I’ve been focusing primarily on multifamily syndication. Most of the properties were taking what you guys taught me and putting that into real life.

The challenge has been, multifamily has been, the cap rates have gone down quite a bit. There’s a lot more competition. Russ talks about a lot of the, even foreign capital has just wanting to be in US dollars. It’s hard to find the yields that my investors are used to with that asset class. I came across the IMN events through some mutual friends, also Real Estate Guys listeners, and focusing more on syndicating these portfolio-type deals.

Transitioning from Investor to Syndicator

Robert Helms: Let’s talk about this transition that you made from investing in your own account to now going out and raising money to invest. That’s a big jump for a lot of people. Take us through what that was like.

Sep: Sure. You hear a lot of success stories where everything goes right the first time, where the properties cash flow automatically. My experience was very different.

It took me two years to get my first, actually all the properties I had at the time, to cash flow. To date, I’ve gone through about 10 property management companies and I’m still a firm believer in using third party property management.

All the challenges that I had with the evictions and not being able to produce the income, it was always an owner problem. It was not having the right team managing that asset. You guys are really big in terms of having those systems in place and treating real estate like a business and not about the properties.

Along the way, as I was able to solve those problems with having the right team, that I’m thankful for, I’ve communicated that with my investors and I think they actually feel more secure in being a part of that type of pool of capital for a deal. They don’t have to go mistakes their own. They can leverage my experience and know there’s a good steward at the ship to protect their capital.

Robert Helms: It’s such a good point. People want to invest with someone who’s been there and seen that. Everyone wants to think we have a good track record, but the lessons you learn when things don’t go well make you a better manager as things get better, right?

It’s not about not making mistakes. It’s about learning from the things that go wrong. You’re a great student. I know that because you keep coming back and you put into practice what you learn, which is rare but necessary to be successful.

We were talking earlier today with some folks about how when the market changes you need to correct your strategy. You give a great example of that.

Multifamily makes sense for a lot of reasons, but right now where we sit, it’s hard to get inventory, the cap rates are compressed, the big guys are chasing the little guys out of the room.

Let’s talk about the single family market. That’s an interesting market. We’re starting to see the opposite effect having, where bigger money’s coming into the single family space. We’ve been talking about that here at this event for a couple days. What are your take always, your epiphanies, from what you’ve been learning in the last couple days here?

Sep: Sure. In essence, the hedge fund and these REITS got into buying these thousands and thousands of properties back during the recession when the, if I can phrase it as, there was blood on the streets at the time. They were taking advantage of the opportunity and they kind of created that space.

Before the notion, including myself, was that single family, well, you can only do 10 properties and then from there you have to go on to … you ran out of Fannie and Freddie type financing. Now there’s actually lenders that step in to fill in the void. There’s not really a cap on how many single families you can have.

In terms of thinking about the forward economy, if we’re buying a property, multifamily property at a compressed cap rate, that’s a speculation if we’re expecting that same property to have that same cap rate three years from now, five years from now. I think it’s safer to be in an asset class where the rents are still inelastic but the numbers make sense from the get go. You don’t have as much competition in there.

It’s really interesting in these panels at the conference where the REITs and these large fund managers are talking about the same concepts and ideas that you and Russ talk about on your podcast.

A couple years ago this was foreign concept to me. With you guys’ training and teaching it kind of opened my mind to that. I can see what they’re saying. They’re concerned about the same thing, slower wage growth. They’re going more for those markets where it makes sense at the get go.

Robert Helms: Yep, and it is a changing platform, right? We see the various asset classes within real estate change, fall in and out of favor. As an investor you got to be nimble.

I think one of the big things that people get stuck on is our motto, “Education for Effective Action.” You’re a guy that’s taken action. What would you say to a listener out there as a word of encouragement. You’ve worked hard and we’ve watched you really take the lessons and sharpen your pencil and study and take a lot of classes.

You’ve now gotten to the place where you’ve got a nice portfolio, things are going well. What would you say to that investor who’s not there yet?

Sep: I think it’s better to invest in themselves, for them to invest in their own education. Even after I went through your guys’ trainings, as I continue to do so, the properties I first started out with, I probably wouldn’t have bought them with the extra tools that I have on my tool belt now.

It’s powerful because then you learn that you’re not competing for properties on the MLS. You can find those great off market deals. You can set up systems in place so that those deals come to you automatically. You don’t need to put 25% down in every deal. You can go raise that capital from investors and have the capital waiting for you over there.

I think the education is definitely necessary, especially if you’re shy like me and sales doesn’t come naturally. If you’re afraid about making mistakes, I think those are definitely the people that should be in the business, because there’s a lot of sharks out there, but there’s definitely a need for people that actually want to protect their investor’s capital and grow that.

Robert Helms: All right, good stuff. We’ve got, of course, our syndication event coming up in January. Are we going to see you again at that one?

Sep: Absolutely.

Robert Helms: All right. Sep has been I think to virtually every syndication event we’ve done. It’s happening January 29th and 30th in Phoenix, Arizona. Come on out. You’ll have a great time and you get to hang out with Sep, as well. Appreciate your time today, man.

Sep: Thank you very much, Robert.

Robert Helms: Keep doing the thing.

Show Recap & How Sophistication in the Industry Affects Investing in Single Family Homes

A wonderful time here in Phoenix, Arizona. What a great variety of folks we’ve had on the show today.

Russell Gray: Yeah, it’s been great. It’s really interesting to see some old, familiar faces. It’s always great when listeners, you guys are out there in the audience, any time you come to a live event, please come see us. Say hello.

Robert Helms: It’s our favorite thing.

Russell Gray: It’s a lot of fun because we get a chance to hear how people are responding to the stuff we’re sticking out here on the radio and on the podcast and the newsletter and the blogs and all that. We really appreciate the feedback, good, bad, and ugly. All of that’s good.

Just as far as the conference itself, you know you heard that there’s just a lot of different people here that are viewing this asset class from different lenses. There’s so much opportunity because there’s so much change.

I think the big issue is going to be for people who just don’t acknowledge that the change is happening. We spend a lot of time on some of the macroeconomic factors. We talk about even some geopolitical factors on the show. We certainly talk about demographic factors, there’s geographic factors. Add to that mix now some technological factors and some business factors.

There’s a whole level of sophistication coming into this industry that really didn’t exist before. When you have that it does tighten the margins. You can’t just be a sloppy little operator out there competing against these big, well-oiled machines that are run by corporate executives that are savvy operationally.

You’re going to have to compete against that, and they’re going to be able to bid. We’ve heard a lot of the complaints over the years from the operators out there that are bidding, “Oh, these hedge funds are bidding it up to where it doesn’t make any sense.” Well, it doesn’t make any sense based on your operational cost. They can go in and they can buy an inefficient asset and they can make it efficient.

All of a sudden, a price that didn’t make sense for you can make sense for them. If you don’t adjust, if you don’t take advantage of some of these innovations and tools yourself, then you’re going to end up getting squeezed out of the market completely.

Robert Helms: Here’s the great news. Because those kinds of folks are in the marketplace, and vendors are sprouting up to support them, the fact that there are so many different non-owner-occupant lending opportunities out there today … You can borrow property now. The Fannie and Freddie stop is no longer there because of that. That’s all happened to serve these folks, and you get to be the beneficiary of it.

If it had just been mom and pops, the lenders that are popping up today, several of which are on this conference, wouldn’t be here. They’re in the business to service the guy with 500 or 1000 homes, but you get to benefit from that. Same with software, same with systems, same with buying power. A lot of the tools out there today, we get to take advantage of. The thing the individual investor can be is a lot more nimble.

Russell Gray: I think just coming back to that debt comment, which is an important one, a lot of times as real estate investors we only ever think about equity. It’s all we think about.

We think, “Okay, we’re going to buy the property. We’re going to be the owner.” We’re on the equity side of things. There are a lot of people who want to invest in the space that don’t want to be the equity. Their investment is to make the loan. That’s a great partnership.

Yes, they’re there to service from an equity perspective. Of course, you’re an equity guy, so you would do that. I came out of the debt side, right? Yes, you want to service, but really what you want to do is you want to get yourself in a position to get a stream of income.

As a real estate investor I’m going to go out there, I’m going to make a down payment. I’m going to take out a loan. I’m going to now receive a stream of income through the rental income. Then I’m going to service the mortgage.

The piece of this rental income stream that the lender gets is just the debt service. I get the difference between the profit, or the income on the property and the loan. Of course that’s what I’m doing is arbitraging. If I can borrow at five and earn at eight, then I make a 3% spread on the borrowed money, right?

The point is, it’s a symbiotic relationship. There are many people who want to feed on the single family home space at an institutional level. When that happens, lots of money becomes available. That means there’s lots of opportunity for people to access those funds, because the people on the debt side need you, on the equity side, to manage the asset because they don’t want to.

Robert Helms: All right. Big thanks to IMN. You can find out what they do at IMN.org. Lots of conferences in lots of places. Of course, to all the guests today, thanks for their time and expertise. Until next week, go out and make some equity happen.

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