Podcast Episode 61 Transcript

Episode 61: Flip, Flip, Fund: Learn How To Use Hard Money Loans For Fix & Flips

Participant #1:
And we did about 100 deals that year, you know, in 2015. And then from there, I recognized the power of partnerships, you know, and finding people that can generate leads for us. So that's been our approach. Our growth has been due to our strength. Strategic partnerships.

Participant #1:
Welcome everyone to the podcast. I'm your host, James Prendamano. We're joined today by Rod Stanback. He's the CEO of Flip Funding. His website is www. Dot. Flipfunding. Com. Rod has funded over $500 million in real estate deals. Essentially, he created Flip funding to eliminate the hassle and possibility of going into a deal and quite honestly, being taken advantage of through the hard money process. I've got a bazillion questions. Rod, thank you so much for taking the time today. No problem. Thank you for having me, James, it's a pleasure to be here. So before we jump into the nuts and bolts of your platform, I like to talk about kind of your history for a little bit. I find this common threads between entrepreneurs and folks that are kind of in the game that we're in. So how did real estate end up even in your interest zone? Was there mentors when you were a kid, or was anybody else in the game as a kid? I didn't have any mentors, but I've always heard that real estate was the route to go. I didn't know anybody that was investing in real estate. I may have known people with one or two properties, but nobody that took it serious as a business. But how I found my way into real estate was I went to College that didn't work out. I went up there acting like a knucklehead, got kicked out. Me, too. I'm glad it did, because I wouldn't be here today. So everything happens for a reason. It's blessing in the sky. So I got kicked out. I came home and was working with Applebee's and doing a bunch of other stuff. And I had an epiphany. I'm looking up and I said, Well, wait a minute. This is not how I visited my life to be at the high school, said I had to make some drastic decision to make something happen. So real estate was hot at the time. This was about 20, 15, 20, 16. You know, the market was booming, so I didn't have the money to get into real estate, but I want to align myself within the industry. So I went back and I'm from Philadelphia originally. So I live in Maryland now. But I went to Delaware County Community College for carpentry that's in the suburbs of Philly. I got my license, I got my certificate. Then I started subcontracting for Home Depot, doing doors and windows. I love that, actually. But then I transition into remodeling property. So my brother, his best friend, had a remodeling company, and they were doing jobs for an investor from New York. A lot of you guys come down to Philadelphia because it's a little more affordable there, so you can buy numerous properties in comparison to one that you may purchase in New York. So he was down there and he was taking properties in the Temple University area, and we were converting them, converting warehouses to student housing. And from doing that process, I learned about remodeling the ins and outs of remodeling that overcame my fear of handling the managing these projects and everything. But I had another epiphany and I thought to myself, I'm like, Wait a minute. This guy is making a killing and we're on the bottom of the totem pole, but we're doing all the labor, you know what I mean? So I said, I have to get on the other end. So I was saving my money at the time at the time, was working, doing that. I was working in a restaurant and doing other things on the side, doing whatever I can to raise my money. But then Lo and behold, the market crashed, which was a blessing in disguise for me. I didn't know anything about what was going on in the market at the time, but I just knew I was saving my money. A guy came to me with an opportunity of a lifetime. In my eyes, it was two properties for $10,000, so I didn't ask any questions. I gave the money. He gave me the deeds, and it was a done deal, I thought. And this was 2019 at the time. So I took one of the properties, remodeled it and actually took a shot and listed for sale. Coincidentally, it was under contract in two weeks, but they asked me for the Hunt. I didn't know what the heck they were talking about the time. So they asked me how I acquired the property. I told them. Then they immediately referred me to an attorney. So I've explained the situation to the attorney. He told me that it was a fraudulent transaction. And then he just so happened to know the guy who sold me the property because this attorney was doing pro Bono work for this guy's children and family court. And you asked me if someone to pursue him in court, but he was a kind artist. I know I wouldn't get anything. It'll be a waste of time, waste of money for me as well. So I just wanted to do whatever we can to resolve it and move on. So what we had to do was acquired title process. For those of who you don't know, quiet title process is when you have to find the rightful owner of the property. So we have to put in three ads in the paper for three weeks consecutively, try to find either the heir or a relative who will claim this property. And if they decided they want the property, then I was out of luck. You know what I mean? I would have just been out of all of my money, and that would have been a tough pill to swallow. Obviously. Luckily, no one responded, so we had private investigators and certified mail to family members homes. The previous address for the prior owner, but she had passed away. So we had to try to find a relative, but we weren't successful and which worked out in my favor. So I got to keep the property. Thank God. It was a hell of a learning experience, to say the least. Well, the second one because it was two properties. Remember, the second one was actually a duplex. I wasn't so lucky with that one. So again, the properties were sitting vacant for a while. The guy did his research. He knew that the property owners were deceased, so he figured no one would come. But this property, the areas they moved to California. So their last vision of the property, it was in shamble. So when we contacted them, they told me to just give them $3,000 and they would move on. So I have to cut check. And that was my entrance into the real estate game, man. Oh, man. I'm always fascinated by people that put so much time and energy into doing things the wrong way. When if you put that time and energy into doing things the right way, you can make a hell of a lot more money. Nobody gets hurt along the way. And unfortunately, there's so much that goes into a real estate transaction. And what Rod's talking about here is essentially, if someone passes away and there's no claim to the property, it has to go somewhere right. So unsettled. The States, depending on where you're located, can go to a number of different jurisdictions. And in Rod's case, they basically just had to play some ads, and nobody made a claim to the first one, at least, and was able to transfer title that way. Traditionally, when you're doing transactions, you want to make sure you have a title report, folks, and understand exactly what the chain of title is and make sure it's insurable. All your deals should be subject to marketable title where possible. You got lucky there. And I guess that's what kind of kicked the whole thing off for you, right? Absolutely. So after that, I work backwards. You're absolutely right. The proper way is to get educated, get a mentor. Do you do deals prior to moving forward in purchasing your first property? But I was so gung Ho and excited. I thought I had to deal with a lifetime, and I had no idea that you can just create a deed. You know what I mean? I thought it was something at the time. I thought it was just like an official government document that only they can produce. So I was naive. And it was a learning experience. But like I said after that, I went in, I got a mentor and read every book, all the courses and everything until I got educated. And then I decided to proceed. There's a ton of information out there now. There are so many courses, and I know you have a pamphlet on your site that you just have to put your email address in, and it gives you some of the details and basics and principles of hard money lending and funding. There's so much free info out there right now. It's like an amazing time to dip your toe in the water. Quite honestly. Yeah. But it can be a gift in the curse as well, because like you said, there's too much information. Everyone is not legit. So make sure you do your research on whomever you're consuming information from. Absolutely. That's a great point. So your platform has something called the profitable pairing process, correct? Yes. So if you could first talk about hard money lending, just talk the audience through what it is and then talk to us a little bit about the profitable pairing process, and then we can jump in from there. Sure. So hard money. For those of you who are not informed, we're essentially an alternative financing option to traditional financing. So we traditional financing. They typically focus on owner occupied properties. With the hard money, we're exclusively commercial business, even though it can be a one to four unit like a residential property because it's an investment purpose, it's considered a commercial deal or commercial transaction. So we only focus on business purpose loans, non owner occupied, and we don't require tax returns. And we can also get loans done a lot faster, whereas the traditional nowadays they're pretty fast as well. But we can get loans done as quick as five days. Right now. It's tough because of appraisals. So I mean, in general, right now, on average, our bridge loans or fix and flips or short term loans are average in about two weeks to close. That's pretty remarkable turnaround. I mean, even in any market, two weeks to close is crazy. But in this market, that's kind of ridiculous. The trade off, folks, is instead of going to institutional debt and going through an exhaustive process of documents and follow up and more documents and all of the regulations. These are non QM Field loans, so they're not nearly as regulated. And you obviously you pay a premium in pricing rate wise, right? Yes. Can you talk us through like a standard fix and flip? Let's talk. Ltvs let's talk rate. Are you funding just the acquisition? Do you also provide construction money? Just give me a typical rundown if you could. I would say we're a one stop shop. And when it comes to one to four unit properties, we do fix and flip. We do bridge. So a bridge loan for those who aren't aware a bridge loan is a short term loan, typically twelve to 24 months. So we do bridge loans, fix and flip loans, buy and hold for rentals. We do cash out or acquisition. On that side, we do five plus units, bridge short term. We don't do any long term for commercial properties, but we do five plus, anywhere from five to 300 units for fix and flip. We also do mixed use commercial properties, but that's where it stops. We don't do any. Did you say five to 300 units? You're doing fix and flips? Yes. Wow. Yeah. And we are providing rehab funds as well. So we provide 100% of the rehab funds, up to 90% of the purchase price.

Participant #1:
Okay. So let's say I come to you with a 20 unit deal that is in need of all sorts of repair. It's under market because of the condition of the property. It's not tenanted or sparsely tenanted. Let's say I've got a strike price of $500,000. Right. That's my contract price. We appraised. There's no problem there. How much do I got to put down for commercial? I have to backtrack a bit. So I said up to 90% of the purchase price, 100% of rehab cost. That's for one to four units. So for the five plus units, we Max at 80%. So you have to bring 20% of the purchase price. And then we would cover the remaining 80% towards the acquisition, and we would give you 100% of the rehab cost. So about 100% down. So I've got to come in with 100,000 down, which is nothing on a $500,000 transaction. If it's 20 units because of the type of loan you're going to fund, the 400 grand. Now let's say I've got to put, I don't know, $50,000 in per unit. So I've got another million dollars I've got to put into this rehab and the stabilized appraised value is there everything checks out. You're also funding some of that rehab money, too. 100% of it, 100% of rehab money. Yes. Even if it exceeds the purchase price, which a lot of people won't do, a lot of people don't like. They call it upside down loans where the purchase price exceeds the rehab, where the rehab amount exceeds the purchase price. And a lot of lenders don't like those. They don't have appetite for those deals. But we do it's all about the numbers for us. As long as the ARV is high enough to where the numbers make sense. And we'll do that deal all day. So, folks, just to give you perspective, I've been doing this for 25 years. I have perfect credit. I've got a couple of Bucks in the bank. We've been blessed. I just bought a primary home, my home where I'm going to live. Okay. Because I'm self employed. I had to put 30% down and I'm paying almost 6%. So you're talking about 20%. And that's through an institutional lender. You're talking about 20% down on the acquisition and 100%, of course, as long as appraisals are there and the stabilized values there of the rehab, even if it exceeds the purchase price. Absolutely. First time I've ever heard that. Yes, it is. First time I've ever heard it. Let's talk rates. What am I in for? How many points and what are the rates look like? As you know, it's competitive. So right now, our Max interest rate, even for a first time investor. Right now, we're starting out. We're not exceeding that the lowest interest rate that we can offer on a bridge loan. Bridge fix and flip. New construction is about seven point 49%. But that's for someone who's done about least ten deals in the past three years.

Participant #1:
On average, we do two and a half points, three points for newbie just coming in if you have somewhat experienced two and a half. But if you're having the experience and depending on the deal size, anywhere from one and a half to two points. All right. So again, I want to give the audience a little perspective. My first land deal. We do a lot of entitlement work, like we find the land and we know how to work through the process. The process is very difficult. In New York to get things approved. We bought a piece of land, we got it approved and sold it. The whole transaction. We were in and out in three months. I paid 18% and point out, and I had to guarantee a minimum of it was either six or eight months of interest. So even though they got the money back in half the time, I still had to pay the minimum required amount of time in interest. Now, you may think folks like that's crazy. That's insane. It was in a different time. Granted, but for me, when I was starting out, I didn't have access to big capital. I needed a high LTV and it was go get a partner and syndicate at 50%. Right. Have someone come in and put up the money and they take half the deal or roll the dice. Pay the 18 plus two. And it turned out to be a nice deal. It worked out. But I haven't seen LTVs like this anywhere.

Participant #1:
When you say commercial, are you doing actual commercial real estate deals or just the classification? Meaning commercial because it's over four family. Yeah. The only commercial we do is over four family, most units and mixed use commercial we don't go into, like, warehouses, industrial or any of the other asset types. All right. So if you're able to provide this type of service, I have to ask, where is the funding coming from? You're clearly not just the middleman outsourcing this stuff because there's just no room in the rate, right? I mean, we're paying this on the retail side. We're paying more than this on the retail side, we're not getting 100% on construction. We rarely get 80% on acquisition. And we've been doing this for two decades at this point. So how are you sourcing the fund to put this together? And then what are you doing with the loan after it's written, actually. So I have the fund, my existing model we don't use the fund. We're not using the fund. So our model is once we fund it, I funded with my capital, and I have some private investors as well. We'll fund deals with our capital, and then we'll sell it immediately to a third party institution and actually the main institution that we're selling our loans to are actually in New York. We have a huge variety, but we prefer to work with this institution because it's a better process and it allows us to guarantee a better experience for our borrowers. So that's why we utilize these guys. But I've been in financing not as long as you've been in the real estate, but this has been what I've been doing since full time since 2013. So I'm making my business to be aware of all of the institutions that are in the game and compare their services, the appetites and everything to see which one will be beneficial to flipfunding and what we're trying to accomplish in our business. So I'm certainly not going to ask you who your outlet is because that's gold for you. And God bless you forgetting it. But I can let you know off here. I'll let you know, James, no problem. I would like to just talk to the audience about some mistakes I've seen in this field where when they get in, folks want to raise a ton of capital and they want to put out as much as they can up front. And they have not buttoned up the back end, which is selling the note. Right. And what happens is, unfortunately, they don't calculate for any hiccups in the market. They don't calculate for when things go a little bit sideways, they raise the money. And folks, when investors are wiring in, you're paying interest the minute that hits your account, they don't care if you found a deal yesterday or if you don't find a deal for the next five years. When their money hits, you're paying. So folks go out and they get so focused on raising this capital up front that the pipeline isn't being built out the right way. And they're self funding these transactions. And you're always grinding right. If you're in real estate, anyone who's in this game knows nothing goes the way it's supposed to go time longer, right? Like there's always play. There's always a title issue, there's always an appraisal review, there's always something that's just part of it. But with proper planning, you can get ahead of a lot of that mess. And what Rod is doing here is not focusing so much on having this massive tranche of capital to tap to continue to fund the deals. I would suspect that you've got all of your guidelines. You know what the volume is that your investors are going to the institutional people are going to buy it for, you know what criteria they want. And you know that if you hit these benchmarks, they're buying the loan absolutely. All right. So are you even servicing it for a day, or are you at the table right off the hop? Is it being assigned? Well, the loan is being assigned. So we are managing the servicing process. So the borrower content? Well, not the servicing the draw process. Even those third party fund managing that the draws while handling the draw releases. We still manage the process. So the borrowers still will contact us. Let us know that they're done this phase. They're ready for an inspection. So we'll contract the Inspector, have them go out once they let us know that the work was completed as agreed or as stated from the borrower. Then we'll go ahead and notify the service and that release the funds. All right. So again, you got a great process here. I want to walk the audience through the back end transaction. So they understand why there's an appetite for it. Because when I first heard about this years ago, it didn't make sense to me. Why would someone be buying these notes for you? And how do you make money if they're taking the note? So if it's a $500,000 transaction, we have a $400,000 loan. And let's say there's $250,000 in construction money that you need. And let's say it's someone who's done less than ten in the last couple of years. So you got three points. So we've got 15,000 in points. You've got $400,000. Let's call it 11% or 10% just for easy numbers. What is your minimum hold time? How long do they have to keep the loan? Well, that was tricky. So I'll go back to the process repairing process. Well, we have different options as far as institutional buyers. So some do have a requirement and some don't. The main institutional buyer that we work with, they don't. So there's no prepayment penalty at all. You can literally close a loan today. Sell it tomorrow, no penalty. But then we have another institutional buyer. The maximum is three months. So a lot of them, they want at least three months of payments. You can understand why they want to make sure they're getting a decent profit on this investment. But three months is the Max. So let's say it is three months, which is again ridiculous. Right. So, I mean, really, it is a three month minimum. We're not talking about a lot of money. We're talking about 15,000 in payments. Right. So we have 15,000 points. We have 15,000 in payments, plus we have on the 250. We got another call. It another five on the construction. So we're talking about 36,000 roughly minimum profit on the loan. So the par value of the loan is $400,000. You go sell it to the investor. What are they roughly paying you? About six and a half. 7%. Six and a half. 7% above. Yes, sir. All right. So they're paying six and a half to 7% above that number? No. Sorry, James, not above that number. My coupon rate that they'll purchase a loan off me would be 6%. So anything above is the spread. Got it. So they're buying the loan back at par. Right. And then you're in between the six and a half and the ten, 1112, nine, whatever it is, and you stay in with servicing because you're collecting and then you're paying the bank, or are you bifurcating that payment? How does that work? Are they paying ACH? It's automated ACH. So I'm not involved in the payments per se, but the rehab draws. We are managing that process, and then on the rehab draws. I'm sure there's $500 inspection every time. $200, 200. How come you are not on this show this long, man? We got a lot of work to do. You're lending in New York? Oh, yeah, absolutely. We're nationwide. Yeah. So $200 inspections. And you're keeping the spread between that six and a half and whatever you're able to win the deal for on the base value. Yeah. And let's say I have an investor on that. I'll even let you know how I pay my investors. So you see, that spread is anywhere between three to four, an additional yield spread three to percent four. So I pay my investors 1% on that loan, which is great because it's not 1% per deal. And remember, I'm selling that loan. So my whole time with that loan is only about one week, two at the Max. So I'm giving that investor 1% for once or two weeks. This is a great model that you got here, Rod. So let's talk about the core business itself. You guys are now lending across the country. In all things considered, this is a short period of time like this is explosive growth. And I understand the explosive growth. Now, to be honest, when we're doing homework leading into it, I didn't quite understand how the growth was so explosive because there's a lot of people in the hard money space now. But now that I understand your loan terms, I get it now. How did you scale that? How did your social media websites? You've got a great following on LinkedIn. You got a great following on Instagram. Great following on Twitter and Facebook. How did all those pieces come together? So, believe it or not, it wasn't any of those platforms that you named, so I don't consider myself with it. Well, LinkedIn is pretty decent, but, like social media, I'm not the most active guy on it. That's like a crucial tool to grow your business. But for me, I sort of took the grassroots approach. So I didn't start out with this model. I started out actually brokering loans. I learned the game from a guy. He's actually a hard money lender, but he essentially taught me how to broker loans to his company. So I really didn't have the skills that I thought I was equipped with in the first 50, not even exaggerating the first 50 transactions. I tried to get funded. None of them worked with this guy that I tried to work with because his program was just horrible. So it forced me to go out there and get some other resources. So started out, I'm pretty sure you're familiar with lending home. So that was like my bread and butter in 2015. That was my primary lender. So we were the top broker with them. So how we scaled the business even the first year? I'll let you know we didn't do well. We did one transaction the entire year. Luckily, in December, we closed one loan. That was 2014. In 2015, I found lending home. We had a great product, and I put it out there. And we did great that year because we tapped into a guy who was a student of the Armando Monte Lango course. And all the graduates from there were they were all excited, ready to go. So he plugged them right into us. I was a broker, but he was essentially a broker for me. He was following all of those deals from Montalano class to us. And we did about 100 deals that year in 2015. And then from there, I recognize the power of partnerships and finding people that can generate leads for us. So that's been our approach. Our growth has been due to our strategic partnerships. Look, word of mouth. It's a slower process. But when you've got a product like this, boy,

Participant #1:
I don't get speechless often, but I got to tell you, man, these rates, these LTVs they're unheard of up here. Let me ask you about land. Are you doing land deals? No, only if you're going to build on it immediately. But we don't do just land only if it's in conjunction with the new construction project. All right. If you come across anyone that's doing land deals where you're purchasing for X, and it's worthwhile because of the entitlement process, we do a lot of that, and there's big swings. I mean, there's 60, 70, 8100 percent increases in value based on the entitlements. At the end of the day. I'd love to talk to somebody about that, but over the last year and a half, a Coronavirus has just caused so much difficulty in real estate, although we're adapting pretty quickly. What is the deal flow been like for you guys? Is it dropped off? Is it picking up what's happened over the last year and a half or so? Surprisingly so, obviously, once the market once Coronavirus first hit, there was so much uncertainty, capital markets pulled out. And so that's where my mind kind of blew up in my face a bit. So it wasn't horrible. But it was just one specific loan that was cleared for the purchase. But as soon as they got wind of the market shutting down, obviously, they were Nick, and I got stuck with that on my books. It was only one loan, so it wasn't a major issue or anything, but it made me a bit precautionary moving forward and made me think about better models. Whereas if this doesn't happen again, whereas though I don't get stuck with all these loans, I'm sorry I got off track of it. Can you repeat the question? No. You answered the question. It's remarkable that you only got stuck with one loan. So your post Coronavirus, let's talk about the appetite of the institutional buyers of your loans. We're seeing big companies, some of the biggest banks in the world, are dumping $500 billion a night into the overnight into the Fed, and they're taking a few basis points. They're losing money every day because they're afraid to enter back into the market. Right. So the jury is still out when that money is going to hit the street. But in the interim, your guys and their institutional semi institutional, I assume they're like a REIT or a fund or something like that. They have an appetite. Oh, yeah. They have even more of an appetite now. Honestly, I'm not sure what exactly it is, but there's a lot more institutional players in the game now, and they have a stronger appetite for these investment loans. I think they're seeing the value in comparison to the traditional loans. I believe the return is. I'm sure the return is a lot higher for them in comparison to traditional loan. So I think that's really what's created a demand in this sector from capital markets. Yeah, no doubt about it. So I've been through now for once in a lifetime. Events in real estate being in New York 911 was a once in a lifetime 2008 crash, was once in a lifetime Superstorm Sandy, once in a lifetime. And now Coronavirus, I've got four lifetimes of no headaches ahead of me in this business. But that said, it seems that these anomaly events are becoming not such an anomaly anymore. So are you thinking about when the music stops yet? Are you thinking about what the model looks like when the markets start to dry up and those rates start creeping and the stimulus runs out? Have you guys got that far ahead in your business plan yet? That's where the fund comes in. Because once the pandemic hit and everybody backed out of the market, no one was lending. Then I was stuck. I had a huge demand because there was no competition. So it was a great opportunity to be lending at the time. But if you're dependent upon capital markets in these institutions, you're stuck. So you have to kind of take things into your own hands. And that's where the fund comes in. So I've had the funds since 2016. But I found this model that I'm doing now, and I thought this makes a little more sense. It reduces the risk because we're not holding on to the notes. And to me it was like a no brainer. But at the same time, we need more control. So when things do happen. Like you said in the world, we decided our fate and not some third party because we missed out on a lot of opportunities. So therefore, I'm planning on just going on an aggressive capital raise. Like you mentioned, that can be a dangerous game for most people. If you don't have the pipeline to back it up and deploy all those funds, because then you're still going to have to pay interest and you can be out of the game as soon as faster that you got in. But we're going to hold in the near future, we're definitely going to hold everything on the books. We're going to manage the servicing rate still outsourced to third party servicing. We didn't want to put too much on our plates, but just having the control of the funds and those actual loans will help us maintain for the longevity. So if I can share with you having been through four cycles, I've seen what the fallout looks like something we're doing that I'd love to talk to you about. Offline. We're putting together the structure for a fun. Now, when the music stops, there's a period of time where the big guys, they get alligator arms and all that capital comes off the table just like you saw when Coronavirus hit. Right? People don't understand this. It's there one day and then it's gone. The next one or two of the big players pull that money off the table and man, it sweeps through everybody. And now all of a sudden, there's zero capital available. There's notes that are maturing that were performing notes. Everything was going great. You can't refi out of them in the institutional way. You can't refi out of them in the hard money way. You're kind of getting stuck. So having seen this and one transaction in particular, I'll tell you about that. We did in 2000 and 2010, the music stopped. Nobody kind of even though it hit them for a year, because that was obviously when Bear Stearns go shit is going down, right? That was again an anomaly. But we had a note that we negotiated. It was an institutional lender. The buyer sought us out. We negotiated a short sale. They bought. It was two buildings that were wrapped. They were about 80% complete in construction. It was 60 something odd million in the note left. The purchase price was significantly higher than that. But just the note, 62. 63 million. We negotiated it for 20 million or 20 and a half million dollars. This fund came in and bought it and finished the construction. And as things opened up, 20, 11, 20, 12. We went to market with those condos. Our sellout was over $105,000,000 and they were in for 20.5 plus, call it 56 million in finishing up the construction and carrying costs. So what I want to do now is I want to put together a fund for when that music stops. And 810 twelve months passes, and people really have to make a move, not the individual who owns it. The banks, right. I want to be able to buy those notes at a steep discount, but I want to be able to leverage. I don't want to have to drain the fund. I want to be able to find leverage to buy those defaulted notes. If you've got a solid business plan and you're in a good market and you've got comps, man, it's a wildly profitable opportunity. I wonder if you guys can kick around thinking about two, three, four years from now when the music stops, because again, folks, it's going to stop. It does not last forever. It never does. And one of the things we joke about is up here when your dentist and your chiropractors telling you about the 20 unit rehab that they're doing, get out. Yeah, absolutely. That's when it's time to sell and get out. No disrespect to doctors, of course. But what happens is everyone watches people making so much money in it. And then there's a lot to look out for, and people make mistakes. Why? I think the passive income funds have become so popular because people want a piece of real estate. They want a piece of that action. But they don't want to be on the working side of the partnership. Contractors, toilets and tenants. Yes. Guys like you are giving them an opportunity there. So I'd love to talk to you at some point offline about maybe we could put something in place, whereas we're sourcing these notes and bringing capital to the table. I'd love to be able to find leverage to buy the defaulted note. Absolutely. All right. Yes, sir. So I got way off track here because I got excited and I tend to do that. The audience knows about my Tweety birds. I kind of get going there the profitable pairing process. Can you talk to us a little bit about what that is? Yes. So the profit repairing process. So our system, we do have a box, but we are not limited to the box, the box that we have listed on the website and everything like that. When I say box, I'm talking about our credit terms and the rates, the leverage and everything that's our preferred program that we like to utilize, that we like to utilize for the institution in New York. We know with working with that institution, it's the same as process. And again, we can ensure a great loan experience for our borrowers. But at the end of the day, there's other people in the industry. Right. And everyone has different appetites, different types of loans and different caveats to their program. So the proper paying process is once someone submits a loan to flip funding, we take a look at the scenario. Then we give the borrower a call just to find out exactly what their goals are, what they're trying to accomplish, because everyone's situation is unique everyone doesn't have the same goal. So based on that goal, we decide we compare all the programs that we have at our disposal and determine what's going to be the best route to get them to accomplish what they're trying to do.

Participant #1:
You've got the intake because you've got so many outlets, folks that we're doing fix and flips bridge loans, rental, new construction, multifamily, mixed use and commercial again defined as non QM field for family or more. You're taking them in. You're taking a look at experience. Are you looking at credit and you're looking at assets? Yeah, we're looking at credit. We're looking at assets only to make sure that they have enough for the down payment and they have enough capacity to make the monthly payments. But we don't look at your income or anything like that because we understand that you may be using a partner or someone like that. So we don't care about your income just as long as you have the ability to willing and the ability to pay. So if I've got credit in cash, I can get funded. Absolutely. Okay, so let's talk real quick just to define credit. Is it 700, 700 and 5800? What kind of credit are you looking for as a minimum on the way in. So for Bridge fix and Flip new construction, we have a minimum of $600 and also for rental loans, we have a minimum of 600, which is unheard of. It is like, Jesus, yeah. There's one catch, though. For the 600, you won't qualify for a 30 year fixed loan. However, you'll get a five, one arm, ten, one arm, seven, one arm. And that'll give by you enough time in case you're back against the wall, you need to refinance and get out of the product. Get out of a loan. This is an option for you temporarily until you increase your credit and can then roll into a 30 year fixed loan. Time out, time out. You're doing more than two year terms. Any product? No, that's only for the buy and hold product. No, I meant like on any product like you're doing it, even on one product, you're going beyond two, three years. Oh, yeah, absolutely. And which product are you doing that on? We have buy a whole program too. So we do three, one arms, five, one arms, seven, one arms and ten one arms. And then it jumps to 30 year fixed. And what about the commercial stuff like the fix and Flips Bridges Rentals New construction 600. Still 600. And how long of a term there's up to 24 months. Those short term. The bridge loans are capped at 24 months. Okay. Now do I need to have almost all of our transactions we've done for two decades? Single Purpose LLCs. We're in, we're out, we file our taxes, we're good citizens. But then we shut it down. Right? Because you don't want two, three, 4510 transactions in One LLC, because if you have one issue which happens, right? God forbid there's an injury with a worker or whatever these things happen. You don't want to get wrapped across those other properties. Now, do you need the entity to have the credit or are you okay if we're doing single Purpose LLCs and I personally have the credit? Yeah, it's just the individual has to have the credit. You can use any entity. It doesn't even have to be a single purpose entity, actually. But, yeah, it's just an individual has to meet their credit threshold and full personal guarantees, right? Yes. And are you getting, like, confessions or judgments or anything like that upfront? No, we do deal with foreclosure. We include that in the loan documents. And how many would you say percentage wise you had to foreclose on?

Participant #1:
Man, this is good stuff. This is really good stuff. Just some general questions for you. If you can go back a couple of years, what advice would you give yourself go back maybe five years from things that you've learned now, five years ago? Honestly, five years ago, I would have tried to. Well, that's a good question because I wasn't raising money at the time. I wasn't directly lending, and this is obviously a much better position because the control. The thing I didn't like about being a broker is because you get blamed no matter how hard you try. Like you said, nothing ever goes right. And it's the worst. When you try your hardest, you bend over backwards. Things happen. It's not your fault, but you still get the blame. You got to stand in front of that bullet, regardless of what happens. And that's the worst feeling ever, just being having a lack of control. So being this position now that I'm in now is awesome. But I started to say that I would have started raising funds prior to five years ago, but I wasn't ready at that time. I honestly wasn't ready. I didn't have the proper team in place, and all that stuff is important. Like I said, I would have put the carpet for the horse, and I probably would have been out of business right now because my reputation might have been mud. Honestly, five years, I was just focused on just making sure that my team was more solid. I had a team, but everything was still 100% dependent upon me. I didn't know how to delegate properly, so that was crucial to me scaling the business, having a proper team that I can rely on and know that regardless of what's going on, the business is still moving the way I would be running it. And that's so hard, man. People don't give credit to it until they're in the position. When you're trying to build something ground up and you're just grinding. There's kind of this thing right now that it's sexy to trade in your nine to five and become an entrepreneur. And that's cool. But people don't see the immense sacrifice that goes into the backside of it. Everybody thinks that it's going to be such an easy transition. Man. It is not like you said. It's sexy on social media and TV shows. You know what I mean? But they don't see the heartache and stress, and it doesn't stop. There is no nine to five. There's no time off, really? Because when you're dating, you still have to use your brain. You still got to think you can stay ahead of the week, the year. You just always have to think and people calling you constantly. It doesn't stop at all. So like one thing for me, James, I had to learn about it got to a point where I felt as though I'm sure I was going to have a nervous breakdown or some type of breakdown. I was just overwhelmed, stressed, depressed. You know what I mean? Making money. But I couldn't enjoy it. And if you can't enjoy it, then what's the use of it? You know what I mean? So I focus on balance. And that's done tremendous things in my life. Did you get any coaching for that, or did this just happen naturally for you? I got a coach. I got a coach who actually went through, of course, he's an entrepreneur, so he could relate. He's been through it. So he gave me some tips and things that I implemented into my life. So again, being an entrepreneur is rough, and you feel like you just have to work to dig yourself out of it. But you don't realize that you're killing it. You're slowly killing yourself. So you have to take time for yourself. Whether it's meditation, a hobby takes some time to just take your mind off of that work and you'll find you come back refresh and you'll be more, much more effective and people again, unless you're in it. Quick advice, folks. If you're looking to make the transition like Rod and I had touched on, make sure it's really measured and you understand fully what you're signing up for. And for those of you who are in the grind seven days a week doing what you do. I was the prime example. I was headed straight for a heart attack when I went kicking and screaming to some coaching sessions to appease some of my team members because I knew better. Right? And one of the exercises had my wife write down the last day I was off and she wrote down, we've been married 14 years. He's never taken a day off, including our wedding day when he had meetings. And it was that moment when I read it like, you know, you're working every day, you know, you're always going, but you don't know. It's so bizarre when you're in it, you really don't see what's happening. And then there's diminishing returns. Right? If you start getting stressed, then you're not thinking as clearly as you think you are. You're shorter with the people around you, you start holding them back, right? And the coaches. I've got two coaches now they've basically taken me where Friday afternoon to Sunday morning. I work Sundays. But Friday afternoon, Friday night, Saturday. You're not getting me. There's a fear like, oh, my big clients. I have to answer. Believe me, if you're good enough, not only are they going to respect it, they're going to almost fear that they can't get you during that period of time. And it's so critical man to take it to recharge. If your family is your thing, be with your family. If fishing is your thing, go fish. But that little bit a week for me. At least it's worked. It's given me every week I come back. And on Sunday mornings, I'm fired out of account. And I feel great. Yeah. And likewise, on weekends, I used to work seven days a week, 24/7. Like you said, I was so focused on building my business, I didn't want to let my clients down. You know what I mean? I felt like I had to just show them that I was committed to their service. But at the end of the day, they understand they should understand this. And if not, somebody will. You know what I mean. So, like, your health is more important and what my coach told me to make me put things in perspective when you're having the gates or whatever. The last thing you're going to say is, I wish I worked hard. I wish I worked more. But you will say I wish I would have spent more time with my kids doing important things. So that's what put things in perspective for me. No doubt. Man. Rod, this has been a fascinating chat. How do people find you? You can find me at Instagram. Rod. Rodflipfunding, you can visit the website flipfunding. Com. So give me a call. 8443-5473-8684-43 54 73 86. My extension is 70. You may not get me, but to leave me a message, and I'll certainly try to return the phone call. Rod, stand back. Flipfunding. Everybody. Thank you so much. Rod. Stay safe. Bud.