REIA 72 Angelo Christian: Doing It All From Financing to Investing in Existing Real Estate

Welcome to Real Estate Investing Abundance, the show for busy, fulfilled professionals like you to learn how to develop financial independence built on solid passive real estate investments. Now here is your host, Dr. Allen Lomax.

Hello, enlightened investors. I'm your host, Dr. Allen. Delighted that you've joined us today. Are you a busy professional passionate about the work of your calling, yet realize that even though you love what you are doing, you're exchanging your time for money? You know that if you were to lose the ability to exchange time for money, your financial well-being will be in jeopardy. If you can relate, I have great news. Steetalker Capital is an investment company designed for professionals to develop financial independence built on solid passive real estate investments. Remove the anxiety of an uncertain financial future and go to steetalker.com. Get your free 1-page, 10-step guide to passive real estate investing.

Enlightened Investors, I am thrilled to welcome back an investor who has the most inspirational story of a youth spent as a couch potato and a near-death experience in his late teens to a totally transformed life that led to financial independence. Angelo Christian—

Wow.

Is doing it all from financing to investing in existing real estate and ground-up development. Angelo, start us off with sharing just that pivotal experience that transformed your life.

Yeah. Thank you, Allen. I love your introduction. You made my day. So my story is being a YouTuber and entertainer and lender and educator. It's been public record now. So I grew up very humble beginnings. It was a very rough childhood. My parents never owned a home. We didn't know what we were doing, where we were going. There was no methodical planning or any type of infrastructure for any type of long-term achievement. And I'm a big believer in that your environment has a lot to do with your shaping. I was meeting with a financial wealth manager earlier today and he was telling me that the 5 people that you hang around, if you look at them, that's going to be your future. And I really believe that to a certain extent. Now, I do I also believe that our past doesn't equal our future. And that's the testament of my story is that, yes, that was my past, but I had hope and inspiration, as you recall, from the movie Rocky, which is my favorite movie, that kind of gave me the spotlight or the path that if anybody, if the great white hope can turn and become the champion of the world, then I can turn my life around. And so I think that people need heroes, they need mentors, people to look up to. And that's what it was for me. Like you mentioned, I was extremely overweight, poor, Broke and homeless. And if you looked at the probabilities, I mean, probably 90% chance of being a drug addict or being, you know, dying early. And, and I turned that around. And so I think that people, they have to hit rock bottom in their life. And not everyone turns that around. Not everyone has a 180 or a 360 or whatever. They, they get stuck and they get lost. Fortunate for me, I had those references. Like I said, watching the movie Rocky, that turned into a catalyst. I immersed myself in reading and learning and really devoured inspirational books such as Tony Robbins, Zig Ziglar, just really dived into learning and reading. And you got to remember, I was a middle school dropout. So for me to learn something like the information I was downloading, um, that you can change your mind, you can change your reality, but it all has to start within. So And then, yeah, that led to me going back to school, getting my education, studying, learning finance. And then really, Allen, the thing is just working, working my butt off and never stop working. I'm always working. I really don't take any days off and I don't complain about that. I actually enjoy it. I like to keep my mind on the business. I mean, there's always something that's going on. So that's kind of a little bit of a background of where I came from. And today we built a mortgage company. We do all different types of funding. Commercial, residential, probably for a lot of your viewers, multifamily. We cater to a lot of investors, a lot of first-time investors, and a lot of successful wealthy investors. That's where I came from and where we are today in the span of 20 years.

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Yes, an amazing story. And if you're interested, viewers and listeners, you can find that story on Creekside Chats with Successful Real Estate Investors, and it's episode number 5. And it is indeed an inspirational story. And as Angelo mentioned, he is now in the mortgage business. And so we're going to focus our discussion today really on the lending aspect and where we are today in the lending markets and where it looks like perhaps we're going to go. And we're going to find out how it is that Angelo can help passive investors use their capital to help them to develop wealth. So let's start off, Angelo, with sourcing of capital and what a passive investor actually needs to know going into that.

So I do want to talk about that because I think it's an important topic to bring up because as we're semi kind of emerging out of COVID the commercial markets are starting to warm up again. During COVID a lot of the CMBS loans, the CRE loans kind of died, and you're starting to see Those come back yesterday. I had a talk with a guy for $2 million multifamily. Today, one for $40 million, one for $18 million, one for $2 million. And those talks, that deal heat's starting to come up again. And it's all for 20 units, 60 units, 80 units, 100 units. And so you're starting to see banks are starting to butter up again to that. People are back to work. They're paying their rent payments. So that is encouraging. During COVID it was quite disastrous. The credit markets froze. Or if they wanted to do a multifamily commercial deal, it was very difficult. The lenders, Fannie Mae, Freddie Mac, were requiring large interest reserves for 6 months, a year, and cutting the LTVs. It was just, it was kind of, you know, very discouraging to try and think about getting a loan the last 12 months.

Yes.

So now it's somewhat getting back to normalization where you can get— they've waived the interest reserves on getting loans. Ground-up construction for multifamily is happening again. And I think that's a huge thing because a lot of banks, they halted construction loans completely, and those are coming back again. So it's encouraging because obviously if you are an investor, you want to make passive income, real estate multifamily is a great vehicle compared to the stock market, where the stock market has experienced more volatility, or a good diversification is real estate, right? Yeah. So because owning some— I'm not saying don't invest in the stock market. That's not what I'm saying. I'm just saying that real estate investments have always Wow. To balance out a portfolio very well with stabilized yields, uh, they're less volatile. So, and we've seen a lot of— some of our clients that own 4,000 or 5,000 doors, and even first-time investors, there's loans out there. FHA has loans for first-time investors to buy multifamily. A lot of people aren't aware of that. You can buy a 4-unit FHA going 3.5% down. If you're a veteran, you can get zero down, 100% financing for a 4-unit. So there's a lot of products out there that people aren't aware of in the marketplace that investors can use. And so I think that's where we are now, and that's encouraging. If you're an investor, you're looking for passive income, my big thing as far as advice is obviously location is critical. And I know you hear that everywhere, location, location, location, but it's really true. Location really does matter. And then I think that obviously The other things that are important is the cap rate that the property has. For example, if you try to buy a multifamily in San Diego, the properties are priced so high that the cap rates are de minimis. I mean, they're 3% or 4%. You can't really make any money versus if you go to, let's just say Orlando, you might have a 9% or 10% yield, which is obviously much more desirable. And Orlando is a destination area. You just have to be thinking about these types of things. Obviously, my advice is to stay in urban metropolitan areas. There's a deal that I'm looking at right now to fund that they've been trying to— borrower has been trying to give me to fund. The population of the town is 9,000 people. And I'm like, look, man, if this thing goes sour, who's going to come and live in these places? And it's a 62-unit apartment complex. And he's like, well, the mayor's trying to get oil workers to come over there. I'm like, yeah, but that's a big what-if. I mean, I can't base this off of that. I mean, there's, you know, you only have 9,000 people there. You guys don't even have a McDonald's over there. I think looking at metropolitan destination areas, higher cap rates, high occupancy rates, I think those are, those are important factors.

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There was actually a 60-unit building in a population of 9,000.

Yeah.

Who built that?

Yeah, that's a good question.

I don't know.

I got, I got asked to fund it though. So it's a refinance. It's a partnership buyout. One of the partners wised up. He wants out of the deal.

Yeah.

And the other guy wants to keep it. And the idea is that it's close to some type of proposed oil rig in Texas. And I don't know. So my point is that it might look good on the surface because it has a high cap rate, but you got to be careful. You can't just— there's the, you know, once you know the business and you know the game, it's easier to play it. But if you're new, you just got to be really careful not to get— the other thing I want to go back to on loans is if you are looking to do a Fannie Mae or Freddie Mac loan, it's not just that you put 20% down and you get a loan. They will also be looking for your net worth or the size of your portfolio currently has to somewhat mirror what you're looking to purchase. So if you're trying to buy a 100-unit and you've never done that before, you're not getting that loan.

Okay?

If you said, this is my first time buying 100 units, even if you have 20% down, Fannie Mae is not going to approve that. So I want to make sure that that's cleared up too, because a lot of people call us and they say, hey, well, Angelo, I want to buy a 100-unit property. Well, what's the biggest portfolio you have right now? 3 units? And that ain't going to happen. You're going to have to either put a massive down payment, 40%, 50% down, or kind of work your way up to 5%, 10%, 15%, 20%, 40%, 50%. But there's no government agency like a Fannie Mae or Freddie Mac that's just going to go. And then your net worth has to usually equal the property purchase or greater. So if you're buying a $40 million deal and your net worth is $2 million, that's not going to happen. Loans are not made like that. And so I just want to make sure that people are aware of that because a lot of people— and I'm not saying there's anything wrong with dreaming, but you have to be real. Lending is very realistic. There's black and white areas, and then there's a little tiny gray area. So just want to put that out there because I want to make sure everyone's aware of what the expectations are with loans. Yeah.

So if you're just starting out going into 100-unit deals or what have you, you better have some partners who have the net worth.

And you can do that and you can do a syndication and then do something like that. And that's okay. If you have a good strong syndication and someone's managing that, either a general partner or limited partner, however it's structured, private equity thing, that's not a bad idea. But the lenders aren't going to take someone seriously if they get a call like that and want to buy 100 units. And then you've never done that before in your life, you know, so—

Exactly. Yeah. So this is probably pertaining more to active investors, but for my own sake and curiosity, when in the deal process should we come to you? Should we, if we are sourcing a deal and this looks like a viable deal, should we come to you at that point in time, or do you want us to have an LOI in place? What do you want before we come and approach you?

Yeah, that's a great question. My advice is to hit the lending early on. This actually, it's an important thing you're bringing up, Allen. So a lot of people, I think where they fall short is they just go under contract and they have no idea what the requirements are for a loan. This is unbelievable to me. I even see, sadly, people that are very sophisticated in this business, they still do that. They'll put a huge Earnest money deposit, $20,000, $50,000, whatever. And then they have no idea about the loan, what's going to be required for the loan. And so I think that is very foolish and dangerous to do unless you have a lot of experience and you have a line of credit or something, or you're just a big shot. So my advice is to get the loan out of the way, get pre-approved, right? So that way you know where you stand. It may take you 2 months to get pre-approved. I don't know. It depends on your file. If you're buying a— we had one loan, a guy's doing an $11 million townhome deal. And this is all in the last beginning of this year, took him 6 months to get approved and close on the loan.

Wow.

And the guy's worth $100 million. So even it took him that long and it's only an $11 million loan, he's worth 9 times the loan amount. So the thing is getting your loan pre-approved because you don't know how long it's going to take and you don't know what they're going to ask you. And you have to be able to produce those documents. So if you say, well, if the underwriter's asking for 2020 tax returns and you haven't even done those yet and you haven't even thought about it, then you shouldn't be going under contract because, oh, I didn't know I need that. Oh, now I have to go get with my accountant and I got to file those and he's going to take 2 months to get them. And then see, there's just all this stuff. Or they say, well, you need $400,000 for the down payment and you only have $200,000. Well then, okay, you know where you stand, but you don't have the money to close, so you shouldn't be going under contract. So my thing is, Get that out of the way, way early on. Flush that out. Get all the documents. Get your preapproval letter, your commitment, and then go shopping for the property. Know what the expectations are, the timeline, the cost, everything. And then you can go under contract to go purchase a property. That's my advice. Not everyone follows that, and everyone has a different method or whatever. There's all kinds of ideas out there. That's my thinking.

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So this fellow that took 6 months to close, is that atypical or do you see that frequently?

It depends. I mean, he was doing that loan, he had a little bit of hair on it because He was in default with his current lender, but the lender kind of— it was a long story. He was doing a horizontal development to get the roads ready, and that lender had some really Dracorian-type carve-outs in the loan agreement that didn't really make a lot of sense. And so, the borrower wasn't able to fulfill those, so he was in default. So it made the other lender a little nervous to make the loan. That is atypical, but it could still take 3 months. Lenders, A lot of, a lot of commercial banks, they're not in a hurry just to quickly close. I don't know if you've gotten commercial loans before, Alan. They, they, they take their time. They look at one document a day. I mean, they're not sitting there trying to bang out 10 loans a week. And that's kind of unfortunately, and I don't agree with that method, but it is what it is. And so yeah, they're still going to take some time.

Yeah. Well, even in residential single-family homes, it generally, it's going to take about 60 days to get approval.

These days.

I had one that just— well, it was just a couple of years ago. It took about 5 months, but that was an FHA loan. But it was just a single-family home. So yeah, it takes time to get these things through.

Right.

And, you know, lenders come up with these demands and expectations at the last minute and can throw things all out of whack. Oh well, everyone's trying to Hustle to get documents to them.

Right.

It isn't just with commercial, it is—

that's— Oh yeah.

Lending.

Yeah, yeah, we do. And we do both. So I, I can tell you, I can tell you from experience. I mean, residential too. I mean, residential isn't as invasive as commercial can be, but yes, I mean, it's still— depending on the type of loan, FHA, like you brought— you mentioned, it's a government loan. They check a lot of stuff on you. So they do a lot of background checks on people with those loans.

Yeah, they do. Well, where are the capital markets these days? You said that things are changing, things are opening up again. Where exactly are they?

Well, I mean, so right now, I mean, what we're seeing is that what's coming back online is, like I said, you have the CMBS loans, you have Fannie Mae, Freddie Mac. These loans are starting to, and we've seen it like in Q2, starting to come back online, reducing some of the previous COVID requirements. Those are kind of being, you know, set aside. And then also the LTVs are kind of being put back in place where they were before COVID It's been a slow process, slower than what I had imagined. But the thing is that when we're fully back, and it's probably going to be next year, assuming, barring that, you know, now the chatter is that there's another variant of COVID and we may be seeing this again. I mean, I don't know if I could live through another one of these things, but, but assuming that doesn't happen, I would think realistically next year we should be back in full swing. I do, and I did want to talk about this, Allen. I do have some concerns about inflation. And I do think that— I mean, I've been doing this for almost 20 years and I've never seen real estate appreciation double digits in single months in my life. And I've never seen property values rise so fast. And so I don't know where that all goes. And I don't know if it's a bad thing or a good thing. It's just, it's very abnormal.

Right.

And so you see it. I mean, I don't know how much you track commodities like lumber, steel, copper, gold, silver. I don't know if the dollar gets weaker and interest rates go up, generally the theme of what's to come, what does that mean for the US economy? What does that mean for demand for mortgages and real estate? So these are things that could be luring in the back behind the curtain that could come out. And I don't think the Federal Reserve could control it. I don't think that markets are going to dictate what's going to happen over what the Federal Reserve can do. That's proven many times in the past. So that is something that I am somewhat concerned with.

It certainly concerns me. I mean, you went through 2008 as well as I did, and we saw Dramatic. I mean, just prior to the end of 2007 and going into 2008, we saw inflation in terms of housing costs, and that just went through the roof. But you were just like saying you had never seen— I mean, even 2008 did not compare with what just happened in the last couple of months here. I mean, I have never seen them either. And I look at that and I go, how can that not be a bubble? And bubbles always burst. And yet a respected real estate investor that I was in touch with just this past week is confident that it isn't a bubble, that it is going to stabilize and continue growing. I mean, he's very respected, but I mean, I myself, I am very, very concerned. I just don't see how this can be anything but a bubble.

Well, I don't know if you remember in 2008, I mean, you had some of the most sophisticated investors that were gobbling up stock of Lehman Brothers at $2 a share and they got wiped out, and Bear Stearns. I mean, I don't remember his name right now. One of those European billionaires, I think he bought almost a billion dollars of Bear Stearns when it was a dollar and thought that this was all going to turn around and it wiped him out. And again, I mean, he just bought the wrong company. He could have bought Wells Fargo instead. And obviously over the long term, and I'm not a pessimist, I'm not saying that we're doomed bloom. I just think that there's things out there that we need to be mindful of. And one other big worry of mine has always been student loan debt. Student loan debt is outrageous. I mean, every customer that we come in contact with, not everyone, 90% of them, they just have an exorbitant amount of student loan debt. And they keep kicking that can down. Now they're talking about forgiving all that stuff. And again, I'm not negative in any way. I want us to do good, but the deficit has just gotten really out of hand. And somebody's got to pay for that. So as you know, in economics, there is no free lunch, but I think long-term, this is the country I'd want to be in. I don't know how it's going to be a smooth sail. It could be a little choppy.

It's hard to know. As Yogi Berra said, it's very difficult to predict the future. I forget how he worded it, but anyway, it was comical. But anyway, there's no crystal balls out there, but there are just so many things that have been so crazy, the double-digit within 2 months, inflation in terms of home prices, the lumber costs that went sky high, and then they've come back down. And then we hear, at least Biden is telling us that this inflation is temporary, that everything is going to stabilize and it's not really bad as what it is. And you just hear all these things and you go, you know, how do you know these things and how can you predict these things? And these are just really, really abnormal things. Was it last year or the year before that the stock market had one of their best days at the same time that unemployment rates were at their highest level? That had never happened before when those two things— those two things should be corresponding, but clearly they didn't. And they haven't been since that time because over this last year with high unemployment rates, the stock market continued going up even in the midst of COVID Mm-hmm. That just doesn't make sense.

Yeah.

Like you were saying, there's no free ride in economics, and yet it sure looks like somebody's getting a free ride.

Yeah.

I mean, I don't know where, you know, what your political beliefs are, but certainly nobody wants this to become the next Venezuela. And, uh, and I don't think that'll ever happen, but I, you know, who knows?

We're coming to the end of our time here. So, uh, tell our viewers and listeners how it is that they can get in touch with you.

Yeah.

So if anyone's looking to inquire about financing for commercial residential or, you know, whatever, they can call or text us. We're actually open 7 days a week. You can call or text us at 832-431-6331, or you can go to our website, officialangelochristian.com. You can also check us out on YouTube or Instagram, Official Angelo Christian. You can reach us out there. So yeah, any, any questions, or if you need financing— now, we're, we're a lender, we're not a consultant or a, you know, some type of broker-dealer or the actual lender. So We're a mortgage company, so if you need financing, please reach out to us. We'll be here for you.

I missed that text number. Was it 832?

832-431-6331.

Well, Angelo, it has been a pleasure being with you today. It's really good connecting with you once again, and thank you for sharing your thoughts with us and enlightening us on lending and mortgage markets.

Yeah, it's my pleasure, Allen. Always like to be on your show. Thank you so much for having me, and I wish all you guys very great prosperous year. And like I said, if we can help with any type of financing, lending, please reach out to us. And I wish you all the best.

Thanks so much, Angelo.

Thank you, Allen.

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