GRID Vacaville | How To Be The Bank: Building Wealth Through Private Lending with Andrew Lamb

Hello.

Hello, Andrew.

Hello, world. How are you?

Hey, how's it going? Mark Beckett here at Grid hq. How are you?

I'm doing well.

Yeah. Great to see you.

You as well. I am just making sure that my computer is keep working while on Zoom and I think we are good.

Yeah, we've all had a great time figuring out how to do all this stuff virtually. I've got ring lights and laptop stands and all kinds of fun stuff now I didn't have before.

That's fun. Me as well. One thing I'm not seeing is sharing to Facebook, which is usually down on the right. Thank you all for joining us. We are just getting ready to start up. See lots of folks. Lots of folks I recognize. Hey Deb, If you are on, I would ask if possible. I know some of us are in our PJs, it's dark out, but if you could be on video, it'd be great to see your face and engage a little bit. And this is one of those topics where the more you ask questions, the more you engage, the more you learn and the more everyone else learns because we all typically have similar questions. And I really want this to be more of a conversation and less of a lecture if possible.

Right on.

Awesome. So more and more people filtering in. I know other folks will join us and some like to hit the registration right before they join instead of early on. So get some more folks in here. Hey, Ryan, good to see you. How's it going? Can you hear me? Yeah, good. Excited. You're on. Me too. All right, we can get started here. Thanks for for jumping on and joining us for how to Be the Bank. I will start to share my screen here. To go straight into the big view. All right, Cool. So how to Be the Bank. So we are going to be here probably I'm going to say 60 to 90 minutes just to give you guys an accurate, what I believe to be an accurate estimate of time for tonight. And really this is a much better use of time if we all are engaged and ask questions. I'm going to be monitoring the chat a bit, but at the same time, I would really appreciate if you just unmute yourself if you have a question and speak up so we can have that dialogue. And number one thing, this is not about me talking about how great I am. In fact, I probably have less experience in this particular topic than many folks on the call. So this is really me just facilitating a conversation so that we can all learn and it's going to act a bit like a mastermind. So that's the way I like to run things. And I really want to think of this as your meeting, not my meeting. Does that make sense?

Totally.

Can everyone agree to play by those rules? Cool. So we're going to talk a little bit about private lending and a little bit about, about me first here. Who are we? Why the heck are we here? What is grid? I've been getting that a lot lately. So GRID Vacaville is launching. It's an investor group where like minded people can come, can work together network and really grow our businesses and our net worth alongside each other. I do not believe we are competitors as much as we can be great collaborators and partners. So I have in the past attempted to talk with experienced investors in our area and have been met with, you know, just straight, straight up rejection. People literally told me they wouldn't have coffee with me because they didn't want to train their competition and they thought that deals were scarce. I have the complete opposite mindset now that I've done some deals myself and I believe that we can all actually go a lot farther, faster if we do it together instead of trying to do it on our own. So that's what this is all about. And Mark, would you be able to talk a little bit about the history of grid?

Totally and very excited to be here and welcome to the group and welcome to the network. So I probably don't know any of you fine folks except I think for Janae, who I think I saw in the group is another of our newest leaders out of Athens, Georgia. My name is Mark Beckett and I am here at Grid HQ out outside of Washington D.C. i'm actually in Reston, Virginia, suburb of D.C. investor Network was started by my partner Rob Chavez out here in Reston a little over 10 years ago, about 11 years ago, as a way to just reach out to people in his immediate area and his immediate network and talk about real estate investing. He had been doing some rehabs and some buy and hold properties for a number of years, had started growing his own agency and just knew that one of the best ways for him to find new business was to just talk to other people about what he was doing. So he started doing that in 2007. We met in 2008 at that meetup Group. I had come from a builder background, doing some construction development, a little bit of investing on my own. I got to meet Rob and a couple other really cool people at those first early meetings, started talking about doing things together. We found a way to do a couple of deals together and it just kind of grew from there. And so we've been running this for a little over 10 years now and we meet every month at our locations to talk about really the full lifecycle of investing. And Andrew, it's exactly what you just said. We're not gurus, we're not professional speakers or teachers by any means. We just talk about what we do in the hopes that it allows some of you to pick up something and get knowledgeable enough to be dangerous and go out and start doing something. We find a lot of people are always preparing to prepare and planning to do something. We really want to try to get people to know that there are no magic bullets, there's no secrets. This isn't going to kill you. It won't make you rich overnight. But if you do some fairly straightforward things, you can figure out real estate investing. There are a lot of ways to be successful in real estate investing. And we just talk about what we do and we find that it works. It allows us to meet a lot of other cool people. Deals get done, we get business from it, other people in our network get business from it. And it's been a really, really integral part of our business. So much so that it's all I do. I'm a full time investor doing renovations and buy and hold projects here in the D.C. metro area. And the Grid Investor Network is now, as of tonight, fully coast to coast. We've got locations here in the D.C. metro. In the past month we've had new leadership open up, as I said, in Georgia, in Philadelphia, now in Vacaville. And the larger this network grows, the more we'll all be able to do. So that's really why we want this to be collaborative. So mics on, cameras on, if you can, ask questions, tell stories, talk about your personal, your personal experience with what we're talking about. Because that's when it's the most valuable for everyone. I think everyone will get a lot out of it. You'll get deals out of it. You'll maybe even do what I did and meet friends and partners that you'll have for the next 10 years out of it. So it's been a great thing for us and Andrew. I'm looking forward to it being a great thing for you and for us growing a bigger network together.

Likewise. Thank you for being here. I know it's a bit later where you are, so appreciate you being on and staying up a little late.

I'm a night owl. I'm good.

And for me, I have been in Real estate about nine years. I have a real estate team with my wife, Catherine, and we have done real estate sales and in the last few years have ventured into real estate investing. So we have some buy and holds. We've done some flips. We're actually working on a flip right now that should be ready in the next couple of weeks. And one funny thing is, and I think it's a common thing that holds people back, you know, I could have done probably 50 plus deals by now had I known about what we're going to talk about tonight years ago. But it's something that not everyone talks about and a lot of deals get done without a lot of, you know, news, without a lot of press, and people really don't necessarily share about it as much. So I just want to help you all grow in your knowledge of real estate. If you aren't familiar with private lending already, let you know that you can make money without having to, you know, get your hands dirty, do a deal yourself and find properties and pick out finishes and all that, and vice versa. If you're here and you haven't necessarily, you don't have the savings or you don't have the ability to be a private lender, but you, you came here to do deals and partner with private lenders. That would be a very wise move for you being here. That's what we're all about, networking and bringing people together. But we'll talk about how to mitigate risk in that process as well. So you're not just working with anybody you meet. So part of this is going to be having those on the call introduce themselves as well. We have it looks like 19, I think that is a good enough size to give everyone, call it one to two minutes to introduce yourself and let us know where you're at in your investing journey, what you do for a living. I'd love to know that. And what interested you in joining us tonight.

Andrew, if you don't mind, I'll go first. Janae from Athens. I'm a little under the weather because I had my shingle shot today, but I didn't want to miss your presentation. I used to live in Northern California and I'm a Southern Californian, but I cashed out, moved to Georgia to retire my first investment. I bought in the 70s because I was fortunate enough to be on the Family Feud game show. And we won. And retired Air Force guy recommended that I buy some land, which I did up near the Auburn Valley Country Club when I was 20. And that started me on my Investment journey. I was in the corporate world for many years, including the Silicon Valley area. And I just kept buying real estate and just on the side kind of thing. And when I retired, cashed out like I said. And I have most of my holdings are in on the east coast now and I got my real estate license just to help watch my portfolio and improve it. And then I came across the grid network because I'm also with Keller Williams and I was really impressed with what Rob had done. And then I met the team Mark and well, met them virtually. And then when I saw that Vacaville came online, I thought, oh, that's my stomping ground. And then I got to see your last presentation, Andrew, and it was just so well done and I'm so happy to be connected with you even though I'm not feeling well and I will stay just a picture and in the background. I did want to thank you for hosting this and congratulations.

Thank you so much. I'm also under the weather. This is my first day out of bed in three days. So I've got my tea and we're making this happen no matter what. So thank you all for being here.

Good to hear and sort of virtually see you today.

Thanks, Mark.

Feel better.

Well, I'll go next. I'm Kathryn Godoy. I do live in Vacaville. I have had my real estate license since actually like 96 or 97, but I haven't been actively selling for the last probably 10 years. So a lot of things are new and I did want to. So I reactivated my license this year and just the real estate investing has, you know, it interests me. So I wanted to jump on and just hear what you know, everybody, what you had to say about it. So and just re. I'm going to be refreshing everything with real estate because there's so many new things that are there. But I've been in Vacaville since 87.

Very cool. Thank you for joining us, Catherine.

Oh yes, it'll be really interesting. I may not have a lot of questions right now, but I can always send you an email, Andrew, and you know, with lots of questions after.

Feel free. I'll definitely follow up after as well.

Okay, great.

Hey everyone, my name's Austin.

I live here in the Bay Area as well.

I invest specifically out of state. So Nashville, Tennessee is primarily where I'm at. We just closed on our first rental and then just signed our first tenant.

Buyer for a lease option.

And so we're focusing mainly on creative.

Financing, seller, carry sub, twos and yeah, we're just looking to network with local.

People who are looking to do the same thing. Cool. Awesome. Thanks for being here, Austin. I'll go. My name is Tuck Chang. I'm actually close to Mark here in dc. I'm in Montgomery County, Maryland. I signed up for this because I saw something from a meetup group I joined from this. So definitely farther away than most people are, I guess for Mark.

I do also creative financing. I have a couple rentals. I basically manage a bunch of properties.

A couple of my own, some of my parents. Then I have one JV deal that.

I have in Baltimore as well.

So basically in Maryland for the most part and done a few flips with business partner in around the D.C. area. Virginia, northern Virginia. Very cool. Appreciate you being here. Thank you. Well, I'll go.

I'm Deb Gillum. I've been in real estate now for about five years and my husband and I have revamped properties over the years. We just helped our daughter buy a home in Napa, help them redo that. And we're looking to retire. So we're figuring, you know, maybe this is something that we can do in our retirement. My husband used to be a contractor for many years and you know, I've got access to the MLS and a lot of tips on how to look find properties. So I'm thinking maybe it's something we should do.

And thank you, Andrew for hosting, of course. And you've heard some of this before. This particular topic is a new one I haven't shared before. But I'm glad you're here and keep on coming to these classes. I love that I keep seeing you engage and I know you guys are going to be successful because you're very learning based. So thank you for being here.

Thank you, Andrew.

Hey guys, I'll go. My name is Ryan, I reside in Vacaville with a lot of the other individuals and this is all new to me come from the telecommunications industry. And so just looking, as Andrew kind of said in his promo videos, to set my daughters, which I have two up for financial freedom in the future. So just looking to gather as much information as I can to see where this potentially could take me. So thank you, Andrew for hosting this. Of course, appreciate you being here.

My name is Mark Presida, actually says Kathy Preceda.

I have a background in accounting and in the last 15 years, so I.

Been doing real estate with public bank out of Fairfield. And even before I bought a rental when I was young with my parents and my sister, some good and Some bad, but I'm looking forward to generate income for retirement also.

Very cool. You said that was Mark? Mark Fruzita? Yes, Mark Frazita. Okay, thanks.

My name is Kalanji Foreman. How's it going, Andrew? I saw Andrew's podcast and I said I gotta jump on this. I had no idea this type of network existed. I am, I bought my first home when I was about 22. Since then I've purchased single family multi units, some parcels of land. I'm a licensed real estate agent as well. I'm licensed in Virginia, D.C. maryland and Pennsylvania. I run a team out of the DMV with a compass down here. And I've been kind of doing this without knowledge or any real network. It's just colleagues that I know that see what I'm doing so I'll allow them to invest in my projects. But having some sort of real foundation and real network, you know, to collaborate with makes me feel like everything can be pushed, you know, exponentially, you know, so I'm super excited to just hear, you know, what everyone has to say and just learn as much as I possibly can. I'm a former educator, you know, so I used to be a teacher. So I'm literally like a geek. All I do is read and listen to audio books all day long and sell real estate, you know, like that's it. So I'm looking to learn as much as I possibly can and collaborate with like minded individuals. So thank you for allowing me this few minutes and I appreciate everyone's input. Thank you very much. I appreciate you, Andrew.

I love that. Thank you. Kalanji. I don't know if you know, I taught third and fourth grade right before I got into real estate. So same thing, same mindset. And it's exactly why I'm doing what I'm doing here, educating people, it's what I love to do.

Very nice middle school science. So very nice.

Preschool.

Oh, teachers all around. I'm loving it. Great hearts.

Who's up next?

Got any other wallflowers?

Hello. Sorry, go ahead.

People can see me.

I can?

All right. Yeah, I don't know. Well, my name is Julia and I'm a realtor with Keller Williams. I'm at the Denver office in California and I've been to the Vacaville one many times. So very familiar to me. I've been living in Southern California for a really long time and then I moved down to Northern California and I'm here, I'm looking into start investing hopefully next year and mostly out of state so I'M really excited to collaborate with people, learn like their tricks and what they do in regards to investing in other places where they don't live, you know, and just looking into a brighter year. Nice to meet everybody.

You as well. I think I've seen you in the office once or twice. So thank you for jumping on possibly.

Yeah. That's exciting. Thank you.

Hi, my name is Ignacio. I'm in school administration currently. I got on to financial, the financial.

World through Dave Ramsey.

Eliminating debt, that kind of thing. So that kind of started me. I dabbled a little bit in stock market through family, had some real estate.

I have all my holdings and now.

I'm just trying to educate myself on best practices, learning and making decisions as time goes on. Awesome. Thank you for being here. Who else do we have? Malik. Morne. Hey.

I'll go next.

So my name is Malik. I'm an army vet. I was stationed up in Fort Meade, Maryland. I'm currently in Jessup, Maryland right now. My niche, well, me and my wife, she's on a call with me too. Our niche is single family homes. We're going to do some things different. We're going to live in the home, renovate it and either we're going to sell it or rent it out, depending on market. What we're looking for, just to network and just to learn how you're pretty much to be a private money lender. I never thought about that. So that would be interesting. How to hope to benefit from the group. Like I said, just to network, build my connections and just to learn new things. Very cool. Thank you for being here. Thank you.

Hey, everybody.

My name is Morne, local coffee shop.

Owner here in Vacavol and love what you guys are doing. Thanks for the invite, Andrew. And I am just interested in. I'm very creative in finding ways to invest and I love exploring new options. And we own two rental properties right now. I would love to just get more involved in the real estate business and diversify our funds a little bit.

Very cool. Appreciate you guys sharing. Gabriel, I don't think we've heard from you yet.

Hey, how's it going?

I'm Gabriel Calderon.

I'm out of the Vacaville office, so I'm a local real estate agent and.

Really, you know, I just want the money to work for me.

You know, I want to get to the bag. I see a lot of successful people.

Out here and I want to be part of that team. Very cool. Appreciate you jumping on. And anyone else. Hey, everyone. Oh, hey. Hey. I can go Pretty quick. My name is Asif. I thought this was actually going to be like a Vacaville, like just mostly for California investors. So I'm pretty stoked to see how many people from the DMV there are. I'm here in Maryland. I'm a software engineer. I work in Arlington, Virginia. So yeah, I mean, I just bought my first rental property. So I'm just kind of getting into real estate. I've been kind of sitting on the sidelines since at least 2016, just kind of waiting to do something. And then the quarantine came and I figured I had a lot of free time, so why not do something about it? I bought the property with private money. Like private money. So like family and stuff. But it was definitely a cool, cool experience going through the process. I tried to make it as legit as possible. And so I'm kind of here to learn more about what that private money process looks like in the future, learn how I can use private money better or how to find private money lenders and stuff like that. So that's kind of the reason that I'm here. Still pretty early on in my investing, but I'm excited to see where it goes. Very cool. And congratulations. Thanks. All right, I think. Did we hear from James? Might not have a mic. I don't see a mute button there. Well, thank you everyone for sharing. We're glad you're all here. And as you have questions that come up, feel free to jump in, let me know. You guys are in control of muting or unmuting yourselves, so should be good to go from there. Just so that everyone is aware this there is important legal stuff that you should talk with an attorney about. That's all I'll say. So disclaimer, talk to an attorney, do your due diligence before jumping into lending money to people. And I really just wanted to share this and start with this. Who here has actually seen or read anything about the cash flow quadrant? Any rich dad, poor dad, Robert Kiyosaki people here. Okay, cool. So he has this idea called the cash flow quadrant where you have an E and S, a B and an I. So when E is an employee, you make your money by working. Most of us start out like that. And then if you are a real estate agent, a contractor, any kind of it. Okay, can everyone hear me all right?

Yep, you're back.

Cool. So with being a, let's say wholesaling, flipping, you know, anything selling real estate, you really just have a high paying job if you're doing it right. Hopefully it's high paying, but if you stop working, you stop making money. And I believe he says 95% of people live their lives on the left side of their quadrant with some form of job. And he calls it the rat race. So we're looking to be on the right side, which is a business owner, where you own a system that makes you money. Typically you would see it say in the E quadrant it would be I do it. And the S quadrant it would say we do it because now you have some employees. But in the B quadrant it's they do it. You have people who run a system, it doesn't necessarily require your time. And then in the I section, the I quadrant, your money does it for you. This is where your money can truly, whether through owning property or lending money, that's where it kind of your money acts like a little soldier going out and capturing more dollars for you. Does that make sense? So we want to get you to where 5% of the human population is, maybe even less. We call them, we used to call them 1 percenters. I don't know if people still say that. But I want to get you out of the rat race and into a place where you're getting mailbox money, where your money's working for you and you're getting a rate of return instead of getting return on your time. And that's what we're going to talk about today. Did you know you can lend money to other investors just like the bank? If you had, I'm curious, actually raise your hand if you did know that. It's not a lot of hands. And this is one of the shocking things, and it's actually not that shocking. It's just a lack of knowledge. And we're here today to learn and grow together. So one of the funny things is almost half of all the lending that happens in the United States happens through non banks. We just don't hear about it. So a bank is a large institution and we're taught growing up that we need to go to those large institutions and use the products they've made available. And yet I think something I read earlier this year when they were talking about forbearance is what it's like 45% of the loans in this country are made by non banks. So that's going to be an institution or a private individual that's lending so that someone can buy property. And little do they tell us that we can actually be in that group. So we're going to talk about how to do that today. So Private or hard money is when an individual provides money for a commercial purpose or for basically purchasing real estate. Right. It's private or hard. I actually tend to think of private money as an individual lending their own money and hard money as an institution lending other people's money, but not a bank. But people do use the two phrases interchange interchangeably. So it's just something to know.

Let me know if you find somebody that comes up with a real true good definition for hard money. It's like this old banker's term. It's like from like the 30s or something. And it's got nothing to do with how easy or hard it is to do. It's based on like the loan is against a hard asset or some nonsense like that. As we'll discuss, it couldn't be anything further from hard to do.

Yeah, and it's, it's very, there's potential to be very creative with it. You should have a process, you should have standards. But what I love about working with individual lenders is that we can work out win win situations and change terms and make things work for us. Where if you go to an institutional bank, you're really walking in saying, you know, please, like kind of begging for a loan and only getting what they'll give you versus being able to work something out that actually works out in your favor. And the lender's favorite. That's a true win win. Now note here, this is a commercial loan. We're not talking about giving someone funds individually for a residence that they are going to live in. That puts you in a whole different group of lenders that you don't want to be a part of if you're trying to avoid risk. So we're talking about commercial loans, not traditional mortgage loans. And the repayment is secured by the real estate. And that's what helps mitigate some of the risk. But it's also what makes it very clear this isn't a personal loan. This is a loan to secure real estate. And specifically it's going to be a loan to an entity like an llc, a corporation. You don't want to get in trouble by giving someone money in their personal name. And then they said they weren't going to live in the property and all of a sudden they moved in. Because stuff happens. Like Covid, anything can happen. Right. We've seen that this year. So it's just one of those things. You have to be very clear on who your target is going to be if you are doing private lending and how that operates the property in question must be purchased and held for investment, so cannot be owner occupied. You are not a mortgage originator. So doubling down on this, there are all kinds of laws that, especially coming out of 2008, that prohibit and provide extreme requirements from individuals lending to other individuals for real estate. So you would be subject to respa, Tila, Dodd Frank. And there's actually a government organization called cfpb. I believe it's the Consumer Finance Protection Bureau, whose job it is to specifically go after people who do provide loans to individuals without the proper licensing, disclosures, all of that. So you want to completely avoid that. Always make sure you run your scenario by an attorney if you are not skilled at this. That being said, if you are considering being a private lender, I believe that you should have some idea of the investing landscape. You may not necessarily have to have done it yourself, depending on if you've been in real estate 10 years and you're very familiar, you know, talking to Deb or Gabriel and you understand, you know, the escrow process and contracts and all of that. And yet I believe you should be very familiar with the process so that you understand what to look out for and maybe some red flags when you're working with, you know, someone who you're potentially going to give a loan to. So, you know, we want to say you should have successfully completed a wholesale deal, a rehab, which is a flip, or have rental properties or all three. But I'll be honest, I started off as a partner to someone else who had done over 200 flips. So I knew him, he had credibility. And I brought in, I actually found the deal and brought in cash. And he used his resources, his contractor, everything else on the back end, his stager, to make it a solid deal. And we split everything 50, 50, and that's okay too.

That's the exact same way I started Andrew. I think a lot of people do that, right? You find partnerships and that works for rehabbing and it works for lending. You can partner with other people who have done loans before and work together. That's a great idea.

So you do need to understand the business, understand the market that you're lending in. And I have a private lender who's done 100 deals himself. He spuns my deals. He actually walks each property and he only lends to six people. So he's done deals and he still wants to see the property himself and run his own comps and make sure that he's familiar and he's comfortable with it. So that's cool too. You can Set your own standard. You can do things however you want to do them. And we'll talk through the way he does loans versus the way we recommend doing loans if you're starting out because he's a lot more aggressive. And did you know that you can lend money from your IRA? So a lot of people have a 401k or have an IRA, but they haven't made it a self directed. And the way you actually determine, you know where your money is going and where it's being invested and the way you can use it for real estate is to have it be a self directed Iraq. I believe it's easy to roll over a current one to a self directed. And it's easy to start a self directed ira. There are a lot of online stock and brokerage firms where you can click a few buttons and open up your own self directed ira, start transferring money in and lending money from there. Writing a check from the ira.

Yep. I don't know if anybody else here has self directed or has a company that they like. Rob and I both have accounts at Equity Trust. They're one of the larger self directed that I don't know if it specializes in real estate, but they understand real estate investing, which is really helpful. A lot of the self directed process involves having a fiduciary that is technically responsible for holding the money. You may have checkbook control, but you have to submit paperwork that that lets them vet to make sure that it is okay. There are some things you can't do with the self directed, mostly involving what's called self dealing. You can't lend money to yourself or your family or direct family members, but you can lend it to a lot of other people for a lot of other situations. And it is a really good way to accelerate growth in a retirement account. And there are a few places that really specialize in setting up those self directeds. Equity trust being one of them. And I think tech just, just chatted in, said he might have one with Schwab. Really worth checking out. If you have large IRA holdings that you want to be able to put in real estate or loans, you can use it to buy property and you can use it to lend to other people to buy property.

Yeah.

Super.

Can you say that one more time?

Is there a penalty taking that out of your ira? Absolutely not. That is the point. That's the beauty of the self directed ira. Its whole purpose is to allow you to invest in things other than the typical stocks and bonds and mutual funds and that kind of thing. This discussion is about real estate. But you can invest in gold and other direct equities. And I used to mess around with options and futures and things and alternative stock investments. You can invest in those things, but the whole purpose of it is to be able to invest in other types of assets besides stocks and bonds. So not only is it not penalized, it actually allows you to kind of supercharge your return. Because if you lend someone money, you can lend and we'll go through how some of the numbers work, but you can make 20, 30, 40, 40, 50% annualized rate of return on your money by lending it. And all of that goes directly back into your IRA untaxed. And depending on how it's set up, you can do the Roth where it's taxed up front. You can do a traditional and pay the tax later. I think a lot of people now are recommending Roth based on the current status of kind of debt in the country and what we're going to have to do to pay back some of the checks we're writing ourselves these days. Interest is probably going to go up. Tax rates are probably going to go up in our lifetimes. So paying the tax rate now is probably a good idea. But talk to a financial advisor about those things. But whether it's Roth, traditional, whatever. Self directed IRAs are really powerful and convenient and their fee benefited. It doesn't cost you more than a regular. It actually saves you money from a regular that you would pay fees to take money out of to do things with.

And they're not reserved for extremely wealthy people. And they're really easy to start. I just heard about one of our other grid leaders started one on E trade, very simple.

I started one with 5,000 bucks and loaned out that $5,000 with other people into other loans. Their flexibility is their benefit. Tech said he did one in schwab. And check your 401k provider to see if you can roll your 401k into a self directed or use it maybe somewhat like a self directed son. Yeah, good to know.

Good to know. And I believe you can use it to fund your own deals and give yourself a rate of return. But that is something to check with your financial advisor.

Yeah, it depends on the structure. Like you can't, you can't lend directly to yourself. Like Mark can't take Mark's IRA and lend himself money. But depending on the structure of the entity, maybe, but definitely check with your, your self directed company.

Yeah, so we actually do have another class and what you'll see is we Have a monthly meeting and rotating topics. We do have one that covers self directed IRAs, so we'll talk more about that next year. So what do you need to know to actually start investing? You have to know how to determine a safe, reasonable after repair value. Get used to seeing acronyms and specifically this one, arv. Whenever someone is asking for money for a deal, you have to know and be confident in what is the ARV because that determines your risk exposure. That determines, you know, how much money they're going to put into it to actually be profitable. It's the end point that we work everything backwards from. So you have to know a reasonable safe arv. How to properly renovate to add value and minimum risk, how to estimate rehab costs. That's not something you need to know inside and out. Like you don't necessarily have to know that cabinets in a U shaped kitchen cost $2,400 from Granite Expo. Like very detailed. But you should have an idea of, you know, general cost to renovate a house. I like to use kind of a formula of a soft kind of a medium and then a really heavy rehab. And that's going to be anywhere from, you know, 25,000 to 40,000 to 60 to 70,000 depending on what we're going to do that do to the house. I'm putting 76 into a house right now, but thankfully I have a great crew and they're knocking it out in six weeks and then it'll be on the market.

Can I ask a question please?

Sure.

I thought I heard you say that I know of Equity Trust. I've heard of them for self directed ira but I thought I heard you say that Schwab and E trade offer self directed IRA you could use for real estate deeds of trust and loans also. Is that correct?

Yeah, we actually had someone in the group say, I think it was tech, say that he rolled his 401k into a Schwab rollover IRA and then into a self directed tech. Was that still with Schwab when you made it self directed?

Yeah.

So currently going through the process. I just recently got out of my 401k in November, split from the company.

And then I started the process of.

Rolling into to set up a Schwab.

Rollover Iraq and then the money is.

Currently in process of rolling into the.

In that rollover IRA and then I have to do the next one. It's a lot of paperwork and time consuming. Yeah, it's like a three step.

You have a 401k. So all I would have to do is just contact Charles Schwab and they could direct me how to take IRA money, for instance, out of TD Ameritrade and put it there where I could invest it in real estate. I could make loans with it, I could use it for rehabs and, you know, I could buy commodities with it. I could do that with Schwab. Yeah, potentially. Yeah.

I mean, yeah, give them a call.

So, yeah, it's interesting, you know, the same thing. And I heard somebody say E Trade also offers a self directed IRA you can do this with.

Yeah, that's information I got straight from somebody who said they started one at E Trade. I don't know if it's something that's still offered, but I do know that they opened one there and that's what they use to fund many investments becoming very popular.

So it wouldn't surprise me that other places were starting to offer them.

Yeah, okay. Okay.

All right. Well, that's interesting. Thank you. I'd heard of Equal, friend of mine's using that. But it's good to know of some other ones like Schwab and E Trade. I'm surprised that they do that.

If I could just chime in, Janae, here. It is usually against the stock and bond trading companies to encourage you to roll over into a self directed IRA because they really can't make any money off of it unless they found a way to make money off of it. And that's why this product hasn't been talked about much. I mean, I think self directed Iris first came available maybe 40, 45 years ago, but we never really heard about them because they're so detrimental to the goals of a broker at a, you know, Schwab or someplace like that. So do be careful. They might have, if they are offering them Schwab and others like them, they might have found a way to work a fee into it so that it would be a little bit more expensive than say, the one at Equity Trust, for example.

Great point.

Okay.

Okay.

Okay.

Well, thank you very much for the information.

Thank you for asking the question. Feel free to anybody, feel free to interrupt me and ask if you have a burning question. Something that you should know is how to pull and review a credit report. I think this is a best practice. It doesn't always happen. The private lender I work with doesn't actually pull my credit, but he understands that I have credibility because I've been in real estate almost 10 years. I co own my Keller Williams office and I do a lot of deals. So he's comfortable and Believes that's all the credibility that's needed along with the deal. If I didn't know somebody and they came asking me for money, it wouldn't be a flat out no, but I'd have to get some background on them. And the easiest way to do that is to pull a credit report. There are many ways to do it and if you have questions later on, we can talk about different resources for pulling credit reports. They are not very expensive and typically you can have the potential borrower front the cost in an application fee to cover any amount of paperwork and due diligence you need to do on them. And then I'd say it's a best practice because a lot of the hard money institutions are now making it possible to pull your credit online with just a soft check. So it doesn't affect your credit score, but they determine the interest rate they're going to give you. Right. They hedge their risk based on what your credit score is and then how to structure repayment terms is something that you should know in order to provide adequate security for the loan. And honestly, I'd say to make it as safe as possible for you while being as easy to use. Right. To provide a great service to the borrower.

100%. I think all of those things you're talking about, Andrew, are really standards that you would have as a lender to protect yourself. The only times I've found lending to go not well for lenders is when they put honestly too much faith in what their borrower told them was going to happen and how things were going to work. Right. As entrepreneurs, we're always super optimistic. Right. And aggressive. And we, we think every deal is going to be great. Your job as the lender though, is to do what's hopefully good for your borrower while also protecting yourself. All of these things that you're talking about do that understanding what you as the lender think is a safe after repair value. What you as a lender think it should cost to renovate a house. Don't just take your borrower's word for it. Right. And a credit report, again doesn't mean you will or won't make the loan. But what credit reports do is tell you what someone's past history is of repaying people when they borrowed money. So it's certainly something that you ought to potentially at least be aware of. This is your protection.

Yep. And that's the goal. Everyone going in has to be very clear about the expectations. I think any agreement, any contract needs that. And that's all we're talking about how are we going to come together and how are we going to separate. Right. That's what a good agreement is. So that's why it's talking about terms. Just know how are you going to restructure, how are you going to structure those repayment terms so that you know how much you're getting paid going in. We'll talk about that too. How much you're getting paid going out and when, and then a cutoff for time frame. So it needs to be for a certain period of time. So we'll talk through that. So how does the loan process work for a real estate investment? Basically, the borrower signs a commercial promissory note that really talks about all the details, right. All the ins and outs. It's talking about the when, the where the how amount, interest repayment, default, what happens in the case that the borrower does not or cannot make the payments in the time frame given a guarantee, etc. So really important to talk with an attorney or find. I recommend talking to an attorney the first time. Perhaps when you have some experience, you can talk with others and network. And I think my lender got his docs from someone else, but he has an attorney will go over everything happens a lot.

Everybody borrows other people's stuff, right. And that's fine. You can save a little money, borrow somebody else's stuff, but pay your guy to kind of look it over and bless it, right? Yeah.

Because then you're not paying him to draft it from scratch, you're just paying him to look it over. Right. So the borrower signs a commercial loan agreement separate from the promissory note, stating that the loan will be used to acquire an investment property only and pledging that property, that property as collateral against repayment of the loan, which means if that borrower defaults, just like a bank could foreclose on a house, you could foreclose on that property. That collateral can then become yours because they defaulted on the loan. So I want you to think about that. If you are funding a loan for someone who's going to flip a property and you have that property as collateral, Right. You are in first position. Meaning if anything happens, that property is coming to you or you have first right. Who has the most risk in that scenario?

Not the lender.

Yeah, that's a real question you can answer. And there's, there's no wrong answers because we'll talk through it and we'll learn together. So, yeah, the lender doesn't have a ton of risk because no matter what, they're either going to get a property that was rehabbed, a property that wasn't rehabbed, but you made sure there was enough room as is versus, you know, the ARV to where you could step in and then rehab the property, make the money or sell it as is and get your money back. So the rehabber has all the risk because they have to pay you back, actually do what needs to be done in the property and make monthly payments on the loan if you structure it that way.

So I'm thinking here that you as the who would be doing the loan, you wouldn't have another person. There wouldn't be anybody else on that title because, you know, like when you're doing the short sales and stuff, you have a person in first position. They always get. They get the property.

Exactly.

So you fall away if you're lending and you're, you're in the second position.

So sort of part of that depends on how much is owed and how much equity there is. And I will say that when a deal is good enough, when it's a true deal, there typically is enough room to allow for somebody to be in first position and to have someone in second. Maybe that person can be in second with a promissory note and indeed a trust, but they're not going to be in first position. A lot of people get hard money loans, but hard money from an institution typically only goes to 85, 90% loan to cost in a good market. That drops tremendously in a bad market. Like we saw with COVID I tried to get a loan on a property in March. That was a bad time to get a loan. I needed to bring in 35, 40% myself.

Yep.

But you can have somebody in second position who then covers the remainder of that and the rehab cost or. And the holding cost. Right. The monthly payments you would owe on that hard money loan. And that way the rehabber isn't really paying much at all out of pocket, except maybe a deposit. But he's got two entities to pay now. He's got a hard money lender and the person in second position to pay back. And it's not bad.

Yeah, it's a great question and point to make because a lot of people do start lending not as necessarily the first position lender. Sometimes people start they're lending somebody, they've met another investor. They have got most of my funds. Yes, that I've got my main lender here. But my deal still needs 50 grand in equity over what lender A is going to give me, if you will lend me some amount of that difference, whatever's left of that 50,000 cash, I still need to do my deal. I will pay you X to be my second position lender. Just the important bit is to understand that positioning and that all of the same paperwork can apply just because you're in second position. You can still get the commercial loan agreement, you can still get a deed of trust, you can still have a trustee representing your interest of the second position lender. Just know that you're in second position. So if something does happen where a borrower defaults and a property goes to auction and is sold, first position gets all of their money back and then once they're fully repaid, the next person in line can start to recover their loan and so forth and so on down the line. So you definitely are taking a higher risk to be anyone other than the first position lender, which is why almost always those loans should be a higher cost, a higher return to that lender who is taking the increased risk of being second, third, et cetera, possession position lender. But by the way, in doing like a regular rehab deal, I've never seen more than maybe a regular, you know, the first trust, private or hard money lender, and maybe a second position lender that's kind of kicking in some equity. You need more than two lenders to do your deal. You probably shouldn't be doing your deal.

Right.

Yeah, that's trying a little too hard wholesale, that deal. Find another way to monetize that deal.

By the way, next month we'll be talking about wholesaling. Right on. So just a couple of questions from the chat. Julia asked, is there an app you are using for calculating investing? I have both. A spreadsheet, which I have an example of later. And I like an app right now called Deal Check where I can put everything in. It's literally like an iPhone and an iPad app and a web app online. And it calculates your rate of return, cash on cash, and internal rate of return. You know, you can put in your rehab budget, you can itemize. It's a pretty cool system. I haven't found anything where you can calculate your return as the lender, but that's not difficult. I'm pretty sure you can just do that with a spreadsheet or a calculator. Yeah, because you don't have all those other expenses if you're the lender. And then related to the topic of position, how many lenders can you have on a given deal? I guess you could have several I don't recommend more than two.

Yeah, there's, there's no technical limit, there's no legal limit, but there's, there's a reason that lender number one is only lending 70%, 75%. Right. There's a reason. Lender number two has said, fine, I will put in the next 5% of the money that you, every subsequent lender is taking on a greater amount of risk. And so there's a certain point at which if the deal was any good, lender number one would have lent more money. Right?

Yeah.

So I'm not saying that being a second position doesn't make sense. That's fine. It just means you're being a little more aggressive than the guy in first position and the guy in third is being a little more aggressive than you. I just really don't recommend it. If you are starting to lend and the first time you want to lend money to another investor, you really ought to be like the first, maybe the second position lender, because that means two other people, if you're in position three, have already said, I'm not putting more money into this. If you want to get it from somewhere else, let them do it. And by the way, there are some lenders who say, you can't put other loans on it. You can do that. You can forbear your borrower from getting other loans and say, no, you have to bring your own cash besides what I'm giving you to get this done. And there are some very good reasons for doing that. We can, we can talk about that when we kind of get into a little bit more of, kind of the loan structure.

Yep. So the next step is the borrower signs a deed of trust, which gives the trustee, right, usually an attorney representing the lender, the right to foreclose and take back the property if the loan is not repaid. This is why when you see a trustee sale from an actual foreclosure from a bank, there's an attorney involved who then, you know, gets everything packaged and sent off to the county. And then properties are sold at the county, you know, at the courthouse steps. The trustee's job is to do that. In this case, you know, you're essentially the bank who would need to make all that happen. So you want to get a deed of trust signed. Signed by your borrower. You don't want to just do a promissory note. You want to have a lien on the property. Ensure that you have a lien on the property, and you sign a notarized document and you actually go through an escrow process and don't just sign something on the back of a napkin. Please, please, please use an attorney or talk to a real estate agent or both to explain the proper process. And then a real estate attorney will draft those documents for the lender. And the borrower usually pays for the cost of preparation. So if it's about $1,000, again, the borrower is paying that. Just like if you went to the bank and got a loan, you're paying an origination fee and duck prep fees and all that other stuff. You can have your borrower pay fees for all the prep work that goes into. And if the loan is not repaid per the terms, it is a similar process as a traditional bank talked about that the lender should always get their money back. However, depending on state, it can be a very long, arduous process. Especially in times like Covid, where states have, you know, delayed many foreclosure proceedings. I follow auction.com quite often and every day I'm seeing the same homes postponed and postponed and postponed over and over and over.

Could be interesting times come January when some of those moratoria burn off.

Right? Yeah. So the risk, it does have risk. We don't want to sugarcoat it. Like any loan collection is impacted by laws in California, the foreclosure process takes, it's not a minimum of 90 days. It's actually a minimum of almost 200 days. 90 days is just to file a notice of default in California, which then gives you another 90 days to start the trustee sale process. So you're into it six months behind on your payments before you actually can auction off the property. And even then, every time you file paperwork, you have to within 10 days notify the borrower. So there's just a lot of time that's necessary. California is very pro borrower and pro home owner. So just know that, you know, it could be a process. The good news though is there it's not as pro borrower if it's not a primary residence and you're not lending on primary residences. So you don't have as many roadblocks when you're trying to foreclose on, you know, an investor who isn't making their payments.

And one other thing, Andrew, I can, knowing that I can read ahead a.

Little bit on the slides.

I know this isn't in here, so I can bring it up. There is also the opportunity to do what's called a deed in lieu.

Right?

A deed in lieu of foreclosure. You have that Option available also where if the borrower says, look, this isn't working out, I don't want to do it anymore, what do we do here? You can say, fine, you deed me the property and we don't have to go through the time and the process and the hassle and the expense of a foreclosure. You do still also have that option if borrower and lender agree.

Yeah, I think I did actually throw that in there.

Did you work that in?

I did. Awesome. Quick question. So Asif asked, without the deed of trust, is a promissory note useful for anything.

To promise?

It's a promise. My mom used to say, you know, don't make them. So, yeah, I'd say if it's not. If you don't have a lien on the property, you really don't have anything. So that's why you want to have a promissory note secured by a deed of trust. And Janae, 45 days to foreclose in Georgia. I've heard in Texas it's. Is it. I think it might just be 30.

I've heard Texas is one of the shortest. We can check. We actually have a grid leader now in Austin. We can maybe check with her. They're real ballers. They do a lot down there. So they would know in Virginia. Here it's the same. It's about 45 to 60 here in Virginia, but one jurisdiction over in D.C. it can be forever. If you've got a professional borrower who knows how to fill out the right paperwork, it's almost impossible to foreclose. And that's the case in a lot of large cities. So watch out for that.

Now, if you are investing right, I'd say the risk of needing to foreclose, if you've really vetted your borrower, the risk is low. And that's what we're going to talk about, how to ensure that you're mitigating that risk as much as possible. So these are typical private lending terms. This is what it would look like, 8 to 12% annual interest. So that's in a 12 month period, 1 to 3 point funding fee, typically paid at closing through escrow. One point is 1% of the loan. So a lot of times if you're, you know, especially right now, with interest rates being so low, let's say they kind of trickle up above the threes a little bit and you want to make sure you get a rate in the twos, you can actually buy a point. Right. And buy down that rate, you can pay extra Money up front to get your rate lower. So that's what it means. A point is just 1% of the loan and this is a strong recommendation. 70% loan to ARV Max. So that makes sure you have enough equity in the deal so that there's plenty of room if anything were to happen. You could still sell that property as is and likely get all your money back. Or just finish up the rehab. 6 to 12 month repayment term. You usually see it longer than 6 months because investors don't want to pay short term capital gains typically and depending on your vehicle for investing, anything less than six months could trigger a big tax event. So you want to go 6 plus to 12 month repayment terms and the end of that term would be what we call a balloon where all the rest of the money is due and then prepayment of some interest and most or all of the funding fee. Like we talked about, I pay my lender two points and it happens at closing and anything that you negotiate, like literally anything that you negotiate could be in there. So construction holdback, rehab draws and we can talk through what that draw process looks like. Typically that means the rehabber is paying some money up front to get materials and get their contractor started. And then once they're at a certain point, 25% of the way, 50% of the way done, then you release part of the rehab fund. So they're paying interest on it. But go ahead, Mark.

I have a question. In California, Andrew, how long on average does it take you to do what you'd consider to be kind of a basic normal pull and replace rehab? Like not doing addition, not having to do a pop top, just kind of a gut rehab. With your permit process maybe being longer, how long it takes to close escrow out there versus here? What's your typical turnaround time?

Yeah, here. So I mean it's always going to depend on the construction crew. I have a great crew. It takes me five to six weeks. Okay.

Okay.

I know others. It takes a minimum of 90 days. Yeah.

I'd say our average is probably five months. Kind of turn to turn from acquisition to disposition.

So true. So full. Like we buy the property, we do the rehab, we market the property, it's sold to the end buyer. I'd say three to four months. Yeah.

Okay. Which gets back to your point about term right of the loan. I've had some lenders for just the reasons you were mentioning about capital gains where I've said look we can probably get this done in four months when that are back, things Break right. Be a quick buyer, cash buyer, whatever. But I'll guarantee you six. Right. We'll do a six month term and if I can get it done in four. Good for you. You still get six. Or I'll get a 12 month term but guarantee the six months of interest to the lender so they have a different time horizon to worry about rather than getting paid back too quickly. Right?

Yeah, yeah. And it's, it's tricky. So my lender does lend so well. My, my main preferred lender and I'll tell you why he's my preferred lender. He lends from his self directed IRA and he does not have a problem if I close very quickly. For instance, the last one I think we purchased October 28th, we just made one, our first monthly payment, interest payment. And we have a cash buyer looking at the property this week and could potentially close next week. And the work's not done. But we'll finish up the work. They just need to move asap and we don't want to deal with appraisals. So it's a good deal.

Good deal.

And that's less than 60 days. And he sees a huge return on his money and is very happy to turn over his money that quickly and it just goes back to his self directed Iraq. Yep. Not everyone would be willing to do that or they would still have you pay 6 months total of monthly interest payments. So that's why it's good to work with somebody and build a relationship and build trust.

So Andrew, how about you? How about you? Where's your prop. Are your profits going back into your self directed IRA so you can miss capital gains or what do you, how do you handle it?

Currently it's going into, we're investing from an LLC and the funds are there and the LLC's bank account. So I am going to be moving things to a self directed IRA because we're doing more and more of these deals. Actually what I'll likely do is I'll fund my whole life insurance policy and write myself like lend money from that because I can still earn. We can talk about this later but I can earn a specific interest rate even while the money is being used elsewhere.

Right.

Double interest here.

Get Rob's so excited. He loves that he has that same whole life policy and does the same thing. Extra juice you're getting out of your money. That's awesome.

And then we did talk about deed in lieu. So the idea here is you can actually have somebody pre sign a deed in lieu stating that if they ever Default, Right. You already have all the paperwork. You can avoid foreclosure completely and just trigger the clause, tell the title company and say, haven't received my money, trigger the deed in lieu and that property goes back to you. You can avoid the whole foreclosure process. These are like ninja tricks. We're telling you right now. Avoid the whole headache of a foreclosure. I feel bad for the four people who jumped off the call and missed that.

Yeah, no, that's huge.

So typical lending terms. Here's an example. ARV of 300 purchase price of 175, timeline 6 months from purchase to resale. And then the rehab estimate, right. Is $50,000. So that's given to the borrower in draws, meaning it's not put into escrow or anything. And the max loan is 210 or 70% of the 300,000. Because we talked about max loan, 70% of ARV. Does anyone have questions there? Okay, if you do interrupt me, I want to make sure you understand the numbers. So on this particular loan they charge 12% interest, which is, you know, over the course of a year. So 2,100amonth and 2 points as a funding fee, which is 4,200. So that's the 210,000 times 2 points prepaid, 2 months of interest and 2 points loan funded at closing is 151,600. Does that make sense? So 210 loan amount minus the 50,000 rehab, minus basically the prepaid, the closing cost there going to the lender, which could be you. So the cash to close is the 175 purchase minus the 151 loan. So that's going to be 24,000 plus 4,000 in other closing costs, title and escrow fees, home warranty, whatever. So that's an approximate 28,000. So the total cash needed is the 175 plus the 50 for the rehab, plus 8,400 in prepaids, plus 8,400 remaining interest, plus 4,000 closing cost. So 245,800 minus a 210 loan, that leaves you 35, 800 total cash needed. So this would be right how much cash the, the investor needs to close. But do you see how they are buying a 300 that. Well, $175,000 property with $35,000 and they're, they're doing 50,000 in rehab work. But they didn't have to put, you know, $40,000 into the property or buy it at. So essentially you're, there are ways like this is a really extreme example. I never go into a property where I need to bring that much cash personally. But part of that is I also buy properties on market and I'm a real estate agent. So my two points get covered by the two and a half percent commission I earn on the buy side representing my entity. So that's a good way to use your commission if you're in real estate. If you have a license.

If you don't have a license.

Right?

Yeah.

There's some cases where I've made money closing a deal, getting into a flip because the closing costs are so low on a, on a cash purchase. And a private loan is considered a cash purchase. If you're not dealing with a major bank, typically it's just funds wired into escrow and not a whole bunch of other stuff. So it's the same as cash and the commission and the closing costs and everything. Like there was more commission than all the closing cost and points. So I got a check buying a property I was going to flip. That's nice business. Does anyone have questions? I know we talked about a lot of numbers and something that could scare people is the numbers factor. I just want to make sure, you know, we get comfortable talking about the numbers. Could you give a visual example? Absolutely. Well, let me give you another example in just a minute here. So under this scenario, the borrower's loan cost, the borrower's loan cost them $16,800 and they would profit approximately 40,000 after the sale. Right. After sales cost, they greatly increase their return versus a 50% partner and the lender earns an annualized rate of 16%. At this rate, your net worth would nearly double every four years. Can you get 16% or have you ever received 16% from the stock market in a year?

You wouldn't over time, right? No, not if all time standards hold true. That's tough to do.

My dad is really good at the stock market and I believe he's up like 28% this year so far. But it's one year because we had an incredible write up and he, he doubled down when things were low, knowing that it would bounce back because it's not his first rodeo.

And I don't know if you make this point elsewhere, but it comes up a lot when you're talking to people about borrowing money. Like, well, you did 12%, man, that.

Sounds like a lot.

Like two points, like another 4,000, $16,000 for this loan. Yeah, but if you did it the other way, where, like what we talked about Earlier. Well, I know a guy that's got some money and I found a deal, right? So I'm bringing the deal and he's going to bring the money and we'll just split it. That's fine. And that can work. But if this deal has $56,000 in it, right, with no borrowing costs, and he just pays for it, and I found it and I manage it, run it and get it sold and all that, you'll do all that work and you'll make 25, 26,000 and the guy who put up the money will make 25, 26,000. Or you could borrow it and yes, pay 12% in a couple of points and it's a $16,000 loan, but you're doing it by yourself and you are pocketing all of the profit of 40,000. Right. That's where these private loans make you more money as an investor than just borrowing from or partnering with somebody else. Your rich uncle, whoever it is, don't give up half of your deal if you don't have to. Even worse if you're buying something that you're going to hold for a while and it appreciates. Right. I know people that have, have done partnership deals with, like, quiet money, like the silent money partner. They found, you know, these great rental properties and bought them with the partner that have then gone up hundreds of thousands of dollars over the past years. The initial partner did nothing other than put in some of the money. They now get half of the equity of a thing that's gone up many hundreds of thousands of, of dollars where if they just borrowed from the, from the beginning, they would be keeping the lion's share of all that profit and all that upside. So a private loan, even though the rate may be higher than what you pay on your regular home loan, first of all, is available quickly from someone who hopefully knows what it is that you're doing, is available on terms that make sense and will allow you to make money and will then, most importantly, allow you to keep most of the profit as opposed to a partner. That's why this is a good deal for everybody.

Yeah. And you know, one thing about having the experience behind you when you start investing, if you've done flips and rehabs and, you know, or in wholesales or anything like that, is the synergy that you get working with a great lending partner. So even though you're not 50, 50 partners, you can still bounce resources and different contacts off each other. Because if you're lending money, you want to make sure they're keeping Their rehab costs down. If you have a great connection to flooring or cabinets and you see that when they send their scope of work, they're going to pay double what you would pay now, you can help them out, you can make them more money. That also could speed things up or ensure that they finish the project within budget. It just adds, helps everybody. So you're acting as if you're 50, 50 partners, but really it's just a win win deal for everyone involved. So this is a different type of, you know, look at the numbers. It's a little easier for me to see. This is my most recent closing. This was a property in Suisun City, California that we bought for 370, put 25 into it. Inspections cost me 550. Closing costs were about 1,500. So you can see everything here. Total acquisition expense, net capital invested was 397. Estimated sales price. We ended up actually selling this property for 480. I thought we were going to get 465. That's what we listed it at. And then within three days we had a really great offer and it appraised. You can also see what the lender got right. Loan amount, well, 390. We only financed 20,000 of the repair cost. So there were points, $8,300. Monthly interest payment was 3,250. We paid a total of three months. And this literally was a 90 day process. We bought it August 18th, it closed November 18th to the new end buyer. And so total financing expense was 18,000. That's how much my lender got. Now I earned a commission. So this is what, where I put like referral commissions. So 9,250 was my commission on this property at 370, which paid those points. And then the end buyer had their own agent. So this isn't actually 5%. This is 2.5% of our sales price. But I always leave the five in there to remind myself if I ever get a deal from another agent, I'm going to let them list it and I'm going to have to pay 5%, not two and a half. So I leave this in my spreadsheet so I don't get used to my own, you know, it's just something that's, it's a nice bonus that I'm an agent, but I still need to do the numbers as if I'm any other investor. And so you can see net sale after our disposition expense paying, our lender, paying, you know, all the expenses, net sale, 450 gross profit 53. But because I made that commission, it was actually like 62. 62, 452. Not bad for 90 days.

Not a bad job for three months. That's right. Good deal.

And hopefully this next one, less than 60 days will be at the same number.

And how about that ROI?

Yeah. So here's the interesting thing. Simple ROI, right? 13.4. Not much to write home about, but still better than the stock market. Annualized. I don't know where you could get 1600% annualized.

Lather, rinse, repeat.

Yeah. So what should your borrower provide? And we are very close to finishing up, y'. All. At least a minimal amount of equity or skin in the game. So even though my lender, my, my. He's my friend now, Brian, he'll probably be on the next call. He lends 100% of the purchase and 100% of the rehab. And I pay him 2 points and 10% interest. And that's just how he does it. He's done 100 flips himself. He's done dozens of loans. He walks the property and trusts me. You don't have to do that. And I don't recommend you do that your first time. Maybe not ever. Do what you're comfortable with. Never lend 100% of the required funds. Proof of funds for required equity. Like make sure that you actually see they have money available and then a credit application outlining the deal and loan and loan sought and possibly signed release for credit report application fee.

And you know what, Andrew? We will change that from never to once you've done 100, then you can lend whatever you want.

Exactly.

We just want people to be safe. Right. And make sure they get their money back.

Yep. And then I was shocked I didn't ask him for it. When he told me what he did for the five people he. He did lending for, I said, please sign me up. I was actually calling him to wholesale him a deal. And I said, please be my lender from now on. I'll buy the deals myself.

Absolutely.

What should your borrower provide to consider a loan? A fully executed contract. You have to see the contract. I would say you also need to see a preliminary title report showing that they are in contract and the title company will issue title insurance on that property. You can also get an estimate for renovations from a licensed insured contractor and then proof of insurance for the property at settlement that can be in your loan docs. And that then makes it the title company's job, the escrow officer. It's their job to ensure they don't close until they see the insurance paperwork. Something to note. A good title company is really like a good partner. There's a team that you should have in place. If you're a lender you want to make sure that typically you want to make sure if you can that you're working with a title company that has used your has seen your docs before they can make or break your deal. I've had a deal with a title company locally that they wouldn't allow the lender to get paid points through escrow. They threw a big fit about it saying he wasn't licensed and they didn't know the rules that you can lend your own funds without being licensed from your, from your self directed ira. There's California code that says that we sent it to them. They didn't care. They would not. They just were reading our documents all wrong. It was horrible. It dragged on and on and on for an extra three weeks and we vowed to never use that title company again. It's actually one specific escrow officer. So just know the people that you're working with and if possible like rinse and repeat, use the same team over and over because that's how you ensure proven repeatable processes. Right? You want to ensure a good product, ease of use for the people that you're lending to. You don't want to have headaches like what we went through.

If only there was a place where investors could go to find out the kind of people that they would want to have on their team and how to meet them and how to stay in touch with them, how to get good deals from them. Oh wait. Coming soon. Grid 2021 I think we cover that in like April. It's a great job. Gotta build that dream team.

And if you guys need referrals, feel free to ask. I do a lot of deals on the sales side. I'm starting to do a lot of deals on the investment rehab side. So if you need referrals 100% shoot me a text, shoot me an email. I'm happy to share. That is it. So please don't forget to leave us a review on meetup as Grid Vacaville. We're not on Facebook yet with the Grid Backaville Group or page but you can go to Grid Investor and leave a review there. RSVP for next month's meeting. This will be the second Tuesday of every single month at 6pm Pacific and Connect with other folks here. So eventually one day when stay at home is lifted, you can meet in person again. But until then, Gavin Newsom's gonna. I'm not gonna make any political statements.

I heard. I heard you guys are locking back down. I think it's gonna happen here, too, by the way. And, yeah, it kills us to not be in the room. We have such a great time. We do these in person with people, and then now is the time when we make all of our money.

Right?

We're networking at the end of these. We're talking to people, we're finding out who's got a deal and who needs money and who's looking for a partner. You know, let's still do that. I've got my information in the chat. Everybody take a look back in the chat. Put your information in there if you can. And the cool thing about doing it this way, Andrew, I've noticed what were there, like, four or five people here from the dmv and Janae from Georgia. We're going to be able to grow a national network with the online with people being able to connect farther away. And I heard, like, at least three or four people from your area, Andrew, that said they want to invest in other places. I'm guessing that's probably because for buy and hold, California is maybe a little pricey. I know that's my problem here in D.C. it's really hard to make the numbers work around here in rental. But we know people who are killing it in Georgia, in the Carolinas and Tennessee. There are a lot of great places to invest outside of larger metro areas.

Yeah, yeah, Mark. I say it's like having a do over coming from California to Georgia, like walking back in time to the 70s, and it is like a kid in a candy store, crazy. Even though the market's blown up a little bit compared to when I first started buying. But, oh, my gosh, I shake. Sometimes I shake. So I don't know.

I think we may try to find a way to keep some amount of kind of virtual presence, because this is great, too, to be able to connect with people from all other parts of the world, really. At least our areas where we're operating, we get back in the room, it's going to be great. It's going to be hard not to go hugging people when I haven't seen them for months when we start meeting in person again. But until then, this was awesome, Andrew. Awesome job. We could already tell from what you've already been doing and what you've done and your social presence, which, by the way, feel free to drop that. Everybody follow up with Andrew. Follow along with what he's doing on all his different social platforms because he's killing it and this is going to be an awesome, awesome group. I'm looking forward to seeing it blow up.

Awesome. Well, appreciate you guys. Thank you, Mark, for jumping on and contributing. I truly appreciate that. And anyone else, if you have questions, I'll stay on for a few minutes longer. Otherwise, you guys are. I respect your time and I know it's getting late, so feel free to jump off, but we'll be here next. Next month. I don't know the exact date, but at the second Tuesday. The second Tuesday, 6:00pm awesome. All right, Bye, Deb. See you guys.

Andrew, thank you.

Yeah.

And you're streaming, you think? Right, I see, I see.

Figure out definitely recording. So I'll get that over to Brittany, but couldn't figure out it's not in the normal spot.

Well, that's all right. Brittany and Jess will harass you for that. They'll take the recording and, and go from there. Really cool, man. It was awesome to. To meet you here virtually and looking forward to more.

Likewise. Thank you.

All right, thanks, man. Have a good night.

You too.

Andrew. Hi.

Andrew.

Hi. I have a quick question before we finish.

Sure.

Yeah. So just quick little thing. So what do you think? Like, let's say if you have a property, right. And you buy it at certain interest rate, right. And then you want to do the refinance to of course, lower the rate. So you probably want to do the refinance. Refinance as soon as possible. So let's say in the next six months or 12 months, right from the purchase date. What if you, let's say you own the property for like 10 years, right? And then you do the refinance 10 years after, you know, it's kind of like doesn't worth it, right. Because you already like had some equity for the 10 years that you've been there and now that you do the refinance, it's kind of like starts again from the beginning. You know what I mean?

True. Yeah. Right. Yeah. That's something to weigh. I mean, if you're trying to lower your, your costs, like let's say you had a high rate before 6%, something like that, and you can get it below 3, maybe it's worth it because that's a big difference in your payment depending on the price of the house. Like in your neck of the woods, Bay Area, Danville, that's going to be a huge difference in monthly payment. So maybe it's worth it, but you're going to have an extra 10 years, like back on? Well, possibly you could have, you could start over again or you can actually refinance and keep your term. You can just lower the rate but keep your same term.

How can you do that? Because from what I understood that you can't. It's kind of goes back to like ground zero.

Different lenders have different products and there are some lenders who can refinance. And if you have like, you know, 22 years left or 25 years left, they can do a 25 year instead of a 30 year mortgage.

But then the payment's going to be higher. Yeah.

Possibly. Again, it all depends on the difference in rates and all that.

Right, I see. Okay. And what do you think in regards to like investment? Like, you know, like with the current market being so crazy with like 20 offers over asking on like single property, you know, do you think like next year gonna be better for that for like us investors? So we don't overpay for a property?

So I think it depends on where you're looking for properties. If you're looking on market for properties that don't need work, I think you could potentially overpay, especially in the Bay Area or in the suburbs of the Bay Area. Like I wouldn't say downtown San Francisco. Condos right now are a great investment and you're probably not going to overpay for that because no one wants them right now. But, but South San Francisco, Brentwood, single family homes, those are still going up. So, you know, it's an interesting, you know, dynamic right now. If you're buying properties off market, if you're buying stuff that's, that needs to be rehabbed, it's a great time to buy because here's the cool thing. I've been buying over the last four months and every single time we gained equity simply from the appreciation that happened from the time we brought the property to the time we sold it. Right, right. So the one I'm working on right now, when I bought it, the comps were 540,000. Today the comps are 600,000 in 45 days. It's insane because inventory is so low. How fast homes are appreciating. So if you're a lender or if you're a rehabber right now, or even a wholesaler, you can make really good money investing if you have good deals. The deal is what makes you the wealth.

Yeah. And how do you ever do anything like out of state, like any of those other states that you can buy such a great deal for like Such.

A little money I am doing. I'm looking for deals out of state. I haven't done any yet. I'm looking for deals in Florida and in Atlanta, and you could go to bad areas of, you know, Ohio, bad areas of Cleveland, and buy a house for $20,000 and fix it up and sell it for 70,000. Or Charlotte, North Carolina, same. Not Charlotte, but Fayetteville, North Carolina, same thing. $70,000 homes. It's just not my cup of tea. Right. I have family in North Carolina, and I'm selling. I'm selling their properties, but I'm not looking to buy any more North Carolina properties.

Really. I'm actually been looking into North Carolina a lot. Like I said, especially Charlotte. I've seen that it's like, appreciates a lot, and a lot of people buying there and, you know, it's like, up and coming.

Charlotte's a hot market right now. I personally just don't like North Carolina. I used to spend summers there, and I don't want to go back. So.

Really? So it's just like something personal that you have?

Yeah, for me, I'd rather like. I just bought a property. I bought one of my listings. It's a property that needs work. The sellers didn't want to do the work. They wanted the 1031 exchange and get out of California and get their money elsewhere because they were worried about the inheritance changes from the different propositions this year. So they said, let's just drop it. 50,000. And when they said that, I offered to buy it myself instead of keeping it on the market because I was able to give them more money than if someone paid that low price and they still paid me commission. So I said, I'll be the buyer. You know, we'll charge a very small amount of commission just to cover my lender's points. And then I'm fixing that property up and I'll hold it. The reason why I want to do that is because after I fix it up, you know, I bought it for 400. It needs 30 grand in work, and it'll be a $525,000 property within, like, 45 days. So I'll refine it.

Why don't you just hold. Hold it and just, you know, let it appreciate? You know, I am holding it in there.

Instead of selling it, I'm refinancing it at the 535, because then I can just do a refi without putting any more money in. Just do a refi at 75 or 80% loan to value and hold It.

Yeah, put some tenants in.

I'm going to hold it because, you know, properties on the west coast appreciate quite a bit. And each property that I have here, and I have a couple of, of other properties here in Vacaville, each property I have here in 20 years is going to be a million dollar property. If I buy a $20,000 home in Ohio or $70,000 home in Charlotte or Fayetteville. Not Charlotte, Charlotte's maybe like 250. I can't imagine them even doubling in value. And yet west coast homes and I guess Northeast, they appreciate rapidly. So I'd rather, if I'm going to hold properties, I'd rather get in here and ride the appreciation and be a multi millionaire instead of being a multi ten thousandaire in the Midwest.

Okay, yeah, I see the. Yeah, but then the properties here are like also way more expensive.

True. And yet if you, if you're using your license, like I just mentioned, I'm getting into properties without any cash out of my own pocket or without much. I didn't have to put 80,000 down. Right. 20% on this $400,000 house I only brought in. I think I want to say 14,000 total.

Oh, wow.

Wow.

You know, I would love to meet with you, you know, sometime, I don't know about this year, probably maybe sometime next year, if you are okay with that, would like to, you know, collaborate, maybe brainstorm, you know, that's something. Okay.

Yeah, definitely. And we will have more of these calls and in January we're talking specifically about wholesaling. So, you know, a lot of real estate agents are trained that wholesaling is bad or even illegal, and it's not. So we'll talk about how to do it the right way, how to make sure, you know, we give real estate investing a good name and how to make, how to make good money without putting all the time and effort into lending or doing a rehab when you don't have to.

Yeah, got it. Okay. And you think Sacramento market is also good? Is it like gonna go, Is it gonna appreciate much Sacramento market?

It can, it depends. Sacramento is a big area. So I think, you know, if you're in an area like 4Olson or Rockland, great appreciation there and just great, great places to be. West Sacramento probably not so much. So it really depends on the pocket inside of Sacramento. All right, well, I am going to jump off. It's been an hour and 41 minutes and this is the most talking I've done in a long time. So gonna go finish my tea and my honey everybody have a good night. See you, Kalanj.