CW 264: Credit Scoring, Short Sales and Nationwide Mortgage Financing

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Welcome to the Creating wealth show. This is episode number 264 and this is your host, Jason Hartman. Thanks again for joining me today. Today I'd like to skew toward the practical side of the ledger and we are going to have a guest talking about the subject of mortgage financing and maybe the next show. I just, boy, I've been into some great books lately, folks. And maybe on the next show we will do the interview on Abundance, which is a book I highly recommend. Just recorded that interview with one of the authors, Steve Kotler, yesterday and the book is entitled Abundance the future is better than you think. Highly recommend that book. So maybe we'll, we'll do that one for episode number 265. But today I want to talk about some practical stuff. The good old subject of obtaining financing, how you can do it, how you can overcome the challenges and the difficulties and experience the wonderful benefits of what I call inflation induced debt destruction. So that's what we'll do with our guest today here in just a moment. And I should also mention and thank a lot of our clients who have been recording episodes with me lately where we've just been collecting more and more practical case studies, client experiences, hearing what they're doing to build their real estate portfolio and have a much, much more abundant and successful and easier including passive income, financial life as the time passes. Really what this is all about is it's putting time on your side when you hear the news stories about the government overspending and you hear all the bad news in the world. All of that, pretty much most of it, at least if not all, plays into good things when you follow my plan for investing in income properties that will all be available to you on this episode in future episodes as well. And I just want to remind you we've got a couple of events we will announce very soon. We're just getting the details finalized for an income property tour and a Creating wealth in Today's Economy seminar. Our first time doing it on the East Coast. Yes, it will be in one of my favorite markets right now, Atlanta, Georgia. And we will do the same thing we did in St. Louis, but we'll do it in Atlanta where we'll arrive for a reception on Friday evening probably in late September, somewhere around there. And then we'll we'll have the reception Friday night. We'll have the Creating wealth in Today's Economy boot camp all day Saturday. And then we'll have a property tour on Sunday. So this will be in the Atlanta market. And look for details on that real soon, soon to be announced. And as soon as we get everything finalized, it'll be on the jasonhartman.com in the events section. And then we also have our semi annual Meet the Masters of Income property event coming up. And we have not finalized our location for that, whether it'll be Southern California or Phoenix. But I will say that we are going to have a very different Meet the Masters event this time. You know, we keep kind of playing with it and seeing what works better. But what's going to be different about this event is not really the format, but but the speakers themselves. And we're doing this especially for you regulars who come to every single Meet the Masters event. We just love seeing you come twice a year and coming back all the time. But what we're going to do is we're really going to mix up the speakers this time and have some different speakers, some different topics, so that we keep you stimulated and thinking in new directions about your portfolio and about your retirement and your passive income and building wealth in your real estate business. So look for that on future shows. I'll keep today's monologue really short and hopefully do a longer one next time. And you guys tell me you like my long monologues. So some people say I go too long, but I'm going to skew toward the longer ones because I get more people saying they like the long ones and then having the guest after that. So let's go right into our guest today where we talk about mortgage financing and exploiting the great lending opportunities. You know, as one of our affiliates and prior show guests, Randy always says most people think of the property is the asset and the mortgage the liability, when in some ways it's really the other way around. So let's talk about that mortgage asset here. And we'll be back with that in just a Moment.

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It's my pleasure to welcome Steve to the show. Steve is one of the top mortgage people that we work with and he finances properties all over the country and has vast amount of experience in the mortgage business. So it's great to have him here to talk about that all important aspect of financing. Steve, how are you? Welcome.

Good, Jason. And thank you very much for the opportunity.

Good, my pleasure. First of all, where are you located?

Seattle, Washington.

Beautiful place when it's not raining.

Yeah, that's a good point.

It is a beautiful place though. So, Steve, first of all, give us a little background. You know, how long have you been in the mortgage business?

I'm an old timer. I've been in the business for approximately 25 years.

Okay, and are you a mortgage broker, a mortgage banker, or do you work for a bank directly? You know, maybe talk to the listeners for just a moment about some of the reason I asked you that. I mean, I know what you are, but for the benefit of the listeners, talk about the different types of mortgage people there are out there.

Well, you have our company, we're a mortgage banker. We're probably a little bit different than some of the other companies in that not only do we fund our loans and do the underwriting here, we also service the majority of our portfolio. And so that kind of sets us above some of the other folks. We handle everything from all the way from the pre quality all the way down to the servicing on the mortgage product.

And pre qualify means pre qualification. So when someone's shopping for a mortgage. Yeah.

And that versus, you know, out in the broker community. Typically what they do is they'll work through a third party and that to be able to funnel the loan store, in other words, and that they might put together along with the intention of that they're going to run it through, you know, another bank or possibly a mortgage company.

And I Remember, you know, I've been involved in several different types of mortgage companies over the years. And I remember when I had my own mortgage company, we were a mortgage broker. And the thing we always aspired to be, Steve, is we always aspired to be a mortgage banker. Never quite got there, never got around to it. But the thing with being a mortgage banker is that then you have a warehouse line and so you fund loans directly off your own warehouse line and that gives, it gives you more control of the financing. Right. Is that the benefit to the consumer?

You know, that's absolutely correct. You know, being able to fund the product and utilizing those warehouse lines and that it just, it's a, you know, it's a big step for anybody to take. And so, yes, it's a great way to be able to do it allows us to fund a lot more products. And we've got several, I think we have three or four pretty big warehouse lines. And when I'm talking, we're talking, you know, eight figures and above.

Wow, those are big warehouse lines.

They're huge.

Big company for sure. Well, Steve, what are some of the myths and misconceptions and misinformations that you hear out there from your competitors and just kind of researching the competition and then let's drill down and talk about how people can have a more successful financing experience. It's challenging for investors to get financing nowadays, but you know, in a way that's what makes it such a great opportunity. Because if you're willing to jump through the hoops, other people may not be willing to, and that lessens the supply of rental property out there for tenants, thus increasing your rent and lowering your vacancy and just making your properties perform better, all in all.

Well, you know, I guess there's really two buckets that I see as far as borrowers. You know, you get those entry level borrowers that just want to get in, they want to get started, and then you've got the other borrowers over on the other side of the other side of the fence, or they're experienced people. Now, the entry level borrower, you know, their first question is, how do I do this? How do I get in to start buying investment properties? And that's where somebody like myself is going to come in. What I'm going to typically do, and that is when a borrower contacts me, I want to try and find out where they want to go, what not only their short term but their long term goals are at that point in time, what I'm going to instruct them to do is to go to my website and have them complete my online loan application with that. Once that's done, then what that allows me to do is download the application, pull a credit report, run it on Fannie Mae's desktop underwriter. So now what I'm. Now I've got a blueprint. Once I received that approval back, I've got a blueprint as far as the documentation. Then once I get that documentation back, what I'm going to do is I'm going to review that to make sure that everything fits in line, get with the borrower, kind of go over the approval process, you know, reserve requirements, because typically on investment properties they're going to have to have a little bit of cash and that for those reserves. And then of course, it's always nice to have a little, what I want to say I'm going to use the term slush fund, you know, in case appraisal doesn't come in or just, you know, for whatever reason, it's always nice to have a little bit of a cushion to fall back on. And so that's really, you know, really where I start with my borrowers. You know, some of the areas that I see where there's some misinformation out there is let's talk about rental income. When somebody buys a property, we don't have a two year landlord history experience, typically that is an investor overlay. So what it allows me to do, if a borrower is buying a $50,000 property and they've got a mortgage for $400 a month, and let's say the property rents for 750, I can utilize 75% of that amount. And basically what that does is that pretty much washes the payment or it may even show some positive cash flow from day one. In addition to that, it doesn't even have to be rented at the time. So if the appraiser, when he's out there inspecting the property, the property's vacant, they'll provide in that appraisal a comparative rent schedule, which if the appraiser says it's worth 850 again, I can utilize that 75%. So that really, for that borrower that wants to get in, wants to get in as far as buying properties is very beneficial to them.

Okay, so first of all, we're talking about beginning investors here. So maybe the sort of the typical beginning investor, they owe, you know, they own their own house and they're looking to purchase their first couple, three, four, five rental properties. And when they do this, I mean, what is it going to take for them to qualify the rental income, the projected rental income on those properties will count toward qualifying, right?

Correct. That's absolutely correct.

Now, will it count at 100% or at 75% or some imputed vacancy rate?

75%.

Okay, so that's what you were referring to earlier then.

Yeah, and then I go a step farther because let's face it, the majority of my investors are out of state. So I know that they're going to have a property management agreement. So I'll hit them another 7 to 10% just, you know, just to take that into, take that into account. And again, it's just an added buff because like I say, I know that 95% of all my investors are buying out of state and I know that's an added cost and that's something that Fannie doesn't factor in.

Okay, so just make, let's make sure people understand this. So in other words, just for simplicity of example, if you are purchasing a rental property and that that income property is projected to rent for $1,000 per month, the bank is only going to assume that you're going to receive $750 per month. In other words, 25% less than your projection on that property when they're qualifying you in terms of your, what's called DTI or debt to income ratio. Right. So can we run through an example on this?

Sure, you bet. And then so let's just say, well, let's just take that same example. So what you would do in that, is it rents for, is it rents for $1,000. Now Fannie tells me, Fannie Mae, because we sell all of our loans directly to Fannie Mae, that I've got to knock 25% right off the top for that. So that's 750. I'm going to knock another 7 to 10% off because like I say, they're getting, they're going to have a property management agreement. So in theory, let's just say I'm going to in all practical purposes and that I'm going to utilize 60, 65% of that amount. That's going to put them at $650 a month in rent. Now if they were to have a mortgage of say, $75,000, they would have a total payment of $560.01. So what I would do is I'd subtract that 560 from the 650, which is going to be $90. And so they'd actually show a positive cash flow of $90.

So that's the way it works. So what happens here is, unlike a home mortgage, I mean, if people, people need to have extra income in order to start buying the income properties because the bank is assuming you're receiving a lot less than you really are. So each property sort of less, it becomes really in the bank size, it becomes a debt, even though you may have positive cash flow on it. If you don't have more than 25% positive cash flow, then the bank will think, oh, this property's losing money. Right?

Correct.

Yeah. Okay, so that's a good way to look at it. Okay. Now, what about credit scoring? How are we dealing with credit scoring nowadays?

Well, there's a, there's there's two elements on the credit scoring. When you have one to four finance properties, you have to have a minimum credit score of 620.

That's not, that's not too difficult.

No, no, that's not. Now correct me, you know, here's the reality at 620 and that you're going to probably have some, you know, some derogatory information. So that's not absolutely a guarantee that you're going to get approved.

Right. So in other words, now just explain that though. So what you could have is you could have a 620 or above FICO score, which would qualify you on the score category. But if there's something derogatory on the report itself, which there would be if it's 620, because that's not a super high score. If there's something on the derogatory in the report, they can kick it out for that reason. Right. For example, if you got your score, say you had a foreclosure and you got your score back up to 640, which, you know, you're moving up there, but there's still that foreclosure on the record, what would that do? Would they give you the loan or. How far back does the foreclosure need to be?

The foreclosure has got to be seven years.

Seven years, not three. Huh?

There's got to be, got to be seven years from the date that it was actually foreclosed upon and that to be able to buy another property with Fannie Mae.

Okay, now I hear conflicting numbers on that. I hear three years. And then it also depends. Maybe they've used one of those credit repair services and they've been able to remove a foreclosure on their credit report. But let's assume it's on there. Let's assume it's on the report, you're saying seven years? I've been told three. Who's right?

Well, seven years, is it. Seven years is a number. The only exception to the rule, and this having to deal with foreclosure is on a short sale.

Okay, so a short sale, how long in the past can that be?

Two years.

Oh, not so bad.

Okay, yeah, not so bad. But seven years, Annette, I don't know where people come up with three years. I mean, FHA is still only at two years on their foreclosure. On the conventional seven years, no exception.

And so that's conventional loans versus FHA loans.

Correct.

All right. Talk more about scoring and derogatory remarks. Anything else?

No.

We talked about foreclosure. What about a bankruptcy?

Bankruptcy, you have to have four years.

So four years beyond a bankruptcy for fha.

And conventional or FHA is only two years.

Two years. Okay, so FHA makes it easier than conventional financing, right?

Yeah, that's correct. But the FHA is not going to be utilized to buy an investment property. It can't. Yeah, that's only for primary resident.

That's for homeowners. Okay. All right, good. Go ahead, tell us more.

The other element is, once you go past four finance properties, the score increases 100 points. So it's a 720 minimum score once you go above four financed properties.

Okay, so the four finance properties. Now, there's been conflicting information about the limit. Is it 10 financed properties? Is that the limit?

That is the Fannie mae limit of 10 finance properties. Now, what? That does not include. That does not include any commercial properties, bare land, they only count in the mix one to four family units.

Okay. Now does it matter if those have been financed by Fannie Mae, Freddie Mac, or is it just if they're one to four units, which is considered a residential property and they're financed by anybody? So even if you bought one and the seller carried back a note or, you know, we have some special deals around the country in different areas where we've got community banks that are smaller, community banks that are making some pretty attractive portfolio loans. Does it matter if, say, one of those community banks financed it or the seller carried back paper?

You know, that's a really good question because there's a lot of confusion out there. What constitutes a, you know, that finance property with the Fannie Mae limit if there's financing on it, irregardless, whether or not it's Fannie Mae, Freddie Mac, if it's private financing, community bank, as long as it's got a mortgage on it, it's counted as a finance property.

Okay, so here's the other thing. And this is where it all gets so murky, folks. By the way, you know, a lot of lenders will say, well, if you had a seller carryback or some sort of unconventional financing, it doesn't count because maybe it doesn't show up on your credit report. So that's like another layer of murkiness, right, Steve?

Yeah, it's absolutely correct in that. But you know, if they've had it for a while, guess what I'm going to pick it up at is under tax returns.

Right? Right.

They write the interest off.

Good. Okay. Now what else do people need to know? If someone. Let's do kind of another example here. Maybe this is the borrower. This is a borrower who is doing pretty well. They're making $15,000 a month. And maybe you would just want to have your software open or your calculator to go over this example with. But they make $15,000 a month and it's a couple and one of the spouses does not work. One works, makes 15,000. They've got a house payment of $3,500 on a primary residence and then they've got two car payments of $500 each. And their credit score is 720 or above. So they've got good credit. How many properties can a person like this buy? Well, it depends how much the properties are in terms of investment properties, of course. But because that 25% imputed vacancy rate, that falsely imputed vacancy rate starts to kind of destroy or wither away at their debt to income ratio. Right. How can they do, can they get up to 10, you think?

Yeah. Well, you know, the other determining factor that I'm going to look at here are assets, because once they, there's asset reserves that they have to have when they own investment properties. Now what I'll do is I'll define that between one and four finance properties. They have to have six months principal interest, taxes and insurance on the subject property.

Okay. So if they, they've got. You said that if they're above four, right?

No, that's one to four.

Oh, one to four. So if they've got four finance properties or anything less than four finance properties, they've got to have six months piti, principal interest, taxes and insurance in reserves in the bank. Right. Now if it's in a brokerage account.

Or does that, I can utilize that. So we can get pretty, We've got some flexibility as far as the reserves.

All right.

They've got to have the six months PITA on the subject. And then if they own other investment properties and, or a second home, they have to have two months PITI on each one of those.

All right, so two months. Two months on each one plus six months on the new one that they're buying to get them above. Well, no, but they're still below four. Right. Finance properties. Okay, yeah.

So they could, let's say hypothetically a person owns their primary. They've got a second home and two rental properties. So on the subject property, I'd have that six months and then I'd have to have two months on their second home and two months on their additional rental property in reserves, the primary residence. Now this is where, this is where I do see. I see some lenders include the primary in there. That is not a Fannie Mae requirement. That's a lender.

Or what's a lender overlay?

Well, this is where Fannie Mae, they'll write the guidelines and what lenders will do is they'll say, well, that's fine. Let me give you an example. 10 finance properties. We're not comfortable with 10 finance properties. We'll only get a four. So we'll restrict it at four. They have. Fannie Mae doesn't have a two year landlord history experience requirement. Investor may say, I'm not comfortable with that. I want to see one. So they can always make them more restrictive.

Investor, meaning the lender. See, when you say investor, the people listening think they're investors. But when you say investor, you mean the lender, the person.

I'm thinking of the lender. That's correct.

What else do people need to know.

You know, that done correctly, the ability to buy these investment properties is attainable. They just have to get with somebody like myself that's going to be able to help them through this financial maze. And I say that as a maze because when I look at lending, right now we're back to lending what it was 20 years ago. Now we've got some, you know, obviously we have some tools in lending that assist us that we didn't have 20 years ago, automated underwriting. So, you know, those are great tools for us to have. But people get scared. They don't think, they hear all these rumors that, you know, financing is not attainable and tough to get a loan. You know, I tell people, I say, as long as you pay your bills, you've got money in the bank and you've got a job and that there's a good chance that you can do this and you know, people shouldn't be scared. If you never ask, you'll never know. Right.

Steve, that raises two questions. I want to talk to you about self employed borrowers because that's a huge segment of our economy nowadays, of course. And I also want to talk to you about, I mentioned and asked you about the more serious credit issues, bankruptcies and foreclosures. We did that. But what about more minor credit issues like some late payments, medical bills, things like that?

They're obviously going to have some impact on credit. I see a lot of people in that that will have some, you know, they've had a couple of late payments a couple years ago. I've even seen them where they've had some more recent ones in like the year that they're trying to apply for finance. A lot of it depends on the number of payments, the severity of the payments. In other words, were they 30 days or were they 90 days? That could have some effect on the underwriting decision. I have yet to see it disqualify anybody, you know, unless they've got, you know, I'll take. Well let me, let me recant that. I've seen some people out there like with their student loans because that's become pretty big and where they'll fall way behind under student loans, you know, that could definitely answer get it to where we could not get enough get an approved eligible.

What about self employed borrowers? If they're self employed or in a commission, they're employed but it's like a commission only position or it's really maybe a base salary or a commission, whichever is higher. And they want to be qualified based on the commission amount. And say for example this borrower say they're new, they've only been in this business or this career or with this company. Let's distinguish all of those for maybe six months. Do they have to have a two year history? Are they going to average their income for two years or how does that work?

Well, let's first address the person. If a person is straight commission where they don't receive any base, I'm going to have to have two years of returns in that or two years to show that they've been receiving commissions. And then I have to average those over two years.

Okay. So it's going to be based on two years tax return. So if your first year in the business you didn't do very well, but in your second year if you did great, then it will be averaged over the 24 months, correct?

Yeah, correct. And the other Thing is, sometimes you get a little latitude. I mean I might have one full year of tax returns and maybe we're in month number 10 or 11. There's some discretion there. As long as the income remains consistent, as long as it keeps going up, you're probably all right.

Now the question there is what if they change jobs but they're in the same industry, they're not going to start the two year clock all over, right?

No they will not. As a matter of fact, I had a gentleman that did just that same type of business. He just moved from one company to the next. All we did is we wanted to see 30 days worth of pay stubs or his commission schedules to make sure that his income wasn't going down.

What about a business? What about someone starting a business?

You know, business typically you're going to want to see two years of returns on any self employed individual. And somebody like myself really it's a matter of going back, looking at the returns on a self employed individual and asking the right questions. Because that's one of the things that I see a lot of our competition doesn't do is ask the questions for self employed. I'll give you an example. Had a borrower that comes in, you know, he's self employed, he's got a lot of credit and so when I look look at his adjusted income, he doesn't qualify. Well, a lot of people would stop right there. I go a step farther in that I know like I know a lot of self employed individuals tell me what you're writing off on the business and 9 out of 10 times every bill they have on their personal credit report they write off through their business and expense it. And as long as we can get the documentation and what I would request is probably 12 months worth of canceled checks to show that they're actually paying those bills to their business.

I was going to ask you about that because one of the big things that business owners do, Kiyosaki talks about this in the rich dad books, is that you get the benefit of spending the money on a pre tax basis. Well, maybe I'm saying that wrong. You spend the money, take a deduction for spending it and then you pay your taxes based on the net, the adjusted gross income and a lot of expenses. Entrepreneurs do find a way to put those through their businesses and so that makes their income lower, but really their income is higher because they're getting the lifestyle benefit of all these things. If they, you know, they always buy themselves a company car, maybe two, you know, maybe there's even a, maybe there's even a company yacht, who knows, a company plane. And these are things that they, if they weren't self employed, they would have to pay for outside of that and pay for on an after tax basis.

Yeah. And again it's back to. And that's the responsibility of the lender to get with this client and having that experience level working with self employed individuals is to be able to go back and ask those right questions and say, okay, so I know, I know what you do now. If you can provide the documentation, we're probably good to go. I mean I've got a guy that makes his, you know, net receipts are 160 grand a year. He's able to expense everything, his house, his cars, his credit cards, everything he showed he's making 1,200 bucks a month.

Yeah. And that's not going to qualify him for anything. What did he do? Were you able to get him financing?

Oh absolutely, yeah, he's on his third property.

Okay, good talk to us. Did we cover the self employed and the commission only issue pretty well or is there more you want to say about that?

You know, and I think what it really comes down to is especially with your self employed borrowers because they have a tendency to be a little bit more complex borrowers is just being able to go back again, ask the right questions, be able to go through their tax returns. There's items that you can pull out of tax returns that you can add back for income that is give you an example of that, of depletion and depreciation, you can look at that. And then if you get some of these other borrowers that are business owners, when you look at their balance sheets, there's items that underwriters specifically look for. Again, as a lender you have to be able to go back and say that, okay, so I know you're looking at that, but here's why they have this. And so again it's just a matter of being able to do a really thorough job analyzing the tax returns.

And that's where experience comes in, doesn't it?

Absolutely.

Let's talk a little bit about those credit repair agencies and things like that. People recovering from financial hardship. Certainly there's a lot of that that's gone on in the past few years and there are a lot of these places out there that make a lot of promises. And I've had one of those companies on my show a long time ago and just wanted to get your thoughts on how those things work.

If they work at all they do. And you're absolutely right. It's like our business. There's a lot of people that they'll promise the world, but can they deliver? And you see the same thing within the credit repair agencies. You know, that in itself, that's a very, what do I want to say, kind of complex environment. I mean, it's not as simple as what everybody thinks. There's a lot of value into it. Again, if you get with the right company and the right individual. So we've had a. And there's some things that I can do on my side that don't require credit repair. I mean, you know, occasionally something will be placed on a borrower's credit report in air. While it's easy for us to just say, okay, so we see this. The borrower said, this is not mine. They go back to the original creditor, they get a letter, they provide us with that letter. I can get it removed. It's only when you get into the stuff that's really deep that you want to go out there and look at credit repair.

The thing I would say is don't pay big, huge upfront fees. Those are where the scammers are. If it's more than a few hundred dollars, they want to charge you two, $3,000. I would say that's probably too much run for the hills. And it's probably worth doing a Google search on the person's name, the company's name. Problem is there's so many ways to hide from this kind of stuff, but just doesn't hurt to do take a look or get a referral from someone you work with, someone you believe is reputable, and do it that way. You know, what do you think, Steve?

Yeah, and that's absolutely correct. I mean, you know, when you come to me, I mean, my job is to gather information for my clients. And I do work and I work with a couple of different companies with credit repairs. We've had good success with them. And again, they don't charge a lot of upfront fees. If they've got to work with them for a period of time, their fees are really, really affordable for the clients. But you're absolutely correct. If you get that person that says, I need 500, $1,000 up front, that's probably time to turn tail and run.

Oh, see, I would say 500 is probably okay. But if it's more than that, I mean, they're going to charge you something, right? How much do some of the agencies.

That you work with charge.

Again? And it's Going to vary from client to client. Yeah, 500 is going to be probably a little bit on the higher end for a more complex client. But a lot of it is the depth of repair that they see to be done. I mean, I have one of my credit customers come back. I suggested that he talk to the credit repair person. The credit repair person called the customer and called me, got me on a conference call and says, you don't need me. I'll tell you what to do, and you can do it without me. See, that's the kind of. That's the kind of people that I want on my team.

Sure, sure. And one of the people that you work with in the credit repair world, we put out a request to get that person on the show here. So look for that on an upcoming episode. Just if you just find these guys on the Internet, a lot of them are total scam artists, so be careful. I think the best thing is a professional referral. Here's one more question I want to ask you just in closing. How long does it take to close a loan? I mean, are you getting them done in 30 days or less? Or is it about 45 days for an investment?

No, I'd say, you know, 30 days is probably a pretty good, you know, pretty good way to gauge it as far as timing. Now, of course, there's always exceptions. There's always things that can come up. Typically, you know, where I see the majority of the items come up that could possibly delay closing is when they start to do the rehab process that we model on the property. And so that can delay things a little bit. But I'd tell you, between 30 and 45 days, that's doable.

That really is what happens when you start crossing state lines. Are there any funny little quirks that you want to mention going from state to state? We do business in many, many states and just always look for the best markets in which to be investing at any given time. But a lot of real estate laws and customs are sort of state by state. What do you see when you go across state borders?

You know, I haven't really seen anything. That's really where it's really impacted my clients. You know, it's like anybody. Like the state of Washington, for example. The state of Washington is a community property state. Some of the other states that you buy property and aren't. So I think this is where when the clients are making those moves, they have an extra, you know, they have an attorney in their home state to where they can get it set up. As far as asset protection, that sort of thing when they start crossing out these state lines. But on my side, the Fannie Mae guidelines are the same in Washington as they are in Tennessee.

Let me take a brief pause. We'll be back in just a minute.

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Steve, last question for you and this time I really mean it. It is the last question. What are your thoughts about the investment market? I mean, you've been in the business well over 20 years now, 25 years, a quarter century. So you're like me, you're a veteran. You've been around a long time. What are your thoughts about the opportunities for investors nowadays? What are clients saying to you? What is their outlook? What is your outlook?

You know, of course you get a lot of people that will run around and talk about how bad the real estate market is right now and that anybody that buys investments are making bad decisions. That's really contrary because this is the time they should be buying. I say that simply because of the fact I see so many of my clients do so well on their properties. They buy these properties, they're making money right off the bat. But it's a great time. They're affordable. And you know, when clients tell me when they talk about these, you know, the bad time, I want to point them back to the mid-2000s when the market was at a high and you had a lot of people that were buying properties at the auctions and the foreclosures, they bought high and guess what? The market tanked. And so a lot of those people that made those errors back during that time are the people's inventory right now that investors are buying because they made some bad decisions at buying times. It's a great time to be buying. Rates are, you know, rates are very conducive for investors buying. I mean, they're mid fours right now on 30 year money. I mean you can get down to almost 4% on a 15 year note.

I mean, what an unbelievable opportunity. You know, the great thing for us as investors, Steve, is that we outsource our debt to tenants you know, investors don't pay their own debts. Tenants pay it for them. It's a great scenario. And right now, even if we had a property sit vacant for 30 years, if it was vacant for three decades, I say with a real rate of inflation, we'd still be getting paid to borrow that money. Because if you ask me, the real rate of inflation now is about 9 to 10%. And if you can borrow in the fours you're getting paid to borrow the day you borrow. And then if you don't pay your own debt, if you outsource the debt to the tenant, you're getting paid a ton of money to borrow that money. So mortgages become a huge asset, don't they?

Yeah, they really do. And the more and more people, you know, we go back to where I was talking to people that may hear this, now's the time to buy. I mean, the market has softened that. There's just a ton of opportunities out there for people to buy these investment properties. The financing is there. What they need to do is just take that step and ask and see if they can do it.

Good stuff. Well, Steve, thanks so much. People can get ahold of you through any of our investment Counselors. Just visit jasonhartman.com and start communicating with one of our investment counselors and we will put you in touch with Steve and his team. You've got a big team there and you just run a good operation. So thanks so much for joining us today, Steve.

Thank you very much, Jason.

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