Episode 26 Matt Brost | Lender For New Builds First Time Home Buyers and Investors

Hey, what's up everybody? We are back with another episode and I'm excited today. The New and Experienced Investor Podcast. I'm one of your hosts, Alex Barnett.

I'm the new guy and I'm always excited. And my name is Joe Homs, and I guess that makes me the old guy. Or the experienced one.

The experienced one, as I like to say. Um, today we have an awesome guest. He started off as a viewer and then became a guest cuz he was blowing our minds through the chat and we're really excited to have him. We have in studio today, Matt Brost. Matt, what's up?

Not much. I'm just hanging out, but I'm glad. Thanks for having me on the podcast, guys.

Absolutely. Yeah. So we're gonna get into it in just a few minutes, but Matt is a lender. He specializes in new builds. first-time home buyers, and also working with investors.

That's right.

Awesome.

Okay, uh, before we jump into it though, Joe, really quick.

Okay, it's here. I hear some background music.

Yeah.

What's that?

It's background music.

Oh yeah, yeah. Is it able to turn it down a little? Okay.

Yeah, just getting the vibes going.

Yeah, it's distracting.

Okay. Yeah. Okay. Background's okay, but it's too much. Okay.

All right. Joe's producing because our producer's not here, so it feels like he has to, you know, take the wheel.

Got it.

Okay. Um, really quick before we jump into it, we do have a meetup coming up on, uh, October 30th. So I'm, uh, pretty excited about this. It's, uh, with Sam Meskimen.

Sam.

Sam. And, uh, a little bit about Sam is he was an aerospace engineer turned real estate investor.

Imagine that. I bet you he reads every single page of a document.

Yeah, he does. Yeah, I bet he does.

That's how engineers are. They have to read everything.

Oh yeah, the ins and outs. Knows every number down to the last cent.

Yep, yep.

Which is good, um, in certain aspects. But so Sam's gonna come, he's gonna do a little presentation 'cause he created this app. It's a really cool app to where you can help fund a flip. So they'll go out, he's done hundreds of flips, you know, 7-figure company, and you can be a part of that for just like owning a share of the flip almost. So it's pretty interesting. It's almost like the crypto investing space meets real estate.

Yeah.

So I'm kind of excited to hear about that.

And it's at a new location.

Yes, it is at a new location.

And it's huge.

And it's huge.

And it's outside.

Yep.

So if it's cold that day, make sure you bring your jacket with you.

It's not. I already looked it up. It's going to be 80.

Oh, nice.

Yeah.

That's good.

Yeah.

That's really good.

I know.

That's California in November for you or October.

Okay. Sounds good.

I know. I looked it up. Joe was like, I don't know. It's outside. And I was like, yeah, I guess you're right. And then I looked up the forecast. That's the forecast. At least it's like 78 or something. I'm like, okay.

I heard someone talking the other day that right now summer ends, but now it's the local summer begins.

Yeah, exactly. Exactly. So you guys, if you're watching right now, you can scan this little QR code or you can go to ocinvestormeetup.com.

On Meetup.

On— well, they can go to that.

Yeah.

.com. Oh, really?

Yeah.

You don't even have to go to Meetup.

Oh.

Yeah. I'm doing stuff in the background.

Nice.

Yeah, I'm doing stuff in the background, but it does go to the Meetup page.

Okay.

Got it.

Got it.

But it's just easier to remember. But yeah, we want to see you guys there at the new location. And, you know—

Bring a friend.

Bring a friend. And, you know, it's a good place to network, find deals. We've connected people before that have done deals together. Private money lenders, other lenders, you know, it's a great place to, you know, just come and hang. So be a part of that. Next, really quick, this Saturday I'm gonna be hosting with Queen Closer, Jen Shelton. It's called Power Hour. So what we do is we bring a bunch of new people together who haven't done a deal yet or are trying to do their next deal and maybe a little scared talking on the phone. We pull a list and then we help you just dial right there and put deals together. So we—I made a little promo for it. So peep this.

Teach people how to cold call.

We're closing deals.

He's an experienced investor. She's a closer. You know, you got everything you need. All you need to do is just show up, do the work, show up, do the work. Read my lips. Show up, do the freaking work.

She's up next from SoCal.

She's closed over 40 deals and is the best closer because she uses creative finance. And she said she'll even use some notes if needed.

So I wanna see if she brought this notepad to the Closer Olympics today. Shout out to Jen.

Jen! Jen Shelton, how you doing?

Was that epic or what?

That was, that was awesome. And I wanted to say, I went to the last one. Yeah. And I was very impressed. I think that's where you took a lot of those videos and stuff like that. Yeah. And people show up and, you know, what to expect, they put you to work. I mean, they give you a list, numbers, addresses, Uh, type of deals you should be calling on, and they want you to call. And Alex is there, and the other young lady's there, and they're kind of supervising everything and giving some instructions. But if you actually want to, like the lady said, work, yeah, then go to the event.

That was the best, like, little pitch, you know? Show up, do the work. That's literally all you got to do. Yeah, I mean, that's like 90% of this business, so Yeah. Show up and do the work. But, uh, yeah, so you, um, if you're around this Saturday, and we're doing it every 2nd and 4th Saturday, but, you know, love to meet you and, uh, come and hang and let's do some deals together. But Matt, so you were lighting up the chat, uh, a couple weeks ago and just dropping some bombs.

Sorry for the spam.

No, no, we loved it. It's like the interaction is kind of like what we live for. So You were bringing up some really cool, I guess, ways that people could still be buying today. Because it's all in the news. We got interest rates doing this, doing that. Everyone's trying to figure out what the next move is. And we're always just saying, just find a good deal and just buy it. What are your thoughts on that?

I think you hit the nail on the head right there with finding the right deal, but also leveraging the tools that are available from, from your lender as well as leveraging your agent and, and putting that all together. So with, with what we were talking about last time, it was— I was telling you how you can turn your, your regular first-time homebuyers getting a mortgage and have them be putting in an actual cash offer. on their home. So they're able to— and with that, they're able to essentially buy that home with cash, but they're closing in a mortgage. And how that works is, so they're going to get pre-approved like every other buyer out there. They're going to get pre-approved. We'll run the soft credit check on them. We do soft credit checks, but we'll run a soft credit check on them. We'll have them fully underwrite on underwritten. And then if they want, they can go with something we have that's called our power buyer. And with that, they put a 3% escrow deposit in with our fund. That's the power buyer, which will allow, allow them to use the fund to put in cash offers on that property. Now, they'll— now once they do that, they're able to waive escrows and everything like that, because we already have them fully approved by an underwriter. And then post Closing is when we'll close the loan, and then once we close the loan, they'll be refunded back 2% of that 3% initial deposit that that they put in. If they close the loan with a different lender, like if we're not able to do it, or if they just didn't like me anymore for some reason, they'll they'll get back 1%, and if they end up not closing, they won't get anything back, and they'll do a lease back until they're able to close.

Okay. I think we kind of skipped over your kind of little background and what you're doing now. And yeah, maybe go into that a little bit.

For sure. So my background, I got into mortgage lending back in 2020 when COVID hit. Before that, I was doing debt consolidations. At that time when COVID hit, it was kind of a flip-flop for those different industries. debt consolidation. No one wanted to pay their debt back when those COVID guidelines came out that said that people didn't have to. And then I always wanted to get into mortgage lending and that was the perfect pivot for me. And since then, so started out me and a couple of buddies that I knew from back from high school, we had our own mortgage brokerage shop and we were just banging the phones during 2020 and 2021, just refi, refi, refi. Because the rates were, you know, 2.25%, 2.75%, depending on what kind of loan. And, and then the rates went up. And now, now it's like, okay, we were banging the— we were banging the phones, buying leads. Now, now no one's able to refi anymore because the rates are so high. Now we need to— and we just ignored all our purchase business. And so that's when I made the transition over. From that company, they wanted to continue in that direction and I wanted to go in a different direction. So I hit up my mentor who is big in the building industry and he taught me the ways of the builder business and helping out builders with their permanent financing on their new construction developments, as well as focusing on first-time homebuyers and networking with the agents and all that. And So it went— it was a, it was a huge shift actually from switching from going direct to consumer to now helping provide solutions for the professionals that are in the industry for their clients.

Okay. And I heard you talking earlier, you're, you're primarily working for builders?

Yes.

Okay. And how's that going?

It's going good. So, uh, right now, um, working on a 15-unit condo conversion. In Ohio. And then I'm helping out a builder who in the high desert, they have about 50 single-family homes that they're selling out in like Victorville, Apple Valley area that are left that are all going to be built by January.

And with the interest rates so high, are the builders offering any type of incentive? Or where are these buyers coming from that they're buying at 7% interest?

So the builder will— it depends on the builder. Every single builder is different. Some builders have their own mortgage company that's built in. Some of them don't. But what they're, what they're doing is they're providing lender incentives. The builder really likes for the buyers to work with their preferred lender because that helps them control the process and protecting their investment.

Mm-hmm.

But they'll, they'll make it worth it for the buyer with the incentives that they're offering. On a lot of the new construction homes over here in Orange County, if it's like around $800,000, they'll provide, let's say, $20,000 towards the closing costs of the loan if they use their preferred lender. And that they'll be able to use that to either do a permanent rate buydown. That's where you see like those advertisements from like Lennar Homes get a 4.99% interest rate in today's market. You're like, 4.99% interest rate? That's not even possible. But they're putting a lot of money, they're putting their own money to help the buyers buy their rate down and make the difference and compete with the resale market that's super heavy out here.

Now, on the rate buydown, because I've been doing this for just a little bit, I don't know if it's any different. I think it is than what I was used to when we did a rate buydown 20 years ago. They were literally buying the rate down for the length of the mortgage. Do— is— I've heard that that's not the case now, or—

It depends on how you want to structure it. You have the option of doing both. So there's temporary buydowns and there's permanent rate buydowns. So permanent buydown is just like buying points. Okay. It's the same thing. You're paying points to get a lower interest rate for the life of the loan. Now, you could also do a temporary buydown, whether it's a 2-1, a 1-0, or there's even 3-2-1 buydowns out there. Where for the— if it's a 2-1 buydown, for example, excuse me, the first year your interest rate will be 2% lower than the note rate. Then the second year, it'll go up 1%. And then in the third year, it'll go back up to your qualifying note rate. Basically, with a temporary buydown, you're able to get a lot lower on the interest rate than what you would be able to do with a permanent buydown. And also with the temporary buydown, like if you're one of those that think that the rates are going to go down in the future, you're able— the funds that are paying for your temporary buydown, which is essentially your temporary buydown, is your rate is artificially lower. And you have money that's paying for that in a separate escrow account that's making payments towards the interest alongside you as you're making payments on your mortgage. That's artificially bringing your rate down 2% or 1%. And if the rates go down within that temporary buydown period, you're able to use those funds towards a principal reduction on your refinance.

Okay. Are the lenders asking— I mean, this almost sounds like an adjustable rate mortgage. Are the lenders asking for trouble here? Because it sounds like you're qualifying them at the high rate. And then they're getting the low rate for a couple of years. So that's good that you're doing it at the high rate. But my concern is that, you know, somebody's paying a lower rate, and then a couple years later, they're paying way too much. And that's what happened in 2008.

I hear you. I hear you. So with their, their only, they're not getting qualified off of the temporary buydown, bought down rate. They're getting there. We make sure that they're approved off of the note rate. Okay. So as long— so any client that comes to me and says that they want a temporary buydown, I'm going to tell them, hey, this is going to be— this is your payment right now for the first or second year. But the permanent— the permanent rate, the payment is going to be this. Are you comfortable with that payment? And if you're not comfortable with that payment, we got to talk about a different price point for you. Are you putting in more money?

Got it. Got it.

Wow. So, I mean, you're, you're, you're— people are doing it. People are still buying. Uh, there was a point where it seemed like no one was buying, and I think people are just getting— they had, they had to get the, the sticker shock over with, and then now they're making the adjustments. The lenders are moving things around because we still need action. We still need action, even though, um, The Fed wanted to slow things down, obviously. The only— where do you see it when the rates do go down? Even let's say they're at 7% now or whatever. If they go down to 5%, now there's just going to be a frenzy again. Then the 5% is the new 2%. You know what I mean? So where do you see that going?

I see a huge increase in people's equity and the value of homes. Because it's just the law of supply and demand. Right now there's a really low supply, but the demand is still there. The homeownership rates, at least in California, the homeownership rates in California are some of the worst in the nation. I think it's like a 45% homeownership rate here. Yeah. Versus in other states, you're looking at like somewhere around like 70%.

Wow.

And so, and there's also high-paying jobs here so people can qualify to buy, to buy homes. Now the payment's a lot more than what they expected. to be paying. But with that, and with that, it's super competitive. I have— I had a buyer in escrow right now who's buying out in Riverside. And there's— they're competing with 40 offers.

Sweet Lord. Wow.

Now, why do you think the inventory is so low? What? People get your crystal ball out and tell me.

Yeah, I mean, it's basic. In 2020 and 2021, every— all the homeowners refinanced. Into a sub-three percent mortgage or just over three percent. Right now rates are you know around seven and a half. Why are they going to trade that two two and a half percent rate for a seven and a half percent rate while also resetting their property taxes as well? Their property tax rate is going to be a lot higher too. It just doesn't make any sense if you're able to if you're it if you unless you really have to move like let's say you got You know, you're living here, you're living here and you bought a house and then all of a sudden you got a really kick-ass job in New York City. You know, you're gonna, you're gonna, you're gonna take that job offer and take that opportunity. And that's when you'll, you'll either sell or rent out your house. And that's, and when people, unless it's like a, like a, like a must-sell situation like that, I, or like if they're, you know, going in foreclosure or Or anything like they just can't afford the payment or they're back on property taxes or whatever it may be. There's really no— it really doesn't make sense to sell right now. And when you look at it, we're already forecasting when the rates go down that the property values are going to go up even more.

Yeah, that's going to be worse. Yeah. Yeah. So is there a way to change it? I mean, let's say you were Granted God for the day. Yeah. Is there a suggestion that you can make that says, you know, legislature, God, whoever? What do you think about this? Let's do this. How do we change this?

The problem is low inventory right now.

Yes. So how do we change that?

You either either need to buy properties that people aren't looking at. Like you can look at distressed properties and. You know, putting the elbow in.

Yeah, but they're not out there. So my question is, how do we get more people to sell their properties?

How do we get more people to sell?

Yeah.

Um, I've got a suggestion, but I just thought I'd ask you first. Yeah, I don't want to put you on the spot.

Yeah, no, I mean, it's, it's a million-dollar question, right? I'm sure all the agents here would love to know, how can I get this guy to sell his house? Um, is he moving up or is he moving down? You know, that's, that's the only, only way I see it is either move up buyer, move down, or move down buyer.

Well, what, what I, what I'm looking at, and it's been talked about, we're in the baby boomer age. People like myself, I don't want to sell because of everything you just said. I've got Prop 13 taxes. My mortgage is paid off. So I don't need to sell. If I did sell, then I can deduct half a million dollars and my house is worth way more than that, which means I have to pay capital gains taxes on the rest. Yeah, so it was floated around that they wanted to change that half a million to a million.

Oh.

Okay, which I would think would stir up a lot of people in my shoes to say, whoa, I'm ready to cash out. Move down. Okay. Like you said, move down to something smaller or whatever. And then in the past, we've also talked about lenders letting people take their mortgage that they currently have with them to the next property. Thereby, then they feel comfortable. Hey, I can sell my house because I, I can take this mortgage I have here and make it portable and go someplace over here with it. You know, obviously it may not be enough to buy this property, which means that, you know, people like you are going to make money because you have to make up that gap, that difference. But those are my ideas.

Interesting. You know, all right. Kind of like that.

I've never heard that.

Really? Yeah. You haven't lived long enough. Yeah. These, these are not my ideas. They're not new. The Jimmy Carters, you know? Yes. Yeah. It's been around since then. Yes.

Wow, interesting. All right, yeah, how do we get people to sell? Let's do it.

That's the incentive. I mean, we have to incentivize people to sell. Yeah, um, you know, yes, if we lower the interest rates down or if the housing prices go down, and I don't think any of us want the housing prices to go down if you own a house. If you don't, then that's a different story.

Yeah, I'm trying to get a house.

Yeah, that's a different story, you know, but most people, I, I'm I've been through 3 up and downs of real estate market, and we're long past due for another downturn. But it's not here.

It's not happening.

Yeah.

Really, it's not happening. Do you see it happening? No, there's—

No.

Nobody's selling.

And it's hard to even see when or if it's going to happen even in the future with everything that's going on. Yeah, um, I think, I think another solution that we need to, to really push is the new development, is having new developments more like having, having an easier process for the permitting for the builders to actually build more homes. We're building homes at the slowest pace that we've ever built home, and it gets slower and slower every single year.

Yeah, um, we're in California.

Yeah. in Cali since—

That's the problem.

Yeah. And Newsom just finally was the first one, was the first governor to actually, and this was just a couple months ago, to announce that they're trying to actually reform some of the legislature with the California Environmental Quality Act. I brought it up a little bit on the last podcast when I was spamming you guys. Yeah. But the California Environmental Quality Act was passed by Reagan in 1972. And I was around. Yeah. And that act has been used and abused and it extends projects out by an average of about 210 days. Wow. And all the environmental nuts use that or like, you know, a frustrated neighbor uses that to stop the development. It's just more red tape that takes place for that builder to need to actually get that project going. Yeah. Yeah. And we have the builders. There's tons of land here. We need to build more and build that inventory. That's what— that's another— that's another solution that I see to it.

We were talking earlier about— I didn't phrase it this way, but free money. That's what I call it. Free money. We were talking about CalHFA. Yeah. We're talking about buyer assistance. Yeah. Can you talk to us about— is that— is that still a thing? Is it still out there?

Oh, yeah. There's definitely down payment assistance programs that are out there. There's multiple. There's CalHFA, there's GSFA. And there's, there's some, some national down payment assistance programs. CalHFA had a really popular one, if you guys remember, like, quite a few months ago, it was like the Dream for All program.

Yeah. It lasted, what, 2 weeks?

Yeah. Last— yeah, I think it was like 11 days. Yeah.

And they're clean out.

They just stopped the funding. Now, like they said that they're going to re-release like the remaining funds that are available. But That if no one even really knew about that program, and last time it came out, everybody's already like waiting for that program. This time it comes around, that's going to be snatched up in just a snap of your fingers.

Yeah.

So you can still get down payment assistance, though, with, with CalHFA. There's 3.5% down payment assistance through FHA, and they also cover 1.5% of your closing costs. They have down payment assistance for that where you don't even have to be a first-time homebuyer. There's no income limits, as low as 600 credit score, and you can buy up a 1 or 2 unit property with it. And that's, that's a great way to also counter having high interest rates. Okay. Yeah, interest rates are high right now, but you could leverage a down payment assistance program and instead of putting all your money on the down payment, now you can keep that money in your bank account to offset the high interest.

And there are restrictions to this.

There are certain restrictions as to what?

Qualification and payback.

Qualification and payback. So for qualification, it's, it's gonna— you qualify based off of DU, which is Desktop Underwriter, as long as any regular conventional or FHA, or even VA loan, you have to qualify through the the automated underwriting system, same, same kind of guidelines. It's just that you're getting the down payment assistance. Now, how, how much interest the down payment assistance has, if there is any at all, some pro— some down payment assistance programs have no interest. And some of the down payment assistance, some of the down payment assistance programs are even forgivable after a certain period of time.

Do I have to be low income?

No, no, you don't have to. There's programs where there's no income restrictions to it.

Wow. And Alex, you listening?

Yeah, I'm, I'm already putting in an offer right now.

Okay. Yeah, got it. You do have a real estate agent in the family now.

I do. That's right. Excellent. And for the one, the programs that are income restricted, like CalHFA is, the, the, the minimum income or the maximum income requirements are very forgiving. Like, the income requirement here in Orange County, I believe, is around $256,000. As long as you make less than that, you fall within that qualification bracket. Wow. And if you make more than that, there's other programs where they don't have that income restriction.

Yeah. So let me get this straight. FHA is normally 3.5% down. Yeah. If you use one of those programs, they're going to give you that 3.5% down, right? Correct. So you're like buying a property like we did in 2006 and '07 with no money down.

No money down. They are going to underwrite the heck out of you.

Oh, yeah. Oh, yeah.

They're going to make sure that you're good.

If you've got a firstborn, you may as well just, you know, give them to them.

Hey, everyone's got to get paid. Yeah.

And they don't, they don't have those programs as well for like, like you're not going to get that with a bank statement loan.

You're not going to get that. You're going to get really, really qualified for it, which is good. Yeah. Honestly, that's good. Yeah. Yeah. Because if not, we go back to the warm body loans. Yeah. You got a warm body, you got a loan.

Do you have a pulse? Right. The ninja loans. Yeah. No income, no job, no problem.

Or the stated ones, you know, yeah, I make $500,000 a year. Thank you. You qualify.

You know, they actually do still have stated income.

Do they? Oh my God.

There we go. Wow. That's what I'm talking about.

So literally, is that what you do? Just say, or do you have to prove it?

You don't have to prove it. But the matrix on it is a lot more strict. You're going to have to put, to get a no, A stated income loan. Like, let's say, like, you're— you might be foreign money or something, or whatever, whatever it may be, you know.

In the cartel.

Yeah, yeah. You're not supposed to fund to the cartel, but okay. Even though we do have cannabis— people that work in the cannabis industry, yeah, we have special loans for those people. Really? Kind of in the, in the middle gray area, but we do have special programs for those people.

Wow, California.

You know? Yeah, yeah, who knows, you know? But you're gonna, you're, you're gonna have to put a lot more skin in the game if you want to get one of those kinds of loans. And oftentimes there'll be a different way to qualify you, whether it's through verification of how many assets you are, you have, or—

Do they charge you more on interest because it's a more risky loan?

The more risky the loan, the higher the rate's gonna be, right?

Okay. Got it. Yeah.

Interesting. We do have a question from a viewer who asks, let me see. Let me, I'm kind of like remembering how to work this. She says, are you okay? I think we're talking about those assistant programs. Are you able to write off mortgage interest? Does the type of loan matter?

You're able to write off mortgage interest. Now, you're able to write off more interest if it's an investment property, because there's a limit to how much interest you can write off as your primary. But essentially, yes, you're able to write off the interest, at least some of it.

He's correct. Nobody here is a CPA, so I would check with your CPA to make sure that that's correct. But he's telling you the correct information.

Absolutely.

Okay. Thank you.

Gotcha.

Yeah.

Thanks. Yeah, I guess we'll check with the CPA. I need to get one first, but yeah.

You need one this year.

I need one this year.

You need one.

Okay. So you also mentioned you're working with, okay, we got the new builds, we got first-time home buyers, and now you also work with investors. So what sort of products are you seeing investors use the most right now?

The bread and butter is obviously going to be the DSCR cash outs after after they they they flip the property with their hard money loan or whatever it may be, and they can cash out up to 75%, sometimes 80. 75-80% of LTV, the new value of the property. The new value.

Awesome. That's awesome. That is awesome. Yeah. I like it. Yeah.

So that's sort of the the the BRRR strategy.

Yeah. Okay. Now now if you want to be an investor but Those, whether it's the hard money or it's, or it's the DSCR loan after, you have to put a little bit of skin in the game and there's a barrier of entry into becoming that, right? So now with, with Fannie Mae and Freddie Mac, you can still do, and FHA, you can still, you know, acquire, renovate the property and then And you— and then you'll have the permanent financing set up after that. And there's a lower barrier of entry to that. The only kicker is that you have to live in the unit for at least 1 year in one of the units.

I was going to just ask you that. Yeah. Yeah.

So is that the 203k? Is that the—

There's 203k and there's also Fannie Mae conventional homestyle, which they just changed the guidelines on the conventional to where you can buy a multi-unit. With as little as 5% down.

I saw that. Nice. I saw that. Nice. Yeah. It sounds like they're trying. Yeah.

You know? Yeah. They're trying. Yeah.

If it's working, but they're trying. Yeah.

So you could get a 4-unit in Huntington Beach for like $3 million right now.

Yeah.

For sure.

Are you sure? That's just for one. I know.

Yeah.

That's for one of the 4.

Right. Exactly. Right. Okay.

Find the right market for it. Yeah, yeah. Know know where you're gonna buy, and if the prices don't pencil out, it doesn't pencil out. But when you do do the the math on it, if you go FHA two or three K, the way it's underwritten is that just like a a hard money loan is they want your after repair value compared to your loan to be at seventy five percent. So it's the same thing for that, but you're putting in a lot less money down. So you put in a three and a half percent down payment. And after, after the renovation, they're wanting you to be at 25% equity. With how it's underwritten, you should be looking at a 21.5% return as long as you pencil it out right. Got it. That's a great return on it. That is. That is. Absolutely. You're almost 6xing your money that you put into it.

Wow. Okay. So you can, yeah, you can. use these products to really, you know, expand your portfolio.

For sure.

Hmm, gotcha. Okay, um, now let's go back to the original— this, this cash offer, right? Yeah, where you can, you can, you can put—

You like that?

I, I just— yeah, it's just, it's, it's pretty cool, you know, because you got to compete these days, you know. People are still putting in these crazy cash offers. So what's, what's sort of the move? Can you break it down and, and, and tell it to me like I'm 4 years old?

Okay, so to simplify it, to simplify it, we're gonna put a cash in— cash offer on, on the property that you want to buy for me. Okay? Okay. Now, do you think— let me ask this— do you think that you can get a better sales price if you put in a cash offer versus get financing?

You would hope so. Yeah. You know, but this market is so tough that sometimes the cash offer gets you in the door. Right, right, right. And you may not get a better price, but at least you're in the door.

Yeah. You're going to— they'll, they'll take your offer more seriously than someone who's coming in with an FHA offer.

Correct. Correct.

And to do that, At the end of the day, as long as if you close, if you close the escrow and you close the loan through us, it only costs you 1% to do the cash offer. Okay.

At the end of the day, logistically, when you, when you do this, your company is purchasing the property. Yes. In their name.

It's— yeah, it's in, it's in, it's in the name of the company.

Okay.

And we have— and then you would have a contract with the company.

Correct.

That once you close that loan and you put a 3% deposit with the fund, okay, that's putting in that offer. And then, okay, and when you close the loan post-escrow, then you get 2% of that deposit back.

Okay, so are you doing like a simultaneous double closing? Is that what you're trying to do?

Yeah, essentially.

Okay, so you're closing one day In your name, and the next day you're basically selling it to this person and putting a loan on it at the same time.

Right, right. And we'll have— we'll have the person— we'll only do that for someone who is fully underwritten, has— we have a certified underwriter approval on it, and we'll back it by like a $10,000 seller guarantee that we'll close that.

Okay. Wow, I like that. Yeah, that sounds good.

Is that new or has that always been around?

Um, it's, it's relatively new. I mean, people are like, these mortgage companies are really hurting right now and they're getting creative with ways to win in this market.

Yeah, no, absolutely. Yeah, it sounds, sounds like they're getting creative. I just caution them to, you know, not get overly creative.

Oh yeah, yeah.

But that sounds great. That sounds awesome. Yeah, I mean, that almost sounds like the wholesale deals that Alex does.

Mm-hmm.

Yeah.

If they're a certain price, then I'll double close on them and everybody wins.

Yeah.

That's what we like. It's the best deal ever when everybody wins in the deal.

Yeah. Right. Absolutely.

Yeah. That's all we do here. So that works out. That works out. Definitely. So go back to 2020. You're doing the refis. I want to hear about this part. So you're banging the phones, you said.

Yeah.

You're just getting all these refis and then all of a sudden everything changes And the interest rates go up, the refis just plummet. Did you see a lot of people that you were working with just completely drop off and change industries? Or are you still with the same kind of crew? Or how'd you work through that?

I'm not with the same crew, although I'm like still totally cool with those people. I see, I've seen a huge, huge fall off. So since that, so when the rates went up, it was also like a life-changing time for me. That's, it was around March, March or February of 2022. And at that time I had twin boys that were due at the same time when that was going on.

Wow.

So, so my kids were my, so I took some time off. I had, I had some loans in escrow, but like I took some time off and And my kids were in the NICU and we're just like taking care of them. And then all of a sudden, like rates are just going up like crazy. And I come back from that. I'm like, what the heck happened? Yeah. My borrower was locked in at 3%. And now if like that didn't close on time and they want to relock, now the rates are like more than a percent higher and they just keep climbing every single day. And it was scary. It was really scary. Like nobody knew what was gonna happen at that point. But, and as far as like companies go, the company that I went to after that, I'm not gonna say the name of it, but the company I went—

Countrywide.

No, no.

Rhymes with, no, I'm just kidding.

Oh no, that's 2008, sorry.

Countrywide. Um, we could just say it's Countrywide because they don't exist anymore. Yeah. There you go. Just went from placeholder, went from being like a 10,000 plus employee company. Wow. To cutting it down to like 2,000. Oh boy. And that was within a span of like 6 months. All those people, like, so we were talking about like people leaving the industry there.

You had to. There's it right there.

Because loans just stopped.

Wow. So it wasn't like Twitter where Elon came in and said, 75% of you are fired, you know, because you have that one girl running around saying, this is my day, you know. It's like, I do this and I work out and I eat and then I go home and I get paid for it, you know. Like, wow.

Yeah, especially if you're at a publicly traded company.

They—

like the company I was at, it was publicly traded. They want to turn a profit.

No, of course.

To their investors.

I can't blame them.

Yeah, no, can't blame them at all. Like, they're, they're a REIT, right? And they need to turn a profit. And so they're going to make the— they're going to right-size the company as much as they need to, to make sure that they're keeping their shareholders' interests at the top.

Wow. Got it. Um, real quick, do we have time? Yeah, a little. Off topic, but maybe not. So we're suffering with, um, fire insurance here in California.

Definitely.

Is that affecting you? I mean, I imagine it's got to be affecting the mortgage industry, because if you can't insure the property and you're putting a mortgage on there, it's like the bank's going to say, yeah, sorry, we're not going to loan you this money. Yeah. So have you had any deals fall out for that reason?

Yeah. So, um, there's some builders down here in South County So it was like the new fire insurance code that came out that really— and also they're like, we're hearing like State Farm's no longer insuring here, Allstate's no longer insuring here.

Yeah.

And, and people, these developers are in there, they're in the process of their new building. They've even sold some of these homes to these buyers. And now because of the insurance cost increase, their HOA fees are going up from— they thought that they were buying a house with an HOA fee of Even like $500. Now after that, it's over $1,000 and they're like, wait, wait, wait. Yeah, I didn't sign up for a $1,000 HOA.

Exactly. Yes.

Yes. And that, that's causing— and then, and then also they weren't able to even execute a purchase contract until they had the fire, fire insurance figured out. So they have all these homes, just like the big builders have all these big tracts. And their homes are just— and they're still building, but their homes are just sitting there and they're not able to execute a purchase contract, which is just burning a big hole in their pocket. They really—

wow. Okay, see, so it is affecting them.

Yeah. Wow. They figured it out since then, but that's— that I'm sure that costed them a ton of money.

Yeah. Wow. What'd they do?

They set everything on fire.

Yeah, they're like, whoops, one night.

I had an investor that I I was working with, real close friend of mine, and we were purchasing properties during the downturn left and right. And, uh, there's some properties we never even saw them inside until, you know, during an auction. And we go there and take a look at them and he'd look at me and go, yeah, Joe, I think this is one of the ones we just torch it and walk away. Yeah. Oh, that's great. Wow.

It's a different landscape out there, everybody. Well, we saw the same thing with, with agents as well. Uh, every, every agent was a rock star. Yeah. While it was going up, you know? Mm-hmm. And then now, uh, you know, you call 'em and they're like, they're like, oh my God, my phone's ringing. Yeah. Uh, yes. Hello? Hello? Who is it? Yes. Put in an offer. Okay. Yeah, sure. Mm-hmm. So it's, uh, you're a buyer?

Are you real? Yeah. Do you have a preapproval letter? Who are you working with? Can I get you qualified with my lender? Yeah.

Yeah. So, you know, you got to— this is where you cut your teeth and, you know, you sharpen your skills. And then when it goes back up, then, you know, then you're just flying through it.

Everybody's an expert in a great market. Of course. Yes. That's I mean that's part of the reason why like I transitioned to focusing with at least a good portion of my business on the builders because am I going to build a relationship with a lot of agents you know wining and dining them or whatever it whatever it is I've never been wined I know Joe's like don't you haven't had that from Joe Matt Gross treatment I know I still That's not good.

Can we buy lunch?

Yeah.

Oh, shoot.

Of course.

Of course. Joe's got a new lender now.

Yeah.

But when you're investing a lot of that time and money into working with someone who was doing a lot of business, and then all of a sudden, now in this market, they're not doing any business. So I just wasted all that money. You know what I mean? Now I still have that relationship, but You know, that person, who knows when they're going to get their next deal. It's a really, really— it's a bloodbath out there right now.

Yeah, it is. Absolutely.

Only the strong survive.

And are you just making calls and like, hey, how's your business going? Got any deals? Or is that kind of like your day now?

I do do a lot of cold calling.

Okay.

I call builders, I call developers, I call agents. And really it's just trying to see if— because it's really hard to navigate this market. How can we find a solution to get you that next deal? Like, what are you— what do you have in your pipeline that you've been working on that's like sticking out to you? And it's like, oh man, like this guy was like almost there, but like something happened, whether like they didn't think the payment was affordable or like they just missed out on qualifying or like the rates, the rates were too high for them and they're just not comfortable. Like, what are you seeing? What, what solution can we provide for that person to make it work? And if we can, let's, let's talk about it.

See, he's found a niche.

Yeah.

That's what you have to do. That's, you know, your niche is wholesaling and stuff and—

Mobile homes.

Mobile homes, flipping.

Flipping.

Yeah. Yeah. So if you're a real estate agent out there, then you need to pivot and start learning other, you know, specialties. Yep. And, uh, and start doing some business again because it's— you just can't sit there and do nothing, you know.

You can, but—

Well, you don't get any money then.

Yeah, that's the only downside of that.

I'd say find your niche.

Find a niche.

The riches are in the niches.

Yes, there we go. Absolutely.

He said he didn't have any catchphrases, remember? That's one right there. Yeah, right at the beginning too.

He comes up with it at the end.

I know, you know, it could— that could have been the clickbait.

Yeah.

But yeah, you're totally right. And it's, it's cool that you, um, you know, like, like you said, we were doing the refis and then you reached out to your mentor and then he pointed you in the direction of the builders, or that's what he was doing. Yeah. Okay.

He was, um, he was a big Countrywide guy. Ooh.

Yeah.

Back in the—

He knows about the good days.

I'm like, Countrywide, they did—

He was running it.

Warm body loans.

God, I need to hear those stories.

Yeah, he was, he was a big Countrywide guy and He said that during COVID and stuff, he was— I mean, he just retired this past December. But they were closing like $2 or $3 billion a year in loans under just his team.

Yes. He just retires the next year. He's like, I'm out.

Yeah, his wife is like, why are you still working?

He's like, I get a rush from the deals. Damn it. Wow, that's awesome.

Yeah, the grind don't stop.

Yeah, we got to get those guys— we got to get like a whole— whoever was around in 2008, like, talk about it, like the glory days, so I can just—

It was fun. That's what I'm saying. The fun was fun. I was hoping in my lifetime I would experience another one because with the knowledge that I have now, it was just so much fun. Yeah, my daughter had just got her real estate license and my son as well. And we were doing probably 20 listings a month back then and buying properties at the courthouse steps and flipping and doing all that stuff. It was a lot of fun.

That's cool.

Yeah.

I would've loved to work in the mortgage market at that time.

Yeah. Every mortgage guy has like 6 Lamborghinis.

It's probably a good thing I didn't, but yeah.

It's like out in Miami, Like, I love this.

I would have been that guy in The Big Short.

Yeah, exactly. Yeah, once, once we hit bottom and we were going back up, it was like literally you'd put the house on the market, it'd be gone in a few hours.

Wow.

Yeah.

Hmm.

So, okay, those are good times.

I wonder when— yeah, wonder what we'll see. There's always something a little bit different. Each turn's different, but You know, it's not really a little bit.

We're starting to see it tightening. Yeah, tightening in guidelines. Like the big banks are being forced.

They're getting scared. Yeah, they don't want to go back to 2008.

Come on, they don't want the buybacks. No.

Oh, see, they didn't have that before. Now they do, right? Yeah, yeah, because can you tell everybody what a buyback is?

Mortgage buyback is a loan that they can't sell on the secondary market, and so the bank is forced to buy back and And, you know, they're now— they now have to keep that liability on their books because like every time a bank issues a mortgage loan, unless they're— unless they're set up as a servicer, they are packaging that loan and selling it on the secondary market for a good amount of money too.

Yeah.

Like for the FHA loans, those are guaranteed ROIs because those all have the PMI that are built into them. Right. They're going to sell those for a pretty pretty penny. But if they don't underwrite it right, Fannie Mae or Freddie Mac is going to come back and say, no, we don't want this one. And if you're a mortgage broker or like a smaller bank, you know, you might be able to survive one or two of those. But when they— like, if you did a lot of loans in 2020, 2021, and those loans come back to you, you're done.

Well, That's just a check and balance in our new system here that you better do correctly, uh, this loan, because if not, we're just going to give it back to you and then you deal with it.

Yeah, yeah, for sure.

Yeah. All right, checks and balance, I guess. That's fine. That's fine.

They're not doing a lot of the, a lot of the crazy loans that they were doing back then. They're trying to be smart with it. Yeah, trying to be. Yeah. But, you know, you never know what happens in this market. I mean, the rates keep going up. The Fed says that they're going to halt the rates and they're saying it.

You know, what's the purpose of a bank? A bank, their main income comes from mortgages, lending money. And if they're not lending money, they're not making money. So that's my fear, is that they're going to get too creative and, you know, they're going to start All this crazy stuff that was back in 2006 again.

Yeah, I mean, they have to find an investor that's willing to take on those creative financing too, because they don't just fund it themselves. They have— all of them want to have someone who's willing to buy it from them.

Yeah.

So they gotta—

Mortgage-backed securities.

That's right, that's right.

Mortgage-backed securities. We're gonna bundle all this stuff. The good And the bad, but mostly bad, and we're gonna sell it. Yeah, yeah, it was genius, man. It was.

They're like, we don't know what happens, and then you find out, and then one guy in the back room's like, this is bad, this is all gonna blow up.

Yeah, he figured it out.

He did. Christian Bale, right?

Yeah, Christian. Yeah.

God, he's so good at everything. Okay, wow, that was, uh, enlightening. Matt just schooled us on some stuff. Thank you. Did you know everything? I mean, you've seen it all. I've seen it and heard it.

Um, this is like the cutting-edge stuff though. This is just a newer version of, you know, what I've experienced in the past. Okay. Yeah, well, like I said, I mean, the banks are in the business of loaning money to make money. You know, you put your money in the bank, they give you what, 1%? Maybe a little bit higher now, but— and then they loan it out at, you know, 7 or 8% or more. It's like, hello. Yeah, I'd do that if I had all that money. I'd do that every day, you know. And the heck with real estate and flipping and everything else, you know.

Just be the bank.

Like, I'll just be the bank.

There you go. I like it.

Like, it's okay with me.

So, Matt, if people want to reach out to you, what's, what's the best way?

Um, they can find me on Instagram at The Real Matt Brost.

Okay.

Or you can just look up Matt Brost on Facebook or LinkedIn and you'll be able to find me.

The Real? Is there a fake?

You have to do it because another Matt Brost took it first.

It did?

Yeah, that's what happened to me.

Now mine is This Is Another Matt Brost. Yeah, no, there's one, there's one Matt Brost out there that I guess is like a PGA golfer or something like that.

But is it like when you say the real, is that something that you get to pick or the company gives it to you?

No, he picks it because the other guy's a poser. You picked it?

Yeah. He just didn't pick it before Matt did.

Yeah. He's just a regular.

It's like that check mark on X. It used to be where, yeah, that makes you real and stuff.

Yeah.

Now he wants people to pay for it, which I think is genius.

That's fine. You know, pay $8 for that.

Yeah, that's fine.

Uh, LinkedIn, Facebook, um, first-time homebuyers, investors, you'll work with them all?

Yeah, definitely, definitely. And, um, and, and with builders.

And with builders.

Builders, all you builders out there, contact Matt.

Yeah.

Okay, nice. Right on. Well, thank you guys so much for joining us today. Um, be sure to reach out to Matt if you have any questions regarding lending, and he'll, uh, get you on the straight and narrow.

Sounds good.

Yeah. And, uh, let's do it.

Let's, let's, let's make you an investor. Let's build your portfolio. Let's build generational wealth. Let's get it done.

I like that idea.

I like that too.

Yeah, that's good.

All right, we may have to have, uh, Matt come to a meetup one time.

We have one at the end of the month.

I'm game.

Okay, let's do it. Uh, that's October 30th at Hangar 24. So we're in a new area. We want to show Joe that it's really cool only because I picked it. And, um, we'll see you guys next Thursday.

See ya. If you want some more advice on real estate investing, reach out to us one-on-one.