Cracks in the Housing & Mortgage Markets with Mike Mills

Foreign.

This is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property. For panties on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now here's your host CEO of We Close Nodes, Scott Carson.

Hey real estate investors.

If you have ever wanted to dive into the sexy side of real estate and become a note investor and not just somebody that owner finances properties or buys and sells on terms, but somebody who's actually buying debt from lenders, mortgage bankers, hedge funds on distressed real estate on both residential and commercial properties. Now is the perfect time. And guess what? We have our upcoming three day workshop here in just a few days on July 25th, 26th and 27th. That's right, that's a Friday. Saturday, Sunday. You can join me live on Zoom and our Note Buying for Dummies workshop. We'll go through the Fs of how to find fund and flip non performing notes at huge discounts without having to use your own money. And we'll show you all the different ways you can make money being a note investor. Day one's all about how we find these deals from banks, hedge funds and how you can automate the process of connecting with these people and get tapes and listen to you over and over again. Day two is all about raising capital and marketing. We'll show you how to tap into thousands of IRA investors who are looking for deals to fund and how to communicate and how to contact them and get them to fund your deals. And day three is all about the flip the exit strategies putting deals together. We'll mix in due diligence. We'll mix in the marketing side along with the structure side. So much stuff in three days live on Zoom with yours truly, the note guy, Scott Carson. Make sure you get signed up by going to Note buying for dummies.com or click on the three day workshop tab on our workshop. Get signed up today as we're still running discounts and you too can soon become a no buyer.

Foreign.

Good afternoon and good evening everybody. Hey, welcome to this episode of the no Closure show. As always, Scott Carson jacked up to be here with you today. Got this very special guest and I'm excited about. We've been working on this for a couple weeks now. Things popping up and down, you know, schedules, all that good stuff. But we are so excited. He's the host of the Texas Real Estate and Finance Podcast. He is a Amazing mortgage expert. Just an absolutely rock solid God of knowledge when it comes to getting done in Texas and beyond out there. Yeah, exactly. He's great at helping people and educating themselves. He's a great wealth creator. He's got a pretty interesting career prior to getting into mortgages, but he has been a branch manager for quite some time now, specializing in DFW and Texas real estate. Mike Mills, what is going on, buddy? How you doing today?

I'm doing great, man. How are you? The, you know, we're, we're in opposite parts of the state, but I'm just glad that the rain has subsided, at least for the moment. I think we're about as flooded out as we could possibly be up here in North Texas. And I'm unfortunately, I think we're headed into the now it's going to be a thousand degrees for the rest of the summer, which I'm not looking forward to that either. But hey, I guess we get extremes and that's it, right?

Amen to that. The heat. The heat dome is already here, man. I was out walking this morning and you know, I was like, oh, I'm gonna have to start soaking my walk my shirt in water before I go for a walk. So it's not so bad at the end of the day. But hey, I saw you on earlier podcast sport that Dallas Mavericks at 77 shirt there. Good things for the Mavs versus the Celtics. Who you got and how many games?

I'm, I'm very excited. I actually, I have the Mavs. Of course I'm not going to pick against the hometown team. I am going though in five in, in maybe six. Probably really it's probably six. But my reasoning is, is that if you look and there's memes all over the Internet, if you're following the stuff that show this. But the path for the Celtics to get to the finals was, was, you know, wrecked with people injuries, being out, you know, not being able to play. It wasn't very difficult. Look, they're the best team in the Eastern Conference by a mile and they have been the whole season. So not, you know, they're in the finals like they're good, but their, their road to get there was very much easier than the maps. And the Mavs had to go through some, some pretty stout competition in order to get where they were getting. And the trade that they made in the, in the, at the very end of the season and their record from that trade until the end is better than the Celtics, by the way. And they're a different team, they're a better defensive team. This. You know when they showed a stat the other day that had the number of alley dunks that they've had in the final or in the NBA playoffs. And like, the Mavs had like 34 and the next closest team had like eight. So, I mean, it's just, they're a completely different team. And you see, it's weird to say that when you see, when you just add a few players, but they're so much better defensively and they have such an extra layer of offense that they didn't have before. They take a little bit of the pressure off Kyrie and Luka. But you know, when you look how Kyrie came out in Game 1 against the Timberwolves and literally shut them down in the first. That was the game that ended the whole series, really, the first half of that game shut the whole series down. And, and Timberwolves weren't the same since. So I got a feeling that something like that is going to happen in this first game. I'm stoked about it tonight. I can't wait. You know, I had to wear my T shirt to promote my show, but. But yeah, I had on my Mavs gear, was ready to rock.

Hey, there's nothing wrong with it. And it's all about getting hot the right time. It says Mavericks being hot, it being damn hot. 100,F you hot in Texas basically here for the next 90 days. Yeah, let's talk about that real estate market here in the, in Texas. And definitely it's a little bit different. Obviously, DFW is hot. Austin's hot. There was a price index that came out today by First American Title, or actually came out about a week ago, talking about how you have the median home price in specific areas and then the buying price, the buying power price and how the buying power price in Dallas and Austin is both above the median sales price. You buy about 20 to $30,000. Yeah, you know, you're, you're as a mortgage banker, mortgage broker in your neck of the woods. How difficult is it, is it to get deals done these days compared to four or five years ago?

Mike, you know, getting the deals done isn't tough. I do want to say one thing about the median thing, though, because I think a lot of people this, this gets reported a lot when they talk about median home sales and how they fluctuate and obviously it's a relevant number. But what gets missed in that is, is that what, what the average person, I don't think understands about median sales Price is, that's a mix of sales, right? So when you're in a market where we're in right now, where the, you know, houses under say 500,000, now you're in Austin, price points are a little higher in a lot of areas down there, but let's say under 500,000. Well, those homes are still moving at a pretty solid clip. If you're buying a 3, 4, and especially if it's under like 4, you know, those houses are moving. The homes that are sitting right now are 6, 7, 8, 9, you know, a million dollars. Those houses, the appetite for buyers is not as high. So when people show median sales prices and where they are, it's not the average value or the average cost of a home, it's the average home being sold in that market at that time. And if you have a high rate environment and you don't have a lot of higher end homes move, then your median sales price is going to be on the lower end until that starts to change. So, so when you see homes go under contract and they're being purchased, you can still have that separation because it's just the mix of homes that are being sold. So.

Love it. I'm glad you brought that up because it's true. There's, it's all skewed in how you look at the numbers and what's being measured. You know, it's kind of like they say, oh, inflation is only 5, 6%. Well, depending on what you're buying, it can be 11, 12, 13%.

It depends on where you started. Because if, if, if inflation's been 5% every month for the last 24 months, you're, you're 20% higher in everything than you were. But just in, you know, as far as getting loans done, I are. The industry for mortgages right now is very much in a place where it's not hard to get loans done, like getting loans done if, if you do your due diligence upfront. Right. And that's, that's a big separation. You know, you obviously spend a lot of time examining, you know, these different notes that are available that you can purchase and what the positives and negatives are and if it's a good investment. Well, as a lender, we do the same thing, but for a buyer, I'm looking at the buyer's ability to purchase. And when I talk to them up front, you know, obviously credit, income, debt, you know, how much cash they have, those kind of things, those are simple metrics. But if I understand what's necessary to get that deal done, then I know the moment I talk to somebody that they're going to be able to close, so. Or not, you know, because that happens as well. So in that situation, getting a loan done, if you know what you can or can't do, you're fine. Okay? There's no issues.

Now.

The rules and how they adjust and what they, you know, they have changed, but they've only changed since 2008, right? The, the adjustment. Even since the market's tightened up, lending hasn't, the rules for lending haven't changed. They're the same. You know, there's nothing that's adjusted. And that's why, you know, these days when people talk about housing crashes, there's a lot of people that don't pay attention to what's happening and say, okay, well, housing slowed down. People, you know, maybe you're struggling a little bit, so there's got to be a crash come in and the foreclosures are going to start hit the market. Well, no, they're not, because lending has tightened down. But Again, back in 2008 and 2009, lending tightened down to the point to where if you do a loan for somebody, for the most part there's, they're good, they're good loans. The only ones that are having issues right now are things that are like down payment assistance loans. Some of the FHA deals are in lower end credit. Borrowers are still having some issues. But I mean, you knew that going into it there's a certain level of risk involved when you do those types of deals. And, and so as a lender and as an industry, we understand that, you know, there's going to be some margin in there, 3 to 4% of those deals that are going to go bad because that's just what happens. That's life. But as a whole, you know, mortgages are performing very well. You know, we're still. Our foreclosure rate across the country, not just in Texas, but everywhere is still at historically low levels. Like, so foreclosures aren't coming. Lending is not tighter. What's tighter is people's budgets and household income and household debt. And, and that's what is affecting people's ability to buy, is they can't afford the $600,000 house because they have two car payments, they have, you know, five credit cards, they have six student loans, they have all these other things and their household income just doesn't keep up with. That's what the tight part is getting. And then of course, there's the cash piece too. But, but really that's what's prohibiting or, or it's causing any type of slowdown in lending.

Yeah. I mean, when you see, you know, exactly like you said, VA loans, FHA loans, those have always had a little higher default rate because people have less skin in the game. Yeah. In a lot of cases there. So they're less prone to. I'm going to fight this out and pay this first before I've got to take care of my thousand dollar car payment.

Yes.

I mean, cars. I just bought a new vehicle recently and I was blown away by the price. It's ridiculous.

It's absolutely ridiculous.

So I'm not going to pay for a small house, buying a truck, you know What I mean? $100,000 Ford F150 Raptor. I was just laughing at. I'm like, if you sell it, you sell it good for that person. But I ain't buying that. And then you look at the amount of credit card debt going up substantially.

Yes.

You know, whenever you get over. What is it the folks at FICO like to say that if you stay under 40% of credit utilization, it's a good thing. That's actually really where the credit companies want you to be. But you.

30.

Yeah, yeah, 30 to 40. Somewhere in there, you start getting above that which people are doing to pay for things that are necessities days. That drives credit ratings down, that drives your interest rates up if you're looking to buy, you know.

Yeah. Well, what I think we're seeing is in the credit market too is it's a little bit of. And I heard somebody put it well the other day, there was a period of time, and I think it's ending now, by the way, but there was a period of time where the average consumer was thinking, and even in the mortgage world, in real estate world, we were thinking, okay, well this, this down trend is just for a short amount of time, right. This, this lull in high rates and everything, it's going to change because we have such short attention spans. Like, we don't. And Covid didn't help, right. Because Covid was everything crashed and then everything took off. And it was a scale of like 6 to 12 months that the whole thing had turned around. So when you talk about like people's recency bias in their mind saying, okay, I just went to this thing where everything was in the toilet and then everything came back. So, yeah, my income's down a little bit. Yeah, everything's a little more expensive. But you know, it's going to turn around. It always does. I think there was a lot of that going on. I think our federal government did that, you know, because we have totally trillions of debt, right? So. So everybody kind of lived in that world. Well, now we're basically two years into this thing, and it hasn't changed. Now. I think there is a little bit. There's some cracks starting to form in the. In the wall a little bit. You know, look at job numbers, and inflation is coming down a little, but jobs are bigger concern. But so it is starting to shift some. But the issue is, is that people then were like, well, I got to keep up with my lifestyle, so I'm just going to charge it. I'll just charge it. It'll be fine. We'll pay it on there. We'll pay that next month. It's not a big deal. Oh, the rates, how much? And that's the other thing. People don't pay attention. They don't realize that their credit card went from, you know, 12%, which is ridiculous, to 25%, until their balance starts jumping up. Like, why is my minimum payment now $300 a month? Well, it's because you have a $30,000 balance that you spent 10 of that on actual stuff. So, you know, it's. It's this. This perception or this idea that things were not. That were going to get better and that they were going to improve, and they just haven't. And now people are starting to feel the effects. Now, if you got laid off, trying to find a job is really hard. If you are working in a company, if you have a tech skill and you're trying, you thought, I'm going to go to learn to be a coder. I'm going to be a copywriter. Do it. Okay, well, now AI is taking your job and they're not hiring you. And so all of these things are starting to impact us, and we're going to see it start to build up. And I'm sure even in what you see on a regular basis, because you look at this, the world of commercial real estate is. Is scary right now with what's happening. And it's all starting. I mean, it's been building up, I feel like, but it's certainly starting to happen a little bit more and more. I mean, I saw something the other day, I think it was from the Fed, where they said that there was something like 68 banks right now, small banks that were. They didn't say failing, but they were, like, on the verge of failing. And it's like, oh my gosh, that's terrifying. That, that's. Now what does that do? What are the repercussions of the economy? I don't know. But I mean commercial real estate's having a hard go of it too.

Yeah, there's actually it's, I think the numbers were like between 53 and 83. Smaller banks where their balance sheet losses could cause them to go under where they, what they have on paper isn't worth the asset that's under, you know, the underlying asset class.

Yes.

You know, so it's underwater basically in that aspect. Now if they hold on to it. Okay. And if they can hold onto it and ride the wave out, they may be okay. But for every non performing loan they have that causes them to have to buy more in put now or bring more in reserves that they can't lend against. And one of the biggest things we're seeing with commercial real estate these days is that now the banks, especially the smaller banks, which actually finance about 70% of the commercial stuff out there, small banks on Wall street these days, is that now they're, they're requiring a deposit relationship from the lender or from the borrower. So like if you're going to go.

To the bank that's buying it. Yeah.

So if you're taking that commercial loan, that bank is going to want you to put your deposits with them so that it offsets the reserve requirements. Yeah. Versus just getting a loan. They want to have that relationship. So it actually prices into it. So you're going to see a lot more stuff where you have to have that relationship of some sort to keep the reserves in house. You just can't have it being shopped around at 20 banks. Well, if you do decide to go to that bank, you're gonna have to bring in, you know, the six, eight months of reserves and keep it on deposit with. In a lot of cases.

Yeah, it's, it's getting hairy out there and I don't, I mean look, if you are a fan of low rates and you are a fan of cheap money, then these things are good to some extent. It's going to be. The problem is it's like careful what you wish for because it's going to be really bumpy for a little bit. I don't think this is my personal opinion. I do not think that we are on the verge of like this massive crash. Okay. I really, I really don't. And not certainly not in real estate, maybe commercial real estate, but not, not in real estate as a Whole I don't feel like that that's happening. I don't even feel like that as a stock market, as an economy that we're in for a massive crash. Couple of reasons. One is because the federal government does not want that to happen because it's an election year. So good luck with, you know, that not occurring. Second thing is, is that there are certain segments of the economy that are performing really well. Like take Nvidia for example. You know the fact that that Stock is now 12, I mean it's trading at $1200 a share right now. It started the year out at like 300 a share this year. So that AI section and sector of the market has exploded and is single handedly, you know, Tesla or Tesla's a bad example because they're a little down. But Microsoft, Google, OpenAI, Nvidia, these stocks, six or seven stocks are holding up the entire market. And I don't see a world in which those come crashing down because the future of that is very bright now. Everything else, the targets of the world, you know, they are struggling right now. There are lots of retailers, stock. So there's going to be like whatever crash we experience is going to be very segmented I think for now. And then what's going to happen is, is the federal government's going to come in. The Fed I should say, same thing. It's going to come in and say, okay, we're going to start lowering rates again because we're going to turn this around. Everybody's going to get real excited because it's cheap money, don't expect it to get to 2 and 3% rates. That's not happening. They're not going that far. But, but they are going to adjust and they are going to cut stuff and it is going to happen over time and everybody's going to decide it's going to go back up. The problem with that is, is that I do think, I don't know if it's 3 years, 5 years, 10 years, but somewhere here in the next period of time there is going to have to be some sort of significant correction. And because things are only going to continue to go up as long as they can until they get to a tipping point. And when you just look at the debt that the federal government has right now and that the fact that there is literally no way to pay that back, I don't know what that leads to. And that's, that's the biggest concern I see on, in everything on the whole is that you know, interest rates will recover you know, businesses will recover, but what is the fact that the federal government is carrying so much debt right now? What is that going to do to the underlying economy, to everybody else? And I think that's the biggest threat.

Yeah. And I think. I think you hit the nail right in the head there. But there's a second thing I think a lot of people get so reminiscent about is the way. Way it is or the way it was. Yes, it was great four years ago, economically speaking. Yeah. Were we in a better spot? Maybe we were, maybe we weren't four years ago. They're not saying it has to do with any president because the president really doesn't control the economic philosophy. What I'm getting at, though, is that life is evolving, and so many people get so used to doing it as is and not growing, not expanding. You know, minimum wage jobs were never meant to pay for a family. And unfortunately, a lot of folks, well, I'm going to go work at burger king, make 20 bucks now. Well, that's great. But everything now is the inflation. It can't afford to be there. You've got to develop degrees or develop skills or work in jobs, because there's a lot of jobs out there that need to be filled, that people don't want to fill them because it causes your hands to get dirty. You know, there's other things out there that you have to do to evolve individually and if you're in an area, maybe to get price out of it. I mean, I'm in Austin, Texas, most expensive places in the country compared to the cost of living in here. If you can't afford to live here, then you need to go somewhere that's more affordable. And there are more affordable places than Austin, Texas.

Yes.

And that's the biggest thing I always crack up is people. You know, nobody's holding a gun to your head saying that you've got to live exactly there. Yes. If your job requires you to be there. Yes. But is that job available somewhere else at a whole lot cheaper?

Yeah. Yeah. And my bigger concern, you know, is like, for our industry and, you know, even though we're on different sides of what we do, to some extent, we're still operating in the world of real estate. You more. A little more commercial, but a lot of residential because you work with homeowners and trying to help them get back on track. But in the. In the retail lending in real estate space because home prices are becoming so unaffordable compared to income. Right. That's a real issue that we're experiencing because you know, I have the old boomer agents that'll call me and be like, well, when I was started selling, you know, interest rates were 18%. And I'm like, yeah, you're right, they were. But the average home value was $70,000 in 1986. Right, right. And yeah, interest rates were 18%, but the average home value was 70,000. Average household income was 35,000. So relatively speaking, those were kind of in line. Well, today the average home value is. Or the average median home price is $460,000 or whatever it is right now, and the median household income is 75,000. So the spread between those two things is massive, and it keeps growing. You know, I always beat this into the ground about, you know, looking at real estate charts, like, now a good time to buy real estate. I'm like, the best time to buy real estate was yesterday. Because go to any housing chart on the. That you can find online. And they all go like this, every single one. There's a few little. There's a little bit of this along the way, but it's all like that. And so if you are in a place where you can't afford or figure out how to buy, there is no time like the present because it's going to continue to get worse. And I feel like. And it goes back to my fear of it is that I think that we're heading into a place where the average American is going to really struggle to be able to afford a home. They already are. And it's just going to exacerbate and then it's going to become like all things have become in this country, which is haves and have nots. Either you have the ability to or you don't. And if you don't, you're never going to have the ability to. And. And that's the thing that's frightening to me because I make my living off of this. The more people that can buy a house, the better. And. And that number is starting to shrink. You know, back to your original question about how is it harder to do lending. It's not harder because of the rules. It's. It's harder because people don't have income because they have too much debt and they don't have cash. And even I always tell there's a story. So a couple years back, and this isn't, you know, this wasn't even recent. This was a few years ago, I talked to a couple that were trying to buy a home, and they were both vets, veterinarians. They had Gone to veterinarian school. They went there for, by the way, this is like six years. Just if anybody doesn't realize, like, it's like going, I mean, you're a doctor for animals.

It's a mini doctorate, basically.

Yeah. I don't want to downplay, like veterinarian out there, but it's, it's expensive and it's long. It's not just, you know, what you might think. And so their student loan bills alone at that time were $250,000 each. Okay. They came out of college, they had one car payment with 250,000 worth of student loan debt. They didn't really have very many credit cards. They might have had one or two, like everybody, but not a lot of debt on there. They made $75,000 each a year. So their household income was 150. Right. They couldn't, I couldn't get them a house because the student loan debt. Because in lending you have to count regardless of if you're paying on it. I have to count a certain percentage. I don't have a choice. There's, I mean, there's ways, there's income based and things you can do to change a little bit, but no matter what, I got to count something. And so that debt was so such a burden on them and having to count that that they couldn't buy a house. These are two people that played by the rules. They went to school, they strapped on their boots, they got good jobs, made a good income, but because of student loan debt, they couldn't buy a house. Now, fast forward, you know, three years, four years from then and now that house that they were trying to buy for 300,000 or 250 is now 450, and there's no way in hell they can buy that house. That's the part that I'm really worried about.

Yeah, we, there was a study that came out a few weeks ago. We did a podcast a bit on it where you look at the top 105 markets. 68 of them doubled in seven years or less as far as the market value. And it is crazy. And that's the thing, is if, you know, the best thing to buy was yesterday, that's the big thing is most people getting the idea like, oh, it's got to be a perfect house. No, no, you need to get a starter house. You know what I mean? You think that exists, but yes, if it does exist. Exactly. But the starter house, to save, to get into it. It doesn't have to be your dream home. So I Have stupid friends. I don't say we count them friends anymore, but friends that went over and bought and overpaid. And overall it's so, it's all the bells and whistles. I'm like, your parents never had anything nice like that. You're really shooting off the hill. Hope you can afford it now it's gone to foreclosure or they had to walk away from it because they literally just can't keep up with that. The cars, the student loan debt and everything else there. You have to be smart. I almost want to say it takes it back to lack of financial education out there. In a lot of cases, how decisions from college and graduation are going to affect you in the long run, longer than you expect.

Yeah, no 100% it, you know, I'm not, I want to be clear. Like I do this, I tell my kids this a lot. I am very, let's say I'm, you know, conservative, liberal, but I'm a pretty liberal person when it comes to understanding people are in situations that they can't get themselves out of that they were born into that. You know, it's kind of like the race. I started at the starting line and you started 15 steps behind me. Okay, so that exists. That's a real thing. Okay. And it exists all over the country in a lot of different situations. However, that being said, your situation is your situation and you have to figure out how to navigate out of that. And as a society, we don't do a very good job of educating our kids and educating even adults on, on simple financial basics of what interest is, what it really means to you in the long term and putting it in a. People understand. It's like, I use this analogy of, you know, like you hear about people in other countries starving for food, right? Like in Afghanistan or Africa or certain parts where, where they don't have food. Right. You know that that exists and you know that that's real and you've seen it on TV and you know, fine, but until you physically go there and you physically see it, it doesn't impact you the way it does in that situation. So you can sit a 12 year old down in a class and you can explain to them about checking accounts and interest and blah, blah, blah, and they're just going to sit there with a glaze face and not care about it. You have to create environments and situations where real world occurrences impact people to say, hey, look, this is what it does. If you buy these pair of shoes on your credit card at 20 interest and you don't pay that off in the next 12 months. It's three times what it costs you to do it. Is that worth it to you? And. And sometimes until they even feel it, they don't know it. So it's like, yes, there are circumstances where people get a raw deal. It happens all the time. But you are what you are, and you have to figure out how to climb your way out of it. And the only way to do that is through education, through learning, by sometimes making mistakes and that. But learning from those mistakes.

That's.

The other thing is people do stupid stuff, me included, stupid stuff all the time. But I have to learn when I do things that were a bad decision and then not make that decision again. And, and that, unfortunately, is, you know, you know, whether you want to call it accountability, whether you want to call it, you know, our parents not instilling in us those, those values, whatever it is, you know, there is a. There's a disconnect there, and I think it's affecting everything overall. And this is. What, is this going to be the first. I mean, damn to the boomers, but this is going to be the first generation, I think, of kids that aren't going to have the same standard of living that their parents did. And that's terrible.

It's totally terrible. But it's. It's a sure sign that the system is broke and it's got to be fixed in some. In some sort of fashion. I'm a big believer that. I hate to say this, but one product, thinking about buying a home. One. One product that I thought that was creative, but also very negative, not for the right person would be like a negative am. Like what happened years ago where people are making partial payments in an appreciating market.

Yeah.

To make it more affordable for stuff, but refinancing into something more affordable after a period of time so that you're not running into that. Oh, when the appreciation is gone and 125 of loan to value, and then you get. Yeah, then you're upside down. I'm also a big believer that folks out there, besides taking down the notches of what they wanted, a perfect home, cohabitating, maybe buying with two families to make things a little more affordable and go on that route for a period of time until both are ready to rock and roll and own their own thing.

Well, I agree with that. And I think our culture in the United States is a lot different than other places in the world because, you know, I was raised especially where I think it is changing But I was in an environment where it was like, okay, you, you graduate high school at 18, you go to college for four years, you get your corporate job and you go out there and you make something to yourself. And if you have to move home, then you failed. Like that's, that's, that was the, or at least that was the mentality that I had at that point was like, this is what is happening. But when you look at cultures across the rest of the planet, you know, a lot of places you don't move out till you get married, right? You don't, you don't go anywhere until you, till you find a husband or a wife and, and then you move out. And then, oh, by the way, when your parents hit a certain age, they're moving back in with you. And that's just what's going to be right. And there isn't any like, oh, we're going to find mom a home. It's like, what? No, you're not. And she's living in your guest room in the family house that she bought that you're living in now with your family. And that's how it works. And look, there are drawbacks and pluses to all different types of things. But the idea that we have always lived in this culture where you have to go, go, go, hustle mentality, success, success, you, it's good. But at the same time, it's okay to live at home with your family for a little while while you're going to school, it's okay to stay with mom and dad while you're working on your job because you can't quite get to that. Those are all things that everybody else does and we've just frowned upon it for so long. Again, I think it's changing, but, but that's what it's been. And you know, even school now, right? I tell my kids today, and we talked about this, I think before, but if, if you're not going to go to school to be a doctor, a lawyer, you know, some sort of professional degree, right, where you need that certification in order for you to, to do that job, engineer, whatever, then is it worth 250,000? I don't think it is. I mean, YouTube exists. Go check it out, right? There's, you can learn anything you want. So, you know, all of these things are impacting what's happening in it. And what's crazy is being in housing. You know, it's like, well, these are broad subjects. It is. But all of this stuff impacts my day to day business as it impacts your day to day business. And you have to be aware of these things that are happening and know what's going on because that's the only way you can plan for what you're going to do.

One of the things too I wanted to ask you about my kind of the trends we're talking about is the move for more folks and the newer generation liking maybe the more tiny home aspect of things. You know, I know it's hard to make money on a hundred thousand dollar loan when you look at maximum costs and things that you're allowed to put in there, figuring the apr, stuff like that. But are you seeing more of that where people are looking at buying smaller houses? How easy are those to get financing it like versus a traditional 3, 2, 15.

As you know, everything is about comps, right? So it's like we get in Texas here, we get a lot of the I want to build a barndominium. Right. I want to do a barndominium. We get that. I get that question once a week, can we do a barndominium? Well, the answer is always if there are comps that support the value of that, if there are other ones in that area. Okay, so, so it's the same principle when you get to the tiny houses or the ADUs or anything like that. It's like accessory dwelling unit, that's 80 for anybody that doesn't know. And so when you get to those type, those new types of homes, it very much comes down to, well, can you comp it out now? Are lenders going to be diving into the tiny home construction and trying to give you a 800 square foot house that's $70,000 on a $50,000 loan? Probably not. And the reason for that isn't because, well, banks are greedy. I work for a bank. We're greedy. It's just what it is. Okay, but that's the main reason. Second reason is that there are actual regulations to where as a lender, you know, Fannie Freddie, typical style lender, there's only a certain percentage of the loan size that fees can be charged. Right, right. And so if I'm buying a $300,000 house, the appraisal is going to cost me 600 bucks, 500 bucks. If I'm buying $100,000 house, the appraisal is Going to cost me five to 600 bucks. It's the same amount even though the house is significantly more expensive. So that amount, that percentage of cost that we can put into a loan gets eaten up very, very fast when the loan is Small. So, and, and you. It's not that the bank doesn't want to do it, it's just that they can't, they're not allowed to. And so, so you run into issues there with smaller financing. But the, the, the bigger issue is, is that you don't have builders that are willing to go all in that because everybody, again, capitalism's the best system in the planet. But if you can't make a certain profit, there's no incentive for you to get in there and build that home. So, heck, to me as a lender, I want to do loans because I want to create a relationship. I want to do, you know, if I'm, I want to get your checking account. Like you said, they want that relationship. So there's a lot of avenues where banks will be like, I'll lend you on anything if I can get other parts, right? But as a builder, if I can't build 100 homes and my 20% margin is only 20 grand, or I can go build a $500,000 home and that same margin gets me, you know, 100 grand, well, which one am I going to do? Right?

Which one?

And I think that's the bigger issue, is that it's not that the lending is tight or difficult on those, is that there isn't a lot of builders that are out there trying to, to create that market. You know, I had this crazy idea in my head a long time ago when the tiny home thing really kind of hit the scene where, you know, I was thinking, okay, what if you bought, you know, three acres of land and you did it almost like a mobile home park to some extent, and you created this little community. You've got, you know, garden and a pavilion and all these things where these little tiny homes could be on, you know, and it like a retirement. Like, these are only for people over the age of 60. These are a younger one, you know, these. I don't want to call it a commune, but it's kind of like, you.

Know, it's kind of like that. Yeah, yeah, yeah.

But that, that very much could be something, you know, that, that could be a thing in the future, that it's just what it's anything else. What are the incentives? What are the incentives for the people that are going to put that infrastructure in place, where's the profit centers for them to make money at it? Because if it's not there, then they're not going to do it. And that's everything. That's not just housing. That's, you know, I can't remember the saying. I was trying to think of it. It was like, you know, ask me for a behavior and I'll. Or show me the incentive and I'll show you the behavior or whatever that that saying is that talks about that. But that's, that's what all of this stuff boils down to. It's like affordable housing needs to happen. But how do you incentivize it to happen?

Yep. Now let's, let's kind of twist a little bit here. If somebody's. How much are you seeing, too, with sellers being willing to give down. Give. Instead of incentives to reduce the price, giving incentives to buy down the mortgage rate, are you seeing an increase in that, in what you're seeing on a regular basis?

So obviously, builders are doing that because builders are very much vertically integrated. So they have, you know, lenders, title, you know, the build. They have it all in house there and all. They're all basically sharing in the profit of that home. Right. You're paying more for that house or they're building that into it. So builders are built. I mean, there's. In San Antonio, I saw something the other day. It's only in select areas, but Dr. Horton was offering like 4.25% on these homes in San Antonio. I don't know the quality of the house. I don't know anything about it, but I saw that. So. So some of the builders are doing that already. The sellers, like the average seller, it always depends on the market, right? It depends on what? You know, if I'm, I live in Mansfield, Texas, and it's a fairly desirable part of dfw, but let's just say maybe someone's heard of Frisco or Plano or North Dallas Allen. If you're buying a house up there, those are five, six, seven hundred thousand dollars homes. They're still getting two and three offers because there's no houses there in those areas that people are desired to move to. If I go to, say, Burleson or Crowley or, you know, some of these South Fort Worth or out. Out a little bit more. And if the house has been sitting for two months or 60 days or whatever, well, then, yeah, they're going to be more willing to, you know, throw something into that deal. And, and by the way, if you're thinking about buying anything, I always recommend getting the seller to pay you money, not take off the price. Because taking off the price, 10 grand is going to save you $65 a month on your payment. Having them give you $10,000 in closing costs, you know, seller concessions could be used to buy down your rate or could be used to pay the 10 grand in closing costs that you're going to have to pay out of pocket. That saves you that money today. Right. So that's a way better use of that money. I personally, and this isn't, I always tell people this when I recommend the stuff about buy downs. There's two types of buy downs, permanent and temporary. Okay, temporary is less expensive. You could get a two point buy down on a temporary buy down for say you know, for two or three years depending on how you do it. If your rates is 7%, you can have five for the first year, six for the second year, seven for the third. And that if it's a $300,000 house, maybe that costs you 3, 500 bucks. Okay, that's a reasonable cost for a short term solution. If you want to buy that rate from 7% to 5% on a permanent buy down, well that's going to cost you like $30,000. Okay. Because it's, it's, that's the interest that the banks can make in over life of the loan. So I am not a big buy down person as far as like suggesting and selling because I think rates are fluid and change and adjust and I can't predict what's going to happen in a year or two years. And so I would rather take the cash today and save my cash and use it for closing costs than I would to buy down the rate. But, but if that's what you want to do, that's what you want to do. And there are, there's certainly an appetite for it. It's just, it just like anything else, it depends on the market, where the house is and the seller's desire to get rid of that house.

Amen to that. Amen to that. All depends on the situation. But some options are available for folks out there that need to get their, need to get their house move in some different ways that, to make it more attractive to buyers.

Yeah, you.

Are you doing loans just in Texas? Are you doing them out of state as well or just in the Lone Star State for the most.

So I do primarily in Texas. I licensed Louisiana, I have a branch in Indiana, we have one in Arkansas, so there's a couple other places. But, but for the most part I personally do most of my loans in Texas just because, you know, it's not that getting out of the state is a bad thing. It's just that it's limited and it does cost, you know, money for us to be licensed in those states. So you got to be able to justify the contracts. And so much of our business still is very much agent referred. So, you know, if we have realtors that we work with and, you know, agents, if you've worked with them are, you know, not all of them, but, you know, they're a little fickle. And so if, if you can't be in front of them, you know, pretty regularly and a new pretty girl walks by, a new pretty lender walks by, you know, they're, they'll tend to move back and forth some and they come and go, but. So it's difficult to keep us keep and sustain a business outside the state if you're not physically there because of where the business comes from, if it came from. If you built your business around online leads or you built your business around, you know, referrals from like, the divorce attorneys and financial planners, and you could keep a network that way, then, then yeah, it can make more sense for you or if you just have, you know, like, I had a little work for me for a long time that she was born and raised in Baton Rouge and that's where she knew a bunch of people. But she moved to Dallas. Well, she did most of her business in Baton Rouge because she knew everybody there. So it all just kind of depends. But I primarily stay in Texas.

Nice. Good stuff. Now, let's talk a little about the. Your podcast, the Texas Real Estate and Finance podcast. What's been your biggest surprise since you started that show?

You know, the amount of work that it takes. Honestly, it, it takes a lot. And, you know, you have to be careful or I have to be careful. And I'm, you know, this obviously because you've been doing this longer than me, but, and, and have a way bigger reach. But I got to be careful on how much time I spend on it versus how much time I spend actually on what I would call money making activities. Now this can be a money making activity and, and it certainly can, can, can develop that way, but I feel like you have to have a real enjoyment for it. You got to like to do it. You got to be comfortable with it in order to do it. Well, because I was telling somebody the other day, so when I first started doing it, you know, I did my research and I went online and I was like, all right, what other. You know, first off, it was like, make the name as simple and easy possible for someone that's trying to find you. So I was like, okay, I'm going to talk about Texas Real estate and finance. So, you know, I'm going to give it, like, it's not like, talk to me. Here's how it goes. And this is the. The Go show or whatever. You know, I just, like, I got to make it simple. And then so I went online and I was like, all right, how many podcasts are there that are. Are about real estate that are in Texas that, you know, kind of do what I do? And when I go to Google, I look it up, and there's a bunch. There's quite a few. And so I was like, okay, well, let me see what they do. And then I go to those sites and I start looking, and they've got six episodes or they've got 20 episodes, and they filmed 10 two years ago and 10 in the last six months or whatever. And. And I couldn't, man, still really find very many that had more than maybe 20 or 30 episodes. And so I look up two years later, and I'm at 130. And the consistency of doing it every week and creating a process to it has really made it easier to do and more and more. And I do get. I get, you know, good feedback from audiences, and, you know, I've. We've had 4, 000 unique listeners and all kinds of, you know, great amount of downloads so far, and it keeps growing every day. So I'm. I'm really happy where it's going, and I'm getting bigger and bigger, you know, guests to. To appear. I got you to come on, which was awesome. And then, you know, I've got the. The managing editor from Housing Wire on Today, which was great. So. So all of that stuff has been really great, but, man, it is a lot of work, and you really got to be committed to it because it's one thing to sit down and have a conversation with somebody and talk about stuff, because that's fun. And I, you know, I love doing it and, you know, I enjoy it, but it's a whole other thing to use it as an outlet to try to grow your business. And that requires, you know, a lot of time and effort to it. And. And that's the part I've learned a ton. Like, you know, these days I could put on a masterclass on how to do a podcast and promote it and all that kind of stuff. But, but. But that's been the biggest surprise is just how much work it took.

Yeah, I mean, I agree There's. There's definitely some work. And, you know, congratulations on 130 episodes. That's. That is Phenomenal. Because you're right. That puts you honestly in some rare air out there. So many folks are flashing the pants, 20, 30 episodes. And I mean, you're. You're doing some great stuff, great guests, great content. I think that's what people really need right now is people that are in the shit. You're in the frying pan right now.

Yes.

Too many people aren't in the frying pan.

No. I get asked all the time with. When we bring on, you know, like, it goes back to, like. Because I recruit loan officers, too, and they'll say, well, you know, are you still originating? And I'm like, yeah, I always originate loans. I mean, I don't do as many as I used to, but I. I do. I mean, nobody's doing as many as they used to, but. But I'm not trying to do as many as before because I'm trying to build a team bigger. But. But I'm never going to stop doing loans because you have to be in the mix. You have to know what's happening on the ground every day to really have perspective, you know, and not sit in some, you know, ivory tower where you have a bunch of minions doing everything and you don't really know what's happening. It's like you have to sit down and evaluate every deal that comes across your table and look at all of the metrics, you know, for these different notes that you buy and say, okay, I know the area here. I know what the, you know, what the median income is on this place and what the chances are that market going up and who this, you know, profile of this borrower is, because I've dealt with them in the past. But you. If you don't do it, it's like a muscle. If you don't continually work that muscle out, then it atrophies and it doesn't. You're not as sharp with it. And so you have to do it. You have to get into the muck and you have to do it. And then being able to share that experience with folks and, and ask people questions that really matter and not just the normal, you know, like, I had somebody one time when I first started doing it that were like, I'm so excited to be on your webinar. I'm like, this isn't a webinar. Like, we're. I'm not talking to the, you know, the CEO of Coke. Like, I'm just talking to the normal dude in his car on his way to work, you know, working, selling houses and just trying to figure out what happened with interest rates or, you know, what's going on with this NAR lawsuit, or, you know, what's. What's happening with inventory in my area. Like, that's, that's the stuff that they care about. And if you're not in it every day and you don't see it, then it's hard to relay that message without sounding like you're fake.

Amen to that, brother. But it's also helps you stand out. There's so many folks have gotten out of the business because they don't understand marketing. They don't understand relationships is an ongoing thing, and you're creating more relationships, more referrals and stuff like that. I know that our podcast has become one of our number one referral sources, not only for deal flow, but also for raising capital and so many other things. So keep up the good work.

Well, and podcast isn't for everybody too. You know what I mean? Like, that's the thing, because I work with agents too, and we talk about different ways to market your business and showcase yourself and, you know, they want to know about the podcast stuff. I'm like, yeah, this is what I do. This is how I do it. This is, you know, the methods behind it a little bit. But at the end of the day, you know, that may not be for you, but there are other ways to market your business and put yourself out there. And it doesn't have to be. You don't have to dance on a video on social media, or you don't have to, you know, host a podcast and talk to people all the time. There's many, many ways you got to do it. But the thing is, is whatever it is, your thing is, like, lock in on that thing and stay consistent with it and do it, because if you do, you'll become the best at that thing. Because everybody else and me, myself included, I've tried other things. I've tried it. Let me try to do this. Let me try to do this. And I start and I stop and I start and I stop and I start and then eventually it's like, all right, I'm not doing that. And this is the one thing that I've been able to stick to and continue to do and have done consistently, and I don't miss. And. And so I've gotten so much better at it. It's just reps. And so if you do it on a regular basis, if you make home tours or if you do whatever it is that you're. That you think is going to be the best thing for your business and you do it consistently, it will pay off. But it's not going to pay off tomorrow. It's going to take time.

No, it takes planting the seeds and letting those seeds sprout and continue to nurture them. What is the, what's the best way for our audience members out there to connect with you? Whether they want to learn more about your podcast or they need financing to either refinance or to purchase their new home?

So our website is Mills Team Mortgage. It looks like Mills Steam Mortgage, but either way, Mill Steam. It's funny, but it's Mills Team Mortgage. Thought about. Should have done that a little better when I made the two S's in the middle there. You can. I'm on every social media platform you can imagine. Facebook, LinkedIn, YouTube, Twitter, I'm on them all. I'm relatively active on most of them. I feel pretty confident that if you googled my name, it would show up on all those as well. Pretty top. Because I've made 130 of these episodes, make videos, talk to people all the time. You know, that's how you can get me. And you know, what we try to do as a, as a mortgage team is we specialize in hard loans. You know, I try to do, we do the rehabs, we do the non QMS bank statements, fix and flips these, these, these times that are a little bit out of the box. You know, I mean, obviously we do FHA conventional and all the stuff. We do those great. But where we really shine is helping somebody with the not so normal situation and trying to figure out a product that's going to fit them. Sometimes we can't find it. But what I tell people is like, look, if, if I can't solve this problem, then it's probably not solvable. And I don't mean to be toot my own horn, but we've been doing this a long time, done a lot of loans and have gone through these. And what I try to do is be honest with people and say, hey, look, here's why you can't do this. Here's, here's what is affecting this, or here's why you can. But if you fix this thing or change that thing or you know, give it 12 months or whatever it is, then you can get there. So at minimum I'm going to be able to give you a path on how you need to get to where you're going to go. Even if you can't do it today, I will show you where it's going to where you when you can and how you can.

Sounds good, bud. Well, check it out. The millsteam.com mortgage.

The Texas Real estate and finance podcast. Again, as simple as it could be. Long but simple.

That's all right. We'll put the links. So all they got to do is click on the description in either the YouTube or the. The podcast there for you. Mike, it has been wonderful. We're gonna have to come back on as the market changes and with updates and good st. Sound good?

I would love to. Yes, please, please. I love having great conversations because we need. We need more dialogue. And we. These days, our. Our section of the media world is growing. People are tuning away from. From the corporate media that's sponsored and telling you how to think and looking for people, you know, that have different opinions and living in their own niche. So I think you're doing great. I'm getting ready to start my. My we close notes class soon because I'm very interested in that. So what you're doing is fantastic. Thanks, buddy. And I really appreciate you having me on.

Thanks, Mike. Well, we look forward to continuing the conversation today. So, guys.

Yes, sir.

Check it out. Definitely go out, take some action. Mike shared a ton of nuggets out there. If you're. Like I said, if you're looking to buy, sell, refinance, give his team a phone call. They'll be there to help you out there and make sure that you're not making any money, mistakes. So go out, take some extra, buddy, and we'll start at the top.

Thank you.