EP NNA 118 - The Ins And Outs Of Investing In Hard Money Loans

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 all right, all right everybody. Hope everybody was doing well this Monday night. Welcome to Note Night America. Glad to have each and every one of you joining us from across the country. Some familiar faces and names and then also some new folks join us for the first time. So welcome. We've been doing no Night in America since 2011, so this marks our 12 or 13th year of doing it. And just honored to have you guys join us here every Monday night at 7pm Central if you're catching the replay. Hey, great stuff. 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This is a Mastermind event so we'll be going through case studies and learning from everybody else in the audience there about their note business networking services, systems that you put in place, marketing, vendors, all sorts of great stuff. That's August 26th to the 28th. It is not a free event. There is a ticket price for that so feel free to email me@scottclosenotes.com of course if you ever wanna one of our one on one coaching students, you're in for free. If you're WCN crew member you get a discount to that but other than that there is a cost for you to attend. So just email me@scottclose notes.com we'll be glad to share with you what you qualify for as far as discount the price and the times and just going to be a great time here in the heart of Texas for the Note Mastermind. So that's the announcements kind of what's coming up. But one of the great things guys, we always got great stuff covering in and out this coming weekend. We got a three day class coming up here soon, some other special one off classes as well for it. But anyway tonight's topic, this is why you're all here listening here on up night in America. Obviously it's why you registered for the call. You want to learn about investing in hard money loans right now some of you are very familiar with A hard money loan is right. Some of you are very familiar with. Some of you like I've heard of it but I've never done it or never been a part of it. I get it. Some people think it's one thing, other people think it's another. Oh, isn't hard money all types of loans that aren't credit based or how do I qualify for hard money loan? Look, I'm not going to sit here and teach you. You can't learn everything about hard money loans an hour tonight. It's kind of an overview and talk about a couple opportunities that have popped up that we want to roll out and make an opportunity for you guys here tonight too. If you're interested, no biggie. If not, not a big deal. But we've had something come across our plate and I'll get to that in a few minutes. But first and foremost, familiar with hard money loans. If you're here live on Zoom, raise your hand. If you're in the YouTube, say hey, let me know who you are, where you're at. But hard money loans have been around for a long time. Some people think of hard money loans as like your cousin Guido the shark, loan sharking because they're higher interest rates and you know, guy shows up with a bag of cash. Well, that's not how it happens. Okay. I'm a previous mortgage broker and I'm also been a hard money lender in the past as well. And you did quite a bit of hard money lending with investors here in Austin, Texas back in 2007. 8, 9, 9 and 10. And then of course got in the note business and moved on from that was doing other things but a Hard money loan is a note. A loan. It's a loan, it's paper, it's written on paper just like any other notebook. But there's some differences to it as well. So let's first start out with what is a hard money loan? Hard money loan, It's a short term loan really, designed for rehabbing real estate. Short term, we're talking 12 months or less. Okay. It's really, you're buying, you're doing fix and flips, you're doing rehabs, doing some maintenance and stuff. It's a short term loan, six to 12 months. Okay. It's usually based solely on the investment property and or project. It's based on the quality of that deal, the specs of that deal, not based on your FICO scores, your credit scores. Okay. Usually a loan and a hard money loan will be at somewhere between 60 and 70% of either the purchase price or the after repair value. They call that arv. ARV stands for after repair value, the property after you do repairs to it. It'll vary by state, it'll vary by lender. Some lenders are going off the 70% of ARVs. We're going off 70% of the purchase price where you've got to bring the 30% down, the rehab cost, yours. Every lender is a little bit different depending on the state it's in. Foreclosure timeframes are a little bit different each state, but on the ball is usually about 70% of at least the purchase price. Okay, I said short term, six to 12 months. There's usually no prepayment penalties involved. If you need to go a little bit longer in 12 months there's usually an extension, a fee you can pay to extend. They're pretty easy. I mean almost every city in the country will have local hard money lenders. Every state has hard money lenders. It's going to vary that state specific foreclosure timeframes and what's going on in the market. Primarily a hard money lender is going to be a first lien investor. They're going to basically put a lien on the property. You can use it to acquire the property. I have some friends like in California and Arizona, they run a hard money lender, but they're doing second liens because there's a first lien in place and there's so much value above and beyond that. They're leaving the first lien in place because it's traditionally financed and they're bringing in money on a second lien position up to 60, 70% or whatever the repairs are needed to repair that property. Okay, it may, when you're at 70%, may include the purchase price plus repairs. Now you're going to have to get your repairs scheduled, easily approved. The Harmon owner is going to review the project, see what kind of work it needs. I mean they're used to doing budgets all the time for repairs. So this is a great thing if you have a property take back in the past I always, a lot of times got our properties that we would buy, got them pre approved, especially on the REO side. We bought a note, took it back, we'd automatically get that asset if you need a lot, lot of work, pre approved with several hard money lenders and they would market the deal to their database and sometimes that loan, that 70% loan may include the repair costs. If there's enough equity and you're buying it cheap enough, it may include the amount for that. Now they're not just going to give you the money, they're usually going to do it in a draw period. It means if you're buying the property for 100, you have a $30,000 repair budget. They'll hold on that $30,000 budget and release it in draws as work is completed or work is finished and they inspect it. Okay, it's an interest only loan. So it's not principal and interest, it's just interest only loan. And the interest rate on these can be anywhere from like 10 to 15%. If you as low as 8% of SEMA's, high as 18%. Okay, but middle of the road, somewhere between 10 to 15% interest rate. Like I said, it's interest only. And there's usually going to be a point, an origination fee of some sort of anywhere from 1 to 4, up maybe 5. Sometimes I've seen 1 to 5 points to the actually hard money lender which is separate from the interest rate they're charging. Okay, so they're getting points plus interest. You may see it, the rates in the percentage may vary by lender and experience. You know the lender may also, if you've done multiple loans with them, they may cut you back on. Okay, so they're charging three points, we're only charging one point instead of 15%. We're only going to do 12 or instead of 12 we're going to do 10. Because you do such a great job, brand new, you're probably going to pay somewhere between 12 and 4. How do they say? 12 million quotes rates, it's 10 and 3. That means 10% interest plus 3 points, 6 months. There may be a 2 point charge to extend it beyond 6 months, beyond 12 months. Now point, what do we mean by point in the mortgage industry when somebody says a point, one point is equal to 1% of the loan. So it's $100,000 loan, they're charging three points, that's 3% of 100,000 means $3,000 is at points. That's really one of the ways that hard money lenders, why they like short term loans, they like the six month process. Because if they're originate a new loan every six months, they're making this point every six months instead of every 12 months. So it puts a lot more money in their pocket. Now let's talk about what a hard money loan isn't or what is it it's not used for. Okay. You would never get a hard money lender and have them be in long term financing. You're not, it's not like a Bank of America, low interest rate or even a subprime loan. An all day loan would be a lot more advantageous than having a hard money lender on there for 10 to 12%. I think we can all agree that. All right. You would not have long term finance to be a hard money lender. That is not anything beyond 12 months just does not make sense because it's going to eat up a lot of your profits and interest. Okay. You're never going to have it on a primary owner occupied home. Like if you're in a buy a new house to move into and you do rehabs on the first year, they're not going to give you a loan on a primary unoccupied home because they don't want you to drag out the foreclosure file bankruptcy delay out in case you don't pay. So most hard money lenders will never do it on an owner occupied home. That doesn't mean some people move into the house when it was supposed to be an investment property. We've had that happen before. You just go to foreclosure record. It's not what it's for. But primary owner occur homes are not what harmony lenders they're looking for true investment homes. Okay? Now here's another thing. You would use a hard money lender on a skinny deal a lot of times on my skinny deal it's where it's at 70%. That's what your purchase price is where you leave, you know, repair costs. Okay? Now listen, unless you have the funds, if your own money on the side, your Own lines of credit, stuff like that to repair the cost you might have to go up to. You can get a hard money lender and do that and do a skinny deal if you have the funds or it's just something simple that you can finance. Not a big fan of using doing a skinny deal to begin with. All right. You always got to leave plenty of meat on the bone. All right? Just because a hard money lender will lend you the money doesn't always mean you should take it full advantage of the full loan amount. All right? Sometimes it works in your favor and other times you don't want to be over financed. You cannot, unfortunately cannot use a hard money lender to buy notes. They just want to own real estate. They want to be in a first lien position. They don't want to be in a 30 year mortgage, they want to be on a one year mortgage the most. Okay, you're not going to use a harmony lender to buy. That doesn't mean a harmony lender like principal won't buy notes for themselves. I've got several friends that run hard money funds. They will buy notes or they will lend money on a side business, their own personal funds into notes, but they won't use the hard money funds to buy notes. They're just not going to do that because they're missing out on that, those points every year, couple months. Okay, so just not going to do it. Now here, if you're an owner occupancy and we're seeing it what a 3% default rate or something like that, you can't use a hard money loan to go bail out your property, bail your ass out. If you're in default because it's owner occupied. Now you can, if you're the investor and you have a friend who's in trouble, you could go get a hard money loan to buy their house to avoid them going to foreclosure. We've seen that happen many a time where a hard money lender is the financing because they're buying a house, a distressed asset at a discount and helping a friend out. The friend is no longer the property owner because it's no longer owner occupied. A hard loan is usually always going to be to an entity person, not usually to a person. I would also. Here's the thing. Long in long foreclosure states, it's going to be a much more expensive because there's going to be usually some more carrying costs. I would not recommend doing a hard money loan in a long foreclosure state. New York, New Jersey won't do that. Anything really over 12 months I would avoid. You're going have a harder time in those states. Now hard money lenders are throwing money at short foreclosure time frames. The non judicial states like Texas, Georgia, Missouri, North Carolina, Arizona, Nevada, some of those states you're going to see a lot of, I mean I had several people reach out to me said hey, they've got money for hard money loans in California that all day long because the values keep going up. And what was if it was at 70% of value six months ago, it's probably now at 55% with the way appreciation is going. But I would not recommend doing a hard money loan in a long foreclosure state. And like I said before, a hard money lender is not probably going to finance to a it into a person. They're usually to an entity, usually an llc, maybe a trust, but that gives them, if it's an llc, it's a non owner occupied loan that they can basically foreclose on that llc. Now you may also see them do a deed loan and escrow, stuff like that. Yeah, Florida takes way too long and like, well, not compared to Florida has gotten a lot better than what it used to be. All right, but that's why, you know, we have property right now, or I should say a note where the bar did take out a hard money loan. We actually bought the hard money loan and they've drug it out trying to drag things out. And we're excited that the next few weeks should be finishing up with a deal. Yeah, New York can take you three years to foreclose. That's why a hard money lender is not going to want to be tied up into a New York deal without some other things like a Dean Loon escrow or something like that. Okay, now let's talk about how hard money lenders work. We've talked a little about this, but I want to just kind of outline it for you guys. Hard money lenders work and here's what they do. They're going out and they're not necessarily using their own funds. They might be, but they're usually going out like many of you guys going out and raising capital. And they're giving investors 6 to 8% on their money because that money's sitting on the sidelines, not doing anything. Okay. And they're going out and raising it and you know, having them tied up for 12 to 24 to 36 months. Okay. Yep, Chuck, you're right. Chuck's on Here says Maryland is a long foreclosure state. Yes, it is. Ding, ding, ding. Winner, winner, chicken dinner. But they're going out and finding people just like you and me. They're marketing for IRA investors. They're marketing the local, they're going out, speaking at meetup groups. They're looking for people who have lazy assets in the sideline, not doing anything. And they're glad to give them 6 to 8% on their money for 12, 24, 36 month timeframe. Okay. Now what they'll do is they'll usually lend that money, turn around and lend that money out to investors, fix the flippers, rehabbers, property investors at a cap of 70% of either ARV after repair value or fair market value. And they'll lend that money out initially the interest rate of 12 to 15%. I know we really briefly talked about this. It may be a little bit less 11, 10. Usually it's double digits though. Okay. And you got to be careful. Some states have usury laws where if you go too high in the interest rate, it's not good. You can get charged with usury. And you don't want to be that where you're basically a loan shark. You don't want to do that. RIP Ray Liotta. Right. Goodfellas and everything. Don't want to be a loan shark. But Europe the fact that it's a little bit more of a riskier loan because you're not basing off of FICO scores. And there's also some rehab, there's some things that mitigate the risk. We'll get that in a second. Okay. Like they said, they're going to charge you one to four origination points that you have to pay at the closing. They're not usually going to roll that in. They're usually going to make you pay that at closing. So you've got to bring the points to. Sometimes they'll roll it in if you've got enough room in the loan where you're borrowing that loan. But I wouldn't necessarily finance the points now. They're usually going to two. If you need to go for 12 months and it's delayed because the market's taking longer or obviously everything that happened in Covid. Most Harmony lenders that I know will charge somewhere around 2 points for extending a loan beyond 12 months. They'll give you a six month extension for 2 points. Okay. Now they may hold back rehab costs as draws. And like I said before, they're not going to give you the whole bottom of money. Cause Some people will take the whole amount of money and run. They're just gonna take off with the cash. And unfortunately not all contractors are trustworthy. Okay, Sometimes we've had seen gcs either take the full draw, pull that money out and just run for Mexico. They're gonna release that to you. So if you finish a rehab on a bathroom, they're gonna release the 10 grand that you need for that. The 25 grand, you can bleed the kitchen. You're usually financing maybe a little bit on credit cards or your own money and then getting repaid back or, you know, working that. There's different ways to do it. Some will release the full amount, some won't Depend on what's going on with the project, how comfortable they are with you as a lender and your experience. Now they may have in those longer foreclosure states. We've seen this done. Have you? If it's going to be a longer and 12 month foreclosure period, go ahead and sign a deed in lieu. That's what DIL stands for. Not dill, like dill pickle, but deed in lieu foreclosure. They'll have you sign that and hold that in escrow with an attorney in case you ever do get 90 days or more behind. They're just going to, instead of going through the foreclosure process and alongside like Maryland and New York, New Jersey, they may just go ahead and file that deed and let you walk away from the loan and they'll just take the property over. It's basically a friendly foreclosure. Now one thing about hard money lenders is they have to understand the rehab project. You out there, ladies and gentlemen, if you've got money on the sidelines, you wouldn't want to lend money out unless you understand what the process was or you had a third party helping you manage the project or you're investing with somebody who actually understands what's going going on in the markets. Okay, so that's one of the cool things about harboring learners is this is what they do. They understand rehabs, understand days of market. Many of them may have be a realtor, they can pull this information. They were closely title companies, they know what's going on the market. They got their pulse. What's the trends of the market, ups or down days of market, what's going on, all that good stuff. They understand rehabs and repurposed. So they're not afraid to take a project back, finish it up, because guess what, they're at 65, 70%. They're at a great LTV. And many times if you financed or you did a hard money loan, you've done most of rehab. It's just that the dragging stuff out, getting it listed and getting it sold may be what puts you in default. A year ago. Yeah, a year ago in April, when the first foreclosure started taking place, specifically here in Harris county in Texas. Here I'm in Travis, but Harris is where Houston is. There was 400, 500 foreclosures and a mass majority of more Hard Money Loans LLC that were not owner occupied home that the lenders had finally said, okay, it's enough, enough. We're going to foreclose because we've got take the property back. Okay, now here's the thing about hard money language. You will have some that lend all across the country. Sync Financial. You can always go to reiclub.com look for nationwide hard money lenders. They'll tell you what they lend on what they usually do. They have a local rep who understands the market goes out, does that. So they've got little, I don't say franchises, but offices that they lend across the country. And they may be a little bit more competitive and rate because the fact is they have more bulk. But they may not understand exactly what's going on. If I'm going to do something, I always want to work with somebody who knows that one market or two markets, like if I was lending here in Texas, you've got Jet Financial out of Houston, you've got Longhorn Investments out of Dallas. They all lend in Texas. And basically the major metroplexes in Texas, Houston, Dallas, Fort Worth, Austin, San Antonio, some will go down to Corpus, just Barry's. But there's a lot of money in the market. I mean, we're getting everybody. You know, he's probably been getting hit up. Hey, I've got money for sale, anywhere from 5,000 to 5. Well, that's not the case. Hard money lenders don't want to do a loan for 5,000. It's not worth it. They want something probably usually at least 50 grand or 100 grand minimum. So that's worth their time and going out and reviewing the asset. Because what they're going to do is often the hard money lenders are going to send somebody out and watch the project. They're going to drive by the houses once every two weeks, see what's going on. They're going to ask you, hey, what's going on with this project? Let's go through some numbers here. Some folks are More numerically based. They want to see the numbers behind a deal. So that's what I thought. I thought we'd throw together a sample deal and who's paying what and what's going through from there. So you got a rehabber who's been lucky enough, they found a Property, it's worth 200, it's light rehab. We're not getting a heavy recap. We'll just say it's $200,000 fair market value. And right now, okay, light rehab, paint, carpet borrower wants to walk away, he needs a cleanup. So they're lucky, they're going to buy the home they get for 60 cents on the dollar. And they found a hard money lender, we'll just say sack investments who will give them up to 70%. So they'll give them the 120 to close on the property and they'll also have 20 grand sitting on the sidelines for the rehab budget. So 140,000, 70% fair market value. Most of these hard money lenders will have an online platform to go through them and put the numbers in the address so they can pull the numbers and spit out a pre approval letter for you. Okay? Now the great thing is hard money lenders are not FICO based. They don't give a rat's ass about what your credit score is. You could have an 800 credit score and you're probably going to get it the same as somebody who's got a 520 FICO. Now more and more starting to look at FICO scores. Just if you've got experience that will heavily outweigh the fico. Some of them do you know if they go a little bit higher, if you want to go above 70%, they're going to want you to have a 630, 660, 680 FICO score in some cases it all depends on what that money's cost. Now turn around. If this guy goes to hard money lender, hard money lender then turns around, said, okay, we got this Pre approval for 140. Let's call John now. Let's call John. Sherry, I know he's got 150k sitting on the sidelines. John and I have an agreement in place that I'll borrow the 140k from him at 6% for 12 months because John's money is making zero. It's sitting in an account waiting for somebody to put a use. John's too busy at his job or he's too scared to pull the trigger to do it. Or he's really scared because he's losing 7%, 8% in inflation every month, which is happening right now. So for John to make 6%, it's like his money's actually making 14% with inflation added onto that 6%. Yay. All right, John's happy. He gets 6% from the hard money layers. You can pay him on a monthly basis or quarterly basis, depends on the agreement. And it's be pretty good. So he's making his 6% on 140k. Now the hard money lender then turns around and lends 140k out the rehabber at 12 +3, so 12% interest +3 points at closing for 12 months. So one year loan to the Rehabbers LLC. All right, now the rehabber will pay the 3 points at closing, which is 140,000 times 0.033 points, it's 4200. So basically the rehabbers bring in 4200 to the closing table. Now, if he's only going to fund 120 and they would approve it to 140 project, he might be able to roll that in. And then the hard money lender gets that 4,200 out of closing proceeds as a line item fee agreement, the closing table. But let's just say for the sake of it, you got to bring the three points to the table because they want to see you bring a little bit something. Now, rehabber fix and flipper, it's going to be paying $1,400 on a monthly payment to the hard money lender due by the fifth every month or payment dates. All depends on when you close stuff like that. Usually they want you to pay within 45 days of closing, which is great because a lot of times you may be able to have a house maybe almost all the way done, completed, especially on an easy cleanup that you're able to list it and you've only paid your first month. Now you also got to have insurance and taxes are going to be paid. So in turn, rehabber is paying hard money lender 1400amonth. The hard money lender is turning around and paying his, his investor 6% or $700 a month on the $148 bar. So the hard money lenders making some money in the spread that rehabber is happy because he's got financing. And then the investor whose 140k was to begin with, he's happy making his 6%. All right, now the hard money lender in total is making $700 a month in that arbitrage between what he's paying the investor and what they're fix and flippers paying. Plus this is the big thing, the points. He's getting three points on this loan. That's $4,200 in point fees. And so in a year time frame, you take 4,200 plus 700 times 12 is 8,400. On this one loan, the hard money lender made 12,600 profits if it took a full year, okay? And if it only took six months, guess what, he'd only be making like ten grand. But you still get the 4200 points no matter what. There's usually no prepayment penalties on a hard money loan. So that's why a lot of hard money lenders like this, because they, hey, if I can do a loan every six months, I'm making a nice chunk of change, okay? You know, I can make this one lender I can actually make $8,400 off of. I can do it in six months versus once a year. That's why they like working with rehabbers that are experienced because they know that their project is 90 days to get done and 90 days to sell. They can rinse and repeat that money. That's willing to give them a little bit lesser rate on the interest rate, but they may still keep the points on that. So let's talk about what the rehabber makes. A rehabber, he borrowed $140,000 for 12 months at 12% plus 3 points. One year in interest is 16,800. That's basically 140 times 12, plus the 4,200 in points. Basically, this loan cost him 20 grand to get done, but he didn't have to jump through any hoops. Okay, he sells the home for 200,000, minus 140k in purchase, in the purchase price plus repairs, plus the $20,000 in money cost. So that's why it's 40k in profit to him. Now, I know a lot of rehabbers, they'll do a hard money loan on a deal. If they can make 15 grand or 20 grand on a deal that gets to be kind of skinny, I don't want to see anything less than 25 for the most part. But 40k, that's not a bad day, ladies and gentlemen. All right, that's pretty good. He did one of Those a year, 40k a year, that's not bad. All right, now the idea here is if he could do it in six months, obviously his interest costs would be reduced 8,400 versus 16,000 and he'd end up making about seven grand more. But here's the thing. The rehabber didn't need to qualify. And he spike a score. His payment history, his job experience, his reserves. He didn't have to jump through any of the flaming hoops the banks make people jump through these days. And it's going to get worse out there as credit tightens up. Okay? Now, like I said, the harmony lender most of the time doesn't give a rat's ass about FICO or your experience. It's all about the project. And the more experience you do have, the better rate you'll often get on the loan. The first time you're doing it with somebody, you're probably going to pay the full 12/4, and that's going to get better as faster, as good as you are and going through. But here's the thing. They just care. More so than anything else, a harbinger is going to care about the property and the project. And does it make sense what the rehab cost? You're talking about what it needs and what you're putting into it. Does that make sense so that you're going to be below 70 and being able to sell this property quickly at 90, 95 cents on the dollar or 100 cents on the dollar, maybe even more, depending on what crazy market it's in. Okay, Like I said, hard money lenders are making money on the difference or the arbitrage between what they're paying their underlying investors and what they're charging the fix. And flippers, they're making money on the point each time they make the loan. So that's how hard money lenders work now? Yeah, there's hard money lenders out there all over the place. There's a lot of them out there all over the place. Depending on what state you're in, stuff like that, there'll be different rates out there. There are some risks and this is something that you have to keep in mind. And people always ask me, well, Scott, this sounds pretty decent. What are the risks? The hard money lender? And of course, then technically to me, being the private investor, well, here's the risk. What if the rehabber doesn't complete the rehab? Okay, you foreclose, take a deep loom, turn around and sell it at 70% to another fix and flipper. Or you know what, you finish the project and sell it yourself. That's the nice thing. Okay? And that's the thing most hard money lenders know, the subcontractors. They have a team of people already in place to step in and do that stuff. Because most of them are also fix and flippers. They're also buying out real estate themselves. And guess what? If they're making hard money loans, they know plenty of other fix and flippers that they sell the asset to to take it off their hands and go from there. That's a great thing. But if the rehabber demo's too much, I mean, like we've had this happen before. We wholesale the property to a guy, his crew went in there and ripped the roof off, ripped off these old hardwood floors. It really did too much rehab. Well, that happens when somebody's not experienced and you don't have the property lender reviewing the rehab and the work. And these days you always want to have somebody who understands the rehab. How are you going to. What are you doing? Tell me exactly what you're doing and let's communicate that specifically to your crew. Okay? In some places, like in San Diego, down everything except one wall, one wall is standing in rehab. It's not considered a new construction. And so they get away with being able to speed a D. A deed in lieu is legal everywhere as long as it's signed on. John. It totally is. You signed off onto an ADID in lieu. It's completely legal in New York. What if the rehabber doesn't pay? Guess what? All right, you foreclose. You foreclose. Take the asset back and sell it off as is or fix the rehab. Okay. If the rehabber moves into the house, okay, that's a violation of the loan agreements. Boom. You foreclose, take the house back, foreclose, sell it all off. And here's the great things, too hard. Money lenders are often servicing the loans, they're collecting the payments. Since it's an entity loan and it's not a owner occupied loan, it doesn't have all the hoops that you jump through. For Dodd Frank, it's an entity loan. So you have the ability to do a deed alone. Escrow. You can foreclose, yes. You still want to have it serviced with servicing where money coming and collected, make sure everything's paid off. Taxes, insurance are maybe escrowed in there. Then this is the thing. When they're buying the property, they're going to want to see if there's three grand in back taxes owed. When they're doing the loan, they're going to want to make sure those back taxes are paid at the closing table. Same thing, making sure there's insurance in case of an accident on job site or you know, tornado comes through, whatever, they're going to make sure that there's insurance required at the closing on the asset and the hard money lender is made the payable. Now are there any questions about that stuff so far? Does this make sense so far what I've talked about? We're not done yet. I just wanted to give you a bit of a rundown of what hard money lending is and what a lot of things go through. Now every, like I said, there'll be maybe some changes in one state versus another. Some lenders want to see a decent fico. Someone want to see experience. Someone wants the experience. Okay, what happens when a homeowner signs a deed loom and later files bankruptcy? Well, the minute the deed loom is recorded, that's done. It's done. I mean they're not going to sign. I mean I don't think they're necessarily going to file bankruptcy. You then go to bankruptcy court and you say hey, we, they've signed this over in this case and so basically get the bankruptcy discharged is what I would imagine happened. But there's been sillier cases where it's drug out. Okay, but here's the thing, if a guy, if a rehabber is struggling with a project, they'd probably be glad to sign the deed over because here's the thing, it's not affecting their personal credit. A bankruptcy is going to affect their credit. A late pay on an entity isn't going to affect the credit because most of time the hard money lenders are not reporting to the credit bureaus. So most of the time if you got a project and it's not going well and you just need to do it over, guess what? Most of our like hey, give it to us, we'll run with it, get it fixed and be done with it. No hard feelings. You probably not going to be able to do a loan with us anymore. Got to go somewhere else. The more communication happens, the better it's going to be. But this is why car money lenders are also going out and inspecting properties they're expecting, making sure that the work has been done before they release the work and make sure they release the right person. Now any other questions before we move on here? All right, we'll move on here. Now what's great is is we at we close notes here. We get all sorts of different opportunities of cross replay. I get phone calls all the time. Like today I had three people reach out to me via email or phone, say hey, I've got a note for sale Some sort or I've got a note available and we're reviewing stuff. Ones in Kansas City, one's in Salt Lake City. But I had a very interesting conversation last week. I had a friend and when you market as much as we do, which you all should be marketing, we get people all the time that refer people to us. Okay? I don't know. But if a borrower signs a deed Lou over and then goes files bankruptcy, I'm sure you can present and get a discharge. The homeowner is different than the investor, you know what I'm saying? So I'm sure you can be able to get the discharge. Your attorneys just got to get it kicked out. All right, talk to. That's a legal question, not a no night in America question. I am not an attorney or accountant, okay? But the opportunity we had this pop up and I thought it enough that I said, you know what, let me run this by because I think there's some opportunities we've actually been looking for what fell in our lap. It's interesting when you put out there what you're looking for, you talk about it, you share it. Things happened. It's all the quantum physics and karma, I guess and say good things happen to those that are that market. Okay, so we had this opportunity. We had a hard money lender reached out to us and they've got $20 million in hard money loans performing hard money loans now. They're very active in their market and they're looking for somebody to come in and either performing loans not at a premium. I've had hard money lenders, they're like, oh, we're written at 12. We want, we want to get, we want to sell it at 10% yield. No, no, no. They're willing to sell these performing loans because they need the 20 million they've got of their own funds to put it back in the market and recycle their money. They have the ability, they said, hey, we got ability to put 40 million in the market. But we right now have 20 million roughly in our own money in the market that we need to recycle those loans and find somebody that can come in and buy a loan after a month. After we receive the first payment, we're servicing them. We've approved the projects, we review the projects we've done. We're big fix and flippers in the market as well too. And they've got loans anywhere from small like 30,000 up to a half million dollar property. They're only doing first liens. I mean they do have Some seconds, but I'm only talking. I was like listen, if we're interested in this, we're not going to buy any of the second liens. We're only going to buy first liens that are up to 70% of the fair market value or lesser. Okay, do that alone for 55% of fair market value. That's what we'll find. We'll go and buy that note at par and take over the payment stream on it. Okay. Now like I said, these are short term loans. They're hard money loans, six to 12 months and they're all at 12% interest. There are some a little bit more but for the mass majority it's a 12 month loan at 12% interest. Okay, pretty good. And they're usually at 70% of fair market value. If they have a few more that are about 70%. But we're not talking about. We wouldn't be buying those. We would want to be at make sure that we're at 70% of fair market value as is value, not ARV. But when we're looking for basically finished projects, they're just dragging on maybe a three month, maybe a six month, maybe a nine month, maybe a 12 month process. And they've got borrowers that anywhere from one deal all the way up to those that have done 32 deals. Okay, they sent us their full portfolio. What they're looking to move 100 plus, 154 plus loans. And I started talking so well listen, here's some things we would only want first liens. I see most of these first liens we would only do this up to 70% of the fair market value. We wouldn't go over that. All right. We basically want them to at least made one payment because they're servicing these loans too. They're self servicing these loans because they know the borrowers, they work with the borrowers on a regular basis and they're servicing so they know immediately if the payment's been made or late and they know to send somebody out directly. That's all. They fix and flip. They buy fix and flip a lot in this market as well too. I've seen their portfolio but they're really got some great things going. It's in the St. Louis market. St. Louis and Southern Illinois area. Not Chicago, not Kirk county, but the St. Louis market. And so give you a bit of an idea. This is the 154 loans on map rule. There's a few outsiders that didn't make the map here. But if it gives you a bit of a map. So you see they know what's going on the market, they know the days on market, they know the repairs, they know a variety of of things are going on the average days in market. Wood costs, you know what I mean, repair cost, things like that. They know what's going on in the market because they've been doing it for a while. Okay. And the opportunity is like, hey, if you're interested, I mean I've got. And I just pulled four or five quick little photos off the 150. You know, that's one of the smaller loans. I think that was a $50,000 hard money loan they had in that house and he's repaired it. This was one of their deals. It's pretty nice. The interior photos are all rehab pictured. It was really nice. This one's another one that they've done. They've also got some folks are going in and doing some duplexes and multifamily stuff there. And Stuart, some of it's in good areas, others in rougher areas. But they're buying and make great values and they're putting a lot of work and then you see a lot of re. Gentrification going up obviously price values going up on affordable home. That's just a snapshot of a few of the ones that we pulled online. Now if you've got money sitting on the sidelines and this interests you, here's an opportunity to put your money to work. Okay. Like I said, an opportunity for you to come and invest in the short term loan. Six to 12 months in the St. Louis or Southern Illinois market. We'd be paying a 6% interest rate on a monthly basis, right? So it's 12. You're basically, you're getting half, you're getting 6%. Our costs are servicing our handling the loans is getting the other half. We'd be buying these at par. We're not doing brand new already newly originated before the. These would require at least one payments made. One monthly payment made. Now is it first liens only? No better than 70% LTV. The loans can need to be serviced by the lender. And here's the kicker. This is the big thing that I asked for and they said yes to. If the borrower stops paying, if it's a. Say it's a 12 month loan. The borrower stops paying after four months. We paid 100 grand for the $100,000 note. They will buy back the loan at 100% of the purchase price at what we paid for it. They would buy it back no Questions asked. Because guess what, they're fixing flippers. They don't mind taking the project over, paying it back to us because they want us to keep giving them money for the good hard money loans that are performed. So that's a huge, huge thing that you don't see every day. They're not all across the country. They're in those St. Louis market and a few of the outliers there for you. We would review the projects, we fly up, take a look at the assets. Already started with some due diligence on myself here. Checking in, walking, looking at the collateral, looking at the servicing docs, actually walking the assets without them knowing it, going up there early and doing that. But that's one of the things that we're doing. Hey, we've got some opportunity here. They're willing to sell these notes. They're making 12%. If you want to put your money to work, it's making zero or not making 6%. Guess what, we can put it to work for a short period of time. Either put it in an LLC or have you pay our profits, our 6% out of the proceeds as well if you're interested doing that. But we would review those things. We make it pretty easy for you to get your money. And like I said, there are no, there's no prepayment penalties. So there's not anything really dragging these things out. Bar didn't pay on time, boom, they buy the loan back from us. If it drags out a little bit longer, guess what, we could actually do the renewal for them and keep making the interest rate on it. So that's kind of what we're looking for. Now your investment would be returned at closeness. If you put a hundred grand in, it was 12 months. Property sold, you'll get your money back, wired back directly to you. That agreement ends. And if you wanted to roll into another one, we could do another one for you. Any questions about that? But like I said, ladies and gentlemen, if you are interested, feel free. Drop me an email@scottclosenotes.com we're going to review everything. I've already started reviewing their loan files on a few of the assets. I asked them to send me over a couple sample loan files we'd see and dive into it. Book, call me at talkwithscottclarkson.com and we jump on the calendar and talk about this deal. I'm not going to tell you who the hard money lender is. I don't want you going around my back. But this is the whole point is that you've got somebody burning a hole and you want to put in a short term stuff. Guess what this is an opportunity to put it in, make a decent return, keep up exceeding inflation there for you so that your money's making you something that sits in there losing buying value on a regular basis. Like I said it may pay off sooner, may get your money back sooner than 12 months, some may drag on a little bit longer. I don't know the ones that like I said we're very very strict nothing beyond 70%. Somebody's got to be make it, they've got to make at least one monthly payment on the road and then I guess that there's the clause for them to buy back that loan on the loan sale agreement if something were to go astray with the borrowers out there. So any questions as you can use your self directed IRA funds, everything approved with our attorneys to help you fund that and put those through. Like I said we're usually we're going to be looking for at least 50k or more minimum per investor note. This is not something where you go out and find a friend and I'm going to broker here's money and use this. Basically it's your own money to invest. Unless you've got investors that want make less than 6% that's fine, you carve that stuff out for you that as well too. But like I said if you're interested please drop me an email at scott@weclose notes.com Please say hey hard money loans and be glad like I said they've gotten loans or anywhere from 50k up to half a million you've got a chunk of change, you want to put the work in short term. Here's the opportunity for you. And then also I'm not opposed to bumping that interest rate up a little bit 1% if you're doing multiple deals with us as well on this to make things like I said, everything will be disclosed. You'll have full access to see everything, collateral files, property once we end up finding the deal and get ready to rock and roll there for you. So any other questions, comments, concerns on this tonight for you? We are looking to close our first batch of these around July 1st. That's why we bumped this up into the conversation as I talked with them last week. So I just want to see your guys interest before we roll this all out across our marketing. So any other questions, comments, concerns for any of you out there. Like I said drop me an email@scottclose notes.com and we'd be glad to talk with you one on one about the deal, go through a few of the things. Like I said, we get enough interest off this call. And another thing we're going to do, I'll jump on a pain and be flying to St. Louis in the next week here to review their process and systems and stuff like that to make it sure it's just not two guys with a spreadsheet. Alrighty. Anything else out there for you guys? Once again we do have our note weekend class this coming Saturday and then of course it's always the third Saturday of the month and of course you want to dive in a little bit more, check out our awesome note mastermind taking place at the end of August. But once again guys, they are been great having I'm just going to pull up the map. Somebody messaged me say hey, can you share the map again so you can kind of see. There we go. There you go everybody. Any other questions? If not, we will let you get back to your Monday evening. Thank you for joining me here on Note 9America. This interests you at all? Please drop me an email let me know I get it. Hey, I got my money type on a project but it may be out next 30 or 60 days. That's fine, just let me know. This should be an ongoing project for at least the next 12, 24, 36 months if we do it right. So once again have a great evening buddy. Thanks for swinging by. Thanks again for joining me here on Night America on Monday night. Go out, have a great week and we'll see you all at the top by Sam Sa.