The Multifamily Real Estate Investing Blueprint

I know you want to buy a bigger house. Like you've got the money, you've got $200,000 of equity in your house, whatever, because prices have gone up in the last 6, 7 years. What if we just look at taking a home equity line of credit, renting out your house? Let's just look in your neighborhood. What are homes renting for? And then see what your new mortgage payment would be. How much difference is between the 3 mortgages and the rent coming in, your new mortgage payment, like Where's the delta and monthly payment difference? And does that make sense for you in the long term? Let's look at this 10, 15 years down the line.

Welcome to the She's Got Assets Real Estate Investing Podcast. I'm the host, Shona Leppis. Follow along as we unpack and demystify real estate investment strategies through expert interviews and personal experience, from how to find off-market deals to creative financing to long-term and midterm rentals. We aim to educate and inspire others to gain financial freedom and generational wealth through real estate. And as always, please subscribe so you never miss an episode. We really appreciate reviews. It helps others find us and just helps us get found. Welcome to the She's Got Assets podcast. Today I have a special guest, Jordan Lee. He is a certified mortgage broker and advisor in Portland, Oregon. He's doing lots of cool stuff, really active in the community. So Jordan, thank you so much for taking the time. I'd love to have you give us a little details about yourself and where you're at with investing.

Oh, thank you so much, Shana. Yeah, I really appreciate you having me on the show. It's interesting. Real estate is a second career for me. I was, I didn't go and get, I fell into real estate like a lot of us did. I didn't, in high school I wasn't like, oh, I want to be a loan officer when I grew up. Like I didn't know that was a thing. I didn't know that was any sort of career option or path that would be something that to aspire to or that I could see myself doing. I just eventually found my way here. I actually, my first career was in, in culinary. So I, after college, I wasn't sure what I wanted to do. I had this inkling that I wanted to open a restaurant, but it wasn't like 100% set that way. So I spent a year in China, like teaching English on a fellowship program through my college. And while I was there, I was cooking in kitchens on the side a little bit. And I was like, oh, okay, I'm going to come back to— I grew up in Salem. So I was like, okay, I'm going to come back to the Salem, Portland area, go to culinary school. Obviously there's culinary schools in Portland. And maybe I'll open a restaurant. And so I cooked for a while. Worked in kitchens for about 6 years, started back, this was, I graduated from college in 2008. It was getting into the economy right at that time where it was like, basically I had to work for free for a while in order to get a job. And then the only reason why I was able to get one is because a spot opened up at one of the top local restaurants. And yeah, at that time, I think cooks were getting paid, I started at $11 an hour. Where fast forward to a couple years ago, wages have gone up nicely. Like I just saw an advertisement on a movie theater for a cook at a movie theater making $19 an hour. So it's a totally different environment, right?

Yeah.

And yeah, so I was cooking, I think by the time I left my, I started at $11 an hour, went to my, at one of the top restaurants, a James Beard Award-winning restaurant in town. By the time I left, I was making maybe $13, which was 3 years later and took on a chef position. And then it was like, I got a decent salary, which would, could like afford living, felt like I could have a kid. And at that point I, I had actually purchased a house while I was still working at $11 an hour. Cause this is back in 2012 when rates were low and home prices were still recovering. I think the home that I first bought, we bought for $210,000 and the original owner had bought it in 2007 for $240,000. So there was like, they had lost out a little bit.

Mm-hmm.

And I had gotten, I had no intention of, I became an accidental investor, right? I had no intention of buying a home. I hadn't planned on it. but my grandma passed away and my parents were like, do you want to take this inheritance chunk now and buy a home? It seems like it might be a good time to buy a home. They were hoping that, I think probably hoping that we would start a family because I was married. Yeah. And so I was like, I guess so. Like, I don't know, can I buy it? I don't know. And yeah, so went in, talked to the bank, didn't go very well. Talked to him, got a referral from a real estate agent, didn't go very well. Ended up finding a new real estate agent who referred me to a loan officer who's actually my colleague now. And so yeah, after I got to that point in the restaurant world where it was like I reached that space where it was either start my own restaurant if I want to keep growing, keep earning more, keep learning more, or do something else. And when I looked at the finances of that, it just I couldn't find like what I wanted. First of all, like it didn't look good on paper. I got a business cause I worked with SCORE, which is a local business consulting organization. I'm not sure if you've heard of them. It's a national nonprofit and they offer free business consulting. It's like retired business owners basically that, and they match you with somebody that's bought and has some experience in that field. So we looked over financials together and looked at a couple of different restaurants and he said, this one could work, but you're gonna be working these hours. This is gonna be your salary and the margin's gonna be 10%. And you have a bad month and, right, your margins are erased. So I was like, I, I like cooking, but maybe it's a passion of mine, but maybe I, for a career, I don't need to do what I think is my one passion at the time.

Mm-hmm.

Because I think that's a struggle for a lot of people. Maybe for some people they know what they want to do, they have a passion and it just like naturally leads into a career that they, that is fulfilling for them. And for me, like I, I did really enjoy cooking and I liked that, like being on my feet and working with my hands, but there was parts about it that I didn't like. I had, I didn't really have any mentors in the field that was like, oh, this person, I want their life. This, that person, he's got a really good family life. They've, they're really financially set up.

Mm-hmm.

Uh, I couldn't find someone that I wanted to model my career afterwards. Mm-hmm. And you know what I mean? It was like, it just didn't quite fit what I had envisioned for a long-term success. And so I was like, okay. Cooking's fun. I'm not really at this point able to find a model that works for it. Maybe there's something else I could try. And I started reading books, got interested in finance, and that's when I pivoted in it. I had owned a home already and I was like, well, maybe I could think about building passive income through real estate and I'll figure out how to do that for myself and help my friends and the family along the way. And so I reached out to the loan officer that did my loan and she's my colleague now.

That's so cool. I, back in college and high school, I was on the front end waitressing restaurant businesses. It's tough, man. I thought I'd waitress forever at one point. And yeah, it's, it's not easy. I totally relate to that. I also love with real estate, I feel like it's a really windy path. Like no one really just wakes up and is Yeah, I'm gonna get into real estate cuz it feels very intimidating and you can figure out a way to get into it. But whatever you're previously doing, I think you take some of that with you.

I feel like, yeah, I don't think there's one playbook of how to do investing, how to do mortgage, how to do real estate.

Mm-hmm.

And I think experience from other fields can be very useful. I've seen car salesmen do well, right? But then I've seen people that with no sales experience do really well, right? I've seen engineers set up really good systems and just be really consistent, right? So I think, yeah, like to your point, there's, you can mold your own path. There's no one way of being a good client advocate and there's no one way of investing.

Yeah. That kind of leads me. Lots of things, lots of questions, but I, you bought your, it's funny cuz I bought my first house for $210,000 too. And at the time it was like, it was very scary. I had a roommate, strangers on Craigslist. So that's funny.

But it was— what year was this?

2005.

Okay. 2005. Okay. So that was like when prices were high. Yeah.

But you know what? It was stated income.

Oh, and it was okay. So you weren't having to go through the rigmarole of qualifying in it?

No, my mortgage guy was like, cuz I was self-employed, he was like, don't you make a little more.

Interesting. And what kind of loan did you get?

It was, God, it was a long time ago. I think it might've been a 5-year with a balloon, but I got into it and then I refinanced out of it. But that first house, like I pulled equity out and did a— was the, was like the start of my, cuz I saw the equity going up and then I was like, holy shit, in a year it went up like $40K. It was just like, and then the crash happened, but.

And were you able, but you were able to hold onto it after the crash and kind of like figure things out?

This was like pre, I didn't know what house hacking was. I had, I'm like, my plan was I had an upstairs and I had a roommate and I was like, I'm not sharing the downstairs. I put ads on Craigslist. I was single at the time and it was, I just had a roommate. That's how I offset my rent. So I was very intentional about knowing it was probably over my head, but I had to help with $500 for the rooms upstairs.

So smart. Yeah. I mean, for me, I was married at the time, like we didn't think about doing that. I was just like, okay, my monthly payment is about the same as my apartment payment.

Yeah.

Like, it's about, so that's great. Yeah, totally.

But yeah, but that kind of leads me to a topic of, I love the idea of buying your starter house. It's maybe not your dream house and then leveraging that into you know, your future thing, which I know that's a topic you like, so I'd love to hear you unpack that a little bit.

Yeah, I think there's this idea of building a, buying a forever home. Or like, oh, I need to be in this house for quite a long period of time because it's not worth it otherwise. I think, and those averages change, but it's pretty surprising to me now when someone's in their home for like more than 7 years. Or low for that matter. I still have the same loan on my old house, but we were there, I guess we were there for 8 years. And I think for us at the time, we looked at quite a few places over a few months, even though this was a time when there was like a lot of inventory and you could get your offer accepted. But for whatever reason, we had just, we had such a tight budget. And I didn't want something that I had to do a lot of maintenance on.

Mm-hmm.

Um, I, not a, I wasn't super handy and I just felt like we wanted to get something super manageable.

Mm-hmm.

I, and then, so that's your main motivation factor when you, for me, when I bought my first house, but then later we realized maybe we wanted to be in a a little bigger yard, a little bigger house to, to have a little bit more room for the third kid, right? And different, we wanted, maybe we wanted to change school district or be closer to the parents. And so there's like a lot of things that you can come up later in life that you just totally not thinking about when you buy your first home. And so I think it's kind of dangerous to be like, oh yeah, I just want to buy my forever home and spend everything on that first one. Because like life changes pretty easily and it can really make you decide, oh, actually maybe I don't want to be here forever. And then you need to go back and be like, okay, now I have to sell because all my equity is trapped in here and I can't afford to change my monthly payment or I can't rent this out for what I, what I need to rent it out for and able to make my ends meet. So I think it's good to start with, like you were saying, a kind of starter home and not necessarily be like, oh, this is definitely going to be an investment, but maybe have that in the back of your mind. What would happen if later on you had to relocate for a job or XYZ reason? What are you going to do with that home if it's, if that happens in 1 year versus selling it, I might not be able to afford the fees. I might not have an equity, enough equity to afford the fees that cost to sell it, or the market might be down a little bit, might not have appreciated enough. So you need to be able to like, just think a little bit about, is there a potential situation where you can convert it into a rental? And I'd always had that long-term plan just from reading books and, and from starting in real estate. 4 years after I bought it, I was like, I, I thought that was gonna be my plan, but it takes a long time for, at least it did for me, to be in that position. Some folks have a very nice income trajectory, right? That just goes like this. But for a lot of us, it might go up and then it might go sideways, then it might go down and then it might go up again.

Yeah.

It might be hard to predict. That point where you'll feel comfortable doing that. But that's the great thing about real estate is just over time it appreciates. It might not go, it might not be a meteoric rise, but goes up consistently over time and your mortgage payment stays the same. And so yeah, what we were able to do, which was a strategy that I tried to convince so many of my clients I was like, okay, what if we just look, I know you want to buy a new house. I know you want to buy a bigger house. Like you've got the money, you've got $200,000 of equity in your house, whatever, because prices have gone up in the last 6, 7 years. What if we just look at taking a home equity line of credit, renting out your house? Let's just look in your neighborhood. What are homes renting for? And then see what your new mortgage payment would be. How much difference is between the 3 mortgages? And the rent coming in, your new mortgage payment, like where's the delta and monthly payment difference? And does that make sense for you in the long term? Let's look at this 10, 15 years down the line. How much have you paid down your mortgage? How much more will this appreciate? What does your overall real estate portfolio and retirement portfolio look like? So like that, I always try and have that conversation with people. And it's, it's really hard. Doesn't work for everyone, right? There, a lot of people are just like, oh no, I don't want to deal with that. I don't want to mess with this. But for me, it was it. I, I talked about it a lot, but it really changed when I did it because it was like I went from that smaller home to a larger home, more comfortable home that kind of hit all the things that we were looking for.

Mm-hmm.

And it felt like I was cheating because I didn't save. Because I didn't save anything. Save like your down payment. Right. I just pulled the equity from the house, got the new one. The tenant was paying my current, my old mortgage and the HELOC payment covered more than that. And there was cash flow on top of that to offset the new mortgage payment. Of course. Market changes, like rates change, like it's not always gonna be that smooth of a transition.

Mm-hmm.

But it, yeah, it just, it works out really nicely in, in the sense that I, I just think about a home very similar to the way I think about what I put into my IRA and my 401(k) and my 529s. Those are on auto draw every month. They go out of there. I don't touch that money. That money's going to be compounding over the next 30 years or 18 years for the kids' college accounts. Right. And like, I don't want to touch that. I want them to grow. Same thing with my house. You know, every month where you're paying the mortgage payment, there's 4 or 5 line items on there, right? There's principal, there's interest, there's taxes, there's insurance. Maybe there's mortgage insurance. But that principal that's going into your retirement bucket.

Mm-hmm.

So if you can hold on to those, then there, then your retirement bucket just gets like bigger and more diverse.

Yeah. No, I'm a big fan of especially HELOCs, cuz I, what I love about them is that, and it is, it's a risk, right? But it's, to me it's very calculated. And to your point, if you're like the rents are this, then it's just, I don't know, I guess we're entrepreneurs, right? It seems like such a no-brainer, but I think for a lot of people, I've tried to convince multiple people to do that. Because you're going to look back at the house and be like, oh my gosh, if I would've kept that thing, the value is just a lot, right?

10 to 15 years later, any house that you look back at in this area, you're going to say, wow, I wish I would've, I wish I would've scrounged and made a way to do that.

Yeah.

Yeah. To your point on HELOCs too, like, yeah, at the time when I pulled my first HELOC, it was basically like the mortgage rate was like 1 or 2%. It was a joke. That's not always the case. And as we saw now, my HELOC payments probably doubled as rates went up. And so they're adjustable. It's, you gotta be used to that, but they're, it's, you, they're also like, it's nice, right? I had paid a chunk of it off over a few years because I had the renter paying it. And then I had a, a tax bill came, come up because I did a, like an IRA conversion from a traditional IRA to a Roth IRA. Cuz I want to, when I retire, I wanna have, I don't wanna be paying any taxes or I want to know what I'm, I don't want to think about the tax planning as much. Anyway, so I had a big. Tax bill that had come up that I wasn't, hadn't planned for. And it's really nice to have that home equity line of credit because it's, yeah, it's a 30-year fixed mortgage is nice because you know exactly what you gotta pay for 30 years. But with the home equity, you can pay it down and then use it again and pay it down. So as long as you're like cognizant of that, I think they can be super, super useful both for defense and offense in, in finance.

Yeah. Like I would say, don't, like if you're putting into an asset or something that's really strategic, not like, hey, I want to take a vacation with my HELOC, right? So we've had a couple of HELOCs just as entrepreneurs, income is, and then we'll see a house like, oh, we have this HELOC that's tapped. So we're like, let's buy a house. I don't want to say accidentally, but we've used them for that. And I'm just such a big fan. So for someone that maybe from a lender, right? Doesn't understand a HELOC. And I actually was able to lock them too, which was great. So it was pretty simple.

Oh yeah, that's true. Some of them you can lock for a few years.

Mm-hmm.

Which I probably should have done. Yeah, I would.

But, it's just, it's, and if you're not using it, it's just access to capital is how I saw it.

Versus, yeah. So for, if you're not familiar with the whole HELOC or home equity line of credit, it's essentially, a, we, it's also known as a second mortgage. So it is recorded on title, right? So you have to be able to qualify for it in the same way that you have to be able to qualify for a normal mortgage. You have to prove the ability to repay. And there are different options for them. There's quite a variety. Some of them are interest only for the first 10 years, and then it's in the re— interest only and draw period, meaning that you can basically use it like a credit card for the first 10 years and you pay on what you draw. And then the last 20 years you go into a repayment period or you can re-up it. That's the most basic structures. Some of them are different. Some of them are amortized over, like amortized, meaning paid off over a 25-year period or 20-year period. It just, Depends on the provider. I offer from a bunch of different ones and I have colle— uh, colleagues and friends that I refer out to that offer different offerings because they might have more attractive offerings. But, but yeah, you can get them on investment properties as well too. But I, I think of it as like a low-interest credit card.

Mm-hmm.

Um, it's different from a, a fixed mortgage in that as you pay it down, with most HELOCs, when you pay them down, your monthly payment goes down right here. So you're only paying on the interest that you've drawn on them. So sometimes let's say you're doing a renovation project on your house and it might take, for whatever reason, 16 or 18 months. It's not like a one-time thing. Some people will get a home equity line of credit and then just draw it out over that 16 months. So they're not paying the— if the project was like $150,000, they're not paying that whole $150,000 interest. Upfront, they're paying it in $10,000, $20,000 increments. And then afterwards they'll be like, okay, now we want to do a cash-out refinance and put this into one mortgage. But the amount of interest they paid over that time period is less because it's just based on what you draw.

That makes sense. I didn't, I've only, I've always gone to the banks that it was like pretty, but I didn't realize how flexible they were. The other thing is I've had like multiple, I HELOCs, I felt like spiderwebs and then I refinanced them back into the house. So I think they don't have to be forever, right? You can lock them or bring them back. Exactly.

Yep.

Yeah.

But they do need to be addressed since they're attached to your title. Anytime you sell or refinance, they need to be addressed.

Yeah. Yeah. We did one, like we had, I don't know, it was during COVID and we were in California. We have, we did this huge like refi of all these HELOCs into one. And then we pulled equity out and the paperwork was— and they came to us, Mobile Notary in California during COVID The kid, it was just— yeah, but you, I think the other thing that I don't think, I don't think I realized till a couple of years ago is you can pull equity out of your investment properties. Right.

I think that's— you can get a cash-out refinance on investment properties, which is a 30-year fixed mortgage, or you can get a home equity line of credit as well. Not all lenders offer a home equity line of credit on investment properties. It's a little bit more risky. But, and they might be the amount of like loan that they'll give compared to the value of the house might be on a primary residence. They might give 90%, but on an investment property, they might only give 75%, depending on the city, the combined loan to value between your first mortgage and the second mortgage. Should be capped at 75% of the total value on investments is typical, but again, it depends on the lender, whereas with different lenders you can go much higher.

Yeah. I've actually gotten 2 HELOCs on one property.

Yeah. So, and some lenders will take your position. Yeah. I have one that, which is kind of rare, but yeah.

No, because we bought the first house, I bought 2 properties and it was just Yeah, that's the power of leverage, right? In real estate. And that's why, what other asset can you just, yeah, do that. That's why I think it's—

Yeah, I like the options. It just gives you options, right? You can't, you can get business lines of credit if you have a business credit or an asset that you can collateralize there. Or on the stock market, you can, you can take a margin line on your asset there. If the market goes up or down, it can get called. And the amount of leverage that you can— the amount of leverage that you can get on it is, it's depends on the firm or whatever, but it's going to be more like a 50% max versus real estate where you're on a primary residence, you can get 97% if it's your first-time homebuyer, right? Or maybe even 100% if you're using a down payment assistance program. So it's Yeah, you can get a lot more leverage on real estate.

Yeah. And I really like what you said about it is your home, but it also thinking out the potential that you, it might not be for your forever home. And it is most people's probably their biggest purchase that they're going to make, right? Initially. So I, it's along with house hacking, right? This whole kind of new multifamily loans. If I was like 20-something, I'd be all over that. If I didn't have kids and I was single, I'd be like, I'm there. So I'd love to hear your thoughts on that.

I wish that our market had more multifamily options, properties available. It's, the supply of fourplexes is tiny and it's super expensive, but, yeah, but there's, there is a decent amount of duplexes and, and with our new zoning, there'll probably be more duplexes slowly coming onto the market over the next decade. But yeah, like to your point, so FHA has always allowed you to do a lowdown on multifamily properties, but once you get to a 3, like for, it's easy for a duplex or a single family ADU, but when you get to a 3 or 4 unit, like in the last decade or so, FHA added a modifier or guideline that said you can do this, but the, if you take the market rents for all 4 units, the principal, interest, taxes, and insurance on your loan needs to be 75% of the market rents needs to equal the, the, your monthly payment. So like in our market, that just, even if you have more income, even if you can afford the, even if you could afford it. They took a very conservative stance on it. So in our market, it, that almost never meets, they call it sustainability threshold. It almost never meets it. And it's, yeah, so that even though FHA allowed that, it wasn't an option for most situations. Now with new conforming guidelines with conventional loans. On a primary residence, you can put as little as 5% down on a, on a fourplex. And geez, now the loan limit on a fourplex is $1.4 million and change. So you could get a huge loan, assuming like you have to be able to qualify for it. You have to prove the ability to repay. And yeah, so that. You could basically, yeah, you could put low down on a 2, 3, 4-plex and use the tenants, those potential rents from the other units to help you qualify. And I've even seen like some scenarios where you could have a seller carry behind the, behind the mortgage as well. That, that's all. In this market right now, there's, it's interest rates are a little bit higher than what some folks have on their properties. If the seller owned the, owned it free and clear and they wanted to carry a portion of the mortgage, you could combine that as well. As long as you're still putting that 5% down. But yeah, it's simple conventional loan. You can get on those, you can get gift funds. Yeah.

As long as you can get from like a family member or something. Okay.

As long as it's from a family member. Yep. Okay. You can have a co-signer as well. So it just pretty much follows normal conventional guidelines and it's a great product for folks that want to get started as investors early on and offset their kind of mortgage payment and just get access to as much funding as possible. If you're, if your goal is to get access to as much funding as possible with as little leverage as possible, that would be the path of least resistance.

I hadn't thought about the owner financing part. That's, if you find someone that's free and clear and you're like, hey, would you carry like X? Yeah, that's really super creative.

And then you could have maybe the seller They, there are some stipulations on the seller carry that have to conform with the guidelines. And I, I can't remember all of them off the top of my head, but I think it's something like it has to be at least a 5-year. You can't have like a 2-year balloon seller carrier. It has to be at least 5 years. I don't think they put a, a stipulation on what the rate ha— is though. So if you had a wheeling seller that, that wanted to, that was wanted to defer some of their capital gains, then you could create a situation where you had a pretty good monthly payment on a 3 or 4-plex with really low down.

And the seller would need to be in, in second, right? Obviously they'd be in second position with the home loan. Yeah. Right. Okay. Yeah. Okay. That's, yeah, that's the ultimate hack.

Yeah.

Damn, that's really— yeah. Okay. So can we run through like a scenario? Say it's $800,000, right? And then you're putting 5% down, right? On that. Yeah.

So what that means, $800,000, 5% down, you're putting $40,000 down, right?

Okay. Yeah.

And maybe you have closing costs of whatever, let's just say $15K to be conservative. So you've got $55,000. So you're in for $55,000. And then if you wanted to, like, you could get a loan, you could get the seller to carry is like whatever you want. Right. So it could be that you're getting the seller to carry $200,000 or they could carry $400,000 or $100,000. It doesn't necessarily matter as long as you're in for that 5%. Okay.

That's skin in the game, right?

Yeah. And then You, if you're the seller, is carrying enough so that your combined loan-to-value is only 75%. If your loan plus the seller's loan is only equal to, or excuse me, if your loan, if your conventional loan is less than 75% or 80%, so if we do $800,000 times Math now. So if your loan is less than $640,000, then you don't have to have mortgage insurance either. Yeah. Because your loan-to-value is at 20%. Like from the conventional lender's point of view, there's a little bit less risk that way. And they don't need to put mortgage insurance on it. And then you'll get better pricing if your loan-to-value is even less. Even though your combined loan-to-value is still at 95%.

Oh, really? So they're just looking at that chunk, not the—

Yeah, they look at their position.

It's just like this game of chess, right?

A little bit. Yeah. Yeah. And they have their own modifiers. There is a price modifier for having a second loan behind it, but—

What is that? Can you unpack that a little bit? I don't know what that like means, like a—

Just basically to get the same rate. So there's lots of things that modify your rate on a mortgage, right?

Okay.

So if you have an 800 credit score, or excuse me, 780 credit score, you're going to get the most favorable pricing, right?

Mm-hmm. Mm-hmm.

Now though, that pricing can be modified by a lot of factors. So if it's a primary residence, it's going to be different than a second home or an investment property. And those will be modifiers that will add to the rate. So for, they'll add to the pricing for the rate. So if the base rate is 7% with 780 FICO score and a primary residence, they might add 1.5%, 1.5 points or 1.5% of the loan, not to the rate, but to the price. To get that same rate. So to get 7% on an investment, it costs you, just for example, 1.5% of the loan amount more to get that same rate.

Okay.

And so there's other modifiers, right? So if your credit score is lower than 780, then you'll have a modifier that is negative. If you're, if it's a multifamily, you'll have a modifier that makes the pricing worse as well. Because it's more risk, but anything that's more risky, it makes the modify, it makes your pricing worse. It modifies it in a worse direction, right? So things like higher loan-to-value ratio, higher debt-to-income ratio, lower credit score, higher number of units, investment property, those are all like risk factors and that they give you worse pricing. And then you, on a flip side, you can improve your pricing with various modifiers, such as having a better credit score or putting more money down, right? If you're putting 40% down, for example, and you have a 680 FICO score, it doesn't matter. Like you're not, as long as you have a 680 FICO score, You're gonna get the same pricing as you would have at a 780 FICO score because you're putting 40% down and the lender doesn't consider that to be a risk to them.

Okay. Yeah. I have, my last couple purchases have been owner carry, so I haven't had to deal with underwriting, but when I've had to do it, it's just, I hate to say it, but it's like they want your firstborn and all this paper. And I mean, it's all risk assessment. I feel like they're just trying to Yeah.

Well, a couple things, right? First of all, they're giving you hundreds of thousands of dollars.

Yeah.

So like, would you just give somebody hundreds of thousands of dollars without— everyone complains about the process. I don't see you giving people hundreds of thousands of dollars.

Totally.

Millions of dollars.

Fair point. Yeah.

Yeah. That's, that's the one thing. And second of all, it's not really your money that you're lending. You're lending someone else's money and that's even worse.

Yeah, because it's, yeah, that's actually that I never thought of that. That's all really good points. Yeah.

And they're going to, it has to hold up to an audit, right? So everyone is lending money that's some, that's somebody else's. And then it's all of these loans are being packaged into what are called mortgage-backed securities for the most 95% of mortgages are being packaged into mortgage-backed securities and sold to the public and institutional investors, typically institutional investors. You can't really buy mortgage-backed securities unless you're spending $10,000 or more. And they're, they're, yeah, so they're, they have to be when you, and so when they're sold like this, it's like a public commodity that's financial security that has to meet all these guidelines. And so, like, every, oftentimes it'll be a client that's got, oh, I'm putting like 50% down. Why did that? Why does the bank care? They can just foreclose on me. That there's nobody is in lending to foreclose.

Nobody wants to do that. Yeah.

Yeah. It's super expensive and that's not how they make their money. They make their money by selling the loan and the person that they're selling it to, they are going to audit it and it has to meet these requirements. Doesn't really matter. Well, maybe you can get some exceptions for XYZ reason on a small guideline, but you can't, you have to be able to meet an audit or you can get in trouble and, uh, Yeah, it's, it, you have, there's a process and some of those rules have gotten a lot harder after the Dodd-Frank Act of 2008. And because there was a lot of loans that weren't performed, that didn't perform because they weren't properly underwritten or there was fraud involved. And so, yeah, essentially, and, and some banks can be a little bit more onerous than others.

Mm-hmm.

Some, each bank has their ability to put overlays on top of normal guidelines.

Right.

So as a broker, I'm, I'm kind of like keeping that in mind. Like, does this person have some unique scenario that, that I know that lender won't like because they don't like to use departing— do they don't like to use income from their departing residence when they're buying a new house. And so I'm going to use this particular investor because they know how to underwrite that. And they're a little bit more flexible with those guidelines. Or this one's more flexible about self-employment. They're terrible about paperwork and they're slow, but they'll give me— they actually keep the loan in-house and they're not selling it to the secondary market and they'll Like during COVID for example, I had a client that got, was approved before the COVID guidelines switched, COVID guidelines switched. And then suddenly he was, lost his approval because he was self-employed and they changed the guidelines for self-employed. And then I was able to take it to a lender that they had a little bit more holistic approach. They don't use automated underwriting and they look at it. As a whole, and, and so they were able to lend on it because of that. That's the kind of the game we play. But yeah, to your point, it can be a pain, but there's a reason for that. We're not, I'm not trying to give you problems, but.

Yeah. I, and I think, but what you're saying too speaks to the fact, like going to someone like yourself who's clearly you understand the nuances and you can tailor something just to go into your bank. They've got certain products. They don't know, they can't match you. I think that's the power of a broker, right? Like you clearly understand that and the nuance of someone's situation and what's gonna be the best fit. Yeah.

And it helps to have some experience doing complex self-employed files. So if you're doing a, a borrower that's, they're buying their first home, they, they're a W-2 employee. So they have one source of income. Their down payment is sitting in their bank account. I need 6 documents, right? I don't need much at all. Then compare that to somebody that has 2 or 3 S-corps and 16 properties and some of them have commercial loans on them and some of them are on their personal credit and maybe they don't keep really good records of that because Entrepreneurs are notorious for being good at being creative, being good at building and finding interesting ways of earning more money and creative ways of doing that. But oftentimes it's like when it comes to tax time, they're like, here you go. Here's this big pile of paper. I don't really know what's in there. Do something for me. And, and not everyone's like that, but yeah, you can really tell, like some people have their business super organized, a lot of records, and it's, I ask for all these documents and then they get them to me like a few hours later. It's no big deal.

Mm-hmm.

But for some people it's, it's very hard to track down all their mortgage statements, track down this, track down that.

Yeah. No, I hear that. I feel like when I was, when I'm doing conventional, I try and be like really organized cause I want them to meet it's just the faster you get them the documents, the sooner they can turn it around. But so let's say like this, I feel like it's this ultimate house hack, right? If someone's, hey, I, and I, the other thing is like, you're not gonna live in an apartment forever. You're gonna live there like a year, right? And then you could move out and keep your loan, right? As far as that.

Totally. Yeah. Yeah. You can move out. Well, the mortgage note you're signing says that you're gonna live there for a year.

Okay. That's what I meant, but it's not 10 years, right? It's just, that's a pretty short amount of time.

No, the mortgage you're signing says that you intend to live there for 1 year and there can be exceptions with that, right? You could have a job relocation, you could have a change in your family. There's lots of things that could cause exceptions to that. But typically, yeah, you could just buy a new primary every year without any—

You do that a couple times.

In this area, you can assume that if appreciation continues as it has for the last 50 years, then you can assume that 3, 350, 400 to $500,000 home, they're all going to be worth over a million in, by the time, you know, 30 years from now. And so if you do that 3 times in your career, then you have 3 assets that you can use offset your retirement. I personally am not counting on Social Security. So that's my mindset for myself, my clients.

And then you could pull the equity out and maybe get the house that you really want to live in. That's—

you're going to have 100%. And the nice thing about pulling out equity is it's, you don't have to pay capital gains tax on it. When you're getting a loan, those, you're not taxed on those proceeds.

Pretty sweet. Yeah. No, yeah, that's just, if anyone's listening, it's just like, this is a window. So if someone's— what's the first step, right? I always tell people like, hey, talk to a broker, see what you qualify for. But do you have any tips of, because I think people are, we're investors, right? But people may be starting out are very intimidated by the process. Like they don't really know where to start.

Yeah. Great question. It's, I think it helps to just talk. Yeah, like you said, talk to somebody. I do end up texting a lot with my clients or Facebook Messenger or whatever. I think, I think it's still good to just talk to somebody so you can get a feel, cause you're going to give them, you're going to give them documents and maybe you might feel more comfortable just going onto a website and uploading everything, but, and that's fine. I like, people are used to that.

Mm-hmm.

But for me, this person is going to have access to your social security number. They're going to have access to your date of birth. Basically everything they do need to do to commit fraud, right? With your, with your phone number, all of your stuff. And so it's good to just get a sense of how someone communicates, what their speed in getting back to you is. Is this someone that you're going to feel comfortable working with? And maybe telling you, oh, okay, look, I found this on your credit report. Is there— what is that real? Is that accurate? And then maybe we need to look at going through this or— yeah, if you're worried, it always helps to just have a quick conversation. The pro— for example, my process is for a new client that's thinking about getting pre-approved to purchase a home for the first time, I have brief 20 to 30 minute conversation, even less sometimes, just about what they do for work, what their goals are, how much they have saved, and what they feel like is a comfortable monthly payment. And if there's anything coming up in terms of timing that could be relevant to the transaction, such as a lease, some sort of inheritance coming in, or anything like that could impact the timing of a transaction. And then we talk a little bit and then after that, if, if they feel comfortable, I send them a secure link where they can upload documents and then I review them, fill out, take care of the application for them. Or I can just do the application on the phone too, if they prefer. And while we're having that initial conversation and then, and then based on that, then We, if they move forward and update, upload documents, then we set a meeting where we'll get on Zoom and, and go over the numbers together. If they want to see the backend, how I do my calculations, how they can make changes to impact those qualifying numbers. Like maybe you have an auto loan for, I think the average is like almost $800 a month now. And I can show you, you'll, you can qualify for about $150,000 more if you pay off this auto loan. Whoa.

Yeah. That, but that's kind of, dude, that's really strategic. If you just upload your docs to some faceless website that Google found, they're not gonna coach you like that. And I think that's the benefit of that relationship, honestly.

Yeah. To, to me, the more interesting part about mortgage is kind of education in building that financial base and learning. It's less about, oh, I just want to get this rate. That's all that matters to me. And sure, you can get that rate, but you might want to look and see what that's costing you and what's your plan. Do you think rates are going to go down in the next 2 years? Are you going to sell your home in the next 2 years? Because if you're going to pay extra money up front, to get this low rate that you can brag about to your friends and family, and then you go and refinance next year, you've shot yourself in the foot. You've wasted thousands of dollars. Like, you should consider not taking that lower rate and paying less in fees because you told me that you're going to sell and move later, or you're going to refinance because you think rates are going down, or you're planning on doing some, some other sort of process. So maybe you'd rather not do that. So you gotta, it helps to like understand how you can make certain toggles because that'll help you make decisions for the short term and the long term that make more financial sense for you and just build, build wealth over time. Mm-hmm. Or that's the more interesting part of mortgage to me.

Yeah. When I think you're really helping people because I, they, people don't understand like your debt-to-income and all those little tweaks. Like I've had to take my husband off my credit card, do those little things just to get our one point up, right? To get it.

Yeah.

Right. Um, and the other thing I think you brought up, I just want to highlight is like, I think we're all holding our breath for rates to come down in this perfect storm of when to buy.

But like, I think people forget, oh, you're not holding your breath because you're going to die. No, just kidding. I don't mean to be like pessimistic. I think we're all optimistic about rates coming down. And, and so there's two things and it's worth knowing, and worth knowing, not that people will totally understand, but long story short is what you hear about in the news the most is the Federal Reserve's rate. So the Fed, which also is confusing because it sounds like it's like a political party or the government. The Fed is intentionally separated from like the president. Like they're not supposed to be beholden. They report to Congress, but Congress doesn't tell them how to act basically. So their job is to control monetary policy. They are trying to, their mandates are to keep inflation down and to keep employment up. And so they kind of have this target of 2% inflation. And there's lots of different indices that people look at to observe inflation, right? And so recently the Fed has raised their interest rate and that lever that they pull, their interest rate lever doesn't directly change mortgage rates. Of course, What the Fed does and what they say can impact mortgage rates, but that impacts short-term rates. What that Fed funds rate actually is, is the overnight lending rate that depository institutions lend money to each other at. Let your local bank, someone comes in to pull out some cash. They're like, oh shit, we're out of cash. I'm going to call other, my other friend banker down the street, different bank. And I'm going to give them some treasury bonds and they're going to give me some money. And they, and then that cash, that, that rate that they're being lent money at is based on what the Fed sets that at. And that is impactful because it determines like the supply. It determines how much risk companies are willing to take overall. In general, right? Because this makes, this is why the rate of HELOCs go up because HELOCs are adjustable. So business lines of credit, HELOCs, auto loans, they're all credit cards. They're all influenced by that short-term rate. And if your HELOC goes from a 1% rate to an 8% rate, you're going to be less likely to use that to purchase things. That's just basic kind of macroeconomics. That's what the Fed's doing to to help influence behavior of companies to slow down the speed and slow down the inflation. And mortgage rates, they are set by the price of like mortgage-backed securities. And there's, this is a long, long, you can talk about this forever, but because there are other factors that influence mortgage rates, including the Fed. They did quantitative easing and they were buying mortgage-backed securities during COVID and it impacted the supply and the price in a kind of different way. But long story short is that mortgage rates are typically driven by inflation. And if you think about that, like if you're lending money to people over 30 years and that's your sole source of income, You're, you're getting fixed return on that, on that investment over time, right? It's going to be whatever. If it's over 30 years, let's just say you get $1,000 a month, every month for 30 years. Exactly what you're getting. If inflation is trending up, what do you have to do, right? To be able to still pay your employees and still be able to run your company. You have to increase your rates. Because all of your current investment, like all of your current pays are, you're still getting that $1,000 every month from that, from those loans. So you need to up it so you can keep up with the cost of having, running a business. So anytime inflation is going up, you can expect mortgage rates to go up because it's more based on that long-term thought. And then On the other hand, if inflation's going down, then yeah, you can offer more competitive rates. And inflation has come down a lot. And unfortunately we haven't seen the equivalent drop in mortgage rates yet. And that's why a lot of people are predicting that mortgage rates will come down is because inflation has been trending downwards. But like we just had a report out today, this morning that the CPI was up on nearly 4%. and when it had been getting closer to 3.5%. So that's when the mortgage bonds responded negatively to that, rates went up. And it never goes down in a straight line either. At one point inflation was like at 8, 9%. So it, it has come down significantly, but it's still not like the Fed has this idea that they wanted to be at like 2 or near 2 before they can start lowering their rates.

Mm-hmm.

Uh, so long story short is it's not guaranteed that rates will come down. It's based on inflation. Inflation has come down and it hopefully will continue to help pull down mortgage rates, but there's some upwards pressure on them because inflation hasn't just come down. It's been come down and then it's gonna bounce up a little bit. So if the economy continues to slow down, if prices continue to slow down, if oil keeps, then yes, we'll get that lower rate relief. When it's gonna happen, who knows?

Yeah.

Historically we're near averages, so.

I think that we have to remember like it, that things fluctuate, but we can't be afraid to like, if it's a good investment, if it pencils, you just, you need to make, you need to, I don't know, I feel like you need to take action and not just wait for this perfect rate and that may never come or maybe years out or who knows.

I had clients when the rates were really low, they're waiting for prices to come down. Now that, and I'm just like, you know what? Just, you're gonna keep waiting.

Right.

Look at the history of prices.

Yeah.

We had one instance in our life in As a millennial, we had one instance in our lifetime, right when we came of age, that, that housing prices went down dramatically, but that's not going to just happen again. And if you're going to just wait for that to happen, then you're going to miss out on— it's like waiting to put money into your retirement account. You cannot do that, right? You can't wait till you're 50 till you start putting money. You can, you just won't be, you won't be very successful at putting money into your retirement account because the money that you put in your 20s is going to be worth quadruple what you, what you put in or more. So it, yeah, it, it's ultimately you gotta, the timing can always be better. It's like waiting to have a kid because of X, Y, Z reasons. Yeah. You can always be more financially stable, but yeah.

No, let me tell you. Yeah. I'm an older parent and I, yeah, it's hard. It's, yeah, you should have 'em when you're young, when you're not ready, when you're not financially ready, just That's too big. That's, oh yeah. Oh my gosh. We're kind of, this is so fun. I think we can go on forever. Is there anything we didn't cover that you wanted to make, talk about, or as a, I think you have so much value as you're an investor and you're in lending, which I think is not everyone, is it also not everyone that's a broker is an investor. So you probably have a different lens, I'm assuming, that you're helping clients with, right? That's more strategic.

Yeah, I think just that a lot of investing in real estate has become more popular in the sense that there's a lot of podcasts out there. There's a lot of influencers out there talking about it in different ways. And I think there's, it's, there's good material out there, but then there's also a lot of material out there. So I think it helps to like actually meet people and talk to people. For me, that made a big difference when I made, met people in person, made, made friends and, and partners in, in that investing world and learned directly from their experience. And I don't know, some people are good about just like learning from books and then being able to figure it out. Me personally, it, it was more of a hands-on type thing and then like meeting people in person and learning from them. And everyone has their own kind of journey and thoughts about what to do with real estate. But yeah, to me it's, it's one really tangible way of building a retirement that has a proven track record that you can also have a lot of control over. That's a little bit, it's more active, right? It's not as easy as just putting money into a 401k and forgetting it, forgetting about it. But it's more tangible. You can, you can make the improvements yourself. You can increase square footage, you can increase rent, you can increase value. There's a lot of things you can do that you have more control of. Than you might feel like you have in, in the stock market. Like I, I've had some success there and I've had some failures and I like to think that I have some control over it, but mostly it's just luck. There's plenty of people that do it. I shouldn't say that because there's plenty of people that do well, but, but you don't have the same ability to control your asset like you do in, in the stock market and you're just having real estate's like owning a business, right? Owning, I think the number one way of building wealth is probably, or the way that you can build the most wealth is probably by owning business. And then the number two way is probably by real estate.

Mm-hmm.

Because when you own a business, you get to, you have control over it. The difference between owning Berkshire Hathaway and controlling the company and doing something like, like he, like Buffett did versus just being like an investor that sits on the sideline. Yeah. Like you can make some money doing that, but it's totally different when you're steering the ship.

No, I feel the same way. Exactly. Just, I feel like I can control it. I can do things to improve it. I, yeah, I 100%.

And for me too, it's always And whenever I'm looking at property, I'm like, okay, if everything went to shit, if I lost everything, could I just go and live there? You know, when I think about the stock market, I'm always like, if everything collapsed, that's all gone.

It's all gone. No, we have furnished rentals and I'm like, can we fit in this one?

Yep.

All right. This has been so fun. I have a couple kind of wrap-up questions. You talked about this a little bit. I always like to ask like, This is, could be a meaty one or however you wanna take it. Top business or life advice to live life on your own terms.

Yeah, that's a hot topic right now. Living life on your own terms. I, I, I think in order to live your life on your own terms, you're gonna have to be invest, like, and keep investing in yourself in different ways. You need to invest in your health, like you need to exer— you need to exercise, you need to sleep. You need to eat well, like all those, you need to constantly be reevaluating what you're doing with that and investing in those things. Like you need to invest in, into, like you need to invest your money, right? You need to take care of that in a way that you have, if you're working a job, you want to be able to feel like you can quit that job and get a different job at any time because you don't want, you don't want to feel like they own you. And it's, there's nothing wrong with working for somebody and I'm a W-2 employee, but my pay is all based on commission. But you want to be able to feel like you're in control in the sense that you could get a different job at any point or learn another skill on the side and feel like you could get employed elsewhere. I think there's a lot of studies now that show that moving for people that are employed will increase their salary dramatically over time because You, yeah, you don't want to be at the mercy of someone else. And then, yeah, like obviously diversifying is sort of, everyone talks about that. I'm more invested in real estate because that's what I know. But I do have, I do work with a great local financial advisor who I, everyone, like I used to think I'm not going to pay a financial advisor.

I know that you know what you're doing.

I know what I'm doing. Like I understand. And, and there's different ways to pay them and it's, it's ultimately like I just sent them, him an email today because we're working on a development project that's coming through and I'm trying to figure out if we're going to set it up as an S corp or a, or a, just run it as pay everyone out in 1099. And what's the most efficient way for taxes. And so. Like those kinds of questions are very valuable, like the long-term planning. And yes, I'm probably not maximizing the, the return that I'm getting on some of my index funds, but also I can't touch them, right? He's touching them and I'm not going to mess them up. And I don't have to worry about that. Like when I do my, the, the Roth IRA stuff, it's automatically all done for me and he does the conversion for me. It's just, it's out of my hands, so I don't have to think about that. So I can send, spend my mind thinking on my other things, cuz I, it took me a long time to figure out like what I wanted to do with that stuff.

Mm-hmm.

But then I could just, you know, it's like I trust him to do it and then when I have questions I can call him and yeah, he charges a premium, but he gives excellent advice and overall it's gonna be much better for my financial health. Than not.

I love that you took a holistic approach to that answer. Cause I think we think like investing is just purely like in an asset, but it's also in ourselves because this business is like mindset and it's not just right real estate. It's all—

Yeah. And I think there's a third point to that too, is like that your family and work-life balance I think is super important. And I think there's this thought and I would just, we were just interviewing someone the other day who was talking about that. And I don't think, I think balance is a myth. A lot of people like to say that they've got that balance, but someone that works 9 to 5 that has perfectly clear-cut times that they're spending with their family, they're spending at work, as entrepreneurs might look at that and be like, man, that's great life balance. And then someone that works 9 to 5 might look like an entrepreneur that's like going out to lunch with a bunch of realtors and whatever, networking and doing fun stuff like traveling for conferences and be like, oh man, they, they have a lot of fun. They, they definitely have a great work-life balance. I, I think everywhere you look, you're gonna find someone that has a better work-life balance, but you just gotta come to terms with what works for you and, and your family and make that speed because that's what's important here is your family and how money helps to support that, but can't have one. There's no point in having one without the other, right? Yeah.

The balance thing. I, I think it's, I've decided it's like seasons, right? Sometimes it's just busier and I'm not, I like, I, yeah, I totally appreciate that. Okay. This is like a silly one, so however you wanna take it, how, what's your superpower and however you used it, like in your investing or your business or whatnot?

Oh man, super. Honestly, what's the biggest thing for me has just been like friends, like that, like reaching out to people, like connections through Warmly. The only way I've gotten loans is through, is through people that are friends and friends of friends and that I've met and made friends with and have referred me deals. Like I, I, if you want to boil your business down into one small basic thing, for me, it's just like meeting people, being nice to them and becoming friends with them. Like that's— and talking to them. That's the only thing that I've done to get paid. There's nothing more than that. And then, but sometimes you talk more about other things and it generates different results. Like when I was cooking, I had to do a certain amount of chops and a certain amount of prep and meet XYZ deadlines. Very different, right? But in this business, it's much more about— and some people do it differently, right? Some people will just spend X amount of time cold calling every day and that's how they build their business.

Um, yeah, that's the hard way though, don't you?

Yeah. For example, a project that we briefly mentioned, we're building a 40-unit affordable housing project in Salem. Came across my desk because of a friend through the Asian Real Estate Association. My brother's friend, turns out he'd done affordable housing for 25 years. He helped a client and friend of mine that went to law school with my other brother. They're running a nonprofit. He's the developer on it who reached out to us about this project. Like, it's all just friends and friends of friends, the architect friend on it. And now we just got $20 million in funding from the federal government. And it's not all where— it's a lot of talk. There's gonna be a big construction project that's gonna happen by the end of the year, beginning of next year. But it's nothing more than making friends and talking and meeting with people.

I, I think we forget it's a people business and it's that simple. It's not, it's just showing up and contributing and yeah, I, I love that. Um, that's a good reminder. Cause I think we get in our heads about it a little bit, right? Okay. So I know you guys give like a resource you'd recommend, your own podcast, something that you would like to share as a resource.

Oh yeah. You can check out our podcast. It's called Realize Gains Podcast. It's, you can find it wherever you find podcasts or on my website. It's at, it's jordanleemortgage.com. You can find my blog and my website. I write a weekly blog that I send out to my realtors and financial advisor contacts. And then yeah, that's. Those are the two main things that I po— that we publish regularly.

That's awesome that you blog. I, that's really, that's some discipline. I love it.

Honestly, I did it because I wanted to learn the language of mortgage. Mm-hmm. And so I forced myself to learn macroeconomics and, and just write. It takes me an hour every week and it keeps me up to date with market and it allows me to talk about finance. Because I didn't take economics in college and I haven't read many econ books, but yeah, it helps keep you up on news and just understand what hap— what happens beyond the mortgages and what factors can contribute to that world. It helps to know guidelines for constructing a deal, but for talking to investors and talking to people about real estate in general, they're more— I think people in general are more, most interested in macroeconomics.

That's, yeah, that's what clearly you're very articulate and it was very, um, understandable cuz it can get pretty, I don't wanna say nerdy, right? But I was really, I really appreciated how you made it very approachable. So clearly that's working. So last question, you mentioned about how can people find you, work with you, reach out to you maybe for mortgage stuff, all that good stuff.

Yeah. Jordan Lee Mortgage is my tag on Instagram and Facebook and my website there and my @jordan@jordanleemortgage is my email. All just, that should be able to find it on the Google.

Perfect. You're Googleable. Yeah. This has been really fun. I, thanks for taking the time and yeah, it was fun to unpack. I know there was a lot of other stuff, but this, I feel like there was a lot of value in what you had to share. So thank you.

I'm clear. Yeah. Thanks so much for having me on. I really appreciate it.