Friday, April 24, 2020

Freedom Warriors Update

https://carolinahardmoney.com/45-freedom-warrior-financial-updates/

Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the "Small Builder" borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and "Ground up Construction Loans" for investors only in NC, SC, GA, VA and TN (some areas of FL, as well). 

 As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.

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Bill Fairman (00:04):
Hi, Freedom Warriors! Bill Fairman with Carolina Capital Management.
Wendy Sweet, sister and partner. Jonathan Davis, also a partner. But he does
all the work. We just hang out.
Wendy Sweet (00:15):
That's right. He's the new guy. We really wanted to
introduce him to you. So, so why don't you do that Bill?
Bill Fairman (00:20):
Warriors, meet Jonathan Davis.
Jonathan Davis (00:25):
Appreciate that. Yeah.
Wendy Sweet (00:27):
So, talk a little bit about what Jonathan brings to the
table for us. Everything.
Bill Fairman (00:32):
Jonathan's experienced with commercial properties,
valuations, secondary marketing. What that means for us is that, when we get
all our many used up in our funds,
Wendy Sweet (00:46):
Which is normally always.
Bill Fairman (00:48):
We sell off chunks of loans so we can recapitalize and make
new loans, right. And Jonathan handles those sales. As well as personnel things
as well. He has put together a really good team and they are extremely
efficient and everybody has bought in. That's even, that's the biggest...
Wendy Sweet (01:13):
He snowed everybody.
Bill Fairman (01:17):
Jonathan came from a family office where they did a lot of
note purchases initially and then he set up their loan origination side of
things and we were very fortunate to meet him.
Wendy Sweet (01:30):
Stealing away with a smile.
Bill Fairman (01:39):
So that said, we want to talk about what's going on in the
market. It is fast and furious. It changes every day.
Wendy Sweet (01:47):
Is Craig gray out there?
Bill Fairman (01:50):
So if you think about it, this past week or two, the stock
market has lost all of its gains in the last three years. Yeah. Now you take
funds like ours and I haven't put the numbers together but we haven't lost
anything. And most other funds in our same space are going to have the same
thing right now. We don't go up and down and it's not crazy. However you're
going to, there's going to be concerns if you're holding a commercial
properties or commercial loans that have a large exposure to retail. So retail
shopping centers, office buildings, those types of things. Yeah. Those things
are going to be hit the hardest right now because you know, everything shutting
down.
Wendy Sweet (02:49):
And the high end market too. That high end single families
I think are likely to [inaudible]
Bill Fairman (02:57):
Right now in. Yeah. Hush.
Wendy Sweet (03:01):
Hush your mouth.
Bill Fairman (03:02):
You know, on the commercial side of things, it doesn't
mean self storage I don't think is going to be an issue. And then you're also
considering commercial multifamily. And now that, the, hotel motels space to be
heard. Yeah.
Wendy Sweet (03:22):
Yeah. If you're investing in hotels, you might want to
pull back on that.
Jonathan Davis (03:24):
Any hospitality. Yes.
Wendy Sweet (03:27):
Just for a while.
Bill Fairman (03:28):
Yeah. And it's really, it's a short term thing. We can
already see it turning around in China. Singapore did an awesome job and then
South Korea has, has been a good job. Now the difference in those societies is
that they're hovering over you. So they have some privacy issues with the....
Wendy Sweet (03:53):
No communism going on in there?
Bill Fairman (03:53):
The reason that they got a handle on it quickly is because
they know where you've been. And they're able to contact all these people that
you are in contact with and to isolate those people. Well that's very
efficient, it's hard for, you know, countries like Australia and America and
Canada and Mexico, I would say, to do that kind of surveillance on them.
Wendy Sweet (04:17):
Yeah. Well, even in Africa, you know, we've been doing a
lot of mission work over in Africa, Tanzania, and they've sent all the kids
home from the schools back to the orphanages and there's nobody on the streets
and it's a completely different situation there. So it's, and, and you know, Scott,
who does our recording for us is down in South America. He's seeing the same
thing there. So it's just, you know, absolutely worldwide, what's going on.
But,
Bill Fairman (04:42):
And again, this isn't a, a market induced downturn, right?
This is a...
Wendy Sweet (04:47):
A Black Swan event.
Bill Fairman (04:48):
Yes that's what we call a black Swan event. And
essentially...
Wendy Sweet (04:52):
We've been preparing for.
Bill Fairman (04:54):
Essentially everything has shut down for couple of weeks
to maybe a couple of months. Right? Now there's going to be some short term
pain. Right. Over a year ago, we saw that the real estate residential market
was, had a lot more downside than it had upside potential because we thought
that it was already at the peak. Now in the areas that we are in and we're
lending, those markets are still growing and they have upside, but there's no
better time than the prison to get conservative. And we changed our model to
only go, or do loans for what we call affordable house.
Wendy Sweet (05:35):
Our bread and butter market. Right.
Bill Fairman (05:37):
And the reason for that is because that is the piece of
real estate that is the most coveted. And why is it the most coveted? Because
it's the most liquid. Why is it the most liquid? Because it's the most coveted.
Wendy Sweet (05:52):
It's just a circle.
Bill Fairman (05:54):
You have first time home buyers that can afford the affordable
housing. You have people that are downsizing. They're going to go to the
affordable housing, and then you have investors. They're going to buy the
smaller homes because, they can still buy those and rent them out and get a
decent return on them. Correct. Does anybody like to talk other than me?
Wendy Sweet (06:16):
Well, you won't take a breath.
Bill Fairman (06:19):
I'm going to pause right now and answer input.
Wendy Sweet (06:23):
Thank you so much. One of the things that I think, we even
had a little meeting today. We've been having meetings every day about what's
going on cause it's changing so much. And you know, we just got a letter from
one of our large institutional lenders, someone that we sell a lot of loans to
after we close them. That basically, and this is for the buy and hold the, the
longer term loans, they basically shut it down that we've got 10 loans in our
pipeline that, that we can't close that are long term loans. So the short term
loans are still being,
Jonathan Davis (06:57):
can I speak to that?
Wendy Sweet (06:57):
Absolutely. Yeah, I'll take a breath now.
Jonathan Davis (07:03):
So, over the last few years and maybe even a little more
than that, we are constantly asked by these institutional backed aggregators to
well, you know, scale your business with us, scale your business with us.
Here's all the examples of everyone who has tenex their business back and
forming to what we're, what we do. Lend like we do and only to us, you know,
make us your, your exit or your, your origination arm, whatever it may be to
company. So we, with what we're seeing right now, we're really glad we were
pretty smart. But the goal was from when we started all of this and when I came
on to,
Wendy Sweet (07:51):
Which was two years ago now.
Jonathan Davis (07:52):
A little over two years ago. Yeah. To make us
self-sufficient, to not go beyond our means to not create a machine that we
can't feed because if we had scaled our business to conform and to capture that
extra, market share, we'd be laying off people right now because they have just
shut down all originations.
Jonathan Davis (08:16):
And we've been sending them over the last few years, things
that, you know, meet their guidelines that are just kind of spill over from
what we do, right. We haven't gotten out of what is our bread and butter and
what makes us good and what makes us, our niche in our market and our niche.
However you want to say.
Wendy Sweet (08:36):
We'll be country and say niche.
Jonathan Davis (08:38):
Sometimes it comes out. I'm from Kentucky, so yeah.
Wendy Sweet (08:41):
Carolina we're the same.
Jonathan Davis (08:43):
Yeah. So, so we're, when I look at this, I get the letter
from, from these institutional lenders for just like, Hey, we're pressing polls
on everything. And you know, not that, you know, I would actually send this,
but my first response was, well, all those people that you told me to give me an
example of who tenex their business off of you. How are they doing right now?
Wendy Sweet (09:04):
That's right. They're ahaking in their shoes.
Jonathan Davis (09:05):
And we know the answer to that. Which, you know, goes back
to, we stay in our markets doing what we know works with the team that we have
to not go beyond our means. That's right. And that's what's so important to I
think, what we bring to our investors. We, you know, we're, we're not trying to
be national lenders trying to take all this money and take over the world.
We're trying to get solid returns for our investors.
Wendy Sweet (09:37):
And preserve capital.
Jonathan Davis (09:38):
And have principle preservation all along the way. That's
right. And I think...
Wendy Sweet (09:43):
We're not sexy or Benella. We say that all the time.
Jonathan Davis (09:46):
But what we're seeing right now is, is proof that
discipline works. Discipline works. It's not like, like when you said it's not
sexy, but it works.
Wendy Sweet (09:56):
This is where the turtle is getting ahead. Right?
Bill Fairman (09:59):
Well, with the institutional investors coming into the
space, they tried to entice lenders like us by showing us a path that would be,
the cost, our cost of capital would be much lower. And that means cutting out
our investors, you guys, because we pay more for that capital because we're all
participating together. Yeah. Versus we're, we're essentially, like a line of
credit where the bank has really low rates. Right. Yeah. Well, I've seen this
story before. We went through 2008, and we know what happens with the larger
financial institutions when...
Wendy Sweet (10:42):
They fall hard.
Bill Fairman (10:43):
Well, they don't necessarily fall. They just stop. Pivot
and go somewhere else.
Jonathan Davis (10:48):
Well, and to build off of that, it's based on like our
core values and what we want to do. Is it more imperative for us to capture a
higher return for ourselves in the short term and line a billion dollar company
with more money in their pocket? Or is it more important for us to say, how do
we create wealth for those around us? You know, one of my favorite sayings is,
you know, we rise by lifting others.
Wendy Sweet (11:19):
That's right.
Jonathan Davis (11:20):
You know, we, you know, we rise because we're lifting investors
with us and investors are lifting us.
Wendy Sweet (11:26):
That's right.
Jonathan Davis (11:27):
With them. So it kind of works all together. We'd rather
help create wealth for, for an investor, for someone who's, you know, worked
hard than for this billion dollar corporation that is trying to get you to
create a machine that you can't feed.
Wendy Sweet (11:41):
That's right.
Bill Fairman (11:41):
Yeah. And since we've been in business that has been the
model, we are trying to benefit both the investor that is investing in our
fund. And we're trying to benefit the small business owner that's borrowing the
money from us. And if both of those sides win, then we will win in the long
run. And the great thing about private capital is that we have the bandwidth to
change and to pivot, as the market changes and pivots as well. The big
companies, if there's trouble making payments and there will be some trouble
making payments by the way. Whether we own that property and we're renting it
out or it's in the form of a mortgage payment, there's going to be, some bumps
in the road within the next, uh, probably six months. Yes. So how do you deal
with that? Well, the bigger institutions, they only know one way of doing it is
you're in default and now you're going to have to pay fees and penalties.
Bill Fairman (12:46):
With what we do is we can always do loan modifications, we
can work with them.
Wendy Sweet (12:52):
We can rent the houses out.
Bill Fairman (12:54):
Is that return for a couple of quarters going to be as
high as it was in previous quarters? Probably not. But we're talking about a
small dip and then a bigger upside. And why is it a bigger upside? Because
we've worked with them and they will remember that when it's time for them to
do another loan. So keep that in mind. Excuse me. People need two things and I
say this every time. Two things in any economy, they need food and they need
shelter and we provide the shelter portion of it and we're doing it in the
space that is really geared towards that affordability. That's right. And
that's the one that's going to be the, if we ended up having to take back some
properties and we can't sell them for any reason, we can still rent them out
for close to what our expected return.
Wendy Sweet (13:41):
Well, you know, another question we keep getting asked to,
from other people, other lenders and and just people in general that are
inquiring about what's going on is you know, what if you can't have gatherings
of more than 10 people and that kind of thing? Well in our office we only have
nine, but we can, we can operate virtually. But the people who are borrowing
money to rehab these houses, the crews that are coming out to work, you're
looking at two or three people on a crew and there's usually just one crew in a
house at a time. So that's not going to violate the, you know, 10 person
gathering and, and they're, you know, they're, they're coming and going,
they're going in and out. It's not, you know, a big group of people all stuck
in one house. So, so rehabs are still continuing. The supplies are all
delivered, so that's, that's easily taken care of. Everything's delivered from
the store or from the supply house or wherever it's coming from and all of the
logistics are still going on. So, so they're still in a position to be able to
continue to rehab the house and get it finished up and even start rehab and get
it on the market for sale. People can still look at houses for sale. They're
still doing that. There's still....
Bill Fairman (14:56):
You can actually start putting virtual showings. I know a
lot of realtors are doing that. Instead of having people grapes traipse through
their homes. Now this was supposed to be like a little 10 minutes.
Wendy Sweet (15:09):
And we just go on and on and on.
Jonathan Davis (15:11):
You know what's interesting? I'll just, butt in real quick,
I don't know. I don't have the data. I don't know anything. I'm just posing
this as a question on the eye buyers. Is that you think that's increasing or
decreasing right now?
Wendy Sweet (15:22):
Eye buyers, tell me what you mean.
Jonathan Davis (15:24):
So like open door or you know, all those like, you know,
you get a letter from them about every week to buy a house.
Wendy Sweet (15:30):
That's right. That's a great thing to ask.
Jonathan Davis (15:32):
Is that increasing or decreasing?
Bill Fairman (15:33):
I Don't know yet because all the data is always, yeah. So
we, we don't know that. However, we do know that cash is King and if in
uncertain times people are willing to take the cash from the big companies that
are willing to give it.
Wendy Sweet (15:48):
It should help them. You're exactly right.
Bill Fairman (15:50):
So anyway,
Wendy Sweet (15:52):
We are still accepting money in our fund. Disclaimer. Disclaimer.
Bill Fairman (15:56):
It is a short term blip and we will all overcome this. Our
particular market is not volatile. It is a needed service like the grocery
chain.
Jonathan Davis (16:08):
Well, the most important thing is to remember to keep your
humanity. To think of others in this time and to put others first. You know,
just so before we, you know, we rise by lifting others. I mean, we had a
meeting, I think it was yesterday, and the question was posed, how can we help
our community right now? What can we do? And we put together several ideas to
do so. But like what can we do to help people through this? Cause we all need
help through this short period of time and the more we help, the faster we're
going to get through this.
Wendy Sweet (16:43):
Well, first of all, we all pray for each other. Yes, for
sure.
Bill Fairman (16:46):
So there you have it. The short 10 minute video that
probably wouldn't 15 or close to 20 because Billy talks a lot. If you have any
questions, we're available. CarolinaHardMoney.com CarolinaHardMoney.com it was
great to talk to everyone. Thanks. Have a wonderful day.
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