73 Finance, Hard Money and Real Estate

www.CarolinaHardMoney.com

Bill Fairman and Wendy Sweet talk with top experts about a variety of topics including financing, hard money, and many more. Tackling real life scenarios and questions in order to provide you with comprehensive ideas and tips in these areas.

Listen to our Podcast here:

https://thealternativeinvestor.libsyn.com/73-finance-hard-money-and-real-estate


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Scott Paton (00:01):
You're live!

Wendy Sweet (00:02):
Awesome!

Bill Fairman (00:04):
Hey, I'm alive!

Wendy Sweet (00:08):
With excitement back from vacation.

Bill Fairman (00:11):
Yeah. Wow!

Jonathan Davis (00:13):
Yeah. Excited to be here.

Bill Fairman (00:16):
Well, it all boils down to, I still want to be on vacation.

Wendy Sweet (00:21):
Yeah.

Bill Fairman (00:21):
It takes a little while to get the rust off. Right? So I'm Bill Fairman. This is Wendy Sweet. Jonathan Davis, Carolina Capital Management. Great to be back. Not really.

Wendy Sweet (00:33):
No, it is good to be back. It is good to be back. We had a great vacation. It wasn't as great as it normally is. All of our cousins weren't there. Like they normally are. Right. But didn't have as bigger crowd.

Bill Fairman (00:45):
We have, we usually have a bunch from Philadelphia come down.

Wendy Sweet (00:48):
This time I had to stay in a hotel rather than a rented house.

Jonathan Davis (00:51):
How many of your family members were there?

Wendy Sweet (00:55):
Maybe only like 20, maybe.

Jonathan Davis (00:57):
Only 20?

Bill Fairman (00:57):
Yeah.

Jonathan Davis (01:01):
I can't evenly name 20 Family members.

Bill Fairman (01:03):
Let's put it this way. We had 10 pounds of chicken breast and it was barely enough to feed everybody.

Wendy Sweet (01:12):
Well,that is true. So we're all pigs.

Bill Fairman (01:15):
So we had lots of great meals on the grill. .

Wendy Sweet (01:20):
Fresh caught Mahi from my son, Alex. I know he did it. He reeled it.

Bill Fairman (01:26):
Right. He does look good in photos there.

Wendy Sweet (01:31):
Yeah, that's right. And bill caught a Barracuda. That's Barracuda.

Jonathan Davis (01:37):
He's telling me yeah. And you also, you lost a couple fish too.

Bill Fairman (01:41):
I was sabotaged! My brother was trying to gaff a Mahi into the boat and he missed, and he cut my line in half.

Wendy Sweet (01:50)
I hate when that happens.

Bill Fairman (01:54):
And I had another equipment malfunction, the Outrigger wouldn't release the line. And right as it was getting up to the boat, your son pulled the line off and broke it in half.

Wendy Sweet (02:04):
He was just trying to help you.

Bill Fairman (02:08):
So I got to see two Mahi get close to the boat, smile at me and then swim away.

Wendy Sweet (02:12):
Say, Im leaving.

Bill Fairman (02:12):
Right.

Wendy Sweet (02:12):
I'm not dinner tonight!

Bill Fairman (02:15):
But the two we did get into boat really tasted good.

Wendy Sweet (02:17):
That's right. We went clamming ,got some clams.

Bill Fairman (02:20):
Well actually we didn't. We watched the younger.

Wendy Sweet (02:23):
One scallop. One.

Bill Fairman (02:23):
The younger kids do it for us while we sat and drank beer on chairs in the waters. That's the way to clam.

Wendy Sweet (02:30):
That's right!

Bill Fairman (02:31):
They brought back like 14 dozen golf balls because where we do the clamming is right off of the 10th tee at this local country club there. And it's over the water.

Wendy Sweet (02:43):
That's right.

Bill Fairman (02:44):
Wherever able to grab all the golf balls in there while you're trying to find clients.

Wendy Sweet (02:47):
So, that's a plus!

Jonathan Davis (02:47):
Yes! Yeah.

Bill Fairman (02:48):
So,

Wendy Sweet (02:51):
But anyway, we're with Carolina Hard Money. Carolina Capital Management. We're really glad to have you.

Bill Fairman (02:59):
Don't forget to subscribe, share , like. All that stuff. Our website is CarolinaHardMoney.com If you're a borrower interested in borrowing money, then click on the borrower tab. If you're an investor looking for passive returns, click on the investor tab. Right?

Wendy Sweet (03:17):
That's right! You know, there's so much bad news. Oh my gosh. If it's not fake, it's bad.

Bill Fairman (03:22):
By the way, if you have any questions, we have a chat thing here.

Wendy Sweet (03:26):
Yeah, Yeah, yeah. We can talk about that, but.

Jonathan Davis (03:30):
Yeah yeah let me get what I want to say.

Wendy Sweet (03:34):
There's so many bad things going on or you know, it, gosh, it's just crazy! The world's crazy, right. It, so we wanted to do a show and all the good news that's going on .Right?

Bill Fairman (03:44):
So we have a half of page!

Wendy Sweet (03:46):
Actually, it's two pages. Look, I was able to come up with two pages, well, a page and a half of good news that we'd like to share other than the Gospel of Jesus Christ, which is the best good news out there. But we're going to talk about what's going on in the economy and with the mortgages and just things that are going on. The first thing I pulled up this morning was the jobs. Our jobs. For unemployment and employment, we, the economy gain two and a half million jobs in May, which is really, really good. The May unemployment rate dropped to 13.3% from 14.7%. Which I think is pretty awesome. And in June it's dropped again. So I'm really, really thrilled about that.

Bill Fairman (04:38):
Yeah. I mean, there's certain sectors of the economy that are just going to struggle. And fortunately, a lot of these people going back to work, the jobless claims and I think they usually come out really? Was it Thursday when they came in? I don't know, but I know it was today. 1.31 million of new jobs.

Wendy Sweet (05:01):
Yeah, yeah.

Bill Fairman (05:01):
So each month or week, whenever they do them, they keep dropping. So that's good.

Wendy Sweet (05:08):
Yeah, yeah. I'm really thrilled with that.

Bill Fairman (05:11):
And I'm trying not to get in bad news, but the total, since it started is 49 million people are out of work for at least a short period of time.

Jonathan Davis (05:22):
It's going down constantly. Things are opening back up and even with the, you know, more cases. I don't know, I don't know, I'm not a scientist. I would pretend to be one.

Wendy Sweet (05:37):
He plays one on TV!

Bill Fairman (05:41):
Just so you know, our millennial here amazed that I could adjust the thermostat with them.

Wendy Sweet (05:45):
By the way.

Jonathan Davis (05:50):
Not as you know, I mean, I'm pretty good with computers, but just like, I don't know. I feel weird about letting my phone control the temperature of my house. I'ts always like, I don't know.

Wendy Sweet (06:03):
You never know what's going to have. Skynet.

Jonathan Davis (06:05):
You know, I've seen too many Terminator movies.

Wendy Sweet (06:09):
So, you were saying you weren't a scientist.

Jonathan Davis (06:11):
Oh, scientist! Yeah.

Wendy Sweet (06:13):
I have to remind him too.

Jonathan Davis (06:14):
It seems like the, you know, there could be a lag in, you know increase critical or serious condition, but it's still falling. Yeah. Now, the cases are increasing for sure. But the critical or severe cases are still falling. Good. And I hope that continues. And if it does continue, then I think we're on a really good course. And I think people are starting to see that, like, you know, just speaking good news here. I mean, in the last four days, the influx of applications after the 4th of July has been insane! And we, I mean, we're seeing double digit applications every day.

Jonathan Davis (06:58):
Just multiple, multiple applications. Just phenomenal. Which that tells me a couple of things. It tells, people are finding deals, which is good because inventory is down. And people are wanting to do deals, which is a bigger piece of that.

Wendy Sweet (07:13):
Right! And they're qualified. And that's, what's really, that's what's really good. That a lot of tire kickers.

Jonathan Davis (07:18):
And they have, you know, they're actually serious experienced borrowers.

Wendy Sweet (07:22):
I'm really thrilled about that. I think too, we need to understand that things are just going to be different. It's a different world. I, everybody says I can't wait till we get back to normal. I'm not sure that there's going to be, that we're really going to get back to what we thought was normal. I think it's going to be different.

Jonathan Davis (07:41):
Well, normal is everyday shifting.

Wendy Sweet (07:42):
That's right!

Jonathan Davis (07:43):
You know, you know, whether we notice it or not normal changes day to day. It's just this normal changed a lot! Much more quickly.

Wendy Sweet (07:52):
That's right. That's right. I mean, you know, where you think about office space. Who needs all the office space that we had before, because now we've realized that a lot of people can work from home. Some people aren't made to work from home. They don't have the self discipline to do the things that they need to do. But, you know, we realized that there's a lot of things that, that we all, everyone in our office can do from home, which also kind of helps the thought of doing VAs. Using VAs, virtual assistants. People on a consulting basis that, that can work with you, that don't have to be in your office, which makes our costs go down. Right. So, cause we certainly have a lower overhead when we do something like that. So it's just completely different normal.

Bill Fairman (08:38):
We recently did a show on that. So to go back into our archives and if you didn't see it and check it out. We had someone that actually run a VA business.

Wendy Sweet (08:52):
The Lechances!

Bill Fairman (08:52):
And we had pop into other real estate investors who use VAs in their business and kind of gave an indication on how they utilize them in their business. Let's talk about the change. So we're seeing,

Wendy Sweet (09:09):
The change. I've been through it. I am 59. Oh, not that one.

Bill Fairman (09:19):
A thought,

Wendy Sweet (09:20):
Come on. That was funny!

Bill Fairman (09:21):
Yeah. I know! I was laughing internally. So people are moving away from the bigger cities. Number one. They can work from home, but it's hard for them to work at home in an apartment. And what,

Jonathan Davis (09:40):
What they're finding is they don't have to pay $3,000 a month for an apartment in New York city to work from home. They can get a mortgage in the Southeast and half that.

Wendy Sweet (09:50):
That's right! Someone was saying that even in like the San Francisco area, that some of those companies were paying their employees like $15,000 to work from home rather than to come into the office.

Jonathan Davis (10:02):
And you're seeing, there's actually cities that are incentivizing people to move there and work from home, you know, wherever, you know, wherever they are. They're like, Hey, we'll give you a $15,000 tax break to move here or whatever, you know, you're seeing cities do that. To bring population in.

Wendy Sweet (10:18):
That's awesome. And we're ready for you right here in the Carolinas. Bringing on! Southeast rocks!

Bill Fairman (10:23):
This is my prediction. So we'll see.

Wendy Sweet (10:28):
So everybody listen closely.

Bill Fairman (10:31):
So, we have a lot of A class apartment complexes all over the country. And what typically happens with developers of A-class multifamily is that they start building and then they build until saturation.

Jonathan Davis (10:49):
Beyond saturation usually. But, yeah.

Bill Fairman (10:50):
That's true. Okay. Part of the reason is they, it takes them a long time to develop and execute the project in the first place. So it's like a cruise ship. It's hard to turn that thing quick. So they have to finish these things up and you know, I'm old. So I've seen these cycles, it happens all the time. They build and they build, and then they get over saturated and then rents start going down and then they stop. And then they wait until there's a shortage again. But I think what you're going to see here is that the people that are really in the A-class buildings that can, are going to move out into single family. And they're not going to want a single family, typical rental that you see they're going to want one with nice finishes. Now it still could be a two bedroom, two bath, open concept with a nice yard. But I think you're going to see a little bit of a change in the affordable housing where you're still going to have smaller housing, but you're going to have nice finishes. To keep up with the folks that are now moving out of those A-class apartment buildings. Your rent in those class-A properties are going to start coming down.

Wendy Sweet (12:10):
We're already seeing that in the Charlotte market, they just put out an article that it's dropped a couple hundred bucks actually,

Bill Fairman (12:17):
But in your C and B class buildings, were going to stay the same or go up because they're going to be higher demand for those as the people that were in the single family that are, where rents are going to go up, are going to be pushed ou.t at the same time, people that want to buy homes. And this is really where it helps us. Now. It helps us in the rental side too. Cause we do short term fixed to rent loans as well as fix and flip loans.

Jonathan Davis (12:49):
And spoiler alert! Where we're just about to open up a longterm rental product.

Bill Fairman (12:57):
Yeah. We'll give you a little bit more detail. But interest rates are so low right now.

Wendy Sweet (13:05):
How low are they?

Bill Fairman (13:08):
Well, new purchase applications were up 33% from this time last year. I mean, that's a lot because last year we killed it. And it's 33% higher now than it was last year. So the issue is inventory trying to find, to get the inventory. You're not going to be able to have builders build sub divisions quick enough. So the inventory is going to have to come from existing homes.

Wendy Sweet (13:40):
So let's go back to the apartment thing you were talking about for just a minute. You know, you were talking about the rents and how they're really staying strong in, you know, not necessarily the A plus, but you know, in the, in the other areas, but you know, what's really cool. We, you know, deal with a lot of people that own apartment complexes. We do loans on those all the time and mixed up with mastermind people that own complexes as well. And what's been really, really interesting is that rent collections for apartments, not only did they not drop, but they actually increased because they were in better contact and communication with the people that were paying. So I want to give a kudos to our government. For which, you know, in many cases they don't get, but for, it was really amazing how quickly they hopped on. Jonathan's throwing stuff out! But how quickly they were able to get the stimulus package approved and out and in people's hands.

Wendy Sweet (14:46):
So that, and, you know, and being able to file for unemployment and getting those benefits so quickly. It's, it's amazing how the, it really just didn't really even skip a beat. For people being able to pay their mortgages and pay their apartment.

Jonathan Davis (14:59):
On the apartment side, you know, it is more geographic. I mean, we did see, there are some that did go down a little bit, but usually marginally. But I mean, like, I'll take an example of an exact city. Fayetteville, not didn't skip a beat.

Wendy Sweet (15:15):
Yeah. And it's a military town, so those folks didn't lose their job. They didn't go through that at all. But you know, our friend Tom Olson was talking about in Gary Indiana, you know, where he is, they didn't miss the beat. They didn't miss a beat out there. And I'm trying to think of who it was that we were talking that was out West, or I should say in the Midwest. St. Louis they we're talking about in St. Louis and just North of St. Louis, how they didn't miss a beat in collecting any rents that they had going on there. So, you know, that's, I think that says a lot for how quickly our government jumped on what needed to be done. So that's good news.

Bill Fairman (15:56):
This morning.

Wendy Sweet (15:58):
Is this a Debbie downer statement?

Bill Fairman (16:00):
Yeah. It's a statistic that you have to take into account.

Wendy Sweet (16:05):
Depends on who's giving it out.

Bill Fairman (16:06):
Third of Americans did not make their rent or mortgage payment all the time in the month of June. It doesn't mean they didn't pay it. They just didn't make it on time.

Wendy Sweet (16:15):
Yeah. I wonder how many people don't to begin with.

Jonathan Davis (16:19):
So many people were told not to make it, not necessarily if you don't, if you can't don't, but Oh, you don't have to. And I forget, I read a report and this was, I think, well, over a month and a half ago where the, you know, the forbearance or the, you know, the, yeah. The forbearance requests on government back loans, they did a study and it was like of all the loans that asked for a three month forbearance, actually only 2% of them truly said they couldn't make their payment. The other 98% they could, they just didn't want to. And then they, then they further didn't understand how the forbearance works.

Wendy Sweet (16:57):
Once they figured it out, what they were going to have to pay, make that payment.

Jonathan Davis (17:01):
Four payments at one time, not just, you know, Oh, well forget, forgive three months. But that was, that was interesting to me. It's like, you know, most people didn't even need it. And that goes back to how quickly government and everything else, people received money.

Wendy Sweet (17:18):
Right. And us too. I mean we furloughed some of our employees. And as soon as that PPP loan came in, we were able to get them right back to work really quickly. And I'm sure there were a lot of other people that kind of fell into that.

Bill Fairman (17:33):
By the way that was Jimmy Reed. That St. Louis you're talking about.

Wendy Sweet (17:39):
That's good. Yeah.

Bill Fairman (17:40):
By the way, Hey Wendell! Wendell says hey.

Wendy Sweet (17:46):
That's awesome!

Bill Fairman (17:47):
Let's get back to the low rates. So historically, Or they went through historic lows already then to 3.25 for a 30 year fixed

Wendy Sweet (17:57):
Here it is in writing. I wrote it down for you. It's 3.29.

Bill Fairman (18:01):
I just keep it in my head. Not exactly when I'm in the ballpark.

Wendy Sweet (18:08):
Yeah, yeah. And actually June 18th, it fell to an astonishing 3.13 average.

Bill Fairman (18:15):
And then it dropped down to 3.13, however, Fannie and Freddie are predicting sub three 30 year fixed rate mortgages. That's good. Now.

Wendy Sweet (18:29):
The entire year of 2021 or 2021.

Bill Fairman (18:33):
And I'm assuming that's going to be for purchase money loans because it's going to cost you a little bit more for a refinance, I believe. And I think they're going to start trying to slow down the refinances.

Wendy Sweet (18:45):
Why do you think that?

Bill Fairman (18:46):
Because it costs the mortgage companies, a bunch of money every time somebody refinances. Because when they sell those loans on the secondary market, it takes them three to four years to make up what they paid for them in the first place. So if they're refinancing every two or three years, they're doing all this for nothing. So they're going to start saying, well, we're going to raise, we're going to have, we're not going to pay as much for these loans, the refinances. So what ends up happening is it's going to raise the price of it.

Wendy Sweet (19:20):
Yeah. That's a good point. That's a good point.

Bill Fairman (19:23):
And then that's going to slow it. Listen,

Wendy Sweet (19:25):
I've never seen them do that. Have you?

Bill Fairman (19:27):
They were doing it recently when the rates dropped so quickly. The secondary markets just put a pause on buying them.

Wendy Sweet (19:35):
So, the refinance was not doing as well as purchase money?

Bill Fairman (19:40):
If you look at the pricing, it's typically a little bit higher. If you do a cash out refinance, it's going to be higher because they think of it as more risky. Because for some reason, mortgage companies think you're going to take that cash out and you know, go off to the Caribbean or a few weeks.

Wendy Sweet (19:58):
And what's wrong with that?!

Jonathan Davis (20:00):
What most people, when they cash out, what they usually get? Like 10 to 40,000 typical. You can do a lot with that. Don't get me wrong, but it's not like...

Wendy Sweet (20:12):
Think about it. A 30 year mortgage in the 2s, in the 2% range. That's almost free money.

Bill Fairman (20:20):
If you're a real estate investor.

Wendy Sweet (20:23):
Yeah, yeah, no doubt.

Bill Fairman (20:25):
If you're a real estate investor and you don't have a problem getting loans in your own name. You can get up to 10 loans, including your primary

Wendy Sweet (20:33):
At 20, if you have it separated out with your spouse.

Bill Fairman (20:36):
Right.

Jonathan Davis (20:37):
And while we harped so much on this 30 year and the low rates, the 30 year mortgages, the best tool to build wealth. Yeah. I mean, it is, it's the, if you don't have it then get it.

Wendy Sweet (20:50):
That's exactly right.

Bill Fairman (20:51):
So two key factors.

Wendy Sweet (20:52):
Well, wait a minute. Before you get the key factor, hold on to that key factor, because you talked about...

Bill Fairman (20:58):
Don't touch me! COVID!

Wendy Sweet (20:58):
Building wealth. We're going to be talking about that tomorrow on the sunrisers group that I facilitate. But we're actually going to be talking about income versus wealth. Talking about your numbers and how you're, how you really need to approach that. So yeah.

Jonathan Davis (21:22):
Rich and wealth. Wealth is sustainable. Rich is not.

Wendy Sweet (21:24):
That's right. That's right. Okay.

Bill Fairman (21:26):
The two main factors,

Wendy Sweet (21:28):
Key. You said key.

Bill Fairman (21:30):
Alright! two key factors and there are more, but these are the two that pop out to me is rents are always going to go up over time. But your payment is staying the same. The only thing that's going up is taxes and insurance can go up. You're always going to have maintenance, but here's the big thing. You're paying 10 years from now. You think inflation or the cost of goods have gone up? So you're paying today's dollars 30 years from now. So that's amazing.

Wendy Sweet (22:11):
Yeah. Plus you have the appreciation.

Bill Fairman (22:14):
That is a serious hedge against inflation. Is paying in today's dollars obligations, 10 years.

Jonathan Davis (22:23):
Well good thing about the people who bought properties in California in the sixties and seventies, I mean, that's exact like 30 years, 40 years later, what, you know what they were paying mortgages on 1970 loan amounts. You know, on a property that had appreciated six or seven folds.

Wendy Sweet (22:43):
Substantially.

Bill Fairman (22:45):
That doesn't even take into account. The appreciation thing. I'm talking about the cost of money, the dollar buys you much less, 10 years from now than it will today. You're still paying it with today's money, which means every year it's like, I'm paying less of a payment. Right?

Wendy Sweet (23:03):
That's exactly right.

Jonathan Davis (23:04):
That's not how it feels. But, yeah.

Wendy Sweet (23:09):
That's exactly right. And you know what amazes me as through all this COVID stuff that we've been going through is the, you know, the people that have backed off in the lending world, making loans are the long term rental properties. And it's ridiculous because to me, that's the safest loan out there. But the guy, you know, with all the money that's buying these, Mr. Wall Street or Mr. Hedge Fund, that's buying all of these for some reason. Doesn't get that. And it's just, it boggles my mind to try to understand why they don't see that that's a stronger bet than a fix and flip loan.

Jonathan Davis (23:51):
Bill.

Wendy Sweet (23:51):
Okay, go Bill.

Bill Fairman (23:54):
Wall street is all about the next quarter. They have to show numbers for the next quarter. That's why most major corporations. And I'll give home Depot a pat on the back here, they're always looking towards the future. They don't care about next quarter's numbers. They're looking 10 years down the road, but most corporations are based on next quarter's numbers and how their stock is going to perform next quarter. They don't look longterm. Insurance companies look long term. But hedge funds, aren't looking longterm. They're, you know, they have investors that are going to pull money out if they don't hit a certain number. Right. And so there, that's why they do that. Right. However you know, Buffett's not that way. He looks long term.

Wendy Sweet (24:42):
Yeah. Mr. Diversification.

Bill Fairman (24:45):
He's in all kinds of housing, Berkshire Hathaway, real estate, he owns a couple of mobile homes.

Wendy Sweet (24:53):
He likes mobile homes.

Bill Fairman (24:55):
He finances mobile homes. He's a smart guy. He's not buying.

Wendy Sweet (25:01):
He's done real good!

Bill Fairman (25:02):
He's not buying airline stocks.

Jonathan Davis (25:07):
Wendell asked a couple of questions.

Wendy Sweet (25:08):
He said, yes. Wendell says, do you know if the USDA loan, there you go, loan requires the owner to remain in the home for the length of the term? I'm thinking. I'm pretty sure it's been a long time since I've been a conventional lender, but I'm pretty sure it's one year. But I'm not sure. That's a great question. And can you rent it out? Well, yeah, you can rent it out after the year is up. So go ahead, Bill.

Bill Fairman (25:40):
I wouldn't call them the refinance it, if it's being rented out though.

Wendy Sweet (25:42):
Yeah, yeah. I mean, the intent of a USDA loan is really for the owner occupied person. Yeah, yeah. Yeah.

Bill Fairman (25:54):
So I'll ask him that question next time. I know there is, I don't think there's a subsidy in there, but there are some restrictions and it may be, you have to stay in it for 10 years to get that a hundred percent financing with USDA. But that, that's something that Wendy's gonna ask Brian now. So we'll see if he answers before the show's out. But since he's in the mortgage business as a conventional mortgage business, he probably won't answer until next week.

Wendy Sweet (26:31):
I don't know. He's pretty quick.

Bill Fairman (26:33):
He's a little busy right now.

Jonathan Davis (26:37):
And what would you say the refinances were up by?

Bill Fairman (26:40):
Oh, they're like 110%. But at point people everyone's going to be refinanced, so then we'll slow down. Yeah. So if you're in the mortgage business, by the way, and you're a loan originator, don't forget about your real estate professionals and concentrate on all these refis because they do go away. It's your purchase money loans that sustain you over time. Right.

Wendy Sweet (27:05):
That's right. And leave our employees alone. We like ours. Everybody's trying to steal everybody else's employees now, aren't they?

Jonathan Davis (27:12):
You know, that's the time for it. Yeah, yeah, yeah. Everyone was, you know, yeah. With the increase that you talk about 110% on refinances, I'm sure every conventional mortgage originator is trying to hire every process or underwriter they can

Bill Fairman (27:32):
Keep in mind. My job is Debbie downer. Let's talk about the obvious rental portfolio issue and that's certain States and municipalities. So if you were, if you want to buy rentals, don't buy them in Portland, Oregon, Seattle, Washington.

Wendy Sweet (27:54):
They're crazy. Crazy. I tell ya. Yeah, Chicago?

Bill Fairman (27:59):
Chicago is not as bad, but definitely not LA. They are not landlord friendly areas and they've got some really crazy rules and it's a shame. It really is because they think they're helping their constituents. But frankly, as far as I'm concerned, they're just trying to get votes. That's all, they're all they're trying to do is...

Jonathan Davis (28:28):
Why would a politician do that?

Bill Fairman (28:31):
The problem is going to exacerbate the,

Wendy Sweet (28:38):
OOhh! Big word! Five points!

Bill Fairman (28:39):
Expensive housing and limited housing, because what's going to end up happening. It's going to drive all the investors out. They'll end up selling it to somebody that's going to live there. Owner occupied the place, and then they're not going to have any rentals available if they keep doing this. No, no one in their right mind would go in there and be a landlord because the rules are. California was actually debating whether to allow people to go ahead and automatically be re-upped for a year, not to pay their mortgage or their rent. A year!

Wendy Sweet (29:13):
Yeah. What does that do to the people that own the properties? Not everybody who's a property owner is rich.

Jonathan Davis (29:18):
Or owns them free and clear. They have to get on them. They still have to pay like, like, Oh man!

Wendy Sweet (29:25):
It is. It's crazy! So who's going to end it then do they get to do a forbearance on their loans because they're not getting paid and then who in the end is going to end up paying for all of that? That's...

Jonathan Davis (29:36):
Our children and their children?

Wendy Sweet (29:37):
Yeah. That's for sure.

Bill Fairman (29:39):
So, there are plenty of rental friendly States out there North and South Carolina is one of them. Southeast for the most part now is in pretty good.

Wendy Sweet (29:51):
We're fairly normal.

Bill Fairman (29:52):
The Midwest. Texas. Actually Nevada and Arizona. Pretty good too.

Wendy Sweet (30:02):
Yeah. Yeah. It was just a little more pricey.

Jonathan Davis (30:04):
Yeah. Just for the lender laws are just a little more strict.

Bill Fairman (30:07):
Utah's not a bad place, but the population centers are kind of scattered there.

Wendy Sweet (30:12):
Yeah. Just, just a tad, just a tad. So, there was a, another article that kind of popped out in my mind, and here's a quote I got from a guy by the name of Mark Lasry. He's a hedge fund manager. And billionaire! He's the co-owner of the Milwaukee bucks, but he said, I know you're not supposed to say this, but this is a once in a lifetime opportunity. You're not going to see this again when you've actually got an economy, that's fine. And you've got a fed pumping trillions of dollars in. So really what he's talking about is he's explaining his stance on the investment landscape. He did this on a chat on that. You who finance. So it says, while stocks should also farewell in the scenario that he described, he said, it's debt investors like himself who are poised to do extremely well making loans to companies that are faltering.

Bill Fairman (31:12):
I take a little bit of issue with that. Yes. They're in kind of a first position as a creditor, but really all you're making a loan against is, you know, fixtures because a lot of companies don't own any property.

Jonathan Davis (31:28):
You can make it against receivables. You can make it against...

Bill Fairman (31:31):
If you're talking about like JC penny

Wendy Sweet (31:35)
Macy's yeah. They're all down over like 3%.

Bill Fairman (31:39):
They don't really own any property. They own inventory.

Wendy Sweet (31:44):
But they don't own the buildings that they're in. Most of them don't own their own real estate.

Bill Fairman (31:48):
The inventory now has been get it to me when I need it. So they don't have a whole lot of inventory store it either. Okay. So I don't know that I'd be doing debt, investing to companies now.

Jonathan Davis (32:06):
I do debt investing to companies that have real estate.

Bill Fairman (32:09):
They do have trade marks and logos and whatnot, that's valuable. And if they had a decent online platform, that's something that could be worth some money.

Wendy Sweet (32:20):
Well, I think what he, what he was saying in this whole article or the chat that he was talking about is that, you know, when this happened back in, you know, Oh seven Oh eight, we had such a long period of time before we rebounded where everybody now really feels like this is a two year or less timeframe. So he's thinking that, you know, you put debt in there and you know, you do the debt lending now and your recoup time is going to be a lot shorter. That's what he's thinking anyway. We'll see if his crystal ball works. Right?

Bill Fairman (32:57):
Well, I mean, let's face it. JC penny was on the way out, regardless.

Wendy Sweet (33:01):
Well they filed bankruptcy again, didn't they?

Bill Fairman (33:02):
Of course. Yeah. But I mean, they're gone. Sears, they're gone.

Wendy Sweet (33:09):
You used to be able to buy a house...

Bill Fairman (33:10):
And you're going to get now Lowe's did a good job of buying the craftsman tool, name, and business, and they're selling them it at Lowe's. So, I mean, that's what, I mean, you, you buy kind of the intellectual properties of those brands and then maybe you can host them on an online platform where you don't need brick and mortar stuff on them with the, with the names on them. And you, you know, you're getting a pretty cheap,

Wendy Sweet (33:41):
That's another thing that this whole COVID thing created for us is the online buying platforms. It's, I mean, look at people that are doing even virtual training with gyms and stuff, you know, we've got a good friend here, locally, her name...

Jonathan Davis (33:58):
You did virtual abs? Did that workout?

Wendy Sweet (34:03):
I've got some virtual abs. That'd be great. I look great in virtually. But Brandy Thomas. She is, she's starting a virtual training session that I think is a great idea. Like she's doing this new thing called 45 days of sweat. Wait a minute, sweat. Yeah. It's Summer Sweat, 45 days of summer sweat. And, and for a dollar a day, you get, you know, training in all different levels and stuff. So we can do that. But the point is, is that, you know, everybody, whoever wanted to do, and at some sort of a virtual at home business now has the opportunity to do so.

Wendy Sweet (34:53):
And people have an open mind to be more than willing to do it now. You know, they're forced. What about schools? All these kids like here in South Carolina, they're offering you the opportunity to have totally virtual school next year, or do what they're calling AB days where you'll go two days a week. And then the other three days you'll be at home. What about all the working parents? And how's it gonna affect the childcare?

Jonathan Davis (35:18):
The childcare. But I mean, the most impacted non-medical population is working mothers. I mean, cause now you have to choose between, you know, do I work? Do I, or do I take care of my kids and help them through school? You know? And then, you know, typically just, you know, economically speaking, it is a dual income family. Odds are, the husband makes more than the wife, which is another social issue we'll get into later. But you know, so just an economic decision, the wife has to stay home and then it's putting women further behind the curve, which is again, a whole nother issue.

Wendy Sweet (35:51):
Start an issue. I'm going to protest it! Well, that just shows that we have issues in everything that we do.

Jonathan Davis (36:02):
Well. And I wanted to, I was thinking about this switching gears here, do you all know the first move that Warren Buffet made in this COVID-19 pandemic?

Wendy Sweet (36:12):
What's that?

Jonathan Davis (36:13):
So he hasn't bought anything or done anything until just recently. And he purchased, or his company purchased a dominion, natural gas, all their assets, like all the dominion, natural gas stuff. Which is interesting. So, you know, it got me thinking, like there's probably a lot of opportunity in, you know, in resources like that, but then also like recycling, think about all the online purchases that are being made. They're all being shipped with plastic, cardboard, all these things, recycling might be, you know, another big thing to look into.

Wendy Sweet (36:44):
Our sisters in the glass business and all the loose sight that they're using to make all the partitions, they're just busting out through the scenes and getting that online.

Bill Fairman (36:56)
So when would be the best time to buy an energy company? When the prices are really low.

Wendy Sweet (37:03):
When you have no energy?

Jonathan Davis (37:04):
Yeah, exactly. He bought it for, I think, whatever. I think it was just under or right around $10 billion.

Bill Fairman (37:16):
Yeah. That's stuff that's great under the couch,

Wendy Sweet (37:19):
His loose change.

Jonathan Davis (37:21):
And I need to hang here. I need to just get close to him and get his flu shot. Oh, can I come check your couch?

Wendy Sweet (37:29):
Can I clean your couch? That's great.

Bill Fairman (37:33):
All right. So I still want to leave you guys on a happy note.

Wendy Sweet (37:37):
Well we were happy about that!

Jonathan Davis (37:37):
Are you the man for the job?

Wendy Sweet (37:40):
Yeah, we can't. We don't elect Debbie downer to leave everybody with happy notes. Or fake. Fake news right here at Carolina Capital Management.

Bill Fairman (37:52):
All the changes in brick and mortar for commercial properties, hospitality properties that's bad news right now. There's a serious restructuring going on right now. But if you stay in single family affordable housing. You stay in your C plus to B plus multifamily housing self storage as well. You really can't go wrong in those sectors. And then you're going to have a better opportunity to buy scratch and dent notes. Probably within the next six months, there's going to be a larger inventory.

Wendy Sweet (38:35):
That's a great Point, Bill. That's a great point.

Bill Fairman (38:37):
I do make one occassionally.

Wendy Sweet (38:39)
That's two.

Bill Fairman (38:41):
That was my five point word.

Wendy Sweet (38:44):
Yeah. You're doing really good today. Seven points.

Bill Fairman (38:47):
So those are really where I would be looking if you have property that is free and clear or close to being free and clear, and you think you have capped out on your appreciation now might not be a bad time to sell and have that cash available to take advantage of those distress notes and other things that may be coming right.

Wendy Sweet (39:13):
Or could they refinance it?

Bill Fairman (39:15):
Well, I mean, you could.

Wendy Sweet (39:16):
But if it's depreciated out, it's not going to be as an advantageous.

Bill Fairman (39:20):
The cash out and you get to tax-free.

Wendy Sweet (39:23):
Yeah, that's true.

Bill Fairman (39:24):
So if you can refinance, it depends. It depends on the value of the properties. You know, typically if the appraised value is under a hundred thousand dollars, you need to sell it. Yeah. Because nobody wants to refinance them.

Wendy Sweet (39:38):
That's right. That is tough. That's something that people really need to really need to know that even the companies that are coming out now with the longer term mortgages for finances...

Jonathan Davis (39:51):
Based out of New York, California.

Wendy Sweet (39:54):
Yeah. So they think that $125,000 rental's a piece of junk.

Jonathan Davis (39:58):
That's a crack house, but that's not around here.

Bill Fairman (40:03):
Well see, that's the benefit of dealing with a local lender on the ground. Right. We understand that. As a matter of fact, we're getting ready to do one in Eastern Tennessee. That's in a, I know it's more, that's what it's, it's sort of Eastern. Anyway, it's in an area that is close to a major city, but because the national lender says, Oh, that's rule. We're not doing it. Or we're able to do that because we know better. Yeah. It's a bedroom community, not rule, but they're not going to see that kind of thing.

Wendy Sweet (40:36):
Sohill asked, Bill, how do you know if a property is maxed out as far as it being appreciated?

Bill Fairman (40:43):
Well, that's a good question.

Wendy Sweet (40:44):
For your CPA.

Bill Fairman (40:51):
It, I, I don't know. That's, that's your own opinion if you've had it a while and it's free and clear, and you've gotten really good appreciation over the years,

Wendy Sweet (41:02):
And maybe it's in an area that's not going to have any more upgrades or building or new construction around it, or it might be in a location where maybe it's down the street from where all the big box stores are being built. And there's new neighborhoods over there. You just, you can tell that it's kind of in a pocket.

Jonathan Davis (41:22):
Odds are, if, if the house is under probably a hundred thousand dollars, it's appreciated as much as it is not going to go up.

Speaker 1 (41:31):
Sohill as you know, everything is everything in real estate is cyclical, cyclical.

Wendy Sweet (41:41):
That's another good word.

Jonathan Davis (41:42):
Cyclical?

Wendy Sweet (41:42):
Yeah. I'll give you four points for that one.

Bill Fairman (41:44):
If you're looking in an appraisal. It will show whether the neighborhood is on the increase on the decrease or is what do they call it? I don't want to say stationary, but it's stationary, whatever. So

Wendy Sweet (42:03):
Transactions that are happening,

Bill Fairman (42:05):
Don't have the appraisal in front of me, but all neighborhoods run in a cycle. They're either on the upswing, they're flat or they're on the downswing. So even if you have something that's peaked eventually it'll peak again, how long do you have to wait for that to happen? So it's all kind of it's guess work, but if you've gotten good appreciation in it, you don't owe anything on it. It might be time to pull some money off the table and see, and it could just be a rental house that.

Wendy Sweet (42:39):
You're making a killing off of.

Bill Fairman (42:40):
No!

Wendy Sweet (42:40):
Don't sell it then!

Bill Fairman (42:40):
Was going the opposite direction. This could be just a problem child, that for whatever reason, you just had bad luck with.

Wendy Sweet (42:50):
That's a great example of the half full half empty cup.

Speaker 1 (42:54):
You're making a killing on it. You don't want to sell it.

Jonathan Davis (42:57):
So if we, if we take right now, what's happening. I mean, we see a low, some of the lowest inventory available that we've ever seen. So the question is, do you think the inventory is going to go lower in the area that, that your house is in? Yeah. If the answer is, yes, the inventory is gonna go lower than keep your house. Cause it's going to appreciate. If the answer is no, maybe it's time to, I mean, that's just kind of simply what it boils down to try to make things as simple as possible.

Bill Fairman (43:25):
The idea on this is can I get something else at a much lower price later by taking a little bit of that money off of the table now? Is my ability to increase my investment dollar greater if I take the money off the table, or if I just hang on to it? Because it is, it is going to increase in value over time. We all know that, but it, it never happens in a straight line. It always happens in smart. So if you think it's going to be a while before it, then it might be time to take that money off and yeah. Look forward to another opportunity, right?

Jonathan Davis (44:01):
Yeah. There's a lot of factors to it. You're right.

Wendy Sweet (44:03):
And you know, that's the other thing too, is looking for another opportunity. People are afraid that the opportunities are not going to come along. We've been doing this for over 20 years and opportunities come along every single day. Never force a deal, never speed a deal through because you're afraid you're not going to get another opportunity. Good deals come along every day. And they have, for the past 20 years, we've been doing this. Right?

Jonathan Davis (44:31):
Before that, even before we were doing it, we could involve much longer.

Wendy Sweet (44:37):
So, so don't feel forced or pressured or, you know, like in a timeframe, you know, it is what it is. And either the numbers are gonna work or they don't. Right.

Jonathan Davis (44:48):
I mean, yeah. I mean, yeah, it's just, that's really what it boils down to. Do the numbers work for you right now. Right. They can, you know, and you know, just how I run things. If I'm doing a rental, if it doesn't cash flow at 10% interest rate, which, you know, you can obviously refinance into much less than that. If it doesn't cash flow at that for me, it's not a good deal. Right. That's just me. Now other people are doing it much thinner margins and that's fine. Right. It's gotta make sense for you.

Wendy Sweet (45:18):
Right. It's the risk tolerance. You know, I had a call from a guy this morning that was going to do an Airbnb in Myrtle beach. And he said, he changed his mind at the last minute because of how Airbnb's in that area dropped during the pandemic and you know, how they're slowly picking back up again. And so, his strategy is wanting to look for Airbnbs, but he's changing his mind because of that. And my strategy, I look for Airbnbs all the time, but I rent in my dinky little town of RockHill and we're doing great.

Bill Fairman (45:55):
You're not doing vacation rentals. You're doing short term rentals.

Wendy Sweet (45:57):
So that's the thing. Right? So, so it depends, you know, the strategy is Airbnb. The strategy within the Airbnb is where are you going to locate the business? So just like you, when you're saying that cashflow works for me, or it doesn't, it, you have to figure out, you know, what is the, what's the total total picture?

Jonathan Davis (46:21):
What's the seasonality of where you're renting. And who's renting it? Do people rent there in the summer? Do they rent there in the winter? Or is there an opportunity to rent, you know, year round?

Wendy Sweet (46:32):
Right. Right. So strategies are different,

Bill Fairman (46:35):
Myrtle beach is a great area, because even in the winter you get like a hundred golf courses. You have a lot of people that will come down here.

Jonathan Davis (46:41):
And they totally we're, I mean, there's a lot of, you know, Airbnb rentals in the, like the coast that if they just get rented for one or two months out of the year, they've paid for the entire debt service and cashflow that person's looking for, and then that sort of strategy.

Bill Fairman (47:01):
So, Sohill back to your original question. You know, that's something that you're just gonna have to make that determination if it's, if you got great rental income on it. But it's also, but it's also in an area that is really low and inventory. I mean, now might be the time to take that money, if you can get a good price for it and invest it in another area that maybe up and coming, right. Maybe you can get enough from that property to buy two pieces of property and double your cash.

Wendy Sweet (47:37):
That will appreciate quicker and...

Bill Fairman (47:40):
Well, even if it doesn't appreciate quicker, you still might be able to get more cash flow later. It's hard to say. You never know. I know back in 2000, we had some friends that do the turnkey property rentals, and they're constantly looking at their client's portfolios. An example of a lady in Phoenix area bought a house. And of course, Phoenix was one of the first areas where the values went up really quickly and they determined that she could sell that property now and then go buy two rental properties in the Midwest and double her cash flow with what she made on, on that house. So that's kind of what you have to look at. Alright. So we're getting close. Join us in our one o'clock show, please.

Wendy Sweet (48:29):
We have Tim Bratz!

Bill Fairman (48:30):
Yeah. We have a great guest, another CG guy. And he's going to talk about building wealth over time as well. So it was wonderful to be back. Thank you so much. Remember subscribe, share, like all that good stuff. Our website, again is CarolinaHardMoney.com. If you're a borrower, click on the borrower tab. If you're someone interested in passive income...

Wendy Sweet (49:03):
And Jonathan, you want to talk real quick about that program.

Jonathan Davis (49:06):
After, after I do say this, so I see your, thank you, please. Don't encourage bill to share his opinion

Wendy Sweet (49:15):
Takes up way too much time.

Jonathan Davis (49:19):
Oh. So we are getting ready to roll out in the next couple of weeks. A rental program, a 30 year fully amortizing rental program. Rates will start in the mid sixes. And it'll only get better hopefully as everything improves, but and we're looking at LTVs up to 75%.

Wendy Sweet (49:44):
So tell all your friends!

Jonathan Davis (49:47):
And once that rolls out, everyone who is part of our network, we will send a blast out to everybody. It'll be on our website. We will we'll make sure everyone is aware and we're excited for the future.

Wendy Sweet (50:01):
Yeah. Thanks again.

Jonathan Davis (50:03):
We're excited about being a part of you all building your wealth.

Wendy Sweet (50:06):
That's right. Yeah.

Bill Fairman (50:08):
Alright. It was a pleasure. See you again next week. Bye you all! Oh, and in an hour!