Financing for Rental Properties

Mike: Hey, it’s Mike Hambright with FlipNerd.com. Today’s show is a very special one. As many of you know, B2R Finance is one of our platinum sponsors, which we’re excited to have, and they’re really a leader in the space of providing financing for rental property owners. Whether you’re looking to refinance your current rentals or get access to funding to buy more, B2R is the clear leader nationally. For those that have very deep pockets, their rates are impressively low and it’s really an awesome opportunity.

So today I’m joined by Corey Donahue with B2R and he’s going to talk to us about the power of owning rental properties and building wealth through rental properties. And we’re going to talk about the role of financing, which is always a big part of that, and, quite frankly, how B2R can help members of FlipNerd.com with getting financing for rentals and helping you build wealth. So Corey, thanks so much for being on the show today.

Corey: Thanks, Mike. It’s great to be here.

Mike: Great to see you. Yeah. So you want to take a minute and talk a little bit about maybe B2R and then we’ll dive into the power of owning rental properties? So talk about what’s happened over the last 18 months, 24 months, in terms of B2R coming on the scene and people can get hard money for deals but getting long-term money for rentals was always tough because…

Corey: Yeah, absolutely.

Mike: …you’re trying to find a community bank or somebody that gets you. But B2R gets you as much as anyone. Just talk about what’s happened in the finance market over the past couple years.

Corey: Absolutely. So my background is definitely in the space as probably many of the people that are going to be watching the show and that is, I understand what it takes to build a rental portfolio because that’s what I did for a very long time. What we’ve done at B2R is try to create products that bridge the gap between what’s been available, which has been very limited for local banks, and hard money, right? We know how expensive hard money is and how difficult it is to build a rental portfolio when you’re paying astronomical interest rates.

Mike: Right.

Corey: So we’ve created a suite of products that will bring some financing and some debt to single-family investors. And that, over the past 18 months, has really… our job has really been to help institutional level banking understand what us little guys need in order to be successful and build our portfolios.

Mike: Right.

Corey: So we’ve definitely gone through the gamut of helping them understand and we’ve got a really great suite of products now that can provide some very good financing to anyone, really, who wants to. All the way from the person who’s buying their first rental property, all the way to an institutional level investment company who’s buying hundreds of homes a month for investment purposes.

Mike: Yeah, and, historically one of the bigger challenges with financing is, even if you could find it, there was always “I’ve got money, but
“

Corey: Right.

Mike: If it’s a Fannie type loan, well best you’re going to get ten deals financed.

Corey: Right.

Mike: If it’s with a community bank there’s always some cap on it. “We’ll give you a half million dollar line” but then they’re kind of tapped out. A lot of the smaller banks, the community banks are great and I work with a few of them but they always, they often have a limit on how much they can lend to any one person because of just how they’re governed.

But I know with you guys, effectively, if you’re finding deals that are right and you kind of fit the model of what you’re looking for, which I don’t think is that difficult if the deals are good, there’s really no limit on the number of financing you can get through B2R, right?

Corey: That’s right. None at all. The more, the merrier. We want to see our clients be successful and this business through institutions coming into our space, has made the world aware that it’s a really, really good business to be in. And our objective is to help the smallest investor all the way up to a large investor do better business and grow this industry.

Mike: Right, right. We’ve got people that are listening to this right now that already have a rental portfolio and they’re maybe focused on building it or maybe just maintaining it, they might want to refinance. And then people that are new that see this path of building wealth through rental properties. So just talk about the importance of, as a real estate investor yourself, of building a rental portfolio that… why that’s important and why people should consider that or focus more on it if they’re not already.

Corey: Sure. I mean, I can just talk from my personal experience because it’s about building my own wealth, right?

Mike: Yeah.

Corey: What we can bring to that, on the leverage side, is just incrementally increasing the returns that you can achieve. So rental properties are going to bring a number of different things, right? You get growth. You get tax benefits. You get just a plethora of ways that, like no other asset class, that you can build your wealth and diversity.

There’s so many different ways that real estate investing, single-family investing, can help you build wealth and it doesn’t require millions and millions of dollars to get there. You can start with a relatively small amount of money and build a rental portfolio that will provide income for you and your family for years to come. So our role in that is to provide that leverage that you need to take that return from a net 5 or 6% return and just incrementally increase that by giving the right leverage.

Mike: Yeah. I know, from my personal experience, my wife and I run 40 rental properties. So not huge but we bought them really well many years back and it’s turned out to be a great thing. And I’ll kind of compare that to something I just found out in the past. I’ve never said this publicly, there’s really no reason for me to even say this publicly, but we have some retirement accounts, different accounts that are invested in the market. And my background is, I have a financial background primarily so when I went to college, I focused on investments. And when I got out, I realized how it’s just more of… it just didn’t feel the same way that I thought it would.

Corey: Sure.

Mike: I can’t control it.

Corey: Right.

Mike: And as somebody that has that background now, I feel so much more in control with rental properties but I’ll share with you. We have a retirement account that we just looked at the other… my wife sent me an email, like a nasty-gram saying “This account” – it happened to be a relatively smaller retirement account – “has lost 92% of its value.”

Corey: Ouch.

Mike: And we just, we’re so busy in my business that I haven’t even been paying attention to it.

Corey: Right.

Mike: And I won’t say what I invested in but we’re just kind of making shots in the dark and stuff.

Corey: Sure.

Mike: It’s impossible to do that in real estate. You’re not going to lose basically 100% of your value on anything. Markets are going to change but not like that.

Corey: Yeah. Right and you just ride it out, right?

Mike: Yeah.

Corey: There are [inaudible 00:06:28] place to live and the great part about real estate, too, is it’s pretty liquid, you know? It’s not as liquid as maybe an asset like you’re talking about, you can’t control. But there are just so many great things to single-family that it’s been such a huge blessing to me in my world, in my life, for my family. I couldn’t emphasize enough the importance of having your own portfolio.

Mike: Yeah, and it’s one of those things that just gets better with time. It’s not as passive as once people led you to believe. There’s drama that happens, no doubt about it. I’ve gotten, you’ve probably gotten some calls. I got called at… my property manager said “Mike, are you sitting down?” He’s never said that to me before. Like why are you saying that?

Corey: Didn’t want that call, right?

Mike: “Well, this house is burned to the ground.” Stuff happens. It’s terrible that it happens but it happens and, in the grand scheme of things, it doesn’t end the game, I guess, unless you have one. But, even then, if you’re properly insured, you’re fine.

But what I see is we’ve had an aggressive plan to pay our houses down and so, while we haven’t had them for a long time, we already have some houses that are paid off. We’re able to pay down debt quickly and then when that cash flow starts to go up and you kind of get a, we have a property manager so we’re starting to get checks, and we’re like “Huh. That’s nice,” and it just gets nicer as you pay more and more of them off.

Corey: It does, for sure.

Mike: Yeah. So talk about, historically, what’s different now with financing that’s available for landlords and how it was in the past and maybe even a little bit about where things are going.

Corey: Sure. So in the past, as you spoke to, if you’re doing a Fannie loan or some sort of local bank loan, you’ve got limits. And those limits are… what we’re working toward is, right now, is trying to remove as many of those limits, within reason, of course. We want to deal with good, professional people who are going to take good care of their assets and pay their bills. But we want to try to remove a lot of the various barriers to entry.

So where we’ve come, since when we started, we had a very kind of tight box, if you will, of who we could lend to. And, as the financial markets continue to understand how safe and secure single-family is, those kinds of barriers to entry are getting less and less.

Mike: Right.

Corey: So whereas when we started, you may need a 720 credit score. Now we’re able to get that credit score down to the 680 range. We’re working towards getting it even lower. So if you look at over the next year, personally, what I’m doing on a daily basis is trying to push our teams low-up, internally, to figure out where we can remove those barriers of entry.

So those of us that have kind of been in the business for a long time are trying to work with the Wall Street banker types and try to get some of those barriers of entry removed. And so I think that what you’ll see over the next 18 months is a product that’ll be very, very tooled to what investors needs are.

Mike: Yeah.

Corey: And we’re really close now. Our products are very good. We’re just launching a new product called “Single Loan Products.” We can do a one-house–

Mike: That’s great how you guys have been working on that. So that’s great.

Corey: Right. And that’s a big deal for us. We’re really excited about that. That’s going to launch in the next week.

Mike: Awesome.

Corey: And as that comes out to the market, that product, by itself, should be revolutionary for the industry. So we’re really excited about what we can do to help single-family investors and help them increase their returns and get good leverage.

Mike: Yeah. And what I’ve seen, for folks that are listening out there, what I’ve seen is, from B2R to some other competitors you might have in this space, which is not necessarily good for you guys but, with this competition, what’s great for investors is the rates just keep getting beat down. I know at one point you guys, you would only lend if you had… at one point it was, I think, it was a million bucks. You had to have at least a million dollars in houses that you could refinance or that you needed to finance.

Corey: Yep.

Mike: And, if you didn’t, then you’d have to have a bridge line to get there and now you’re coming all the way down to a single-family house.

Corey: Right.

Mike: So it just keeps getting better for investors and I know rates have continued to kind of go down as well. It’s a, from an investor perspective, it’s a great thing to have financial partners that are beating each over the head to help you more.

Corey: Not only that, but I think that it’s our job. We want to partner in ways that make things easy and make the lending process as easy as we can. As we know, being investors, it’s not always just about how low you can get the rate.

Mike: Sure. For sure.

Corey: Which of course, we don’t want the rate as low as we can get it, but it’s the customer service that you can get, it’s the speed at which we can operate. It’s the ease at which you can submit for a loan. And all those things are part of what we’re developing.

Mike: Right.

Corey: So as our websites continue to develop… and we’re trying to use as much as technology as we can to make things as easy as possible for our [inaudible 00:11:19].

Mike: Yep.

Corey: So that’s a big piece of what we’re really concentrating on now.

Mike: Yeah and one of the things that I’ve appreciated about B2R is that I know guys like you and some of the other people there have bought thousands of houses, really have a lot of experience doing this. And so, just in another connection I have with B2R is constantly saying “No, this is what investors want. This is what investors want.” Trying to get the financial side of the business to really understand what the main street side needs, what the person on the street, the person that’s listening to this call right now, really needs. And I know that you guys have a lot of influence on making your products fit what investors are actually looking for.

Corey: Yeah. That’s a daily adjustment we’re trying to make and constant communication about that because there are many of us in leadership roles in the company that have done, like you said, thousands of rental properties on our own. And we know what the market needs and now we’re just trying to push as hard as we can get to get there.

Mike: Yep. That’s awesome. Awesome. Well, Corey, can you talk a little bit and get more specific on how B2R… we appreciate you guys as a sponsor, it’s such a great fit for what we try to do at FlipNerd because we want our members to ethically invest in real estate, but really kind of build wealth through real estate and help provide for their families and build their communities and stuff like that. All the same things that matter to you guys. Could you maybe get specific on how B2R can help members of FlipNerd.com?

Corey: Sure. So the first thing is going to be the obvious, we provide financing rights.

Mike: Yeah.

Corey: So B2Rfinance.com, if you go there, we’ve got a number of articles that will help your folks see what we do and understand the process. That’d be the first thing that I would say where we can help. And then we’ve got local reps all over the country that we’ve been in their shoes so we can help by helping them through the process. We all understand exactly what the challenges are with financing.

Mike: Yep.

Corey: So the best thing that we can do is just provide as much customer service as possible around that leverage and around making things as easy as possible for your clients.

Mike: Okay. That’s awesome. Maybe you could share a little bit here on what kind of role you play or why… I guess, if people have a rental portfolio right now, why they should consider maybe refinancing. There’s really kind of two ways that people think about rental properties generally is they either want to keep them levered up and financed all the time or they want to get them paid off.

Corey: Sure.

Mike: But, you know… and I’m more of the type, I want to get them paid down eventually but there are opportunities that make sense to refinance, pull cash out, to allow you to grow more. Talk about that kind of phenomena, I guess.

Corey: Sure. There are two schools of thought, right, that you’re talking about.

Mike: Yeah.

Corey: So either you’re in “I’m set where I need to be” and then “My portfolio is the spot where I need to be. I want to pay them down because I’m looking at cash flow for retirement.” Or you’re in growth mode where you need to continue to add more assets.

Mike: Right.

Corey: Everybody’s different at what age level they’re growing their portfolio. So if you’re in growth mode, and that’s where we can really help because we want to give you as much leverage as possible so you can go out and buy more assets.

Mike: Right.

Corey: And with the market doing what it’s doing now and the rental markets, I’m very, very plugged in nationally on what’s going on with rental growth and, right now, single-family rental growth is just gang busters in most major markets [inaudible 00:14:44].

We would love to be able to help take some of that cash out of your properties and then go help you buy and be able to have leverage to buy some other ones and grow your portfolio. So if you’re in growth mode, we’re there. That’s what you need. We’re here to help and we’re here to make that happen.

Mike: That’s great, yeah. Some of those people want to refinance, I think, too just to consolidate their lenders.

Corey: Sure. Yeah, if you’ve got hard money [inaudible 00:15:08].

Mike: You may have [inaudible 00:15:08] finance, you still want to pull cash out but you’re like “Man, I don’t want to deal with five different lenders that I have these things tied up in. Let me just kind of work with one partner who gets me.”

Corey: Right. And a lot of what we’re doing is refinancing out of those hard money loans, too. So high interest debt, we can get that interest significantly lower and, like you said, kind of consolidate everything.

Mike: Yep. Yep. Awesome, Corey. Well, any final comments on B2R?

Corey: No. Just B2Rfinance.com. We’d love to work with any individual who really wants to grow their rental business and retire early.

Mike: Fantastic. Well, for those listening, I have a lot of friends. I know a lot of people that are using B2R for their rental properties. I definitely, highly recommend you check them out. Corey, thanks so much for joining us today. Thank you for being a sponsor of FlipNerd.com.

Corey: Absolutely. I really appreciate your time.

Mike: Yep. Have a great day.

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