Welcome back to the show! I’m really excited to talk to you today about lending and how to find the right lending partner. I have my buddy, Julius Mendoza from Lending Home, and he is going to share some amazing tips! Let’s jump into the show!
Hey everybody. Welcome back to the show. Really excited today to talk to you about lending and how to find the right lending partner. And I’ve got my buddy Julius from lending home with us going to share some amazing tips.
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[00:01:00] Hey Julius. Welcome to the show. Hey,
Julius: pretty to be here Mike. Thanks for having
Mike: me. Yeah. Excited to have you, um, you know, uh, lending is such a critical part of our business, and I think we saw like when COVID hits and you know, it brought for a lot of people who have been in the business for a long time. It brought back memories of 2008, 2009.
Like I had, I had a great relationship with my lender. And then they disappeared. Right. And there’s just, you know, there, there are these there’s turmoil in the industry sometimes, and we haven’t felt it for quite some time until COVID hit, but it was one of those realizations of like, I need to have a really strong lending partner in relationships there because life is going to get in the way and the industry is going to shift and I got to find the right person to work with.
And I think we’re going to cover that today, but Hey, before we jump in, why don’t you just tell us your background, uh, of, uh, of, uh, being a lender. Yeah, absolutely. Thank
Julius: you. So, um, I’m out of the Bay area. We’re gonna raise the San Francisco. I work out of Oakland now, remotely, even though I work with people nationwide.
[00:02:00] Um, before I got into lending, I was actually a currency sales, uh, uh, currency trading sales broker. We’re doing about 365 billion a month in trades for a company called FXCM. So I did that for about five years and one of the founders of lending home, and then got on board with, um, Lending. I never did anything in real estate before I’ve been with the company for six years.
Now, what really brought me in was like the technology piece, because on the currency trading side, there was a platform where you go on there and place your trades. And like, I was all about the technology, right? Yeah. Sending home, they have a portal where you price submit, manage everything, keep everything in one place.
So that’s what really drew me in. And ever since I got into the lending side of things with lending home, never looked back now. Real estate is a real passion of mine. And here we are today.
Mike: Yeah. And it gives some context, uh, lending home is, I don’t know if you guys are the biggest or certainly one of the biggest for sure.
I mean, what tell, talk about just kind of the size of, I guess the amount of lending you do per year typically. Yeah,
Julius: absolutely. So lending home is the largest [00:03:00] provider of short-term fix and flip financing in the space based on the numbers. So last year we did about 6,500 units for 1.4, 5 billion. Every month we’re doing around 600 loans for about 150 million.
About one 35 million of that is short-term bridge loans for fix and flip cash out refi, or just short-term financing in general. Once you can find a more permanent solution for it. 15 million of that is rental. So we are doing
Mike: long term rental loans as well for third grade. Great. That’s great. I think the point there is, obviously you guys have a lot of credibility.
We have a lot of members and know I have a lot of friends that work with you guys. And also just that, you know, when, when you, when you’re a borrower, you just want to be sure that you’re working with somebody that actually has the funds when you need them and can close. Right. And so, yeah. Yeah. Awesome.
Well, Hey, you know, one of the things that, um, I’ve talked about a little bit before is when I first got started in the business. I would like to say that I’ve, I’m much more mature, like business-wise than I used to be. Uh, when I first started, when I [00:04:00] first started, I thought everybody was out to get me. I got to like.
Got to put the screws to my contractors. And like, I gotta beat every, beat, everybody up on price and all this stuff, because everybody’s out to get me. I don’t think that way at all. Now I’m a true collaborator. Like I, I know everybody has to make money, all these things and in exchange, I’m like, well, what’s the service that I can get from that person, because it’s not all about price to me.
Although you guys. I probably have the most competitive rates that are out there, but just let’s talk a little bit about kind of a lender as a partner, because again, I used to think they were a provider and they’re a necessary evil, but now I know your lenders are truly your partners. I mean, you should look forward to paying them in that relationship because you want to do these things over and over and over again.
So what are your thoughts on like how you position yourself as a partner with somebody and not just them? Money provider,
Julius: right? Yeah. Yeah, absolutely. So I mean, the way the lending home thinks of things, um, when we really designed these loans, initially, we’re trying to solve for the needs of operators to see how we can help them build and grow and scale their [00:05:00] business.
Right. Um, one thing that we’re really harp on is speed and ease. So we designed this technology so we can create a streamlined process, not just for the operator, but for us on the backend too, when we’re. Processing underwriting, drawing, docs, funding, and so forth. Right. So speed and ease is huge for us. Um, reliability, right?
They’ll know this is a relationship and, um, credibility based business. So the better we perform on the loans to help you close on time, the more deals you’ll get, whether it’s through wholesalers or agents or, you know, getting good referrals from the sellers themselves. Right. And then the last thing is just on pricing.
Um, we are always working with our capital markets team to, um, keep overhead down and get our rates down and keep our origination down because the more you grow, the more we grow. So for us, we really don’t look at people as customers or clients. We really look at people as, as partners. Right. I wanna help you.
We want to do a repeat process, like you [00:06:00] said, We don’t want you to come in and, and do a dealer too with us. We want it to be a long lasting, mutually beneficial relationship for many months in years to come. And whenever people submit deals on the portal, you know, we, we make sure everything looks good with the rehab funds and the, in the budget.
And we do evaluations sometimes evaluation. When we do the comps, like it could be a gut check just to make sure that the underwrite on your end is good too. Um, so there’s different. There’s, there’s multi there’s multifaceted ways that we look through the deals and make sure you’re good so that we can make it a repeat
Mike: process, for sure.
Yeah. Yeah. You know, everybody’s heard horror stories. There’s some lenders out there that will kind of allow people to hang themselves sometimes because they, they, the lender, especially like some, some, I’m not saying all local lenders are bad. There’s a lot of really good local lenders for sure. But, um, you know, there are some people that are like, Hey, this is my market, you know?
If I have to take the house back, I’m cool with that. In fact, if your people say like, in fact I’ll make more money. If I get the house, you know, and that’s obviously a horror story for an investor, you don’t want that. I think, you know, one of the [00:07:00] things that you guys do well as, uh, you’re not looking to be a competitor with anybody, you, you would rather like everything you look at is how to keep them safe because.
By keeping them safe. You guys are staying safe because they’re using your money. Like you want them to be safe. And then, like you said, after, I know this is how business works in our space when you have a services business. And I don’t think all investors think about this, but there’s actually a huge cost associated with acquiring a new customer.
Right. So after you have that relationship, your goal is really to grow those relationships over a long period of time. Right? Right.
Julius: Absolutely. It’s all about retention. Um, you know, everything. And that we do at lending home is in-house right. So our servicing team, you know, we’re not in the business of taking, pull us back, like you
Mike: said, right?
Julius: Yeah. The servicing team will always reach out proactively. Like at the nine month Mark or so and say, Hey, you know, how are things going with the house? Are you planning on still selling it? How’s the rehab going? Do you want to keep it? You want to put it in a 30 year loan? Like, what’s your plan? You need an extension.
So yeah, we definitely [00:08:00] proactively, um, make sure everything’s good with the servicing book and what’s current for our borrowers that we want. Again, we want them to stay for the long run. We want to make sure that we can make it a repeat, um, relationship.
Mike: Yeah, for sure. So let’s talk about like different kinds of lenders.
So there, obviously you can borrow money from local community banks. You could borrow money from friends and family. Uh, you could have private lenders, you could use hard money. There’s lots of variations. And some of them kind of depend on what your exit strategy is or what your goal is. Right. But let’s just kind of go through some of the different types of lending.
Cause I think you guys, would you advocate as the largest hard money lender in the country that it’s not always right to use you guys, right. Right, right, right.
Julius: Absolutely. So, um, there’s different types of lending, like you said. Uh, I think that cash is actually a type of financing, so to speak, right. Just cash, whether you’re raising capital or using your own cash.
So that tends to be the cheapest. Right. Cause you don’t have your interests or your points or whatever. Um, but, [00:09:00] um, the thing about cash is obviously it’s finite, right? So cash can only get you a certain, uh, to a certain point. Um, typically when we work with cash buyers, um, it’s because of one or two things.
One, the Cassius tied up. So they’re missing out on opportunities or two. They want to get their business to a level that their cash won’t be able to get them to like, say they want to do 20 or 30 or whatever it might be. Right. Yeah. So, um, and then, and then there’s private money, right? So private monies are sweetheart deals.
Uh, your, your rich uncle or father-in-law or a doctor or a lawyer, whatever it might be. Right. Um, they’ll give you money. That’s fast, high leverage, and very, very competitively priced that thanks for hard and winning won’t be able to compete with. Right. Um, so that money is great too, but again, that money can be finite, right?
Mike: it always, it always is. Yeah, we have a, there’s another, there’s another member of investor fuel that I’m thinking of is he had this great source. It was somebody that had a company that was rocking. This was pre COVID and he seemingly [00:10:00] had an unlimited supply. And then one day the guy just said, Hey, I need to make this other investment.
So I’m not going to build it. Be your lender anymore. So as you pay these houses off, like I can’t lend you anymore. So those, those things happen. I mean, they can’t happen with private lenders. I mean, private money is good, right? Typically the rates are a little bit lower. There’s probably less documentation and stuff.
And some of the fees that are there, but it’ll run out and it’s fragile. Like people could just change their mind one day, especially if you just have one of those relationships, you know?
Julius: Yeah, yeah, absolutely. And then, um, of course there’s bank financing. So bank financing is more on the conventional side, right?
So you’re going to get lower rates, lower origination, but tighter credit box, uh, time to close is a little longer. So we all know, we like to write quick competitive offers when we’re inviting these contracts. Um, so I have some people that will sometimes buy cash and use bank financing after the refi, because then they can just.
Take the 30 to 40 days or however long it takes and get the lower rates if they want. [00:11:00] Right. But then the underwriting can be a little painful sometimes because they don’t always quite understand like the way of flipper things and the way like investors think. Right. But we’ll get those, those bank rates right in the, in the, in the threes or whatever they may be right now for investor loans.
Yup. And then, um, and then you have your hard money, right? Like to think that hard money is kind of like a mix of all of them. Um, with hard money, it’s typically institutionally funded. So the well won’t run dry. So there’ll always be money to fund the deals as long as they fit the credit box, whatever credit box, the hard money lender writes up.
Um, it’s going to be quicker, right. Especially if the lender doesn’t need interior access most do before closing, but if they don’t, that helps to speed things up. And then, um, so it’s quicker, higher leverage you get money for the rehab too. And then, um, as far as like process goes, it makes more sense from an investor standpoint, uh, because hard money lenders tend to understand the investor and what they’re looking to [00:12:00] accomplish and all that good stuff.
So, um, as far as pricing goes, it’s going to be in between private and bank, right. Right. But you are paying for that, um, that investment, um, that lender, that partner that understands what you’re looking to accomplish. And hopefully we use
Mike: a partner. Yeah. And I know that you guys, and some of the, you know, other national lenders that you guys specifically are constantly looking for, what are some other products we can create a.
To help our clients. So for a long time, I don’t think you guys were in a long-term rental space and now you are right. And so those are things you’re kind of listening to your customers saying, what else do you need? I’ve even heard you ask, like, what are some other ways that you guys, you know, in investor fuel, you’ve asked like, well, how else can we help you guys?
And I know you guys are constantly doing kind of product development, just listening to your customers, right? Yeah,
Julius: definitely. We definitely, always want to keep a pulse on everything. You know, what are people doing? Which direction are people pivoting to? Is it you construction? Is it commercial? Is it multi-family?
Is it [00:13:00] rental? Right? And, um, there was a huge opportunity for us to get our institutional investors on board with the longterm, uh, product, because you know what a lot of people are doing these days is they’ll still look for properties that are distressed. They’ll look to take them down, renovate. And now we have options, right?
If plan is to sell, but maybe the market didn’t appreciate the way the investor thought it would, then maybe we can get it into a long-term rental program for now wait until the market appreciates. And maybe we can sell later or just keep it and keep cashflow. And then, you know, the tenants will pay for the mortgage and you get some cash for it.
So now we’re getting appreciation and cash flows. So. Yep. If we jumped into that, it’s been good so far.
Mike: Yeah, that’s good. That’s good. So it’s interesting. Cause we’re about to, as I told you in about a half hour here, we’re hosting, uh, inside of investor fuel for our members, we’re hosting kind of state of the union on rentals.
There are some people that think like. I CA I can’t believe how much my rental I’m one of those. I can’t believe how much my rentals are worth now. Like their [00:14:00] houses that I bought for like 15 grand, 10 years ago. And I can sell them for like one 50. Now. It’s just insane. Right? Not that we didn’t put some money into them along the way, for sure.
But like, it’s insane. Like I never really accounted on, counted on appreciation when I bought. My rentals, you know, I had a mentor that owned thousands of rentals and he, he here in Dallas and he kind of said, look, appreciation is not a thing here in Texas. You really need to focus on cashflow. So we focused on buying them really deep.
So we get that cashflow. It turns out we’ve made way more money from appreciation, uh, than cashflow, just because there’s been massive appreciation here, which is historically not a thing, but it’s like that everywhere around the country now. So there’s people that are like, You can sell them for an insane price.
Why wouldn’t you sell them now? And then there’s people that say, look, if you like what you’ve seen so far, there’s going to be massive inflation in the U S at some point here, because the printing press of they’re running nonstop. So get those fixed rate loans and just sit on those things, because they’re going to blow up over the next.
Who knows five, 10, 15 years. Who [00:15:00] knows? Who knows? Right. So we’re talking about that today. So anyway, what are your thoughts? We’re where are we going with interest rates or lending products or what should investors kind of look for? And I know nobody has a crystal ball, but what are, what are, what are you guys are.
Have your ear to the ground being the largest lender in the country to real estate investors. I’m sure you guys have an opinion on where things are going. Yeah.
Julius: So, uh, yeah, to your point, no real crystal ball, right around, uh, prediction, but you know, um, things have been. It’s just kind of crazy because, you know, as you know, when the pandemic started, um, everyone kind of was getting a little scared, right?
Um, liquidity on the secondary market, completely shut down. Um, we were able to continue funding, um, albeit tighter terms through our securitizations convince sources of funding. Right. But then things got tight. No one knew it was going to happen. And then we started seeing an upward trend. On, let’s say, uh, volume and loans, right.
Um, prices were pretty stable, but then we started to see demand, get lower [00:16:00] and, um, prices increase. Right. This is something that we saw across the nation. Right. Um, so, uh, we just, we just, we just raised another round of funding, which means from a venture capitalist standpoint, things are pretty positive and bullish.
Right. And we’re gonna use those, um, funds to try to create new products. We’re looking at new construction later on this year and hopefully, maybe portfolio as well. Um, so overall, um, no crystal ball, right, but, but overall bullish just based on everything that’s happened in the last nine months, our, our, our rates are pretty much where they were before on the secondary market.
And if they continue to get better, Because basically when we fund our deals, we use some of our money
on the deal. Initially, then we’ll send it to the secondary market and then as those rates get better, then we pass those savings along to the investors.
Mike: Yeah. We all work from home [00:17:00] these days. I do my podcast seven years ago. I just made, uh, you know, when we first started, we’re trying to highly produce everything and make sure there’s no, you know, officer dog barks and it’s like, you know what, I’m not going to be able to do this show for the longterm, if everything’s perfect.
So this is life. These, I think people know what over the past year, more than anything like, Hey, this is this. Everybody gets to see the good, bad and ugly of all of our, Oh, well it lives there. Yeah, for sure. Cool. No, that’s good. So, um, So, let, let me ask you a question. You’ve been a valuable member of the investor fuel team.
I know a lot of our members work with you and we’ve got a huge community of really successful real estate investors. And you’ve been a part of it as well for, for quite some time now. Okay. Would you mind just kind of sharing your thoughts on a investor who a little testimonial, if you will.
Julius: Yeah. Yeah. I mean, I’ll start with saying I’m a band.
I mean, I’m obviously wearing my, my shirt today. Um, got a lot of swag, you know, both from the, the, the fits and just the style of the investors that we work with [00:18:00] with investor fuel. Um, I would say that it’s a great group of people in the sense of knowledge, like a knowledge to share. Everyone’s very open to share abundance mindset.
And then, uh, the quality of the content as well is great. I would say. Um, I’ve, I’ve developed some great relationships from it and I would definitely recommend it to anyone that’s looking for, take their business to the next level. And I say that, you know, in full honesty. So I love hanging out with you guys every quarter.
So what can I say?
Mike: Yeah, I appreciate that, man. Hey, so, um, if folks wanted to learn more about, be able to connect with you, I know you, you help, uh, a lot of, uh, clients work with lending home. If they want to connect in some way to, uh, see if you’re somebody that they should be working with, whether it’s.
Short-term fix and flip money or long-term stuff, or they’re planning to do both. I need some short-term capital and then I want to roll it into a rental portfolio. Like how do they connect with you to learn? Yeah, for sure.
Julius: So, um, you could reach me one of two ways. You can either shoot me an email. So it’s going to be, uh, Julius.
It’s my name, [00:19:00] [email protected] And then, um, my phone number is (415) 202-6245. And then one more time. Uh, (415) 202-6245. So email is good because if you send me an email, then we can set up a time to chat. If you give me a shout. Um, often I’m on, I’m on the phone all day. My color, my counter has been getting crushed these days.
So it might be better like email and then set a time, but you can still call me too
Mike: either way. Awesome. That’s great. Well, yeah, if you guys are looking for some new lending partners, whether you’re a newer investor or a C or, or, uh, or, uh, you know, highly experienced investor, these guys are great. And I think the really, I know that Julius really focuses a lot on relationships and building long-term relationships and truly being that partner for you.
So you should reach out to those guys. We’ll have the contact info down below here. So Julius, appreciate you joining me on the show, sharing some thoughts on where the market’s going lending wise and how people can find the right lender, uh, as a partner. Yeah. And then everybody is watching the show. Hey, hope you got some good value from today.
[00:20:00] The great thing is, is there’s access to that capital out there for you to run your business in. And these guys are here to stay. I mean, when the market has a hiccup, they figure out how to readjust and try to, you know, they don’t, they’re in the business of lending. So they’re always going to find a way to work with you.
Um, and everybody, thanks for joining me on the show today. Uh, we’re gonna keep these things coming at you. If you haven’t yet checked out our investor fuel family. We have an amazing family of real estate investors. In fact, uh, you’re kind of hearing it here and now we just started leaking out that we’ve actually added a couple of groups to focus on.
Uh, multi-family investing. We call them the cashflow groups, whether you’re just moving into that space or you own thousands of doors. Uh, and that’s through a partnership with my buddy Corey Peterson, the big kahuna. And so if you haven’t yet talked to us to see if investor fuel might be a fit for you, just go to investor fuel.
Dot com until then we’ll see you on the next show.
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