One common trait in successful real estate investors is their ability to evolve in their approach to the role they play in investing. It could be evolving out of necessity because of the market, evolving to refocus your business on more profitable parts of your business, or less risk, or simply evolving towards things that you enjoy more and can do more sustainably. Jordan Fisher’s business has evolved in many ways, and his approach to investments by partnering, and lending by building relationships has allowed him to focus on the best parts of his businesses. It’s easy as a real estate investor to get caught up in ‘the next deal’, but a broader approach to focus on win-win situations and building a sustainable business is the holy grail. Please watch this episode of the FlipNerd.com VIP Show to learn how Jordan has taken his businesses and more importantly, way of thought, to the next level.
Mike Hambright: Welcome to the FlipNerd.com podcast. This is your host Mike Hambright, and on this show I’ll introduce you to V.I.P.s in the real estate investing industry, as well as other interesting entrepreneurs whose stories and experiences can help you take your business to the next level. We have three new shows each week, which are available in the iTunes store or by visiting FlipNerd.com. So, without further ado, let’s get started.
Hey, it’s Mike Hambright with FlipNerd.com. Welcome back for another V.I.P. interview show. Today I have with me Jordan Fisher, who is a real estate, mentor, author, broker, and all sorts of exciting stuff. He’s a private lender too. He’s gonna tell us about that, primarily operating in Los Angeles. Before we get started, let’s take a moment to recognize our featured sponsors.
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Hey Jordan. Welcome to the show.
Jordan Fisher: Thanks, Mike. It’s nice to be here.
Mike Hambright: Yeah. I’m glad you’re on. We were talking a little bit before the show about your background. I call it the evolution. I think a lot of real estate investors have made that over the past few years, whether it’s because of necessity or changes in their market. Heck, maybe a lot of people are going through that right now with markets tightening up in a lot of areas. I know you started off as an investor and worked your way through a number of different things, through brokerage, and then ultimately putting a lot of focus on the lending side now. Why don’t you introduce yourself and then we’ll talk a little bit about how you’ve evolved over the last several years.
Jordan Fisher: Sure. My name’s Jordan Fisher. I’m in Los Angeles. Pasadena, actually. I’m the managing partner of Inspire Capital Management Group, Inspire Capital. Yes, I do still have a thriving real estate investing business that I’ve had for quite a while. Yes, you’re right. I really enjoy the lending side, I think. Don’t get me wrong. I love the rehab side and the wholesale side, and we still do a lot of that. I’ve always thought it’s a little optimistic. We were talking, it’s a little bit like brute force. Sometimes realtors are like that. Realtors get the deal, they get the listing, and then they go, “Where’s my next listing?” When you get paid, you’re like, “Oh no, where is it?” Although we’ve done a lot of volume on the investing side, I think I just really like the coaching side. I do a lot of mentoring, so on the investor side I don’t think a lot of people realize that when a fund or investor lends money out, the investor or fund typically makes more money the quicker the money comes back. The person the money was lent to pays less interest when it comes back.
For me, it’s a win-win situation where I really get to help someone, another investor or a peer, make as much money as possible on a rehab. I really love the private money side, and I’m just enjoying it.
Mike Hambright: Yeah. Why don’t you tell us a little bit from your investing side? What do you think is going on right now in California or in the markets that you serve right now? I know a lot of markets have tightened up here. We’re coming up on summer 2014 here. Markets have tightened up a fair bit. There’s a quote to the effect of what’s going on in California will then make its way across the market across the country. Why don’t you tell us what you’re seeing out there?
Jordan Fisher: Yeah, yeah. We do a lot of both. I’d say 65% of our lending business is in California. I’d say probably 70-75% of my investing business is in California with some in Nevada and some in the south. In Los Angeles, we went up 25% last year. In Los Angeles, it’s been a while since it went up that high. Because of that, it went up so quick… In L.A., Hollywood people have a short memory. People just get used to what it’s been like. Realtors still are saying it’s going to go up another 25%. That’s just ridiculous.
The market has definitely flattened since about October or November or last year. It’s not really going anywhere. It doesn’t look to go anywhere. Inventory is still relatively low, and I think across the country it’s starting to recede to that low inventory. It doesn’t mean prices are going. You don’t have as much urgency from the buyers anymore, so you have to use a lot of different things, especially when you’re selling properties, to really get the results you want.
Mike Hambright: In terms of a selling standpoint, I know you’re known for selling properties quickly. Do you want to share some information on real estate investors and how they can sell their properties quickly?
Jordan Fisher: From the investing side, and especially from the lending side, I see it so often that investors rehab a property and they just can’t sell it or they’re holding onto it too long, or they’re leaving money on the table. They’re not selling it for as high as they could, they’re not selling it as fast as they can, and they don’t have any control over the deal. That’s what I see. There’s a lot of real estate investors who have hope. I always say just to keep it simple and on the down low, hope costs money. Hope is a good thing when you can give someone else hope. Your business can give someone else hope. I think that’s a great thing a lot of real estate investors use some way, especially in the stress property market. You don’t want hope in your real estate business. Hope is not a business term. I talk to a lot of real estate investors, very seasoned ones across the country. A lot of them say, “I don’t have hope, I’ve got systems. I got systems, I don’t have hope. I’ve got systems, I don’t have hope.” “Really? Well, you know what? When you sell a property, you list it for a certain price, right?” They go, “Yeah, sure. We list it at a good price.” “Great, great. And you hope that you get offers?” “No, we get offers.” “Okay, great. We’ll, you’re hoping you get a lot of offers?” They go, “Yeah”. I go, “And you hope they’re good offers, right?” They say,
“Yes”. “Then what?” They say, “Then we counter people”. I go, “Okay, great. Then you hope that they come back, you hope that their loan closes, you hope they don’t find anything during the inspection, right? You hope they don’t give you any problems during the escrow?” They go, “Yeah. But I mean, everyone has that.”
Absolutely not true. I think the more that you understand this concept of how to eliminate hope from your real estate business, the more control and the more fun you have when you’re selling properties. The three biggest words in real estate all start with an L, right? But it’s not location, it’s leverage. Leverage. I always say you have to put leverage at every step of the deal, especially when you’re selling properties anytime you take a step forward. That means listing the property, that means taking a call on the property, that means in your description of the property, that means when you show the property and how you show it, if you don’t proactively put leverage in play on your side, you’re letting a little cockroach of hope enter your deal. Sometimes you don’t see the cockroach. It crawls on the wall and you never see it. It’s there, and I guarantee you it’s gonna come up later in your transaction. When you don’t put leverage, there’s more cockroaches coming. When they come out, they come out big.
Mike Hambright: Give us some examples of what you’re talking about. Obviously leverage and financing your deal, everybody gets that. In terms of selling and the other parts you talked about, give us some examples.
Jordan Fisher: Yeah, sure. Leverage when you’re selling a deal means this. The normal way to sell a dealing for a real estate investor, if you’re not wholesaling it but you’re selling it on the retail market, is to list it on the M.L.S. or list it as many places as you can and get as big an audience as you can to look at the property. Right? You want to open it up to the market.
A lot of people, especially real estate investors because they get personally involved in the deal, say, “I bought at this price, I rehabbed at this price, I looked at the columns, and my house looks great. It’s totally rehabbed, it should be at the top of the market. 150. So, we’re gonna list it at 149.” It’s silly because people think they have leverage or think they have a great property. It’s because they’re personally involved. If they took a step back and said, “I’m just gonna act like I’m a big hedge fund and I have 2,000 properties I’m selling today”, that means I would not be personally involved. I would do everything possible to sell the property without any personal feelings.
In that regard, you don’t have leverage until you have an audience. When you put on a theater show you can do all you want and have a great show. Unless there’s people in the audience, you don’t have their attention. You gotta get their attention first. I don’t care how you get it. You have to get it. Once you get it, that’s when you can start putting leverage into play. For example, some people say, “Just put out a ridiculously low price”. That’s true. Prices will draw people to the table. A lot of people think, “Well, if I put it at a low price, it can never go higher. Then I’m branding the property as a low price property or people are going to think there’s something wrong with it.”
What I say is, “Does it really matter?” You have to get their attention first. Once you have their attention with a little price, then it matters. I always say price it 5-7% below market value. Some markets you have to price at 10%, but I always say 5-7% below market value for the property… Enough so everyone in the market pays attention, thinks if there’s something with the property because the pictures looks great. Is the seller really motivated? There’s something strange with this property because the price looks ridiculously low. That’s all you want. Once you have their attention, it’s really what you communicate why it’s priced the way it is. If you communicate a certain way, you can establish leverage from the start. Once you have leverage from the start, you can take control of the transaction all the way through.
Mike Hambright: What’s an example of why you would say you’re pricing it at that point?
Jordan Fisher: Because you run a tight ship. You’re going to let the market decide. We’re not gonna fool around. You have to say it is priced ridiculously low. My phone’s been blowing up. Everyone’s calling because it’s priced ridiculously low. We’re just gonna [inaudible 00:10:42],
they’re gonna let the market decide. We’re gonna have an open house on this day. Everyone’s gonna come and make an offer, they’ll get counters in a day, and we’ll let the market decide what it’s gonna sell for. You take your personal opinions out of it and you just let the market dictate what’s gonna happen.
Mike Hambright: You’re saying in some instances the price is gonna get bit up anyway?
Jordan Fisher: Oh, it is gonna get bit up. When you put a sign or a list price up, it’s not really a price. It’s just a sign. How big a sign do you want to put out there? If it’s a high price, you put a little sign like this. With a low price, it’s a big sign. It doesn’t matter if people say,
“I’ll take your property for a dollar.” I could care less. All they’re doing when they make a bid is saying they want a seat at the table. To be honest, if you price it right, it’s a bell curve all the time. 60% always put it at right at whatever price you put it at. 20% usually put it low, trying to low ball you even further because they think there’s something wrong. 20% try to put it higher to steal it before there’s a bidding war. That’s a very common bell curve, and that’s what you want. Now you have an audience. Now you can go like this. Now you can get all set. Now you can manipulate the market to do what you want to.
Mike Hambright: It’s interesting. I was just talking to some folks. I’m sure this is not just in my market. Some agents, especially if they have F.H.A. buyers, they’re offering above list price to lock it up knowing that it’s probably not gonna appraise for those levels anyway. In fact, we were a victim of a deal like that within the past week or so. We listed it a little bit high and we got full price for it, but later it came back to be appraised. We’re not so much a victim, but there are some people who are offering 5% above list price just to get it locked up and letting the dust settle where it may with appraisals.
Jordan Fisher: Right. If you let the dust settle where it may, that means, the investor is out of control. That means you’re hoping it sells in your favor. That’s why a lot of agents like to say, “What do you want for the property? Why don’t you just tell us a number and if my client agrees to it, fantastic.” You know what happens? If I put a list price out at 150 and I really want 170, and I get offers in and then I counter 170 and someone says, “Oh, here’s 170.”
We go, “Great. Handshake.” Most investors think they got what they wanted. That’s the worst news you could hear. You know why? You were up here, and now you’re even again. You just shook hands in the middle and said, “I want 170. You’re willing to pay 170. Fantastic.” Now we’re even again. You know what? They’re gonna beat me over the head on the inspection because I have no leverage on them. I always want to keep a lot of leverage on them even when I accept an offer so they will never give me a problem during the escrow.
Mike Hambright: Yeah, yeah. That’s interesting.
Jordan Fisher: It’s more fun. Once you do it one time, you’ll be like, “Oh my god. I loved it.” All the agents on the other side and the buyers will hate it. That’s perfect. When it closes, they will all look back and say,
“I respect what just happened because I was out of control, and god I want to do that on my next transaction.” That happens every time.
Mike Hambright: As you’ve moved more into the lending space, it’s interesting over time. I always appreciate people that have a background as a real estate investor who are lenders. I personally don’t use a lot of hard money. I have access to some private money, banking relationships and things like that. Any time I recommend hard money lenders, it’s people who have been in the business themselves. They understand what that person’s going through versus the financial guys that have access to capital, but don’t really get the business and are enamored by potentially high rates of return. You said something early on about how you effectively coach people who are borrowing from you as to what they may do right or wrong or different things they can think about to sell it quickly or save money. Talk a little bit about that kind of relationship intertwined with a lender and a borrower, because that is fairly rare.
Jordan Fisher: Sure. I was on, and I still am a real estate investor. I was on that side for the last eight years. I used to borrow from funds all the time. I used to borrow from hard money lenders all the time. In fact, in Los Angeles I know most of the hard money lenders, big and small. I’ll tell you what. 96-97% of them are Wall Street guys that are financiers who have capital – usually from Wall Street or other people, and they lend it out. I like to call it passive capital. They’re lending out passive capital because they’re uninvolved. They lend it out and you never see them again until there’s a demand at the escrow or the title company when it closes. We just don’t do that. Passive capital reminds me of an out of shape third string athlete waiting on the sidelines that never really gets involved. They make the loan and just sit. They wait for the closing and go, “Here’s my demand,” unless there’s a problem.
That’s one of the reasons the private mortgage pool fund I run is called Inspire Capital. It’s because we are inspired by our clients, and we like to think our involvement in their success inspires them. What we do is we make a loan and then we stay in touch. “How’s the rehab going? Are we still on track to take three or four months? What are you listing it at? How’s the sales process going? Do you want to send pictures?” A lot of people don’t realize when a private lender or a fund makes a loan, the quicker the money comes back, the more money the fund makes. The quicker it comes back, the less interest the investor pays so the more profit the investor makes. It’s a win-win situation. For me to help coach or get involved and help is a big plus. I want the person to do well. I want them to sell the property quickly for as much as they can and get the money back quickly. That way I can turn it quicker.
When I keep in touch people I know if there’s a problem and I can try to head it off. I know the planning of when it’s coming back so I can schedule our cash flow accordingly. I know what’s coming in the pipeline to fund other people. It makes a lot of sense, but I would say it’s very unusual the way we do it. I probably just do it this way because we love to educate and coach and we’re in the business ourselves. For that reason, we’re just very involved.
Mike Hambright: I gotta believe from a borrower’s standpoint that they would appreciate having somebody they can talk to or can give them recommendations on what to do because they have experience in the business.
Jordan Fisher: Yeah. We only work with people we know, we only work with people who are referred to us, and we do all referral business. The last thing that I want to have happen is have a person who has a huge problem and nothing’s working out and we end up having to foreclose on that property. Then we never have that client again. It’s in my best interest to try to help them get through it no matter what it is, and do whatever I can to work with them to get the property sold and the loan paid off.
Mike Hambright: Yeah. I have a lot of friends who are hard money lenders. They usually don’t do what you do that I’m aware of. I think they purposefully try to stay at arm’s length from folks because they don’t want to say, “Well you told me to use this contractor.” I’m not saying that you do that. They don’t want to enter themselves in maybe being a scapegoat as to why something didn’t do well. These guys have told me that more than half of the people that default, they can’t find. They disappear. They’re embarrassed or they want to pretend it didn’t happen. They’ve also told me the people they are in touch with, they figure out a way to make it work and say, “Look, just deed it back over to us. Here’s how we’re going to go through this. We’re not gonna foreclose.” They don’t want to foreclose anyway. It’s a lengthy process. The people who really cause a lot of disruption are the ones that disappear.
Jordan Fisher: You hit the nail on the head. We do not work with clients who do not communicate, period. We have a great relationship with clients who communicate and everything works well. Yes. The client doesn’t communicate, and that does happen. That’s always a sign. If you haven’t talked to someone in a week or two, that’s always a sign that there’s something wrong. It’s okay if there’s something wrong. We just need to know so we can try to help.
Mike Hambright: Yeah, yeah. Why don’t you talk a little bit about the relationship between a hard money lender and real estate investors? There’s two different ends of the spectrum. Some people say they will never use hard money because it’s so expensive. Then there’s people who wonder why you would use your own money. Just lever that up so you can do more deals. Why don’t you talk about that relationship between a borrower and a lender, and where you see that it makes most sense?
Jordan Fisher: That’s a really good question to hit on there, Mike. I think it really matters on the individual. Yes, private money can be expensive. I don’t really think it’s expensive. It’s really commensurate with the risk. A lot of people don’t realize that it’s commensurate with the risk. Obviously, if you’re putting more money down it’s a lot less risky, so it’s not gonna be very expensive. The less money you put down, it’s obviously going to be more risky. That risk has to be built into the price. We don’t call our fund hard money, it’s private money. Hard money is the passive, here it is and I come back with a demand. Private money means we have a private relationship and I can help you. I like to think of it more as convenient money. All the people we fund, they don’t do one deal at a time. They have three, four, five, six, 10 deals at a time.
You know what? It’s not that they don’t have their own money. Cash flow is always an issue when you have that many properties. Convenient money is better than cheap money any day of the week. When it’s there, it’s quick and it’s convenient, it’s great. In terms of using your own money, people try to leverage. 90% of people try to see how much money they can get. It’s all about that. It’s not how much they have to put down, it’s how much they can get. Then they decide. It’s because they don’t want to use their own cash. There’s a good and a bad. It depends on the personality. Some people, if they don’t have any money in the deal they’re just not as motivated to finish quickly or not as motivated to treat your money as if it’s their own. One of the things we always try is we want to know every borrower treats the money we give them as if it’s their own money. If they do, fantastic. I know from experience, and I’m sure you know too, that things works so much better when people treat it as their own.
If you’re in a deal with 10 partners and you’re only getting 10% of the deal, you’re not as motivated to act on something today or make it a priority, or make that extra call and go for that extra thing. At the end of the day, it’s not gonna affect you that much. There are some people who feel like if they don’t have any money in the deal, that is the case. That will be a problem.
Mike Hambright: Right, right. I know you have a lot of experience in short sales as well, right?
Jordan Fisher: Yeah, yeah.
Mike Hambright: Maybe not as much anymore. What are your thoughts on what’s happening with short sales in the market? This is different by geographic area. I’ve heard some people say there’s more short sales in some markets because there are less foreclosures. The banks are working it out. I’ve heard some people say even the short sales are drying up. There’s really not a lot of deal activity. There are people who are one legged stools. All their deals were short sales and those people are struggling right now. What do you think is going on, at least in California, with the short sale market?
Jordan Fisher: I think in the hardest hit markets… probably L.A., Vegas, Florida and a few other parts of the country… short sales are going to be there. I’ll tell you what. It’s hard for me to say short sales. I’ll say under water. I think a lot of people think of short sales as a number. “Is it worth less than what was loaned on the property?” I think that’s just numerically and logically one way to look at it. The other way to look at it is what’s happening in the market. Even if someone is over leveraged or under water with the property, do they want to short sale the property?
What are market conditions? Has the market gone up in the last year and people think it’s gonna keep going up, so they’re not gonna short sale their home? They’re just trying to hold out as long as they can. Do they think the market’s going down and they better just get out now before the bank forecloses on it? Are the banks foreclosing a lot or has my neighbor been staying in his house for two years without making a payment?
I think that’s very local or geographically located. I really think that’s important in determining what’s happening. For us in Los Angeles, short sales are a lot less prevalent. Because of the sheer volume of the market, there are still a number of short sales. It’s much harder to get deals on with the banks. Most banks run them much quicker than they used to before, but laws are still changing all the time and bank incentives are changing all the time. It’s still a crap shoot. I think if that’s all someone’s doing, I think that’s a problem.
Mike Hambright: Yeah. Yeah. Jason, if folks want to learn more about Inspire Capital, tell us a little bit about where you lend. I know you do a lot of lending in California but you lend in a lot of other states as well.
Jordan Fisher: Yeah. All across the country. California about 65%, Florida 15%, and the rest all around the country. It’s really wherever we know, and that’s because of the volume. It’s also because of relationships I have across the country with people. Wherever the investors are is where we lend. It’s really about the relationship.
Mike Hambright: Yeah. How do folks get a hold of you?
Jordan Fisher: The best way is probably to email me. Jordan, J-O-R-D-A-N, at InspireInvestments.com [firstname.lastname@example.org]. You can call me at 213-268-1896. Feel free. People ask all the time. We are more than willing to look at deals. I think that’s what we do a lot. We just help people because we do this. I’m a real estate investor, and my partner is on the side as well. We’re looking at deals all the time. We’re willing to help. When someone says, “I’m buying it at this and selling at this, here’s the rehab money and the scope of the project,” we always want to look at that and have a discussion. You really have to have a discussion.
Mike Hambright: Awesome. How about a website? Should they contact you directly, or do you have a website for Inspire Capital?
Jordan Fisher: Yeah. InspireInvestments.com. It’s actually going up next week. We just redid it. By the time this airs, it should be up.
Mike Hambright: Yeah, absolutely. Awesome, awesome. Thanks for your time today and for sharing your insights on the market, hard money or private money, and all those other things. I definitely appreciate your time.
Jordan Fisher: Oh, no. It was my pleasure. Happy to do it.
Mike Hambright: All right. Take care.
Jordan Fisher: Sure.
Mike Hambright: Thanks for joining us on today’s FlipNerd.com podcast. To listen to more of our shows and hear from incredible guests, please access all of our podcasts in the iTunes store. You can also watch the video versions of our shows by visiting us at FlipNerd.com.