Rod Wilson from Anchor Loans is with us today to help us thinking like a lender to get the best financing for our deals.
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Show NotesRod Wilson from Anchor Loans is with us today to help us thinking like a lender to get the best financing for our deals. This is especially important with the tightening up of lending that has started. Rod says they are continuing to be somewhat aggressive with lending which is great news for real estate investors.
In this episode, discover:
VP Loan Originations – Anchor Loans
General Manager – Diversified Capital Partners LLC
Rod has over 28 years of experience in all aspects of real estate, including remodeling, building, managing and marketing both residential and commercial properties. With a background in funding and managing his own real estate investments and development projects, Rod understands what it takes to be successful and satisfy the needs of both lenders and investors. Rod uses his degree in Finance (CSU Northridge) and vast experience in entitlement, construction and negotiations to structure projects to minimize risk and maximize returns.
Rod believes the key to success in real estate development is to see what other don’t see, and create great designs and user experiences that the market will appreciate and pay for. By leveraging his personal experience and team of professional resources, Rod provides his clients with the tools and financing to complete more successful projects.
With Rod’s past experience in managing difficult development projects and challenging market conditions, he is able to provide a ‘second-set of eyes’ to help his investor/developer clients be more successful and overcome the difficulties and surprises that inevitably arise in residential construction.
Rod provides hard money debt financing to residential fix-and-flippers, new-construction developers and Long Term Rental investors.
Rod lives in Reno with his wife and German Shepard dog and enjoys his 4 adult children (3 in college) as often as possible!
links
Optimized Real Estate With Rod Wilson
Rod's Podcast
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Episode TranscriptionWEBVTT
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Danny Johnson: All right, everybody. Welcome back to the flipping Junkie Podcast. I’m really excited today
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Danny Johnson: to be talking with Rod Wilson. How’s it going, Rod?
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RodW: Good how you doing
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Danny Johnson: great?
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Danny Johnson: Yeah. So we wanted to to get on here and talk. We’ve been chatting a little bit before this
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Danny Johnson: now, mostly about Diane exercise. But we will be talking about that as much in this episode, and i’m sure you guys would be glad about that. But you know what I wanted to cover in this is is we’re on. It is is brilliant with what he does, and with the changes in in the market
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Danny Johnson: and and things like that, I think, for lending.
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Danny Johnson: You know a lot of the investors out there looking for money to do. These deals are questioning what’s happening with that? What’s going on with that? How can
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Danny Johnson: I adjust to make sure that i’m still being able to get funding from my deals and all that kind of stuff. So i’d love to to talk about that with you today, Rod, and just to start in case anybody hasn’t heard of you before you. Would you like to give your background, and how you got into real estate and everything that you currently do.
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RodW: Sure, yeah, I was just thinking we we got to start another podcast called the Health Junkie.
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RodW: Oh, yeah, that’d be awesome. We can talk about health and fitness stuff. That was that was fun. Yeah. So my background, you know, at a college I I started actually doing mortgages, which is kind of funny. I’ve gone full circle doing lending again. But
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RodW: I was doing conventional mortgages always had an interest in real estate.
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RodW: When I got out of college, first thing I did was went and flipped a house.
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RodW: I tell the story where I think I, if I, you know.
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RodW: netted the thing out as far as what I made per hour is probably like, you know, minimum wage.
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RodW: because I did everything myself, my my buddy and I basically did everything. So that was kind of the cutting our teeth. And you know, just doing our first flip and then
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RodW: in the nineties I was primarily focused on buy and hold. I was, you know, just trying to buy a a property or 2 a year
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RodW: early 2,000. I got back into flipping. I did, you know, but a a project with another buddy, and you know, just did very well on it, and I have these handful of rentals that are making, you know, maybe netting couple of 100 bucks a month each, or
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RodW: a few 100 bucks a month, and then I did one flip, and then, you know, i’m putting 100 50 K. In my pocket. So end up kind of selling out of the the buy and hold stuff, and just really got the the flipping. And then that turned into land Development went out to
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Idaho, and in kind of a big way.
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RodW: which is great at first. It’s just it. I I’ve got scars from going through, you know, 2,008.
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RodW: We were primarily doing land development had some commercial projects, and when bought a shopping mall I mean.
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RodW: we were just, you know. It was kind of the Wild West early 2,000 s out there. It was a I don’t know if you’ve been out to the Treasure Valley near in in Boise, but
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RodW: it’s just this very cool market.
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RodW: and anyway, not to
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RodW: not to go too deep on it. But yeah, we we basically just, you know, couldn’t get out of the stuff fast enough, you know. Land development. It’s just. It was slow and
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RodW: had some issues with weather and various things, you know it was it? It turned out it was like one of the wettest springs, and then one of the the coldest winters.
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RodW: So just you know, cutting pads and doing stuff like that when it’s, you know, 0 basically was just challenging. So, anyway, end up kinda
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RodW: looking my wounds and and started fixing, flipping.
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RodW: probably in the 1112, you know, 2,011, 2,012, something like that, and proving again about that time. Right? Yeah, exactly. It was just, you know, kind of coming off the the the low. In fact, I I think the low is right in that that zone, as far as real estate values, and
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RodW: so primarily was doing fix and flipping. And then
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RodW: our buddy of mine took over as
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RodW: CEO of of anchor loans. And you know, we were actually acquired by a company called Premium, who’s about a 40 billiondollar Asset Management company, real Estate Asset Management Company.
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RodW: and he’s like you. You gotta come over here. We’re doing some good things.
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RodW: I was kind of slow from a a development perspective, and
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RodW: I don’t know it Just kind of made sense. I like the idea of. You know the lending side of the business.
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RodW: It allows me to. You know, when you’re
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RodW: when you’re doing real estate, you know, and you’re you’re always looking for another deal. If you’re not, you know. If you’re not actively doing deals you’re not making any money, and so
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RodW: you know things kind of got a little bit slow. I was primarily focused in the bay area.
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RodW: and then so made the move to lending. And and here I am.
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Danny Johnson: awesome. Yeah, I want to dig into how you operate, and what
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Danny Johnson: you know what what? I’m. Sure, you you guys are having meetings. You guys are looking at data. You’re seeing what the markets are doing.
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Danny Johnson: How? What is, what are the conversations like for you right now, as far as that goes, Are there markets you’re keeping an eye on, and you kind of
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Danny Johnson: you know we’re not gonna do anything here for a little bit, or you know what what is that like right now? What’s going on with all of that.
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RodW: Yeah, that’s a great question. And actually I’ve I’ve it’s funny. I’ve I’ve tried to get my
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RodW: capital markets guy on my podcast before, and he’s a little reluctant to to, you know, share all the the goodies. But yeah, so from a, you know, protecting the company. Obviously the mark. There’s market shift, and you know we pretty much do this all the time, anyway, and it’s even more important now that we’re.
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RodW: you know, in this kind of shifting downward trending market. So we we do look at basically every we’re in. We’re in 48. States. So
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RodW: we analyze pretty much every major Msa
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RodW: and he does kind of a heat map on. You know where they’re at, based on, You know the various numbers, and so
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RodW: they they kind of come back with. You know where there there are some off off limits markets that we are not lending in.
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but for the most part it kind of gives us an idea, and we dictate leverage and pricing based on you know, this heat map. So some of the markets that are, you know, seeing, like
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RodW: you know, significant declines. Not only are we a little, you know, careful as far as values and whatnot, but also, you know, just from a risk perspective, they tend to be a little higher risk, and so that’ll dictate margins. So there are. There are, you know, a handful of markets will will reduce leverage we keep. You know we keep lending.
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RodW: I mean, that’s been the nice thing about being with anchor, because somebody lenders have
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RodW: had a lot of challenges during these, you know. First we saw the kind of interest rates, you know, going crazy, and then
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RodW: we saw the market shift. So you know, those 2 factors are obviously pretty tough on
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RodW: on this business. And so, but you know, given the the backing of of premium, who’s our parent company?
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RodW: You know there there’s kind of staying power, and where, with all.
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RodW: not only are we able to, you know, continue operating, but we’re still. I I think, pretty aggressive, you know, pretty as far as rates and leverage. Still.
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RodW: you know, providing I think, a really competitive, you know, pricing for our for our borrowers.
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RodW: But
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RodW: yeah, so I think you know, outside of just the heat map and determining kind of what markets are are hot, I think, in general, most lenders, you know. We’ve seen rates go up obviously, and then also
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RodW: fairly recent. We’ve seen leverage being reduced.
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RodW: So you know, from you know where’s the the the trend? I mean. We just had a discussion the other day about this, when the market was super hot. We got
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RodW: we and I would say the lending, you know the private money lending or hard money lending community got
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RodW: pretty aggressive. So you know, you were seeing like 100% financing.
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RodW: you know, maybe 90 9,190% leverage at at acquisition. And then 100% of the the Rehab funds.
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RodW: you know, that was pretty common, even for maybe not the most experienced borrower, because, you know, the market was kind of going up into the right.
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RodW: and you know the risk was relatively low, even if someone took longer or maybe didn’t do a great job at the you know whether it’s a ground up, build, or or rehab.
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RodW: You know the time was almost on your side right. So you know it’s it’s got to increase in values, right? Yeah. So you got not really a mistake, you know. But exactly
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RodW: yeah. So a lot of guys got bailed out, or or, you know, benefited from, you know, taking longer.
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RodW: And so we just, you know, totally flip that right. It’s like the longer. You take, you know, and it in a down. We’re trending market. I mean it. It it gets painful. So
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Danny Johnson: do you you also get? I mean.
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Danny Johnson: I don’t know how much of this you can get into. But
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Danny Johnson: within the markets themselves are there price ranges and brackets of price ranges
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Danny Johnson: that you look at that get treated differently? Or is it all kind of lumped into one market
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Danny Johnson: being a little bit more risk?
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RodW: It’s. That’s a great question. I I don’t have a good answer for that. To be honest, I i’m sure they do look at You know the amounts dollar amounts
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RodW: primarily. It’s it’s you know, kind of market specific, you know we’ll do. I mean our Our minimum, for the most part, is about a 100 K.
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RodW: And then we’ll go up to 10 millionbucks. And so you know, as a
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RodW: if you’re looking at a market in, you know Brentwood, and in you know Southern California, I mean, you know we’re doing 3, 5, you know. 7 million dollar deals out there. Is that a higher risk? Then
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RodW: you know something in Missouri for a 100? K. I mean it. It just yeah, it just kind of depends on the product type and the and and we.
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RodW: I guess.
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RodW: maybe transitioning to the second thing we look at is, you know the individual. Actually, it’s it’s more of the first thing we look at is
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RodW: everyone I talked to. I mean, I want to find out what the credit is and what the experience is, because this that’s really what we focus on. And
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RodW: obviously the you always want. You know, the highest possible credit.
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and and I’m amazed at
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RodW: I mean I I’ve been there as far as like, you know, letting your your credit.
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RodW: not necessarily because of late, but just because of inquiries, and you know how much debt you have out, you know you can get. You can get kind of beat up on the the credit score.
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RodW: But yeah, so we’ll look, you know, closely at that. And you know I i’m always recommending people that are kind of in the
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RodW: the 6 is just getting kind of in the sevens, because it’s it’s a big deal, as far as you know, rate and points in most cases, and then
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RodW: related to experience. It’s
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RodW: what I like to to tell people is Don’t. Leave the experience to chance like. We will go and verify, and most lenders will go, and, you know, verify your past experience just to see, you know. Make sure you kind of do what you say you’re gonna do. But
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RodW: I would. I recommend people go one step further and and really kind of tell the story and provide all that data, not only just, you know, addresses, but, like you know
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RodW: what you do. You know what was the level of the construction of the rehab? You know what was your buy? What was your sell even, you know, profit info if if you’re willing to
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RodW: to share that, because that to me shows success versus just a project, and and also being able to work through challenges, I mean. No.
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RodW: you know Well, rarely is a project, you know. You don’t run into some kind of challenge or surprise.
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RodW: and so telling that story. It’s almost like, you know, going and and getting a job. I mean. The more you can tell about how you’ve dealt with, You know adverse situations is
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RodW: is always what it underwriter wants to see, because, you know, we
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RodW: been doing loans that at anchor or anchor’s been doing loans for 25 plus years, I mean
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RodW: we. I think they’ve seen like every scenario.
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Danny Johnson: All stay right. The commercials
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RodW: Exactly. But they’ve seen everything, you know. But
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RodW: that’s right.
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RodW: Yeah, so it it rarely. In fact, sometimes they’ll come back with some guideline or something, and i’ll
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RodW: i’ll basically question it because I mean, I’m I’m: I relatively new and lending. So you know I’m. I feel like I see the world more from an investor or developer side, not a lender.
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RodW: so I I kind of drive them crazy, because usually i’m, you know, going to bad for my borrowers
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RodW: and trying to explain. You know why this is a a good credit risk, but they’ll come back, and it seems like 9 times out of 10 They’ll have some
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RodW: crazy scenario that they had to deal with, you know, 5, 10 years ago that that didn’t work out real well. So
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Danny Johnson: yeah, and you know there’s 2 ways to look at. You know a lenders looking at your your the level of risk that there they will be
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Danny Johnson: accepting and giving and doing alone. You know. One is that you know that really stinks. I’m gonna have to prove all this stuff
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Danny Johnson: and
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Danny Johnson: and jump through these hoops and things like that. But
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Danny Johnson: the other side the other way to look at that, I think, from just my experience in the past was.
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Danny Johnson: you know, especially with like a mentor, somebody that you know we’re where I was splitting deals with somebody in the very beginning.
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Danny Johnson: They kept me out of trouble a lot.
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Danny Johnson: you know where it’s like. If they don’t think this is a good deal, it’s probably not a good deal like I should not be doing this deal.
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Danny Johnson: And so, you know, do you find that that happens sometimes when you, when you
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Danny Johnson: you know, get an application that you kind of just say, hey, this is gonna work out. And then the people like, maybe I shouldn’t do this deal.
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RodW: Absolutely. No, I I mean I that’s where I think a little bit of what I bring to the table versus just the
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RodW: average, you know
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RodW: lender is just I I I feel like I’ve maybe not seen it all. But I’ve seen a lot, you know, as far as what works and what doesn’t, and and just you know I’ve got the you know, the scars or the stripes where you want to call it, to prove it. But what you just said, Danny is such a huge nugget right there
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RodW: for anyone who’s either, you know, a total Newbie, or, you know, relatively new in the business, and this is one of the things, because we
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RodW: we have a a minimum where you’ve had to have had done 3 prior projects before we’ll lend to you.
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RodW: We focus primarily on, you know, experience guys.
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RodW: but I all the time I’ll get either new or relatively new operators or investors that will come to us, and
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RodW: I just I i’m like, you know, do yourself a favor. Give up a a piece of the pie, and just get someone who’s got the experience to walk you through these, because
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RodW: there are so many things that you you know you think you know, and and you just don’t, and you don’t. You don’t. You don’t know him, or you won’t know him until you go through that situation. And
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RodW: I I’ve been through plenty of a painful situations, where
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RodW: you know just little things where an experience, you know, developer would have would have said, hey, that’s not going to work, you know.
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Danny Johnson: right, and it’s really not that hard to do. And of course you know you hear somebody saying that that’s been through it, and it’s like oh, it’s easy for you to say that i’m
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Danny Johnson: That’s not what I’m experienced. I’m having a hard time finding somebody that’s gonna
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Danny Johnson: you know. Help me through these deals. But
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Danny Johnson: you know the the way to do it if anybody listening. Others probably
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Danny Johnson: heard this, but if you Haven’t heard this, it can help you a lot, and maybe
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Danny Johnson: anybody that’s heard it. But it. Hasn’t believed it.
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Danny Johnson: It’s really about, you know. Don’t go looking for the person right.
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Danny Johnson: You go, and you find a pretty good deal, and then you go look for the person because they’re interested in the deal, not
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Danny Johnson: you, or just helping you for nothing, or you know, or helping you learn the basics that you can can learn on your own online with everything that’s available nowadays.
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Danny Johnson: if you, if you are getting some calls from likely motivated sellers.
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Danny Johnson: and then you go to a Ria meeting, and you talk to people who who’s who here has mentored other people, or who here has been around for a long time, and you just go and talk to them. Say, I got this lead for this house here the numbers They’re gonna look at it right, because there’s potential to make money
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Danny Johnson: right right. And if you show that you’re a go getter and you’re bringing them leads on a regular basis, They’re gonna that. That’s gonna develop that friendship their relationship
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Danny Johnson: right? It’s not a let me go Talk to this person and not bring anything to the table other than my interest in it which everybody’s got the interest right. You have to have something else. They’re showing that you not only have the interest, but have
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Danny Johnson: the ability to go out there and make things happen and get these leads in.
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RodW: Yeah, I know there’s so much there’s so many advantages because it
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RodW: if you get, and if they’re willing to sign on, you know, on the debt. If you’re if you’re getting debt, I mean just them being, you know, the signer or one of the signers can usually improve the pricing to where I guess they almost end up paying for themselves, and, you know, doing the right project where maybe you should have passed.
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RodW: and you know they’re They’re showing you Why.
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RodW: you know there’s the pricing because they’re, you know, just a better credit risk. They’re going to qualify and get, you know better, pricing better leverage
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RodW: and
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RodW: what there was another one I was just thinking of. They.
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RodW: anyway. I lost my train of thought, but they, you know there’s a lot of advantages on. Bring in a good partner, you know it’s just you. You! You don’t want to be out there on your own, you know. I mean, you know even even
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RodW: you know experience investors, you know, fix and flippers, you know. They’ll come across a a land deal, and they’ll, you know, Want to go. Take it down. And there’s all these Gotcha that you know. I’m doing a an entitlement deal that you would just never know about. I mean, I’ve done this before. I brought buddies in that, you know. Do this for a living, and you know there’s all these things that I just I thought, you know.
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RodW: I thought I knew, and I really didn’t, and they, you know, kind of save my save my button some cases.
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Danny Johnson: Yeah. I just got a call yesterday for 27 acres near San Antonio, which is where i’m at
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Danny Johnson: and I was kind of excited at first about it. And then, you know, after talking to a couple of people, it’s like, you know what this isn’t really my cup of tea. I’m gonna i’m gonna sell this lead off to you know
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Danny Johnson: somebody else, and they do it.
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Danny Johnson: Great, you know, makes money. I’ll make a little bit of money for the lead. But
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Danny Johnson: you know, stay out of there. But getting back into the lending part of it, because I think
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Danny Johnson: you know anybody out there that that’s maybe done that right started with with a a partner starting with a
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Danny Johnson: a mentor that was covering the cost, and they were splitting everything half and half, which I like that set up a lot.
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Danny Johnson: But after a year. So when you’ve really learned the ropes and you’ve done well, they’ve made good money. You start thinking I really want to start doing more on my own
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Danny Johnson: right, and I think that conversation needs to be had with them, you know. Just one. They tell them, hey? I’m doing this on my own now later, because you know there, there’s a relationship there. But but but you know, talking with them about your plans to do that and all that kind of stuff.
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Danny Johnson: and
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Danny Johnson: you know.
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Danny Johnson: you know. And then looking into okay. So i’m going to need to get the funding for this. What is this going to cost me? What is this?
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Danny Johnson: You know? I was given up half of the deal, so even with
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Danny Johnson: you know some hard money.
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Danny Johnson: I’m probably gonna be making more overall
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Danny Johnson: right. But
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Danny Johnson: and all that kind of stuff how it? So what I would be thinking is, how can I find the best financing like? How can I get the best financing? Do you have any tips on anybody
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Danny Johnson: to find the better financing?
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RodW: Yeah, No. So the one thing that you had just mentioned I mean, there’s you know, the 2 2 things I I mentioned, as far as you know, getting good, financing, competitive, financing. It’s it’s credit and experience, and with experience I mean every lenders different. But I I made a huge mistake
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RodW: where I had a a a buddy that
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RodW: we were. We had been kind of working together. He was more commercial. I was doing residential. He wanted to come together. He had all these investors and money and whatnot that he wanted to deploy on the residential side. So we came together. He created an entity or had an entity.
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RodW: and we started operating and buying under that entity. And he was
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RodW: he, you know, he basically told me. You know, i’m gonna add you to the entity blah blah blah. So anyway, it’s like months. And then it turned out years ago by you know we do 1520 deals, and I never, and you know, ended up on the entity.
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RodW: and then we kind of went our separate ways. And then here I am. I, you know, done 1520 deals over the last 2 3 years, and had basically nothing to show, for there was not a you know, because I got paid out through, you know, internally through the company
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RodW: that I didn’t really have anything to attach me to that experience. So
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RodW: it depends on the lender. So you know, we will definitely want to verify and look at, you know, addresses and tie whatever entity owned the property, and did the project back to You know the individual borrower.
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RodW: But I guess just as far as like thinking ahead. You just want to be able to attach yourself to a project, whether it’s you know you’re on the HUD, and you’re getting paid out a a fee, or you’re part of that company just, and I I recommend people do this. All the time is, just make sure that there’s a way
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RodW: to, you know a paper trail showing that you were tied to that project, and the more the better. I mean, if you can, you that you were, you know, project managing, I mean, you know, wholesaling a deal. It’s really not going to get you much, you know
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RodW: much juice as far as experience. But yeah, if you were like managing it, you found it you. You know we’re involved in the sale of it, Whatever your you know, your your role was. You just want to be able to show that because then a lender is gonna look at that and say, okay, Well, you know, maybe
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RodW: it’s not his entity, and you know he wasn’t on title himself. But
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RodW: he did get paid out on these, you know, 5 or 10, or however many deals, and you know, or he was the guy that that found it managed it
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RodW: So it it sounds like.
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RodW: you know, kind of a pain. It sounds like, you know. You know. Why do you want to spend the time on doing that? It is absolutely huge, because when it comes down to getting financing.
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RodW: you know. Rate points, you know. Leverage, you know, term all all the terms related to the financing.
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RodW: from little to no experience to, you know, a decent to a lot of experience. It’s it’s it’s huge huge difference.
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RodW: Yeah, that’s a great
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Danny Johnson: yeah, it’s a great point that you brought up, and that’s like one of those things where you go through it without knowing what you just said.
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Danny Johnson: And then that’s the thing that you’re thinking. I wish I would have known them before. I did all those deals right, so I had right had a way to show that that. And one of those ways is, you know, if even if you are getting a mentor, somebody that’s putting up the money, and you guys are splitting things.
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Danny Johnson: It could still be a property bought in your name, and they’re the lender right. They lend on it and secured by that property.
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Danny Johnson: If that’s something that they will do. That’s a great way to do it, because then you do have ownership of that property, and you do go through all the
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Danny Johnson: you know, the the fix up and then selling it, and you have the HUD to show that you or your entity
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Danny Johnson: purchased it and sold it right?
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RodW: Right?
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Danny Johnson: Yeah. So
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Danny Johnson: So those are the ways to get the you know, to to be able to show the experience one.
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Danny Johnson: and then the credit showing that you’re good with money. You’re not going to go and buy some fancy car and start posting on.
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Danny Johnson: you know Tik, Tok, or whatever you you’re a ball, or already, or whatever you know, all this kind of stuff. But anyway, kind of showing my age. But talking like that. But that’s that’s funny. It’s so true. You get get a picture next to a jet, and you know.
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RodW: trying to get some followers. Yeah, the other. The other thing I I guess i’ll throw in there, you know, related to that is
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RodW: well, I I I always, and I I do these little quick tips, and one of them is, you know, tell your story, and I recommend because I ended up having to do this. You know you’re busy. The last thing you want to do is like, stop.
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RodW: you know. Spend a half day or a day, or a couple of days, you know. Look, you know, pulling all your heads, you know, getting all the address info the numbers, the the you know what you did to the project past project.
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RodW: So I’m always recommended people just, you know. Take a day off. I actually.
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RodW: I went and just
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RodW: got out of my office and just sat there, for probably, you know, I don’t know 4, 6 h, and just kind of right. We went through Each one of my past projects
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RodW: got the numbers together, and then I told the little story. You know what we do. We moved walls, we added footage blah, blah blah! So the more you can tell your story the better.
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The other is related to the actual project you’re doing.
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RodW: You know. A lot of guys will just say, yeah, it’s Fix and flip, you know. We’re gonna add 200 feet. Blah! Blah, blah Whatever
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RodW: talking about the strategy and why you’re doing certain things also goes a long way, and I know it’s time consuming and it, you know. You most guys just want to, you know. Kind of send over the the bare minimum and try and get funded. But the more you can tell
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RodW: the story of the deal, you know, and your game plan related to it, or your strategy.
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RodW: That’s what underwriters they don’t like unknowns. So
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RodW: you know they’ll You get a purchase, you know contract which is purchase price. You get
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RodW: your rehab budget.
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RodW: and that’s where most you know Most investors are most fixing. Flippers will stop.
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RodW: and so i’m always, you know. I’m. Either telling the story for them after a phone call, or I’m telling them, you know. Give us some more detail. You know what
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RodW: what kind of pool are you putting in, and why, and you know you’re instead of you know, having this particular layout, You’re gonna open these walls and have kind of an open, you know modern floor plan.
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RodW: you know. So it it seems like it’s, you know.
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RodW: Is it really worth it? Is it going to get me, You know more? But again I go back to
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RodW: underwriters. They don’t if there’s you know, questions or uncertainty, or there there’s something that they don’t have. The you know kind of the backup date on
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RodW: in general. I mean, I think that kind of makes them nervous, and it’s just it’s harder to get, you know, a deal approved, or get the pricing you want.
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Danny Johnson: Yeah, and I think that goes that gets into this idea of
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Danny Johnson: you know, people running the real estate investing business as if it’s a hobby
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Danny Johnson: versus a true business, right? And that’s a huge thing, because so many people
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Danny Johnson: do get into this business to get
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Danny Johnson: rich quick, right? I mean it’s it’s just something, you know. They want financial freedom, all that kind of stuff. And
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Danny Johnson: and I, you know I got into it for that same reason I was like. This is awesome, you know. It’s like all this opportunity here, and all this kind of thing. But
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Danny Johnson: at the end of the day, if you’re if you’re trying to do this as like a side hustle or something that you just want to do
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Danny Johnson: these quick things, and then just move on and make this money. You kind of missing out on how you’re operating that as a business, and it’s not going to last very long, and it’s not gonna be as profitable as it can be.
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Danny Johnson: and based on what you were just talking about. That kind of shows, you who who is operating this thing is just something that they’re hoping to profit from. And don’t really care too much
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RodW: Right? Oh, for sure! Oh, for sure! No! You’re you! You nailed it. In fact, I think you know most of us are guilty of
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RodW: of doing that. You know you. You just you get busy. You get focused on whether, whatever it is deal, flow, or managing projects, or or all the above. But yeah, taking, you know, taking these little pauses to you know. And that’s that actually brings up Another point is.
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RodW: you know I do. I? I deal with this all day long every day, but you can definitely tell
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RodW: the ones that are
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RodW: treating this like a professional business, and the ones that are, you know, either.
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RodW: Maybe it’s a professional business, but they’re kind of wing in it, and just how organized you are, and that’s
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RodW: you know they don’t really teach organization in in school, you know. That’s one of those things. It’s kind of like, you know personal finance. They just don’t teach it. They don’t teach you how to, you know. Keep your files in order and stuff like that, but
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RodW: and and this goes back to, you know
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RodW: just the whole, you know, overall strategy of of what I try to, you know.
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RodW: Give my borrowers and clients is, you know. I want to be able to get these loans turned around quickly so you could write, You know, more aggressive offers, and you know, get started on project. I mean, you know time is is money right?
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RodW: And so it’s just it’s huge being organized, and you know there’s stuff that comes up. We don’t, we don’t. I don’t know everything that I
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RodW: You know that the underwriter is gonna ask for. But you know some borrowers. It’s like, hey, I need You know this resolution for this entity, and then boom! It’s. It’s it’s in my inbox, you know, an hour later versus you know, 3 days later, and then they’re like, hey? Where are we closing? It’s like, you know. We’ve been asking you for these.
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RodW: You know the Comp data or some doc or whatever. So, anyway, just the more organized the better. I mean that that kind of goes across the board, but it’s it’s huge in it. It’s such a time sensitive industry that we’re in.
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Danny Johnson: Yeah.
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Danny Johnson: yeah, that is. And and I and I say those things that I brought up those things because I was guilty of it for a long time, you know, and and just how
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Danny Johnson: much better the the business operates when you treat it like a true business, and how that feels because it does give you the
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Danny Johnson: the confidence, I think, When I operated the other way it was hustle, hustle, hustle.
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Danny Johnson: I wasted a lot of energy in time, and lost money where I could have made money, you know, not not losing money on deals, but losing out on deals because I was busy dealing with stuff because of the
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Danny Johnson: the you know the structure of the business wasn’t where it could be. We eventually got through that, and learned from it.
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Danny Johnson: But if you can can do that
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Danny Johnson: early on better, because you know.
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Danny Johnson: you might say, Well, i’ll wait till i’m doing really well to to do that kind of thing. It doesn’t typically work like that. You know it’s kind of like. As soon as I make a 1 million dollars i’ll give away 10%. It’s like. No, you you want like. If you won’t, get 10% of what you got now you’re probably not going to give 10% later.
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Danny Johnson: But
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Danny Johnson: you know I do want to say Another thing that you had brought up was the the story of the deals.
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Danny Johnson: I think that’s a brilliant idea. I love that idea, and we did that early on for someone. We were looking at getting some new private lenders and using some other lenders.
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Danny Johnson: and I like looking back at those.
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Danny Johnson: because it’s like of all the hundreds of other deals that we’re done, I don’t remember thing about them.
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Danny Johnson: you know, but those that that had a little thing written about them, and had some pictures, and before and after, and all that kind of stuff. It’s really cool to go back and look and see like, hey, You don’t remember this house. I remember it did this, and
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Danny Johnson: and then there’s some other investors, too. I I remember years ago I was. I was making an offer on a property I really wanted to buy
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Danny Johnson: as a rehab, and the seller
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it’s it.
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Danny Johnson: you know, showed me that this other investor was wanting to buy that house as well, and he had left behind like a binder of all these before and after, and all this stuff, and I was like, Whoa, this is crazy, you know. It’s not something that she gets to keep, but you know
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Danny Johnson: she death. You could tell that She was like.
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Danny Johnson: you know, wanting to to sell to this guy because
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Danny Johnson: he let her into his life and what he’s doing with this whole thing. And it was. It was really interesting. It was fascinating.
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Danny Johnson: you know. I never got around to where I did that kind of thing, but
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Danny Johnson: you know it’s kind of cool to have that kind of thing, because it also does help you show like this is.
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Danny Johnson: you know I I you know, just for the same reasons. You guys want to see it for the lending.
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Danny Johnson: You know. Sellers sometimes want to see that because they they don’t know who you are or whether you’re gonna
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Danny Johnson: be able to do what you say. You’re going to do
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Danny Johnson: So You’re just having things already prepared to be able to prove that you can.
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Danny Johnson: You know, so that people can trust you right?
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RodW: No, absolutely. I’m. Actually in the process of building a a personal website. And that’s one of the things I’m.
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RodW: I have not. I. I have a list like a word document list of past projects with what I described. You know kind of the by the cell, the rehab and it in a paragraph in the story. But i’m going to have it there, and
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RodW: I mean that is a huge nugget to be able to. This is it makes me think of. I don’t know if you you’re familiar with Dan Kennedy.
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RodW: Yeah. So he had this. You know he has this concept, you know, years and years ago about the shock and Awe package, and
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RodW: you know. So you just describe the shock and all you go. Sit down you go get 2 investors. Sit down with the seller.
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RodW: One’s just kind of wing in it, and one has this package that say, and they flip through and say, Well, this is kind of what I was thinking with your house, and
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RodW: this is why I can, you know, quote unquote, pay more for your house because we do such a good job, and
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RodW: you know you that you connect them to kind of your almost your business model to where they you know they’re gonna try and figure out a way to do. You know, work with you because they know you’re a a professional versus the other guy, even though he may be a professional. It looks like he’s just kind of winging it.
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Danny Johnson: Oh, absolutely. And I think that’s what with a lot of things in business, right? I mean, if you’re doing direct to mail or anything.
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Danny Johnson: you know, you consider what people get, and typically
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Danny Johnson: you know, I know, for for some of the properties that I own I get mail from investors.
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Danny Johnson: and I swear I mean it’s always the same stuff. It’s the same stuff. The ease of use kind of thing
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Danny Johnson: where they’re letting deal machine do their their postcard. So it all looks like all the other ones I got.
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Danny Johnson: you know, and it just kind of like.
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Danny Johnson: you know who’s the one that I know. I’m not a motivated seller at this point, you know, for for anything. But you know, you know i’m seeing what a seller is gonna see, and if if you have one that stands out above all those other ones.
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Danny Johnson: you know it’s going to stand out a lot, because there’s so it doesn’t take a whole lot to stand out.
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Danny Johnson: But not
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Danny Johnson: yeah. So how how? I know we’ve kind of talked about this. I don’t know if you have any other nuggets about. You know how to think like a lender
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Danny Johnson: and under right deals accordingly. I don’t know if you have anything to add from what it’s already been said here.
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RodW: Yeah, I mean not to get into like the weeds of kind of the lo! To cost, lo! To values and all that that stuff I mean, every lenders a little bit different.
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RodW: Obviously the the as is is important as is value. And then, you know, we’re kind of dictating the Max Loan amount based on the the after repair value
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RodW: incorporating, you know the the to fix it up.
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RodW: So you know I One other thing, you know. I
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RodW: tell people a lot of times, you know. Don’t leave it for chance, if you you know. I I assume that most investors know their markets relatively well, and you know they They determine what they think. Their exit is going to be, you know, based on a certain value, you know. Give your lender those comps, you know. Tell them.
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RodW: Look, you know, 2 2 streets away. You know they’re getting this number, but this is actually a more true comp because this street has less traffic. Blah! Blah blah! You know kind of tell that story. So you know you don’t hand it over. I mean we do.
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RodW: We? We get appraisal on every file.
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RodW: but we will fund without an appraisal. We have an internal valuations team, and
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RodW: you know they’re
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no appraisers perfect. Our internal evaluations team isn’t perfect, I mean. In most cases.
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RodW: you know, we know California pretty well definitely Southern Cal. But there’s definitely markets where
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RodW: you know we don’t know the little intricacies of of the You know various neighborhoods and streets and whatnot.
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RodW: And so again.
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RodW: Tell the story, you know. Just explain why you think you can get, you know, whatever 5% more on your exit than
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RodW: then the you know kind of the average comp.
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RodW: The other thing is that that’s happening, you know. Just I think, kind of industry wide. And again, it’s based on trend we touch on this before, but just leverage.
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RodW: and I have a book
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RodW: handy.
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RodW: It’s like the real estate, Titans, or something, and
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RodW: it it it it it’s not really an interview format, but it’s kinda like, you know. They They went out and kind of met with and talked to some of these top, you know, real estate
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RodW: ballers throughout the world. Actually, there’s some, you know, handful of international markets, and
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RodW: it was interesting in, and I would say at least maybe 80 of the cases. One of their
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RodW: their pieces of advice, or one of their nuggets, was was leverage like low leverage.
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RodW: and it was kind of interesting to read that. And again, These are larger development, you know, mostly commercial, or you know hotels and stuff like that.
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RodW: But I think it. It translates to our business as well more on the fix and flip, and in ground up construction side, and i’m totally guilty of it, so i’m not saying that I did it any different than you know, kind of the average, but because I was focused on, you know, Max Leverage, you know
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RodW: lowest pricing.
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RodW: And so I think
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RodW: I got into, You know, some challenging projects that took longer costs more like we we all have, and when you’re extremely high leverage you have much, you know you have less options. You almost get to a point where you’re not really in control of your deal. And so
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RodW: I, you know, as just a you know, either a suggestion or recommendation to some folks is.
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RodW: you know, don’t focus on, you know, getting Max leverage in all cases, and I think it’s it’s almost as easy to go out. It doesn’t seem like it, but it’s almost as easy to go out and get. You know more if you’re not using your own cash, anyway, to go out and get, you know, equity investors to come in to kind of make up the difference.
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RodW: and you know it. Everyone structures their deals a different way. But I think given the market. And just, I think, kind of a smart way to do business. And
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RodW: again, you know, hearing from some of the top real estate operators, you know, in the world.
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RodW: I guess they would suggest. Go low leverage. But i’m just saying, you know. Think about
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RodW: how high you want to go on your leverage, because, you know, if you run into challenges, it’s always, you know it’s always better to to not have a bank, kinda, you know.
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RodW: coming down your street and wanting wanting the property back right?
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Danny Johnson: Yeah. And I I think a lot about
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Danny Johnson: what I heard a lot of happening back in in 2,008,
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Danny Johnson: and the term for that that I that stuck with me forever, and as soon as I hear, high leverage. I just think of this term, and it’s domino.
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Danny Johnson: You know the the people that experienced some problems ended up in high leverage, and everything dominated, and they lose everything
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RodW: right, because there’s there’s not
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Danny Johnson: There’s there’s not a strategy to how they’re doing that to keep them a little bit less risky, right?
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Danny Johnson: And
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Danny Johnson: you know there’s reasons to leverage. You know, the cost of money, all that kind of stuff inflation making it actually cheaper to buy a house.
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Danny Johnson: you know, nowadays. Then then, it would have been to pay for back in 88. I don’t know. I’ve seen calculations like that, and all that kind of stuff because of inflation, but
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Danny Johnson: but as far as the whole leveraging side of it
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Danny Johnson: to to that extent, the
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Danny Johnson: there’s a local investor, Mitch Stevens.
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Danny Johnson: and he always talking about this moat theory.
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Danny Johnson: where he had his core investments or his core things to keep his family and everything financially stable, and he never
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Danny Johnson: would ever use any of that for leverage, or anything like to leverage any of that.
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Danny Johnson: you know it was like, and then he could do the other stuff, and then he would leverage off of all the other things and
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Danny Johnson: and do those things. But he kept that core always there.
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RodW: if that makes sense. Yeah, that’s smart.
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Danny Johnson: And and I think that that there should be some mix of that for everybody, right like always kind of playing it safe, but but also taking some risk. But by doing it in a way that’s structured. And you know
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Danny Johnson: you know what you’re getting into a worst case scenario.
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Danny Johnson: you know, this is what could happen. But I’m: okay. With that, you know. In worst case, as you get wiped out, you probably not. Okay. With that, you know.
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RodW: Yeah, no, that’s that’s another thing that I I think I probably have a
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RodW: one of my quick tip. Videos was on, you know, looking at the downside, like, you know, looking at the significant downside like, what are your options? And that was, you know that was one of the
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RodW: the lessons learned that, you know. I wish I would have been talking to some land developers way back when but that was a a big lesson learned for me. You know it’s like when the market turns, and you got a bunch of, you know, either raw or even titled. Land
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RodW: I mean, man. It it’s almost
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RodW: valueless
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RodW: because you got, you know, finished, you know, finished lots ready to build that are
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RodW: selling for you know less than what you’re in your You know your paper. Lots.
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Danny Johnson: Yeah.
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Danny Johnson: Crazy stuff, man. I I think we’ve got a
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Danny Johnson: go ahead and we’re we’re at about time. So we’re gonna close this out. Do you have any last advice to anybody that’s that’s looking to get some
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Danny Johnson: that some funding for their deals right now.
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RodW: Yeah. And I feel I feel like I’ve said this, like almost every comment I’ve made is, you know I’ve I’ve made this mistake, but I would just also recommend not solely focusing on. It seems funny coming from a lender. Obviously. I’m. I’m. I’m.
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RodW: It’s not like. I’m trying to sell you. But don’t focus on points, and you know, in pricing everyone’s just like, what’s your rate? What your rate? What your rate? And
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RodW: frankly, I in the back of my mind, i’m thinking you know how how experience is this guy is he so focused on rate because.
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RodW: you know, things like fun control, and you know the terms and all the other things that make up, you know, kind of debt financing can become, major, and the reason I bring up fund control is because I’ve had situations where
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RodW: it literally would take me weeks to get my
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RodW: my money, my my rehab funds, or my construction money.
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RodW: and
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RodW: in some cases it’s really slowed down a project. And then, you know, especially if we’re in this, you know, whatever we’re in this downward trend shifting market, I mean
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RodW: that could just be a killer if you you know you got 5 or 10 draws, and you, you know one lenders, you know, given your your money, and 3 to 5 days, and the other one’s 2 weeks, I mean, you know you add a couple of months to a project, and it’s like you could just totally miss the market. So.
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RodW: anyway, that’s kind of My
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RodW: My parting advice is, you know, obviously racing points are or are key Leverages key.
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RodW: You know it. You’re trying to reduce your overall cost of doing the project, and that’s you know. Those are a couple of major ones, but
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RodW: it’s also time. Time is time is huge.
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Danny Johnson: Yeah, I appreciate it. I appreciate you sharing all of of what you’ve shared on on this episode for everybody listening and and some great information
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Danny Johnson: for anybody, even if if lending isn’t something you’re looking for now. I think there was a lot shared with, you know, setting up your business so that in the future you’re prepared, and and you’re gonna look pretty good to those underwriters and and all that kind of stuff, so
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Danny Johnson: I appreciate it. If anybody is looking to get in touch with you, what’s the best way for them to do that?
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RodW: So my I mean my cell, you know text I I kind of live on my my cell phone, so I I don’t mind, you know, sharing that it’s (408) 568-6875,
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RodW: The I have the optimized real estate podcast primarily on Youtube, and the process of
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RodW: actually you could find a a handful or 2 on on spotify.
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RodW: And then what else? I’m not really the
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RodW: the the social beast that some guys are online. But yeah, I definitely have a huge tik Tok following.
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RodW: Yeah, my my daughter’s, you know, slowly educating me on on that. It’s amazing. Actually, I’m surprised how many guys are on tik tok. But there it’s it’s becoming more of a thing
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RodW: I don’t know. I don’t want to have anything to do with it. So yeah, it’s. And then my website and my actually my personal emails [email protected] So they could always just shoot me an email. And then
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RodW: my personal website that I had mentioned is probably a week or 2 away from from fully launching, which is
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RodW: Rod Dash, wilson.com, or Rod Hyphen Wilson
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Danny Johnson: Nice.
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Danny Johnson: All right. Well, I appreciate it, and I do want to say, in in closing
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Danny Johnson: that I I probably get request weekly
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Danny Johnson: from different lenders to be on the podcast.
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Danny Johnson: and and I I pretty much. I just do. I just delete most of them, because I mean it’s it’s just
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Danny Johnson: you know the there it’s just I want to be on your podcast, and that’s it.
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Danny Johnson: And I don’t I don’t remember what our
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Danny Johnson: communications were, but but something about your seem different.
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Danny Johnson: And then our conversations that we’ve had.
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Danny Johnson: you know.
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Danny Johnson: had me want you to come on it, and and just really was looking forward to you coming on this show. So I just want to say that because I think other people out there, you know, when you’re talking to
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Danny Johnson: different lenders, and sometimes they can just be all business and like there’s no relationship. But I feel like with you
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Danny Johnson: people talking with. You are going to feel some sort of, you know, relationship being built, and and that’s the reason why I’ve got you on the show. And so I just wanted to say that.
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RodW: No, I, Danny, I really appreciate You have me on. In fact.
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RodW: the podcast that we did. You Did you know I me interviewing you is going to be actually, it’s live on Youtube now. But that was, you know, some some great content. And, by the way, the little teaser is we talked about, you know, kind of
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RodW: systems before leads, and I think that’s a just a great topic for most people that
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RodW: you know they’re so focused on on leads. But then you know, what are they actually doing with them?
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RodW: So I appreciate. You know you, you taking the time, and and you know, providing that kind of content to
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my followers and and clients and whatnot. But yeah, you’re you’re a stud, I, you know. Keep it up. Keep all the the entrepreneurial, you know, software products coming, because
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RodW: I think that’s a that’s a huge game changer.
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RodW: as far as you know, doing this business well, and and you know profitably
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Danny Johnson: alright, cool.
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Danny Johnson: And you call me instead. And you know we’re not affiliates of each other. We’re not pushing each other’s products and making money off of it, or anything like that. So I know it’s a genuine statement. But anyway, yeah.
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Danny Johnson: appreciate it. And yeah, everybody, if you’re you’re looking to, to get some learning definitely. Check out, Rod, and give him a call and talk to him
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Danny Johnson: and see what can be done. All right.
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RodW: Sounds good.
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RodW: Thanks, Rod. Have a good, all right. Thank you, Danny.
