012 - Creative Financing Resilience

2 Wealth Show S2 Ep12 – Creative Financing Resilience

Justin Bogard and Super E discuss creative financing during times of opportunity.

Key Takeaways:  

1. Seller Financing 
2. Traditional Lending Practices Tighter and Tighter
3. Doing Your Due Diligence 

 Resources and links discussed  

• Videocast on BrightPath Notes YouTube Channel 
• Videocast on Elizabeth Maora YouTube Channel 
• BrightPath Notes Website - https://brightpathnotes.com 
• Elizabeth Maora LLC Website - https://elizabethmaorallc.com 

Sponsored By: Integrated Health Solutions

We are passionate about your health and wellness and we know you want to enjoy a vibrant, pain-free, active lifestyle, but when you are in pain this seems almost impossible. 

In order to be pain-free, move fluidly, and enjoy an optimal level of functionality, you need a personalized yet integrated, research based and clinically proven approach and that’s what we do.  

To learn more visit us at
ihsindy.com
cryotherapyindy.com 

About the Hosts 

Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!  

Super E – Real Estate Investor specializing in short-term rentals and the management of them. She connects investors with short-term tenants and manages everything in-between.

Connect with the Hosts: 

• @2wealthshow – Facebook/Instagram 
• @wealth_show - Twitter 

Transcript

Justin Bogard: 0:05

Welcome to the, 2 wealth show a show that shares how you can create real wealth for you and your family. I'm one of your hosts, Justin Bogard. And my cohost is Elizabeth Sickles, AKA super E. I am a real estate note investor specializing in performing residential real estate debt. I find the deals acquire them for my own portfolio, as well as educate investors while walking them through the process of owning a real estate note, my cohost, a real estate investor specializing in short term rentals and the management of them. She connects investors with short term tenants and manages everything in between. Our show is sponsored by BrightPath notes. And Elizabeth Maora. You can find out more information by visiting our websites at brightpathnotes.com and elizabethmaora.com. Hi, welcome to the, 2 wealth show. I'm Justin Bogard, one of your cohosts, and this is episode number 12. Ooh. Hi Elizabeth. Still, still kind of in quarantine, right? We're obviously still on the zoom call recording the video cast. If those of you that follow us on our video channels. Mmm. But Elizabeth, I'd like to give a kind of a shout out to, uh, this episode is, is brought to you by integrated health solutions. And the owner of that is mr. Dr. Charbel he's actually became a close friend of mine. He's is a sponsoring this episode. And so dr. Charbel does acupuncture. He does a soft tissue and he does chiropractic work. He also has an offshoot business that focuses on the healing of the body outside of, of those things. So like things like cryotherapy, magnesium floats, infrared saunas, and, um, there's the therapeutic, I guess I call them therapeutic cuffs if you will. Um, I know that you've experienced this as well at dr. Charbel's office, but I would kinda like the cryotherapy part of it, where they put you, like in this chamber, if you will, you're standing in this chamber, it's almost like a Tanning bed, but a vertical Tanning bed, if you will, and your head kind of pokes out the top. And then it has like nitrogen in the, in the system and it kind of fogs around you and it makes it super cold. It's like, I don't know, like negative 170 degrees or something in there. And your body is in there for a couple of minutes. And then you walk back out, you're so cold and you get to hit that warm air. Like just, do you just feel the blood like rushing to all your extreminities? It's kind of, kind of a neat feeling, but a lot of athletes use this stuff to help them heal faster and recover faster from workouts and stuff. So, um, I love it. I love going back to Charbel.

Elizabeth Maora: 3:00

And integrated health solutions. How about you? Yes, he's fantastic. I've done the flotation therapy, which is the most relaxing thing ever. So I highly, highly recommend it. And I have done the infrared sauna, which is also relaxing and I love the heat. So it's very hot opposite of the cryotherapy and then all of the health benefits as well. So I also highly recommend dr. Charbel and his staff there. They're really fantastic. So check them out. Absolutely. When you thank them very dearly for sponsoring this episode for us. So Elizabeth we've been going through quarantine and the COVID-19 and all that stuff since, since March. And obviously when we're recording our podcasts and video cast here, we've always been having to do it over zoom up. You mentioned before. And so we've seen some regression and progression throughout the stages. And so as of this recording, we're recording in early June for this episode.

Justin Bogard: 4:00

Oh, so what kind of changes have you seen? Mmm. That you can kind of highlight from your perspective from beginning of that March time period to now, then also what's what's on the horizon for the business that you're mainly in with short term rentals. Sure. We've seen, it's kind of like a roller coaster. So of course we had a huge March was awful for us part of April. So we had over$75,000 in cancellations, but what's really interesting is as fast as it went down, it's come right back. So for example, the last four weekends in a row, we've either been 85% or 100% booked every weekend. Yeah. I mean, it's, it's huge. And what we're seeing is, and the really important thing. So of course we lowered rates I'm in the beginning of this and then we've been slowly increasing them and we've increased the last two weekends in a row.

Elizabeth Maora: 4:59

Okay. So we're, we're super thrilled about that. Our average stay, um, prior to the middle of March was about four nights. And actually right now, our average day is back up to about three and a half nights. So while we're not, we're just starting to see, we really catered towards the business guests. Okay. But we're just starting to see business folks, which really kind of started about a week and a half ago coming in. So, which is really, it's fantastic news. Um, we've seen, what's been so there's bad and good and everything, right. So we're just, we're going to talk about the good of this. And one of the things is that you have a whole segment of folks that before, for whatever reason, they would not stay in a short term rental. Well, now they want to be somewhere where it's a private entrance. You don't have all the foot traffic. So we're getting a lot of, and even a lot of newbies saying, well, normally I stay in a hotel, but I don't feel comfortable right now. Um, we've had a lot of that. So, um, you know, I mean, I feel for the hotels, I mean, they're, you know, they're great as well, but obviously my I'm glad people are seeing the, all of the benefits of short term rentals.

Justin Bogard: 6:17

Yeah. So you, you mentioned the average a stay is three and a half nights, you said.

Elizabeth Maora: 6:24

Yeah.

Justin Bogard: 6:25

So is that over a weekend or is that just at any time during the week

Elizabeth Maora: 6:29

That's at any time? So we've been booked, like I said, we've been booked up over the weekends. Right. But what we're seeing is that people are taking longer weekends. So before people just check in Friday and out Sunday, we're seeing actually the, we see more people checking in on Friday and out on Monday than anything, but then we're also getting five night stays. We have two weeks days, we have a lady that's here. She's going to be with us at least a month. Her dad just had a lung transplant. So, um, we're, we're kind of seeing the whole gamut, so to speak. The other thing that's really interesting is that we're seeing people that they were supposed to be having family vacations maybe in Florida or in the mountains. Well, they don't want to travel that far. So they're coming here instead.

Justin Bogard: 7:20

That makes sense. I said, I guess I'm not surprised to see the, the Airbnb or the short term rental business pick up because everybody's been kind of locked in their cabin, so to speak and to have that fever. And now they just want to get out and go somewhere. And it makes sense not to travel long distances yet, and might not want to stay local, but stay somewhere different and just give yourself a different perspective and a different view, uh, when you look out the window or step outside. So that's a, I'm glad to see that the business is coming back and hopefully it stays strong for, for a long time.

Elizabeth Maora: 7:52

And actually just on the short or on the short distance as well. So this is for Airbnb specifically, 70% of the bookings right now are within 200 miles of, um, of the person's home. So actually Airbnb is making some different enhancements to their app so that they're just pulling up houses and properties within 200 miles of wherever you're opening it.

Justin Bogard: 8:17

Yeah. That's like what a three hour drive more so

Elizabeth Maora: 8:21

Yeah. Yes, yes. Depending on how fast you drive,

Justin Bogard: 8:26

How far your right foot goes to the floor right. Of the vehicle. That's right. So, yeah. So how about, how about for you and notes? What are you seeing now? Yeah. So what, what has transpired is in March kind of people kind of, from our perspective, it kind of shut down on investing and kind of general, everyone was kind of holding to see what happened. A lot of people thought that they were going to see some short sales and some foreclosure opportunities pretty quickly. And, uh, on this side of the business, I know that that's not really possible cause banks have to charge off loans and such. So it takes a while to see that sort of change. But, um, people were just holding dry power, as they say, waiting for opportunities. And March and April were like that. We didn't really see a lot of people investing. Like they were obviously in February, January and all the months prior to that, um, we, we really didn't change our model internally with our portfolio. We, we still kept finding opportunities and going in there and going after them. But our investor clientele really didn't do a lot of activity in March and April. They kind of just held, held their pattern, just was waiting for opportunity. And then March came along and it kind of changed several people started to, I want to invest a little bit more and it got stronger and stronger. So all through may, we kept seeing it more and more investors out there doing trades, like they were in the, in the months prior to are our quarantine or the COVID-19 hit. And then fast forward to today in June, we're still seeing, seeing that happening. What were well we're focusing on now as our company model is seller financing. We're seeing a lot of opportunities, Elizabeth, like every week, we're seeing people that, uh, just are either struggling, um, to find a house. And if they find a house or struggling to get the appraisal where it needs to be, because things are getting overinflated and so seller financing becomes an option for them. And so if the seller of the home is willing to carry some of the financing for the borrower, then Mmm. That, that makes it a pretty interesting opportunity for them. So, so our financing in general is just, just becoming, okay, a better option for people, not only to have cashflow longer term, uh, but there are people that are struggling to make their mortgage payment. And that's where as you know, Elizabeth and the business, when you, um, buy a property for somebody subject to first mortgage. And so you can actually take over and make their payments for them while you pretty much own the house and you're paying on their debt. And then you can either rent the house for more than what you're paying the subject to mortgage for, or you can wrap a note around. And so wrapping the note around those subject to mortgages is becoming a very popular strategy now versus, you know, over the past couple of years, it wasn't as popular just because you weren't seeing as many opportunities as you are now. So that's, that's kinda what we're seeing now. Investors are investing the ones that have the dry power, so to speak, and then the seller financing and the different facets of seller financing. Like I described as what I'm seeing today is as being kind of the hot, hot things to do in the note investing.

Elizabeth Maora: 11:40

Excellent. Do you think that we're going to see after, or you're going to see a continuation of that?

Justin Bogard: 11:48

Absolutely. Um, I think we mentioned on this episode before maybe we interviewed Joe Varnodore and a couple episodes back about how chase bank had sent out some media about the, there are minimum requirements to do a conventional financing loan, which a conventional financing loan. Is it a loan to where the borrower would put, you know, like a 20% down payment or something larger like that? And so chase was saying, or bank bank of America, I think it was chase bank, um, said or JP Morgan, Chase. I said like a 720 credit score and like a 20% down payment where the minimum standards that they would, you consider doing a conventional financing loan before that it was more like, you know, a 600 credit score. And it was probably, you know, 10 to 5% down payment. So lending practices got tighter and tighter, and we're seeing that still today. And I don't know when there'll be lifted because it's really not up to the banks. It's up to, as you learned a couple of episodes ago, Fannie and Freddie and Ginnie Mae, they kind of dictate what they buy from the banks as far as the criteria. And if they are looking for, um, borrowers to have more skin in the game and a higher credit score, and that's the paper that they're going to write up and that's going to be there. Mmm they're their product, if you will, to consumers that have bank. So consumers are going to have to look for other ways to acquire properties and to get Mmm, bank financing and they won't be bank financing, it will be seller financing. And so that's why we got, we're going to see that continue to be very strong for, for at least the remainder of this year. I can see that.

Elizabeth Maora: 13:26

Um, I'm sure you know, this, I'm interested to get your opinion as well. Wells Fargo probably two or three weeks ago had said that they're not going to loan, um, on automobiles that they're not gonna loan to car dealerships on autos because they don't think people are going to be able to make the payments. So what kind of a ripple effect do you think that that's going to have in the housing market as well?

Justin Bogard: 13:51

It can, it's tough to say how it'll affect it, but it will affect it. The bottom line is these large banks. Like we keep mentioning there, they're tightening their lending criteria and they're lowering their risk because they don't, if they don't see a consumer buying their borrowers end product, which is the car dealer, then they don't see that as a viable option for them to continue to lend because they're, they're getting tighter and they're getting squeezed on their side as well. So then again, the car dealerships will have to get creative and they'll have to offer creative financing to acquire those cars from them. So it may not be the consumer, that's the problem. It's just the lending practices and the lending criteria that the banks are getting tighter and tighter on. So it just makes it harder and more challenging for businesses or for people that are getting those conventional bank loans to get them. So it's happened before in our whole cycle of being in this new age world with, you know, getting loans and getting, um, acquiring financing from it's just now we have to look at it that we have to provide the, so financing guess, guess what? In the 1980s, you know, the interest rate was like 16 to 20% on, you know, bank loans. So, which is why seller financing was so strong in the eighties and stuff, because, um, there was just a different opportunity. So when people can't get money from the bank, they have to rely on other ways to get that money. So I just think you're going to see more and more those opportunities, not just in real estate, obviously, but thanks for bringing that up about the auto industry as well. So you're gonna see create a financing cause just like, if you go to use Carla, you know, it's like, you know, you buy here, pay here or you can extend pay here so to speak. Yeah. Cause they'll find creative ways, which is how they actually make more money to just let you borrow the money. No credit, no problem. No down payment, no problem, no license, no problem. I don't know what, but you'd get it. And so that's, that's, we just have to get more creative about what we do. So things will change, but we always find a way to adapt to it. And I hopefully other businesses and industries will be able to adapt that way and not rely on the big banks so much.

Elizabeth Maora: 15:59

Uh, absolutely. So this is where, especially if you have cash or you have investments that you can leverage and doing the seller financing, doing any type of creative financing is huge. And actually when I took, um, all the, the classes that Robert Kiyosaki was, um, owners of for the education classes, I took the class creative financing taught by the same instructor three times, because it was so fascinating. And it just took because he went through 20 different ways to do create a financing. And so there's, there's always a way to get, to get the deal done.

Justin Bogard: 16:37

Absolutely. There's still ways that I'm learning how to do creative financing from my mentors. They have been the business for 30, 40 years and they, they are bringing back strategies that they did in the eighties and the nineties, because it's just relative to the cycle of today's real estate economy, if you will. So you did, you have to think, you really have to think outside of the box, we've always been a standard box. Like, okay, let's put our money here. This is what we do with it. And then it grows this rate and then retire. We're going to have this much money. Well, we have to learn that when the economy changes and our financial stock market changes, we have to adjust for that and figure out how to move forward and grow our money and grow it the way we want with the most security, which is why you and I are both in real estate, because that's what we believe in the strongest. And, um, it's just showed its resiliency through all this stuff. Yeah. I was talking to somebody the other day about the economy and how this Corona virus came through. And it definitely affected our, our standard economy, meaning our stock market and our stock exchange and stuff like that. But our real estate market Elizabeth, it really didn't change a whole lot, maybe areas dips, but I didn't see it. And at least our local market and what we do everyday, we would see a change in real estate, a property value, which just tells you how strong our, our market is for our selling market right now.

Elizabeth Maora: 18:05

Oh, absolutely. And we're still, you know, we've had, we had a couple of our guests that were, had sold their property and was waiting to find a new property. Um, so we have a new, we also manage traditional rentals as well. And we have a new tenant that new resident that his house sold much quicker than what he thought it was gonna sell. Um, and, and this is not an inexpensive rental property at all. I mean the rent$1,700 a month. So he's going to be with us for at least a year. That's nice. So yeah, it's kind of, you know, to Indy we're, we're kind of in a way, I mean, we're so diversified in our, um, in our economy and all the segments that we have here, healthcare, aerospace, automotive, um, uh, tech tech is huge here. You know, that it's yeah. I don't know if we've seen all the, all of the downfall kind of from, from all the COVID-19, but at least so far, we're still, we're still strong.

Justin Bogard: 19:09

Yeah. It's, there's such a demand for all of our industries, not just real estate, but other industries that it's just hard for. I can't see us failing quickly. I think it may take awhile to have some sort of fail in the system if there is going to be, but it just seems like there's a need, like you just mentioned technology there's need for technology. Cause guess what people did run the quarantine, they had to have computers, they had to have internet. They had to have, um, a platform like zoom, like what we're on right now, too, be able to chat with somebody to be able to talk to family, to be able to, I mean, there for everything bad that happens. There's always something that good that happens, you know, as far as an industry. So I just see because of what we just went through the best couple of months, how important it is to be set up virtually and how important is to continue to be a hybrid of both, you know, in-person things and also being virtual because I can, I can see us being in some sort of, um, I hate to use the quarantine, but some sort of restriction to where we won't be able to do what we did in February for quite some time, because I think there's always going to be some sort of restriction that they're going to say like, Oh, you know, maybe they'd get up to a hundred people in a room at the same time, but they want you to, to wear masks. I mean, there's, there's, it seems like it's always going to be something. So it's going to be very difficult to have a lot of in-person things without everything being totally lifted, so to speak. So being virtual and being adaptable to this environment and obviously young huh, entrepreneurs like us, most small businesses to where we don't have to have a storefront, so to speak, it's easier for us because we can, I can hop on my, just put my backpack on and go wherever I need to, with the internet connection, I can set up shop, shop there, so to speak. And that's how I've always been as business. So for me, it wasn't a okay. A big deal to adapt to stuff out. I don't know if you experienced the same way. Mmm

Elizabeth Maora: 21:00

It's you know, one of the things just on the technology is that I've been really big on the tech part from when I started the business. And one of the other really great things about, about my properties and other short term rentals as well, that implement technology is that we are we're virtual check-ins. We don't actually check people in. So they get their special code. It's only valid during their stay. And we've had a lot of, um, actually guests that have messaged us and saying, Hey, how does your, how is your check in process? How does it actually work? So, I mean, that's even, you know, that's paid off tremendous. I mean, from the beginning it was paying off it, especially now. Um, so I'm a huge advocate of tech and my team, they worked remotely before and now obviously we have to go to properties and stuff. Um, but they've always the only time that my team had to be in the office was for our operations meeting. And that was once a week. So, um, so I, I think flexibility for schedules, you know, if you do own your own business or even if you don't own your own business, but that's, that's even more key now, but that's for sure. Yeah. Some industries, they don't have the luxury of doing what we're doing to meet with people and stuff online, just because they're, they're so involved, like just, you know, the, the trades, the trades groups, you know, with electricians and plumbing and HVAC and like landscaping groups and other things that have to do with real estate, just cause that's top of mind. I mean, they really can't have too many things. We can, a lot of virtual things because they have to be more hands on. So that, that kind of is what it is because they're essential anyways. Um, but the rest of us can, and that can mitigate some of this stuff going around as well. So there's, there's my little, little, uh, too sensitive information about it. Absolutely. So, you know, so overall, I mean, we're, we're really thrilled, um, with, with where we are right now, um, in the short term rental market, our rates are high. Um, I don't know, we're not gonna recover from the conventions that have been postponed this year. I mean, that's, that's just not possible, but I will tell you that my clients are very happy with where we're trending the other nice thing that's happening as well. Is that just the end of last week, we started getting bookings for the end of July and then for September also. So that's normally we open our books six months ahead of time. Um, that changed earlier this year and now we're opening four months at a time. So the fact that they're booking that far out is really good news and just shows the confidence that people have in, in the trajectory.

Justin Bogard: 23:38

That is awesome. Neat. You're right. Exactly. I was thinking the same thing. It's the confidence that the consumer has and what's going on, or quite frankly, that maybe they're just sick and tired of staying at home. Well, we're going to go no matter what.

Elizabeth Maora: 23:51

And we have, um, just two we've hosted cause you, cause you've mentioned it, we hosted a lot of even look like local local people, people that live in Indianapolis who are just sick of looking at the same four walls. So we had a ton of those type of guests. Um, so, and, and we'll hope we'll take him.

Justin Bogard: 24:15

Absolutely. I believe it too. Elizabeth, um, we're running out of time here on this episode, we, we, uh, got to talk, I didn't realize how long we were going into this episode, but anyways, do you have some closing thoughts about what we talked about today?

Elizabeth Maora: 24:30

Sure. So I think overall, you know, really for both of our industries, there's still a lot of opportunity actually just looked at properties last week. Um, for a new client, I looked at two properties for two new clients as a matter of fact. So I'm really, really encouraged by what's going on. So I would just encourage people, keep an eye out for everything and make sure that if you are going to do investing, run your numbers, make sure you're confident with it and get started.

Justin Bogard: 24:56

Absolutely. That's a great closing thought it was. But then I'll just kind of echo what you said about, uh, doing your due diligence, you know, check the person you're buying from and check your investment very thoroughly and make sure your risk is mitigated by several different factors, especially in real estate. So get ahold of one of us. If you're interested in either one of these industries as an investment opportunity, we both are educators and a free will of information. So we often give information away because we just love to do that. So anyways, I'm Justin Bogart and my company is BrightPath notes. This episode is sponsored by integrated health solutions, dr. Charbel.

Elizabeth Maora: 25:33

And I'm Elizabeth with Elizabeth Maora.

Justin Bogard: 25:36

All right. So don't forget to check out the video version of this episode on BrightPath notes, a YouTube channel or Elizabeth Maora YouTube channel as well. This is episode 12. So next time guys,

Elizabeth Maora: 25:48

Thank you.

Jusin Bogard: 25:52

2 wealth show is produced by Justin Bogard and super E sponsored by BrightPath notes and Elizabeth Maora. Thanks for listening and watching for our show.