BiggerPockets Podcast 055 with Jimmy Moncrief Transcript

Link to show: BP Podcast 055: The Five Steps Needed to Get Any Lender to Say “Yes” with Jimmy Moncrief

Josh: This is the BiggerPockets Podcast, show 55. Eight, twenty-seven.

You’re listening to BiggerPockets Radio - simplifying real estate for investors large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place.

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Josh: What's going on, everybody? This is Josh Dorkin, host of the BiggerPockets podcast here with my co-host, Brandon Turner. Hey Brandon, you realized that this is like our 28th take of this intro.

Brandon: This is, I think it's like our 50th take of this intro. That's all right.

Josh: Oh, my goodness.

Brandon: Now people know our secrets, that we actually suck at this. Yeah, one of my secrets.

Josh: Suck. We suck.

Brandon: Anyway, big day today. Big day.

Josh: It is a big day. You know why it's a big day?

Brandon: Tell me.

Josh: It's a big day because the BiggerPockets podcast has reached a pretty cool milestone – one million.

Brandon: One million.

Josh: Listeners.

Brandon: Yeah, that's awesome. One million. That's a huge number. I can't even fathom that number. Okay, I can but…

Josh: It's amazing, man. I mean 54 shows, we hit a million listeners. I don't know. I'm pretty proud. I'm pretty proud of that. I think we've brought tons of really good information to people through the show and I think the 54th preceding shows to this one have just been of incredible value. So thank you to everybody for listening. We definitely appreciate you guys.

Brandon: Yeah. You guys rock.

Josh: For trusting us. Yeah, you do rock. And if you think we rock…

Brandon: Come leave us a review on iTunes. There you go.

Josh: Yeah. Actually I wasn't going to tell them that.

Brandon: Oh.

Josh: I was going to say, "Spread the word." Let other people know about the show. Tell other people to come check it out, BiggerPockets.com/podcast. Put it on your Facebook pages. In that little share link, put in http://www.BiggerPockets.com/podcast. Share that link with your friends, your family, with everybody. Help educate them in real estate investing. Help us help them. Help us help you.

Brandon: Nice. Nice.

Josh: Yeah. You like that? You like that? Yeah, I bet you do.

Brandon: Let Jerry Maguire help you.

Josh: That was me, man. That was me. Show me the money

Brandon: All right. Well, moving on…

Josh: Yes, moving on. So today, we are going to skip our quick tip. And the reason we're going to skip…

Brandon: Quick tip. Quick tip.

Josh: …is we have a couple really, really good ones in this coming show. So pay very close attention.

With that, why don't we just kind of dive in here? So this show is featuring Mr. Jimmy Moncreif. And Jimmy is a real estate investor in the Tennessee area, who also has a day job working as a real estate investment underwriter.

So basically, Jimmy is the guy ultimately responsible for saying yes or no on loans, which is why we wanted to have him on the show today. What we're going to do, we're going to pull back the curtain for you guys on the lending industry and show you exactly how you can get loans for your real estate deals.

If you don't think it's that big a deal, this is a huge deal. This guy is going to give you insights that you may not have ever gotten before. Talking to these underwriters is a rare privilege, so we're especially excited. I know I am.

Brandon: Yeah. Yeah. Me, too. This is going to be an awesome show.

Josh: Yup. So, of course, the show notes for today's episode can be found on BiggerPockets.com/show55. That's show 5-5. And we invite you to come. Leave comments or ask questions if you've got them. Jimmy will be participating and will be answering your questions for you. So definitely be sure to ask him on the show notes.

Anyway, with that, why don't we get to the show and get this thing started? So Jimmy, welcome to the show. Good to have you here.

Jimmy: Thanks for having me, guys.

Brandon: Yeah, yeah. We're happy to have you on here. I always really look forward to your post every week on the BiggerPockets blog, and they're always entertaining and informative. So, hopefully we can bring out some of that today on the podcast.

Jimmy: Sounds good.

Brandon: All right. Josh, do you want to ask the first question or do you want me to do it?

Josh: I think I could manage, Brandon. Thanks for asking.

Brandon: Yeah, I'll be a gentleman. Take it.

Josh: Do I need permission to scratch my nose, too?

Brandon: You might. Go ahead.

Josh: All right. Jimmy, so tell us about how you got started in real estate.

Jimmy: All right. Well, let me back up. I got sort of by accident, but I kind of got started in investing when I was 12. Not so weak.

Josh: Wow. Nice.

Jimmy: Yeah. I wasn't so good at sports. So for the international BiggerPockets numbers, that's very bad in America. If you're bad at sports, you're pretty much just put away, locked in a closet.

Josh: I'm raising my hand as well. That was me.

Jimmy: Yeah. So when I was 12, I won a stock market competition. So my parents were like, "Yes, he's good at something."

Josh: Nice.

Brandon: Nice.

Jimmy: So I started…

Josh: So they strapped you to a computer and forced you to figure out the buys and sells and they're totally rich and retired now, right? Thanks for 12-year-old Jimmy.

Jimmy: Well, this was like pre-computer; I'm showing my age a little bit. But they did pretty much lock me in a library for the summer after that. And then, what did I do? I want to start more competitions. So then I started reading Warren Buffet books and Peter Lynch books, and that kind of got me into stock investing. And then I got a job at a hedge fund after college and became a partner there. But in between buying my first house and moving, it was so much easier just to rent our house, sell, and then move. So we just tried that.

And then a couple of years later after analyzing my investments, I realized that this little rental property that we really didn't think anything about was doing better than my stock market portfolio. So that's when I really started focusing on real estate. Yeah.

Brandon: Well, hey, I actually have a question about that.

Jimmy: Yeah.

Brandon: We've never really talked about this with any guests yet, and that's the idea of… I know we're kind of interrupting your story, but the idea of…

Josh: [06:35] Brandon, to interrupt. I'm listening and paying attention.

Brandon: I am paying attention. But I want to know more about the idea of, you lived in a house; you moved because it was easier to rent it. And then that's how you got started. That's also kind of, I guess, how I got started in a way, and a lot of people do.

So maybe we can just touch on that for a minute. What made you actually think like this was a good idea? Did you actually look at the cash flow or was it really just, "The market's bad; I can't sell". How did that kind of decision play into that?

Jimmy: Yeah. Great question. I should come up with a really sophisticated answer. Like, when you were asking that question, I was like, "Oh, man, I should right now have a very sophisticated answer." But it was honestly like it was so much easier that just rent it, and then sell it and have two mortgage payment while you're trying to sell it.

We knew we could rent it out for a couple hundred extra bucks over over mortgage payment. So my wife and I were just like, "Hey". We didn't have kids at that time. We were like, worst case scenario, this is an awful experience, and we sell it after we tried the rental thing. So it wasn't a sophisticated analysis like it maybe should have been. I don't know.

Brandon: Well, I don't even think so.

Josh: That's fine. Yeah.

Brandon: You don't know what you don't know when you're starting out, but I think that's a really, really good way for people to get started with real estate, is just turning their our own homes into property, especially you can get home owner loans for a lot cheaper than you can usually get investment loans and the rates are usually better. And you can just move and keep doing that up to a certain number of properties. So it's cool to hear you say that. Cool. All right. Anyway, moving on, back to your story. So what happened next?

Josh: Yeah.

Jimmy: So then that worked out okay. So then, I found a multifamily, a triplex, that was empty and it was just a great investment. I thought about the numbers anyway. We got it for 80 and all three sides could rent out with for 550 a side at the time. So the cash flow was pretty awesome with that. So that is what really got me into multifamily where I’m at now. But feel free to interrupt if you have any questions obviously. But during that…

Josh: I don't have questions.

Jimmy: Okay.

Josh: We're polite. We don't interrupt.

Brandon: Okay, I’m going to interrupt. I do have a question. So…

Jimmy: Okay.

Brandon: Eighty thousand. You said 5500 a side?

Jimmy: Yeah, 550 a unit, triplex.

Brandon: Okay, yeah, 550 per unit. So you're bringing in… do my math homework, 1650 a month on an 80,000 investment. That's better than the two percent rule. That's great. That is awesome. All right. How did you find that good deal?

Jimmy: I've had the best luck in not doing anything. I've with the MLS and just finding those for-sale-by-owners signs. This was like a classic. It was some sign stuck in a yard in a street that nobody goes down.

Brandon: Nice.

Jimmy: Yeah. Not the best move if you're the seller, but it was a good move for us because I don't know. It was a great area town, but was just not a through street. Nobody went down the street but the three people that lived on it. I don't know. That's how I found stuff. Just unfortunately, I don't have a systematized process online, but I found my best deals like that.

Brandon: Was it an MLS deal, with that listed?

Jimmy: No. That's my thing. I've only bought one house, the one I'm in now, and it was in MLS. It was very exogenous circumstances how I get a good deal on my current house I'm living in. But normally, I just don't have… I don't know. It was just a waste of time dealing with the MLS. I'm just speaking of me. I'm sure there's a hundred thousand realtors listening to this podcast and was like, "Well, because you're doing it wrong." And you're probably right. I'm sure I am. I'm doing everything wrong, I'm sure. But yeah, that just work for me. Yeah.

Josh: So Jimmy, first of all, can you please define exogenous? That's a word I've never heard in my life.

Jimmy: Just very extraordinary circumstances. So, yeah.

Josh: Okay, nice. No, it's good. It's just a word I've never heard. I assume it's something like that. But we're here to learn, and I'm learning.

So it sounds to me like your method, your technique is to go on a map, find every dead end street in your area, and then basically circle those dead ends once a week, once every two weeks, hoping that somebody on those street is doing a FSBO, and knowing that no one else is going to ever see that property, and grabbing it and getting a great deal. By the way, which, if that was what you're doing, it's kind of a good idea – very labor intensive but a very cool strategy.

Jimmy: That's pretty much it. I mean, I love…

Josh: For serious?

Jimmy: Yeah. I mean, I love it, because I have a defined area. I'm not driving around the State of Tennessee. Look, I have a defined area that I like, and just the side streets, dead-end streets. And people just throw like these for-sale-by-owner signs out that get stolen. So most of the time, it's interesting with these for-sale-by-owners, the seller doesn't think it's moving fast but in reality, their signs are getting stolen. So that's really the reason…

Josh: And now, are you the guy who's stealing signs? That's a good question.

Jimmy: No.

Josh: Come on, Jimmy. This is confession.

Brandon: I can see that being the next big 997 training course on how to get a good deal, is to steal all the signs. That actually worked.

Jimmy: Extra cash flow.

Brandon: Yes.

Jimmy: Sell it on Craigslist. Yeah.

Brandon: There you go. Wow, that's impressive. So Jimmy, how did you actually finance that triplex then? Did you pay all cash for that or did you get a loan?

Jimmy: Okay, great question. This transaction is why I got really interested in real estate finance because, just for a back story, at that time, I was a partner at a hedge fund. I was bounded with a business partner, and he was an executive at an insurance company.

So at that time, we've had 800 plus credit scores. We had over $100,000 in liquidity. We made great money. No real debt and we couldn't get a loan. It was crazy. We called different… I was in-charge to get those financing and he was in-charge of like, "We were going to fix it up." So he was in-charge of dealing with the contractors.

I called them after like the 10th bank. I was like, "Man, we're having a problem. We can't get a loan." He was like…

Josh: You can buy the bank.

Jimmy: Yeah. He was like, "What are you talking about?"

Josh: Like, "I'm going to pay cash for the bank but I can't get loan from the bank", right?

Jimmy: Yeah. He's like, "What are you talking about having trouble getting a loan? We don't even need a loan." I was like, "I know." This is like the craziest thing I have ever experience.

So when people complain about bankers and banks, I completely understand. It's crazy.

Brandon: What do you think your maybe mistake or maybe with just the times? What happened? Why was it so bad? Why were you getting turned down? That probably leads us into our next conversation about what you do nowadays. But I'm just curious, what was it that was wrong?

Jimmy: I mean, that's my big platform, is like what I like to talk about on the BiggerPockets blog is, I was just going about the process the completely wrong way. So this is my big platform, okay, Brandon, is that people go – generally, investors go about financing, and even investing, I would say, the exact backwards way. Everybody goes and hunts for a deal, and they spend all this time analyzing and looking at deals, but they spend very little time looking and figuring out a good financing structure and developing financing contacts and banker contacts.

So that's my big platform, is I was just going about the process the completely wrong way. This was the fall of 2008. The world is coming to an end. And, of course, I'm calling all these banks, and they don't know me, I don't really know them and I'm asking for a loan. And even though it was just like 60, 70 thousand bucks, there was no relationship there. They didn't know my finances. They didn't know my story, my business partner's story. So that's my big platform, and that's [15:50]. Yeah.

Josh: Nice. That's great.

Jimmy: Yeah.

Josh: That's really great. So you, ultimately, I'm guessing, you then went and transition from this guy who didn't know the banks to somebody who went out and just really just started to get to know all these guys.

How do you do that? What's it about? What do I do when I show up at the bank or when I call them and say, "Hey, I’m Josh. I found this great deal. I'm doing this professionally now. I'd love to start working with your company." What does that conversation look like for the typical person…

Jimmy: Yeah.

Josh: And what does it look like for somebody like you who's getting them to say, "Yeah. Things were good with Brandon. Hey, we want to extend you a new line of credit", or any of the guys who are out there really killing it.

Jimmy: Yeah. Great question. And let me take a step back from that, Josh. Here's what you really want to do, is treat this like a sales process, okay? So most people come in and they already have their tax returns and they're just ready to throw up on a banker with all their tax returns. Instead of doing that, reverse the process in you be the prize, okay?

So when you go into a banker's office, don't just tell him your deal and this is what you want. Reverse the process and you tell him or you interview the banker and you ask them what kind of, "What loans are you looking for?" I would reverse the entire process that most people do. And that's what I'll have to teach on the BiggerPockets blog and all kinds of lessons.

Josh: So essentially, you're going from, "Please, please, give me a loan" to, "Listen, we're interviewing a lot of banks. We're looking at various products to see which are best for us. I'd like to hear from you what you can offer to me". Not, "Oh, please give me money", "What can you offer me?"

Jimmy: Exactly.

Josh: Is that kind of what you're doing?

Jimmy: That's exactly. And I know you guys haven't done your quick tip yet, but if you are listening to this and you're in your office, I want your listeners to write this down right now. This is something you can do. If you're listening to this on a Monday, this is something you do this week that takes less than an hour. They can have a dramatic difference in your real estate investing. Write down two community banks, okay? And then, write down preferably two small community banks. Then write down two small credit unions, and then two maybe regional banks.

So now you've got six contacts. Go on LinkedIn. Try to find a commercial banker at those financial institutions and call them and try to meet face-to-face, if you can, and do exactly that. Interview them and ask them. Before you present yourself and just like, "Hey, I'm Brandon Turner. I invest in multifamily properties", ask them what kind of loans are they looking for. If they're not looking for multifamily properties to finance, ask who is and they'll give you referrals.

Brandon: That's a good idea. That's a good tip. I can actually kind of testify to that. I think I mentioned a month ago or so here on the podcast about for the first time ever, I had a banker actually call me and want to develop a relationship. And I felt totally on the other end of that thing. They were trying to get me to come in and I was the prize, just like you said. For the first time, I never felt like that before. That was just a fundamental shift in the way that I think in terms of before I was always, always begging for things, that I need things. Granted I still need things, but it became a kind of cool fundamental shift that I encourage people to do as well, is start thinking of yourself as the prize. So, very cool.

Josh: Yeah. I mean, I think there's a definitive distinction there in just the thought process. Bottom line is you're not begging. You're not saying, "Hey, come on. This is a great deal." And like, "No, no, it's not that great a deal." It's not about the deal anymore.

I say the same thing when it comes to property management. Most people, especially when they start, will go and they'll meet a property manager, and they're kind of trying to sell their property to the property manager. You can't do that. It's the total opposite. It's, you're interviewing them; they work for you, and you have to understand that.

The same thing, I think, goes with the banker. They work for you in many ways. If you can shift the thinking to, "They work for me. They're providing my loan. I'm granted. I’m servicing it. I'm paying it. I'm taking care of via this property", suddenly you're in a whole different ball game. You're no longer like, "Oh, I'm desperate for money." Now, it's, "You're competing against four, five, seven other companies who have the potential to get in on this opportunity."

Jimmy: Absolutely. Yeah. And if you can take one thing away from this podcast, I mean I would say that would be it, is reverse the podcast with whoever you're getting a loan from, because in reality lending money is a commodity. You should work that to your advantage.

Brandon: Yeah, I agree. Let's talk about real quick, because a lot of this hinges on what you do for a living now, what your career is. What exactly do you do? And can you kind of tell us about that?

Jimmy: Okay, great question. So I'm a bank credit officer. So when you go in, and like you were saying, I guess a loan officer took you out to lunch of something, Brandon, and that's like the sales guy and he's wanting closed loans, I'm the opposite of that. I'm the guy who says yes or no. So I'm like, "I want to do your deal, Brandon, but the underwriter says…" I'm like the bad guy that took blame. So I'm the guy like the risk management.

Brandon: I hate that guy.

Jimmy: I know. Yeah.

Josh: Everybody hates that guy, Brandon.

Brandon: Except for when he says, "Yes", then everyone loves that guy.

Jimmy: Yeah.

Josh: But they don't really love him because he may say no the next time.

Jimmy: Right. That's the only reason they keep you hidden. You never meet the underwriter, right? You just always say, "All right, in underwriting." It's never like, "Oh, Jimmy said no." It's always just like, "Oh, the underwriter said no."

Josh: Otherwise they'll come to your house.

Jimmy: Exactly. Exactly.

Brandon: He's the little guy that hide in the back closet.

Jimmy: Yeah. So being an underwriter and a real estate investor is like being an IRS agent and doing your taxes at the same time. It's a little weird.

Josh: Nice.

Brandon: Yup, yup, yup. That makes sense.

Josh: That's great. That’s great. So then, what is it, other than what we just talked about, as the underwriter, this is a pretty unique opportunity for us and for the listeners to kind of learn a little bit more on the inside, what is it that you're looking for? As an underwriter, we already talked to your bank. Your bank wants my business - your bank being everybody but you so far, the little nasty angry guy in the backroom, what do you want? What are you looking for?

Jimmy: Yeah. Great question, Josh. So all banks have credit policies. So before I put anybody to sleep, I'm not going to talk like numbers and exact credit policies, but I will talk about all underwriting, whether it's with the community bank, credit union; I've been an underwriter at a Fortune 500 company; but even a hard money lender, we all have a five C foundation framework which all lending pretty much goes through. So I'll talk about that if you want me to, the five C's.

Josh: Yeah, we do.

Brandon: Yeah. Definitely.

Jimmy: Okay. So if, again, if your listeners are at an office, it might be good of you to write this down. So, the five C's are: character, capacity, capital, conditions, and collateral.

So the first one, character, that kind of goes back to what we were talking about before about relationships and just developing that relationship with your banker. What kind of character, reputation do you have in the community. You obviously don't want to make a loan to a convict or whatever. So that's that. That's pretty straight.

Brandon: Josh, you're out.

Josh: Yeah.

Jimmy: All right.

Brandon: He's giving me the stink eye into the camera. Anyway.

Jimmy: All right.

Josh: Speaking of convicts, by the way, just to interrupt, my next door neighbor's house was broken into last night. And I'm like, "God, man, what's wrong with people."

Brandon: Hey, Jimmy, I know who broke into his house.

Jimmy: Oh, man.

Josh: Oh, shut up.

Brandon: He was looking for some new clothes or something.

Josh: Oh, god.

Brandon: All right, back to character.

Josh: Oh, geez. Yeah, back to current show. Sorry, I had to digress there, Jimmy.

Jimmy: What…

Josh: Speaking of character, obviously, I need to find a co-host with better character.

Brandon: Ouch. Anyway…

Josh: All right, character. Let's go back to character.

Jimmy: All right, character. So we got character. Capacity is the next one. So this is where the analytics really come in. So your capacity as a borrower, it's basically like, "My name is Jimmy Moncreif. I'm the borrower. How much debt can I personally handle?" Or my company is called, let's say, Moncreif Incorporated. How much debt can Moncreif Incorporated with the personal guarantee, how much can that cover? How much debt service can he cover? What's his liquidity situation like? So that's really where the analytics come into play.

So the next one is capital. Again, that's a very analytical C on how well-capitalized are you? How much money have you personally invested in the business? What's your balance sheet looking like? Things like that.

Conditions is another C. In the fall of 2008, I bought this multifamily property. Honestly, it was a horrible economic conditions. But now, it's not a good time. Banks look at land, raw land, as very bad. It's a bad time to buy land, I guess. So, we kind of look at that.

You guys have been talking a lot of about distressed areas. I know that's a hot subject in the forums like Detroit, right? So honestly the conditions in Detroit aren't great. You have to just take that into effect when you're underwriting.

The last one's collateral.

Josh: Jimmy, really quick.

Jimmy: Yeah.

Josh: Jimmy?

Jimmy: Yeah.

Josh: Yeah, yeah. Can you not bash on Detroit, please?

Jimmy: No, I'm not bashing anything.

Brandon: Uh-huh. Yeah, we don't ever bash Detroit on the show. No, we love Detroit, right? Yeah, whatever.

Josh: All right.

Brandon: So anyway…

Josh: So let's get back to it.

Jimmy: All right. So the last C is collateral. And that's the hot topic. That what the vast majority of people that email me on my blog or whatever or ask me in the forums like, "How do I get around this 80 percent LTV rule on the collateral", and things like that. So that's why appraisals are required and things like that, but they want to look at, obviously, the appraised value and just however else they can get a good collateral value for your lending capacity.

Brandon: All right. So, the five C's are: character, capacity, capital, conditions, and collateral. I actually would love if we can just dive into each one of those just a little bit more.

Jimmy: Absolutely.

Brandon: Would my assumption be correct that you would say if a person can master all five of these, then a loan would be no problem. I mean, is that kind of the ideal?

Jimmy: That's absolutely correct. Yes.

Brandon: All right. So that's what I was thinking. If we talk about each one of these in a little bit more detail, how can a person improve each one of these? So we'll just start at the top.

Josh: Yeah.

Brandon: Yeah, character.

Josh: It's a great idea.

Jimmy: Thanks a lot.

Josh: You could stop being such a….

Brandon: Thanks. How do I improve my character, Jimmy? I mean, I'm going to show up to the bank…

Josh: As it regards to the bank, of course.

Jimmy: Okay. I was going to say, Brandon…

Brandon: Yes.

Jimmy: …I think you're going too far. I think it might be…

Brandon: I'm gone.

Josh: It won't be hard. A step-up won't be difficult if you…

Jimmy: For the rest of the BiggerPockets listener, what you can do character-wise? Several things.

One, the best thing you can do from a lending perspective is just get not just to walk into a bank not knowing anybody, but just get referrals. So for me, even for me, I'm a banker but when I got the RIA every time… I’m actually organizing a BiggerPockets meetup and we've met a little bit here in Chattanooga, and we talk about that every meeting. We talk about who you guys are getting a loan from? Who's lending? How's that going? In turn, they're not only just telling me what bank are they dealing with, but I will ask them, my friend Thomas, who I met on BiggerPockets was like, "Hey, can you let John Smith at ABC bank? Let them know I’m going to call and just like to talk?" Because she gives that referral, my character is already in a better standing than if I was just to coldcall John Smith at ABC Bank.

Brandon: That is such a good tip. That's such a good tip. I don't think a lot of people do that, right? I get together with other land lords and we talk about our latest land lording story or tenant story or whatever or I'll share my maintenance guy, "Hey, you should use this guy." But I don't think I've ever asked one of my landlord friends, "Hey, who are you getting you getting your loans from these days? Who can you introduce me to?" That is an excellent idea.

Josh: Yeah. Well, now my thought on that is this, and then I’m curious if you've run across this. My thought is: a.) a lot of people are going to be stingy about that. Like, "Oh, I'm not going to share that. You'll lose only so much money, and you're not going to get…" And they talk like that too, by the way, when they do.

But the whole idea, even at BiggerPockets, I'm going to digress for a second, like when I first started BiggerPockets, a lot of people were like, "Well, why would I go on this site and help other people on my area? Why would I provide my secrets?"

Well, there's no secrets. But I think people still have that mentality. So my question is, has that been something you've run across? And if so, how do you kind of get around it?

Jimmy: Man, that's an interesting issue. I've never ran into that, especially all the people I've met on BiggerPockets locally here in Chattanooga that that's never been an issue. We're always helping each other out.

What I will say, and I know that we don't have enough time on this podcast forever, and I've talked about complaints about banks, but one big complaint that I see that's false is that all banks are not lending. Obviously, that's just like saying I own a rental property, I don't rent anymore. You know what I mean? I just like to keep my houses empty.

What that really is, is like banks aren't making that type of loan. So like in my situation in the fall of '08, they weren't making multifamily property loans. I've crossed a ton of banks who weren't making that type of loan. So when you hear that, a complaint from somebody, like, "Oh, I love my banker but they don't make hotel loans." That's, again, going back previously in the podcast, is why it's important to go interview banks, and go interview bankers to see what type of loans they're looking for so you don't waste your time.

Brandon: Yeah.

Josh: Good advice.

Brandon: A ton of sense. Yeah. Very cool.

Jimmy: Yeah.

Brandon: All right, next one. So we talked about character a little bit and improving that capacity. So let's talk a little bit more of that. How does somebody improve their capacity?

Jimmy: Okay. So this is really driven a lot by your history, your borrowing history. I hate credit scores. I'll have a big tangent on credit scores. I can go off on that tangent if you guys want me too, but they…

Josh: Yeah. Sure.

Jimmy: Okay.

Josh: The reason I say yes is this. I mean you've got a unique perspective as somebody. Again, it's rare that we get to talk to somebody in your position, in your shoes. I think, for me, I'm fascinated. I know a credit score it's just a number, right? It's an algorithm.

Jimmy: Exactly right. The credit score was developed for like the lowest common denominator in lending, right? When you go in and you ask whoever is at the teller line, "Can I get a loan?" And she's like, "What's your credit score?" And it's like, "Oh, it's below 800." "No, you can't get a loan."

A credit score doesn't give any value to your liquidity, to your income. I have seen the craziest circumstances. I've seen people with eight million dollars of cash, no personal debt and a 480 credit score. I've seen the craziest of circumstances.

But mortgage people, they just rely on them as like a foundational element of their underwriting. But I'm a commercial underwriter, so I just take it ridiculous. Because just last week, I saw where somebody paid off a million dollar line of credit and their credit score went down. So their cash last year was around 50,000 or cash position. Now, it's around 300,000. And they paid of a million dollar line of credit so they have less debt, and their credit score went down about 100 points.

So I mean it's ridiculous to rely on a credit score. So that's another quick tip as you guys like to call out.

Brandon: Quick tip.

Jimmy: So write this down, if you're listening to this in an office. If somebody turns you down for a loan for a credit score, don't just hang up and get mad. I know it's easy to do, but here's the question to ask specifically: what in the credit score concerned you, okay? So then that forces the issue of they actually have to read the credit score and figure out what's going on.

I saw this three weeks ago. This guy had a low credit score because he had a maxed out line of credit on his HELOC. His HELOC was maxed out. Well, he didn't have a first mortgage and it was like a million-dollar property and his HELOC was 300 grand.

So the credit score is saying, "Oh, this guy's maxed out." It's like, "No, that's not the case at all. You got a three percent HELOC." Of course, that's a good deal.

So ask specifically what concerns them about their credit score. A lot of times, that will open up the conversation to where it's a fixable problem.

Brandon: Yeah. That's great advice. I'm glad you went on the tangent, man. That's really, really good advice.

Jimmy: Okay. Great. So that's capacity. A lot of that deals with, like I said, your borrowing history. And unfortunately, with those annual fees and credit cards and all that stuff, it may now just tear you up. So just, whatever. Try to get that fixed up and get a free credit report, if you can.

And also, like, you really want to, with the ratios depend on your liquidity ratios and you really want to have a fair amount of cash. So when we were getting that loan for the triplex, it's like they did the analysis of how long can I go with this triplex being completely empty before stress starts to happen? So you want to position yourself for more capacity for your debt.

Josh: Yeah. Got you.

Brandon: What about then….

Josh: That's great.

Brandon: Let's say I wanted to go out and buy an apartment complex, let's just say.

Jimmy: Yeah.

Brandon: Or any like a large one, let's say 100 units – maybe five, ten million dollars. There's no possible way that me, as a single borrower, could ever pay that mortgage, right? I mean, there's no way I will personally ever have the capacity to do it. So how much does that play a role into things into the property itself being able to hold the capacity verses me personally holding it? Where does that…

Josh: It's a great question.

Brandon: Thank you.

Jimmy: Yeah. Awesome question, Brandon. That’s a very ironic thing. I don't know when this spike has us getting scheduled, but who is the McElroy?

Brandon: Yeah, Ken McElroy.

Josh: Ken McElroy. Yup.

Jimmy: Okay. He has this quote, and I will be misquoting this, but it was something to the effect like of why he focuses strictly on bigger developments. It’s like it takes the same amount of time but it's more money.

So I have been thinking that too, because it's very ironically, it's almost easier to get a bigger loan like that than it is a smaller one. Because that's exactly right, Brandon, you're not on any kind of five, ten million dollar loan, like a big hundred plus. The lender already knows. There's honestly no point in you being… I mean, you're going to be a guarantor in the loan if it's with the bank usually but that's not going to constrict you to not getting that loan.

Brandon: Yup.

Jimmy: So, yeah. That's a great question, though.

Josh: Jimmy, let me follow up on that.

Jimmy: Yeah.

Josh: I mean, are you saying, the average guy, take an average middle class person making six plus figures, got a couple of rental properties, things are going well. Could one of those people then essentially go out, find a deal on a big multifamily, like Brandon suggested, a hundred unit at ten million bucks, say, and essentially present that to you and say, "Listen, I know the guy who's selling. We've talked to him. Here are the numbers." It looks like a good deal. Would you consider that average Joe, given all the other C's, if everybody's pretty much on the up and up, but nothing spectacular beyond just the deal itself?

Jimmy: Yeah.

Josh: So where would that come into play, because it seems like that really has to be the most important factor given everything else?

Jimmy: Great question, Josh. For disclosure, at the bank I was at before, it was a Top 10 bank, and I made 10, 20 million dollar loans all the time. At the bank I’m at now, I don’t or max legal lending limit is three million. But one of my neighbors, he'd had a multifamily lending at Wells Fargo, and his minimum loan amount is five million. So we actually just talked about this a couple of months ago. So I'll just tell you what he told me, and that was his deals are evaluated strictly on the deal.

However, from an underwriting perspective, what's important for the personal guarantee is obviously, you can't be in financial stress personally. That's one. But two, maybe the more importantly is your experience in that. So like me, I've never owned a hotel in my life. So it's like if I wanted a 20-million dollar loan for a hotel and I was going to run it, that probably wouldn't be approved because I don't know anything about the hotel industry.

Brandon is actually a good example, because you've got some experience in multifamily, is people that continue to do well in multifamily and just scale up, then they will. Because you've got that experience in multifamily and you just want to operate on a larger scale, then it's really that offers no experience that matters more than the financial.

Josh: Got you.

Brandon: Yeah. And that's actually a good reason why…

Josh: That's great.

Brandon: People often say, "Should I start with a large multifamily or start with a small one?" We ask that kind of question to Ken McElroy on show 52 I think it was.

Josh: It's somewhere in there. Yeah.

Brandon: And he actually thinks you should start with a single family. I was actually surprised, kind of taken aback when he said that, because a guy who does only apartment buildings, that's all he does, why he would recommend that?

But I think that's exactly why. You start with one house, then you go with another house, and may be a duplex and a four-plex, and you got a 20-unit apartment. And by that time, each step adds to that capacity aspect we're talking about and the reputation.

If I were to go in right now and try to go get 100-unit apartment complex, I probably would have a lot easier time than most people because I've got that built-up reputation.

Jimmy: Yeah. Have you ever looked at a HUD loan, Brandon? A large…

Brandon: Not a large one, no. I'm actually curious about that, that you know anything about that.

Jimmy: Well, I don't. But going back to my neighbor, it was very interesting. Again, he's had a multifamily for Wells Fargo in this region and he came from California. These HUD loans, he said it's like a pregnancy. It's like it's fun in the beginning and it's painful. But doing loans, these five million dollar loans – so these are hundred plus unit apartments that he's doing - he's doing 35 year M's at three-and-a-half percentage straights, with five percent down. It's like, how can you make money with that?

Josh: That's crazy.

Jimmy: Yeah. But again it's not easy. It's a lot of paperwork. It's not easy to get on, but what is easy, right? And it takes nine months. But if you can get that type of financing structure, a 35-year M, and it's government-guaranteed mortgage, that's a good loan. I mean, that's a good structure.

Josh: Wow.

Jimmy: Yeah.

Brandon: That’s awesome. I was actually just talking with Ben Labovitch about that the other day, how he mentioned he wanted to buy like a large property. And I said, "Well, you need a loan." He's like, "Oh, a HUD loan." I'd never considered that before. You hear about HUD for the small three-and-a-half percent down single family homes or small multifamilies, but there is a whole world about there of FHA or whatever loans for these large properties.

So someday, we'll have to actually talk to a major apartment guy that use them. That'd be really a fascinating show.

Josh: Yeah. If there's somebody who's listening who actually uses these HUD loans, we'd love to talk to you. Yeah, hit us up for sure.

Brandon: Cool. All right. Moving on to the next one, we talked about character and capacity. Talk about capital. That was, if I remember right, my memory is terrible, but that's like how much money you have, right? I mean, essentially?

Jimmy: Yeah. You know, what they want to see, especially as a sort of form of commercial underwriter, what I want to see is, are we on the same side of this? Is the bank a true stakeholder in your company? Are we both positioned for benefit? Are you at risk in this as well as I am? Right? So have you put money into this company and left it, what's the equity position like of your balance sheet?

What you don't want to see is a company that's just, every year, it's in the overdraft and it's draining; the owner drowns the cash out of the company and there's nothing left, and it's just a very weak balance sheet. So that's a very balanced sheet driven issue right there.

Josh: Okay. Got you. Got you. And obviously, to improve that, you draw less of the money.

Jimmy: Yeah.

Josh: The company would leave cash in there and make smart decisions for your money, not just yourself.

Jimmy: Yeah. The 80 percent LTV, I mean that's a regulatory driven number, but there's all kinds of ratios in there. It's like, let's say you get a loan on some equipment and it's a 70 percent LTV, I mean all that's regulatory driven and grant policy driven. But it's really looking what's behind the scenes of, like, the banks are just wanting to see, make sure that you are on the same page and both of you guys are at risk. So that's what you're looking for.

Brandon: Yeah.

Josh: Nice.

Brandon: What about specifics? How much money… I know that you can't really answer this directly, but let's just say I'm looking to refinance half a million dollar apartment complex – a small apartment. How much…

Josh: Just hypothetically, right?

Brandon: Hypothetically.

Jimmy: Of course. Yeah.

Brandon: If I needed to re-finance my apartment complex, do I need a hundred grand in the bank, do I need 500 grand or do I need a thousand dollars? I mean, what would you feel comfortable as an underwriter scene?

Jimmy: The cash in the bank isn't that important as the appraisal of the property. I would be happy to give you a $400,000 loan. And let's say, because you've invested in some refurnishing and maybe your cash position is a little low, that's fine to even do a cash-out refinance and maybe pull it up to 85 percent LTV. So that's not as important as just making sure the appraised value of the apartment complex is fine.

Josh: Okay.

Brandon: I'm self-serving in that because I do need to refinance my apartment, and I've been talking with this local bank, which to bring us back to earlier. I was talking to the guy who refinanced my personal house, and then he's refinancing two of my small multifamilies. I mentioned to him one day, "I got an apartment I need to do." So he said, "Hey, let me introduce you to our lead commercial lender in the company."

So the three of us are sitting down for coffee next week sometime or the week after when I get back from vacation and we're going to talk about that. That's exactly what you're talking about there – introducing and relationships.

Josh: Nice.

Jimmy: Yup. We’ll get back to the scenes. But I want to tell you two things, Brandon.

Brandon: Yeah.

Jimmy: Okay. One, try to find another bank of that size, okay, that's a direct competitor to that bank that's courting you right now for a loan, okay? Then ask to speak with their commercial banker and tell them the situation and get a rough approximate for range, okay?

There's a way to do it very artfully. What you don't want is to make both parties mad and not want to deal with you, obviously. But there's a skillful way.

I just did this actually. I just got an unsecure line of credit. It took a little while. I said, "Are we still good, because this other bank, they're asking for my business as well. And I can just go there, if that would be easier for you guys". And they were, "Oh, no, no, no. Do you need [48:51]? What do you need? What do you need?"

Josh: Nice.

Jimmy: So that's the first thing to do. And the second thing I was going to mention – and this isn't necessarily for you. Before I went out, talked about how I called 10 banks and I couldn’t get a loan and I was just doing everything the wrong way. That happens a lot when people call around and they get a contract that's on a duplex. This happens a lot with the duplex and a triplex – is to call and will get a hold of somebody, the person on the frontline and they will be like, "Oh, we don't make this type of loans", and then they'll just hang up.

Well, that's not true at all. Your bank makes this type of loan. You're just talking to the wrong person. So ask to speak with the small business banker or the commercial banker, something of that effect.

It's very interesting. If you're dealing with a big megabank, don't ask to speak with the commercial real estate department because they just deal with the megatype. If you're a full-time professional, the Ken McElroys of the world, right, and has the big publicly traded. They just deal with that. So don't call and act like you're the man and you're about to go public next year. But if you're just needing a loan on a duplex, ask to speak with the small business banker or like a commercial banker. So that's really…

Josh: That's awesome.

Jimmy: Yeah.

Josh: All right. So we talked about character, capacity, capital. Why do we jump into conditions here?

Jimmy: Okay.

Josh: So can you expound upon conditions a little bit more so we can kind of get a deeper look?

Jimmy: Conditions is what you have the least control over, and that's just like your general economic climate.

But here's the important thing to remember when you're writing a letter or putting together a presentation for your lender, which I think is a great thing if you're serious about developing a lending relationship. So, the conditions. Okay.

So I think what the lender wants to see is they are lending on a productive asset, okay. So that's the important thing. You have a tough time getting loans in the warzone of your Detroit or whatever, it's because the conditions are bad, right? That's why you have a tough time getting a loan on raw land, is because it's an unproductive asset. So that's what the bank wants to see, is are you improving this asset? It's a good asset.

Josh: Yeah. Roger that.

Jimmy: All right.

Josh: So is there anything beyond just the simple improvement of that. So ultimately, it sounds like this is the one that's mostly out of your hands.

Jimmy: It really is.

Josh: Okay.

Jimmy: Again, this is all lending. It's not just real estate. Let's say you've got some BiggerPocket listeners that own some high end hotels. So they're very sensitive economically to the economic downturn because it's very cyclical. So that's what…

Josh: Yeah.

Jimmy: Okay. So that's conditions.

Josh: All right. So conditions are pretty much out of your hands. But let's jump into collateral and maybe how we can improve that.

Jimmy: All right. Great. And collateral is maybe the most important, such as cash flow, of course, servicing the loan, because with banks – and I’m just speaking for banks here – they want to have cash flow paying back the loan obviously. So that's what you need to show your lenders.

With your collateral, they want to make sure it's good collateral, but they also want to make sure that it's enough that if the loan goes bad that they'll have enough collateral in a stressful situation to liquidate that collateral.

But here's a tip that your listeners can utilize, because this happens a lot. People get turned down because their appraisal is bad, right? I mean, that happens all the time and that's happened to me, right? But here's what you can do, is if you have an investment account somewhere or something else you can pledge, or let's say maybe a better example is if you want a line of credit because [53:17] lines of credit, and unsecured lines of credit are really hard to get, is pledge an investment account or some other kind of collateral. Like maybe if you have a car paid off or whatever, so you can pledge that as collateral for your line of credit or for any kind of loan that you want approved if you get a bad appraisal or something like that happens.

Josh: Jimmy, I got a question.

Jimmy: Yeah.

Josh: Sounds kind of like what Brandon does at the poker table.

Jimmy: Yeah.

Josh: Yeah. I mean, isn't that what that is? Isn't that like, "Hey, we're all playing poker." And he's run out of cash so he throws his car keys down? I mean, isn't that what it is? I mean, I almost took his car a couple of times.

Jimmy: You got it. You got it.

Brandon: But it works. I mean, what do they call that? Like cross collateralization or whatever?

Jimmy: Yup. That's it. Yup, that's it.

Brandon: I mean, obviously, that increases the risk quite a bit because you'll lose it all, you'll lose it all.

Jimmy: Yup. And another problem from the lendee perspectiv if something gets cross collateralized, is, like you were talking about refinancing your apartments, Brandon.

Brandon: Yeah.

Jimmy: Let's say to get those awesome rate, you got to pledge this other little single family home that you own [54:35], and you just cross collateralize and no big deal. Well, it's a really big deal if you want to sell or refinance again because you can't split up those assets.

Brandon: Yeah.

Jimmy: You can. I mean, you can do anything, but there's going to be a big fee involved. It's like a big headache. A lot of lenders don't want to deal with it. So there might be a pre-payment penalties. So that's another issue. Yeah.

Josh: Okay.

Brandon: Yeah, that makes perfect sense.

Josh: What do you recommend… sorry. I was going to say, what do you recommend when it comes to cross collateralizing? Obviously, we're not going to throw down your big fuzzy dice or your diamond ring. We're talking about something more substantial. Is it typically a small rental properly or something like that?

Jimmy: Honestly, it depends on the situation. But what I am personally am looking to do this year is to utilize – I have like a small little investment account with stocks and stuff and just to pledge that because here's the thing: I know the previous guest talked a lot about having an investment account for diversification, if there's stocks in that bum portfolio throwing off a dividend yield or something around five percent, and you get a line of credit around that same range, I mean it's almost like a zero percent loan, right?

Brandon: Yes.

Jimmy: Okay. And if it stocks, hopefully, I know they crash and burn sometimes, but hopefully in the long term they go up a little bit… and this is all driven by mistake I made. I've made every mistake probably. The first house we bought, I like sold off on my stocks, even some IRAs I had, right? I paid all these fees and penalties. Now I know that you don't have to do that. All you have to do is pledge those and use that. You don't even have to sell them. You just pledge that so the lender is in a good position collateralized to make you a loan.

Josh: Yeah. That's great. Yeah, that's great.

Jimmy: Did that answer your question, Josh?

Josh: Yeah, yeah it does. It does. So I'm going to kind of take it, I guess, one step past the collateral. I think we've pretty much covered that. I think these five C's are fantastic. I know Brandon and I didn't intend on having this entire show surround the C's. But I think this is superb information. And I'm sure very few investors know about all this, especially the newer guys, so thank you.

But really quickly, how important are financial statements, business plans? Do underwriters care? Do those come into play or they just kind of tools for supplying the other information?

Jimmy: Yup. Great simple question. Here's my not so simple answer, is if you want to really establish yourself, if you're serious about real estate investing and you're serious about want to develop relationships with your bankers, this is what the professional real estate investors do, right, is they make me a presentation that goes through all the C's that we just mentioned, okay, like, "This is the deal. This is my financial statement. This is my tax returns."

Ironically, the bigger deals that I underwrite, they get done faster because these professional investors, it's very organized and I don't have to dig. So they get done faster than these little $30,000, $50,000 loans because then I have to go and hunt their information. They don't email in their tax return. Everybody gets stuck in email hell. Nobody likes that.

So if you're serious, it doesn't take that much time at all to develop a presentation of all your tax returns, PFS, blah, blah, blah, a little banker's book, and take it around.

Brandon: Yes.

Josh: So ultimately, what you're doing is handing on a silver platter all the information that the banker needs. And by doing that, if they're looking at you versus the other guy, that competitor that may not have wanted to share the banker with you, they're going to lose no matter what, because frankly you're organized, you're showing your level of professionalism. You're actually, I think, by doing so, improving your character by saying, "Hey, I'm a professional. I know what you guys need. I know what you want."

Jimmy: Absolutely. That's the thing. The reality is, going back to what we were saying earlier about the podcast about reversing this process and making it like a sales process, you're just making it easier because if you're dealing with a larger loan, right, for a larger apartment or complex, they're going to have to take this to a loan committee, maybe the board of directors, and the loan officer is going to have to sell you, right, to me - the underwriter, the credit officer. If you've just got a bunch of random tax returns and stuff, I'm like, "Ah, he's not serious. He doesn't look like he has stuff together." I don't want to loan money to people who don't have their stuff together, right?

Josh: That's great tip.

Brandon: Actually, like, I just feel like totally like bad now. I just had my banker a few weeks ago like just a pile of stuff.

Jimmy: Same like right now, Brandon.

Brandon: I know. I'm like, "Man, I am so going to change that right now." I mean, if I could summarize kind of like what kind of this whole show has been about, it's just like if you just take a proactive approach to lending in the way that we might make a proactive approach to our investing tragedy…

Jimmy: Yeah.

Brandon: …everything just works out better. It's the same road map kind of, what do you call that? I just take a road map, right? You just plot things out ahead of time and you just follow your own map – the same thing works for lending, that sounds like.

Josh: Yeah.

Brandon: And no one thinks of it that way.

Jimmy: No. But I told people to shoot the moon. Go listen to publicly traded conference calls and publicly traded home builders and publicly traded apartment complex. What are they talking about for half the conference call? Their financing strategy. What are they going to use? Are they going to issue equity or they're going to get more loans? What's their balance sheet looking like?

So, obviously they're serious to public trade it. If you want to be a serious real estate investor, treat it like that.

Brandon: Yeah. Yeah.

Josh: Right.

Brandon: That's awesome.

Josh: No, that was incredible. Really, really great stuff. We need to move on. And with that, we are going to move to the…

It's time for the fire round. Fire.

Brandon: All right, the fire round. Thirty-year fixed mortgage or 5-1 arm. Well, let's just say any kind of variable rate mortgage. What are your thoughts on that?

Jimmy: From a completely opposite, depending on who you're asking. Me, the real estate investor, I go with the 30-year all day, every day. That's pretty much all my loans. As a lender, I structure a 5-1, a 3-1 if I can get away with it.

Brandon: So it's the bank's interest to try to get the lowest possible term that's fixed and then go to variable.

Jimmy: Yeah.

Brandon: But it's our interest to go the longest possible.

Jimmy: Yeah.

Brandon: Okay. And so some were in the middle, probably as where possibly you're going to end up meeting if you negotiate some kind.

Jimmy: Yup. And speaking of negotiation, if you want to get negotiate a really low rate right now and you're okay with the risk, I mean just ask what the rate would be on a completely variable loan.

I've had several hotel investors do this because their LTV is in a great position; they're okay with the risks. They've got the cash, so they're just like, "Give me a completely variable rate. I'm fine with it." Man, they've gotten some extraordinary deals.

Brandon: Interesting. Yeah. I mean, it's risky but it's…

Josh: Definitely risky.

Brandon: That's strategy, especially if you have the cash and you can handle the risk, that's great. Cool.

Jimmy: Yeah.

Josh: Yeah. Right on. All right. No money down. It's one of those phrases that people like to pitch in sell as a way to make things happen. So is there any way that you can see no money down deal happening with a traditional loan?

Jimmy: No. I mean, it happens if you want to use collateral. Like, I was talking about either like pledge an investment account, cross collateralize it with a piece of property that you have paid off, something like that.

But a lot of the financing strategies that the gurus talk about and people ask about on the forums, I know that they work and they're out there, but generally speaking, I mean it's just you're looking for a needle in the haystack. For me personally, if you got a structure on place that can work around that, it'd be best just to go with that, versus just trying to find no money down.

Brandon: Yeah. That's great. How about this then? Next question, somebody outside of the U.S, can they still get a loan, a commercial loan? Are you working with these people?

Jimmy: No.

Brandon: These people?

Jimmy: Here's the primary problem with that, is they have foreign tax returns. That's impossible to underwrite for somebody like me. Even if Canadian tax returns, I mean you need to deal with the Canadian bank because they know how to underwrite a Canadian. So that's the primary problem with that.

Brandon: Okay. And there's probably some banks out there, somebody that does that.

Jimmy: Absolutely, like larger bank. Yeah, absolutely. Yeah.

Brandon: Okay. Cool.

Josh: Right on. Right on. So can somebody go and get a commercial loan on multiple single family houses or do they have to, because we're dealing with single family houses, do they have to go through traditional?

Jimmy: Yeah. Portfolio loans, it's really interesting. People talk about it in the BiggerPockets forum like it's this unicorn. It's really not a big deal. I mean, I underwrite loan and make them all the time. You have to have a proper presentation for your lender and you obviously have to have equity and it has to be in good position from a portfolio perspective. But they're not that hard to get for community banks, and even credit unions.

Brandon: Yeah, that makes sense. Okay.

Josh: And I know there's a bunch of players who started to really jump into the space, particularly like Blackstone with their B2R finance and others who are really targeting people specifically for these types of loans as well.

Brandon: Yeah.

Jimmy: Yeah. An that's going to be probably bigger in the future. I think that's probably how lending is going, because I know a lot of my friends that do that. They have equity investors and then they put up all cash upfront, and then they get a portfolio and then they do a cashout to grow or to pay themselves back or something like that. Yeah.

Brandon: Yeah. Interesting. Yeah, I think things are definitely changing right now. It'll be fascinating to see where it all ends up.

Jimmy: Yeah.

Brandon: All right.

Josh: Well, suddenly, there's a lot of interest in single family space which hasn't really had interest for a long time. But the wolves are starting to come in, so to speak.

Jimmy: Yeah.

Brandon: Cool. All right. Hey, let's move on to our final round of the show. This would be our…

Famous four.

Brandon: What is your famous real estate book?

Jimmy: I've thought about this for a while. Actually, I'm going to give one. It talks a little bit about real estate, but I don't think anybody's recommending it on the podcast before, but it's MJ DeMarco's Fastlane book – Millionaire Fastlane.

It sounds like a cheesy title, but he talks about building systems around real estate in the end part of the book. It's like Tim Ferriss' 4-Hour Work Week, but I think it's just different. I like it more because it's more granular and it just gives more details about building systems for your business.

Brandon: Yeah, cool. I think I remember he was the one I think Pat Lynn's podcast a while back.

Jimmy: Yup.

Brandon: Yeah. So I've heard the name. I'll check that book out.

Jimmy: Uh-hmm.

Josh: Right on. Right on. All right. How about your favorite business book? What is it?

Brandon: Favorite business book. I'm going to go with 80/20 Sales and Marketing. But I'm big in the, like, 80/20. Just how to scale a business and things like that. So I'm completely focused on Pareto's principle, so I'll just go with that.

Brandon: Okay, cool.

Josh: Very nice.

Brandon: And I'll link to those in the show notes also.

Jimmy: All right.

Josh: What about hobbies? Any type of things that you do for fun outside of a real estate?

Jimmy: Yeah. I actually like to hunt and fish, and do that here on the south. I like to ski in the winter.

Josh: Nice.

Jimmy: That's my hobbies. Yeah.

Josh: Right on. You guys have skiing down there in Tennessee area.

Jimmy: We do, but it's a little embracing. I don't like to tell people.

Brandon: Like 18 of your mountains and [1:08:42], right?

Jimmy: Yeah. It's pretty embarrassing, especially for you guys out west. But I'm going couple of week out west. So, yeah.

Brandon: That's cool.

Josh: Nice.

Brandon: All right. Last question of the Famous Four. What do you believe sets apart successful investors from those who are not?

Jimmy: One word – organization. So I would just, again, like I was talking about the presentation and things like that. If you want to just email in all your tax returns and whatever and somebody's asking you, or you want to have like a comprehensive plan, presentation, book, whatever you want to call it, and then hand that out, I mean, you're at such a better advantage strategically to negotiate, to get the loan you want. It's just a better position to be in.

Brandon: Awesome. I love it. I love it.

Josh: That is great. All right. Well, Jimmy, listen, man, it's been a real pleasure. We definitely appreciate having you on the show. I want to thank you for taking the time. And where can people find out more about you?

Jimmy: Yeah. Hit me on BiggerPockets. I have a negotiating guide; I have LinkedIn bio for everybody, and then my personal blog is realestatefinancehq.com.

Josh: Awesome. Awesome.

Jimmy: Yeah.

Josh: All right, man. Well, thank you so much for being on the show and we'll see you around.

Jimmy: Thanks, guys. Have a good one.

Brandon: Thank you.

Josh: All right, everybody. That was our show – show 55 – of the BiggerPockets Podcast. You can check out the show notes at BiggerPockets.com/show55. I don't know, man. I know I said during the show a couple of times, but that was awesome. What do you think, Brandon?

Brandon: That was awesome. I learned probably like a thousand new things that I had no idea about. So hopefully everyone else out there feels the same way.

Josh: Yeah. And we all learned that you're quite disorganized.

Brandon: I'm so unorganized.

Josh: I'm glad to know that. I'm glad…

Brandon: Yeah.

Josh: …that's been working for me and I'm just figuring that out.

Brandon: Yeah. I'm completely a mess.

Josh: Oh, man. It's not good. That was great. That was great. Well, listen, hopefully you guys enjoyed the show. Again, I know I'm super proud that we crossed our million listen milestone, so thanks again for those of you who are regulars. And if you're new to the show, get back there and check out our previous 54 shows. There's something to learn in every single one of them, so definitely make sure to do that. Otherwise, thanks for listening. Check us out on Facebook, facebook.com/biggerpockets; Twitter, twitter.com/biggerpockets.

If you're not following this on those places, if for nothing else, it's a great place to kind of keep up-to-date on new content that we're sharing. But we also share news if ever there's a problem with the site or anything else. It's a good channel to turn to to find out about what's going on.

Otherwise, if you're not active on BiggerPockets, get active on BiggerPockets. Jump in. Get a profile created. And don't just sit there with an empty profile. Introduce yourself to the community. Get involved. Ask questions. Help people out. Connect, communicate with your peers. Participate. Because what happens when you participate, Brandon?

Brandon: You make money.

Josh: Yeah. I mean, I think that's pretty fair. I mean, those people who are engaging, connecting, participating, are getting to know their peers and their peers are getting to know them. It's invaluable. So do it. Get in there and make it happen. That's about it. It's all I got for you. Thank you so much for putting up with Brandon. And, hopefully, we'll see you for the next one. Are you not going to take us out? Okay, fine. I give him the opportunity. He chose not to. This is Josh Dorkin.

Brandon: Signing off.

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Josh: Hey, hey, hey, what's going on, everybody? This is fat Joshua. I'm your host of the BiggerPockets podcast.

Brandon: What?