All Forum Posts by: Doug Smith

Here’s rant #2 for the day. I have a preliminary call in a few minutes with a person that wants to get into private lending and wants to engage our loan consulting side to assist. When we asked “what they were currently doing, what they planned to do, and how we could help.” The response was that they paid a guru to teach them how to do 100%, 2nd mortgage financing to real estate investors for purchases and down payments. I looked this person up and they have a bajillion followers/disciples (I think bajillion is a number). The guru has zero lending background…zero. They also didn’t even get into anything remotely real estate-related until 2011. They also had a professional license taken back by regulators. The guru has never seen nor have they survived a downturn. Do you see all those commercials by Baltimore Oriole great Jim Palmer touting those 100%-125% 2nd mortgage loans? Me neither. That company went belly-up during the last crash long before this guru even thought about real estate investment let alone finance. I’ve done this 33 years now. I’ve seen high-highs and low-lows. To you folks that are paying gurus to learn lending, make sure 1) they actually have a formal credit/lending background and 2) make sure they went through at least the last major crash of 2007-2009 and lived to tell about it. To those who are doing 100% financing for down payments and EMDs…a train is coming. I highly advise that you get off the tracks. End of rant #2 for the day.

We've done a lot in Plant City...both personally and financing flips/construction/rentals for customers. We're actually closing on one close to Plant City on Friday. It's safe and is in a great location. It all comes down to math. We've tweaked our model over the past 15 years and we're simply not willing to overpay like a lot of people, but if you find a deal where the numbers truly make sense, I think Plant City is a great place to invest. By the way, I've lived in the Tampa area for 26 years and, for the past 23 years, I've lived in the Brandon area near Plant City. I know the area well. 

I would love to get a discussion going over this topic to see what other "in the know" armchair economists think. 

This chart shows mortgage interest rates over the past 30 days. Rates are directly tied to the 10-Year US Treasury which are impacted by not only our market-driven economy, but also government action (or inaction). I’ve been saying for many months that I did not see a path to dramatically lower interest rates like government officials, the media, and many real estate pros were touting. Today’s economic news…heck…economic news for the last several months seem to continually be “worse than expected”. The US Federal Reserve (do they ever really help out or simply get in the way) is notorious for taking action way, way too late. One of my biggest bones that I have to pick with them is this fascination with “2% inflation”. When I studied Econ in college, we used an average 3.1% inflation rate as an assumption. When I was working for banks and did financial planning for customers, we used 3.1% as an assumption. The 2% inflation target was adopted by New Zealand in the 1980s and then other central banks followed suit.

That certainly doesn’t mean that such a low target is a good idea. The Fed under Paul Volcker and Alan Greenspan, there was no 2% target. Ben Bernanke mentioned it and then Janet Yellen and Jerome Powell are all in for 2% inflation. Damn the rest of the economy! The Fed is fixated with 2% inflation, but they are ignoring what is best for average Americans who are just trying to put food on the table. Couple with it the dramatic increase in currency in circulation caused by runaway spending by politicians of both parties and you get even higher inflation. Once again, the Fed is acting too late. Boo Fed! Thank you for indulging my rant.

HELOCs are usually tied to the Wall Street Journal Published Prime Rate (some are tied to SOFR). Prime is directly tied to the Federal Funds rate which is arbitrarily set by the Fed. With inflation pacing higher than expected and with the Fed obsessed with a silly and arbitrary 2% number for inflation, don't hold your breath on significant drops for a bit. The media and many real estate brokerages keep touting "rates are coming down". I don't see the economic indicators that lead me to believe the Fed is going to drop rates any time soon in a significant way. 

From a lender's perspective, we struggle to get good loan officers. I would love to bring more on. The issue is that a majority of the MLOs that approach us ask us what we can do for them, not how they can help us. Most loan officers don't stay in the industry long-haul, so most won't want to front you $ for licensing. If you do find someone that makes it a practice to front the licensing $, then they will likely keep a big portion of your commissions and they will have you sign an agreement tying you in for a while. We're based in Florida. The school that I have always use belongs to a guy named Jim Montrym, who's been doing it forever as is evidenced by his url: https://brokerschool.com/ . It's really not that expensive to get the NMLS licensing. If you click that link and scroll down a bit, there is a 5 minite video where Jim takes you through the process. Even though you're in TN, it's worth checking out. 

The last time I did something like that (I'm in Tampa), I had to pay a reduced amount. Do you have a title company you work with regularly in Tampa? I would call them and have them do it for you. That's what I did. They'll know the answer much better than the peanut gallery here. 

Hi @Don Konipol, I've dialed back on answering questions myself. I feel the same frustration. There are gurus all over the place with absolutely zero resume/background that are charging $10K/pop for info...which many are willing to pay. Meanwhile, I am sure you get the same calls I do where people want me to send them our proprietary modeling for free. Our time has value...so does the knowledge we've amassed. It's like the story of the huge ship with the frozen propellor. They called the repair man who took out a little hammer and tapped it on the hull. The propeller sprung to life. When they got the bill, they screamed "$1000! For striking the hull with a little hammer! That's outrageous." The repair man then updated his bill to say "$5 for hitting the hull with a hammer. $995 for knowing where to hit." I can't speak for others, but I have 33 years experience and a formal credit background from 3 of the largest banks in the world. I've been a well-regarded industry conference speaker for the past 15 years. I know my stuff, but for some reason some guru with no background has more value than me? I don't mind engaging in discussion either, but like you...I'm done "helping" takers that have no intention of giving in return. I'm with you. 

I haven't invested in Fort Wayne for a decade, but a little tidbit about that town. During the last crash, believe it or not that was the #1 flip market in the entire country. That's all I have to contribute...carry on. lol

This is turning into Dodd Frank 2.0. There are issues in the realty industry...primarily the fact that the barrier of entry is so incredibly low to get a license and the vast majority of agents don't hone their crafts. They don't learn the tricks of the trade or understand the rules, laws, and contracts. That being said, there are some amazing professionals that bring a great deal of value and really protect their clients...and save/make them $$$. I often hear great agents say they regularly hear "I would love to use you as my agent, but my neighbor's 19 year-old daughter that is working at Starbuck's just got her license, so I feel compelled to use her." News flash, if someone with experience is on the other side, you're gonna get fleeced. I've been a lender for 33 years and I really remember Dodd Frank. In an attempt to clean up the industry, legislation was written by those who 1) had never been lenders themselves and had no understanding of the industry and 2) their biggest campaign contributors were big banks (look up Barney Frank, Chris Dodd, and Elizabeth Warren's campaign contributors at the time and you'll see big banks). Dodd Frank really helped big banks by, in the name of "helping consumers", added so many regulations on small banks and smaller lenders (basically big bank competition) that it hurt consumers. It did, however, clear out some bad actors, so it wasn't all bad. In this NAR lawsuit, the proposed settlement does something that needs to happen...it makes buyer's agents (known as selling agents) get a buyer's agreement in place. The media and social media keyboard warriors have really mischaracterized what it does. A seller CAN offer $ to pay a buyer's agent...it just can't be shown on the MLS. It does not, however, raise the barrier of entry for real estate agents nor does it do anything about the crappy continuing ed classes that agents take. I have a license and have to do it, but all classes pretty much say the same thing over and over every year. The industry MUST weed out the weekend warrior agent if consumers are to be protected. It also has a massive hole for VA buyers. The VA won't allow a Vet to pay their realtor. Why would a realtor work with a customer for free. That puts Vets at a severe disadvantgage. Something's gotta give on that. One of my knocks on sites like BP is that it gives novice investors the illusion that they can DIY it and go up against an experienced Agent or seller without getting fleeced. It's a great place to learn and ask questions, but you still need your professional advice. The buzz around this NAR Settlement is not only wrong, but it's going to dangerously put buyers at a severe disadvantage when they go up againts experienced Agents and Sellers. The way the settlement is written, this is NOT good for consumers.

I think it is if the agent is a good one. I know what a good real estate agents have to go through that a customer does not see. With all this NAR lawsuit business going around, I think people believe that a real estate agent slaps the property on the MLS and that's it. The problem is that the majority do exactly that, but a great professional real estate agent knows what boxes to check and the tricks of the trade. When we've bought property, if the seller is unrepresented or if they have a weak agent...we pretty much fleece them (sorry, I have a duty to our investors and our customers). I even just did a loan for an attorney that was using a weak agent. The contract milestone dates did not line up. That's on the bad agent. Back to your question, $4K is more than fair for a good agent. Good agents aren't indentured servants. They can not be expected to devote time to the process for free.