Dave Debeau [00:00:09] Everyone, Dave Debeau another episode of the Property Profits Real Estate podcast today, zooming in all the way from just outside of Philadelphia. We've got Ian Walsh, who is a very, very experienced real estate entrepreneur and a guy who knows all about hard money lending. So welcome to the call today. How are you doing? Good. Thank you for having me. My pleasure. So, Ian, you got started an act of real estate investing yourself. What kind of stuff were you doing? Were you doing buying all? Were you doing flips? What were you up to originally?
Ian Walsh [00:00:43] Yeah. So I started 12 years ago or during the first crash and it was I was wholesaling, so I was out of school and money Redbridge that poor and probably everybody in real estate and then saw that line about where he would sell the property in Arizona for like 40 grand profit. And I was like, that sounds that sounds like what I need to be doing. So then I learned that old sale didn't take very long to learn how to do it. And then I learned very quickly it's all about marketing and making the phone ring. So that's where I got my start. Ended up rolling into a property management business as that as I grew away from the wholesaling, which looking back was just me cutting my teeth in the business. But I probably would have not done property management. But I learned a lot actually. When I say I probably wouldn't have, I learned a lot. There are a lot of sacrifice. It's really hard business to do correctly. But we did build that six, seven units sold it retained some interest in a company in Philadelphia. It's got about three thousand units left that fully. And seven years ago, we decided we were going to deploy capital in mindspace for private money and so forth, because just the background of being the amount of investing that we've done just made sense.
Dave Debeau [00:01:53] All right. Very cool. So let's talk about hard money lending and different financing options available for real estate investors. So in a lot of people watching or listening, this probably already have some experience when it comes to real estate investing and getting financing. But those folks are just kind of getting started or some of us need a bit of a refresher here. Maybe give us a big picture overview of what are the typical options a real estate investor, real estate entrepreneur has when it comes to financing their properties.
Ian Walsh [00:02:29] Yeah, so you're saying private money or
Dave Debeau [00:02:32] no interest in just in general, then we'll get right into what you guys in
Ian Walsh [00:02:36] your options. Usually to buy a property, you're going to be a few things. You're going to have either you buy cash or that you use a private lender slash hard money lender. We're really the same thing for the most part. Or you go to a bank, it's really pretty much one of those three that you get do creative stuff like no money down that's subject to financing and stuff like that. I'm not I'm not the biggest fan of that stuff. But those are really your options that I'm aware of that I've ever made aware of in terms of leveraging to buy or get a property seller. Financing isn't there, too. So does that answer your question?
Dave Debeau [00:03:08] Yeah. So for sure, what are the biggest differences between, let's say, going to a bank to get a mortgage versus going to a hard money lender
Ian Walsh [00:03:17] to
Dave Debeau [00:03:18] get financing
Ian Walsh [00:03:19] one of them? Right. So a bank is typically going to be in a position to the bank. Bankers are not investors. First, by nature, there are bankers, which means they're underwriting you rather than your deal. And really, when you're in, they're not really fit for our space because MySpace is built on the investment properties like that's I have to underwrite the property first and then borrower second. And when you do that in reverse, you miss the essence of what private lending and hard money lending is and you run into trouble. So a bank is usually going to say, alright, bringing your to your tax returns, your DNA, know everything about you, because I have no idea what a house is worth and they're going to go home to get an appraisal. Will tell me what it's worth. You're in this business long enough. You've seen enough appraisals you way off. So putting hard earned cash against an appraisal because an appraiser said it. I mean, this is a good appraiser, but there are some really bad ones, too. So not the business friends. And it's going to take you significantly longer to close on a deal. You probably banks aren't even interested. They're not interested in that. Fifty thousand dollars shell that is ready to fall over, that's going to be worth three hundred thousand. They don't care. Like most part, they just it's not their world. Their world is a paper by renovated house move in 700 credit score, live there for thirty years and pay them five percent interest. Private and hard money is going to be a lot more flexible. We're about speed. We're about analysis, quick analysis on the property first. And that's really I've been prepared to close the same day. Got an inquiry in the morning, closed in the afternoon. Who was the borrower that screwed up? But that's the speed that you're looking at. And I ever see a house in my inventory that's fully renovated, I'm going to go, something's wrong because that's if you're bringing the house is fully renovated. I don't know what you're doing. Bank wants to see that house. I want to see the house. That is just enough to be off the ground. You've got a foundation. You've got some framing. That's what I'm looking at. So we're really lending and looking at different things.
Dave Debeau [00:05:10] Yeah, OK. A very good explanation. So. To summarize it, the banks are in the business primarily of lending money to mom and pop homebuyer that are going to live there to pretty house already. And you're more in the business of loaning based on the not just the current value of the property, a real value of it, but also where it's going to get to in the not too distant future. OK, so so you talked a little bit about hard money lenders versus private lenders. What what's the difference there? What's one versus the other
Ian Walsh [00:05:45] so hard money lender? I mean, it's really terminology. And what people kind of see in the industry is what we're all the same. Well, here's where we're not the same private lenders. It depends on the companies like private lenders, which might be somebody maybe just sold their business. They got a few million bucks and one deployed on the streets. You'll find them sporadically throughout your debt. Every market has them. But two or three million bucks, it sounds like a lot. It is a lot of money to an individual, but it's not a lot of money in regards to lending. You need we deploy 40 million a year or something like that in our space, could deploy one hundred eighty to have that kind of space to really be a private lenders. But the way the deals are analyzed and how it's set up. So what we just had was a run up during the last cycle. And you see towards the top of every cycle, money gets cheap or easy to access and crashes. And that's what happened. Online competitors got knocked out of business. So what was happening, though, is so you have the private lenders, mom and pops, and then you have a few companies similar to ours. We're a little bit more rare where we have the capacity of the bank backed lender, but we operate like the mom and pop lender, whereas I can make a decision very quickly. I do the underwriting. I don't use appraisers and we can deploy pretty much unlimited capital. And that is a hard way to build our business over the last 10 years. The third tier of that, which is what most people run into with hard money lending right now, are like what happened was banks got really attracted to the fact that interest rates are so low and they were like, oh, we can make like 10, 12 percent on our money. That spread was very attractive to them to deploy a lot of capital while the interest rates are so low. So really what happened was banks in the back door came in and they they talk to lenders that were probably trying to raise capital 10 years ago, and that's hard to do. And they said, hey, take the apple on the tree and we'll give you 10 to one leverage on your money. So meaning I have 10 million now I have one hundred million base in the bank. That's a very attractive proposition. You go, wow, our business can explode overnight. We decided not to do that. We knew through multiple other companies like ours that that is a trap. And what happens is you get while on the ride up, it's OK. You know, you're still cost cutting. And there's a whole bunch of reasons that it's not, I think that appealing. But what ends up happening is when you get near the top, as soon as the bank scare, these are bankers, not investors. First they pull their money off the secondary markets that need to be sold. So if you're being if your all your funding is from a bank and all of a sudden they go, guys, we're holding off like the week of covid. All my competitors shut down because they were like the banks just said, we're done, everything is being pulled. And you're like you're looking around, you got staff, you got payroll and you're going, what do you mean, we're done? And it just like that overnight. Twenty four hours people get wiped out. So really what's happening is I always tell people, ask the hard money lender where they're funding sources from, because if it's not truly privately funded and there's a bank funding that money, it's OK because there's a place for that. Not in this market, though, in a market rising. Sure. But know where your money's coming from, because if you're just really being underwritten by a bank, you have somebody else running that business. There's a big difference on the inside baseball of who you're talking to and how private, hard money kind of are broken up. But you can call it whatever you want. You can call us all private money, hard money, just terminology, easy money, soft money for whatever it
Dave Debeau [00:08:50] gets down to the level and the professionalism of it. So somebody has got an individual who's got some deep pockets or got home equity line of credit, or is it kind of like a private lender, private money in that respect? You guys make a business out of it. It's your full time thing. You take a lot more seriously. OK, well, OK, cool. Thanks very much for for that explanation. Also for you guys like you went from doing wholesaling to property managing. If you don't mind me asking, how did you how did you accumulate forty million to start lending out or how did that all come to come to
Ian Walsh [00:09:25] the track record. Like we didn't start with forty million. That would, it'd be nice. Yeah. No. Now that took time to build. It was like well you don't need money, everybody wants to give it to you. And when you do me money, nobody wants to give it to you. Right. So like now we just turn a lot of people we don't do really capital raises or anything in the beginning. It's always hard. Yeah. You have like a few million bucks in your it's hard to hard juggle, but you do the proper underwriting, you return the money, you do the responsible thing for investors. You make the deals whole. We're very transparent. Everything is run the way you want your money handled. And then so we've got a few large clients that then have friends, family that all of a sudden it's like. Every time we meet with them, they're trying to, like, hand you like a check on the side to try to get more money in because we're not taking any money or whatever. So it's like I don't remember what year it was, but there was one of the years along the way of the build. It was like, OK, we need no more money. We don't you don't ever want to have the pressure of deploying capital either. That's very important for underwriting. So, like, there's a certain point where you're like, look, if I try to because you're asking me to deploy your money, if I try to deploy that money, I'm putting it at risk for pressure to deploy it on a bad deal. I'm not doing that. And we've always had to like. We will lend to the capacity of the deals in front of us, not the money that's in the bank.
Dave Debeau [00:10:43] All right, very good point. So from your point of view, being the guy that's lending the money, what are some of the big mistakes you see real estate entrepreneurs making when they're trying to get the money?
Ian Walsh [00:10:56] Right. So that's pretty common. I mean, this is like I I've been asked that question a lot, and I don't feel like anybody listens to this answer, but I get a hundred inquiries a day or whatever it may be. And the major I would find every single one of them if they were deals. So and if people knew their numbers and I'm not kidding, like, that's not an open promise that is legitimate of those hundred funds, maybe one to three a day. Right. So it really comes down to most people don't do the due diligence to ask somebody for a couple hundred thousand dollars. That's what you're doing. You're asking somebody for. And it's legitimately could be my money in that deal. If you're asking me, you call me up on the phone. I don't know you. And you go, hey, let me get a couple hundred grand for this deal, OK? Like, if somebody called you and ask you that question, I would say, what do you know about it? Really, what I'm asking for I don't want a story is the numbers. I'm a numbers guy. I need to know what is the address, what are the renovation costs and what is the acquisition price within like under thirty seconds. I can tell what kind of a caliber bar where I'm dealing with, if they know their market, if their construction numbers are right, all of that stuff I can tell right away. And it's not because it's magic, it's just because I've done it thousands of times at this point and I can see like so. If you're calling a private lender, not a bank, but a bank, lenders don't know you can do it or you're not good, whatever you're calling a private lender. Know your numbers. And I mean, like even if you're new, which is fine, I know I have a lot of new borrowers that I deal with, but when they come in researched and understood and understand their values, they understand what a house is truly worth on the back end. And they're concerned, but they're not giving me answer. Three miles away, their construction numbers are within 10 percent one way or the other. What they should be from, because I know where they should all be along the way. Then I'm looking at this going, OK, either you're getting this knowledge somewhere else in your life or you've done enough research to ask somebody for several hundred thousand dollars. Either way, I'm much more comfortable. It's when you come in and I need like 10 grand, I'm buying it for 90 and I can resell this for one twenty. I'm going to get those all the time. Those are the scenarios that really make me shaky. So it's knowing your numbers and just spending the time jumping on Zillow and sending a few deals over or a few properties that you see is not that's not how you properly approach a private lender. Just pay the respect to the money you're asking for is usually the best rule of thumb.
Dave Debeau [00:13:09] Excellent. Very, very good advice. And time flies when we're having fun. I think you've put together a special report for people on what they need to have lined up to request private money or something like that.
Ian Walsh [00:13:22] Right about that. They're seven steps of securing our money. If anybody wants to email me for, I'll happily send them a free link to it.
Dave Debeau [00:13:29] Perfect. Or do you have a website? People can go check things out.
Ian Walsh [00:13:32] Yeah. That big obnoxious thing that you can't even see this stupid thing behind me. Nobody's ever going to know what that is. Right. But hard money because I'm in between. It's hard money, bankers, dotcom, hard money bankers that fantastic.
Dave Debeau [00:13:47] Very good. Well, thank you very much for your time today. It's been great.
Ian Walsh [00:13:50] Thank you for having me.
Dave Debeau [00:13:51] All right. Take care and we'll talk to you on the next episode cover. Well, hey there. Thanks for tuning into the Property Profits podcast. If you like this episode, that's great. Please go ahead and subscribe on iTunes. Give us a good review. That would be awesome. I appreciate that. And if you're looking to attract investors and raise capital for your deals, that may invite you to get a complimentary copy of my newest book right back there. There it is, the money partner formula. You got a PDF version at Investor Attraction book, dot com again, investor attraction book, dot com Taika.