GREATEST RISK in Real Estate Deals Today is Short Term Debt Structure. Underwrite with 30 Yr Fixed

Video Closed Captioning:

good morning good afternoon good evening

folks michael zuber one rental at a time

it is friday where you’re talking with

mr stephen dow and again what makes this

channel unique and why you need to

subscribe like and comment yes i said

subscribe i always forget to say that

subscribe right now is because i have

experts that come on and talk about

different things and

i can merge conversations together so

this is going to be an interesting one

i’m going to take a conversation i had

yesterday with jonathan twomley a huge

syndicator who’s doing huge deals and

we’re going to work in this conversation

with mr stephen dale but before we do

that let’s welcome to the show and ask

him to do his marketing spiel so we both

don’t get in trouble

okay thank you again although i work

very happily for velocity mortgage

capital all the ideas and topics

discussed on this channel that of my own

and let’s get it going then yeah so

yesterday with mr jonathan tumley we had

a great conversation about the three

levels of risk

in doing apartment syndications right

one of the things about doing a

syndication is you have a gp and you

have lps right limited partners

if you’re an lp uh it is truly a passive

investment

right but you have three levels of risk

and we are going to talk about number

two because i had never thought about it

before so just so we know the three

levels are the deal obvious and number

three is the syndicator or the gp

general partner or general general

partner yeah whatever principle right

but there’s a second variable that was

very important it was in folks if you

haven’t watched the video with jonathan

yesterday you have to and that is the

debt structure

a lot of the deals being done today are

being underwritten with um bridge debt

very short term we’re talking short term

like blew up dave ramsey short term and

i think people need to realize that you

know what they’re there is 30-year money

out there

right or a commercial for office for

apartments you are a provider of that

you’ve given me 30-year money on a cash

out refi on an office which i didn’t

think was possible

right um so again if you’re looking at a

big deal right either for your for

yourself

i strongly suggest in the environment we

are in you at least consider

30-year money i would underwrite the

deal at 30-year money then if you choose

to go get a five seven ten-year arm i’ll

go for it but at least underwrite the

deal with 30-year money will be higher

but it will give you peace of mind so

what do you think about that you you

you’re in the game right you go to these

conferences mezzanine bridge all this

stuff

man it just screams risk to me

well

again especially in the environment that

we’re in that kind of risk isn’t really

uh the smart play i would say because

you know rates are going to be

going up not if but when and how much

and so why stick yourself in a

short-term fix

you know um six-month loan or what have

you because then now you’re not gonna

get into a better loan it’s gonna

possibly be a higher rate at that point

so why not lock in like you said 30-year

fix at a much lower rate the risk there

is none especially for 30 years yeah

what i would tell folks if you’re

looking at buying an apartment or office

like i am i’m looking to deploy like 2

million bucks this year

i’m going to underwrite the deal with

with fixed 30-year debt and you know

i’ll compare and shop around but i can

tell you peace of mind

is uh

that’s the one thing i’m i’m at i won’t

grow as fast as lots of people but i

will sleep like a baby

well i i think nowadays rates aren’t

still too bad given the fact they’re

even 30-year fixed relative to some of

these short-term fixed uh because

especially on the commercial side sure

the rate again if you’re rate chaser

might seem uh um you know more

advantageous but the fact that it’s a

short-term fix and the amortization is

either 20 to 25 year so the cash flow’s

not as well so again i think that whole

like data on the rent as we did on the

previous uh episode i think that would

be an interesting aspect as well so

i think

that that’s another important factor as

far as cash flow and the stability of

the fixed uh rate for 30 years so a

combination of that it’s

it’s a pretty uh it’s a triggering

option yeah it’s funny because again

people sometimes don’t do the math

and it is amazing what would happen you

know your higher rate no they do the

math but i think the scope of

perspective is so somewhat short-sighted

you’re like 50 years that you’re doing

people like two years from now or oh you

know what my cash flow is good this year

because they’re only calculating that

six month short term you know uh uh uh

interest rate or loan they’re not doing

okay are you only gonna keep it for six

months are you gonna keep it for two

years or however long that loan is no so

if you’re gonna keep it longer lock in

that 30 year money yeah

yeah for me where i was going is it was

amazing to me because at least i will

admit to having never done this before i

actually never compared a 25 year i am

at a 30-year ramp right this extra 60

months it was shocking you you gave me a

rate on 30-year money that was i think

i think it was like a quarter point

higher than i could have gone elsewhere

but i would have gotten a 25 year

amverse and had adjustable rate mortgage

i think the payment different was like

three dollars

right like

for three bucks i don’t have to think

about refining in three or five or

whatever years like right sign me up

three dollars for peace of mind

well i think that’s where when you have

that that kind of conversation with

people and you’re able to present the

right you know perspective in a sense

without math once you do it all it’s

like wait a minute okay that makes sense

but when it’s short-sighted with just

rate chasing because that’s the easy

sale i got the lowest rate i got the

lowest rate yes you do hundred percent

but then when you do the math and the

cash flow and the you know and points

right

and and you know all the hoops you guys

jump through and the length of time it

takes and everything else

it’s not always the best situation so

especially on the commercial side right

now yeah so three dollars i got a 30

year fixed uh i got it done in five

weeks which most of that was the

appraisal

right um you asked for three pieces of

paperwork

you know really the only one that wasn’t

you know the only one that was extra

which was valid was the leases for

people in the office i’m like well that

makes it right

right

not your whole portfolio

dude somebody did that to me before i

was like i know you told me you told me

i’m out because my leash is 15 pages

long you think i’m going to send you

right i’m going to have my guy send 3

000 pages of i’m not doing that to

somebody

yeah not after you told me you would

never do that that was the thing that

you know obviously you told me they make

promises

it always yeah famous last words oh no

don’t worry no no

yeah so again these this the importance

of 30 or money so again what i would

tell folks if you’re one rental at a

time family you’re like me you’re

looking to shop right the market’s going

to slow down deals are going to be out

there i do believe

that peop there are a lot of people

doing today’s with short-term financing

that will become forced sellers i’ve

done this before it has happened you go

get a deal you you cobble it together

you get over the finish line you

celebrate but you’ve just signed up to

lose money because what will happen in

12 months is the lender in a higher rate

environment is going to refi the

building because again when the refi

comes up because this is bridge debt

they’re going to re-look at the asset

and maybe you didn’t get the rents that

you wanted or maybe the repairs aren’t

done maybe cap rates are higher they’re

going to be great thank you very much

now send us a check for 100 grand

because we don’t have the same value and

most people can’t then you become a for

seller then you sell to a guy like me

that’s like yeah i’ll take over the

building but i’m not going to give you

what you want 40 cents on the dollar

i’ve done it before so yeah

yeah this is this is coming uh i

strongly suggest if you’re a one rental

at a time family you’re looking at

office commercial uh bridge portfolio

blankets whatever

30-year money

30-year money you hear matt

it’s it’s definitely worth a phone call

because when you do the math just look

at what you’re paying now we’ll pull out

my mortgage calculator you tell me and

we’ll crush that and

numbers don’t lie so yeah do the math

yeah so i expect a lot of you are

looking at these deals please reach out

to steven dow now this weekend uh

because uh

you got to get a file started you got to

at least have the conversations you got

to get a yes or no because he doesn’t

lend anywhere he does doesn’t land

everywhere he doesn’t land on all things

he doesn’t lend in all cities so reach

out now so you have a partner or he can

say sorry i can’t help you fast just

fast no that’s what i ask how do you

want to reach out

s gao at velocitymortgage.com

please leave uh the acronym or wrap

o-r-a-a-t which is one right at a time

the subject line in the body of the

email you can maybe give me a brief

description of your scenario um at the

very least stadium state of where the

property uh is located and then property

type mid fico score desired loan amount

um you know things that they need to

purchase price then i can just kind of

put together the best response and you

know cut down on the back and forth

emails and phone calls and then um yeah

leave your phone number to be the best

one never reach back at so i can call

you just to make a quick phone call

versus a bunch of emails other than that

keep trying i apologize we’re getting a

positive overwhelming response but

there’s only one of me and 24 hours in a

day and i i’ve got stuff but please yeah

i’m i’m calling people back from like

you know late december so far but

everyone’s been very patient and i think

they understood because during that time

it was you know yeah yeah yeah

and recently you know the copic surge

really affected our business as well so

it’s just been a lot of you know kind of

dealing with all the health issues so

thank you for everybody’s patience yeah

and again folks that’s why i’m asking

you to reach out today if you have any

interest you’re shopping you’re just

shopping call them tell them what city

you’re in tell them what you’re looking

at all that stuff just so you get a yes

or no don’t be surprised don’t say hey i

got a great deal but steven can’t help

because it’s a city or a type or a thing

or a widget or whatever it is call

create a file he’s fun to talk to get

ready because he he’s like this with no

caffeine

it is he is just

on so

pretty much almost all hours a day i’m

expecting 10 or 15 people to reach out

this weekend to get uh new file starts

oh no

i’m looking at several already right now

so and and this hasn’t even been posted

yet so it’s a lot of residual because

some of the i think people start to

watch more more of the videos and you

have a playlist on the channel there’s

right there’s probably 50 hours of

material you help you and i helping

people it’s easily easily and no it’s

they’re starting to come around a lot

and so and we’re even getting people

referring people from this channel so

like they’re really wanting to pass out

you know because it’s just the right

information

you help people you do good work good

things happen so i’m happy for you again

you helped me

i appreciate you thanks buddy likewise

thanks

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