Video Closed Captioning:
good morning good afternoon good evening
folks michael zuber one rental at a time
back with this friday expert mr stephen
dao how are you
i’m fantastic yourself awesome man one
of the things we do on this channel
is we bring on experts thank you again
for being a
consistent guest on fridays uh but also
we educate so one of the things i want
to do here is we’re going to take three
pieces of vocabulary that is very
comfortable for you that has become
comfortable for me but we’re going to
get a chance to kind of break it down
for folks but before we do that
do that marketing thing i don’t want to
get in trouble thank you
although again i work very happily for
velocity mortgage capital all the ideas
and topics discussed on this channel
that of my own so let’s get it finished
there you go buddy so the three pieces
of vocabulary we’re going to talk about
the first one is something that in the
mortgage industry is called compensating
factors so once you break that down as
the professional and then i’ll share my
non-professional opinion
well um
in our world um not every deal is cookie
cutter right i mean exactly the same
fits a box um that’s why they come to us
uh because after you know being denied
with conventional and you know other
challenges due to how you you know file
your income things of that nature um in
many cases there are certain
deficiencies as far as your overall
profile to be able to get conventional
financing so in our world uh the term
compensating factors can mean so many
different things to offset some of those
deficiencies to allow us to then do the
deal still as an exception even though
it doesn’t fit our normal guidelines so
for example
um if you’re
you know um
dcr is a little bit on the higher side
let’s not use acronyms dcr is
right debt coverage ratio so that’s the
term uh where you’re comparing the net
operating income of the subject property
to that of the mortgage payment so
there’s a certain ratio that you have to
kind of meet um and if the probably
isn’t
you know garning it enough in in rent to
kind of meet that uh uh
ratio we can sometimes offset that or
overlook that if you’ve got you know
good fico scores or if you’ve got you
know a certain amount of reserves
meaning
number of months of p-i-t-i uh monthly
mortgage payments uh in reserves for at
least you know three to six months then
we could offset that and say that that’s
a compensating factor because if
anything should happen you got about
three to six months of you know kind of
a buffer to try to rectify it or have
that at least amount of assets to pay
somebody to fix it so things of that
nature to offset that deficiency so
compensating factors can mean so many
different things and um so that’s what
helps us to be a make sense lender
because again if you’re in the
conventional side
a computer is not going to look at that
they’re just going to see either you fit
the ltv your ratios are at a certain
amount how long you’ve been on the job
um and yeah uh and full documents tax
returns and everything else so yeah and
that aspect the top saving factors
really helped us to yeah this is this is
what it is to me and again you’re the
professional i’m not
so in my in my simple mind right there’s
a base rate right whatever it is 4 5 12
whatever it is and then what happens is
the deal right the the package that
you’re evaluating which is the person
and the asset and the plan
right and plan slash experience i think
there’s kind of in my world there’s like
three things right the person right what
is their credit score is their income
document
right so and again the beauty of a
compensating factor is it could be a
plus or a minus on the best base rate
maybe you have a perfect credit score
never did this and you use credit well
so maybe the base rate goes down right
right or you
you know you don’t have credit and it
goes up correct then there’s kind of the
deal right is it is it uh you know is it
do you putting 50 down or is it correct
is it a junker that needs you know
you’re paying 50 but it needs 150 and
rema
then there’s the deal again plus or
minus and then there’s the experience of
the lender and what you’re looking to do
in the plan so the reason
i value you being a part of this channel
is
really the non-cum space but you you to
me right there’s there’s obviously
thousands of you out there but you’re
the only one on my channel you you would
you evaluate all three of those
right and you know some again positive
negative but that’s why people need to
email you call you
early tell you what they’re thinking
about so they know where they’re at
because you know maybe they’re calling
you hoping to get you know four percent
but again they’ve got no credit no this
no that no experience you’re like i
can’t do four it’s going to be five or
five and a half or whatever i’m not i’m
just making these up but that’s why
that’s why i think people need to
appreciate that you the building in your
experience plus or minus that’s what a
compensating factor is to me does that
make sense
it does and and it’s always worth the
conversation because if you’re finding
you know financing challenges on your
normal you know
search for for whatever it is that uh
you need but uh yeah it’s worth the
phone call because in many cases if i
can’t do it i’ll try to point you in the
right direction uh my current network
where you know either if i can’t do it i
try to just throw it over the fence
there’s no oh i know this guy let me
charge you an extra five points on top
of that so hey i can’t do it here’s who
you should call yeah just be done right
move on process well because again once
i lead them down the right path at some
point they’re going to be circling back
because it’s not if you need me but when
i agree because either you hit the
maximum limitation on conventional
financing or at some point you’re just
not gonna qualify anymore because
you know those ratios get really really
tight yeah and the lenders get tired
yeah
so at some point you’re gonna need me
either due to the scenario itself the
the condition of the property because
sometimes it’s not convinced you know i
mean it doesn’t pass the smell test in
that aspect um and so there’s so many
different uh areas that we can
accommodate financing versus your
traditional uh or conventional financer
and then as well as better terms versus
your traditional hard money lender so
that’s where the space that we’re
somewhere in between so i think that
people are starting to slowly get that
especially if all they’re exposed to is
private money or local banks yeah um for
for residential
one to four units local banks are
throwing them into commercial loans
right short-term fixed 20 25 gram even
on even on uh residential properties
yeah so we’re getting a lot of those to
call into because again short-term fix
shorter amortization we go 30-year fixed
30 or am just blowing my mind yeah all
right so here’s number two you actually
mentioned it earlier but i want to hit
it again so people know what a
sense lender is
what is that
well
again
on the conventional side you either fit
the box you meet the ratios with fico
score all these
you know industry standardized uh uh uh
uh requirements for conventional
financing um whereas with us as a mixed
sense lender sometimes even you don’t
get any of that box or even our boxes
but if it makes sense yeah we’re gonna
do it um
i don’t want to give out too much but
recently we we funded a very large
single-family uh uh
sfr no gcr meaning no debt coverage
ratio needed uh it was above six million
dollars oh wow so that’s a nice house
that’s a very nice
um that’s a good living right there
right and that was even that i believe
at a max ltv of 75 so you should know
that anything above really 2 million 3
million is never going to debt service
no of course so
uh
at that time though that’s well beyond
our normal max as far as for residential
properties but
i believe the borrower had well over 200
million in real estate
and she had like a 780 something
fico score and i forgot how much money
in the bank but it was a lot so it was
like it was a safe loan when you when
you did all the compensating factors
together it’s like yeah we can do that
she’s never been late on anything i
think like 20 something years she’s got
over 200 million in real estate yeah you
know she just needed this fast she
didn’t want to wait anymore because the
whole you know she’s very complex as a
borrower and they promised her oh yeah
fast fast speed she paid a little bit
more in rates of course but she’s like
speed i just want the speed and yeah
yeah makes sense because it was like
yeah
what makes sense linda is me and again
i’ve experienced because i’ve done
business with velocity is
you’re not a computer model right i
think there’s a lot of things going on
in the mortgage industry which again i
think a lot of companies are going to
cut staff and get bought i think there’s
going to be a lot of consolidation in
the morning
look at what was that better.com yeah
like that crazy nice phone call from the
ceo
not a good look don’t give me ptsd
anybody else like you want to do zoom
call
what’s your call you know
you know
not no not a good look but again when
i’m going with this is those computer
models um they don’t have feelings right
they don’t they don’t ask questions they
don’t dig deeper it’s like oh nope
you’re out you don’t fit and they just
throw people
they’re not throwing people they’re
throwing files out
right right they say less to a very very
and i think proved eligible or not
that’s yeah i think it’s going to get
tighter and tighter
so again it makes sense lender to me as
a person it is somebody who has
experience someone that’s going to ask
questions and listen
and allah
do a deal that they normally wouldn’t do
on six million bucks in your example so
that’s what it makes since lender is so
number three and the final one i want to
talk about is asset based lending what
does that mean yes
well again um in on the conventional
world side you know to qualify a
borrower typically they’re going to look
at you know all the aspects that you
said you know credit worthiness um
uh uh income obviously as far as uh what
you get paid a month and then the asset
itself so in this case um
asset based only is you’re not going to
be too concerned about the income part
um so it’s mainly going to be based on
the asset or the or the house itself as
far as you know the the likelihood of
repayment or or things of that nature so
that’s what’s leveraged but in our case
it’s not just asset-based we’re
somewhere in between that’s what i would
say hard money or private money is
really just looking at asset based
because if god forbid you definitely
just take the property and they would
almost i don’t want to say that that’s
really what they want for you this
default but they wouldn’t mind oh there
are some predatory lenders i’ve i’ve
been involved with them uh i i know it’s
like no i don’t want to like generalize
i will i will i don’t want to i will do
that there are some lenders out there i
know them i’ve spoken with them they’re
like we expect 30 of our loans to go bad
and we get it we get real estate at a
discount that is their business month
right no that’s not we don’t want yeah
we’re not trying to be a real estate
holdings company we want our money back
uh yeah you’re just churning it yeah
recycling it or whatever the right word
right so but no as far as asset base
that’s what it basically means so if
you’re having issues you know qualifying
conventional uh things of that nature
you can go to an asset based lender
obviously expect to pay a little bit
higher interest rate but the ease of use
and and qualifying is going to be the
the determining factor but other than
that that’s pretty much what asset based
is yeah again this is my opinion not
yours uh asset-based lenders to me
are all about the asset right you know
if they get they they get
a lot of press perhaps or a lot of
thoughts because people don’t know
they’re very expensive they’re they
don’t have the compensating factors
about the borrower and experience it’s
all on the widget
that the loan is going against right um
typically the ones that i’ve seen are
very short term again they
are they are an event-based asset based
right it’s like you’re going to flip
this or you’re going to buy a dog and
burn me out
more expensive lots of rules uh skin in
the game and again what i have seen not
you what i have seen is some of them are
like 30 of these we’re gonna get we’re
gonna get on the cheap so
pretty crazy stuff dude i wanna thank
you for this you’re gonna get a lot of
phone calls this weekend uh what is your
email and how do you want people to
reach out
uh please ask doubt velocitymorris.com
in the subject line please leave the
acronym o-r-a-a-t in the body of the
email please leave a brief description
of the scenario looking to inquire about
and or maybe some general terms uh
property type uh your mid fico score
price range
desired ltv i guess um and then at the
very least not the property address the
city and state just to make sure we lend
there and then best phone number to call
you back at just to reduce the amount of
emails going back and forth so uh and
then last but not least
if for whatever reason you get stuck in
quarantine and or you slip through the
cracks and it’s been several days please
just try back again i promise you i’m
not
it’s just overwhelming so many emails
that i sometimes only 24 hours a day and
and there’ll be people that attest i’ve
called or tried to reach them at like 11
12 o’clock at night and that’s the only
time i can call them but it’s
unfortunately so but yeah we’re trying
my best but i’m definitely here for
everybody this has been such a great
rewarding positive uh like experience
people on this channel are awesome very
nice very patient um and and a lot of
them are you know quite knowledgeable in
the sense that they get it they hear the
message and when we do the math they’re
like
that’s awesome it’s just now i’m like
the third fourth and fifth series of
loans for for some of your your your uh
your people here so thanks again for the
opportunity mike no i appreciate it
you’re bringing value to this channel
you’re covering a topic i don’t know
about you are an expert on purpose
because you allow us to do some things
so folks playlist below three amazing
videos today have a wonderful time
remember i’m looking for 10 or 15 new
people to ping him this weekend s dao
that is d-a-o-s-d-a-o
velocitymortgage.com thanks bud