NATALIE: What’s going on with loans? What’s going on out there in the market? Interest rates still low or are they inching up?
BLAKE: A 30-year fixed Fannie Mae on an investment property is about five and a quarter right now.
NATALIE: On an investment?
BLAKE: On a 30-year fixed, yeah. Owner-occupied is somewhere around four and three-quarter’s range — but once again Fannie Mae’s just one type of loan. And we have our portfolio lending—what’s becoming more and more prevalent is private lending and getting more and more these private individuals to loan money on real estate.
NATALIE: Right.
BLAKE: Guaranteed return, secure first lien on a property, and it’s working out for them.
NATALIE: I had a member come up to me and wanted to know who has done the private lending. He wanted to know if he could talk to an individual that’s done private lending, ‘cause he wanted to know more of how to do that.
I know for some people that seems like we’re speaking a foreign language or it’s some magical, mystical thing that’s out there—this private money that really isn’t there. But it is so there. It’s everywhere. And these people want to make a good return on their money.
If they leave it in CDs or money markets they don’t get a good rate of return, where they can get a good rate and have it secured by a property. So our members are educated in the sense to do that. We really are here for your information and to help you move forward in real estate investing.
I have an article here. I don’t know—it’s from RECON, the Real Estate Center Online News, from February 16th, which is today. “Highways to Bye-ways, Survey Says.” Obviously with our $16 billion deficit people are wanting traffic—or they don’t really care about the construction anymore. They want to save money and cut the deficit.
“Dallas Foreclosures” Dallas Morning News: “After a 4 percent year-over-year fall in February foreclosure postings, March postings increased 30 percent from the same month last year.” And going on: “Fewer than half the homes scheduled for foreclosure auction each month are sold by lenders.”
Lots of opportunities everywhere with this market. How are you positioning yourself to take advantage of the great sale that’s going on with real estate?
Let’s go on to “Facing Foreclosure? Know the Facts.” “Texas is experiencing its highest residential foreclosure rate since the late ’80s.” If you could turn back time and go back to the ‘80s and buy all that real estate and make all that – wait a minute. We’re in the ‘80s now.
BLAKE: Well, you know, I was talking to Jeff Smith earlier today, and we were talking about his father-in-law who’s got – I don’t know – 80 houses or I don’t know what it is.
He said it was fun to hang out with him because in the morning he goes out there and he meets with a handful of other investors that bought 50 to 100 houses back in the ‘80s and most of them if not all are paid off. And they just have a little breakfast with each other once a week. Jeff and I were saying hopefully we’ll be like those guys.
NATALIE: I have an issue. I know it’s hard to believe. Sometimes I get these. I have a concern when people are tripping over pennies or tripping over dollars for pennies — that’s that saying?
BLAKE: Don’t trip over pennies when we’re in it for dollars.
NATALIE: You know with the hard money, some people are just averted or they have this huge aversion to the double close ‘cause it does cost a little bit more and it takes a little bit more of the equity. But it’s not your money on the line in the sense it’s money that’s getting paid for by the tenant.
It’s not coming out of your reserve or your capital, so you can keep that capital and go out and keep buying property and buying more. So I just don’t want people to shoot themselves in the foot and four houses down the road they can’t buy anything else.
BLAKE: Well, couple things. Let your properties pay for themselves.
NATALIE: Yes.
BLAKE: That’s what I believe in. The other thing is if you’re concerned about the extra closing costs, that’s my personal preference—hard-money loan, hard-money loan, hard-money loan and roll like three properties into a small blanket loan. And what you’re doing is saving a lot of the closing costs on the refi.
Once you cover a certain amount of fixed costs associated with the loan, then it’s just really loan size for when you add the second property or the third property.
NATALIE: And you can even purchase into—well, okay.
BLAKE: I don’t recommend that.
NATALIE: So you purchase hard-money and then you refi into your permanent financing is how you’re suggesting?
BLAKE: Ideally you buy it at 70 percent. You pay your closing costs out-of-pocket and then you refi at 80 percent non-seasoned cash out and net/net. You know if you bought it you’re all in it 70 plus your closing costs—let’s say $5,000 on a hundred thousand dollar value—and then you refi at 80 minus closing costs 3 or 4,000, net/net, nothing into the deal and might actually pocket a thousand or two.
And that’s what I’ve done. Out of my 25 properties or whatever I’ve bought, I don’t have any of my own money tied up into these things and I keep on rolling the same money over and over and over again. And you know my cash flow’s enough to sustain me.
NATALIE: You just keep your money working for you so that you have that reserve.
BLAKE: And I don’t have a lot of debt equity. Yeah, it just keeps rolling.
NATALIE: So there is a method to the madness. And the whole goal for you is to retire yourself quicker or to be able to keep the wife staying home and managing the properties. Just to buy a better lifestyle, in essence, so that you can fly to California and take a NASCAR race trip around the track kind of thing. It’s a lifestyle choice that’s not—
BLAKE: NASCAR sounds so redneck.
