Get Your FILL
Get Your FILL
E28 Ann Bellamy

*Intro and outro music are from an original piece by

Carl Zukroff of The Blue Hotel

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Hello, you have stumbled onto another episode of Get Your FILL, Financial Independence and Long Life, where we explore ways to achieve those two goals. While you have been listening to the original score by Carl Zukroff, I’ve been getting to know our next guest, Ann Bellamy. Ann is going to debunk the myths of hard money lending and educate us on when it is – and is not – a useful tool. Ann has been investing in multi-family and commercial real estate since ‘97 and has been lending private money since 2006. She’s the past treasurer and board member of the New Hampshire Real Estate Investors Association and she’s Co-Founder of The Boston Area Real Estate Investors Association and Black Diamond Real Estate Investors, which is where I met her. She’s dabbled in tax liens, modular spec homes, and out-of-state investing and she is really a wealth of knowledge on hard money lending, which I know a lot of people think might be the answer to how they’re gonna do investing. So, Ann, thank you so much for joining us today.

First of all, how did you get started in real estate? Was that the plan from the beginning?

A: Well, I was the victim of an infomercial just like so many people, but it was way back in the ’90s, and back then the biggest info guru on the TV, was named Carlton Sheets, who no one has ever heard of anymore except old people, like me. And so Carlton Sheets would sell this course. I ordered whatever it was – course, books, tapes, something – and I listened to it and I said: You can’t do that, that’s ridiculous. Nobody’s gonna sell you a house for pennies on the dollar.

So what I did do, is I kinda got bitten by the bug, is because there was some explanation in there of why real estate was so good as an investment so I started investigating real estate investing on my own through other means books, etc. I read everything I could get my hands on and eventually decided I wanted to be real estate investor on the side. I wanted to buy rental properties and build equity and build income and there are so many ways to make money in real estate.

So I moved to New Hampshire on the theory that my tenants would be paying all my taxes because there’s no income or sales tax, only property taxes and that’s gonna be paid for by the tenants. So that was my reason for moving to New Hampshire. I’m from Massachusetts originally so that’s how I got started in real estate investing and I did it strictly on the side working a regular W-2 job at the time and I bought my first duplex in a small town in New Hampshire that was an absolute wreck. I had no idea what I was doing, nor did anybody else when they first started real estate investing. But that’s how I got started.

C: Now, how long was it from then until you felt comfortable to leave your day job?

A: I probably left my day job around 2011, so it was a while and the reason was not because I had enough properties but what happened – I found a real estate investing group. I joined the group. I ran for office just so that I could get known. By mistake, I got elected to office, thinking that was a big deal. It’s not a big deal. It just means that they’re desperate for volunteers.

C: Nothing against you but I’ve had the same experience with these volunteer organizations, they’re like: Oh, yes, you wanna be a leader, go, go, do it.

A: Any of these volunteer organizations, we’re desperate for people. So yeah, if you think you can do it, you can do it. Yeah, so I got elected and I took it seriously, we tried to make the content of the group as good as possible. So I would stand in front of this group every month, as if I knew what I was doing, which I was really just a beginner – a real beginner and I would pretend that I knew what I was doing.

Fake it ’til you make it, right? So then I was working a W2 job and my boss was actually a developer, a real estate developer, because I took a job that was somewhat related to real estate and his wife / bookkeeper had to go out on bed rest for a difficult pregnancy. And so I ended up, by default, doing the accounting for the company – not that that was planned – and realized that he had millions sitting around making practically nothing and so I said to him, since he was a real estate developer, I said, “You know, I know a lot of real estate investors that would like to borrow your money and you could make a lot more than the 1.5% you’re making now – or back then I guess it was 2%. He said, “Really?”

So we went together and got educated and I started finding him deals to lend on ’cause I had no money, so certainly they were all his deals and I was, in effect, brokering them, but he and I learned quite a lot together. And so what happened was that even though I was working for him in the W2 capacity, the lending became so busy, that I didn’t have time to do my job and he got very annoyed with me.

Yeah, he wanted to make a lot of money from me but he didn’t want me to do it on the W2 time. He didn’t want to mate the two, so I can’t blame him for that. There’s a job to do.

So we found someone else to take my job part-time and then gradually that continued to get busier and so we found someone to take my job full-time and I became full-time just doing lending but it was strictly happenstance. I didn’t plan it. It was simply taking advantage of opportunities that presented themselves. Boom, land in my lap – hmmm, that could work.

So it was not any planned-out strategy like most people have. So it just happened, just evolved. You just kind of followed the path where it led. We lost a lot of money in the downturn, back in 2008, ’09, ‘10 and learned a lot of lessons, and then you really do know what you’re doing after a while, because you’ve made so many mistakes.

C: Did you learn about money lending through that course or you just realized that that would be a good idea?

A: Well what happened was, I went to an attorney, who was my real estate attorney, who coincidentally, I did not know this but he represented a lot of private lenders. That was another convenient happenstance. My lender and I went to the attorney and got educated on the legal, at least the legal side of it. Of course what we never got really educated on was how to evaluate a deal. However, since my lender was a real estate developer, he could look at a property and say, “Well if I get the property back, then this is what I’ll do with it.”

And that’s pretty much what every hard money lender who is truly not a big company, is just a small private lender, that’s pretty much how every lender looks at it, is what will I do if the worst happens, and I have to take it back. They don’t want to take it back, they want their interest and whatever, and move on to the next deal, but that’s pretty much how everybody looks at it. So that’s how we learned. And I learned a lot from him being able to evaluate those projects.

C: What a great opportunity.

A: It was, it totally changed my life in so many ways, so many ways but, like I say, it was just kind of following where the chips fell.

C: Well, a lot of people could have been in that situation, had not even seen the chips.

A: Well, I suppose that’s true. I just, I got lucky or whatever, it was.

C: You got smart, you can say it.

A: It was mostly luck really. I’d like to think I was smart, but a lot of the things that fell into place were just opportunities just waiting to happen. Back then, there were not six hard money lenders on every street corner the way there are now. There were only a few.

C: I work with a lot of new investors and they all think: Oh, I’ll just go hard money. But can you explain exactly how it works, especially for a person who it is their very first foray into the investing world

A: Right and they’re kind of scared of it.

C: Yes and they don’t know what they’re doing either. So from your perspective, they’re a risk.

A: Well, yeah, so as a matter of fact, some hard money lenders will not lend to beginners because they are much, much riskier than someone who knows what they’re doing.

So there’s a few things to start with, as far as how it works and could talk for hours but I’m probably sure that zoom will cut us off and not allow us to do that. So I’ll give you a few basics and then if people want more questions, they can reach out to me or they can ask you to do a follow-up or whatever because I could always do a future date, go into more detail, maybe examples or something.

Hard money is simply a business tool. You have to think of it as that, not something scary. Just a business tool. We’re not loan sharks, we’re not the mob, we’re simply real estate investors that want to do less work.

C: But that doesn’t mean we won’t break your kneecaps if you don’t pay.

A: No kneecaps, no.

It sounds really scary, because of the term ‘hard money’, but the term comes from the fact that hard money lenders are lending on a hard asset, which is real estate. Real estate is a hard asset, as opposed to when you get a loan based on your credit score or your income. Those are soft assets. A hard asset is real estate. There are other hard assets such as gold and stuff like that but hard money is almost always based on real estate.

As a matter of fact, it is, that’s the definition of it: a real-estate-based loan. So it simply means a loan based on a hard asset. Not that it’s hard to get or that the lender is a hard arse, okay. It’s nothing like that, it’s just an asset-based loan and most real estate investors that progress and don’t want to be hands-on, it’s not uncommon for them to progress into the lending side because it is a lot less work.

I do a lot of evaluation online at my computer and numbers and photographs and maps, and then I visit the property, and then I have my attorney do some paperwork. That’s a lot less work than managing contractors and making call after call after call for deals.

So that’s why the people progress into lending because it’s so much easier. It takes a lot less conflict work. It’s not necessarily tons more lucrative because people that really ramp up their flipping business or their rental property business can far exceed what you can do in lending, but nonetheless it’s easier and is still lucrative just as is real estate investing.

Okay, so that’s kind of the outline of that. There’s pretty much two kinds of hard money lenders. One of them are small people like me. I’m now beyond the point of only having this one person that I lend out someone else’s money. Partly because he was killed in an accident which was a little devastating, so I did have a little bump in the road there – yeah, he was quite young – and partly because I just don’t spend any of the money that I make. I build up my capital so that I have it to lend, so anything that I make from my business stays in the business and grows.

So there’s two kinds of lenders, there’s small people like me that have built up their assets and lend out their money and then there’s larger companies that basically syndicate other people’s money, such as a crowdfunding platform or any time you have a loan originator working for a large company, they’re taking investor money, 50,000, 100,000, whatever. It’s tons and tons, hundreds and thousands of people, putting small amounts of money into a fund, and then the fund makes money by taking their 1% of all the loans that are done and all the investors get money back. So those are pretty much the two kinds of lenders.

I am the smaller variety, my lending is myself and one other partner. I do have a partner that is not the same one that was in the accident. And I also have a business partner who runs the operations side of the business, so we are very small and we’re using our own money, we are not syndicated funds. You’re not calling a loan originator.

So there’s pros and cons to both. When you’re talking to smaller lenders you have to make sure that they are not gonna run out of money, okay, when you’re talking to bigger lenders, you’re gonna have to make sure that you aren’t gonna fall through the cracks and the day before your closing, they’re gonna say: “Oh, we don’t lend in Massachusetts,” which happens. I get calls like that all the time. They knew where my project was, why didn’t they tell me they didn’t lend in Massachusetts or New Hampshire, or whatever?

Believe it or not, that does happen all of the time because their underwriting happens at the very end instead of at the beginning. So those are the two kinds of real hard money lenders for the most part, they all do short-term loans and they all do loans that don’t qualify for regular funding. So that’s kind of an overview there and then we go more into who uses it and what kind of criteria are there.

C: Yeah, so you said it doesn’t necessarily matter. Does the person, the actual person who’s doing the work or that’s asking for the loan, did they not enter into it at all? Except for example, like you said, they have done it before?

A: No, they do enter into it. They enter into it quite a bit. For example: their amount of experience matters because my rates depend on experience level, documentable experience level as the principle. In other words, if you are the real estate agent on a transaction, that doesn’t make you the principal. That makes you the principle in your real estate business but not the principle in the deal because you’re not the one who has their money on the line, based on the decisions you’re going to make and what happens when you buy or sell or whatever. So based on being a principal and also not just the contractor. I do talk to contractors who say, “Oh I’ve done six flips for such-and-such a company.” You mean, you were the contractor?

“Yeah but I know how they do it so I’m all set, I’ve done six flips now.” No it’s different when it’s your money on the line, you’re not just the contractor.

C: Also because presumably, they have a day job if you’re doing someone else’s work, during the day, and you’re hoping to come home and do your flip at night or whatever.

A: And that’s a whole different thing also. And many beginning real estate investors are doing it on the side of a day job and sometimes they are contractors, working with their customers and then flipping on the weekends and the nights that happens too.

So the rates are based on experience. So the person’s experiences does matter, the principle’s experience. Sometimes if there’s two partners, the fact that one partner might have more experience than the other, that’s sometimes helpful, unless the experience was in a completely different environment, such as you did condo conversions in Miami Beach, that’s really not gonna apply to a 1750’s single-family flip in Salem, Massachusetts. You know, that sort of thing.

So the individual’s experience matters and all hard money loans are personally guaranteed – well, all with a couple of exceptions – are personally guaranteed by the borrowers just as are residential loans and commercial loans. There’s no difference there. So yes, the person does matter but we are primarily looking at the project and what the plan is for the project and is there enough profit in the deal and is there enough capital reserve for the borrower to be able to contribute what he needs to get the project out of trouble when – when, not if – something unexpected happens because something unexpected always happens. You have to plan for it even though it’s unexpected.

So these are the riskier deals from that perspective of things not going according to plan, but the person does play into it, but it’s always a business loan. So for example, we lend to real estate investors that are in business. For example, someone calls me and says, “I wanna buy a duplex, so I wanna live in half of it and I want to put my grandmother in the other half.

Well, first of all, you’re living in it and second of all your family members in it, so even if you weren’t living in it, then it’s a family loan according to Dodd-Frank, so we still can’t do the deal. It’s a residential funding deal. We lend to real estate investors that are in the business of either fix-and-flip – whether single-family or multi – or fix, rent and holds and refinance (BRRRR).

So those are our two major groups of people. A person is at the core of everything, every company has people, but it’s not a consumer loan, it’s a business loan.

C: So who would be your ideal kind of clients?

A: Well, we do actually lend to beginners and so, my ideal client is someone with, say, two, three, four flips under their belts. That’s my ideal, because they’ve got some experience, they’ve started to realize what’s really involved. They’re still in the game after reality has set in and they still decided to be in the game. So that’s probably my ideal client but at the same time, we lend to beginners all the time. Number one, there are not a lot of lenders that will loan on a first deal and we will and number two, we do, quite honestly, charge a higher rate because there’s a lot more risk for mistakes to be made.

So we look at those deals, we’re more likely to turn down a thin deal from a beginner whereas if somebody says, “Oh, I’m on my 13th flip.” And I say, “Don’t you think that’s kind of thin, you’re only gonna make $20,000 on this.”

“Yeah, I think I’m gonna make 30 on it. And yes, it is a little bit thin, but I know the market really well and I’ve done three flips in that subdivision and blah, blah, blah, blah, blah,” so that makes a big difference.

So my ideal client has a few flips under their belt but we do beginners all the time.

C: Most hard money loans, you had said earlier, tend to be for a short-term. So what’s the typical scenario for a hard money loan?

A: So they’re typically a year, they used to be actually even much shorter than that, but now most hard money loans are typically a year. We hope that your project doesn’t take anywhere near that because honestly, you should be moving the project as quickly as possible because the longer you have to pay me, the less you’re gonna make and the more I’m gonna make. So the faster the project moves – I would rather that you move fast, make more money than me and then do another project and then we’re all happy. Versus take too long, get burned. I’m the only one that makes money. The borrower’s unhappy because I’m the only one that makes money. And so, we give a year to allow for problems but the project should generally take less time. Unless it’s, say, a major rehab project, for four units that were burned out that has to be gutted, but even those, they can be done in less than a year, say nine months or something like that.

So they’re a one year loan. We lend a portion of the purchase price and we lend all of the construction funds as a rule. There are variations on that, but that’s the norm. You must take title in an entity, so you must either have an LLC or a corporation in order to take title.

We fund the construction money as you go through the project so we hold it in escrow and then as you complete work, we reimburse. Those are called construction draws and they are essentially the same as in any commercial, construction loan, that’s essentially the same thing. Commercial construction has been working with construction draws for dozens of years, I guess, decades.

So it’s the same thing, it’s a pretty straightforward loan. It’s simple interest. We evaluate the project after you submit an application, we come out and see the project. We issue a term sheet. We proceed to close. You start the construction. We come out and visit. We give you some more money for what you’ve already done, then you do some more work, then we give you some more money. Then you do some more work, then we give you some more money.

If you put it on the market, you sell it. We get paid off, you get paid off, everybody’s happy. That’s how it works. It’s not quite that simple,

C: So, is it primarily a flip kind of scenario? Because I know banks don’t like to lend on flips, they want you to keep your loan much longer, right?

A: Banks don’t like flips. So we mostly do flips. We also do small multis that are buy, renovate, rent and refinance.

So they’re not flipping those, they’re refinancing them to hold and that’s fine with us, too, as long as we know that the person can get refinanced out at the end, but they are almost always projects that do not qualify for conventional funding because if it qualifies for conventional, I’m gonna look at that and say, “What’s your credit score?” And they’re gonna say, “Oh, 760.” and I’m gonna say, “Why aren’t you doing conventional, commercial funding for that, because you have the time you’re closing date isn’t for six weeks and this is a six-unit building and you have good credit. And why don’t you apply for conventional commercial? I think this would qualify.” And the borrower goes: Oh okay, you got anybody? Because conventional commercial is half the price, it just takes two or three times as long to close. We close very quickly. Conventional, commercial generally needs about six weeks to close.

C: So what’s like a range for interest rates?

A: Interest rates range for me from 10 to 12%. Twelve, obviously for the beginners. 10% would be for the more experienced. Typically points are charged and points are capitalized into the loan so that they aren’t paid when you buy the property, they’re paid when you sell the property.

We charge between one and a half and two points and there are monthly interest payments, so you have to keep that into account. The time frame is generally a year unless you’re doing a very large project that needs more time than that but most of the time, those aren’t the projects that we usually work with.

So interest 10-12, points 1.5 – 2, you have to take title in an entity and I can quote better rates to a specific person based on their individual experience level. We have a matrix that we work with that we change a little bit. Also the amount of downpayment varies by experience also.

For you to have, say, a first-time borrower, we’re gonna have a minimum of 20% of the purchase down but more experienced people can put down as low as 10% of the purchase price and then we still always fund 100% of the construction.

C: Okay, so someone is looking at some kind of a transaction, they come to you and say, “Okay I like this place, I’m gonna do X, Y, Z to it, that’s gonna allow me to add this much value and then I’m gonna try to sell it. Is there any sort of prepayment penalty when they do finally sell the property?

A: Not the way you think of a prepayment penalty. What we do ask is that we have a minimum of three months of interest. So I’ll tell you where that comes into play. Let’s say you’ve bought a hoarder house that’s full of stuff and you can’t even see the walls, okay?

And it’s in a nice neighborhood, and you got it dirt cheap because the yard is a mess, the house is a mess, it smells to high heaven and everybody in the neighborhood knows that.

However, you start cleaning it out and either another real estate investor or sometimes a family member of someone that lives in the neighborhood comes and says, “Oh I’d be interested in buying this house” and the person that’s interested in buying the house, it could be another house flipper. The person interested in buying the house makes you an offer and you realize, I’m gonna clean out this house for five grand and they just offered me 45 grand more than I paid for it.

Gee, how do I make that decision?

It does happen, it happens all the time.

So we have no problem with that because that’s your best way to make money. To take less money for less risk is, in my opinion, always better. You don’t have to open up the walls, you don’t have to worry about the building inspector, you don’t have to worry about Grandma’s ashes that you find in the basement under that pile of crap.

You don’t have to worry about any of that and so you agree to sell it to them. But if that happens in a two-week time frame, then the lender has made virtually no money but they’ve done the same amount of work that they had to do as if it was a six- to 12-month loan.

For those cases we build in a three-month minimum, and all you do is pay the three months minimum of interest, which you planned on paying anyway because you were gonna do more work and if you’re going to make 40 grand for a week’s worth of work, usually that extra couple of months is not a big deal. So if you’re in that great a position that you’re gonna make $40,000 in a couple of weeks, then the 3% is no big deal.

C: Especially like you say, that’s already been factored into your calculations. So how early in the process, typically, would you get involved as far as looking at the deal? Do they have to submit plans to you and say: this is what we’re thinking of doing, or how much detail?

A: Okay, so there’s a couple of ways that these happen: let’s say they’re a beginner and they’re unsure, so they want me to bless the deal, kind of line up the money before the deal happens. That is hard to do with any degree of certainty but we have a process called feasibility and it’s a brief little web form on my website, under pre-approval and you give me some real basic information such as the address, the price you’re paying, how much you think you’re gonna put into it for construction and what you think it’ll be worth when you’re done and I take a quick look at the deal pulling some comps and then I call the person – and usually all this is the same day, we do it all on the phone the same day – and I call, of course that we discussed the deal, and I say, “Yeah that looks feasible. Go ahead and make your offer.”

It’s not a firm commitment, you’re never gonna get a commitment, just like if you go get a loan to buy a house you’re gonna live in, you’re never gonna get somebody to approve you for a house before you’ve got the house under contract. You can get a pre-approval but those change, we all know that.

So yes, so we do have that pre-approval process where we will look at the deal or sometimes, real estate investors that are confident, that have done many deals and know that they have a deal and are confident that they can get the funding, they will pull the trigger, they will get it under contract, and then they will call me and say, “Okay Ann, what do you think about this deal?” And that way, if I say no, they know then they have to go and start making more phone calls.

But either way is fine with us. I look at deal after deal after deal that never ends up happening and it’s just part of what we do.

So it is a pretty easy process. It’s about maybe a minute on a form on my website and then I call you. I like to do it right away. We are different in that we underwrite from the beginning. And so, if I don’t like the deal, I’m gonna tell you right up front before you’ve done a lot of work as opposed to: oh I’m sorry it didn’t appraise or oh, I’m sorry, we don’t lend in New Hampshire?

I can do all that stuff right at the beginning. Then once you’ve submitted the application and you have it under contract, then I dig a little deeper. Then when we come out to the property and go through with you and you show us: I’m gonna do this, I’m gonna add a bedroom or I’m going to finish the basement or I’m going to move this wall and open up the kitchen and the living area or whatever it is that you’re going to do but we’re okay either way, looking at the deal, and then come out either way, but we don’t come out until you actually have it under agreement.

C: And then what would you say is your lending criteria for the whole process? Do you have an application for them to let you know how much experience they have and that?

A: Yes, the application is on my website. It’s in a spreadsheet format, so there’s a page for personal information, like how do I reach you, how much experience you have and that’s just bullet points, because we’re gonna get into verification of that later.

Now, I’m gonna say: Okay, you’ve done five flips, I need to see the HUDs because you’re gonna get a lower rate based on that so I need to see documentation. And there’s a page about the project itself, where it is, what you’re paying for it, what the after-repaired value is going to be. Then there’s a page for your line item rehab budget. This is not to the penny, this is what you expect. Like Windows $6000, kitchen $12,000, it’s not like: doorknobs, $3.29. That’s not what we want.

The last page is an evaluation that plugs all those numbers in that you already gave me and comes up with an estimated profit, and it also estimates all your closing costs, so it’s helpful to see where the deal is gonna land at the end.

Yeah, so that helps beginners see their closing costs and if the deal is up being a little thinner than they thought, then we can talk through those numbers: Okay. I’m an agent myself, so I’m not gonna have to pay both sides, I’m only gonna have to pay 3% to the buyer agent and so that brings that number down and that sort of thing. It’s not winter, so I don’t have to pay any heat. It’s in New Hampshire, so the transfer tax is higher, not lower. That sort of thing.

So that’s my application and along with the purchase contract and that’s all I need to go from there.

C: And then you said, it’s a very quick turn-around.

A: Yes, so generally what happens is: I’ll do the initial evaluation on the phone, then when somebody sends me a full application with a contract, then it takes me a day or two, just depending on how busy we all are – there’s only three of us – and then we call and set an appointment. And if it’s an occupied property where the seller is still living there, of course we have to work around the seller.

For the most part, these properties are not occupied.

So, we set an appointment, we meet the borrower there. It’s important to meet the borrower because we need to know what he or she is going to do with the property.

We went to one recently that had all the pipes burst and it had sat all winter and you know what those are like and we went in and out as quickly as we possibly could, ’cause everything was ruined in the house and of course, mold was forming. And so we wanted to see that there was no structural issues and what the floor plan was and the neighborhood and we were in and out of that house – Oh my God, lickety-split – ’cause it just was, it was like, “Oh I forgot to bring my mask.”

We’re used to those. I mean, that’s part of what we do. We walk on hypodermic needles, we deal with mold. One of my Black Dimond partners is very fond of calling all his projects meth labs. I don’t usually lend on meth labs because those are pretty dangerous. So we come out, look at it – we did not need her to go through the whole thing in that case and say, “Okay, I’m gonna open up this wall” because every wall was going to be opened up. The siding was okay, the outside was fine. She was going to powerwash it. She was gonna re-grade the yard because it’s all cattywumpus. Sorry, that’s a grandmother’s term. My grandmother used to love that word, cattywumpus.

So the yard was a mess, she was gonna re-grade the yard and there wasn’t much for us to look at, so we got in and out of that house in just a couple of minutes.

And so that’s the process and then the next day, we’ve issued the term sheet and the borrower goes through it, asks questions, signs the term sheet, we send it to our attorney. She’s usually ready to close within a week.

C: Wow, the title search and everything is done within that week.

A: Oh, yeah, she has in-house title. I know it’s not normal in the residential world, but it’s very normal in the investor world. And she’s very fast and very good and she only works with investors. She does all the work from there.

C: You’ve got the money just waiting for the person.

A: That’s exactly right. She pulls the title and lets us know that title isclean and marketable. We do not close with exceptions that are not okay with her. So sometimes these auction properties have exceptions for say: the owner is still in residence and stuff like that. We won’t close with those but once the title is clean, then we wire the funds so that she knows that we’re ready and she produces the loan docs and we close the next day. It’s a very fast process unless we’re waiting on the seller, which happens.

C: So it seems like any sort of short-term project, any kind of project where it needs to be a quick turnaround would be perfect, right?

A: Yes, it’s pretty much any time you can’t get conventional funding because of the condition of the property or you can’t get conventional funding because you don’t have time. Let’s say you’ve got a divorce situation and the court has mandated that they sell and they’re both sick to death of each other, so that kind of thing. We’ve got to close by March 31st.

If I could get that call today, that’s easy peasy. If I get that call on March 28th, that is tough ‘because I still have to do all the underwriting and come out to see it and get a term sheet put together and send it to the attorney and pull title. We’ve done it, I’ve done it in two days, twice for existing borrowers.

Only for existing borrowers, people I’ve already known, I’ve already worked with… And they already know what they’re doing. So they’re already working double speed to do everything they have to do because they know what they have to do.

Singles, small multis, condo conversions. We were doing small commercial and new construction but because of where we are in the market, we’ve kind of backed off of that but that’s the criteria.

C: What’s your range? Do you do all of New Hampshire, Massachusetts, New England, how far out do you go?

A: In general, we go as far as the Lakes Region up into New Hampshire, but rarely. For the most part, I go up to Concord, New Hampshire and south from there. I go down to Plymouth, Massachusetts, Cape Cod canal. I do not lend on the south coast: Fall River, New Bedford. It’s a little further, the deals are smaller and I don’t know the area at all so I don’t do the south coast, but I go out to the Western suburbs of Worcester and conveniently, my new web designer put this nice little map on my website of all the towns that I lend. So you just click on it and it expands out the map and you can see where your project is and if you zoom in, it’s even got the names of the town, so easy, peasy.

C: And your website and everything is on your bio, is that right?

A: Yeah, it’s

And my web developer just… It’s a new site in January. He’s very proud of it. So if you have any comments you like me to pass on, I’m sure he’d be happy to hear them.

C: Alright, so when you were learning about all of this, what kind of resources did you use? Did you read books? Did you listen to – I guess that was pre-podcast, right?

A: As a matter of fact, I did a podcast years ago on bigger pockets. And it was a very early one and I don’t think there were any podcasts on and it was very difficult to find books on private lending back then.

Now, there are some out since then. And I’ve read them and I promptly forgot about them because a lot of them are sort of like: Really that’s what you do?

So every private lender does it themselves and does it their own way. But I read everything, I’m a big reader so I read everything I could get my hands on. When I was first buying rental property, I just read every book I could get my hands on about rental properties. I read everything I could get my hands on about lending, but there wasn’t very much so I leaned heavily on my attorneys because there are a lot of legal intricacies to the lending part that don’t really apply when you’re just a real estate investment. So there’s an extra layer of information on the lending side but on the real estate investing side, there are tons and tons and tons of books.

There’s tons of information on Bigger Pockets, some good, some bad. Some of the books are good, and some of the books are bad. You sort of have to weed out your own – what you like and what you don’t like and talk to people that have done it – not people that are in Utah that say they’ve done it, people that are local here – real estate agents and brokers that work with investors, like yourself, that know their markets.

If you get a really good broker, like you, then you’re going to have a much better chance of properly evaluating properties. Not that I’m putting in a plug for you or anything…

C: But I appreciate it anyway, but you’re right, I walk through homes with people and they’re just like, “Oh I can fix up this whole place, for $15,000.” I’m thinking… yeah, right. It helps to have someone who’s been through the process a number of times.

A: The only thing you can do for $15,000 is clean out the trash and paint it and have the carpets shampooed.

Well, that’s not the only thing, but it’s pretty close.

C: Just the very basic, most basic cosmetics.

A: Yeah, a new light fixture here and there as long as you buy it on the cheap from Home Depot.

C: You certainly can’t open up a single wall.

A: No, you can’t open a wall. Yeah, for $15,000, you can open the wall. And then you can put it back together for another 15, right – and there’s always unexpected things that are gonna happen and you have to assume that they’re going to be in every single job, no matter how cosmetic it is. The only time that there are no surprises is when it’s already bare bones to the studs and even then, you don’t know how the building inspectors gonna treat it. They may make you bring it up to code, so that every stairway has to be redone, the whole building has to be reframed, it has to be rewired, it has to be re-plumbed. You don’t know that. At least you can say what you have to do.

C: I was at a luncheon the other day and I was talking to someone. We just, obviously got talking real estate ’cause that’s what happens, even though it was not a real estate luncheon, but she was saying she wants to buy this house, which has mold damage and she’s got herself a quote for that. And I said, “Look, you need to talk to the city because it happens to be a city that I’m familiar with and I know the building department is a little bit strict.

So I said “You need to talk to the building department and find out that once you cut off all that mold and you basically have the walls open, are they going to require you to bring everything up to the current code?

A: And she didn’t know the answer to that?

C: No, she didn’t, so hopefully she’s doing her due diligence now before she gets into a crappy situation.

A: Yeah, building departments are great. They’ll tell you. Well, most of them, will tell you a lot of information and then they’ll tell you even more information after you’ve already bought it, that they didn’t tell you the first visit.

Why didn’t you tell me that the last time? Well, that’s not the question you asked me.

C: What are you talking about, you must’ve realized that I need to know this.

A: No, they don’t care.

C: Yeah, so do you have a favorite – doesn’t have to be real-estate related, like a favorite book that you sort of go to that you’ve read over and over?

A: Well actually, I did, I had one that I think I read four times and it’s in its third printing and it’s kind of old, but it goes into a great deal of detail about rental properties and analyzing them and how to run the numbers and that is called: Real Estate Investments and How to Make Them, by Milt Tanzer. His first name is Milt as in Milton and you can get that on a second or third or… I don’t know if it’s a Kindle available or not, but I know that you can get it on Amazon, but it may be a used copy, it may be out of print now.

The reason I like that one so much is that he went into such great detail with the numbers. If you’re not a numbers person, you’re gonna fall asleep, but if you wanna truly understand how the numbers work, because there are five ways to make money in real estate or is it four? There’s appreciation, there’s tax depreciation, there’s rental income, and then there’s another one and then they’re… Sorry, it’ll come back to me in a minute. And then there’s the power of leverage which you can’t do in say stocks and bonds, right?

So this book goes into all of that and how to understand those numbers and how to build a spreadsheet model. And then there’s another book called: The Income Stream, as in a stream of income by Robert Goodman.

It does an analysis of cash-flowing real estate, it’s the APOD (Annual Property Operating Data) that the commercial real estate investors use, which is the first page of a financial analysis of a commercial real estate property and that book dissect all of those numbers and tells you how to build the spreadsheet model.

And all that is, is an analysis. It’s not an analysis of real estate, it’s how to understand the numbers,

C: Which is key, even if you don’t like numbers, you need to understand them, in order to be successful.
A: And the first book is called: Real Estate Investments and How to Make Them. Those two together, gave me just about everything I needed on the numbers. It doesn’t teach you how to find deals at all.

C: Nobody can teach you that, I don’t think, that’s just hard work.

So what should I have asked you that I didn’t ask you? Would you like to share that I failed to ask you about?

A: The only thing I left out – and I don’t think this is critical because it’s a concept that doesn’t translate well – I do lend a percentage of purchase and all of the construction but that is subject to a total of a percentage of the After-Repaired Value. And every time I say that, people go: huh? So I do it with an example and I do that on the phone with them.

It helps more experienced investors. It doesn’t help beginners and it’s on my website that it says that. So, if they’re going, poking around, they’ll find it.

Great, Ann, thank you very much, awesome, Ann, thanks so much for sharing your wisdom with us today, and thank you, Listener, for listening. Be sure to be here next week when we’re gonna have a really interesting conversation with Cedric Dahl, who is gonna talk to us about none other than crypto-currency, specifically bitcoin, which I think a lot of people are interested in especially now, the price is dipping a little bit. Also if you remember from last week, I had an illness and you’ll be happy to know, or at least I’m happy to know, that I didn’t die and that I have recovered fully and then it wasn’t the coronavirus. So I hope that you are also healthy and enjoying this off-work time to focus on becoming financially independent.