Ep #2 Real Estate Agent's Discussion: Having the Proper People in Place to Close Real Estate Deals

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- Welcome to "TDJ Equity Funding Insiders Podcast." I'm your host, Jacquelyn Jackson, a loan broker at TDJ Equity. Today's episode is gonna be about real estate investing from the realtor's side of view. So let's welcome our guest, which is Ms. Brandy Marshall who's a licensed real estate agent in Texas. Let's dive in and see what her knowledge and wisdom she has for us today. How are you doing, and welcome, Ms. Brandy.

- Well, thank you. Thank you for having me on. As you said before, I'm Brandy Marshall, and I've been a realtor for six years, but I've been serving people for the last 18 years. My heart is to educate and to bring awareness to all the things that are all things real estate, whether it be investing, residential, commercial, land, apartments. I try to learn it all.

- Learn it all and help them. That is wonderful. So, with your experience in working with your clients, can you tell us, far as the funding part, what part do you play far as helping them with funding?

- Initially I usually try to get people qualified like understanding what the criteria is before I send them off to a lender. I think it's important for you to give them the knowledge of like the basic level of what they actually need in order to qualify, right? So I send them. Usually, I get on the phone, do a call with them and say, "Hey, do you have your tax documents in order? "Do you have the income that you can support this with?" And then if they can answer all those qualifying questions, then I send them to a preferred lender that I'd like to work with.

- Okay, so basically what we're saying, starting out for homeowners and even on the investing side, you need to do the same thing. We have to explain that to people when they come to us with real estate investing that we give them a sheet of what you need to have and be prepared, and part of it is having your taxes together. You necessarily might not need 'em, but according to what the project is 'cause on real estate investment, it's more the integrity of the property than it is the person is individual 'cause I think with homeowners, it's more with the homeowner, which is their credit file and everything like that, right?

- Right.

- Okay. So when they go to a lender, what should they look for when they go to a lender?

- A big thing is interest rates, and we see that all across the board. Everybody's like in a tizzy about interest rates, and especially when you are investing because usually on those loans, the interest rates are higher, and as soon as you purchase that property, you've got either one or two choices. Either you're winning or you're losing. You're either winning money on it, you know, you're able to flip it, fix, flip, whatever you're doing with it, or you're losing, meaning the property's sitting there and you hadn't really done anything. You don't have workers or contract people to work on it. And now you're in a position where the interest rate is high, you don't have contractors, and you're losing money on it. So interest rates are really important. To understand that, even if you can't get an appraisal, using a realtor is beneficial. Realtors are able to run what's called a BPO, which is a broker price opinion instead of an appraisal, which is an equivalent to that. So you can see what the property value is. So you're not paying higher interest rates and in over your head because you paid too much for the property.

- Okay, so basically what you're saying, the same type of pitfalls that homeowners have, my real estate investors gotta realize you can have the same pitfalls.

- Correct.

- Because I think they think it's different, and it's not to the point where, let's say this, that as an investor, and we deal as a loan broker, we deal with them, is that when you looking at interest rate from the business side, and that's what real estate investment is, business, known on or occupied, you look at the interest rate, and you definitely want a low interest rate, but if you doing fix and flip, what I try to tell people on bridge loans, they're gonna always be higher. It's not until you do permanent finances where you're gonna go down. The thing you have to think of, some of them will give you interest only payments, or they'll set your payments up where it's already in the loans to a certain point where it's a hold back or something of that point, or they'll have you to put so much where you don't have to worry about paying for it. It's all based on what type of property deal, what type of the lender is offering you, but understand that what you do for your home is different for what's... The stipulations is different for what's required for real estate investment. I think that's something we need to make sure our listeners understand. You don't have to go through the same process of doing that. So I definitely agree with you. Interest rate matters, but also the situation of where you at on the interest rate matters as well.

- Right, and I just wanted to touch on, you made a really good point, I also encourage investors to weigh their options, right? You just went through a whole gamut of options that people normally don't necessarily know about unless it's a good lender. Like a lot of lenders are not created equally, you know?

- We're gonna say a knowledgeable lender.

- A knowledgeable lender. All right, let me reframe that, a knowledgeable lender. Yes, because all of them are not created equally. Product wise, in my opinion, this is Brandy's opinion only, a knowledgeable lender gives options, right? They give options to the client, and they can be creative within those options and those guidelines, but it's important to find a lender that does that. So, if you're out here wanting to invest, I encourage all investors to get a knowledgeable lender because it's important. You need those options.

- So we need the options as real estate investor, but also we need it as homeowners. I'm purchasing a home, I need to still get options. One thing to come to me in order for me to do the financing of my home.

- Right.

- Okay. And even to touch on that, so if you're in residential, if you're looking for a residential home, it's okay to shop your loan. It is perfectly okay. You can use more than one lender and even say, "Hey, I've gotten this interest rate from this lender, "what can you do for me?" We're all in business, right? It's beneficial to you to shop your rates, so you can see what's out there, and just don't go for the first yes 'cause there might be more out there, but at least you'll know. But no is always the answer to the question you don't ask.

- Right, if you don't ask, you won't find out, right, and that is really good. And that's something I think we go into business, whether it's home buying 'cause it's still business 'cause you're trying to, your personal business, or if it's real estate investing that you're doing, we go on what we've heard or what we thought or what we read a little bit about, and we go and perform business that doesn't necessarily gonna be feasible for us because we didn't know how we need to do what we need to do. So as I always say, and everybody in the office know I say this, you know, you don't know what you don't know 'cause you don't know what you don't know. And we have to understand that that's why it's important to get a realtor. And I say this to my clients as well, whether it's wholesale or you getting something off the market, you really need to have a realtor on your team because they can be a protection source for you, especially when it come to the contract. You putting earnest money down? Are you gonna get it back? Does it say it? Do you give... I think one point you said that there's some type of... I guess you give 'em some type of covering where they can be covered to get out of the contract.

- Yeah, through like an option period is the term for it, but not only that, I've seen investors not use the title company.

- Oh wow.

- And investors out there, that is a big no no. Title companies are there to protect you. They make sure there's no encumbrances, liens, clouds, judgments on the property because you have to understand if you go into that property and purchase it and there was a mechanic's lien on the swimming pool, the guy put a swimming pool in and he didn't pay for it, he'll walk away and say, "Hey, no problem. "I'm just gonna put a lien on your house, "so then when you get ready to sell it, "that's gonna transfer with your property." And so if you just don't use the title company and you do like a cash deal with this person, you inherit-

- A quick deed. 'Cause you don't have a title for that.

- That's right, if you do like a general warranty deed, you inherit the debt.

- Whatever lien is on that property becomes yours.

- It becomes yours because you didn't use the title company, and that's one layer of protection with the title company. They run it through the system, and they can see all that. So at closing, that debt is taken care of by the seller instead of it coming out of your pocket or it being your responsibility now.

- Because basically, let's say this, at the time, it's gonna be your responsibility. When you purchase it without a title company, that lien is on that property, so it's there. So when will you see it? When you try to sell that property or refinance that property.

- Exactly, right.

- You're gonna have to... And user lenders require you to pay any lien that's on that property. So you may have a great property, a great deal, fix it up, and I mean, it's below market and you have so much equity in it, wow, that's great. After a couple of years, let me refinance it and pull out my two, $300. Well, guess what? You gotta pay that $100,000 from that pool guy. And so that's what we have to understand. Things are in place contrary what people say. There are a lot of things in place that protect us. Like you said, a realtor is there to protect you. "I don't wanna pay them 3%. "I don't wanna do this," but you don't understand. By not paying them, you're gonna be dealing with a bigger problem later. The same thing with a title company, it's not much with a title company, but some people decide, "Well, I think that's a little bit too much, "I don't wanna do that." Well, the fact is it's there to protect you, and, guys, you have to pay for that protection if you wanna be successful in doing your real estate investment. There are so many stories out here. So many companies are doing stuff to help investors, which they say, and some of 'em are, but the thing is if you have certain professional entities a part of your team, that's gonna protect you no matter what. And I've always emphasized title company, a realtor, I don't care if it's wholesale, fix and flip, under market, I mean, you know, not on market. You still need to have these people in place along with funders and bankers and all of that as well, but we talking about the real estate with the realtor part right now. So that is great.

- Yeah, and not only that, they have... Usually majority of title companies have an attorney on staff. So whenever your documents are being reviewed before you close, they're actually being reviewed by an attorney. So that's an actual another layer up, a reason or another layer of protection for you because they actually send... They prepare your documents at the title company, send them to their attorney on staff, they review them before you close.

- Okay, well, you had said something earlier that I know some of my listeners and clients have actually talked about is when we actually talk about having the appraisal done. You know, some of the deals, especially they wanna 'em quick, we ain't got time for appraisal, it's gonna take a lot longer, and they get discouraged on it, and they say, "Oh I don't need it." They say, "I don't need it." So tell me, in your experience, by not having an appraiser or appraisal done on your home, whether it's real estate or some of the convenient loans are gonna require it, but on your home, but what have you seen resulted of them not having an appraisal done on a property?

- The biggest thing I've seen is a person being upside down on their loan. So when it's time to pull out equity... And honestly right now, the equity in property is crazy. You know, back eight years ago, you weren't seeing $100,000 within two years of being in a property or 50,000 within one year. Now, you're in a situation where you've paid way too much for the property because possibly it was prime real estate. You know, maybe it was near a highway or something, and you were like, oh, this is prime, I wanna fix and flip this, but you overpaid for it because you wanted to beat out the competition. So you didn't stop, and you wanted to close in eight to 14 days or whatever. You go out and get that property, and now you're upside down. Still, you didn't weigh the cost of repairs or contractors or anything else that goes with fixing and flipping, and you've gotta have that margin. And a lot of times I feel that or I've seen that the margin's not accounted for. So then you have homes that are in your possession, but you're not able to finish them. You see people not being able to complete their projects, and they're just upside down in the loans. And I think that's the biggest thing that people have to understand why using a realtor and even just getting a BPO, which is comparable to a comp analysis, right,

- That's good to know.

- To say BPOs is just you going out and you are looking at the price of all the properties to see if you're even in the ballpark range. Once you repair the property and you're able to sell it, then that allows you to see, okay, if I spend $100,000, and this property's only worth 300, I've only got maybe 100,000 to work with, and then I still do have some margin even if the plumbing's bad or I need to rewire the electrical or whatever it is 'cause you just don't know what's gonna happen. You need a little rainy day money even when you're fixing with it.

- You need to account for all that, and I agree. Also what I recommend too is that when you get an appraisal, you need to get an appraisal based on the lenders telling you you need an appraisal. Some people say, "Well, can I just go out "and get an appraisal?" I mean you could, but I don't think that's good. Let's see if you qualify, if the house even qualifies, and the numbers even work first. And then the lender will actually order the appraisal for you because, believe it or not, if you do a appraisal, they're not gonna accept yours. They can't accept yours, okay? So it's best to go ahead and pay that fee one time through them, and you will get a copy of the appraisal. They give you that, right, a homeowner? Okay.

- On the residential side, but like if you use the hard money loans, I'm not sure that that is required. If you use like a hard money lender, I don't necessarily believe that they required an actual appraisal, but, yes, in the residential space, they require you to get one because they're not gonna overpay for the house. They're just not.

- Some hard money lenders will require it too.

- Will they?

- It's really based on the lender. Again, like you said, you gotta weigh your options, and that's what I think people don't understand. There are different types of lending facilities out there that you could use, and that's why it's important that you get people on your team like a loan broker or a realtor that knows, and let's say knowledgeable. we gonna have to use that because just because people have titles doesn't necessarily mean they know. So therefore, you have to do a little, you know, work on your end and research to make sure where they can help you and guide you through your process. But I think that's one of the biggest, one of the biggest things, or the myth is about the appraiser, whether I should have it or should I not and when and when I should. You know, and it's basically like you said, if you want to see if the number's gonna really work, you gotta have something substantial to compare it to. That's what an appraisal or a BPO will do for you. So that is something that's great to know. So having a BPO, people having a realtor, basically what she's saying is that that's what we need that can kind of guide you on the localities of it, and then protect you at the same time. So, with that said, and we are looking at real estate investors doing, what other things do you think as a real estate investor, besides just those two things, what else should they look at in the process of doing real estate and investing as well?

- I would say contractors are a big thing. Contractors are a big, big deal. I would like to tell a little story. So, I had this one real estate investor, and he does maybe 30 homes a year, and he had this group of contractors that had come out, and there was a disagreement about something, and we came out the next day to check the property out, and they had rewired the light fixture where the mirror in the bathroom went and put holes in some of the sheetrock, and it was a lot of damage that was caused and then a delay, right, to find new contractors. So, having great contractors that are able to do the job, understand what you actually need and that can fit in your budget are a good thing. Also, I would say picking a prime spot, meaning like a prime property, like that's a big deal. Like, if you don't want your property to sit on the market forever, you know, unless it's land, land never depreciates in value, but if you're looking to make money as a real estate investor, finding a property where maybe it's near schools or retail locations, I think those are a big thing to look for as well.

- Okay, and those things as well. And I think so too that we do have that, construction, contractors, we all hear the stories. I tell my clients that if you are looking for a contractor, I think a great place to start, and it's just my opinion, is that in the city that you are actually building, go to the Chamber of Commerce. Those, they have a list of contractors 'cause Chamber of Commerce is more of a networking type thing I believe, and people kind of get to know each other, and if you have a contractor that's out there and he's sponsoring stuff and he's doing different things, that one pretty much has a more credible is what I'm saying. And I'm not saying because a person doesn't do it that they're not a credible, we're not saying that. I'm just saying when you have no clue, in Boston, you have a home, you don't know anybody, start with the Chamber of Commerce and go to their list and see what they have far as contractors and start there. I have in my experience in past have sent investors all over the nation I deal with to those places, and they've come back and have gotten some great contractors through that. So that's why I think that's one way to look at that, you know, for rehab of whatever work that you have as well. And so with that said, based on our real estate investors, but also as homeowners, there is certain things that's expected of them and the realtor. So I know we had talked about debt to income ratio. In a homeowner's side, how does that work for them needing to know that?

- Well, it depends on the loan product for debt to income ratio. I don't specifically know the numbers, but I know that they're different between FHA and a conventional loan, but it plays a really big role in it, especially if you have student loans, credit card debt. I think the best way to explain it, especially for FHA, I wanna say it, don't quote me on these numbers, I'm thinking it's like 49 to 50% 'cause they raised the rate of debt that you can have.

- I think it's like 41% now.

- Okay, so that's what I'm saying. So how I explain it, if I'm sitting down with a client, in layman's terms, if you got 100% and you split that down the middle, all that debt on like whether it be your rent, your car payment, your credit cards, your student loans, it cannot equal more than 50% of your income. When you're in that space, we need to talk about either downsizing or making extra money or doing something that can offset some of your debt because that's a huge factor that lenders look at whenever they're gonna qualify you for the loan.

- Okay. Okay, so that's important, and I'm gonna say this about the debt to income ratio. When it comes to home buying, they're actually looking at everything that's on your credit report.

- Correct.

- So if it's on your credit report, they're gonna count it. If it's less than 10 payments, they want, except for a car lease, they're gonna account a car lease until if you got one or two payments. It's gonna be accounted in your debt for that month. So that's what you wanna look at. What's on your credit report determines what they're gonna look at as far as all your debt, okay? And they take in consideration your child support, any court order that you may have 'cause child support's court ordered, right? Yeah, it is. So they'll take any court order that you obligated to pay as well and make that part of that, okay, as far as your income. So they can figure that up as your overall expenses plus your housing, and housing expenses, which I thought was like light, water, and gas, no, it's not that. It's actually like you got a... They look at your payment. They looking at your HOM, your HOA, if you have that. They're looking at your home mortgage insurance. Those are the things, your taxes, things that consider that goes around with the support of that house far as, you know, financial. That's what they're looking at. So that's your home expenses that they're looking at. And then they add on what's on your credit report. So we're saying that, which I think is really good. So people can look at that before you actually start. Some of the stuff you can look at yourself, or if you get what a realtor like Mrs. Brandy that will actually guide you through that where if you can't get it now, you can get it later, but let's help 'cause that's mainly what you do, so how do you help them on that side as well, getting prepared if they can't get it now, they can get it later? What do you do to help them with that?

- So home ownership is an education. That's what I look at it as. And so when we start, I just always recommend that you go to a lender and fill out the application and see where your baseline is. Sometimes people think they're way worse off than they really are. They just don't know where to start. And so it gives us a baseline. So once I know where the baseline is, I know how to help you, right? I know where you need to be. And so from there, we start working through... So maybe the lender tells you you've gotta pay off certain things or that you need lines of credit 'cause that's a big thing. Trade lines are a big thing when you're buying a home, and then the length of not just the trade line, but the length of time that you had the trade line. So it's best that when you go ahead and fill out your application and you're told that, you don't procrastinate, you go out and start working on those trade lines, so you can get some time, you know.

- I know you had mentioned before about some links. What type of home loan tools or links or information you think they can go to to get more information?

- Another part of that is people have to understand it's about down payment assistance and closing cost. Those are two big things that play a big factor in the home buying process. And so one of the links would be TSAHC. We can add it in the YouTube video. So if you wanna click the link, you can. There is a home buyer's kit, which talks about... It's a loan kit actually, and it talks about the entire loan process from start to finish, whether it be a conventional loan, a FHA loan, or a USDA loan, which are the three primary loans that are used. It talks about all three of those.

- And those items, they can Google 'em, as well as we will have them as well inserted where people can actually go to 'em as well. So that is some good information for 'em to have and have that document. So you're saying like also, I know you had mentioned before about HUD is good for them to go and get information as well.

- Yeah, HUD is a good resource. HUD is there to protect you, right? So they've got a lot of criteria that's outlined about homes. They do have programs as well. I know they were running a program for a while where you could buy a house for a dollar, and then they've got loans where you get the loan, and then through Fannie Mae or Freddie Mac basically, and they will pay you basically to fix up the home. They'll give you a line of credit and allow you to fix up the home through... And they'll tack it onto it, but it's the cash to be able to do that. So yeah, there are loans, there are programs. If you are a medical staff, if you are a teacher, a fire person, or anything medical, anything dental, medical, they will give you... And especially here in Texas, I think they're called hometown heroes, they give money towards essential, I guess they'd be considered essential workers. They give money towards essential workers. So especially if you're in just specifically in the medical space, they give the money to them. So, it's a great thing to take advantage of. I'm trying to think other programs. Oh, lenders do have lender credit. So sometimes based on their programs, they will give you lender credit. If you're looking at new construction, a lot of times new construction, they give home buyers incentives, which the incentives are usually paying their closing costs. It may be nine or $10,000 towards closing, and then the lender may give you, may buy down your interest rate, which means they will give you some money, and instead of putting it in your hand, they pay your interest rate down.

- Okay, well that is wonderful. So basically, not only do we give you our opinion, the wisdom she gives you, but she also gives, as you can see, some tools and resources that you can actually use, okay, as well. So, what we wanna do is thank you so much for coming out today. We have enjoyed it. Again, this is "TDJ Equity Podcast," and if you all would like to get in touch with us, we can be reached at podcast at tdjequityfundinginsiders.net. Again, thank you, and take care.

- We hope you enjoyed this episode of "TDJ Equity Funding Insiders Podcast." If you'd like to be a guest or get in touch with us, please visit our website at tdjequityllc.net/podcast or email us at podcast@tdjequityfundinginsiders.net. Until next time, take care.