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Welcome to the West Side Investors Network, WIN, your community of investing knowledge for growth. This is the Real Estate Professionals Investing Podcast. For Real Estate Professionals by Real Estate Professionals. This show is focused on the next step in your career....... investing.
Welcome to the Westside Investors Network. WIN, your community of investing knowledge for growth. This is the real estate professionals investing podcast for real estate professionals by real estate professionals. This show is focused on the next step in your career, investing. Thank you for listening.
Intro speaker:And please, if you like our content, rate us on your podcast provider. Just a quick disclaimer. The views and opinions expressed in this podcast are for educational purposes only and should not be construed as an offer to buy or sell any shares or securities to make or consider any investments or take any other action.
Trent:Welcome back to another episode of the deal deep dive segment on the Westside Investors Network podcast. I'm your host, Trent Warner. In this segment, our future guests will share their unique stories on a specific deal they've invested in. We will dive deep into finding the deal, financing the deal, writing an offer, and the due diligence. Do us a solid and smash that subscribe button, leave us a rating, and share this episode.
Trent:And now let's dive deep. Alright. Welcome back to the Westside Investors Network podcast today. Josh Shine with Trius Lending is joining us from Maryland. Josh, thanks so much for your time and joining us today.
Josh:Thanks for having me. So happy to be here.
Trent:We've got a pretty special guest. Josh has done plenty of deals throughout his twenty plus year career, so I'm honored to have him on the show today. Just to dive right into it, how did you get into financing for real estate and lending?
Josh:So I'll be somewhat abbreviated on the story. Happy to dig into as much detail as you wish. I come from a real estate family, so let me just start with that. Right? So it's one of those things where, you know, and I think you've probably seen this and I certainly see it almost every day where there's like, it's like in the blood, it's in the DNA, it's in the gene.
Josh:Like some other family member, a cousin, a father, grandfather, whatever. For me, my grandfather was in real estate, actually in New England. I'm originally from New England, from Providence, Rhode Island. So my grandfather was into it. My father was into it.
Josh:My uncle was into it. So it was a whole real estate history. So I sort of grew up around rent, collecting the rent, financing properties, visiting properties with my pops, you know, that kind of thing. So they're real good and they're great memories for me. And it was always like, you know, real estate long term holds, little bit of flipping here and there, mostly sort of like standard rentals.
Josh:We were in Providence, Rhode Island. There were some universities there, Brown University, some other places. It was just always a great business and the family always did well with it. And so it was always interesting to me. I ended up through a random and various course events in life, ended up getting into the regular mortgage business.
Josh:And so no real estate at that point, although I was still dabbling in it with my dad over the years and got into regular mortgages. And this is back in 'ninety nine. I've been doing mortgages for a long, long time. And traditional loans, traditional purchases, traditional refis, that kind of thing, it was great. Rolled it up through the meltdown in 'seven, 'eight.
Josh:We had a very robust company, a partner and myself. We had multiple branch offices, multiple locations, and we're doing a heck of a lot of business. Everything imploded at that point. Long story short, went to work for some corporate mortgage companies after that and was sort of a road warrior corporate guy. And I just got fried from really two main things in the traditional mortgage world.
Josh:One was the corporate side of things. So that's pretty obvious and that could be a whole podcast itself. And the other part is the regulatory environment. The way the regulation has been structured, there's so much paperwork and so much oversight. It really slows down the process.
Josh:It makes it really difficult to get things done and really difficult to be open in conversations and dialogue and in figuring out how to structure deals because there's so much regulation and oversight. And I went back to a partner, a branch office who had been a branch of mine back in the day, and he had always done hard money lending as a side gig when he was a traditional branch of ours. And I said, You know what? I think I wanna get into sort of real estate investing and funding and doing all this. And so one thing led to another and we became partners.
Josh:That was about five and a half, six years ago. Triass Lending had been around and has been around since 2003. He had sort of done a really nice job in building it up over those years, but my coming on board along with his son, we came on board at the same time, sort of some younger, fresh energy, and sort of blew it up from there. So the itch was always there, and it was nice to be able to scratch that itch by getting into it and getting my hands dirty with doing real estate funding, working with investors on a day to day basis, looking at deals, pricing deals, meeting people at properties, that kind of thing.
Trent:I know there's thousands and thousands of people that have done the traditional lending, conventional loans, all that fun stuff. For maybe people that don't understand the differences, what do you other than the paperwork and the regulations, is the biggest difference just the clientele that you're working with from home buyers to investors? Or are there any other differences?
Josh:So great question. I would say a few distinct differences. The one distinct difference is the ability to build a different kind of relationship. And that's what I love about this part of the business is the repetitive nature of it. It's very rare in the traditional world of mortgage finance, home financing, refis, that kind of thing, to go and do repeat business over and over again.
Josh:It's sort of like they're gonna buy a house. Maybe they'll refi a few years later. So, yeah, you keep them in your database and you might get a call from them or something like that, but that's pretty much it. It's the exact opposite in this business. Someone comes to me, maybe for their first, we deal with a lot of first timers getting into the investing business.
Josh:Their first deal, and I have stories of people who did their first deal five years ago, and now they're on their sixtieth deal with us. And we know each other and we trust each other and we like each other. We work together on so many deals. The private loan, getting them in, doing the rehab, the exit loan getting in the long term as they've evolved and grown in their life cycle of a real estate investor to then go into multi and commercial and medium sized commercial and continue to grow from there. That evolution, it's great to be a part of.
Josh:It's great to build that trust and rapport with a client where it helps everyone grow successfully. And I think that's really one of the big positives. The other thing is the fact that there's a much more common sense approach because we're our own lender. Okay? As a direct private lender, we make our own decisions.
Josh:And that's a beautiful thing. I'm happy to jump into whatever detail on that, but the bottom line is, does the deal make sense? And that is really the opposite in many ways of, like, the traditional mortgage financing world for owner occupied and primary residences, meaning it has to fit in certain boxes and matrixes and guidelines. And for us, I don't have to have a box or a matrix or a guideline. I can say, hey.
Josh:Let's look at the deal, and I like where you're going and I like what you're trying to accomplish. I agree with it. I see the upside. We're okay to fund it. That's really nice to be able to it's a lot more to it, but in essence, that's what we're doing.
Josh:And that's really nice to be able to do that and work with people and grow their businesses that way.
Trent:Two things. Two things about everything that you just said. First of all, as a real estate investor, whether it's, you know, buy and hold or or flipping houses, I can attest 100% that the clientele that you're explaining are all deal junkies just like myself. Get the first one with the conventional program, and then we realize, oh my gosh. I can't sit here and try to use my DTI and all this stuff with the conventional loans.
Trent:I need to find a way, to still do deals. And that's why I think this industry is so powerful because, like you said, you build relationships, you repeat with the same people that you work with, and everyone is progressing in their real estate careers together rather than, hey. I'm gonna buy a house and live in it for twenty years, and I'll talk to you if you're still in the business down the road.
Josh:It's it's so exciting to be able to do it that way. It's rewarding. It's a win win for everyone. And to be able to have a guy call me up on a Sunday night or even just text me, contract's being sent over. Need to close next week.
Josh:I'll call you tomorrow. I'm like, done and done. You know? And we'll meet for drinks after closing. You know?
Josh:It's like I mean, that's incredible to make it that easy for someone to grow their business, for all of us to grow our businesses. It's incredible. And I don't think there's anything else really like it. To your point on the junkie part of it, the drug is real, right? I mean, we love and we're passionate about it.
Josh:And I think if you're not passionate about it, you'll have a tough time being successful because even during the tough times, and I'm sure you've experienced this too, there's challenges, there's tough times, there's bumps along the road, there's the repair that was unexpected, there's the vacancy that went on a little too long, and there's a million things like that. We still love it, though. That's the difference because you gotta love it and have that passion for it because you know and believe in what you're doing. And I think that's somewhat unique to this business and this industry versus a lot of other businesses and industries, and I I love that about this.
Trent:You hit it right on the head. Couldn't agree more. One thing that I think and and I'm sure you could explain this better than I can. But when you go from being a client of the conventional lending financing world to the private money world, your will start to spin, right? Like you're not just focused on single family houses that you're going to occupy, you're looking at flips, you're looking at multifamily that you can buy and hold refinance, cash out, all that good stuff.
Trent:What would you say that your mix of clients is doing the buy and hold strategy to get more rentals and build a portfolio and the types of clients that you have that are flipping houses, flipping small multifamily properties, that kind of thing?
Josh:Yep. So we've seen a clear distinction, a clear shift in the past number of years. Now this has been a crazy market. And having been in the mortgage industry for twenty three years now, I've seen everything, Prices up, prices down, insanity with lenders, you name it, the economy, what have you. But a lot of the people that we work with, and depending on someone's age and when they started in real estate investing, if you got in in '12 and you rode this out till '21, early twenty two, it was nowhere but up.
Josh:It was just one direction. Right? It was just the sky's the limit. And everyone felt they had they had the Midas touch. Obviously, that's changed a little bit, and that's a conversation we can have in a moment or two.
Josh:It was clear a number of years ago, at least in our region, in the sort of Mid Atlantic East Coast region where flips were just easy. There was great money to be made. And the dollars and the returns were pretty good. Good percentage returns and a nice chunk of change to be made. Get in there, get a crew in there quickly.
Josh:Great for private lending. Right? I can close within a number of days, get you those rehab funds really quickly. And then you can turn that around and flip it. It's gonna be great.
Josh:As the market shifted where prices continue to elevate with no stop or no end in sight, all those flippers were like, wait a second. This is getting a little nutty. The cost of rehab is going up. There's some delays. COVID was a big part of it, obviously.
Josh:And those delays really exist, I think, everywhere still to some extent. And the prices keep going up. My margins are starting to really contract. How do I make money doing this again? And we would see person after person who had really not wanted to be long term hold people.
Josh:Their whole plan would be like, flip, make money, flip, make money, pay my bills, putting some money in the bank. It's funny. A lot of them were looking to maybe accumulate a large chunk of change to be able to then buy the larger multi or the commercial or what have you. But they were just it was sort of single-minded in that goal of just accumulating the wealth in that manner. And they saw the writing on the wall and said, I gotta start dabbling in the rentals and the holds.
Josh:And they did. And we saw that shift take place from a ton of flips to very and very few rentals to a ton of rentals and very few flips. The market was speaking to people, and we always say to people, I always say to people, the market will very often make that decision for you. You can go into a property or a project and say, I'm definitely doing it this way. And I'll say, I have to caution you using the word definite for anything in real estate because you just don't know.
Josh:The market will dictate buyers, sellers, timing will dictate that for you. If you can't find someone quickly, you might say, I'm gonna hold this thing. I was planning on selling it. And a lot of times the opposite happens, right, where someone comes in and says, I'm gonna rent this right now. Or, you know, I've got people and I have a manager management company, and I can get all these units rented or whatever it might be.
Josh:Those things happen that cause you to make change your mind with it. But the evolution took place. And now for us, oh, it's probably 85% holds. Everyone is looking at that long term trajectory of saying, hey, take it long. I know I'm paying.
Josh:Market rates right now, probably, you know, sort of par. I don't know that it there's so many discounts. It's tough to find the real discounts out there. And I'm willing to do some rehab if I need to. No problem at all.
Josh:But I'm looking at a long time horizon. And I'm looking at saying to myself, how can I sit at the beach on whatever island in twenty years and know that during those twenty years, we all know how it goes? The property continued to appreciate whether it's 2% or 6% or 8% a year. The principal balance dropped down as you were making those mortgage payments. The rent continued to increase.
Josh:All those things are the greatest factors and the greatest recipes for success long term. Is it a three year? Is it a seven year? Is it a fifteen year time horizon? No one can answer that question either.
Josh:Time will also tell. But if you're patient with it, you're gonna win the race. And what I tell people all the time, my two famous lines are marathon, not a sprint. Right? Do not ever try to sprint in real estate.
Josh:You have to take it slow and steady. Pace yourself as you go for financial reasons, for mental health reasons, and just for being able to handle everything. And on the other saying, the other concept that I bring up a lot and that I hear from people a lot is, I wish I bought more. I wish I bought sooner. Okay?
Josh:And that's the story all of us say. I say it. Wish I bought more, I wish I bought sooner. Wish I started earlier. Why did I wait so long to get into this?
Josh:Because time will always make you right. If you found the deal and you were wrong, assume that you can ride it out. I don't always recommend doing that. And we would look at the math on that. You might wanna dump that place.
Josh:But over time, you will be proven right if you can ride it out long enough. And so if all of us graduated college, I'm not even sure how old you are and it doesn't even matter. I just turned 50 and I'm saying to myself, man, if when I was 22, I started buying properties at the pace I see guys 22 buying now, with all due respect, I wouldn't be on this podcast right now. I'd be sitting on a boat with my feet up and a glass of whatever in my hand. Right?
Josh:Because that's just the reality of how time and the hard work over those years will absolutely pay off.
Trent:So couple questions because I definitely agree with you. I think the shift has occurred from the easy flip to the buy and hold. In our local market here in Portland, Oregon, it's a lot more difficult to find a buy and hold that pencils. What is it like in your market? Are people buying and holding single families, or is it all small multi?
Josh:So the challenge and the struggle is real. I mean, it's a serious problem everywhere. I will say that our market is a bit different from yours, from the very little amount of knowledge I have from your market, but bigger cities, and I would say hotter cities, more popular cities, yours being one of them for sure, has seen during really any cycle, and certainly during this last cycle, real spikes in values, right? And it's really impacted things. Now potentially, I don't wanna say falling off a cliff, but some somewhat decent declines.
Josh:One of the things with our region, and this is not as true in the Washington DC area, but they're metro outside of it, the greater sort of Maryland region, which is a pretty popular region for real estate investors. We don't see the super highs that a city like Portland sees. We also don't see the super strong pullback that a city like Portland sees. Our band, our range of sort of highs and lows is much narrower. It will go up a little bit, but we're not gonna, like, triple or double.
Josh:And sometimes we might not even go up 50%. This is a slow and steady increase over time. So when the market slows, it slows, but it doesn't also sort of collapse, so to speak. It sort of just pulls back a little bit. It flattens.
Josh:It softens. Having said that, yes, there are deals to be had, but they are hard. They're 10 times harder than they were six months ago, and they're 10 times harder than they were six months before that. I had lunch with someone today. We were talking about the fact that there are people still finding deals.
Josh:They are digging deeper. They are scratching at it and working harder to find them, but they're there. They're getting into those deals and saying, no one wants to lose money nor can anyone afford to lose money at the outset. But maybe I'm just barely breaking even in the beginning. And over time, again, I'll be proven right, and I'll make money on this.
Josh:How much can I afford and what where's that delta where it makes sense? And that's an individual decision. We certainly provide some advice and counsel on that, but to each their own on that. With regards to our market overall, the individual properties seems to be a really popular trend in our market and our region. Buying sort of scattered site portfolios or just one offs on their own.
Josh:I have people that come to me and they're buying one or two, and then come back a few weeks later, another one or two, another one or two. At the same time, I have someone who is currently trying to negotiate the final terms for like a 46 unit portfolio of individual properties, 46 different rentals. But that happens a good bit around here as well. And those seem to cash flow and work pretty well okay in the current market that the math can still work. A good variety of section eight, a lot of our area does deal with those.
Josh:There's obviously pluses and minuses. And again, probably do another hour podcast just on that, government housing and subsidies, etcetera. But that's one of the strengths we have in our region. And affordability and sort of cost of living is a real plus for us well in our region. You can buy a home here.
Josh:This is the stuff that has West Coasters fall off their seats here. You can buy a home for, you know, $250,000 here. Right? I mean, you can rent a place for $161,800 dollars. You can rent a place for less than that for $1,300.
Josh:Okay? So the number and you can be, you know, a forty five minute train ride to Washington DC, an hour train ride to Philly, certainly Downtown Baltimore, tons of medical, tons of tech. So it's unique in that sense. And so we have a unique perspective, certainly, I think, where Portland and some of larger cities do.
Trent:And with again, I'm sure a lot of people haven't heard of the private lending sector, but when it comes to maybe some people are shifting and having to do the single family rentals, the longer term plays, does a private lending company like Trias have longer term loans? Because I think a lot of people hear private money and they think twelve months, that's it, we're done. What does Trias do?
Josh:We have two channels that we offer to clients. And again, we wanna be a part of the life cycle for an investor. And so whether new or experienced, I want to be there at the beginning and I want to be there at the end. And if we continue to grow and evolve as a business, we doubled our volume in '20 and doubled again in '21. We've been on a really nice trajectory.
Josh:We want to be able to stay in strong and close contact with those relationships that we built as people are getting into larger and larger communities and larger developments and larger commercial properties. So right now, we handle all the private lending. Again, one year notes, whether it's fix and flip, fix and hold. And then we do have all the exit products. So we have thirty year products that are at a much lower rate than the private lending, which is generally in double digit rates.
Josh:That's just sort of where the market is, very quick closes. So these are more of a thirty day close, I'd say twenty five to forty days, depending on the intricacies of the deal. There might be a portfolio loan. We can take 10 properties and package them up. We did a 2,500,000 office building last year.
Josh:We've done some different types of small multi families. I just did a 12 unit recently. And then a ton of individual properties. And so those are thirty year financing. There's a prepay penalty on those.
Josh:Usually, it's five years. There are some three year options. But it's a great way to sort of just get into a long term loan to really start paying attention and working on that cash flow. And then riding that out as the market evolves to say, okay. When rates drop, rates are certainly high now.
Josh:And when rates drop again, I don't know if it's one year, two years, five years, whatever, I'll refi at that time. Generally speaking, most people do refinance every five years for these long term investor loans no matter what. Sometimes that's due to equity buildup or due to a change in rates, but that's sort of the the history of those loans in recent years. So we wanna offer that to everyone so that the client has to come to us once. Again, keep that relationship going as a strong connection to us to say, hey.
Josh:Trias lending can fund whatever I need, and it's really nice to be able to offer that to those clients.
Trent:So for the buy and hold, I'm assuming the underwriting for the fix and flip is different than the buy and hold. But for a buy and hold property, are you is it all DSCR based, or how are people get qualified for that?
Josh:So yeah. DSCR is super popular now. Right? So the debt service coverage ratio loan, making sure the rent is covering that principal interest, taxes, insurance, PITI payment. Really, it yeah.
Josh:Was talking earlier with someone, you know, it's somewhat reminiscent having been in the mortgage business for a long time. There was, you know, the no income, no employment loans. That's exactly what it is. There's no search on your income nor need to provide any income or employment, and that's really nice. You need to have credit score assets, and then the debt service coverage needs to work.
Josh:And it's pretty clean and easy in that sense. There are some other loans that we offer, which is sort of with relationships and bank partners that we have, which are full doc loans. If someone is willing, able, and has the documentation to be able to say, hey, I'm willing to go what we call full doc, few years tax returns, my income, my employment, my job history, the whole, as we call it, a global underwrite. Then there are some terms and some opportunities out there to get a better deal overall as far as a rate is concerned because it's a more thorough underwrite. So because there's a little bit more time to get it closed and a bit more a good bit more documentation to be provided, you're gonna get a better rate and better term overall if you're willing to do that.
Josh:A lot of people say, you know what? Just get me the quick loan. Let's just move on with it. And so that's just an option clients have and we offer both. And that's what we wanna be able to do is be able to provide and offer what's best to our clients based on their situation.
Josh:So not everyone wants to provide that. And a lot of self employed real estate investors, I've seen tax returns and I'm sure you're familiar with this. And this is sort of famous from our perspective on the lender side is tax returns from people who own, you know, two fifty properties. Right? They're cash flowing like crazy.
Josh:They're making real good money. I know on a personal level, they're doing well. They're having a pretty good life. And you look at their tax return and they lost like $600,000 last year. So, you know, that person isn't necessarily a great fit for bank financing.
Josh:Now some banks are open minded, might be able to see through that. We certainly can see through that when we're doing our private lending underwrite, but they might be better just going straight DSCR. They don't wanna provide this 400 page tax return to the bank and have their, you know, insides, you know, dug up and looked in. That's how some of those decisions are made with us in consultation with our clients. And now here's a word from our sponsor.
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Trent:Since this is the deal deep dive segment, I know you've had some full cycle clients that I and kind of want to focus on the bridge loan or the small multifamily loans here. Can you share a story on a bridge loan or a small multifamily loan that someone has obviously acquired the property and then decided to hold that property with your services with your, you know, one of your
Josh:clients. One really great story that comes to mind is a client who was also relatively new to the business, had done a few single family things. He worked for the government in our neck of the woods. A lot of people work for the federal government, good stable employment, etcetera, which is great. And he was which, as we mentioned before, you know, had to find deals, tough to find good deals.
Josh:You know, You dig deep enough. You work hard enough. You scratch and claw your way around. You'll find them. It's hard.
Josh:It's hard. It's hard. It takes a hustle. It takes twenty four seven, you know, commitment to it, but they're there. And so he was able to find this deal.
Josh:It was an eight unit property. It was a little beaten up. And that's always sort of step number one is the ability for the investor to sort of see past the initial image. Right? That perception.
Josh:What am I looking at? What could this be? It's a challenge I think we're all familiar with in our lives. Right? You and your significant other go to see a house you wanna live in, and you're like, it's the people who can see past and say, well, I know what this kitchen could be.
Josh:I know what this upstairs could be. I know what the opportunity is for that. A good real estate investor obviously is able to see that as well. He was hesitant, reluctant a little bit because he was a new investor. We met him at the property and wanted to sort of tour it together after he had identified this as something he was interested in.
Josh:We arrived there and we were like, this is like this is beautiful. This is like a dream come true property. The value made sense. Just the dollars and cents on that price made sense. Yeah.
Josh:There's a good amount of work to do, but the upside on this long term, we really felt that it was there. And as we were walking through with him, we said, you know, with some maneuvering and some restructuring and a little bit of rehab, this could probably go from an eight unit to a nine unit. Okay. Now with zoning approvals, obviously, are we okay with that? So we were constantly trying to think outside the box is where we can help increase that ROI, improve that ROI, and just make this that much of a sweeter deal for him.
Josh:We closed on the private loan. I'm using the term private more than hard money these days. We're transitioning away from the term hard money in the industry. So we did the private loan, which was acquisition plus rehab. And he got to work on making those changes with regards to adding the ninth unit and cleaning up this entire property from inside to outside.
Josh:It was a pretty decent rehab, all siding, roof. There was the emergency stairs, the fire stairs. It was sort of that kind of old property that had the outside stairs. You had to redo those. Parking pads outside.
Josh:The inside was like wall units that was full HVAC to redo. They were not tremendously large units, but they needed a pretty thorough redo. So I'm not gonna say it was down to the studs, but it was a pretty thorough redo. And as I mentioned a few minutes ago, you know, hiccups and headache along the way. Okay?
Josh:So a big storm came through and, you know, basement floods. Right? So not a severe flood, but all of sudden there's water there. So now we have to budget for for waterproofing. And so the one lesson I say there is or or explain to people is the rehab budget that's been put together, a, hopefully, have some padding in there.
Josh:Hopefully, you as the investor has padded it a little bit. Obviously 10% is sort of the standard rule to give a little extra room there. We're going to recommend that as well. Keep in mind, some other stuff might happen that far exceeds that 10% and you have to have reserves for that too. That's always, you know, is king in life, Right?
Josh:And we're very conservative and we always wanna teach and explain and counsel our clients on being conservative in real estate investing. And so having cash and reserves is important. And so we had not budgeted and he was, not gonna say tight on the dollars and cents, but didn't have a ton of extra cash around when he did this deal, and we cautioned him against it. And so having to then come up with and find that money, and he did to then waterproof that basement. You know, that that was a little more out of pocket he just hadn't expected.
Josh:So there are some of those bumps along the road, part of the process, part of the learning experience. It took longer than he'd expected, both the zoning approval to go to nine and just overall contractor headaches. Common, common story. We hear it all the time. I have someone right now who just called me.
Josh:She's on our fourth contractor. It's just how it goes. Again, we could do an hour on that. I mean, it's just it's part of life in this. And when you find a good contractor, hold them like they are a member of your family and take care of them like they are a loved one because they're worth their weight in gold.
Josh:So he had those challenges. We're a little bit of a unique lender and that we are very hands on and working through that. And I would encourage people to try to identify that kind of a lender. We were working with him and the contractors. We were talking through challenges and issues.
Josh:We were helping to provide advice, sometimes in person, sometimes just, you know, with a FaceTime sort of seeing what's going on if we weren't able to make it. And really making sure that all the players were there and involved and that the contractors knew that the lender was a hands on participant in the process to help drive success for everyone. And certainly our client felt that way. Like, wow, these are the kinds of guys I wanna have a long term partnership with because they are really going out of their way to help me. And that's really special.
Josh:And so we wanted to prove our value and our long term value to the relationship. And I think the contractors liked that too. It wasn't some arbitrary lender off in whatever state that they're gonna just request money with and hope it comes. It was someone who they've met and talked to. And that I think was a real plus for them as well.
Josh:And so over time, as the work got done, they started looking really good. Rentals was a little bit of a challenge. He had originally assumed he would be able to go section eight, and that wasn't really a fit in the end for a variety of reasons. The inspections were a pain in the butt. The timing involved in getting that approved is just an additional hurdle he didn't really wanna overcome.
Josh:And most importantly, he said, you know what? I think I can make more money not going Section 8. Again, Section 8 has its sense of security. I have a big client who has two ten rentals, all Section 8. When COVID hit, he didn't lose a night of sleep.
Josh:Right? He got paid every month no matter what. Beautiful thing for him. But there's negatives with that too. And so this client looked and said, you know what?
Josh:I can make a little bit more per unit of these nine units now, not going section eight and just renting them. So hired a good management company, which helped him with that, and he got the tenants in there fairly quickly. We had to wait, obviously, until that property was stabilized. That's always the key for getting the best terms. There are some products out there that you can rent, finance rather, a place that is not fully rented, even not rented at all.
Josh:I just don't really recommend that. If you can wait a little bit longer, you're gonna get much better terms on loan to value, on rate, on everything if you can possibly wait till it's mostly rented. We would like 80 to 90% rental. Obviously, a 100 would be a dream. So we encourage them to wait till it's fully rented, which was not a difficult task.
Josh:And then we went about working on the refinance. Now that's where things get a little tricky. Is the value gonna come in? Don't we look at it on the front end as the private lender? We can estimate the ARV, the after repair value.
Josh:I can bring as many appraisers as we want into there to try to figure out whether this ARV is gonna happen or not. But markets shift, comps change, quality, work, timing, who knows? And so it's like fingers crossed. So the first appraisal did not come in high enough to make the LTV work. A client was, like, ballistic on it.
Josh:And not the first time I've dealt with that. And I'm trying to counsel him and say, listen, I'm not the appraiser. Right? I'm not making these decisions. We think it's worth more.
Josh:The question is, and appraisals are not inexpensive when you're talking about a nine unit, you know, property, it can be pretty expensive. But we said, you know what? I think well, the only choice at this point, you don't wanna keep paying a high interest from me. I think we just have to do a second appraisal. We did a second appraisal and sure enough, that one came in at the right number to make it work.
Josh:I would say that's a cautious tale, but can be a successful strategy. In twenty two, twenty three years in this business, I've used the additional appraisal strategy. Sometimes it's been incredibly successful. The whole appraisal world and appraisers is its own unique world. And I've sometimes seen three appraisals in the same property within ninety days of each other with wild swings on value.
Josh:So sometimes you just never know, is the bang worth the buck. Right? Is it is it worth investing again for another one and waiting a little longer to get that value? And that's a question again. As I say, we would work in consultation with our client to say, do some math on this.
Josh:If we can get that number, we're good. How much are we getting now? Or is the deal totally dead at this point? Anyway, his situation, we finally got the second appraisal that worked. A few hiccups with reserves since it was a bigger property and the dollars were bigger.
Josh:He needed more reserve to get that second loan closed. He was able to put it together and scrounge it up, which worked out well, and we closed it. Fast forward now, he's cash flowing beautifully. Since he did a ton of renovation, there's not a ton of upkeep to do on these things. And I think it's been a really profitable and really successful deal for him.
Josh:And he's since moved on to a number of other properties and projects, all multis to mixed use. He likes those too where he's doing some sort of commercial slash coffee shop slash laundromat with rentals above. So he's gotten into some really interesting things. He's grown a lot and learned a lot, which we all do as you go through and and have some bumps in the road, which is just the best for learning experiences.
Trent:I'm kinda caught up on and I appreciate you sharing this whole process because.
Josh:Yeah. Hope I didn't ramble too long on that.
Trent:Yeah. Again, a lot of people hear private money and they think it's just twelve months and that's it. But I like how you guys are able to do the short term and then get them situated with the long term. But the appraisal is what I'm getting caught up on because I'm actually going through getting the HELOC right now, and the appraisal came back at one number, but the credit union decided that that appraiser didn't know what they were doing. So they're gonna just create their own number and base the HELOC off that number, which which I've never seen before.
Josh:Yeah. Darien. That's really interesting. Yeah.
Trent:Yeah. But the fact that this is a nine unit, shouldn't the appraisal be based on an income approach and not be that hard to figure out?
Josh:It should. This was an area where there weren't many multis. When I say weren't many, I mean, were none. And so, was really figuring out what those rental comps should really be and where are you gonna pull them from? This is a little bit unique to our area.
Josh:I do wanna say that. The greater sort of Baltimore region and certain areas in Maryland, but I'll say the Baltimore City, Baltimore County area, there will be a property that is, in this case, a nine unit, And then there is no other multi, no other anything other than a one or two unit within a few miles. And it's a pretty densely populated part of the city where a few miles away. So on that appraisal, we went back and sort of went to the appraiser and had to really discuss with them what's an adequate comp, obviously, big the units are, but should you be only looking at multis across town that are a little further away, or should you be looking at single family or two units that are close by, and how does that affect those values? And then the conversation that at least we were able to have with the appraiser too is, yes, we're looking at income approach, and we're calculating things that way.
Josh:But I also do wanna look at sort of a sales comp approach as well. I wanna have that as part of the conversation here. And so it's just a really good and healthy dialogue with the appraiser to do that. And that can happen. And again, in our area, as I said, a little more common when you don't have a large number of six, eight, nine, ten units in that area or larger multifamily in the area.
Josh:So that's what was unique about that situation. But to your point on the situation you're going through, the appraisal world, the appraisal analysis, the appraisal process in and of itself is unique. Sometimes it's an art. Sometimes it's science. Sometimes the technology becomes more dominant in a good way.
Josh:Sometimes the technology, meaning the ABMs and the automated values, can hurt things. And I would just caution people to be educated on appraisals, be aware of what's going on, and communicate if it doesn't seem to make sense. I guess that's what I would say, and there can be opportunity to try to squeeze a little more out of it here and there. If it doesn't seem to make sense, sometimes you don't win. And I'll be clear about that.
Josh:I've had some down and out battles and they have not worked out as well. Keep in mind, the residential world, you're not allowed to talk to an appraiser at all. So that's a very different kind of thing in commercial and certainly as a private lender and depending on the kinds of loans we're doing. And, you know, I say to people, if you can meet them at the property and get an opportunity to chat a little bit, you know, that's always helpful too. Some will let you do that, some won't let you do that.
Josh:But sometimes that helps in I don't wanna say influencing. That's the wrong word. But just informing, educating, and ensuring they have all the relevant information at their fingertips. I'm not looking to try to damn or do anything wrong, unethical, or inappropriate. But at the same time, they have a lot on their plates, and they're really busy.
Josh:And so they don't always have the opportunity to look at the big picture and see everything there and take everything new in count that you may have done or that you wanna make sure they're aware of.
Trent:And I guess, well, I guess two things. 100% you're correct when meeting them on-site for this is actually our second appraisal because the first one was not even close. The second round I happened to be home just how my schedule worked I was working and the appraiser asked me questions Hey. What did you do to because we renovated the entire house. What'd you do to it?
Trent:You know? When was it done? That kind of thing. The prior appraiser didn't know any of this. And so that was a huge, huge factor.
Trent:But going back to the Baltimore, this nine unit, and correct me if I'm wrong, but I'm imagining that it's probably difficult for an appraiser to gauge not only rent comps and sales comps because of how it's you know, how the market is Correct. Area is structured, but also the cap rate. Because there's not just, like, a targeted area with a four cap or a five cap.
Josh:100%.
Trent:They're trying to almost guess and
Josh:figure out what's the time. 100%. It can be almost arbitrary to some extent. Now, obviously, when you get to a certain size level, the cap rates are gonna start to become consistent. Size level meaning size in in square footage, most and more importantly in dollars.
Josh:Right? So these aren't I mean, I'm talking about a nine unit. This isn't, you know, a $6,000,000 place. Right? So or or even a $2,000,000 place.
Josh:It's under that. So when you talk about some of those numbers, they do have a tough time calculating that cap rate, and there can be inconsistencies. And it's just something to look out for. And, again, communication, awareness, knowledge, and trying to be a part of the process is really important there as well. And that's where you know, some people love this neck of the woods and are looking for only places like this.
Josh:I've had people who have started here and then they've done different areas in Ohio, different areas in Michigan, sort of, I don't know what tier city I would call our area. I don't wanna offend anyone, but it's certainly not a Portland, a Seattle, a San Francisco, an LA, a Dallas, an Austin. I mean, we know we're not there. And so there are areas where they can be a little more affordable. There can be more opportunity, but there's ups and downs, and there's some other things you have to be aware of.
Josh:And this is one of the challenges is our comp's gonna work. Our value's gonna work because they can be somewhat hit or miss, I guess, is what I would say to some extent. And that can cause some lack of reliability on the financing side, long term financing side. It can on the short term financing side too because you're gonna run into our opinion and someone else's opinion, which sometimes can be different because you can look at it differently because it is not very clear cut. It's not like, listen, there's 18 properties within, you know, three blocks of that.
Josh:They've all flipped. Cap rate's been x. Per square foot's been y. We know what the rentals are in this area. It's not always so clear cut and that does present its challenges.
Josh:But with that comes some opportunity as well.
Trent:Awesome. I do wanna touch on the bridge and gap funding just because we haven't talked about it on this segment at all, to my knowledge. What is or what are a couple examples of when someone comes to you looking for bridge funding, gap funding? Are there clients that have already started a loan program or a project that they're working on? Or is it just someone out of the blue looking for cash?
Josh:Generally speaking, it's someone who has a bank loan set up. I had a number of these. And so they've negotiated a sale. Usually they're larger transactions and they were going to a bank initially and they had enough time for the due diligence. You know, it might have been a larger project where there was some environmental, some proper due diligence, a larger appraisal, which was taking a little more time, etcetera.
Josh:But at the end of the day, that seller, and obviously, that contract, as any contract has, has got a deadline somewhere. And then what happens is if the deadline comes and goes and there's an extension, and they do maybe a two week or a thirty day extension. And the bank and or larger lending institution, I've had both situations, is doing what they tend to do, which is quite frankly the reason private lenders exist is because banks are operating at their own pace. And their paperwork is this much, and there's 14 committees that are meeting to discuss it, and then they're having 14 more committee meetings to discuss how the meetings went. So, you know, those kinds of challenges are great for us, bad for the client.
Josh:So the client will call us up and say, all right, I've extended twice. The seller is telling me if I don't close in the next, sometimes five business days or seven business days or even three or four business days, I have our record is twenty four hours for a million and a half dollar funding. Okay? Title work was done. We were able to underwrite the client and inspect the property that quickly, and they needed to close immediately.
Josh:This whole thing was going to blow up. So that's where a true sort of bridge is coming in to say, all right, this seller is going freak out. They're going to pull the contract. Now when these were happening a year plus ago, the market was continuing to go up. It was in the seller's best interest to get out of that.
Josh:Right? So the seller's saying, I hope we can get out of this contract because I agreed on x price. If this guy can't perform, I keep the EMD, and I'm gonna go out on market, and I'm gonna increase this by 10 more percent because the market's on fire, and people are paying obscene amounts of money for anything. So the seller's excited. They wanted to blow up.
Josh:They're doing everything they can to have that happen, which is awful, unethical, and inappropriate on so many levels, but it's a reality. And the buyer's saying, I know that's gonna happen. I don't wanna lose this, and I certainly don't wanna lose my EMD. So that's where coming to us and us being able to drop everything and move fairly quickly can work well. And that's where the right partner and I've had people who are existing clients with us who are coming to us.
Josh:We knew they were going to an outside institution for a variety of reasons, whatever it wasn't a fit, and they're coming to us. Those are obviously the easiest. So they've got a relationship with us already. I can really pivot on a dime. I'm like, I know them.
Josh:I have their information. I have their past history, their track record. It's gonna be really easy to do. I just gotta sort of make sure I like this specific deal itself. But I've had newbies come to us too.
Josh:You know, referral from someone else in the industry, referral from a title partner, referral from an agent, a wholesaler who what have you who says, gosh, you gotta jump on this. They need to close tomorrow. You know, I'm the title guy or I'm the agent involved. We all need to get this done. Can you do it?
Josh:This might be, you know, 03:00 in the afternoon. I say my standard line is if they can get me everything I need before close of business, and I can see it first thing in the morning, I can literally close tomorrow before business closes, before end of business. And that's what we've done. And it is a complete scramble internally for us. It's stop the presses, drop everything, a new person.
Josh:I do underwrite borrowers. We do. Our team does that. So a few of us will, I feel like maybe we are a bank at that point. We're sort of all hovering around the desk, but we're doing it in I can underwrite a client in twenty minutes, right?
Josh:Credit income assets, their real estate owned schedule, their history, what have they done? Let's check it out. Okay. Thumbs up. This borrower is a good borrower.
Josh:We like them. We like their ability to handle the risk and handle the payments going forward, etcetera. Okay. Tomorrow morning, let's meet at the property. And in the meantime, we're doing our homework during that night and into the early hours, sort of like doing our own comps, using some of the software and sort of checking things out, MLS, what have you, LoopNet, etcetera, to sort of see what's going on and what we think of of the area, rents, comps, etcetera.
Josh:We're out there first thing, physically walking the property. And then we're drawing our own docs. We're funding our own loans. I don't work with third parties. I don't work with any lending institutions that I need to have them approve or look at anything or sign off on anything.
Josh:So because all those decisions are under our one office, our one roof here in Maryland, it gives us enormous flexibility to move and pivot at a moment's notice and be able to fund pretty nice sized deal incredibly quickly. And that builds a rapport, a trust that is like, as you can imagine, pretty mind blowing. I mean, our clients like, you know, giving us hugs at the end of the day. Like, this is incredible. You saved my butt.
Josh:And the agent, the title, everyone's like ecstatic because this was really a miracle to get to the finish line. We love doing those kinds of deals. It's a lot of work, but it's in a short period. So we're okay with it. You know?
Josh:And those happen from time to time, and we just take them as they come. We're always available for them.
Trent:No problem. I guess that's one example of you sprinting in the real estate industry.
Josh:Yes. Yes. 100%. Those are true insane sprints. Yep.
Josh:And listen, it's like we're saying it's the addiction to the whole thing. Right? It's the junky of it, and we're just like, oh, we only do deals we like. Right? So we'll look at the deal and be like, love this property.
Josh:Like, just love the upside. It's weird because we invest and do some of own stuff as well, but we truly look at it and say, it's sort of I'm gonna say this, it sounds a little odd. It's sort of like the father looking at the son, like, I'm so proud of this deal for you. Like, you're gonna kill it on this one. And we're so psyched to see this property go from acquisition to getting fully leased up to the long term financing on it, whatever rehab you're gonna do.
Josh:You're gonna cash flow like crazy. This is gonna be the start of something big. It's exciting for us too to see and be a part of that, even though we're not profiting anything other than we're doing our deal our loan. After that, I have nothing in it, but we feel like a partner. We were, like, in the fight, in the battle to get it to the finish line, and it's rewarding to see the success for those clients to be like, knocked it out of the park.
Josh:It was a long, rough, and bloody one, but I'm killing it. And they'll come back, you know, when it's time for the second deal. Hey. How's that person working out? Killing it.
Josh:We're cash flowing like crazy. My tenants are awesome. It's just that was such a great deal. I'm like, man, next time we we're out together, let's do a drive by. Just wanna see how that place looks.
Josh:That's so cool. We love being a part of that and seeing that success. It's a great feeling because it's just a win win for everyone.
Trent:I love it. K. Two more things before I let you go. I know we're Yeah. Dragging you on a little bit.
Josh:No problem.
Trent:I heard you mention that you do some of your own real estate investing. What kind of deals are you guys doing?
Josh:So over the years, I've done dabbled in some commercial properties, some larger commercial properties with some sort of larger sort of corporate style tenants, and then a bunch of rentals over the years. And right now, as a company, we are looking to take that some of our own advice that we're giving out to people and say, hey. Let's be a little more opportunistic and look at some long term rentals when they come our way, when we see them. We've got enough expertise. We've got enough knowledge of our region.
Josh:Obviously, we know the financing side. So it's like, hey, I think there's some opportunity here for some good long term holds. And so we're looking for long term holds, not flips. Ideally, not a ton of rehab, but certainly we're interested in providing some value add and updating some of the units as appropriate and as necessary. And just taking that long, slow, and steady approach.
Josh:Right? And sitting here and saying, okay. You know, like I said, I just I just turned 50. So, hey, how are we gonna look in ten and fifteen years if we can get to you know, can we get to a few 100 doors? I think absolutely we can.
Josh:We're gonna be raising a fund. And with that fund, you know, know, everyone's gonna be pulling that money together. And, you know, with Daniel S. Phillips, if we could raise, you know, 25 or, you know, 40,000,000, you know, we could buy, you know, a $100,120,000,000 in real estate. This neck of the woods, that goes pretty far.
Josh:That's a lot of doors, a lot of rentals, and we can make some really good money with this. So we're, again, opportunistic and optimistic about the market for the long term. And I think if you look out there and follow the news, I'm sure you do. I'm sure a lot of people listen to this do. There's a lot of funds being created.
Josh:A lot of the large Wall Street guys are going and trying to gobble stuff up. They're not doing it because it's cheap. They're not doing it because, you know, the market's down and they wanna grab it. That's actually the opposite. They're not doing it because rates are really low.
Josh:They're doing it because this is still a great time. If you're patient and you have the long term perspective, right time to do it? Yes. Could things drop a little bit more price wise? Maybe.
Josh:But I'm not in it for the quick buck. I'm in it for the long term appreciation. So maybe I overpay a tad. Maybe I pay market on this or that deal. Hopefully, I can find some deals here and there and get some discounts and balance it all out.
Josh:But at the end of the day, in the long run, we're confident we'll have that success and have really tremendous ROI for ourselves and for our investors as well.
Trent:You know, Josh, you're the second person we've had on the Westside Investors Network podcast that has talked about starting a fund within the last, I don't know, maybe month, month and a half. I mean, we have Uptown syndication that we have, and that's kinda your more true syndication platform. But it's interesting that you mentioned fund. I think it's a great idea. I obviously think it's a great way to take down some big big numbers, but it that it's interesting that you're talking about that.
Josh:Yeah. So we've been in the fund world for a little while. So our the mortgage private lending is funded by a fund, which is our money and investors. So the $63,000,000 in loans that we have on the street for individual private loans is comprised of members that are in this fund who get a really nice, consistent, steady return, never have the value of their principal drop at all. They are loving life.
Josh:They didn't have to worry about Tesla going up 45% and then dropping 60 and then going back up or Bitcoin or Ethereum or what have you. Right? They've been slow and steady. It's an eight percent return. And I have people who just every month we pay them out.
Josh:They're happy. They're making good money. Slow and steady wins the race. Again, I was reading some of Warren Buffett's. They had the recent annual meeting.
Josh:I think it was last weekend. Slow and steady. Don't go for the big hits. Don't go for the huge wind. Give yourself time, and you're gonna make a killing over time.
Josh:And that's sort of our approach with it. So that mortgage fund was set up a number of years ago, and this real estate fund is a new fund for us. And for us, it was the only way to go to really try to scale this and get it to the level we wanna get it to.
Trent:Awesome. I can't wait to see what goes on with that.
Josh:Yeah.
Trent:Last question. Do you want people to connect with you on the Internet or in a newsletter form? And if so, how can they do that?
Josh:Yeah. Love to connect. Always love to network. Listen. I hope it comes through.
Josh:I'm passionate about real estate. I love what we all do. I could talk about this stuff for ten hours. We could talk funds. We could talk appraisals.
Josh:We could talk mortgages. I mean, I just I love it. And so always open to connecting with anyone and everyone. I'm on all social media platforms. We do a good amount of work on Facebook, Trias Lending on Facebook, myself on Facebook, obviously on LinkedIn.
Josh:I'm pretty busy on there as well. I'm trying to get out there and do some more TikTok and Instagrams. I do some quick videos on there. Nothing funky or crazy. I can guarantee you that.
Josh:So please check me out on there. And happy to talk to anyone else. My email is pretty easy. It's josh@triuslending.com, t r I u s. People get us mixed up with Truist Lending.
Josh:Truist Lending took over, I think, a conglomeration of a few different banks, SunTrust, BB and T, a few different ones. We are Trius, t r I u s, lending dot com. So joshtriuslending dot com. Always happy to connect, always happy to network, always happy to chat with people and be helpful, be a resource, and have all of us grow and find success together. I think that's the best way to be and the best way to live.
Trent:Awesome, Josh. I appreciate your time again today. Thank you so much for joining us
Josh:You got
Trent:it. And all about the private lending world.
Josh:Happy to do it. Great to meet you, and thanks for the time, and I hope to do it again soon.
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