Transcription

• Speaker #0

  I'm going to these trade shows selling websites to mortgage people and I'm seeing how much money is flowing into this, you know, industry at the time. You have to have buying power. That's where you're coming from, you know, and we want to make sure you have good strong buying power. But then you also have staying power. The property itself has to help you stay in the game. We're investing in awesome assets, but in the end, we're also investing in human beings.

• Speaker #1

  We were in negotiations. We're investing in real estate. They're winning. They're making money.

• Speaker #2

  What's up, everyone? Welcome to the Real Estate Educators Podcast, where we provide the education you can build on. I am your host. Kevin Amos. We are back in another fantastic episode. I'm excited about this one because this gentleman has a ton of experience, over 20 years in fact. So Peter Skaggs, you are like, you were born to be real estate, sounds like. You were literally born to be a real estate investor. You got the passion from your grandfather who sounds like you may never have met, but it's in the genes, man. You wanted to do it. 20 years in the mortgage industry, over 250 units now owned. So glad to have you on the podcast, man.

• Speaker #0

  And I'm honored to be here, Kevin. I'm so grateful for the opportunity to chat with you.

• Speaker #2

  All right, well, let's get into it. So generation skipping, it sounds like, yeah?

• Speaker #0

  Yeah, my dad is so smart, so capable, but he was much more of a creative type. You know, he's an artist. And... And so for whatever reason, it just skipped that generation. But I have, in fact, I was just looking at it, Kevin, a couple of days ago. I was looking at some old photos of my grandpa, you know, on Memorial Day. I was looking at him and, you know, because he was a vet as well. And so we're looking at those. And inevitably, I'm seeing Skaggs Real Estate and Skaggs Big Heavy Equipment Rental. And, you know, he was a developer. And... and had apartment complexes. He passed away when my dad was 16 years old. And so I didn't get to know my grandpa, but I hear these stories and somehow, someway, like you said, it's in the genes, you know, somehow ended up inside of me. And I, from a little kid, I've just always been fascinated with, you know, my other grandpa on my mom's side had, he had a cabin and a lake, lakefront property. And I'm like, I want to do this. How do I own this? You know? And so It's just been in my blood.

• Speaker #2

  That's so interesting. We have something in common here. My grandmother was a real estate investor and she had some like triplexes and fourplexes around town. And my grandfather served in World War II. So he was also a veteran. And then it skipped a generation. They had three kids. So I have an aunt and uncle and then obviously my father. And none of them really got into real estate. And then I'm like, I love it. Like, I feel like I was born to do it as well. So your grandfather was a diva. developer. Did he own rental properties also?

• Speaker #0

  Yeah, he kept a lot of them. And in fact, when he passed away, he left five kids behind. My dad was a middle child. And so he had a couple, my dad had a couple older siblings, a couple of younger siblings. And my grandma, in essence, raised her family without having to go get a job because he had kept a couple of those. He had an apartment complex. And so that helped her. make it through. And, you know, man, I'm getting kind of a little emotional about thinking about my grandpa set my grandma up to protect her, you know, and a little bit of God's divine grace there, you know, and kind of making that happen so that when he passed away unexpectedly from a heart attack, you know, that she could be taken care of for a period of time. So, yeah.

• Speaker #2

  That's pretty special. I had one of my very close friends, Peter, his name was Charles, and he had a brain aneurysm um he survived it but he he could never work again it really um took a toll yeah but his wife doesn't have to work he doesn't have to work and again it's because of the rental portfolio that they had built so i definitely want to get into that but before that the financing side so like me you were attracted to the debt side of real estate so why why why'd you gravitate gravitate towards the debt side.

• Speaker #0

  So it was an accident.

• Speaker #2

  Okay.

• Speaker #0

  So I knew I wanted to be in real estate. That was for sure. And always wanted to be in real estate. And while I was at college going to school, my roommate had an older brother who was starting a web design company. And he needed some salespeople to help him design websites. And I needed a job. I was a poor college kid. And so I was just desperate. And I said, I'll work for him. I'll sell websites. And this is back in 99, 2000. I mean, this website's kind of new still, you know, and just up and coming. And almost immediately getting hired with him, we took this slant towards mortgages. We started building mortgage websites. He had a little bit of experience in banking and mortgages, the older brother. And so we kind of understood that space a little bit. So we started selling mortgage websites. And this is now into the early 2000s. And there was a lot of money flowing into these. And so I, as a college kid, I'm going around to these really cool trade shows all over the country. I went to New York City and I went to LA and I went down to New Orleans and all over Florida. And I'm going to these trade shows selling websites to mortgage people. And I'm seeing how much money is flowing into this industry at the time. And so I graduate from college in the mid 2000s and actually start hitting hit up a local company that was one of my clients and said, hey, I'm graduating. I need you know, I've got a job. I need a career. Can you help me? And so that's kind of how I ended up in the mortgage space. I just saw a lot of money being made there. It was in close enough proximity to real estate. And so I found myself in that space, worked for them for a few years. And then in 2008, nine. There was the mortgage meltdown. And unfortunately, the company I was working for was a byproduct of that. They melted down and I went out looking for another job and nobody wanted to hire a mortgage guy during 2009. You know, so I said, nobody will employ me, so I'll employ myself. And I started my company in 2009. Here we are 17 years later, still going strong.

• Speaker #2

  And the name of the company, Lighthouse?

• Speaker #0

  So. Yeah, so Innovative Mortgage is my mortgage company. And this gets a little confusing. I don't mean to confuse, but Innovative Mortgage is the mortgage company, but because it's highly regulated in things and because I do a lot of coaching and otherwise, so I do the coaching under the Lighthouse brand and definitely want to chat about that. But Innovative Mortgage is where my license is. That's the licensed entity for mortgage, yeah.

• Speaker #2

  Okay. So you're still, you still have the mortgage company. I do. Yeah. And then you have the coaching and you also have your portfolio. So there's a lot of ways we can take this conversation.

• Speaker #0

  Entrepreneur. Yeah. Entrepreneur. So 2009,

• Speaker #2

  that's like right after the safe act, right? So that's the whole NMLS and the licensing and all of that. So you were just starting when all of that was hammering us.

• Speaker #0

  It was, and it was wild. And I just, you know, so a blessing here. In 2007, I bought my first investment property, Kevin, and smart decision, right? 2007, right at the peak of everything.

• Speaker #2

  I wasn't going to go there, but you did.

• Speaker #0

  Really, really smart here. But the great thing about that and the lesson that I now teach a lot of the people I coach is that that property actually had cash flow. So I bought it for $340,000 in 2007. I watched that value. I had it appraised in 2010. So three years later, I had it appraised at 220. So bought at 340, goes down to 220. But I was able to hold onto that property because it was cash flowing. I didn't have to get out. And so I held onto that property for a number of years. I actually sold it in 2021. So 14 years later for $640,000. So almost doubled the money, you know, almost doubled the value, but it took 14 years. And that's through one of the worst economic turns, you know, real estate turns in history in 2008 and 9. And so, but because I had that house that was cash flowing a little bit, that allowed us to kind of make through some of the difficulties that we had. Again, it wasn't cash flowing a ton, but it was nice. You know, I had a little bit of money and we had some savings and things. And then I was able to sell another. asset that I had. That's what we started my company on was just those funds. That little bit of cash flow from that rental property kept us barely above water, but kept us above water. And then I was selling another asset that I had.

• Speaker #2

  So you must've had some fixed rate debt on that. I did. Yeah.

• Speaker #0

  So I did. You were one of the few. Yeah. I was one of the few and that was just dumb luck. So I worked with my uncle to help me. I have a, you know, I call him my rich uncle, very smart. He's in the financial space, very much a financial planner. And in the 2000s, everybody was getting their mortgage license because it was raining mortgages. Right. And and so he had his mortgage license. So it wasn't his primary, but he helped me. And in fact. He was the one that said, hey, Peter, I know you've been thinking about real estate, you know, because I've been talking to him about it. He says, I'm actually looking to buy an investment property in Utah. And he said, you know, if you want, I'd be glad to kind of guide you through that process, what I'm going through. I said, heck, yeah, I love that. And so I was in a ride along with him, you know, as we're looking at properties. And we ultimately decided on he decided on a property. I literally, Kevin bought the property five doors up from the one he bought. And, you know, because I. And I didn't know what I was doing. And then he just helped me put the financing together and he put me into a great little mortgage. So it wasn't one of those no income, no asset, no job type. Negative amortization. Exactly. Yeah, it was. Luckily, it wasn't that I didn't know any better. You know, at the time, I was still very, very new to I was selling websites to mortgage companies. I was not in the mortgage space. And so, you know, it was just because I had a great. rich uncle to help me. And so that's what I tell a lot of my coaching clients is I just want to be a rich uncle. I had a great rich uncle who set me up for success and I didn't realize it at the time. So I just want to be that for my clients.

• Speaker #2

  So a great mentor, really.

• Speaker #0

  Great mentor.

• Speaker #2

  That's right. Like you could write a book, right? Great uncle, poor uncle. Yeah. So you're one of the very few real estate investors that were actively investing in real estate in the crash and made it through without. This sounds like without much harm. And the reason for that is that fixed rate debt. Now, some people would say we're in a challenging market right now, Peter. What's some advice that you've learned through this time that you would give someone that's maybe looking to get in like you were right before that crash?

• Speaker #0

  I love this question. And I've got kind of two thoughts here, Kevin. I teach a framework. The ideal for me is... We're buy and hold. I like to teach buy and hold. And if you're going to buy and hold, you want to set yourself up for success. So I talk a lot about you have to have buying power. That's where you're coming from, you know, and we want to make sure you have good, strong buying power. But then you also have staying power. The property itself has to help you stay in the game. And that's where that cash flow comes into play. You know, it's such an important piece of that staying power, long-term debt, liquidity, transferring risk, all of these things. are important if you want to stay in the game. And then we have growing power. Growing power is appreciation. It's the four pillars of wealth that we get when we invest in real estate. It's the ability to build a portfolio. I've been a collector of real estate over the years, and I'm changing. I'm trying to improve that. I've kind of gone an inch deep and a mile wide in my portfolio and now I'm refining that. And I want to go a mile deep and an inch wide. I want to become a real expert in just one asset class and try to become, you know, so that I can see deals. And I know what issues are going to be from a financing, from an asset, from a market standpoint, because I've gone a mile deep. And so that's the growing power. I know I've left a lot of money on the table over the years because I've been a collector and not a portfolio builder.

• Speaker #2

  Okay. That's interesting you say that because I 100% agree with you. We talk sometimes about building wealth with focus and preserving wealth with diversification. And we can get into that if you'd like, but it sounds like you were maybe doing the opposite a little bit and you were trying to grow with diversification. And I saw in your intake sheet here, Peter, that you had many different asset classes. So walk me through what your portfolio looks like right now.

• Speaker #0

  Yeah, so I've got a couple apartment complexes. I've got a commercial building. I'm actually standing in it right now. I've got some short-term rentals in Hawaii. And then I've got a number of single-family, long-term rentals out in the Midwest, scattered throughout the Midwest. I also have an apartment in my house, some primary residence, and I do hard money occasionally, although I backed out of that. You're much better at that kind of space than I am. you know, so. So I've kind of done it all and have a little bit of all of it. And again, that's the collection side of things that I just mentioned.

• Speaker #2

  So you have all of these different assets, different types. So you have commercial buildings, you have apartments, you have residential. Apartments and residential are sort of managed in the same way. So I can put those in the same category. But then you have some hard money lending business. Sounds like maybe brokering that. And you're running a mortgage company and you got some coaching going on. So help me, help me here, man. Where's the focus going? How's what's the mile deep look like? What's the inch wide look like?

• Speaker #0

  Yeah. Yeah. So what, where I really am focusing, doubling down is is on the single family. single family rentals, long-term rentals. And the reason for that is because I really do want to, I love what I do for a living. I love helping real estate investors structure financing, go through strategy sessions and get good debt, long-term debt. I mean, Warren Buffett says the 30-year mortgage is the best financial tool out there, you know? And so I want to help a lot of people take advantage of that great financial tool of 30-year debt. And so that's really becoming my focus. But in order to do that, I want my real estate to be much more passive. And I want it to just grow. And I want to become really, really good at it. So I like single family for a few reasons. One, it's the most in-demand asset class out there. We got, you know, people want homes. They want a single family home. You know, I own apartment complexes. it. transient nature of those apartment complexes is constant, right? It's a constant, you know, a rotating door of tenants versus a lot of my long-term rentals. They've had tenants in there three, four, five years, you know, and they're great tenants, pay every month. They're just not an issue at all. They love it and they treat it as their home. So it's the most in demand and tends to stay longer, but also, you know, it's easiest to get financing on. It's really easy to get financing. It's easiest to sell. In the downturn with the interest rate environment that we've been in the last couple of years, mortgage business has slowed a bit for me. And I've sold one or two assets just very simply, quickly to just keep the lights on and things moving forward in the mortgage side of things because I've got a lifestyle that I've got to support and that my wife doesn't want to change. And so as a result of that... I've loved having the single families because I can, you know, they're a little easier to get rid of versus the apartment complexes. You know, it takes a certain type of buyer and in a high interest rate market, multifamily has not been it's been hit pretty hard here in a couple of years, you know. And so it's not easy to offload that asset without taking a big haircut, you know, on it. And so that that's why I like single family. So that's where I'm trying to go, you know, a mile deep. Now you have to... talk about diversification. I believe in that to a degree. My diversification is going to be in different markets. You know, I want to have some stuff in Tennessee, some stuff in Missouri, some stuff in, you know, Alabama or Florida, but ultimately they're single families. And, you know, that's just where I've liked being.

• Speaker #2

  Yeah. The interesting thing that you said there, the apartment buildings are so sensitive to rates. Because you're selling it to investors and investors demand a certain amount of cash flow. And so the NOI is calculated before debt, but after NOI comes your mortgage payment. And then the bottom line is your cash flow, right? So it's very sensitive and that's why you've seen the price drop in that asset class. Single family homes aren't like that, are they, Peter? Because you have owner-occupied buyers that they might be willing to pay the higher. interest rate because they fall in love with the house. It's an emotional decision.

• Speaker #0

  And if we can get a good cash flow, and rents are going to go up each year, I got some stability in it. Now, if you have one of them and you have a vacancy, you're 100% vacant, right? So that's where, again, the diversification, I want to have multiple properties in multiple markets. But ultimately, if I can build a portfolio of those, that's right, I got 30-year fixed debt. A lot of times that's very, very hard to get in the multifamily space, right? So I got 30-year fixed debt. So I can do what I did in 2007. I could buy it. You know, they say that buying bad real estate is like getting a bad haircut. You just wait a while and it'll fix itself, you know? And I think that's mostly true. Mostly. Mostly true. Mostly true. I experienced that. I bought a property in 2007, you know, at the top of the market. And if I was desperate, my financing was, you know. I had a balloon payment or an arm or adjustable rate there three or five or seven years later, I'd have been in a tough spot. I'd have been $100,000 upside down, you know? And so because I had 30 year debt, I was able to weather that storm and I could wait until 2021 when the market had recovered mostly interest rates were a lot lower and I could go sell it for $640,000 versus taking the haircut at 2 20 10 years earlier so yeah

• Speaker #2

  And I took a bath during that time because I did the opposite of you. I'd had a variable rate debt. In fact, it was so variable, it adjusted every month. That's how it used to be back then. Yeah,

• Speaker #0

  yeah.

• Speaker #2

  And so as my payments are going up with the interest rate rising, my rent wasn't, right? So my rent was actually going down because people were out of work. So payments going up. rent going down, and then that creates a forced sale situation. And that's not where you want to be. So you did it exactly right. Now, the current environment, we don't know where interest rates are going. Okay. So I'm not necessarily asking you to project that, but what are you telling your clients right now? Is it still a 30 year fixed or are you saying maybe a five one or a seven one or something like that? What's your advice there?

• Speaker #0

  30 year fixed.

• Speaker #2

  Always.

• Speaker #0

  And yeah. And the reason for that, Kevin, in my mind is especially if we can get the numbers to work out. But ultimately, we don't want to buy an asset unless the numbers work out on a 30 year fixed debt. And the reason for that is because then I transfer all the risk over to the bank. If rates go up, I get them a six and a half percent interest rate as an example. You know, I get them a six half interest rate. If rates go up to eight or nine or 10 because of economic issues that we have no control over. the bank carries that risk. I'm fixed at 6.5% for 30 years. If rates go down to 5, 4, 3, 2, not likely, but if they do go down, I can go adjust my rate through a refinance. And so by setting it, I can forget it unless I can trade it for cheaper debt. And so I like the 30-year fixed mortgage. It just creates. that breathing room that I want as an investor, because I don't have a crystal ball. I don't know what market's going to do, you know, but that again is why I like single family is because it's hard to get that fixed long-term debt in other spaces, you know, in other asset classes.

• Speaker #2

  So I agree with you and appease me here. What's the 30 year fixed rate approximately? I think it's around six and a half right now but Around that. And then what is like a 7-1 where it's fixed for seven years? What's the price difference for an investor?

• Speaker #0

  Great. Yeah. Great question. So for an investor in my world, it's not that much different. You know, you might be saving in an eighth, a quarter or whatnot in interest rate. Now, maybe if you go to a local bank who has a little they're not necessarily beholden to Fannie Freddie guidelines, they can lend their own money. You might be able to get a little bit different. variation. But, you know, in my experience right now, it's just the yields have kind of compressed and we're, you know, we're just in a unique market. So I haven't seen the distinct advantage of going over a seven year arm, you know, so 30 year fixed, I'm willing to pay an eighth, a quarter higher in rates to have that, to have that risk, you know, transferred to the bank. I'm not carrying that risk in five or seven years. That's why they give you a slightly better rate because they're trying to put the risk on you. Yeah. Right. Hey, you carry the risk if the market goes up, because now we've got an adjustable rate. We can adjust our rate up, you know, in five years or seven years because because of the arm that you're in. So, again, I want to just give the bank as much of my risk as I can.

• Speaker #2

  And if you know for sure you're going to sell the property within the seven, it might be worth. considering the low rate, but you could get trapped. So I agree with you, Peter. Yeah.

• Speaker #0

  That was our plan with our apartment complex. I mean, we did everything right on that, Kevin. We got some great debt. It's like a three and a quarter interest rate. Great job. Yeah. We went through HUD. I don't recommend that, but we went through HUD to get the financing. We've stabilized it. We're at like 95% occupancy. We increased rents. We've done a lot of capital improvements. We've stabilized it. It looks awesome. It's great. It's wonderful. But our cap rates have gone up, bringing our value down because of just the market that we're in right now. And so it's just, we thought we would sell at five years was the plan. It was a 60-month hold. That was the goal. We're now into it 65 months, 68 months, something like that now into it. And I don't see us selling for what we actually tested the market with one of the apartment complexes. We tested the market about a year ago and we were getting offers basically at what we had purchased. And we were into a three million or something like that in in additional renovations and things. So, you know, just, you know, our goal was five years. Here I am. five and a half, almost six years into the thing, and I don't see myself selling it for another few years, that's hard. Now we've got all sorts of issues potentially. So, hey, I know I'm going to sell it at five years until five years comes and the market's different and I can't sell it.

• Speaker #2

  Sometimes those headloans are assumable, right?

• Speaker #0

  They are. And it is an assumable loan. And so that'll be the saving grace if we can sell it. But again, we're... We tested the market and we're just not there. Now, I might be able to get some premium because I have the assumable loan and I can sell that down the road. But I need the market to also improve a bit. I need investors to be a little more comfortable with where things are at from a rental perspective, et cetera, on multifamily. Yeah,

• Speaker #2

  my guess there is two reasons you're not getting the price. The cap rate won't go up to the market cap rate if you have an assumable loan in place, especially at 3%. So it should hold down. But the reason maybe, and I'm just speculating here, Peter, so tell me what you think. But if they need more money down payment because you've been paying down that loan for the last five and a half years, so now it's a larger chunk out of pocket. And then we're not seeing sponsors underwrite rent growth as much. So they're not expecting rent growth. So they're not willing to pay for that.

• Speaker #0

  And then you also add the complication of HUD. It took us. almost two years to get financing through HUD.

• Speaker #2

  That's why that's so valuable. So does it take that long to assume the loan also?

• Speaker #0

  So I don't know, Kevin. I don't know, but I can only assume from my own personal experience on getting the initial loan and getting some of the renovation reimbursements that were a part of that initial loan, that it's going to be the same issue, you know, that we're going to have at least to some degree or another an extended close date. closed timeline and then it's hard to have you know it's hard to have um uh you know projections when you know the market could change a lot in a year you know and it's going to take us a year to assume that loan so again i don't know maybe maybe it does that on an assumption but i don't think so i'm sure that they've gotten a lot of i mean it's a snap of a finger but they don't have to underwrite uh capex and they don't have to underwrite the asset anymore it's just that you

• Speaker #2

  So it should be, you would think, you would think it would be faster, but who knows. This episode is brought to you by Pine Financial Group. Pine Financial is a private lender specializing in short-term rehab lending to real estate investors. Got a property that needs some love? We can help. We are able to offer funding solutions because we raise private money from individual investors. With more than 15 years of experience, Pine offers passive investors an alternative that provides stability, consistency, and security to your portfolio. If you like real estate but want to avoid the ups and downs and effort, a Pine Mortgage Fund could be a perfect fit for you. Accredited investors will experience an 8% preferred return and profit sharing. Diversify your portfolio out of Wall Street and into Main Street with a Pine Financial Group Fund. To get more information at pinefinancialgroup.com, that's pinefinancialgroup.com. All right, man. So tell me about your deal analyzer. It's something you have on your website, I assume, but is this part of your coaching through Lighthouse? I'd like to hear more how you're helping your clients.

• Speaker #0

  Yeah, I appreciate that. So InvestorLighthouse.com, InvestorLighthouse.com is our website. They can go there and there's a free deal analyzer in the upper right corner. They just click on that. It asks for an email and that's all. And what we've done there, Kevin, it's really designed mostly for single family, duplex, triplex, fourplex, something in the residential space. 15 questions is all you have to answer. If you can put in 15 questions, answer 15 questions about property, what it's going to do is we want to make it so simple that somebody who's brand new to real estate. can know in an instant whether or not it makes sense to buy that investment property. But then we wanted it to be sophisticated enough that a very savvy real estate investor can then drill down and understand further the economics of that asset. And so what we do is you put in the 15 questions, and then you're going to get a green, yellow, or red. So green is go. We like the asset. It checks all of our boxes. And as a result, we're going to recommend that that is an asset worth making an offer on. Yellow means, hey, caution. There might be something in there. Maybe it's a financing thing. Maybe it's just rents need to be a little stronger or whatever it might be. So just proceed with caution. And you can always schedule time with me to review it. Red is, hey, no, we don't like the economics on this. But again, it doesn't mean don't buy it. It just means go proceed with or stop. Let's go figure this out. Before you proceed, let's make sure that we're comfortable with the reason it's red. And so then you go into it. And I just mentioned it a little bit earlier, but we're checking against three things, buying power, staying power, growing power. So we check against those things. And so they can drill, the investor can drill down into each of those categories and understand better as to why we say buying power is green or yellow or red, staying power, staying. and growing power the same. So it allows them to go in in a matter of seconds and see it. And then it's got cap rates and NOI and cash on cash and all of the other economics that you kind of want as an investor to see. But those are a little, you know, they're further in. We want to help you just right out of the gate, you know, whether or not it's a great asset. I would add too that I just talking to an investor yesterday, he's got a portfolio of 17 properties. He put his existing portfolio in there. And I hadn't considered that when I was developing it. He put his existing portfolio in there and he and I analyzed his 17 properties. He's got mostly green properties. They're great cash flowing assets. They're working really well for him. But he had three of them that were a concern that popped up yellow and one was red. Two were yellow. One was red. And so we talked about those. Is it the financing? Is it does he need to be a little more aggressive on rents? You know, what is it? And so it allowed us to go through and evaluate his portfolio as a whole. So it's a great tool for, you know, somebody who's looking to buy a single family, you know, rental, long term rental. But it also will work for somebody who has a portfolio. And I'd encourage you to use it in both cases. And again, it's free tool on InvestorLighthouse.com.

• Speaker #1

  That's amazing. And I haven't seen it. I didn't get my ignorance here.

• Speaker #0

  Yeah. I'd love to get your feedback on it. You're an expert in this space, Kevin, you know, real estate. And so I'd love for you to try it out and just get, get, get your feedback.

• Speaker #1

  So I'm just trying to picture this in my mind, how this would look. So I love the color system. That's pretty hard to screw up.

• Speaker #0

  Yeah.

• Speaker #1

  So if I put a property in that I'm looking at in the MLS and it shows up as red, I'm assuming I'm putting in the listing price probably. Could I just, re-enter that at a lower price and keep going down until it turns green. And then that's my offer.

• Speaker #0

  Yes. This is one of the best parts about the calculator that we designed is that it allows you to do a few things. One, you could leave it in as red and then you could go duplicate that entry and now insert different kinds of financing or different purchase price or different, whatever it might be to see what turns yellow or green, you know, to see how, and then you can stack it up against the red. You could also look at multiple assets. You say, hey, I'm looking in this market. I'm looking at two or three or four properties in the MLS. I'm going to put all four of those properties in there. And then Peter's calculator, the deal analyzer, is going to ultimately spit out a result and make a recommendation based on those results. Hey, this is the asset we recommend first. And so we'll rank them one through four for you. And you can put in, like I said, my client did 17 properties in there. you can get as many in there as possible. The other thing that I do, and I kind of alluded to this just a minute ago, but I will oftentimes go in and do 20% down versus 25% down. A lot of investors think, oh, 25% down, one, I'm borrowing less money, two, I get a little bit better interest rate. So that's gonna improve my cashflow. But I'm finding that a lot of times 20% down and then we'll have them do a third scenario where they do 20% down with like two points. and so now you've got a buy down or is that yeah buy down yeah with a rate buy down and so what a lot of people aren't aren't thinking about is hey i can do five percent down on a 200 000 asset now that's another 10 grand or i could pay two points which is like 3 500 bucks and i can get similar Great. but I only do 20% down. So I get to keep the 10,000 in my pocket. I'm out 3,500 for the buy down. I just kept $6,500 and I can get a cash flowing and things. And so it allows me to keep 6,500 bucks, get the same rate as I would on a 25% down, but now I'm 20% down. And so that's something that we've helped a lot of investors and it's kind of this light bulb for them. And it's like, oh, I thought you had to do 25% down. No, we can do 20, keep some money in your pocket. We want money in our pocket, right? Kevin, you never know. We're investing in awesome assets, but in the end, we're also investing in human beings. You've got a tenant in there. And humans are, inevitably, they get sick. They lose their job. They make dumb decisions. They're irresponsible. Life happens. And so to have liquidity is important. So if I can keep an extra $6,500 as I'm stabilizing that asset, That allows me if I need to, you know, I had a tenant on one of my properties here recently. I had a tenant two months in, three months in, filed for bankruptcy. And I can't evict them for six months while they go through bankruptcy court. And, you know, so I'm now carrying the mortgage. I didn't have enough time to carry, you know, with some cash flow to build up a reserve. Luckily, I financed it right, did the right things, had liquidity, and that allowed me to weather that storm so that I could ultimately turn that. property once we were able to evict them. So I just, I preach liquidity, long-term debt and liquidity. I feel like, you know, I'm just constantly saying that a preacher, long-term debt and liquidity in my world are important, important things.

• Speaker #1

  Keeps you safe.

• Speaker #0

  Yeah.

• Speaker #1

  I want to get back to this buy down because I always find this very fascinating. So we could, we could buy for the listener. You could pay a little bit more in closing costs and you can get a lower rate. And we're talking about 30-year fixed rate loans here, right? So it's going to be fixed for all 30 years if you pay this one-time fee. Sometimes, Peter, it's worth it. Sometimes it's not. So we go through a little analysis. And the way I look at it is what's my break-even? I'm assuming that's how you look at it too when you're making that decision to do it or not. So what, for the listener's benefit, like what is a good break-even point to... to say, yes, green light, let's do the buy down.

• Speaker #0

  Love this. Yes, break even is the math. And so just to drill down just a little bit further on that, the idea is, okay, if it costs me $3,500, using the example we just used, if it costs me $3,500, that $3,500 saves me $100 a month because I'm buying the lower rate. Well, it's gonna take me 35 months. to recoup my $3,500. So then the question becomes not will I keep the asset for 35 months, but will I have the mortgage for 35 months or longer? And so then if you will have it for, if you think you're likely to have that mortgage for 35 months or longer, then it makes sense to buy it down because then after the, on the 36 months, you're saving an extra a hundred bucks, 37th and so on. So every month after that, you save an extra a hundred bucks. You've broken even, you've covered your costs, and now you're making money on the backside. So that's the math that we go through with all of our clients. That's perfect. My break even might be a little bit different than other people's break even. I tend to feel strongly about I can see out two to three years. I think market cycles tend to vary every seven to 10 years or whatnot. I got a pretty good idea what rates will do. to some degree or another in three years, I also know what my life's going to look like. I also know that I'm going to probably have this asset for that long. So I like a three-year break even, you know, so if you're 37 or 38 months or, you know, something like that, I'd probably stretch to that, you know, but somewhere in the three-year mark is what I usually will recommend to my clients. But then in the end, it's up to them. And if they say, you know what, Peter, I'm comfortable with a five-year or seven-year break even because I... I don't I'm doing 20 percent down. I'm not going to have a ton of equity in three years. You know, and I'm on a 30 year fixed mortgage. So I'm fine with this. I'm getting some cash flow. So I'm OK sitting on it for 10 years until I want to harvest the equity. And as a result, they'll break even at six or seven years. And as you know, well, so we'll do that. You know, so it really comes down to the buyer. But that's the education that I'm going to give them is somewhere in that three years of my recommendation. And we can just simply do the math to determine what their breakeven point is.

• Speaker #1

  All right. That's awesome information. So that's a little nugget there for the listener. I want to get into my notes here, go through what I've learned from this episode. But before I do that, is there anything? Well, I don't know if I totally understand the coaching program. Okay. Tell me about that real quick.

• Speaker #0

  Yeah. So the coaching program, thank you. The coaching program is basically a free service. It's a top of the funnel for me. So if you guys want help, or if any of your listeners want help buying, maybe they have one asset or two assets that are kind of new to the game. They want to make sure that they're buying the right assets. I've literally helped thousands of investors at this point buy single family, duplex, triplex, fourplex. So if you have a listener who wants that, they can go to investorlighthouse.com. They can play with the deal analyze, but they can also just schedule time with me right there. And then they schedule with me. And the hope is, is that we're going to, They're going to. get to know and like and trust me and give me the opportunity to help them with the financing. So that's the coaching right now. Now we can take it to other levels down the road, but really that's it. It's free coaching because I want to help them buy real estate because I believe in it so much. My grandmother and my dad and his siblings were blessed tremendously by real estate. I was blessed by owning real estate, but I know it can be scary. You know, we're talking hundreds of thousands and, you know, dollars that we're borrowing. We can I don't want people to make a mistake. They don't have a lot of time sometimes to figure it out. They don't have they don't know where to go. I don't want there to be a barrier of entry. So they can just schedule time with me. Kevin, we'll go through what their goals are. The strategy that we teach, our framework will help them ultimately to make wise decisions. And then our then our hope is that we'll earn their trust so that we can do the mortgage. So that's the coaching as it stands right now.

• Speaker #1

  That's fantastic. So free coaching from a 20-year vet at InvestorLighthouse.com. All right, Peter, let's get into it. Tell me what I'm missing here on my notes because I wrote down, I think, everything, but there's always a chance I missed something that you want to make sure you get clarification for our listeners. So real estate has been huge for you. We started off with that because of your grandparents. More importantly, even got a little emotional, your grandmother, because of that, she was really set up and didn't have to struggle financially after you lost your grandfather or your dad lost his father. Cash creates safety. You said that multiple times. Liquidity is huge. It's important. Mentors saved you. Mentors save investors. And you are a mentor now to other people. You need buying power, staying power, growing power. I love that. And the growing power is the focus, right? So one inch wide, a mile deep. You love single family, sounds like detached homes, although you do assume small multis. That's your asset class of choice. When we talk about an inch and a mile, that's where you're sticking to. And you love that for several reasons. It's in demand, both on the rental side. So tenants stay longer, but it's also in demand on the sell side. So if you need to liquidate, you could get rid of that. And it's much easier to pull a unit off than a bunch of single family houses and apartments. So you did mention that to support your lifestyle. That's fantastic. It's easy to finance and you could get 30 year fixed rate debt. That is your favorite financial tool. Warren Buffett says it's one of the best financial tools out there. I agree. It's the lowest interest that you're gonna find anywhere. And it's all Fannie Freddie. So we talked about the bank and doing maybe the seven one on a bank. chances are that they're going to have a seven-year maturity. So it's going to balloon. So really the only 30-year fixed rate loans out there are Fannie Freddie. That was me saying that, not you.

• Speaker #0

  But yeah.

• Speaker #1

  And then the last thing I just said is money in your pocket is very important. So long-term fixed debt and money, that's how you stay safe. So what you got?

• Speaker #0

  Sorry, I didn't mean to interrupt there, Kevin. Oh, you're fine. I love that part of your show that you go through the review there. So you make it sound better than I did. So you did a great job there. I would add that we do Fannie Freddie 30-year fixed, but you can also do DSCR 30-year fixed on residential as well. So that's non-Fannie Freddie stuff. And we do a lot of that. We're really, really good at that as well. It's phenomenal that also.

• Speaker #1

  That's a good point.

• Speaker #0

  Yeah. So we can go DSCR also. Yeah.

• Speaker #1

  And at DSCR, they don't have maturity. They don't have maturities on there?

• Speaker #0

  Not on residential. Yeah. So it is a 30-year fixed, amortized over 30 years. It is the same as Fannie Freddie from that standpoint. Now, DSCR might insert some prepayment penalties or something like that. But right. It has gotten really, really, really competitive. I mean, I I can actually show you with like a two or three year prepayment penalty. You're basically about the same interest rate as a Fannie Freddie that does not have a prepayment penalty. So if you think you're going to liquidate the property inside of two or three years or you're going to refinance it, then DSCR is not the way to go. But the advantage to DSCR is that. I don't have to provide all my tax returns and W-2s and pay stubs. It's just based on the asset class. Do the rents, cover the mortgage plus a little bit. And if so, we've got great financing options for you there.

• Speaker #1

  That's great. I'm so glad you pointed that out because I didn't realize. I mean, we don't do DSCR really. And I didn't realize that they had 30-year fix with no balloon payment. So that's fantastic. All right. Anything else I missed in my notes?

• Speaker #0

  No. We did a great job. All right. Fantastic, Peter.

• Speaker #1

  For a newer real estate investor, what's one final piece of advice? And then I'd love to reiterate the contact information.

• Speaker #0

  Yeah, I appreciate that. I think you hit the nail on the head. You know, when I talked about my rich uncle and I tell my clients, I want to be a rich uncle, you know, you called it out. Well, that's really just a mentor. And that's exactly right. I think real estate. Can be scary because we're talking hundreds of thousands, potentially millions of dollars, depending on the market and the asset class and things. In the end, though, it doesn't have to be scary. We can go into it with a lot of help, a lot of clarity, a lot of guidance, and we can do really good, solid financing and other things. You just need somebody who's been there before and done it before to help you, to hold your hand and to guide you through some of that. See you. you know, avoid some of those inevitable or some of those learning curves. I call it tuition. You avoid some of that tuition that, you know, might otherwise pay that you and I have both paid right over the years because, you know, we didn't listen to our mentors. We didn't have them. We tried it on our own, you know, so that would be my one piece of advice. Get a mentor, get somebody. And I'd be honored to be that person. But, you know, maybe I'm not in the right asset class for it. So find somebody who's in the asset class that draws you in. And Kevin, you've had phenomenal guests. A number of your guests would be great mentors.

• Speaker #1

  Thank you, Peter. So you can get a mentor like Peter for free again and the amazing calculator there at InvestorLighthouse.com. Is there any other contact information you want to share?

• Speaker #0

  That's great. That's the best place to catch me. Yeah.

• Speaker #1

  InvestorLighthouse.com. So Peter, you are one mile wide, one inch deep, super busy. coaching, mortgages, all types of asset classes. And yet you came and spent 45 minutes with me. Thank you so much.

• Speaker #0

  My honor. My honor. My pleasure. Thank you, Kevin.

• Speaker #1

  All right. And for the guests, you have other podcasts you could be listening to, and you chose the Real Estate Educators Podcast. And for that, I am so incredibly grateful. So thank you.

• Speaker #0

  And I hope you make this day a great one.

• Speaker #1

  I really hope you enjoyed this episode as much as I did. If you did, please be sure to follow and leave a... five-star review. Oh yeah, and tell a friend.