Truly Passive Income: How RPM Investments Revolutionizes Real Estate Lending for Effortless Returns

Ready to unearth the secrets of successful real estate investing and hard money lending? For this episode of the Legacy Wealth Code podcast, we had the pleasure of chatting with Ryan McGuinness an industry titan who started his adventure in equities and options before hitting the jackpot in real estate. Ryan walks us through his shift from flipping houses to private lending in 2015, introducing us to a business model that offers both quick loan approvals and a passive investment avenue for lending partners. 

As we navigate the landscape of hard money lending, Ryan opens up about the rewards and risks tied to lending vast sums to real estate investors. He shares his journey to growing his business to a whopping $90 million, all while maintaining premium service quality. Ryan delves into the art of building robust relationships with lending partners and managing borrowers, offering invaluable insights to anyone looking to make it in the industry. 

But that's not all. We steer the conversation towards real estate investing, where Ryan, now the CEO of a thriving lending company, spots the benefits of investing in short-term loans. We talk about the impact of rising interest rates on the real estate market and how hard money lending can be a lifeline for real estate agents and buyers. So, gear up for an episode brimming with golden nuggets about the real estate market and hard money lending.

Contact RPM  Realty Investments at 352-262-3722
Instagram @rpmrealtyinv

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Chapters

• 0:00 Building Wealth Through Real Estate Investing
• 8:40 Hard Money Lending and Risk/Reward Factors
• 15:24 Discussion on Real Estate Investment Opportunities
• 23:40 Interest Rates and Real Estate Discussion

Transcript

Speaker 1: 0:00

This is the Legacy Wealth Code podcast helping you build long-term wealth and elastic legacy through real estate investing, tax strategies and motivational stories from some of the most successful and influential people out there. Here are your hosts real estate investor and entrepreneur, Michael Notbohm, and real estate investor and attorney, Andrew Hoek.

Michael Notbohm: 0:23

Welcome back to the next episode of the Legacy Wealth Code podcast. My name is Michael Notbohm and I am here today with a good friend of Ry. an McGuinness, . Welcome to the show.

Ryan McGuinness: 0:32

Appreciate it. Thanks for having me on.

Michael Notbohm: 0:33

We've got some technical issues, so Andrew is taking the day off. Got to try to dial this whole technology thing in a little bit better, but you know it is what it is. I want to chat with you today. I know you were on here, I guess what about six months ago or so, probably Talking about your awesome life that you've built through the hard money lending business, and you know you and I have had a lot of conversations around. You know what it is that you're doing, kind of your track record and history that brought you to building the business that you have now. And I think it's really cool because there's so many opportunities out there where people try to say it's a truly passive opportunity until you get into it and you're fixing toilets at three in the morning and you know garbage disposal, so you've actually got what I would consider a truly passive opportunity. Do you agree?

Ryan McGuinness: 1:18

Yeah, I mean it's. You know we're a lot more active as the portfolio managers, but for our lending partners it's 100% passive. I mean we underwrite everything, we handle everything. It can be as passive as they want it to be.

Michael Notbohm: 1:30

So walk me through, I guess, just for people that don't know your background. You're real. You know from college till now kind of your real estate. You know what's brought you to where you're at now.

Ryan McGuinness: 1:40

Yeah, I saw value in real estate around 2009,. Right, so sort of after the crash. Prior to that I was kind of in equities and options and bonds, more stock market related ventures, and we saw real estate as a way to make income and through a friend, I started flipping a lot of houses. You know, back then houses were, we were flipping, buying stuff for 50, 60, 70 grand, putting five, 10 grand into it you know, and making a nice, a nice spread.

Ryan McGuinness: 2:05

Now those houses are all 300,000, right, I wish I kept them all, but we did that and new construction as well, and that kind of carried me into 2015, 2016, where I was looking to stay in real estate, but I was looking for a product that eliminated a lot of the risk of it, because at that time the market had been going up for maybe five years.

Michael Notbohm: 2:25

Now you know, we've had you look at the normal cycle and you're kind of traditionally at the top of it.

Ryan McGuinness: 2:30

Sure. So we wanted to see what could still achieve a high yield but not have that dollar for dollar risk and return like flipping and construction, and we kind of transitioned that point into doing a lot more private lending in real estate.

Michael Notbohm: 2:43

Yeah, I kind of laughed because I remember when I did that the beachfront, waterfront property and you know you as a friend you're like, yeah, man, that's great. And then I know that you and your brother were like these guys are idiots for doing because it's, you know, that was our first big, you know multi-million dollar flip, which I mean most. You know it's there's a definitely an element of risk and flipping yeah.

Michael Notbohm: 3:05

And then now you add on a million dollars that you're, you know, taking out hard money loans on, and it's like, yeah, all right, this is like it happens to everybody.

Ryan McGuinness: 3:14

You know every, every aspect is going to be over budget. Every aspect is going to be over time. You know people think with flipping, hey, I'm buying a property, a 30 day rehab, 30 days on the market and 30 days closed right, yeah, that 30 day rehab could be six months, could be a year, who knows, could sit on the market a couple of months and then you may have a time or two of of under contract that fall through before you actually find your your end buyer. So it can definitely rapidly increase in in time and money.

Michael Notbohm: 3:41

Yeah, so all right. So you've got the portfolio. You decided to kind of start liquidating some of that, and then are you using your own funds to to start the hard money business? Are you using mezzanine debt? What's that look like?

Ryan McGuinness: 3:53

Yeah, so initially our own capital and then some private you know, friends and family, much of the model that we have now. We don't really deal with institutional lenders, because then you're under the scrutiny and the same rules that that they have right so we are the end decision makers on all of our notes in our portfolio. That that allows us to give a a quick answer to the underwriting of of that deal for our borrowers.

Michael Notbohm: 4:14

And so you know and I can definitely attest to that because you know, doing hard money loans on a project, they always make it seem like it's super easy and then you end up basically going through the same underwriting processes. If it's like a conventional loan, like I need to see the you know four months of bank statements, I need to see your tax returns, like I thought this was, you know non QM, now all of a sudden I'm basically giving you my entire life story.

Ryan McGuinness: 4:37

Yeah, and it'll tell you that day one. Right, that's that they tell you that.

Michael Notbohm: 4:40

They tell you that in their flyer, Like it's oh, you know, you don't even have to, you know, don't even submit an application, We'll just send you the money You're like wow, this seems easy.

Ryan McGuinness: 4:48

Sure, and I would say with us in particular it is almost that easy. A lot of other hard money lenders or private lenders like you say, you know they say approve the deal. And then they start asking questions later. You know, with our deals we try to, within an hour or two, fully underwrite and approve the deal. You're never going to have any surprises or changes after that. Maybe it takes us a day to underwrite it if it's something complex, but we can get those answers to our borrowers very quickly.

Michael Notbohm: 5:12

Well, what's funny? Like in our friend group, of course we've got a lot of friends that are in real estate and that you know we all kind of joke because it's like everyone, you know they'll call you. You give them the breakdown. All right, let me see if I can find a cheaper version of this. They might find something that on paper looks better and more attractive, and then the day before closing then they call you back and they're like hey, man, this didn't work out.

Michael Notbohm: 5:34

How often does that happen All the time, all the time.

Ryan McGuinness: 5:37

Yeah, so a lot of times we're very clear with our pricing structure and upfront. So even though you know we might seem a little more costly or we may be more costly upfront, you're never going to get those hidden fees that you don't see until the closing table right. All of a sudden somebody shows up.

Ryan McGuinness: 5:51

You see an admin fee, an underwriting fee, an application fee, a wire fee, you know all these other fees, five or six fees that add up, that we're simply not going to have any of that with us. We have our origination fee and that's it.

Michael Notbohm: 6:02

You may need to start building in a I told you so fee, though that's it, yeah, for sure, I told you, so it's going to be an extra 3% now.

Ryan McGuinness: 6:08

Yeah so a lot of times we'll get that. And then, a few days before closing, like you say, either they're under capitalized and couldn't close the deal their current you know lender or it was a conventional deal that fell through or they're just tired of the waiting process and they're under a deadline to close, or they're going to lose their hard deposit, and then we'll get the deal done.

Michael Notbohm: 6:25

Yeah, all right, so walk me through like a typical deal. What does that look like?

Ryan McGuinness: 6:28

Yeah, so our asset only lending. So we're not pulling your credit, we're not pulling your tax returns, we're not pulling your bank statements, no income verification. So you can eliminate that piece, which is the majority, typically with bank underwriting, right that's they look a little bit out of the property but they're pulling all this other information. That takes time and there's all this variable. So we eliminate that 100%. There's none of that. We're asset only lending. We need to determine the value of the property, either through an appraisal or our own knowledge or comps that we can do and we lend up to that. 70% of current as is value. 70% would be like a clean, single family home. If we're dealing with multifamily or commercial, we may be closer to like a 65% and then raw land. We're typically up to 50% LTV loan to value.

Michael Notbohm: 7:15

And do you even like so on raw land. Do you care what their goal is Like? I wanna buy this piece of land. Do you wanna know what's the? What are you gonna do with it?

Ryan McGuinness: 7:23

Not really. I mean it's you know we'll listen, but all we're looking at is as is value today, right? So if they have some grand idea, that's great and we hope they exit that way. But we're not lending on that. We're lending on what is it worth today, because if we get it back into the fall, we're selling it today. We don't hold anything right, so we don't wanna be in the business of being a landlord. We would sell that property, so we just need to know how can we safely exit it.

Michael Notbohm: 7:46

And so now you were you know I know we've talked about scale before and when you were doing flipping. To flip the amount of properties that you now have loans out on would be a huge undertake.

Ryan McGuinness: 7:57

Sure, right now we have about 250 active loans today. So I mean, even if I had 20 or 30 flips, but I can't imagine 200, something you know we'd have to have dozen employees, probably at least a 10,000 square foot office space. We're talking about millions of dollars of payroll, millions of dollars of overhead and all the unknowns that go with that.

Ryan McGuinness: 8:17

Right the there's so many variables Dealing with the city, dealing with people not showing up for work, material cost, Right insurance to the roof, taxes to the roof, all the problems that ownership comes with it would carry over into that flipping where with lending it's totally scalable, virtually no employees. You know we have a book of about 90 million now in total loans and it's very easy to manage.

Michael Notbohm: 8:40

Well, I know I gave you that book, the Banker's Code and I told you that you'd been holding out on me because I'm reading this like okay, so this was like the Rothschild's their family secret that was passed down generation to generation and I think that there's so much to learn from that because, realistically, in any environment, the banks are always the ones that win. Right, you sell a house. If you're upside down, the bank gets paid first, and then you know they're probably gonna come after you for the rest, if you don't have the equity, but you're never gonna get your money. First, the bank always gets their money first, right.

Ryan McGuinness: 9:09

I mean there's larger upside potentially to flipping. But as long as you're comfortable with the yield that your notes are returning you, then who cares? You know you hope your borrowers kill it, you hope they kill it and come back and come back, and come back, and you know so that's. The only thing is that with a bank you're generally limited to your loan. You know your loan around or possibly default interest rate or possibly if you got the property back you'd have an upside there. But I don't think the risk versus reward or the headache of doing it it makes it worth it.

Michael Notbohm: 9:38

Yeah. So you transition into this hard money thing and went through friends and family, your own cash. You get to a certain threshold where you're like, okay, the demand is still, it's more than the capital that we have, right. So then you started. Essentially it's kind of like a fund, but I don't think you call it that right.

Ryan McGuinness: 9:54

Yeah, it's not a fund per se, because each individual lending partner knows exactly the specific deal that they're in.

Ryan McGuinness: 10:01

So when we get a deal and we underwrite it. We underwrite everything in-house, we fully approve it. At that point we'll kind of custom tailor that deal to already know who's in queue for that size deal or that duration deal. Some lending partners may prefer a longer term, which in our case would be two-year balloon. Some you know a guy might say, hey, I'm gonna flip this, it's gonna be 90 days or 60 days, and some people, some of our lending partners, prefer a shorter term. So we kind of fit that mold to what our lending partners want and then give them the full underwriting on that and they have the final approval, of course. But if I'm sending you a deal, I'm in it myself and you should approve it as well.

Michael Notbohm: 10:39

Okay, so you got a deal. You know, one comes across the desk today for half a million dollars. You're gonna lend a 70% on that, or up to 70%. You package it up, this is approved. You send it out to the people that they're not giving you their money until the deal is done and they're not even giving it to you directly. Right, correct?

Ryan McGuinness: 10:55

They just fund the title company or the closing attorney directly. We don't ever manage their principal. The only thing we would manage would be the monthly payments every month.

Michael Notbohm: 11:04

And then how does that work for if somebody invests money with you?

Ryan McGuinness: 11:07

Yeah, so all of our notes are 12% annual. We take a servicing fee from that and we net the lending partner around 10% roughly and that's a baseline. You know, in Florida the fault interest rate goes to 18 or 25% depending on the size of the note. If it's under 500,000, it's 18%, if it's over 500,000, it's 25%. So they would participate in that upside should the property go into default. How often does that happen? To go all the way through with the foreclosure is extremely rare. You know we've done more than 900 deals and we've taken back maybe five properties because our borrowers have so much equity and skin in the game, even if something unfortunate happens to them. We kind of work with them like, hey, sell this property, don't allow us to take the property back. Right, you have a million dollar home. We lent you 600 grand on it, 700 grand, whatever.

Ryan McGuinness: 11:53

You know, don't allow us Sell it yeah, sell it for 850 if you had to, or 900 in a fire sale, get rid of it. And we work with our borrowers. We're not like, hey, you're five days late, now there's this fee, and now we're filing this and now we're doing that. If you're community with us and you're saying, hey, I got behind, but in 30 days I'm selling this property, I want to get caught up or in 60 days I'm doing this, we always try to work with you and that's how we've kind of built our business right. We see a lot of other lenders that are just all about fees and just driving every cent on their borrowers.

Michael Notbohm: 12:23

Yeah.

Ryan McGuinness: 12:24

And you know, we see it in every aspect and we're total opposite of that.

Michael Notbohm: 12:28

Well, it's kind of crazy being able to maintain that you know level of service when you get to. You know 90 million on the street is a lot. Yeah, you know that's significant. I think what was the award you got this year Fastest?

Ryan McGuinness: 12:39

50 companies in Tampa. Which is awesome right, so congrats on that. I appreciate it.

Michael Notbohm: 12:43

But yeah, I mean once you grow, you know it's like anything business-wise once you get to certain levels of scale, there's always a new set of problems. Sure, so like what do you think from what were you at last year?

Ryan McGuinness: 12:53

Probably 60 million Okay. So I mean, that's a significant growth. Sure.

Michael Notbohm: 12:58

What do you think the new problem is now?

Ryan McGuinness: 13:00

Yeah, I mean, the hardest part of the equation is always the borrowers. For us, we've been very fortunate that our lending partners are very well capitalized and, over the decade of doing deals with them, when they compare their returns to other investments and especially the risk of other investments, you know they have a lot of money on the sidelines that are ready to go and we've definitely picked up some significant you know 10 million plus net worth investing lending partners within the last year or two. That really help out.

Ryan McGuinness: 13:30

So, the borrower is always the hard part of the equation, right? It's because that's the finite thing, you know. You got to have a guy that has a lot of money down or a lot of equity, and also decided not to go to the bank route, the traditional bank route, for whatever reason.

Michael Notbohm: 13:44

So is that, is the majority of the people coming to you fix and flip type guys?

Ryan McGuinness: 13:48

or are they? They're really just one-off scenarios where time is of the essence. They need to get a deal done in you know, five, 10, 15 days, or maybe they had 90 days, but the bank's been jerking them around for 85 days of it right. And they're going to lose the deal or something is going to happen to where they need to get their deal.

Ryan McGuinness: 14:04

Yeah, their escrow's gone yeah so you know they decided to put $50,000 hard down because another hard money lender said they'll definitely you know get the deal approved and they call us with a few days. So it's really just somebody that doesn't want any questioning of all the underwriting.

Ryan McGuinness: 14:18

That's typical and needs to close quick and really the premium in interest is isn't anywhere near what it used to be right. All of our notes have always been 12%, even going back two, three, four or five years ago. So the spread back then when you could get a mortgage at 2.75% or 12%, you know it's like man 9%.

Michael Notbohm: 14:36

Yeah, that's a big difference. Yeah, that's a big difference.

Ryan McGuinness: 14:38

You know, now we're seeing 7, 8, 9, you know some SBAs 11, there's a lot of hybrid loans, you know non-QM stuff in double digits. So it's paid a little bit of spread. Another reason that our business has really increased yeah, I mean it makes you call you.

Michael Notbohm: 14:52

Okay, I got the equity here, I got the down payment. That's pretty much. That's the last question that you really need to know what's the property worth.

Ryan McGuinness: 14:59

Yeah, and then you need the money to put down to purchase it.

Michael Notbohm: 15:02

Now the, you know, as interest rates have gone up, why have you not increased yours?

Ryan McGuinness: 15:07

You know that's a good question. Like I said earlier about we're happy with our yield, we're happy with the income that we're making. Our lending partners are happy with that.

Ryan McGuinness: 15:15

You know we're not trying to squeeze every last dollar from our borrowers. We could have raised it, but then you know, then's the question rates go down, am I lowering? I like that. All of our network knows our rates, knows our term. So when you have realtors that are helping their assist, their clients, they know what they can call us and get, or mortgage brokers, or attorneys, or title companies they've done, you know, dozens or tens of deals with us and they know our terms, so they're not having to. Well, let me see what Ryan's rates are today and let me see what you have to put down today. Let me see what they can do today. You know we are the simplest, easy one pager and we're truly sticking to those facts. You know as to what we can get done.

Michael Notbohm: 15:52

Yeah, and I know I've said you've deals. We've done an interesting deal not too long ago where I think it changed about what? A hundred times.

Ryan McGuinness: 15:58

Probably. Yeah, that was the Now and with it closed, there's so many different properties in and out.

Michael Notbohm: 16:02

I had to I remember you called me and you're like well, 10 minutes ago it was off and now we just closed it.

Ryan McGuinness: 16:07

Yeah, and that was at like four in the morning and like five in the morning. Things were changing and like what's going on?

Michael Notbohm: 16:11

Yeah, usually when you get those calls at four in the morning, you kind of know what the condition of the borrower is Sure sure. He's thinking about some different things based on maybe like a roulette session or a craps. Or a craps session. So if somebody wants to be an investor with you guys, what does that look like?

Ryan McGuinness: 16:27

Yeah. So they would come in. They would just give us a general ballpark that they want to put to work. Now if they say, hey, I have a million dollars I want to put to work, it doesn't mean they're putting a million dollars in one deal, so I know what to limit them up to. So I might call them and say, hey, I have a $200,000 deal and now they fund it a couple days later. Hey, I have a $300,000. So we'll kind of go up to their comfort level.

Ryan McGuinness: 16:49

Every month they're going to get the interest payment dispersed to them on the first of every month for all the deals prior of that month. So most of our lending partners have multiple deals. So their borrower pays on the 20th and the 25th They'll get a report, it's all automated. And then the ACH batch goes out on the first day of that month and sends them their payment out To fund those deals. They'll have a full our full underwriting file and you know why we want to fund this deal. And they give a commitment and then within you know, usually five or 10 days is the actual close date. They wire the money directly to the title company and that's it.

Ryan McGuinness: 17:24

It's really, it's really simple. In the event, there needs to be, you know, a demand letter for a late payment or even a foreclosure. They're not actively involved with that at all. We handle all that. We have the legal infrastructure to handle all that. Obviously, they have final approval and we'll keep them. You know abreast of what's going on, but they're not okay. You know my loan's in the fault. Now I need to find an attorney. There's none of that. It's truly, truly, truly passive for them, as much as they want it to be.

Michael Notbohm: 17:48

So the person wires the money to the title company get paid monthly. Worst. Like longest terms, two years. Correct, most of the time let's just say it sells in eight months or nine months, yeah.

Ryan McGuinness: 17:58

So all of our notes are two-year balloons. So somebody's not, you know, stuck in some long-term 30-year, 15-year product. The borrower has no prepayment penalty on our notes, so they can pay it off, you know, anytime. I would say around that eight to 12, 14-month mark is probably the majority of the payoffs, right, okay, it could go up to two years and we've had deals go two years and again other lenders might say hey, your balloon, we're not renewing, we're foreclosing on you.

Ryan McGuinness: 18:22

Now, if the property's good and the economy's relatively the same and that borrower has been making payments, we'll renew it another year or two-year term. There's no, you know, we're not out to get any of these buddies property, nor do I want anybody's property. I'd rather just collect the interest and have them in it. So we would extend at that point. And there's always liquidity in our notes. We hold all of our notes in house, right, we don't sell our notes off. But if somebody has a liquidity, personal liquidity event they need, I would just assume no note with my own personal capital or another lender would take over. So it's not like oh man, now I'm not going to see my money for two years.

Michael Notbohm: 18:55

Right, I'm screwed for two years. That's pretty awesome, okay, so somebody wants to get involved with you. What like they call you? What's the process look like? Because they're not giving you the money, they're just basically saying, hey, I want to be an investor with you.

Ryan McGuinness: 19:08

Correct, we're servicing and everything. Yeah, they can contact me. My cell phone is 352-262-3722. They can reach out to me directly.

Michael Notbohm: 19:16

And I can verify that. You answer, I think, pretty much all the time, unless you're boxing or it's past 8.30 at night and you're asleep.

Ryan McGuinness: 19:23

Yeah, and in between boxing rounds I might still pick up.

Michael Notbohm: 19:26

Yeah, that might be true, if you catch me past my bedtime.

Ryan McGuinness: 19:29

I'll call you back at 4 am, don't worry, yeah.

Michael Notbohm: 19:31

So what are you looking for? I mean, now that you went from 60 to 90 million, what's the goal for 2024?

Ryan McGuinness: 19:37

Yeah, Just continue to the growth that we're on. I mean, I believe for sure we'll be well into the low hundreds of millions. We're just trying to keep getting our name out there and keep growing. But the organic growth of the company, because you're doing all these good deals. And one thing when Bank of America says they're going to fund you and you sold your house in Virginia and you're moving down, and it's Tuesday and you're moving down, you're closing Friday and you got your wife and your kids and your dog in the U-Haul and you're all coming down, and Bank of America calls you on Thursday and says hey, we didn't realize how much money you spent on Best Buy on your credit card last month. We can't fund this deal anymore. It's off right, which is real.

Michael Notbohm: 20:18

Yeah, no, I'm laughing because you're not wrong.

Ryan McGuinness: 20:19

Yeah, so we get that call. If Bank of America funded that deal on Friday, they wouldn't have told anybody about it. It's just expected. So we get that call on Thursday on a guy who doesn't know us, who, guy who's been dealing with whoever for 30 to 60 days, and he calls us and says man, we're supposed to move in tomorrow. We got everything packed in, we're on the way down. Is there any way that you can get this deal done? And we get it done in one day? He's telling everybody.

Speaker 1: 20:44

Right.

Ryan McGuinness: 20:44

And the two real estate agents that were about to make no commission are telling everybody. And the title company that was about to do all the work for free was telling everybody. And the attorney that did the work he's telling everybody. So it really sells itself versus just an ordinary lender or other hard money lender that just do what they're supposed to do. When we come in and save something, that was like a catastrophic event for a family.

Michael Notbohm: 21:04

Yeah, when you think about too, I mean from like an investment standpoint. I've got friends who you know and Andrew and I on the last episode talked about what wealth meant and what building wealth meant and I've got friends who have this mindset that they just well, I save my money and like they literally have hundreds of thousands of dollars in a checking account or a savings account that makes like 0.025% interest. It's like the end of the year, on 300 grand, they made like 12 bucks.

Ryan McGuinness: 21:30

Yep, yeah, and you know we're in a higher interest rate environment. So even somebody like that hopefully they're getting three or four or something percent in a CD. And I always tell people you're going to make more than double that with us. And if you truly understand what we're doing, you realize that the risk isn't there, right? People think, oh, mortgages I'm lending, what if they don't pay?

Michael Notbohm: 21:50

Well, that's your most profitable deals. Probably, right, exactly.

Ryan McGuinness: 21:53

Yeah, you know, my baseline is 12%, but my default interest is going to be 18 or 25% or potentially a house with a half off coupon. Right, I lent 500 grand on a million dollar house. Those are the biggest home runs because you're making almost 100% return then.

Michael Notbohm: 22:08

And most of the time that 500,000 dollar house, like when shit hits the fan. They were halfway through construction and they ran out of money, so now it's worth more, anyways, because they did a lot of stuff to it.

Ryan McGuinness: 22:20

Almost always, our borrower has improved their property on their own money. We don't lend on rehab, right? So those little sticky situations I think that's how you find yourself in a bad situation, Lending on rehab and people don't perform, and then you're like all right, well, where's the money we lend them on? You know, we gave them 100 grand for rehab and the guy didn't do much with it because he's paid something else off with it.

Ryan McGuinness: 22:39

We will never have those issues because we don't underwrite like that and we don't lend on that kind of stuff.

Michael Notbohm: 22:43

Is most of your stuff in Florida.

Ryan McGuinness: 22:45

Almost all yeah, because again we have organic network right. So probably 90% of it is within two hours of Tampa, probably 9% throughout the state and then 1% outside of Florida.

Michael Notbohm: 22:56

Like when I call and say hey, can you lend me money in Indiana, correct?

Ryan McGuinness: 22:59

correct. Yeah, you know, outside of the state we don't have the legal infrastructure, we don't have a ton of construction crews if we need it. I'm not there to manage the project in person. So that would be something that we would lend to lower LTV If somebody had a single family home. We may only go 60% to 65% on the out of state deal.

Michael Notbohm: 23:17

So are you optimistic of the real estate market going into 2024 and beyond? I know we're in an election here, so it's kind of.

Ryan McGuinness: 23:23

Yeah, I think it's healthy to have a tapering or even a down. I think Florida and Tampa in general is maybe insulated for much of a downturn because everyone continues to want to move here and live here. But I think it's okay to go down a little bit. And these higher interest rates, who knows if they're going to trickle back down or go back up? But it has to slow things down.

Ryan McGuinness: 23:45

You can't tell me that 3% rate environment and 8% rate environment. I mean it just kills affordability. It kills payments, lines of credit, car notes, all these things that really add up and it hurts people in their pocketbook. I don't care if you're middle class and you're doing well. When your interest expense is 2 to 3x of what it was a few years ago, that's really going to hurt on what you have.

Michael Notbohm: 24:11

And I think what's the most surprising to me is the fact that we haven't seen a huge downturn. Sure, it's like to your point, like back in 2016, when you're like, well, we're kind of at the tip of where normal market would turn and it just kept going up, kept going up, and in 2022, it's still going up, and now you start to see a little trickle off, but it's like I'm not seeing prices go down.

Ryan McGuinness: 24:35

I agree with you. My opinion on that is that people have the properties First of all. They're not in a big rush to sell, because then they have to go by a higher interest rate, note right.

Michael Notbohm: 24:44

Yeah.

Ryan McGuinness: 24:44

A lot of those properties for sale are locked in at 2%, 3%, 4%. So if they did sell? So they're kind of like, okay, this is my price if I get it, but they're not willing to go down. But I think over time you're going to have more and more people. They get into a situation where they have to sell and then you're going to have those price cuts and then you're going to have, you know, appraisals come down and kind of the butterfly effect of that. But I don't think it's a rush like we've seen, maybe an 08 or you know 09, something like that.

Ryan McGuinness: 25:11

Yeah, that was kind of like the perfect storm of everything that could go wrong. Sure, sure. No-transcript Loans generally have good underwriting. You know, it's not the days of 08 where somebody with no job with 780 credit can go buy five beachfront condos because they did a stated income loan and they have okay credit.

Michael Notbohm: 25:29

When the mortgage guy calls his buddy the appraiser hey I got this 123 Main Street. I really needed to come in at 650 and it's worth 425 on a good day.

Ryan McGuinness: 25:38

Or they're lending 100% LTV or 120%.

Michael Notbohm: 25:41

LTV. Yeah, the 120s was always great. Like what could go wrong in this scenario. It was just so great idea.

Ryan McGuinness: 25:45

The banks like, hey, let me lend you 20% more than it's possibly worth and think this is okay.

Michael Notbohm: 25:52

Which is really kind of crazy to think about, because banks are very conservative typically, so for them to be like I'm banking that this is gonna go up by at least 20% and we're so confident we'll lend it to you now, yeah. And then, obviously, what could go wrong? We saw what went wrong Pretty much everyone being foreclosed upon. So well, I mean, dude, I think this is awesome, you know, I think what you've built in a fairly short amount of time I mean you saw a good niche. I think you know there's other people out there that call themselves hard money lenders or private money, and it ends up being really a, you know, basically a normal loan in terms of all the underwriting and everything. You've made it a pretty straightforward and simple process. You know, I would say the only you know when I talk to people about you know what you do and kind of how they can invest some of their money. The negative side and I think a part of it's just not understanding it is hard money, I think has this like weird negative connotation.

Ryan McGuinness: 26:50

Absolutely.

Michael Notbohm: 26:50

You know, like you're imagining a mob boss, like in a basement, like he's giving you the hard money loan if you don't pay by Friday.

Ryan McGuinness: 26:56

Yeah, that's why I like getting out there and talking to real estate firms, you know, and if anybody has real estate firms, I'm happy to come talk to them, because even seasoned real estate agents, and especially newer real estate agents, they understand, you know, the term hard money private lending, but they really don't understand what it means or what it is, and even if they do understand it, they don't understand our company, right? They maybe they've dealt with another hard money lender and they were like, hey, yeah, well, they said they had approved it and day 25 of 30, the hard money lender bailed. Like you're never gonna have that. So I've been trying to get in front of a lot of agents and explaining what we can do and how we can save all their deals, right, because I mean, as an agent, you've seen how many deals fall apart because of financing and a lot of times it falls apart late into the contract.

Michael Notbohm: 27:38

Well, you remember that guy set you Paul. He was with you know, a hard money guy and everything looked great. It was actually a hard money guy I had used and it was easy when I did it, but that was because I had done so many deals. That my experience. But they give you know, absolutely, absolutely. Then in the 11th hour they pulled the rug out from underneath them and you came to save the day.

Ryan McGuinness: 27:58

I'm getting in front of agents and brokers and explaining that and explaining there's a lot of other advantages. Like when you're a buyer and you're negotiating with a seller and they want 500,000 for their house and you say, hey, you know I wanna give you 450 and they're like, no, I want 500. But when you approach them and say, hey, I'm using a private lender, there's a little bit more of a spread of interest. You know we can close next week. There's not gonna be any underwriting. You know we're not closing in 30 to 60 days. How about 450? Because I'm absorbing these other costs that I'm gonna have to incur and there's the guarantee we're closing next week as a seller. That's much more reasonable than a guy just saying, hey, I want 50,000 off because of it. So you know, explaining that to the agents to kind of coach their clients and use that in the development of the deal, it really has helped out.

Michael Notbohm: 28:46

Yeah, no, and I think that there's definitely a huge education piece there for agents, because if you don't do anything on the investment side, you don't really understand it, and I think getting people informed on that is key. So, investors, though, that wanna partner with you, how often are you explaining that this is a pretty safe way to do it?

Ryan McGuinness: 29:05

I get a lot of calls. I get calls most days. I'm not the pushy salesman, probably because we're well capitalized from other people, so it's not like, oh man, we committed to this deal and I find this money. Let me just call the last eight people I talked to and beg them for cash. Right, I'm always happy to get anybody in. I love getting people in. I love people making money and entrusting me with their money. So it just depends on the deal flow of who we need to get in.

Michael Notbohm: 29:30

Yeah, so we'll drop a link in the bottom, I guess, just your website and obviously your cell phone number for anyone who wants to explore the opportunity. I know we've got a couple of friends in our immediate group that started with a couple hundred thousand on a deal and they're like, man, this is awesome, and now they can't wait to fund the next deal, cause it's I mean, part of it's just the fact that once you see the money in your bank account, it's like okay, this is truly passive. I didn't have to do anything and every month I'm getting a deposit, which is great.

Ryan McGuinness: 29:59

Yeah, anybody that's gotten in has always significantly increased their money with us. And then you just keep piling in and piling in. They're getting their monthly disbursements of interest, and I didn't mention this earlier. When their deal closes out, they get all their principal back too, because from the title company again, we don't handle that. So then they have the option to hey, I wanna reinvest that, or I wanna add more, or whatever they wanna do with it.

Michael Notbohm: 30:21

How quickly like say, something closes today, how quickly can somebody get in another deal?

Ryan McGuinness: 30:26

We close deals most days, so obviously have lender other lenders to deal with too. But if you made a commitment with capital, I would hope that within one to two weeks we can get you worked in and always get you in that flow. That's great.

Michael Notbohm: 30:42

Yeah, all right, so we'll drop that in the bottom. I appreciate you being on again. It's always great chatting with you and I love the fact that you've built such a crazy big business and I've been here to kinda watch the whole thing grow.

Ryan McGuinness: 30:54

Yeah, I appreciate it. Have me on anytime.

Michael Notbohm: 30:56

Absolutely All right till next time, guys. Legacy Wealth Code podcast onward.

Speaker 1: 31:00

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