Cash flow and qualifying for financing are two of the biggest hurdles when it comes to running your real estate business and landing your next deal. We're talking about forward-thinking lending in this episode of The Real Estate Law Podcast.
Meet Robin Simon, a Partner of Easy Street Capital, a private real estate lender headquartered in Austin, Texas serving real estate investors around the country.
Robin oversees the EasyRent division, which provides long-term financing on business-purpose 1-8 unit residential mortgage loans. Robin oversees the marketing, business development, operations, and secondary/capital markets involved with the EasyRent line, so he's the perfect person to discuss non-traditional financing ideas.
Robin provides financing solutions for real estate investors with a specialty on short term rentals and BRRRR method investors by qualifying entities with no DTI (Debt-To-Income) requirements, no tax returns required, and no income verification
If you're an Airbnb investor, hear how you can qualify for your next investment with 20% down using AirDNA projections in many locations, including vacation and tertiary markets.
Robin also works with AirBnBRRRR (yes, that's a thing!) investors, with loan products that cover a purchase, rehab, AND refinance, offering 100% cash-out refinances within 3 months without a lease requirement.
What we discussed during this episode:
- Financing options that are outside the box of conventional mortgage lenders
- The mental shift required of serious investors away from debt-to-income loans
- When should an investor contact a company like East Street Capital rather than pursue a typical DTI loan with a local lender?
- Working with investors holding 3-5 properties looking to make the move into full-time real estate investing
- Understanding the debt service coverage ratio
- What expenses are taken into account when calculating DSCR?
- The three factors that go into qualifying for a DSCR loan.
- Why they occasionally underwrite sub-1.0 DSCR loans
- The loan products that Jason and Rory have used for their investments
- Why it's important to be up front with your lender and insurance company about your true intentions with a property
- What are the conversations like with newer investors just discovering these alternative loan product?
- Being in the "third inning" of the Short-Term Rental industry where smaller investors can still scale up before institutional investors assert their influence
Where you can find Robin:
Website - https://www.easystreetcap.com/easyrent/
LinkedIn - https://www.linkedin.com/in/robinsimonesc
Email - firstname.lastname@example.org
Join Jason Muth and Attorney / Broker Rory Gill of NextHome Titletown and UrbanVillage Legal in Boston, Massachusetts for another episode of The Real Estate Law Podcast!
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Instead of the short term fix and flip, these are loans for, for holding for cash flow for appreciation for 30 year fixed rate mortgages. So we really view it as, you know, a separate investor and a separate product, but a very complementary front. Because, you know, we've seen a lot of people in the fix and flip space, and there'sAnnouncer:
You found The Real Estate Law Podcast, because real estate is more than just pretty pictures. And law goes well beyond the paperwork and courtroom argument. If you're a real estate professional, or looking to build real estate expertise, then welcome to the conversation and discover more at realestatelawpodcast.comJason Muth:
Hello, hello, hello. It's another episode of The Real Estate Law Podcast. Thank you very much for listening. Once again, we have a great, great discussion that you're about to listen to. We'll get into it in just a second. I'm really excited about this topic, by the way, I'm Jason Muth one of your hosts Rory Gill attorney from UrbanVillage Legal, NextHome Titletown Real Estate and Boston. Rory, we've been talking a lot about this both online and offline. And that is financing real estate deals. So I'm excited to hear a little bit about some of the alternative ways to finance them. Because I think that most people are just used to going to the bank down the street and saying I need a mortgage. And that's not always the case for real estate investors, is it Rory?Rory Gill:
No. And we're covering kind of a mental shift that a lot of serious investors have to make when they go away from sort of the conventional debt to income loans that you'd get at your neighborhood bank to really looking at loan products that are meant for investors, whether you're flipping a property, whether you're scaling to have numerous rental properties, or doing short term - things that are kind of outside the box for a lot of the conventional mortgage brokers. These are things that you should be aware of, particularly if you're looking to grow your real estate portfolio.Jason Muth:
Yeah, and we haven't discussed this all this much on this podcast. I mean, we always talk about real estate meetups and people meeting each other doing deals together. But you know, the big question that looms over everyone's head is how do you get the deals done? Right? Like how do you finance these things? So we'd like to welcome our guest, Robin Simon. And Robin is a partner with Easy Street Capital. And Robin, welcome to The Real Estate Law Podcast.Robin Simon:
Thanks for having me!Jason Muth:
Yeah, we're excited to hear a little bit about Easy Street Capital kind of your story, how you helped found this company, what type of investors you're working with these days, some trends that you've seen, you know, it's been a very volatile year so far, we certainly don't expect that to, you know, to quiet up good or bad in the coming months. Just because, you know, there's rumors out there about increasing rates from the Fed as well. We saw this year how some of those increases didn't necessarily lead to an increase in mortgage rates. So those things weren't fully correlated, as a lot of people thought they were going to be. But you know, you're working with investors who are looking to purchase property and rehab, do a fix and flip loan you're looking you're working with short term rental operators, you know, people that are really looking to scale their Airbnbs up, how did you get into this space. And you know, that's probably a great place to start.Unknown:
A little history on Easy Street Capital. We are a private lender, we're located in Austin, Texas, but we have a national platform. So we'll do we'll be well mortgage loans all over the country, really everywhere, except that North and South Dakota, just due to some licensing issues. So Easy Street Capital was actually founded back in 2015, the original partners of the firm kind of fix and flips themselves buying a lot of foreclosure properties that needed work. So Southern California, they did that in the early part of last decade and then around 2015-2016 it so hey, we're gonna move to Austin. That's, that's probably one of the Texas is one of the next big growth markets. And instead of being on the principal side, equity side, they're gonna go on the lender side, it's a little less risk. And then of course, with experience doing thousands of of these flips, purchases and rehabs. If anything goes wrong, we need to foreclose, they know exactly what to do. So that business has been growing steadily and chugging along for the last seven years or so. Recently expanded back to California, throughout the Southeast, and now a national footprint there, and they're having a lot of success, big volume, great reputation online, was really important and hard money space. There's some good guys out there, it's bad guys some with shady reputation. So we really pride ourselves on a really good track record of serving a lot of borrowers by investors, repeat business and over the last few years, I actually came into Easy Street as a partner in last December, December 2021 to launch really a complimentary division of industry, which is long term loans. So instead of the short term fix and flip, these are loans for holding for cash flow for appreciation for a 30 year fixed rate. So we really view it as you know, a separate investor and a separate product, but a very complementary product, because we've seen a lot of people in the fix and flip space. And they're saying, well, instead of flipping, I can make more money holding this in my portfolio and doing the BRRRR strategy and refinancing or selling the property is not. So we had a lot of internal internal referrals, internal borrowers who we've done lots of rehab loans with over the last few years. And we were losing those two competitors, because we didn't have a long term plan about refi products. So that's where I came in, I came in, it's called the easy rent program. And now we offer those investors a one stop shop my property, getting a hard money loan, and then refinance into a 30 year loan once that's rehabbed. And we're seeing a lot a lot there, especially today where the market is a little choppy, and you go and you buy a property, fix it up, you expect to sell it for, you know, an ARV, and maybe the market is not there. But if you kept it and rented it out, you're you're seeing cash flow. So instead of having to go to lenders, instead of having to go to a good shop, you can just pivot stay in house, we're comfortable with you do the refi with us and add to your portfolio. Other parts. That's not all we do. We also have kind of a full suite of what's called DSCR Loans, which are mortgage loans that don't look at DTI. They don't look at personal income. They're really based on an easy qualification and the cash flow property. So that's anything from a rental property a single family home duplex triplex up to eight units. And then we also specialize a lot and short term rentals. So Airbnb properties, vacation rental properties, will give you that that 30 year fixed rate loan, that easy financing, easy qualification, and then we'll be able to underwrite that not on your personal income, not on your ability to manage multiple vacation homes. But we'll actually look at what that property can do as a short term rental and how much I've learned that that means getting it up and running in 2022. It's been a little bit of a choppy market, but we're still growing a lot investors happy and still have a pretty positive outlook for growth. I've done that this type of platform added another lender previously. And that is kind of just a brief background. My career before that it was mostly commercial real estate, but I'm kind of switched into this gray area between residential and commercial lending where it's it's residential properties, but they're commercial loans because their income producing properties on it. Really love it. I'm really, really excited about the future of this industry, especially in the short term, short term rental space.Rory Gill:
Yeah, sounds like you've assembled a great deal of different loan products and everything that are geared toward the investor market. And I kind of want to just unpack a little bit about what you said, particularly for people who may not be as familiar with this space. So in the opening, I started to contrast you a little bit to a conventional mortgage broker that relies on DTI, debt to income kind of the traditional way that we think of home buying process where you take your income, and then you know a certain percentage of that can be allocated toward the cost of housing. And that's how most DTI or conventional mortgage brokers operate. That's the critical factor that they they look at there. When should somebody be giving you a call, instead of the mortgage broker that they may have used to purchase their home?Robin Simon:
That's a great question. It's something we see every day. So really DSCR rates, mortgage loan rates, they're all be the same kind of program, 30 year fixed rate, pretty basic plan, our rates are going to be about 75 bps to 100. So 1% Higher, you know in terms of your interest rate versus a professional product where you're getting a DTI product from a conventional bank for or agency lender. So if they're if their rates are five and a half percent our rates probably six and a half percent depending on no other factors. I tell people kind of flat out - hey if it's your first, second, third property, you're still qualifying your W-2 income and you can qualify you don't mind paperwork, you should go that conventional route because those are you know, terms and we're enraged we really don't keep. We're really really really good for when you kind of graduate and when a scale and it's that five to 50 really units you have when you got your first couple properties. Realize you're doing any want to make that proverbial jump into scaling. Maybe you want to quit your job. Maybe you're ready to do the real estate investing full time. There's some other reasons because it gets hard to qualify once you get 3-4-5 properties, especially that DTI calculation. Other advantages we have is all into LLCs. Well, let's say you and your individual name or LLC, really, some states have some, some rules around it, but we prefer an LLC. So when, again, it really goes into that scaling question where, okay, you have maybe your own home, and one or two extra rental properties, that's okay to put these loans in your name to get the best rates. But once you get, you know, four or five properties in different markets or all over town, it really ends up being, you know, smart in a lot of cases to restructure this into an LLC, getting the protection. So you guys probably probably know more than me about the benefits of that. That's another reason, you know, when you want to switch over to the DSCR product, not my product, rather than, you know, the conventional. Other advantages are we offer our partners with LLC, if you have two or three partners on a loan, so a lot of people like to do this real estate investment attorney necessarily on their own, they might want to bring 50 partners or or a few partners to run this business. So our lenders are fine with that fractional part there. And then, you know, banks agency, Freddie Mac, Fannie Mae, they generally also have limits, so a little vague, because you know, every year they have cap on investment properties, generally, it's about around seven, until seven, nobody's you can do with agency. And until you're tapped out sides on conventional tap sometime, I think this year, it's around 620,000. So when you want to go bigger, when you want to go with a partner, when you want to go with an LLC, when you're ready to scale, past concentration limits, those are all the big reasons why people want to jump into private lender space, and then there's flexibility as well, too. So maybe you qualify for conventional but you're really going into short term rentals, and a bank or conventional loan, it's not going to be able to use the AirDNA projections, or you know, use your your operating history or really look at a more creative way where your private lenders like us really be ahead of the curve there and be a little more creative, flexible, on, you know, underwriting guidelines, as well. So once you've scaled up to like 50-60 properties, then you're probably looking at at big institutional money. So we are really right there in the middle, probably I would say, overall, you know, 5-50, when you're when you're ready to make that job, and you're ready to scale, we're really good option.Rory Gill:
I just wanted to make sure that we're not skipping over something that some people want to understand. Because you know, when we're talking about, you know, kind of at the bottom of the scale, we have the conventional lenders that will rely on DTI debt to income. But as you're, as you're suggested, most people will run out of capacity at around four properties or so where the debt to income analysis doesn't make sense for them anymore. And just the complexity of the loan application is starting to get to the point where it just isn't feasible. So you instead you sacrifice maybe up to a point in percentage interest to go to a DSCR loan - debt service coverage ratio. But before we get too far in the conversation, could you explain what that means the the debt service coverage ratio.Unknown:
Instead of looking at income, so looking at your personal income, we'll look at the income, the rent, basically, that will be generated by by the property. So I mentioned before, not everyone has a W-2. So it's another reason to be self employed or whatever when it comes to salary. It's not a W-2 with history. But DSCR it stands for debt service coverage ratio, and it's basically a ratio of the revenue and money coming in and rents divided by your expenses operating the property. So for us as a lender, it's a pretty simplified ratio, we only take into account on the expense side the debt service so your monthly principal and interest payment and then property taxes and insurance. So we don't take into account you know, any sort of management fee or utilities or repairs and maintenance where you might do that when you're underwriting personally but but for us as a lender, we'll qualify based on just those four costs. So you know, for an example, if you're making let's say you're making $120,000 a year in rent on a property and when you add up your debt service for the year and your taxes and your insurance, and that's $100,000, then you calculate your DSCR by 120,000 divided by 100,000. So that's 1.2x DSCR. So that means for every dollar of costs, you're making $1.20. So a DSCR of 1.00 basically means you're breaking even all your rent goes to all your expenses. And you're, you're right on zero profit, but with zero loss. So we calculate that DSCR number to see how much comfort how much cushion, are you bringing in enough money, rent income, to cover your obligations.Rory Gill:
if we take that kind of borrower, somebody who's looking to purchase the long term rental property to start with, and this was the key thing there is that they're identifying a property where they can demonstrate that the rents are going to exceed the costs. Is there anything else aside from just picking a good property that a borrower should do to get themselves ready for a long term? DSCR loan?Unknown:
Yeah, I mean, it really is, really is driven a lot by you know, that property and that property's ability to, to generate cash flow over over the long term, not only in the next year, but long term, since we're writing these loans as 30 year fixed, when it comes to your pricing. So what kind of rate you're gonna see what kind of closing fee you're gonna see me can vary quite a bit, the three main factors are going to be your DSCR, your LTV, so your leverage, so you know how much money you're putting down versus your loan, and your your FICO score. So if you're looking to really get the best, best rates, the best terms, you want to make sure that you are, you know, keep keep that FICO very high. If and that will make a big difference. Choose a property that is cash flowing and cash flowing, you know, as much as possible, and be as conservative on on leverage as possible. So we'll, we'll go up to, you know, 80% LTV, so where you only have to put 20% down, we'll even, you know, at some cases, finance properties with a debt service coverage ratios under one where it's negatively cashflowing. And we'll go down to pretty low FICO scores. I think, right now, we'll go down to 620. But you're going to pay very, very high rates, and fees to get that done. So those are the really the three levers that you went on, you want to maximize as much as possible. If you're looking for the best best rates and terms.Jason Muth:
Why would you do a negative? Why would you go below one with that ratio?Unknown:
That's a really good question. A lot of lenders will have different answers and say, We don't want to go under one. But I'm actually a bit of a contrarian there, I think we see deals that are good, and they're under one. Some of these situations are, so we underwrite pretty conservatively, in terms of its long term rental you have, there's the appraisal is going to give you what's called a Form 1007. And that's the loan term market rent that the property owner and then we'll compare that to the in place in place lease if you have it leased out. And then to be conservative. And pretty much this is pretty industry standard, we'll use the lower of those place versus market rent to underwrite. So say you're buying property that has a tenant in there, that's paying $2,000 per month, but the market rent is $3,000 a month, and you buy the property and the lease, the lease is gonna roll in six months. So you buy it, you identified and under market lease, you're gonna raise the rents to market - common the real estate investor strategy, six month rolls, that's going to be your strategy and you're willing to live with a lower lower lease amount for the first six months because it's a long term investment. So us as a lender are going to have to underwrite the DSCR with that $2,000 versus that $3,000. So on paper, that can be a sub-one DSCR whereas in six months, we fully expect the property to be leased at market and then that will take it over the limit. These are also 30 year fixed rate loans that are look at it. Rents have really skyrocketed in the last couple of years and there's not a lot of evidence saying they're gonna go down, but generally rents rents exceed growth, the rent growth is about 8% I think on average in the last 40 years, generally rent growth exceeds growth in property taxes insurance, etc. So maybe you're losing money on year one, but you've had a fixed monthly payment for 30 years. And maybe after year three, or four, the rent keeps growing. So what was initially as sub-one DSCR, negative cash flow at the beginning of the loan becomes a positive cash flow for 27 years after when you walked in a fixed monthly payment. We, and there's also, you know, there's markets where, you know, very, very high and popular markets we're here in Austin, were really, basically impossible to get a, you know, property to cash flow, California for many years, where there's been a lot of skeptics saying, why would you buy a negative cash flowing investment property and bank on appreciation as potentially a very risky move, but then there's a lot, a lot of very wealthy people who, who buy properties in those markets, California, in Austin, in New York, that are back with, with just gigantic property appreciation that far outpaces maybe losing a little bit of money. So there's some of the reasons reasons I give. You know, there's also, you know, lots of tax benefits that come with real estate. So maybe you have portfolio cash flowing properties, and then you can work some tax losses on onto properties that are breaking even or losing a little bit. And that gives you a holistic benefit. And then there are short term rental properties where maybe you don't have the experience, you don't have the history of 12 months history showing the robust cash flow, maybe you're confident that you'll make a lot of money as a short term rental, but as a lender, you underwrite conservatively in some cases, and underwrite, say, Okay, this property made $2,000 A month as a long term rental, make $5,000 short term rental. We're gonna underwrite on paper that $2,000 per month to be conservative, showing a negative DSCR. But in reality, if you operate a short term rental and you know what you're doing, you're going to easily easily cash flow that property. So again, these situations where it might just be on paper for conservative underwriting, the negative DSCR, when in reality, it's going to be a clash-flowing property.Jason Muth:
I know, You've been in this space for a long time, I think that the conversation we're having right now would have been foreign to me about 16 months ago, before we did our first deal using, you know, a private loan similar to this for one of our short term rentals. And, you know, just to kind of humanize this a little bit, because if you're listening to this, you're saying, Okay, I think I get some of that some of it might be confusing, I'll talk about our situation, like, I'll talk about how we kind of have run down the road where we're investigating, you know, Easy Street Capital, and, you know, financing opportunities, such as DSCR loans, you know, everything you've just mentioned, Robin, you know. A loan on our primary house, right, and, you know, we've moved a couple times, so we've bought different loans over the years, you know, buy one place, so one place, you know, but the short term rentals that we operate, two of them are on second home loans, vacation home loans. They are in two different markets. So we're able to do that. And we took ownership of them intending for them to be second homes that we would supplement. And sometimes it tilts a bit more toward the short term rentals. But they're both conventional financing, longer, you know, standard longer term loans. I think one of them is a 30 year fixed, one of them is a 20 year that I refinanced. The rates are rock bottom, you know, it starts with a three going to be really difficult to want to refinance those, and they have a ton of equity in them. That's how we were able to do those all from, you know, when I was a W-2 employee, we're looking at debt to income I was working with, you know, conventional finance companies, tons and tons of paperwork, and the paperwork got even deeper, the more properties that we got. And it became very, very complicated. You know, this, this most recent loan that we did, for our current primary home was nothing like I've ever seen before, you know, it was just the amount of things we had to submit, you know, not to complicate things more, but we have a construction loan on another property that we're doing with another bank, which is, I think, going to be the steal of the century. You know, I locked that in at 3% for 30 year fixed in November, you know, for property that we're building right now, which you got, I don't know if I'm ever going to refinance that thing. But, you know, that was another conventional loan that we're doing with a great local lender, and you know, we have an LLC, you know, where we operate a commercial condo and that is done with a commercial loan with a local commercial company in Boston, but Rory, the first kind of foray that we have into this space was last year with the most recent short term rental property that we posted, right?Rory Gill:
Yeah. And it was because we started to hit these limitations in the conventional market with, you know, operating another property and the same market, combined with the fact that this one really truly was an investment property didn't have a second home purpose. And then the DTR the debt to income with DTI, the debt to income ratio just started to become unfeasible for us. So we were meant to do it that this way. And, you know, while the rate was higher at the time, and we would have experienced otherwise, it was an unnecessary step. And, you know, I'm encouraged to do that, again in the future, and to keep building the portfolio that way. Just because it would be completely untenable for us to, you know, to keep pursuing these conventional loans. We did it, we had the experience, we had to demonstrate that we were credit worthy, we had to have decent FICO scores, but I don't even think they looked at the tax return as part of the application process.Jason Muth:
Definitely a different path. And we took that path because this property, you know, for a few reasons, this one's definitely an LLC, and we're operating it, you know, primarily as a short term rental, we're not even allowed to really occupy it. I mean, we do, you know, to maintain it and everything, but we had to signed something saying we're not gonna live there, right?Rory Gill:
Yep. So we, you know, it's almost the opposite. When you have a closing for your primary residence or second home, you're signing affidavits that you're intend to use this as your primary residence for you the intended use of this the second home, we had to sign kind of the reverse affidavit saying that we are not going to occupy the property. This is for rental purpose. And so you know, so we have to abide by, of course, you can go in there, we can stay there to maintain the property, we had to go there, and stay there to, to fix the property up and get it ready. But we couldn't just decide to up and move there.Jason Muth:
Right. You know, Rory one more kind of legal question right there. And then I'm going to ask Robin something. If we're going back to the vacation homes, like let's say that you're listening to this saying you own your home, you have some equity there, you've saved some money up, you want to buy a vacation home, but you also want to short term rent it out. What's your recommendation about going to a local lender in terms of disclosures, right, like you don't want to lie, you don't want to sign anything that you know, they could call the loan. But you know, what is that conversation like, in your opinion?Rory Gill:
You do want to be upfront with two people, the mortgage lender and the insurance company about what your intended use is are because they can work with you if you start that conversation upfront. And well, lenders really cracking down on it is relatively rare, you really don't want that to happen. And we're in an environment where rates are rising, or at least they're they're volatile. And you don't want a lender to be incentivized to go in and call a loan because they found that that you were dishonest in the application process. So you know, with a second home, there are certain amount of rentals that are allowable, the attitude of the lender might vary from lender to lender, but you do want to be kind of upfront with them with your intentions and your intended uses for the properties because you don't want to you don't want to make it a business habit to start sending affidavits that are not true.Jason Muth:
Right. Robin, so you know, you have a lot of long term clients, I'm sure that you know, they call you up, they have a mortgage, you know, a member of your team, you guys are already talking the same language in an advanced capacity, right? What are those conversations like with people calling you for the first time or the people that are like us that a year ago said, I don't know, let's explore this, this might be a way that we could actually jump in and get some more financing for some more properties as we continue to scale. I'm guessing you're getting a lot of those phone calls these days, as short term rentals are getting more popular as a way to you know, increase the cash flow of a property. And people probably bumping up against those income limits with their conventional financing.Robin Simon:
I might not have the fullest answer for that we have a great team of a retainers basically, will call our sales team who specializes in taking those calls and walk them through potential borrowers and really explaining how everything works. So but kind of overall, you know, our big pitch and our, you know, value proposition is the ease of this easiness were named Easy Street Capital, where whereas it should be a pretty simplified, straightforward process versus what they're used to. So I know you mentioned mentioned before, the amount of paperwork the amount of headaches just even on a primary home loan. You know, it gets gets very high. And you know, there's there's good lenders, there's bad lenders out there, sometimes they can process it very quickly. Sometimes they're asking you for the same document over and over again. Sometimes you know, it's the stretching months because they can't find everything to ask for. So we will always ask the questions but it really comes back to how easy it is compared to conventional financing for dealing with, with a bank. So, you know, we, we stressed there's, there's no tax returns. So that's big for a lot of people. No income verification, so you don't have to look either we asked for two months of bank statements. So just two statements show basically you have three to six months of payments in the bank. And that's, that's really it, we don't ask her two years of bank statements or, or all this other thing. And we have an application, that's, you know, a PDF, that's a few pages, that's, that's 10 or 15 minutes to fill out, we can get you a full term sheet of terms within a couple hours. So it's it's a very simplified process, we kind of lay it all out that we need on our application. And it's, it's not a lot of documentation. We will really emphasize that and be glad to talk through talk people through things, but there's just compared to what they used to conventional wise and bank-wise, the conversations are really about what's not needed versus, you know, what we might need?Jason Muth:
Yeah. What about people who, you know, they're surprised by some of the additional costs and fees? You know, because these are higher rate loans. There's, do you guys use, like a five year period that you can't refinance, or there's a penalty for five years? Or does that not apply for your loans?Robin Simon:
Our standard is a 5% prepayment penalty, but we'll be flexible there. We can reduce that or get rid of entirely and just kind of be exchanged with a higher upfront fee or rate.Jason Muth:
Yeah. And then some of the closing fees might be a little bit higher for loans like this, like, Are there points involved with your loans, I've seen some other you know, some other private lenders that are, you know, charging one or two points based on the rates.Robin Simon:
We'll charge me some closing points. So we, you we like to be very transparent, there's a lot of, especially in the hard money space, and a lot of lenders out there, it's it's a low barrier to entry industry. So a lot of people come and go, and a lot of those people that are coming and going, sometimes they'll be a little unethical or, or or juice the fees a little bit. So we really pride ourselves on being fully transparent. We have a hurdle to make X amount of money on a loan. But you know, that can come from balance between interest rates and points that we charge. So we can be flexible on that, on that kind of seesaw to the point where you know, we can charge zero points, but you're paying a little higher rate, or you want to buy down that rate, lowest rate possible. But you're willing to pay, you know, a couple points, two or three points upfront and kind of anything in between. We also have a little unique, I think, lenders, we have a deposit that's up front, it's purely what we call pass through fees. So we, we collect fees that basically we pay out to third party vendors, and then we'll refund the difference and not make any money on that at close. So so we'll lay all that out in our term sheets. These are pure pass through where we'll show you how much we spent on appraisal, the appraisal review, legal document generation where we review of the entity documents that are going through an LLC, the flood certificate, the credit report, the onboarding fee to a servicer so, so we definitely pride ourselves on being very transparent on these and it's usually pretty reasonable.Jason Muth:
You know, some of the things just mentioned right there, those terms are probably very familiar to people that have purchased their primary home or that first investment property. Rory, in terms of closing loans like this, you know, what is the process like afterward? I mean, you close a lot of loans as an attorney here in Massachusetts being that you have to have an attorney closing. Are you seeing like the paperwork that Robin's just described, or the process right there? Is that going to feel similar to an investor when they sit down in your office and start signing papers?Rory Gill:
It actually will. I mean, the actual kind of just the legal war changes when a property becomes like a five family or greater or if it's true commercial property, and, you know, as one would conceive a commercial property because then there are some, there's additional due diligence in that case, but if you're purchasing a four unit or less residential building, it's going to feel very much just like a residential loan closing is going to happen the same way. You might have a couple extra steps related to the LLC and the entity but it's gonna feel very similar to the closing you have for your primary residence.Jason Muth:
Let's move toward our final up questions and then we're going to have Robin say where we could find him. I'll put all this stuff in the show notes, your link your website and all that interesting information. So you're easy to be found. But, you know, one thing I want to emphasize is that this might sound very complicated if you haven't gone down this road before. So if you're listening to this podcast, and you're still listening to this podcast, because you're very interested in figuring out how can I get money for that deal, this is a way to do it and there are companies like Easy Street Capital and Robin and his team that could actually help you walk through that process of finding financing for deals, because one of the things that shouldn't hold investors back is how do you find the money? Like that was a question that we had many, many years ago, which was like how we're gonna find the money for this stuff. The money is out there for these deals. If you don't have the downpayment money, go raise the downpayment, money go find investors that could help raise that downpayment money. If you don't know we're going to get the other 80% or 75%. You know, it could be a conventional loan, right down the street from you at the bank that you knock on the door, or could be a guy like Robin, and Easy Street Capital, because they have ways to finance investors. You know, all those investors that you see at the real estate meetups, like they're not sitting on millions of dollars of cash in the bank, and they're not using all those millions of dollars of cash to walk in with cash. Some of them are, right? Some of them are doing that. But you know, I think everything we've heard for many, many years, is about leverage. Now, some people Dave Ramsey's not gonna like that, right. But like a lot of people - they leverage everything, right? You leverage it. And like, we've been fortunate that the market keeps going up, that it's a smart move to be leveraging that money because that leverage is turning into more wealth. So you know, just wanted to put that all out there as well. It's, it's a space that if you're not in this space, you have no idea what any of that conversation was all about. But like, if you're investigating real estate, as a way to financial freedom and financial independence, it's companies Easy Street Capital, that can help get you there, not just your local bank, down the street.Robin Simon:
Jump in there really quick, I've been doing a bunch of trainings and bring on a lot of people growing fast. And that's kind of the first lesson that we go over is the power of leveraging real estate. And us as the lender, we we get zero, you know, participation in any appreciation of property, whereas the investor gets 100% of it. And it's a little bit of a trick question. But it really, really opens people's eyes when I say, hey, we have a million dollar property and a $700,000 loan, that property appreciates to 1.2 million. How much as the lender can we see of that $200,000 growth, how much does that investor? And it's 100% investment, because they're leveraging that that property, they're only putting $300,000 down and they're seeing, you know, the $200,000 appreciation 100% themselves, potentially buy multiple properties and see all that appreciation with leverage versus if they can, if they can only buy one and don't take on debt, they're still getting that appreciation, but they're leaving a lot on the table where it's very one-sided. That example tends to kind of open people's eyes to really the power of making a lot of wealth in real estate is used by a lot of people to you know, use leverage, because the investor is able to, to capture 100% of that that property appreciation when it comes to real estate.Jason Muth:
Yeah, excellent points. And that very well could be your answer to the first question that we have for you for a final three questions. But maybe it's not. We'll get into these questions that we ask all of our guests just to get to know you a little bit better and wrap things up. First question we have of the final three is if you can get on stage for half hour talk about any subject in the world with zero preparation what would that be?Robin Simon:
I know we touched on a little bit in this podcast now you guys are familiar with it. But what we didn't talk too much about is the short term rentals industry. And you know, I've been I'm getting on stage at conferences and making, talking about short term rental financing and the industry a lot over the past year or two. And that's probably my answer to this question. Just because it's very, very exciting industry to be a part in. You see, we see these conferences that are growing in attendees amount of people involved. There's the short term rental forum, which was the first of its kind this year by IMN in Austin a couple of months ago, that we were happy to sponsor with, but you see a lot of people doing short term rentals, making money investing in real estate in that niche. But the most encouraging thing is there's cottage industries growing around that. So now there's three or four pricing software companies that exist solely to help people maximize their their short term rental earnings and algorithmically price, the best possible way. There's short term rental management companies. There's software for managing your accounting and your guests. There's amenities where you sell products for your short term rentals, different types of smart locks, different types of XYZ. And it's really exciting to see, you know, durability of growth, there feels like one of the few industries that kind of one of those once in a lifetime, or, or maybe a couple times in a lifetime, you know, average average everyday people might pop investors, people that aren't institutions are able to kind of get in the ground floor by a bunch of Airbnbs, scale, short term rental portfolio, where maybe in, you know, five to 10 years, I'm thinking that's going to be institutional, it's going to be Wall Street, it's going to be a, you know, a big time industry with big barriers to entry. But this is one of those times where you can really, really get on the ground floor and scale as a kind of a mom and pop that small time investor that can scale to being a big time investor. And it's really exciting. So I tend to think it's kind of it's not new anymore. It's been around a few years. But I think it's still somewhat a third inning of the growth from Airbnb coming out, you know, 12 years ago to to an institutional asset class. And being in the third inning, I think it's a huge opportunity for a lot of people.Jason Muth:
That's an interesting way to put it being in the third inning. And I think you're right, you know, like, we've been in the space since 2016, right Rory, that's when we got the first one?Rory Gill:
We have, and it feels like it was a 20 years ago, in terms of this, this business, just because of how, you know, the the additional listings that are coming up around us and the improvements that we made to its but it you know, there's some thoughts out there that the market is getting oversaturated I don't know if that's the case just yet, but the market's certainly maturing.Jason Muth:
Yeah. Robin, a lot of what you alluded to, you know, pricing, software amenities, you know, property management, software, all that, those are things we've also discovered relatively recently, you know, the past 12 months or so, some sooner or some before then. You know, before then we were slugging it out as a lot of DIY, we built our own systems, we scaled up, you know, the properties that we have, we thought we were doing pretty well, well enough that, you know, when I had the opportunity to not work anymore, I said, this is what I want to do, and we're gonna scale this up. And then I start peeling back, you know, some of the layers of the onion, and I'm like, Oh, my God, we could be doing so much better. That's kind of how I see it. And, you know, you're right, the third inning is probably the best way to put this. We're a little nervous that, you know, it's gonna it's like, there was this secret cottage industry that suddenly everybody knows, but I mean, like, what are we going to do? It's not our job to keep the secret in the bag. I mean, it's way out of the bag right now. So it's, you know, how do we profit from, you know, being experienced operators in the space, you know, and have that little bit of a head start. So that's what we're figuring out right now.Robin Simon:
Yeah, and I totally agree with that. And when it comes to where I'm saying, it's third inning, it's not the beginning, it's beginning middle, there's still it could be saturated. And I think because there's still the ability for a lot of people to get into the industry to start to, you know, buy their own Airbnb and not have, you know, economies of scale with a pricing software management team, with everything geared up. But I don't know how long that's gonna last, I think there might be a year or two, or that's much harder than it was a year or two ago. And it will be much harder in a year or two from now. For that, I think people like yourself, and like, hopefully, like listeners who have been doing a couple years and peel back layers of that onion have figured out Oh, I was doing well, but it's a game changer with pricing software and a managed company, cleaners I can trust an X, Y, Z. It's going to be harder and harder and harder for for people to break into the industry as it gets more institutionalized, where maybe five years, you're not going to be able to jump in, you're not going to be all that success on Airbnb, these people that have been doing it for five years, have everything dialed in, have all their pricing and all that are going to eat your lunch. So that's why it's really exciting because there's still time to enter this and to be an owner equity owner in an emerging institutional asset class. But but you know, it's becoming institutionalized. There's gonna be a whole ton of wealth built, I think, in the next few years. So it's not too late but it'sJason Muth:
Yeah, I think we're getting down the road also of you know, some of the investors like ourselves, you know, taking a bunch of the properties that are profitable packaging all up, maybe we'll sell these to an investor you know, and a couple of years who knows. An investor might actually find properties to be worth more if they're also profitable Airbnbs instead of just like, you know, what the, the empirical value of the property is. If you have that property that can be used, that someone could occupy, great, you know, it's worth 500k, 600k, whatever it is. But like if you could also prove on paper, this has been a successful short term rental, maybe it's worth even more as a result. So that's that's how the future holds. Let's see what happens in the future as the real estate market just continues surprising all of us. Second of our final questions. Tell us something that happened early in your life or career that impacts the way you're working today.Robin Simon:
I'll go with the career aspect of it. I usually tell the story of kind of how I got into real estate, I went to business school at the University of Texas in Austin to do a one year program and really accounting bootcamp to get a CPA and to really enter the workforce in a Big Four public accounting firm. I didn't want to do accounting long term, I didn't really want to stay in that area for too long, but I was told and it's played out, and it's a great opportunity to kind of get in the business world see, you know, what, what you like what you're good at. I ended up going down to Houston and, you know, that's big oil and gas city. First time I've been there, the one I didn't know what kind of industry or what I want to do specifically, I just, I just knew I wanted to see multiple things, you know, not to kind of be a cog in a machine. So I did end up seeing some, you know, oil and gas clients, going to big factories and oil fields and seeing all these different types of valves and pipes and machinery, and I had no idea what that was looking at, no clue. You know, 22 year old kid versus got on some real estate clients, commercial real estate clients. And, you know, I can't tell you the difference between this valve, this oil synthetic, but I can tell you the difference between a nice retail strip center, and a nice apartment building and one that's, you know, having troubles or, or which one's better, which commercial real estate, it's you know, by living your life, it's you don't have to have much technical knowledge to to really start understanding the real estate industry. So that's kind of what led me down a path toward real estate, real estate finance, and then it just, it's very intuitive. So many people can grasp it, kind of really with no experience or with little experience really get good understanding of the differences in assets and say you want to jump into short term rentals. It's easy, and it's more accessible to me and a lot of people because people will stay in Airbnb hotels, you don't have to have a degree, you know, engineering to know what's good a Airbnb. So that kind of set me on the path toward sort of career in real estate.Jason Muth:
Yeah, I wonder if anyone's going to set up an Airbnb on an oil rig, that'll be a way of combining your first two answers. Probably not. Pretty confident, that's not going to happen. So the question we have for you tell us something that you're listening to watching or reading these days.Robin Simon:
Just kind of a kind of a jumble. But, you know, we as TV show watching is called Echoes on Netflix. It's an interesting drama show. But you know I'm in the middle of that. That's an answer, they're very busy, obviously, building this company out building this platform out so much time for, for anything else. But that's a that's an interesting show.Jason Muth:
Yeah, we know how it is. Spend the whole day working evenings with our toddler and then I fall asleep. That's kind of life. Awesome. Well, we're gonna we'll link everything up in the show notes as to where people could find you and Easy Street Capital, but you know, what are some of the easiest ways to reach out to you Robin?Robin Simon:
Yeah, it's easystreetcap.com So that's justJason Muth:
Great yep website looks great, really easy to easystreetcap.com. And, you know, we have a we just relaunched our website, you know, a couple months ago, and it looks looks really, really good. We do try to do a pretty navigate. Program terms are all there for all the loan product products. I have it up on my screen right now, I'm sure that good presence on social media. So I have a pretty active professional account on two platforms, Twitter, Instagram, @robinsimonesc on both those platforms, but should be pretty easy to find on website. Platforms. We're always open to talking to potential investors, mortgage brokers, real estate agents, we have a great referral program for real estate agents. And yeah, if you want to shoot me an email at email@example.com you, you know, tweak the page every so often as rates as rates change. But you know, it's all right here. So, again, we'll link this up in the show notes. Rory, where can people find you?Rory Gill:
You can come find me at my real estate brokerage NextHome Titletown nexthometitletown.com, or my law practice UrbanVillage Legal, UrbanVillagelegal.com.Jason Muth:
Awesome. And if you have questions about this discussion of this podcast, put them in the comment section. If you're watching this on YouTube, email me directly firstname.lastname@example.org. If you'd like to be a guest on the podcast, go ahead do that as well. If you've enjoyed this and want to give us a rating, hopefully it's a five star rating. And we welcome those on iTunes or Spotify or anywhere else you can rate the podcast. Thank you for subscribing. Thank you for listening and learning about this. Robin, thank you for appearing on The Real Estate Law Podcast. This is a new world for people that have not navigated into this world. But for people that are deep into scaling their portfolios, I think this is the only way you can go. You know, I mean, and I really appreciate a lot of your insight into a lot of loan products that you offer and the types of investors that you're working with. I think it's going to be super valuable for a lot of people who are listening right now. That's my guess. So thanks, Robin. Thanks again for being on the podcast and thank you for listening or watching and we'll see you next time. Bye.Announcer:
This has been The Real Estate Law Podcast. Because real estate is more than just pretty pictures. And law goes well beyond the paperwork and courtroom arguments. were powered by NextHome Titletown Real Estate, greater Boston's progressive real estate brokerage. More at nexthometitletown.com and UrbanVillage. Legal, Massachusetts real estate Council serving savvy property owners lenders and investors more at urbanvillagelegal.com. Today's conversation was not legal advice, but we hope you found it entertaining and informative. Discover more at the realestatelawpodcast.com Thank you for listening