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SHOW NOTES FOR EPISODE 675: CASH FLOW THROUGH PRIVATE LENDING
Some real estate strategies don’t work well in today’s economy but there is one that thrives! In today’s podcast, real estate investor, author, private money lender and founder of Pine Financial Group Kevin Amolsch shares how he has found a niche that produces great returns in any economy.
What You Will Learn
- How you can generate great cash flow lending or investing in lenders who fund real estate deals
- The real estate benefits of military service
- Creative financing strategies to build a massive real estate portfolio when you don’t have cash of your own
- The three main benefits of rental property investing
- Pros and cons of lease options
- Great niches for today’s inflationary, recessionary market
About Our Guest
Kevin Amolsch
Kevin Amolsch is a successful hard money lender and mortgage fund manager. After 4 years in the US Army, he got his finance degree and started his first real estate investment company which is still active today. Founder of Pine Financial Group, Inc and author of “The 45-Day Investor” he has completed well over 2,200 successful transactions. He is a recognized investment expert, a frequent speaker, and has been quoted in the Las Vegas Review Journal, The Denver Post, The Denver Business Journal, Yahoo Real Estate, Forbes and many more.
More About Kevin
- After graduating from high school, the last thing he wanted to do was to go back to school
- But, he loved the idea of playing “laser tag” for a living and decided to join the army
- He went into the army as an infantry man – spent 3 years active, one year in the National Guard
- While he was in active duty, he spent a ton of time in the field
- Living in the barracks
- Eating in at the mess hall
- He didn’t have any expenses and he ended up saving his pay in a little savings account
- Eventually, he wanted to invest his savings somewhere
- Started reading books
- Came across “Rich Dad Poor Dad”
- Got enticed into investing in real estate
- He was 21 years of age – still in the army
- When he got out of the army, he moved into the house he had bought and got a friend to room with him to help him pay his bills
Breaking into Real Estate
- He started going to school and continued doing real estate
- He was still in the National Guard
- He had the GI Bill paying his school and his living expenses
- He didn’t need student loans but he took one out anyway
- This was in 2001 – during the dot com crash, right before 9/11
- He used the loan to get his down payment to buy his second house
- He kept that house as a rental property
- He watched the…
- Cash Flow
- Appreciation
- Tax savings
- He watched the…
- He kept that house as a rental property
- He feel in love with real estate
- He said, “This is what was going to make me rich!”
- He bought one or two houses a month while he was going to school
- He learned how to do creative financing
- He had no credit
- He was able to structure creative dealers with the sellers where he didn’t have to put down payments down on the deals
- His strategy was using lease options
- He had to find the right sellers in the right situation where he could help them
- Between classes, he was talking to sellers on the phone negotiating seller financed deals
- He learned how to do creative financing
- He was also working at night
- In 2008, he started Pine Financial Group – during the Great Recession
- He was going to seminars and classes to learn as much as he could
- The seminars were about finding foreclosures
- They taught how to go to lenders and negotiate a “short sale”
- Pay the banks less than what was owed for them to release the lien
- You could negotiate equity into the deal
- He was knocking on doors, ready to negotiate deals
- He finally found a seller willing to negotiate
- But Kevin had to give him $3,000
- Kevin’s mentor said, “Get control of the house. Get him to deed the house to him. Don’t use a contract. Get him to “quick claim” the house over to Keven
- Kevin borrowed the $3,000 from a friend and paid the seller
- He did everything as the mentor told him
- It was supposed to be so easy
- But the bank said “NO!”
- The seller foreclosed and lost his house
- He lost his $3,000
- After that, Kevin figured foreclosures was not the way to go
- He finally found a seller willing to negotiate
- They taught how to go to lenders and negotiate a “short sale”
- He read a book by Peter Conte about how to do “lease options”
- He bought the forms online
- He couldn’t afford an attorney
- He does not recommend anyone to do it the what he did
- He learned how to do lease options
- He bought a few houses that way
- He joined Peter’s mentorship program
- And his business really took off
- He did around 200 lease options
- He enjoyed it
- But didn’t enjoy the cold calling and knocking on doors
- He did enjoying sitting down with people to help them put a deal together that would help the out of their situation
- He found out that the success of a deal depended upon HOW you were going to finance the deal
- What does your “capital stack” look like?
- What does your debt look like?
- Are you going to negotiate a lease option?
- Or other “owner carry” terms
- He enjoyed the financing part of this process and decided to open his own Mortgage company
- Lease options are very profitable but hard to scale
- The seminars were about finding foreclosures
Becoming a Lender
- He decided to become a mortgage broker in 2006
- The experience was not good
- He had zero control
- He was approving people for loans one day
- Guidelines were changed and they were no longer approved the next day
- He was approving people for loans one day
- He found out that he could raise private money
- Then 2008 came along
- Susan wasn’t much of a negotiator during the Great Recession
- Kevin was good at the negotiation part and decided to go off on his own
- He started buying
- Loans at this time, they were mostly financing “fix ‘n flip”
- They were doing high-leverage loans up to 100% of the costs, as long as there were at a conservative loan–to-value at exit – 70% of the completed value
- Back then, they were charging 4 points at origination and 15% interest
- The hard money business has changed a lot since then – they get no where near what they did back then
- Everywhere else, at that time, the mortgage business and lending was at utter chaos
- Regulations were terrible at that time as well
- He needed a securities license to lend out at that time
- He called the state regulations and asked, “Do I need a license to do this type of lending?”
- They said “Yes!”
- He got invited into their office and was quickly put under investigation
- He went through a stressful and complicated investigation but he came out alright
- He came out well
- They said you’re going to do more and do more disclosures and you’re operating at a high level
- He got his license
- And that’s how he got started
- He went through a stressful and complicated investigation but he came out alright
- They started doing loans for a 6 month term
- Went to a 9 month loan term
- 4 points
- 15% interest
- He called the state regulations and asked, “Do I need a license to do this type of lending?”
Today
- He is still doing hard money lending through Pine Financial Group
- And he does his own real estate investing on the side
- Back when he started, there was not a “Private Hard Money Lending” industry
- There are various national entities regulating the industry
- He attends various conferences throughout the year
- With the new industry, there are institutional investors – it’s not all privately-raised capital anymore
- There are two major changes in the industry
- Wall Street is getting into the business
- With more people lending money, it has driven prices down
- More competition – more crowded
- There are two major changes in the industry
- He has had to search for institutional investors to keep prices down
- They’ve raised over $100 million
- He has multiple mortgage funds
- He sees his company as still “old school”
- He does a lot of things like he did when hw started
- Today’s terms
- 2 points
- 12% interest
- Other products:
- Commercial bridge loans at 8% and 18 months
- Most banks won’t to commercial bridge loans unless the property can pay the price of the loan with existing cash flow
- The property is more important t0 the bank than the individual guarantor
- If the property isn’t generating enough income, you won’t get the loan
- Banks require title seasoning before they’ll refinance you out
- Fannie Mae and Freddie Mac don’t have title seasoning
- You can get a single family home, rehab it and get it re-appraised, get a new approved value
- Fannie & Freddie will look at that at a new value and ignore what you paid for it
- Fannie Mae and Freddie Mac don’t have title seasoning
- Commercial bridge loans at 8% and 18 months
- Everything they do today is value-add, short-term
- They focus on the niche of real estate assets that need to be repositioned to produce income
- Apartment buildings that are totally vacant
- Hotels that need to be converted
- Warehouse conversions to small bay or self-storage
- There’s a high demand for all of those
- They focus on the niche of real estate assets that need to be repositioned to produce income
Biggest Mistakes
- His biggest mistake as a private money lender was to call the regulators for advice
- Call an attorney – someone who will be on your side
- As a private investor, his first tenant was not screened
- It turned into his first eviction
- Setting his goals incorrectly:
- He was so fixed on his goal of buying one property a month
- He wanted to look cool at the REI clubs
- He wanted people to look up at him
- It’s very easy to look successful when you’re doing a high volume
- But they could be terrible deals
- To make his goal, he had some marginal purchases
- And this was leading up to the biggest housing crash in history!
- He was so fixed on his goal of buying one property a month
Biggest Success
- 2008 really humbled him
- He has taken on more of a “Ready, Fire, Aim” mindset
- He is more willing to take on risk
- He has taken on more of a “Ready, Fire, Aim” mindset
Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years
- We have to get our eyes off Wall Street – 25% in less than a year
- It will eventually go back up
- But you don’t see that kind of fluctuation in main street investments
- Get on to Main Street for diversification, if for no other reason
- You could do fix ‘n flips or lease options if you’re willing to grind a bit and put in some effort to make a tremendous amount of money
- If you want more passive income:
- Turn-key rental
- Private money lending
- He believes, if you do it right, it could be the safest investment
- As a lien holder, you get paid first
- If there’s a problem with a buyer, you get your money back before they do, especially if you have a low loan-to-value, so there’s any fluxuation in the market
- But you have to do it right
- They also have a public fund outside investors can participate in
- They accepted bot Accredited and Non-Accredited investors
- They have some individual loan investing
Current Business
- For his business:
- He’s excited about their public fund
- Everything they have done up to now has been done with private offerings
- Now, he can raise money from all states
- He can advertise the fund
- It’s fully approved by the SEC
- Terms:
- Minimum: $10,000
- 8%, paid monthly
- He’s excited about their public fund
- For his personal business
- Looking for bigger projects (i.e. just bought a large warehouse in Minneapolis)
- Seven figures on exit projects
- Doesn’t want to syndicate but may take on one or two partners
- Looking for bigger projects (i.e. just bought a large warehouse in Minneapolis)
Today’s Economic Outlook
- He compares the recession we’re experiencing today with the 2008 crash
- But it’s different too:
- We have equity in today’s properties
- We have fixed rate loans instead of adjustable
- Record credit scores
- At super low inventory
- He’s not as worried about the housing market
- It moves slower
- The factors are better
- He is concerned about the stock market continuing to fall
- He believes you should still diversify – that’s pow you get through a recession like this
Rap-It-Up
- Favorite real estate book: Multiple Streams of Income by Peter Conte
- Favorite business book: Traction and the eMyth
- Most valuable web site for success (other than your own): Redfin
- Favorite app: MyFirstAm
- Favorite quote: “Whether you believe you can do it or your don’t, you’re right!”
- If you lost everything – all your assets – and had to start all over, knowing what you already know, and you only had $1,000, what would you do to re-launch your real estate investing business? I would do what I did when I started and use lease options. And I would try to build relationships with people who have money are are willing to invest with me.
How to Get Some Free Reports
- ThePineReport.com
I Will Ask You How People Can Reach you
- Website: PineFinancialGroup.com
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