Welcome to The Deal Pen, a podcast that digs into the details of untold stories from crafty real estate investors. And now, here's your host, Avi Rosowski.

All right, Wendy, welcome. We are live. How are you doing today?

Avi Rasowsky

I'm doing terrific. It's Friday, Friday for us.

Wendy Sweet

Absolutely. Well, thank you for being on. This is Wendy Sweet, and she is from Carolina Capital Management and Carolina Hard Money, which we're going to get into those businesses and much more. But I really appreciate you being on this episode. You're actually the first official guest of the DealPen. Number one. Number one. Number one guest. So I really appreciate you doing that. And I'm looking forward to our conversation today.

Avi Rasowsky

I'm really thrilled to be here, and I'm so glad to see you doing this. I think it's a great idea. I've been doing a podcast for over four years now, and it's fun, and it's a great way to network, and it's a great way to learn. I've learned so much. Whenever we interview other people, we learn so much from them. It's amazing. It's a great way to network in real estate, for sure.

Oh, absolutely. And I'm excited to see how that unfolds for this podcast. But for anyone listening that has not heard of your podcast, how do they find it? What's it called? And what's it about?

It's, it's called the alternative investor podcast. That's the whole name of it. Alternative investor podcast. And, and our, our market are investors who want to be passive and lend money, like put money in the fund or be lenders. Um, and it's also real estate investors because you can learn a lot about being a good borrower. That's really the key. Okay, great. Because, you know, When you're in real estate, I think one of the main things that people are always concerned about is, how am I going to buy this? Where am I going to get the money? How am I going to make those payments? So having a tool belt of lenders. whether it's a company like mine, Carolina Hard Money, we do hard money, or it's a private lender, somebody who just happens to have money in a self-directed IRA or 401k or cash in the bank and they just want to do a little lending on the side, or whether you have a bank that you might have a line of credit with, or you could go with a big national lender out of California if you want to do something like that. And it's not that one is better than the other. It's which one works for that deal, because they all offer different terms and different rates, different lengths of the loan. They'll all give you a different amount of money. How much money are they going to have you come to the table with? What are you going to have to take out of your pocket? So you have to decide what works for that deal. That's why it's good to know a bunch of them, right?

Absolutely. And so we're going to get into all of that in terms of financing opportunities and financing paths to take as investors, because you and I are both real estate investors and both in, I think, similar but overlapping parts of the industry. And I'd like to get into... This show is supposed to be about deals, right? So let's talk about... Everyone has their own perception and definition of what a deal is in their business. I want to dive into the details in both of your businesses, and I think you probably have more businesses than I know about. I probably have more than I know about. There you go. Well, before too long, the government's going to know about everything with the new laws. That's right. But before we get into the details of each entity and things like that, if you could explain what is a deal in your world, right? So some people may have a deal that means I'm buying a house or I'm lending on a house or I'm being a seller on a house. What is a deal in your world? And then we're going to get into some specifics of your company and the deals that you do.

So as a lender, any deal is anything that involves financing and real estate at the same time. That's a deal to me. Now, personally, I also do self-storage facilities, I do short-term rentals, and that's my side gig kind of thing. But for me as a lender, a deal is anything that involves financing and real estate. And to me, it's the art of the deal. that's so exciting for me because whether you're a wholesaler, a rehabber, a new construction, a developer, a note buyer, it's all about how you set the deal up, what the terms are, what's your buying strategy, what's your exit strategy. All of those things have to be taken into account on any deal you do, whether you're a wholesaler, a rehabber, a contractor, a new construction person, developer, note buyer, whatever it is. It's all about how you set up the buying strategy, the exit strategy. Those two things make all the difference in the world. But it's the meat in between that's the fun part, because any good deal is a win-win for everybody. It's a win for the seller. It's a win for the buyer. It's the win for the investor. It's a win for the lender. It's a win for the attorney. If there's a real estate agent involved, it's a win for them. You want it to be a win for everybody involved. That, to me, is the epitome of a deal when everybody wins.

Amen. That's capitalism right there. I mean, you talk about any deal that you got one person walking away feeling like it's not something they should have done is not a good deal. So you're right. If you can exchange value, whether it's money for real estate or whatever it might be, And both parties feel like, yeah, I got what I was looking for on my end of it. I totally agree. Win-win. I love that. So your definition basically would be, as a lender, if you're financing something and the real estate is the collateral, is that accurate?

Correct. Correct. That's the only thing I'll lend on is some sort of real estate. I don't lend on businesses. We lend on the real estate.

Interesting. Will you lend on businesses that have real estate underneath it, or you just really stick to the real estate only?

We stick to the real estate 100% of the time. Now, a self-storage facility is the real estate. Now, it's based on what the income is. Any rental property is real estate based on what the income is. So as far as that's concerned on the business side, then yes, we'll do that. But we don't lend on anything that's not collateralized by some sort of a piece of dirt.

Okay. And what about location-wise? Are you sticking to the Carolinas only or you go in other markets as well?

So in the beginning, we've been in business for, I've been lending since 2001, and we have been in business as Carolina Hard Money since 2011. And we started in the Carolinas, North and South Carolina, because we knew that like the back of our hands. But as we have gotten a lot more experience under our belt, and We're also involved with a lot of mastermind groups that are located across the country. So we've been able to meet a lot of really successful go-getter real estate investors that are located more along in the southeast. Well, they're located everywhere, but we're only interested in the southeast because to us, that's a growing market. That's a strong market. We're not a bubble market. We're Steady Eddie, you know, I like the Southeast. So we'll lend. We started lending to people like that, that we knew, that we know, like and trust. So we started lending to those people in the Southeast, got more comfortable in those areas. So we've expanded to lending in just the Southeast. We have no intention of going outside of the Southeast. And for us, that's Virginia, the Carolinas, Tennessee, Georgia, Florida, and some of Alabama.

Okay. So you're not looking for a frozen water pipes in the winter, huh?

No, thank you. Well, actually that's happened right here in South Carolina.

And I believe it. I believe it.

To me personally, on Christmas day, it was really exciting.

Yeah. Well, we were selling something to Open Door a few months ago. And the day before closing, a neighbor calls and says, you got water coming out the back? And it's probably an hour and a half for me. I'm like, oh, goodness gracious. And you don't think that's going to happen in North Carolina, but it does.

It does. Yeah. It really does. Yep. That was, that was not a, not a fun way to spend my day. So how did you handle that? Did you call somebody or did you have to get the car and take care of it?

We, so we had a neighbor that was very, very generous and helped us. Awesome. Yeah. They went, they were, they were the ones that told us about it and fixed it. And then we went out there the next day and it was actually not that bad. It was just dripping a little bit, but it looked worse than it was.

Oh, that's that's great. Yeah.

Yeah. That's great.

That's one reason why it's so important when you when you're buying a house. The day you close, you should be going to all the neighbors, giving out a little coupon for free pizza or a discount, maybe a $20 gift card to Starbucks or whatever. Introduce yourself. Hey, I just bought this house. Oh, yeah. Keep an eye on it. Here's my information. I just want to give you something for that. Yeah. You'll make friends.

Having the neighbors as your allies is definitely something that is a good thing in this business, right? That's for sure. You don't want them calling the code enforcement for extra leaf in the yard, which sometimes happens.

That's exactly right. That's exactly right. You got to make friends.

Yes. Well, you said several things. I want to touch on a few things that you said. One of the things that stuck out to me is how to be a good borrower. So I want to kind of focus in on that comment. And then I want to ask you about some different types of deals. We'll kind of get into some of the details and have some fun with it too. But if you could just expand on what you mean by that when you say how to be a good borrower, because it's so important.

Well, you know, as as a company, you know, we do our quarterly meetings and our yearly meetings and at the end at the end of every quarter and every year we do. our meeting on figuring out who our borrowing avatar is. Who's the favorite person we like to lend to? And we do that. Here's the single family fix and flip borrower. Here's the single family long-term borrower. Here's the new construction borrowers that we come up with an avatar for each one of those borrowers. Who is it we like to deal with? And it involves everything about them, their personality, their experience. We'd like people to have experience. They don't have to have experience, but we'd like them to have at least a deal or two under their belt. And if they don't, we want to make sure they're plugged in somewhere, that they're going to real estate investor meetings and subgroup meetings. And, you know, they're educating themselves. They're not just jumping in and watching Home and Garden TV and saying, oh, I want to do that. Because we all know that that's not the truth. Right.

Not the whole truth and nothing but the truth.

Yeah. It's not reality, that's for sure. So we care about that. We also know what's important to us as far as credit and money in the bank is concerned. We like for people to have, you know, like a 650 credit or higher, but our favorite is somebody who has a 700 or higher. So that would be part of our avatar. And then we like people to have money in the bank. Why do we care about money in the bank? People think it's because we want them to come to the table with a lot of money. That's not the case at all. I want to see that that person saves money, that they're good with their money, that they don't have. I mean, I get people that will show me their three-month bank statements. They'll have, you know, $40,000 in the bank. And then the end of the month, the month prior to that, they had, you know, $28.42. Now, I don't like to see that. That's telling me like, whoa, what's going on here? I want to see something steady. I like to see some money in the bank because I need to know that they're budgeting, that they're going to take care of the money we're lending them just as good as they're taking care of the money they already have. And the amount is not as important as the steadiness is.

Yeah, so it's not like you have to see 85, 120 grand in there every month. You want to see, do they have something in there and is it a consistent pattern?

Exactly. Like if somebody gives me three months bank statements and they basically have $10,000 in there, but they might have a month where it's $25,000 and it goes back down to $10,000, or it might be $40,000 and it goes back down to $10,000. I know how that works. You're buying and selling houses. Things are coming in and going out. You're paying contractors. I get all that, but I want to see a consistent base. Don't don't run out. That's not a good place for anybody to be. So being able to budget their money is really important. And then I talked a little bit about experience. I like experience, even if it's bad experience. In fact, I want to hear about people's scars. I want to hear about what messed up what you could have done differently and how you pulled yourself out of it. I love somebody with scars. I've got them. I've got lots of scars. And I'm sure I'm going to make some more. But I can tell you, I've learned from every single one of them. When somebody comes to me, I'll be, you know, we lenders sit around and talk with each other about, you know, how many properties you've had to take back and, you know, deals that you've done in the past. And I always think it's so funny when they say, well, you know, we've never had to take back any property before. Or you've got an investor that says, we've never lost anything on any one of our investments. they're either lying or they haven't done enough deals. Because you're going to lose money in this business, right? Have you lost money?

Yeah. A small handful of deals. I'm not saying I've had a bunch of losers, but yeah. Either risks that I thought were going to have more upside than they did. I mean, we're into some properties where we have partial ownership interests, where we've got good chunks of money. I mean, $20,000, $30,000, $40,000 into some of these that have... There's no clear exit until we get title issues solved and or go to some type of a lawsuit to figure it out. And then we've been on the other side of lawsuits too. We've gotten named in lawsuits where we've got issues that came up because something happened with... I'll tell you, one of our most frustrating ones was a Medicaid issue that we didn't know about until 4 months after we closed. And then we go back and look at title insurance and Title insurance knows what they're protecting for. They had an exception there. So Medicaid was, was an exception that if that came up, which is a good reason why you need to read your title, read your title insurance policy, actually read the commitment before, before the policy comes in. So read the commitment before the, that's right. Yes. But yeah, we've definitely had some mistakes and costly mistakes. But you're right. Every single time, I'm learning something new. And my rule on real estate deals is something always goes wrong. I just don't know what it's going to be yet. And sometimes a lot of things go wrong and you plow through them all. But as long as you're learning and getting more wisdom with the experience, I think that's the key.

That's exactly right. And the other thing is, is you've got to be transparent. Because, you know, I talked about the importance of networking, being in groups, you know, not just learning from them. But I promise you, whatever you're going through, someone else that you know has been through the same thing. Absolutely. And they're there to help you and encourage you and give you ideas and direction and get you out of that situation. I mean, that's why I'm so transparent about all the things that I've been through and we've been through as a company is because I know there are other people that are getting ready to or have been through the same thing that I've been through. And I want to help them get out of it because it's hard. going through stuff like that. It's stressful. It happens to all of us, but it's not the end of the world. And if you can keep your stress at bay and understand that this too shall pass, I'll figure this out, your head clears up and you can start seeing what it is you should be doing. But when you're in the middle of it, you're so stressed out and you're thinking, oh, what am I going to do? How am I going to fix this? You know, and I don't want to tell anybody that I failed. You can't have that thought pattern. You have to be able to be transparent about it with your friends, your co-workers, the people that are there to help you, your colleagues, and also with your investors or your lender. You have to let them know. I would much rather get a call from one of my borrowers than I have. saying, you know, hey, I'm going through a divorce or whatever it is they're going through. You can't control other people and what goes on around you. You know, the crash just happened. You know, I'm out of money. I don't know what I'm going to do. I'd rather get that call when you're about three months from being out of money so I can help you work around it. Yep. Because, you know, we've been there and we can see different opportunities for you to be able to take advantage of and get you out of that. I'd much rather have somebody call me and tell me, you know what, I've got two more payments left and I can't I can't make any more after that. Right. You know. Great. Let's see what we can do. Let's look at the situation. Yeah. It's all about working together to get yourself out of it and being transparent with who you're in that business with.

Yeah, because a lot of times, and I'm sure you've seen it way more times than I have, when a problem gets ignored, it typically gets worse. It doesn't just go away. So you want to know early on so you can work with them and maybe do some kind of modification or some kind of an arrangement. So that makes total sense. Um, I wanted to ask you about, so, so when we think about different types of deals and you, in your own words may have a different way to describe this, but I think about a lot of people have a bread and butter deal, right? It's not going to be a retirement deal, but, but it's your bread and butter. It keeps the business running. What is it?

Daddy plotting wins the race.

There you go. What is, uh, in your, in your world, what's it, what's an example of a bread and butter deal. And if you could apply some numbers to it, just so people can kind of wrap their minds around what that looks like in your world.

So bread and butter is not a home run, but it's a double, it's a triple, it's a single. It's a way for you to steadily make money. And for us, we're a bread and butter company. So when we're lending money, we get people that call us. They want to do a new construction single family for $1.6 million in downtown Charlotte. And our first answer to them is, I don't think so. We're, you know, sure, we'll make great money off of it, and they may be the most experienced person on the face of the earth, but we like working in the recession-resistant market. We love, especially here in the southeast, you know, we love properties that are worth about $400,000 or less. We really love them in the $200,000 and $300,000 range because we know that if we have to take that house back tomorrow, and that's the way every lender thinks, if we have to take that house back tomorrow, we know that we could either sell it or rent it When we could rent it for enough to be able to pay our investors back. That's what we're trying to do is keep our head above water. So as a real estate investor, fix and flip person, somebody that wants to go in and just fix and flip properties, build up their cash balances. To me, the safe road is the vanilla road. It's not sexy, but you're going to be able to buy it, fix it up, and sell it quickly if you stay in that recession-resistant market. There's also a way that you can kind of be too cheap in the deals that you're doing. Because if you're trying to sell a house for less than $100,000, you buy it, you fix it up, you wanna sell it for less than 100,000. There's a couple of things that you're putting yourself in danger with. Number one, your budget for that house is critical. Like a $500 mistake can really affect your profit. Where if you're in a $300,000 house, a $500 mistake isn't gonna make that big of a difference. So, so, so your margins are tighter when you're under 100. The other thing is, is people under 100 are having a difficult time qualifying. for the house. So your best buyer for something like that would be a real estate investor that wants to buy it and rent it out. But there are this many buyers for OwnerOck and this many buyers for investment properties. So your market is much more contained. It's harder to hit that. So you just got a few more barriers to go over. really staying in the 120,000 to 400,000 price range is what we like because it's proven to be recession resistant. That's bread and butter to us.

That makes sense. And what about, it's got to be, I assume, close enough to a metropolitan area. You're not going to do something in the middle of nowhere where you've got

Well, quite frankly, since COVID, people aren't afraid of living in the middle of nowhere. Okay. And you definitely don't want it, you know, 20 miles from the nearest grocery store. Right. But these small towns, you know, just outside of, you know, Charlotte and Raleigh, even Greensboro, the smaller towns are are good, they're good places for you to look at. In fact, they're the places where I believe you can find the better deals. You're gonna be more likely to find somebody ready to sell a house that needs work when it's a little bit outside the city than one that's in the city. So I'd rather spread out and go a little farther out. Because we have such a housing shortage, people have to move to where they need to move to be able to have a place to live.

Right. Absolutely. Okay. That makes sense. So the example deal being, let's say somebody brings you a property. They're a borrower you haven't worked with before, right? And you think you could sell it. The retail price might be, after it's all fixed up, would be $200,000. Well, what is that conversation like? What is that person typically borrowing? And I know there may be a rental exit versus a flip exit. So how do those conversations typically go when you have that bread and butter deal come on your plate?

So the first thing I ask everybody is, what's the after repaired value? Because everything you do in real estate is based on the after repaired value. If I get somebody that hems and haws and says, well, I'm really not sure, I say, well, you're really not ready to be in real estate. Because that's the number one, that's the number one number you need to know in any transaction you do. is what's the after-repaired value? Because everything's based off of that. You know, how much you're going to pay for it, how much you're going to be able to fix it up, whether or not you should even be doing it. Everything's based on that after-repaired value. So, of course, we take the after-repaired value, we multiply it by 70%. 70% of that after-repaired value is the highest that you should be in any deal. especially in the price ranges that I've been talking about. 70% is the highest you need to be in that deal. Within that 70%, that needs to include your rehab cost and your purchase cost. And everybody thinks, well, I'm going to make 30% off of this house if I get into that 70%. Well, not really. If you're going to sell it, you may have real estate commissions. You're going to have taxes, insurance. You're going to have all these things that you're going to have to pay while you're rehabbing it before you can even get it sold. And then if you go to refinance it, because if the exit strategy is for you to keep it, then you're going to have even more costs in refinancing it. And the insurance and everything that comes along with doing that as well. First thing I ask is what's the after repaired value? And they'll say, Oh, well, I'm not planning on selling it. I want to keep it. Well, I still, you still need to know what the after repaired value is. That's still the number that you're going to start with. So if it's a buy and hold, then my next question is how much rent are you going to get for it? Well, I don't know. Why would you buy and hold something if you don't know how much rent you could get for it? Those are just obvious, obvious questions that you need to have the answers to. Because whether or not you're going to hold it, are you going to make enough rent to cover what your mortgage payment and your taxes and insurance are going to be? You need to know all that, right? So, I care about what the monthly rent is. And they say, well, I haven't been able to really figure that out. Or I went on Zillow and Zillow said this, and we all know Zillow lies. So it's not as accurate as it should be.

The algorithm isn't a human.

That's exactly right. So I always suggest that people call a local to the house property management company and say, I'm getting ready to buy this house. Here's the address, here's the number of bedrooms and bathrooms. If I list it with you, what do you think you can get it for? If I list it for you, how much rent can you get for it? That's the question I want them to ask. I mean, who else better to ask than somebody who's a property manager?

Absolutely, that's a great resource.

So those are the numbers you really need to look at. And then if it's a rental versus a fix and flip, your rehabs very well may be a little bit different on what you do. You're going to, you know, to fix and flip, it's got to be a little more fancy. It's going to have to be very visually, you know, attractive to get it sold quickly. If it's something that you're going to buy and hold, oh, you might have, Some things that you may not replace. You may not have to replace those countertops or the kitchen cabinets. But if it's a buy and a hold too, you're thinking about, do you put carpet in it? Uh, I wouldn't, I wouldn't put carpet in a rental. You can get away with putting carpet in a, in a property for sale more than you can get away with putting carpet in a rental. Cause if it's a rental, you don't want to have to replace that carpet over and over again. Right. Right. But if it's a, if it's a fix and flip, you might want to do the LVP on the flooring, you know, in the main living area, but in the bedrooms, you can get away with doing carpet.

Yeah.

Because a lot of people are doing that. So, especially in the price ranges that we're talking about. All of those are things that you're definitely going to want to think about and understand what your rehab is. The big mistake that I see people do when they're figuring out how much it's going to cost to fix up a house is they fail to go under the crawl space and they fail to look in the attic.

Interesting. Okay.

And those are the two things, as you know, Those are the two things that can take you down.

Can you explain that a little bit? So, so talk about the crawlspace first. Yeah.

Well, there's lots of secrets in a crawlspace. That's where you can see termites very easily. You can see water damage very easily. All kinds of wood rot. You've got piers that are doing this, or missing completely, or the grout's missing. There's all kinds of, or they might be sinking. There's all kinds of things going on under a crawlspace. People who store stuff in crawlspaces are just asking for pests to come in and eat everything.

Yeah. Sometimes if you're lucky, you get to walk into a house and take a quick trip to the crawl space by falling through the floors. I've done that a couple of times. I was walking into a house in Conover probably two years ago, and I had a cup of coffee in my hand, just relaxing, walking through. first step in the front door, directly full left leg into the crawl space. Thank God it didn't rip me open, but it was... You are lucky you didn't get hurt. Yeah, now I'm a little bit more careful when I see some weak floors. I'm like, I might go through there.

So... Yeah, you never know. And then when you go up into the attic too, you know, the roof might look great from the outside, but when you go up into the attic, you can see the roof You can see it rotting. Or you can see where they've cut the joists and sistered them in properly. Same thing under the crawlspace, where you can see, you know, you can't take a little piece and sister it with that. It just doesn't look safe. Anybody could look at it and say, that doesn't look safe. You know, but they don't, I'm even surprised at how many contractors don't look underneath and in the attic before they give a bid to you to repair your house. Then when they get in there, they go, Oh, I didn't notice this, or I didn't notice that. Right. And it's big, you know, it's, it's not uncommon to spend 15, $20,000 in a crawl space.

Right. Yep.

In a small house. Right. Ask me how I know.

Yeah, exactly. Well, let's get into, let's get into the deals that, so, so we talked about the bread and butter deals and that's, that's what keeps the company growing, right? That's the, that's the engine behind your, at least the hard money operation. Um, and I, and I know the, maybe I should clarify this.

It's 60% of our business.

Okay. So bread and butter deals in general, about 60%. What is the other 40 comprised of?

So the other 40% would be a mix of new construction, development, and commercial, like multifamily, strip centers, self-storage facilities, that kind of thing.

Okay. And when you're talking about percentages, you're talking about Units of deal flow or dollars in terms of actual dollars? Dollars.

Dollars in what we're spending because those deals are bigger. That's going to be $3 million and under.

Okay. Okay. So the volume on the bread and butter is huge. You've got a lot of volume on single family houses. Yep. Okay. Yes. What would you say is an example of a, you know, think through your, because you've got, you've got a couple of decades of experience. It sounds like 2001, 23 years. Yeah. So what, what are some things you, you obviously run your business the way you do, because you've learned quite a bit from probably some deals that went South. What's an example of a deal that just was a total disaster and then share a lesson if you could on how you changed based on what happened in that deal?

Well, I've got so many, it isn't even funny. But one thing that I think is that I can think of that could have easily been avoided is lending money on new construction where there's already a house on there and they're gonna knock it down. And they don't have enough money in the budget to cover everything. And I think that's probably the biggest change that we did is we never lend Rehab money just based on the scope of work that they give us. It has to be a scope of work that if we have to take that house back tomorrow. That we can finish it for that. You know, my cousin, Jimmy now, he, he, he's given me a deal. You know, I know it's. It's normally 115 a square to build this house, but my cousin, Jimmy, he's going to do it for 85. Well, that's great. Jimmy's not going to finish that house for us if we have to take it back.

Right.

Okay. So, uh, I, you know, we got caught on that deal. The guy knocked the house down and I literally had to sell the lot because that's all that was there. So, um, and even though we're only lending 70% of what that after repaired value is, that was during a time when, um, uh, they were, building houses. It was in, it's probably in 19, 2019, when it was in Nodah, that Nodah area where they were, you know, just houses were selling for $40,000 and they'd fix them up and then all of a sudden they're, you know, $400,000. It was just crazy at that time. And this was a street that hadn't quite turned yet. I was coming down the road, you know, you can see it coming down the block, but this this part hadn't quite turned yet. And remember, as a as a lender, it's more important for us to have our money now so we can lend it out than to sit on it for six months or a year and wait for it to come down the pike. Or five years. Yeah. Yeah. Yeah. That would be that would be really bad. So. Yeah. So so that kind of thing has happened. We've also learned not to lend too much to any one person. If there's one person that's a really experienced real estate investor and they bought a piece of land and they want to build five houses at the same time, that's great. We'll lend you the money, but we're only going to lend you the money on one house at a time. We make sure that no one person is carrying more than 5% of what's in our fund. Okay. Okay. Interesting. Cause that'll put a hit. It'll, it'll hit you. If you, that 5% goes, it affects your fund.

Yeah.

So, and, and it's better for the borrower to, you know, because now they're not holding the bag on, Oh, and all this money that they can't do anything about.

Okay. Thank you for sharing that. That makes a lot of sense. Those risks that you try to avoid now. And you've learned, obviously, from past experiences, it sounds like. So that's fascinating to hear about. How did you come up with the 5% number? Was it a committee decision or was it just... Yeah.

So it's a committee decision. And the committee is me and my brother, Bill, who's my business partner. I started lending in 2001 and brought him on in 2012. And that's when we started our fund. And then about 2000, I guess it's 2017, we brought on a third person that is really his name is Jonathan Davis. He is really really good with commercial stuff, the bigger commercial stuff. Okay. He also is in charge of selling off our loans as soon as we make them.

So... Interesting. Okay.

I didn't know you... We have money. This is really cool the way this works. Okay. So we have, let's say $20 million in our fund. Okay? We have $45 million on the street. So how do you do that? If you only have $20 million in your fund, how do you have $45 million in the street? We take, as soon as we close a loan in the fund, we sell that note out of the fund. And at this point, we're selling it to like insurance companies, you know, they'll give us a $20 million lines. So they're, they're buying stuff as soon as we close it, re putting money back into our fund. Wow. And then we'll lend it out again.

So you're actually assigning, let's say North Carolina. That's exactly what it is. It's assigning the note. How about that? I did not know that. So the insurance company is just buying it because they, they want, they're buying the cashflow and they understand.

They're buying the cashflow. They're buying and we're servicing it. We still, we still keep a piece of it. We will, we'll send, sell them like 80% of the note.

Okay.

So we still keep a piece of it. We still control it. We keep a piece of it. They get paid every month for their line that they're buying that on. And oh, very interesting.

I didn't notice that money. Uh, just out of curiosity.

Go ahead. You can even do that with individuals too, because there's plenty of people out there who aren't accredited and can't get into our fund. Right. We have another fund for, for investors who aren't accredited, but the, the, uh, accredited investors that people who want to get in the fund, but they're not accredited and they have two, $300,000 in self-directed IRAs, they can buy notes too. We can sell it to them. Do we do the same thing with them? Sell them a percentage of it. We still service it.

Very cool. So how does the servicing business work? Is that... Sorry, that's off there.

No worries. I can still see you. Technical glitch.

Uh, how does the servicing business work in terms of, is it a state by state thing? You have to be sort of a servicer in each state or what's the requirement?

As long as you're servicing your own stuff, you can do it.

Okay. Got it.

That's why we're keeping pieces of it. Yes. Okay. Because we, we need to be part owners of it. So if you're, if we're not a servicing company for anybody else, so I couldn't, I couldn't really tell you about it.

I think I've told you, I have similar thoughts on servicing my own notes and some things that I've been dabbling into. It's an area of curiosity for me, but that's interesting. If you're servicing your own notes, you're good. Let's say you sell off 80%. the money flows into your servicing business and then you send the 80 or however you structure the paperwork with the note buyer. You're sending them.

We send them there what they've got and then we keep what's left over.

Okay, nice. Very cool. Yeah, that's... Now you got my mind racing on the insurance companies buying notes. I guess they're probably a lot pickier than individuals though, I'm guessing.

The insurance companies? Yeah.

In terms of buying a note.

Well, we sell it to them on a tape.

Okay. So they're buying how many notes at once?

Yeah. We, we, we do it every, at the end of every month, we dump it over there and, and we know what they want. You know, they've got a parameter of what they want. So those are the ones we sell to them.

Interesting. That's very cool. I was told, I heard a story from, I think it was the gentleman who started the Homevestors, that he created the whole, do you remember his name?

I don't remember his name. I know Eddie Speed is friends with him.

Right. So I heard Eddie talk about it. I'm pretty sure that's where I heard it, where he basically built... He was selling to... Basically, the product that home investors were creating was exactly in line with the notes that they knew would be bought. Yeah. It sounds like a similar model where you know exactly what your buyers are buying.

Why wouldn't you only buy what you know you can sell? So even if you're an investor and you're buying a house to fix it up and rehab it, wouldn't it be nice if your buyer came to you first and said, here's what I'm looking for. Three bedroom, two bath, I love it in this area and I want an open kitchen. Great, let me go find you a house. I mean, why would you not do that?

It sounds amazing. And I've noticed really over the last six months or so, I've heard probably because I'm listening more for it now, but I've heard several people that have been around for a long time that that's how they built their success was start with the buyer first, go basically find exactly what you know you're going to get paid for. And that's it. I think actually Lou Brown talked about that on your webinar. Yes, he did.

Yeah. Yes, he did. And especially if you're a wholesaler, And you know you have certain real estate investors, what kind of houses they're looking for. Why are you not just farming that neighborhood like crazy? Because you've got buyers that are ready to take it. Why would you not do that?

Yeah, absolutely.

It's so much easier to do it that way.

It makes a lot of sense. It makes a lot of sense. And it's like you're flying blind, especially if you're just starting out. You don't really know what a deal is and how to analyze values. You think you're looking for a deal, but yeah, starting with what you know someone's going to buy is definitely a smart way to do it. What if we shift for a moment to a home run deal? If you can think of an example of what may not necessarily be your bread and butter business, but just something that you're like, Or an example or two of something that really was a deal or a set of deals that took your company to the next level and really created a big windfall?

Well, for us, anything that would take our lending business to the next level is picking up an insurance company that's going to give you $20 million. Absolutely. It doubles the size of your fund. That's a home run.

How does that even happen? And whatever you're comfortable sharing, how does that even happen in your path to success? Were you looking for it? Did it fall in your lap? How did that even come about?

Nothing really falls in your lap. You're always looking for it. And that's why it's important, I think, to be the small fish in a big pond. Okay. Um, like when, when we're going to, when we first started, uh, joining these masterminds and going to events, we knew we could barely afford to pay for the booth. Okay. I mean, at the time it was, you know, we were having to pay, you know, 2,500 or $5,000 for a booth. And we were just a dinky little lending company and, You know, we knew that it was a stretch for us to be able to set the booth up because it's not just the booth. You got to get the banners and all of that set up. But we did it because we wanted to look big. And when we did that, it let other lenders and insurance companies that were there, the other people that were there, saw that we had a booth. So that alone opened the door for us to start having conversations. And also, when you spend money to educate yourself, and I'm not talking about buying this person's product and that person's product. I'm talking about going to the events that they put on. Okay. You don't have to buy the product to be successful. Go to the events. Right. You know, like QuestCon or your local real estate group. American IRA does events. There are all kinds of places where you can go and be at that event. And that's how you meet other people that are interested in what you're doing, that want to see you succeed, that are there to help you. I mean, that's how we met them all. That's even how we met our partner that we brought in, Jonathan Davis. We met him at an event. He was working for somebody else. And, uh, we started doing business with, with the company he was working for. And then he mentioned he wanted to move to Charlotte and we were like, Oh, we can help you do that.

There you go. Exactly. That's awesome. So putting yourself in situations where they're going to find you because you're there.

That's exactly right. And you have to, you have to talk. You're not, you know, you're not there to be a fly on the wall. You need to meet people, get out, shake hands, meet people. Don't be shy.

Yeah. Well, I noticed that about you and every event we've been to. You talk to everyone that's there. And you have an actual conversation too. It's not just, Oh, I'm going to meet you and check you off my list. It's you're actually... You care about each person that you're eye to eye with. I think it's very cool and quite a talent you have. Thank you. Yeah. Thank you. Very cool. So we ran through, obviously, quite a bit of the gamut of bread and butter deals and disaster deals and home run deals. What else would be, I guess, valuable, in your opinion, to share for others that may be listening that... And look, I'm just starting this, so I have no idea who's going to listen yet, but I think other investors people that are getting into the business, maybe people that want to lend, maybe people that want to borrow from you. What else can you share with us about your business or businesses that you want to talk about with regards to hard money and capital management and anything you'd like to share? We'd love to hear.

So obviously, we're lenders. If you can go to CarolinaHardMoney.com and learn about everything we do, it hooks up with our fund and And all of that stuff, and on that website, too, you can learn about 2 other things that I do 1. 1 thing is called Wednesdays with Wendy. It's a 30 minute. 1 on 1 session on zoom, I set aside 5 slots every Wednesday, 530 minute slots. And it's an opportunity for us to just talk about whatever it is you need to talk about. I don't care how new you are, how experienced you are. It doesn't matter. The bottom line is, I've been doing this for 23, 24 years. And having a 30,000 foot view as a lender, I've experienced a lot. I've seen a lot that's happened. I'm growing my company from a small little company to pretty decent size at this point. The mistakes I've made, the successes we've had, I want to be able to share that with people because that's how I got here, because people shared with me. So, you know, I get people that are brand new into real estate and then I get people that have been doing real estate for 20 years that might be bringing on a new partner. We'll talk about how that's supposed to look and, you know, things you need to watch out for and, you know, whatever that is. Sometimes we just talk about family and it just turns into, I call it the real estate therapist.

It's great. I'll tell you firsthand, I was the beneficiary of a Wednesday with Wendy meeting a couple days ago. So yeah, thank you for doing that. It's very cool that you do it. It's tremendous value. So I appreciate you sharing your experience and your thoughts with me. And I'm sure anybody that would take you up on it is going to also have a really, really nice experience as well.

And it's a lot of fun. And I tell you, I learned something off of every single one that I talked to. Every single body.

I can imagine.

Even if they've never done real estate before, I'll learn something off of everybody. And I love that. I do this other thing called Sunrisers. It's a faith-based real estate investor group. We do a 15-minute devotional, then we talk about the market for a little bit, and then we talk real estate. And that's on zoom every Friday morning at 730 we have people from Hawaii and Portland and Texas and Virginia and Florida people from all over the country on it and and the quality of. The speakers are mind-numbing how good they are. They're national speakers that come on there every Friday. It's pretty awesome. Plus, the networking is really good. It's a really great way to start a Friday morning, and we've been doing that for 21 years.

Very cool. How do people find, I know I get the emails with Zoom links, but how do people find Sunrisers? Can they go to your website? Yes.

If you go to my website, carolinamoney.com, carolinahardmoney.com, I don't even know my own website. If you go to carolinahardmoney.com, there's right there on the homepage, kind of down toward the bottom, you'll see the links for all of that to be able to join. And then you can watch, previously recorded ones on YouTube. YouTube forward slash at Sunrisers and Sunrisers is spelled S-O-N. But we've probably got four years of recordings on there every Friday.

Very cool. Yeah, I'm going to have to cherry pick through some of those. I've been on a few, but I'll definitely check out some of those. Now, what if somebody wants to come in and lend to your Carolina Capital Management? I assume you're looking for people that have self-directed IRAs or they don't have to have that yet?

They can be accredited or not. It can be cash or self-directed money. It doesn't matter. If you've got money you need to invest, you can find us again on Carolina. In fact, I think it's Carolina I was gonna say carolina.fund. Believe it or not, that's a website, carolina.fund, or you can go to carolinahardmoney.com, and there's a tab there for you to go to as well.

Well, it's always a pleasure talking with you, Wendy. I really appreciate you doing this. And, um, and I look forward to future conversations and, and for anyone that listens to your experience. Yeah, I'm sure they're going to find, uh, lots of little gems and some very big ones as well. Cause I did for sure.

Thank you. Thank you for inviting me. I appreciate it. I feel good that I'm the number one.

Yeah, you are. You will always be.

In my mind.

Yes. Well, thanks again, Wendy, and we'll get your information out there. Wherever this is posted, I'll make sure that some of those links are in there so they're easy to click.

Sounds great. Thank you.

Thank you.

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