Avoiding a Financial Disaster: A Guide to Property Prices and Loans (w/ Jorge Almonte)

This week, chat with real estate professional and lender, Jorge Almonte. We break down why getting a loan for a house is trickier these days - think higher interest rates and picky lenders.

But fear not! Jorge gives us the lowdown on how to value a fixer-upper to impress even the strictest loan sharks.

This episode is basically your guide to avoiding financial disaster when buying property. We talk about how a housing crash could affect businesses too, so listen up if you're worried about the economy.

Plus, is the government playing fair with investors? We discuss a story about someone fined for supposedly lying about property value.   Is the system rigged?

This episode is your key to navigating the crazy world of real estate investing without getting soaked.

This episode is brought to you by Premier Ridge Capital.

Sign Up for our Newsletter and get our FREE E-Book where you'll learn everything you need to know about creating financial freedom through multifamily syndication.

Visit www.premierridgecapital.com now!

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Transcript

Speaker 1: 0:30

This is Wealthy AF, your ultimate guide to understand what it truly means to be Wealthy AF. And today I have a special guest and a friend, jorge Almonte. Jorge is an active real estate investor and a loan originator that specializes in helping clients get the funding they need to get their deals and helping investors interested in growing their money with double-digit returns. His extensive experience in the automotive industry as a finance director, combined with his background as a former personal finance specialist back in the banking world, has given him the unique perspective on the real estate industry. Over the last 11 years, he has successfully completed numerous real estate transactions, both as buyer and seller.

Speaker 1: 1:14

My brother, bienvenido. Thanks for coming on, man, appreciate you having me? Yeah, so I wanted to. As you know right, I'm a real estate guy. This is my game, right being the real estate. That's what I do for a living right Buy properties, fix them, sell them, buy them, rent them. And the most important thing in real estate, in my opinion, is the finances right, like that's how you create wealth. The real estate is by getting the right financing. Talk to us. What are you seeing currently? What's the current environment like in this lending world here in 2024, where rates are as high as they are and prices are not wanting to come down on the residential side of the world.

Speaker 2: 2:01

Great question. I think the industry right now is in a pocket where some things feel similar and some things are completely unchartered. The fact that we had low interest rates for so long created a problem that we hadn't seen. So, as you mentioned, prices are still high From a lending perspective. What we're seeing is that right now we're entering an era of contraction.

Speaker 2: 2:25

When banks start to contract, you'll start realizing that scrutinize an application a lot harder than they do when things are just flowing and it's ebbs and flows, right. Sometimes banks are loosey-goosey. They're just very eager to do business and they don't really question the whole lot. So long as you provide them their minimum requirements, they're happy to do it. Sign off on the check and they're done. But right now, we're in the opposite of that. Right now, banks are making sure that they're extra cautious because they're anticipating certain things. We don't know what's on the horizon.

Speaker 2: 2:56

We've noticed that leaders in the corporate space, like the Jeff Bezos of the world, are cashing out and selling shares of stocks, and so that sends a signal to the market and in our environment specifically.

Speaker 2: 3:07

We're not in the conventional space where we lend, our lenders are backed by hedge funds. So when you do a deal with us. Yeah, we underwrite it and we do it just like a conventional mortgage might. But when the deal is packaged, it gets sold to Wall Street and Wall Street buys these deals. So if you do a DSCR loan or you're doing a hard money loan, a lot of times it's an equity or hedge fund that's sponsoring it. So when you see that they're tightening up and saying, hey, you know, I used to give you 90%, I may only give you 80% on this one, it sends a signal to the market to say be very careful with what you're doing Now. We can make money in real estate in any part of the cycle, but the, the, the. The message right now is if you're doing a deal, you want to be very certain and conservative with your numbers, because the bank is definitely going to be conservative with you.

Speaker 1: 3:55

Let's talk about conservative with your numbers. What does that mean to be conservative with your numbers?

Speaker 2: 4:01

So I would look at your ARVs In the past.

Speaker 1: 4:04

you might say, hey, I look at what's ARV For those listeners? I may not know what ARV is. Great question so after repair value.

Speaker 2: 4:10

So a lender, when you're looking at so after repair value. So a lender, when you're looking at an opportunity to fix and flip a property, the lender is looking at what's the value add, what can you push the value to after your repairs? So you might be buying a property, let's say for a hundred, 150,000, but when you're done putting in some work into it, maybe it's worth 300,000. The lender calls that $300,000 figure the after repair value. And when they take that value they say, hey, we always want to be equitable in our position. So even though you're going to push it to $300,000, we're not going to lend all the way up to the $300,000. We're going to lend up to a percentage of that value and in today's world that's usually about 75%, is the average. Give or take a couple of percentage points in either direction, depending on the lender and where we are Right now. 75 is okay. Some lenders are scaling back to 70. But let's say 75 in all fairness, right, and what they're going to say is we'll lend you up to that 75% of that number.

Speaker 2: 5:08

Now, when they do that, how do they confirm the after repair value? What they do is they look at comparable sales. They're going to look within a certain mile radius and they're going to look within a certain timeframe and it's a back look right. They say how many properties have sold in this area and what is the average sale price and of course they want to make sure the properties are comparable by number of beds and baths, number of square feet and distance.

Speaker 2: 5:36

Ideally we say, hey, you can go up to 1.5 miles from the subject property to find comparables and you can go back as far as two years in some cases. When we say, be conservative, don't go back two years, try to stay within half a mile and try to only go back three months if you can, at most six months on the sale, because you really want to use the data closest to our now moment, because things are possibly trending right, Whether the trend is up or the trend is down. The closer that we are to the data points, the more accurate it's going to be for the lender. So when a lender in the past may have said, hey, we're willing to go further back right now, they might say, hey, we're only going to look at three to six months or something like it.

Speaker 1: 6:18

George, what would you say is the number one thing that impacts lenders, whether they are conservative or aggressive in lending money, like you said, loosey-goosey, or they're tightening the belt. What would you say? That thing is One thing I teach about real estate. Investing is one thing I've learned, and I also pass down the good old rule of money he who has the money makes the rules. And one thing that I do is to get a pulse on the market.

Speaker 1: 6:49

One of the things that I do, other than looking at the data, is I go to the lenders, I go to he who has the money and I start paying attention to the lender. So I talk to guys like you hey, what are the banks doing? What are the lenders doing? What are they saying? And the big thing I look at is I look at what is the loan to value that they're willing to lend on money.

Speaker 1: 7:08

Whenever I see that the loan to values is 80, 75, 80, 85, 90%, even on sometimes you know the market is hot, that means the market is going up they're lending and, remember, the banks have all the data, so they're paying attention to what they have. Also in the streets, right, they're seeing all the appraisals come in. They're seeing everything, that means the market is hot. When you see them contract like you mentioned a moment earlier, 75, and they start going from 80 to 75 to 70 to 65% LTV, that means the market is contracting. That's what I call a clue right in the market. That's one of the ways that I keep my eyes on the street. But what do you think impacts the most in your opinion, as a professional lender, impacts the most whether banks are more conservative or more aggressive?

Speaker 2: 7:59

Two-prong answer. So the first prong has everything to do with interest rates and the cost of borrowing money. As we know, the Fed determines what rates are going to be. How does that influence our space? Know the Fed determines what rates are going to be. How does that influence our space? The higher the rates have increased. We do that to control inflation in theory, and that makes the cost of borrowing money more expensive. Well, these larger institutions also borrow money themselves, so the cost of borrowing gets more expensive all the way around. And who ends up paying for that? The consumer.

Speaker 2: 8:30

So we look at how Fed rates impact In our space. Specifically, we look at bond rates. How are the bonds impacting in terms of the cost to borrow money? What's the yield on it? And as that starts to take impact on the market, you start to see that it becomes less and less affordable. So the house that you looked at a year ago maybe you calculated it and you were going to cashflow at, say, a 4% or a 5% rate. You were going to cashflow, say, I don't know, $700 a month. Now all of a sudden, only cashflows because rates are so much higher. That starts to spread like wildfire and naturally people become more hesitant to buy the same properties they were buying a year ago because the spreads aren't the same. I'm not going to make as much money, so why would I go through that?

Speaker 2: 9:17

Ultimately, what ends up happening is you get the impact that the Fed wanted, which is to slow things down. So it makes us, as investors, scrutinize the deal a lot more, ask for better terms, ask for better sales prices so that the numbers can fit in and make more sense. When you can anticipate that, when you can see that, when you can smell it in the water the way we are right now, where you're seeing lending, is contracting as an investor, you can do one of two things. Either you can wait on the sideline, which I never recommend, but let's say you do. Just stack up your cash and make sure that you're only pulling the trigger on deals that truly make sense, or the deals that you're actively pursuing. You use this to negotiate and get a and get a much better deal.

Speaker 2: 10:02

Every part of this cycle creates an opportunity. We just need to know where we are in the cycle so that when you're negotiating your deals, you're you're doing a lot better because, at the end of the day, one thing still holds true. Our lenders still want to lend you money. Yes, they might, you know, make it a little bit harder than it was when things were in a period of expansion and things were growing and moving fast, but right now there's less competition for you. We still want to lend you money. You just have to make sure that you've dotted your I's and crossed your T's, because we are going to make sure that you are successful. Our tides rise together. As lenders, we want to make sure that you are successful because it only benefits us all If you win. The cycle are we in right now, in your opinion, and what's the opportunity within the current cycle Great question.

Speaker 2: 11:00

So and that allows me to, because I neglected to talk about my second prong, which is the state of our political environment. Right, where we are in our cycle, we are fighting the inevitable word recession. Right, and we have been systemic as we're fighting to avoid that. You know, things move in ebbs and flows. We're naturally in that part and as we're fighting that, we're propped up by our government's efforts to help us keep going and incentivize us to keep spending and to do things that naturally don't happen. But then, if we spend too much, what happens to inflation? And so all these questions linger and enter 2024, an election year, as political parties start to create favors and move things around to get elected.

Speaker 2: 11:51

Where we are in the cycle? I believe we are at that bottom of the curve, where we're in that recession, even though we haven't admitted yet. And things are contracting. And here's the thing regardless of your political affiliations 17 years of watching banks move around I can tell you this whether you're a Democrat or a Republican, irrelevant During a Democratic party, there's're a Democrat or a Republican irrelevant During a Democratic party. There's a lot more scrutiny in the financial field. You're going to see a lot more laws. You're going to see a lot more observation.

Speaker 2: 12:22

Regulation and regulations, and during a Republican hold there's a lot less of that. There's more money being infused into the economy and, as a result, banking regulations get loosened up a little bit. So right now regulations are very tight and so the opportunity here is that that creates less competition in the space to answer your question, meaning there's less buyers in the space to answer your question, meaning there's less buyers in the market. Yeah, we have this unusual factor here with the supply issue of houses. But if you're a strong negotiator and if you can implement a system to find the deals, this is the opportunity to buy them now. Because what's going to happen if any party changes happen and all of a sudden rates get better? The market's going to get flooded and you're going to see an increase of 10% on sales prices of homes anyway.

Speaker 2: 13:12

So why not take advantage of the opportunity we're in right now to really strongly negotiate and find the opportunities that are there? And, scrutiny aside, you're going to get funded so long as you meet the criteria. Scrutiny just means an extra layer, an extra checkbox or two that you have to commit to. So long as you can meet those obligations, you should be able to do a lot better deals right this second, because my fear is the market's going to get hot again if rates drop Now. If they don't, we continue to live in the space that we're in of continuously trying to find the deals.

Speaker 2: 13:45

And the scary part about this inversion because it's an inverse relationship is when the market is hot, it's harder for people to make decisions because they start saying, oh well, if I don't make a decision right now, somebody else is going to take this opportunity from me or somebody else is going to beat me to it. And people start rushing and offering higher and higher and higher. And you get into this debate of this battle of pricing. And now, is it still a deal? Right now things are slow enough where you have the time to figure it out, make the right numbers, make the right call and get into the deal the way you want to.

Speaker 1: 15:41

You know it's interesting. You said that my partner and I we were looking at a 118-unit apartment building close to where you are in Virginia, your neighboring state, and we made an offer on this light tech property. So light tech property, for those that don't know, it's a property that's subsidized housing, section eight, and kind of like rent control type of thing, where you have a contract and it's controlled. We ran the numbers, the numbers made sense, we made our offer and I'm in your mindset, I'm in your same right, your same thinking. Right, we get a call from the broker and I called, I called BS on it. Right, we got a call. We got this call from the broker back and broker tells us we had eight offers and yours was the only one that had a finance contingency.

Speaker 1: 16:34

Finance contingency meaning hey, this is going to be dependent on us making sure we get finance, we're financeable. But hey, this is just how you do deals, right, anymore, where people were 100,000 hard, I want the deal right from day one and my partner and I we had the tough decision to say, nah, we're out Like this is not the economic environment, because we understand what is happening on the finance end of it. Right, we know what's happening on the, on the backend of things, how they're screwed, like the lenders are scrutinizing more. That's too much of a risk In this current economy, in this current state, where the banking system is to be like yeah, how much did we offer on that? I think it was like $6 million or $7 million. On a $7 million deal.

Speaker 1: 17:23

We're going to waive a finance contingency. We're not balling like that right now. Right, we can't do that. We can't afford to lose 200 grand and go hard and then the bank comes back and says they don't like it for whatever reason. And then we followed up. We had a discussion Me and her had a discussion the other day and I was like, hey, have you talked to that guy, the broker, again? And it's on the contract, the property's on the contract. So I don't know, man, what is your take to that?

Speaker 2: 17:50

I think it's kind of like and I've worn many hats right, I've seen stuff, I've been a banker working with stocks, just like I've worked in real estate and the same thing happens in both environments. There's a delay. Imagine you're in a truck and you hit the brakes. You don't break instantly. The truck has a while before it comes to a complete stop, as it comes to a screeching halt. What's happening right now is we're hitting the brakes on the economy and that truck is still sliding across but we're stopping. But I realize we're stopping because we're still moving, we're still in motion, but they don't realize that the brakes have been hit. So they're still making offers that way and not realizing. The difference is you have insight and experience that has led you to understand the brakes have been hit, even though the truck is still sliding, and that it's eventually stopped. So in my mind, you did the right thing. I can tell you of an example instantly that came to mind as you were saying that we're in the middle of a refi for a commercial property right now. The client anticipated a valuation of $850,000. The appraisal came back at $875,000. That's a win, you would think right. Except they did an internal audit, the lender did. And then the lender came back and said hey, we disagree with this opinion, we think the property is only worth 630. Now imagine all the feeling. That's a huge discrepancy. Now, as an individual, you're offended because you say, well, what was the point of me paying for a professional opinion that says 875 when you're going to digress and say I only think it's 630. But it's sent a huge signal to myself and my clients. They are going to scrutinize every number because they are looking at it from different angles. Right, they're in it, they're stuck In the commercial space. Specifically, you talked about a multifamily 118 units. What do we know to be true? Right now there are loans coming due that are not going to be able to get refinanced and, as they're anticipating those losses, they need to put good deals on the books to offset the bad deals that are coming down the pike. And, as it's depending on how they've handled their book in the past, some banks may go out of business. We don't know yet. It's hard to predict, but I can tell you this the brakes have been hit and that truck will come to a stop, and that's where the market readjusts Now.

Speaker 2: 20:18

Being a car guy, I saw it happen in the car world. First, 2021, like you said, cars were still high priced at high value, and what happened was banks pumped the brakes there, as well as rates started coming up the used car market, which, during the pandemic, had an exceptional boom because we couldn't get new cars. Now, all of a sudden, the valuation of cars are readjusting back to normal, pre-pandemic figures. So take, for example I personally purchased a vehicle. That vehicle has a $25,000 loss in its valuation in less than a year, which is unnormal. But what happened was I purchased it, we were in that bubble, which that bubble has burst already, and now we're starting to see it happen in real estate.

Speaker 2: 21:04

Same concept the brake was hit, but the truck is still sliding. So because the truck is moving, people think, oh, the market's still good, the market's still doing what it's doing, but we haven't hit that halt. Now I'm not saying the market is bad. I want to be cautious of that too, because there are some unique factors. But when I say the breaks are being hit, all I mean is that somebody out there is seeing something in the economy and right now, being in cash, being liquid, is going to be the best position to be in. I take special note of the fact that the CEOs of major companies that we like, know and trust, such as Mark Zuckerberg, elon Musk, the CEO of JP Morgan, have all liquidated large positions to have cash For what a whale does something you pay attention 100 dude.

Speaker 1: 21:53

let me tell you something. I talked about that in this podcast, actually, and I don't know if you saw that or heard it where I was like I reported on that jamie diamond is selling and he gave us this, this story he's selling I don't know a bunch of shares, like he's starting to sell off his share. Uh um, amazon guy, amazon guy, jeff Bezos, right, and I was like wait a minute, guys, like stop, listen. I know he's telling us he's going to be retiring. Stop. Why is he selling? And not just him?

Speaker 1: 22:24

But then you add Jeff Bezos it's not a Quincek Mark Zuckerberg, all of these people, high elite influencers, billionaires why are they going into a cash position right now? Why, if everything is so good, why are they doing that? And I said and I said it right here in this podcast I says what does he know that we don't know? I don't buy that. He's retired, the retirement story he gave the public. I personally, respectfully to him, I personally don't buy it. I'm a thinking person and person that likes to think and strategize, and I'm looking at the, I'm looking at that picture. I'm saying why is this? Jamie diamond, the biggest banker in the world, has all of the information, of what's coming, what's happening, consumer spending. Why is he going liquid? There's something there, brother.

Speaker 2: 23:18

Very quickly, I'll just say I couldn't agree more, and something that people don't realize is, unfortunately, they cannot share the information, not because they're gatekeeping, but because of the impact to the market. If he creates some kind of stir and everybody starts rushing, it creates a secondary effect that we don't want, where people start removing their money from the market or doing things, and so that's why we, as consumers, need to observe the behavior and imitate it. If things are on the up, you'll see it in high volume. If things are on the down, you'll see it in high volume. But if they say, hey, the sky is falling and everybody got it man it's, it's mayhem, so so it's.

Speaker 2: 23:55

it's great that we're talking about this, because for for our audience watching this, you just need to watch what they do and do it too. I mean there's, there's a whole nancy pelosi scale. Yeah, uh, her investments, right, I mean it's, it's no coincidence, you're right, they do have insider. Here's no coincidence, you're right, they do have insider. Here's the thing For you and me to trade on insider information is illegal, but for them it's called politics. So I'm going to watch and see what they do and take special note of it, like you said, because it does influence, even in our day-to-day the cost of eggs. I was just talking about this with a lender earlier today. Bye-bye, no longer can I get $1.65 eggs at Aldi's anymore. You know they're up there at $3.

Speaker 1: 24:33

$4 and something I heard they were going up to or something. Yeah, $4.65.

Speaker 2: 24:37

I read a couple of days ago General stores are closing left and right, right. So pay attention to that and pivot. Be ready to pivot. I'll share very quickly something called the garrison cycle. Very quickly is something called the garrison cycle. Google it. It was taught to me a long time ago. It talks about real estate cycles and which strategies work best during what, depending what cycle part of the cycle we're in. It's called the garrison cycle. I won't go into it because I don't want to do it a disservice, but Google that. It's a fun, interesting I remember you. I think you posted it on your IG.

Speaker 2: 25:05

So the garrison cycle highlights where we are in the economy and which strategies work. That's why I said if you can anticipate what's happening, so what if the truck is breaking or whatever? Now you just pivot to the real estate strategy that makes sense, right, there are times where wholesaling makes more sense than actually flipping what visual cues there are, what's going on in the economy, and then it literally highlights which of those particular real estate strategies make the most sense. For example, I participate in the creative community right now. When we say creative, these are non-traditional, non-lender products, like doing subject to right.

Speaker 2: 25:47

Those people that are doing sub to this is their pocket right now because rates are very high. So taking over somebody's mortgage that's at a smaller amount makes perfect sense in this part of the cycle, Whereas when rates were two, 3%, why would I do? Subject to when I can just go get the loan myself and not deal with the hassle of the in-between? So perfect example of how, depending on where you are in the cycle, one strategy may make more sense than another. It's on you to know which ones make sense where, so that you can benefit from that and take full advantage of it and move forward.

Speaker 1: 26:23

Really, really good advice. Where do you think, what's the strategy you think should be deployed right now in this cycle, if you're an investor?

Speaker 2: 26:33

As an investor. I mean it's tough for me to say because I am right now I'm looking for as much cash as possible. So, for example, I'm not taking on huge undertakings and rehabs. On huge undertakings and rehabs, I'm buying good, solid deals that are perhaps turnkey or close enough to turnkey, where I don't have to deploy an insane amount of cash to get into them. I mentioned subject to subject to is something that a lot of people are doing. I have not done any subject to deal, so I don't want to even scratch that surface and it's just not my wheelhouse, it's not my preference, but I do know people that are having a lot of success with it and are getting very creative. I think overall, you want to respect your cash. Cash is still king. I'm taking advantage of opportunities where a few lenders are still doing 100% financing on rehabs and if I can get some OPM and somebody else's money to do it, I'm all over it, because I'm in cash preservation mode right now and one of the things that MetLife touts is how much cash an insurance company in general has to have above, say, a bank's requirements.

Speaker 2: 27:55

At any given time. The government requires a bank to have X amount of money on hand. Insurance companies have to have an exponentially higher amount than the bank, the reason being, in the event of a catastrophe, they need to be solvent enough to pay out the claims. So take, for example, one of the bragging rights as an employee there was that during 9-11, our president went on television and made a declaration that this was an act of war. Many people don't know this, but life insurance policies have a disclaimer that says that if it's an act of war, they may not cover or pay out. Well, metlife stepped up and paid 80% of its claims within 24 hours and the remaining 20 were just waiting, confirmation that they were passed away. Our bragging right was that we not only had $4.3 trillion to pay out claims, that MetLife additionally had, back then, $20 billion in reserves to start the company up again.

Speaker 2: 28:48

I go into the weeds about this because at that time this was a younger version of myself. The economy was just about to blow up in terms of mortgages, and right around 2005, metlife sold buildings, real estate that it had in New York City and it was holding onto for over a hundred years and, in anticipation, watching the brakes being hit before everybody else did, because they have to be so scrutinous with their reserves, they decided to stack up on cash and sold buildings that they thought they would never sell, including the famous one on 42nd Street At Life Logo. They sold it and kept a hundred year rights to leave the logo there, so that people assume that it was still their building. Well, wouldn't you know that after the building sales the economy tanked and so they were able to anticipate that at their cash position.

Speaker 2: 29:38

Now I don't know how true this is, but I believe I read somewhere that because I long left MetLife after this came out but supposedly they went back and bought up a lot of those buildings back pennies on the dollar after they had sold them at the height of. So I share that story because I feel like this is eerily similar where we are right now and your story in the Virginia offer that you made. I almost feel like I wouldn't be surprised if you get a call to come buy it later, pennies to the dollar, because somebody overpaid in this market right now.

Speaker 1: 30:39

We don't know if we're going to blow up or we're going to blow down, but either way, just be scrutinous. I don't have all the answers, but I say they have gone after our ex-president or something that's gone on the regular when it comes to transacting real estate.

Speaker 2: 30:54

So removing the political.

Speaker 1: 30:58

Yeah, let's remove that. Let's just talk about investors, from one investor to another right.

Speaker 2: 31:02

Let's look at it from information and how information is used for or against us and how our audience needs to continually educate themselves, because what's happening here is nothing new under the sun. Our ex-president has something and I know people will strike me for this but has one very positive thing going for him he can't shut up. He tells everything and when he does, he reveals a lot of things like his strategies and things that everyone benefits from across both sides of the aisle, including tax loopholes and things, and so people get mad at him because it's almost like hey, quiet down, you're revealing our secrets. But let's look at historical. There's a great book, everybody knows it Rich Dad, poor Dad. If you read Rich Dad, poor Dad very closely, there's an explanation about where we get our understanding of taxes, which is our biggest expense, and where we get our explanation of how, which is our biggest expense, and where we get our explanation of how money works and what it boils down to. Is that historically, whether it's this country or any other great empire, we always want to take from the rich. We always want to take away from the people that the haves and give it to the have nots right, and when you get away from that impoverished mentality which is the whole point of rich dad, poor dad, and you certainly learned the system. You realize that you too can benefit from what our president has exposed in this. So, to go full circle and back to your question, what he's exposed, or what he's revealed and people getting mad at him for, is let's put a target on him because the have-nots are going to fight against him for being one of the haves, versus thinking you know what, if I learn from him, if I see what he's doing and I emulate what he's doing, I too could, could ultimately be in a position where I could benefit from that strategy. Right, we're, we're, we're in a constant battle in our country between entitlement and working hard. Right, and and and.

Speaker 2: 32:54

As an independent, you start to ask yourself OK, well, what makes sense? I look at it like this we come from you and I come from a historically third world country and we got it out from out the ground and we benefit from some of these corporate structures, that that. But we benefit from it because we learned how to work it to our advantage Right. At the end of the day, our audience. When they're not educated, they feel like, well, that's unfair. Why does he get to not pay this or that? Well, what about the jobs that the corporation created? What about the tax that brings in right? What about the roads and everything else that gets paid from that? We need more leaders in the world. So if you feel like what he's doing is wrong, well, we need you to learn about it, understand it and come to me and tell me why it's wrong.

Speaker 2: 33:41

I don't think that he's doing anything that anyone else isn't already benefiting from. I think that, ultimately, people are shining a light on what's always been there historically and we're just learning about it, and so now we're kind of seeing where we fall. Is this a good thing? Is this a bad thing? I don't know. Overall, I can tell you this Um, what I'm learning is that I'm excited to see how we, how we move forward with it. Um, if the rules change, what are we going to do? We're going to pivot and we're going to, we're going to learn the new rules right, um, and we're going to learn the new rules we're going to try, right?

Speaker 2: 34:15

You know, at the end of the day, that's all we can do is work with what we have. And at this point, if you're highlighting it and viewing him as an enemy because he took advantage of a system, he didn't create the system, he just played the system, played into the system and he played into it. And so I don't take that as a personal dig. I'm excited that he brought light to it because it has us talking about it. It created a conversation around it. If we need to change it, well then what's the better answer and that's what we really need is what is the answer here? If it's not that right, how do we improve? And that's the ongoing debate.

Speaker 1: 34:50

You know he got fined. $450 million is the number. He got fined, $450 million. And, guys, this is not a political situation, I'm just I've shared my thoughts here. This is not political biases, because I'm going to share my thoughts, but I'd like to get your thoughts on this. You know he got fined $450 billion or million dollars, excuse me, 450 or 25. I don't know, something is 400 plus and they fined him because he overinflated his values.

Speaker 1: 35:20

So when you as a lender let's say I wanted to refi my 12 unit with you, jorge, right, I go to you. You say, hey, martin, here's the application. And in that application you're going to have a question and you're going to say what do you think the value is? There's a spot where I put what I think the value is and I'm going to go do the math and I'm going to say, okay, I'm going to get X, y, z amount in rent. I'm going to take out my expenses. What I project, my expenses, is all a projection, by the way, projection and based on whatever cap rate, here's what I think my value is. And you're going to say, okay, cool, martin, even though you think that's your value, we're going to still send an appraiser out to verify and determine what the value is, and thank you for letting us know what you think the value is. But the value that we will use, like you said earlier, the bank ultimately decides. You shared an example. The bank ultimately decides what the value is. Cool, that's just the way business is done. That's just the way we transact right Lender, customer back and forth. That's the way we transact. The appraiser goes out, the appraiser says, okay, this property either confirms my value is higher than my value or lower than my value, and then the bank ultimately decides what the value is going to that they want to lend on. And that's what they lend on. He who has the money makes the rules.

Speaker 1: 36:36

In this case seems like to me like they are going after this man because he put that his value was higher than whatever. No one got hurt. That to me, jorge, is an attack on the American people of the way that you and I do business. Holy crap, now I'm doing a deal with you, jorge. Now I'm scared as an investor and I was like oh shit, like dude. I'm doing a deal with you, jorge.

Speaker 1: 36:57

Now I'm scared as an investor and I was like oh shit, like dude. I'm calling you to say, hey, man, what do I put here? Like, hey, this is how we've done business, george, but I don't know, I don't want to be the next guy. So this is not a political party thing, this is more a capitalism thing. This is more like who's going to want to go to New York and do business in New York after that? Right, what investor is going to be like, yeah, I'm excited to go and put my money in New York after that? Like now I'm calling my lender and saying, hey, I'm going to leave this blank because I don't want to put a number. You decide what number you think it's worth.

Speaker 2: 37:30

Right, I'm here's the loan I want, but I'm not going to put a number in there when it's the way we've been doing business for years and years and years and years. It boils down to something that most people don't talk about. It's the difference between valuation from a lender's perspective to the valuation that local government gives it. Enter the word taxes right, let's look at a tax opinion, right, and that's what they're arguing. They're saying the tax assessment is this, but your opinion is that. And so if you're going to start that conversation, there creates some serious consequences. Because what do we as investors want? We want the lowest taxes possible and we want the highest valuation possible on our property. So we'd love it when the tax assessment is a fraction of what? A fraction of what, what's truly what? What you know the value. So it comes in and says that the value of my home is a million, but the tax assessment says that they're taxing me based on half a million. That's what I want, ideally.

Speaker 2: 38:27

So it's an interesting conversation because it is an attack on the system and it's going to shine light to that discrepancy, because that's what they're arguing. They're literally saying the tax assessment of this property is significantly less, but the tax assessor. How does a tax assessor decide what the value is Right, the land, the improvements, okay. What does the appraiser use? He uses the income of the property. He uses the data all around. So you're absolutely right. We're being attacked on a current system. What's the answer?

Speaker 1: 39:00

I don't know. Here's my challenge, here's my pushback to that. Right, I'm glad we're having this discussion. Here's my pushback to that. Okay, so what space does the government have to interfere with private businesses in the way that private businesses are lending money If no law is being broken? Okay, let's just be real here. No law is being broken. What business does the government have to interfere in a transaction where you say, okay, I agree with your value and I'm going to lend you money on that, and I say, okay, great, and when the time is due, when the money is due, I pay you.

Speaker 1: 39:37

No one got hurt, no one stole from each other, despite the fact that they think that this property is worth X, y, z less than you and I transacted. On. What place and what business do they have? Real talk, guys. This is again. This is just as a capitalist. I'm speaking as a capitalist. I'm a flaming capitalist, brother. Right, as a capitalist. What business does the government have to come and interfere in a business dealing that you and I have done, where no one's got hurt? No one, no one, no one stole money from each other. Like, where does that play come into play, is my question.

Speaker 2: 40:17

I think government interference is never a good thing. It's the whole reason, it's the foundation of our country. It's why, you know, we, the English, left and started this country right, because we don't want government interference. Now, that said, consumer protection enters the conversation. So then we have to argue no one got hurt brother.

Speaker 2: 40:35

So so it boils. It boils to exactly that, and that's the point I was going to make. Can you provide evidence that anyone was was exponentially hurt by this? I think what's what's going on this is a lot more personal, president, I think you know he. He has a a habit of of taunting um, his, his um on his opposition and his opponents. Right, I want to say the words my kids use the ops, right, and in doing so they're trying to create a fight against him that some of it is unfounded, I think. But to what extent is the conversation going to go. That's why I said they're going to highlight and they're going to shine a light on things that up until now have never had a light drawn to it, like, for example, this tax versus appraiser conversation.

Speaker 1: 41:28

And that sucks because let me tell you, as a homeowner, as a homeowner, you think it's an attack on Americans, brother, it's an attack on all of us.

Speaker 2: 41:37

People think that this is against him and a specific party. No, this is an attack on you because you, mr Homeowner, you have a house that you bought at $200,000. Now it's worth $500,000. You love hearing that. Right, oh, my house is worth $500,000. You brag about it at the dinner party to your family. Well, now Uncle Sam is going to say, well, guess what, I'm going to tax you off 500,000, since you like bragging about it. And that's what I'm scared of in this conversation. That's why this question is so important. I don't think I'm educated enough to know enough about it, but as a consumer, I don't want to pay higher taxes on anything, point blank. So if this attack on him leads to, okay, well, if that's how you're going to treat him, guess what, mr Homeowner? They're going to do the same thing to you. Same thing to you. Yes, yes.

Speaker 1: 42:21

And then if you look at the intentions behind it, why they did it, then it becomes even worse. It's an attack on the American way. Why you did it? Because he has a big mouth. That's our First Amendment right freedom of speech. Like, okay, I don't agree with the guy and everything that the guy says all the time, but it's his american right and it's your american right and everyone else's american right. So now we're gonna attack people's finances because we don't like, we don't like their political party, we don't like what they believe, we don't like what they say. Like, oh, now it's not an attack on him, it's an attack on the American way, my brother, that's, that's, that's my thought. Last question, cause we got to wrap this up when do you think interest rates will come down? What's your magic ball? When do you think and what impact will it have once the feds lower it, even a quarter?

Speaker 2: 43:15

so I think what we're holding out for is getting closer to the, to the election. Uh, because if we do it too early, we can't credit the party that's doing it. Um, right, we it's all about. Uh, look at me, I did this, I did this for you, the economy, vote for me, right? Um, because powell's been touting it and, mind you, powell has been in. We're both parties, but at the end of the day, the conversations they're having behind those doors this is what I think. I think they're just pumping the brakes and saying let's wait a little longer, wait a little longer. That way it takes on meaning when it matters the most and when it does happen.

Speaker 2: 43:51

What's going to happen is you're going to have a rush to the races. Everyone's going to start buying things back up. We still have a shortage of supply. We don't have enough inventory. So what's going to happen? You're going to see a 10% increase on properties, and I was just watching a video right before this talking about how we are in an unusual pocket where, if you look at a map of the US where it makes sense to buy versus rent in 2020, it was cheaper to buy. You'd have a lower mortgage payment than it would cost you to rent. Fast forward to a map today and the map shows that it's cheaper to rent than it is to buy and how we're officially a renter nation.

Speaker 2: 44:30

Now, when you compare us to other developed nations and you look at how most people it's uncommon for the average person to actually own real estate in those nations because they are renter nations.

Speaker 2: 44:43

And so we're in this weird pocket right now where now is the time to buy, guys, because eventually it's. There's so much incentive for corporations to buy, you know, between depreciation, appreciation, tax incentives, et cetera that the big, the big guns with the big guns with the big pockets are going to take it all up. So lower the rate. And guess what? They're going to step up even harder and buy up even more. So what I think is going to happen? You're going to see us push and push closer and closer to becoming ultimately an entirely renter nation. We don't want to own anything because it's just easier to pay, it's cheaper to just rent it and you get all the amenities now with it than it is to own. And if you're smart, you're going to see right through that and you're going to say I'm going to buy now, while rates are where they are because I can always refinance later.

Speaker 1: 45:26

Jorge, it's been a pleasure to have you here. Brother, thank you for the insights. I want to have you back on. We're out of time, so let's make sure we get you back on here, because there's so much more I want to ask you. There's so much more I want to unpack. If folks wanted to get a hold of you, how can they find you? They need a loan. They want to connect with you. They want to follow you on social. You're putting out some great content out there, so make sure you guys follow him.

Speaker 2: 45:48

Great question. So I've been wearing the universal loan exchange. So T H E U L E X on Instagram and my email is Jorge J O R G at the? U L E Xcom. As I'm available, uh love to to to meet up with you, talk to you. Um, I often fly to real estate events too, and I would love to meet you in person, so if there's an event that you want to invite me to, please, uh love to join.

Speaker 1: 46:15

My brother appreciate you. Thanks for coming on, my son.