50-Year Mortgages: What Investors MUST Know (2025 Update)

Mike Hambright (00:33)
Hey everybody, welcome back to the show. Today I’m here with Ryan Stewman and Kevin Jerome. We’re going to be talking about the 50 year mortgage that just rolled out, what it means for real estate investors, what it means for the economy, and a bunch of stuff related to kind of affordability of housing and where we’re going from here. So guys, welcome to the show. What’s up, Mike? Yeah, good to see you, buddy. Kevin, welcome back to Texas, sir. I don’t see you that often, Ryan, but both of you guys, I saw you twice in two weeks, or twice in one week, really. Last week in Investor Fuel and Kevin came out to my ranch.

We talked about Ryan’s Ranch a lot. gotta like have a shuttle that’s moving people back and forth maybe. I met your son last week you introduced us. Yeah. I sat there and talked to him for about 20 minutes. And a great kid by the way. Yeah. And really interested. And I could see that he’s been like.

practice and what questions that’s he’s like you fixing flips or you long-term so like all right I like it you know and and I got to talking to him for about 20 minutes I didn’t realize that you lived here I knew you lived in Dallas but I thought you lived like on the other side like the Fort Worth side and for reason I thought your ranch was in Granbury I know and so he was like no the ranch is in van and we live in Louisville and I’m like man we could have I thought you lived a long ways from here so yep because I you know the event was in Fort Worth so I’m

just like, you know, you guys live pretty close to here, right? And he’s like, no. Yeah. Yeah. had a good time out there. So, hey, before we get started, obviously a lot of people know who you are, right? But would you guys introduce yourselves and a little bit about your background? ⁓ my name is Ryan Stewman and lived in North Texas my whole entire life. I own a few companies, ⁓ in the lending space, roofing space and insurance space. And then I run a large

Mastermind one of the largest mastermind networks out there called Apex been doing that for 15 years a lot long time before it was the cool thing to do and ⁓ This is my man Kevin, you know ⁓

Originally from New York, moved a lot, first generation American. Finance, been in the finance space for a long time. My mom was a former stockbroker and I knew once I started going to work on Wall Street, I was like, man, I gotta be like that, man. All the money she’s making. But yeah, got into the lending space. Been learning a lot about real estate. Really enjoying the process of ⁓ building these relationships. Coming to Texas, damn near every week at this point.

And yeah, just been in the finance space now for 10 years. Yeah, it’s been a switching journey. so you and I have known each other for year and a half or so and been working together. And you’re first generation American. Where’s your family from? So my family’s from Haiti. I had no idea. Yeah, my family’s from Haiti. Everybody want the, hey, look, we’re getting nine to five.

I knew I was going be in sales. When I moved to Georgia, I was like, need to make some money. So my family was like, go cut some grass. I’m like, I’ll go cut some grass. But I also started doing some upsells. Like, hey, I’ll cut your grass, and I’ll walk your dog or something before you know it. Football season comes around, and they’re like, hey, Kev, we got these coupons to sell. So I’m like, wait a minute. So if I saw enough of these coupons, can I keep it? He’s like, yeah, you’re not going to sell that much.

That sounds like what they did in the Sopranos they like split up parts of town like that’s book. That’s your book of business over there Ten years later my family’s in the same neighborhood when I go back and they was like Kevin Always hustling. Yeah

That sounds familiar, yeah. So let’s talk about this 50 year mortgage. It’s kind of come out recently. A lot of people are, it’s obviously gone viral over and over again. I’ve done some videos on it. It’s, ⁓ right when I saw it, I was like.

you know, obviously as a finance guy or real estate investor, there’s a bunch of stuff that happens to us, quite frankly, as real estate investors. And I’m like, I know that’s not good for the dollar or the country long-term, but it works for me now, right? I’m like, that’s my first thought. A lot of our, a lot of folks in investor fuel have houses that are just sitting there. Anything to make housing more affordable or subsidies or anything. It’s that they, quite frankly, I hate, but they’re good for business, right? It’s always a balance. But what are your initial thoughts, Ryan, on the 50 year mortgage? Well, I don’t think it’s a solution to affordability.

⁓ the three card Monty or the the magic rabbit in a hat trick that people do in finance. Okay, I I’ve been in the finance industry for 21 years now and that dates me a little bit but I’ve been seen a subprime boom and a housing boom and a crash and all that a couple times at this point. And ⁓

you know, here’s what happens, they get you thinking about interest rates.

they say Mike, 6 % interest rate, Mike, 6 % interest rate. It reminds me of the old story of Zig Ziglar used to tell about, you know, he goes home first time for Christmas. The wife is putting ham in the pan and cuts the ends off the ham. And he’s like, that’s the most delicious part of the pig. Why are you cutting that off? She says, I don’t know. My mom does it. Ask her. Goes and asks the mom. She goes, I don’t know. My mom did it. Go ask her. Goes ask the grandma. She goes, I never could afford a pan big enough to fit the whole ham. Right. And so I say that because people say, hey, when you go to the

bank,

make sure you get a low interest rate. And so the banks are smart, right? So they know everybody’s focused on interest rate. So where they get you is the terms. what you think is, it’s a 6 % interest rate. That’s 6 % of the balance annually interest first over 30 years. That’s really more like a 50 % interest rate when you all add it together. It’s actually more like 60%. And that’s over 30 years. And now if you look at my grandparents and probably your grandparents, they took out five year mortgage.

mortgage mortgages. Yeah, right? And then sometime in the 70s, they moved to 10, 80s, 15. I remember when I bought my first house on a 30-year note, my grandpa was like, can’t believe people are financing for 30 years and we will say that same thing in the future when people do it for 50 years. Um but here’s the other side. I was in the mortgage business when the solution to affordability in 2007 was a 40-year mortgage.

⁓ They were predatory as all get out because what they would do is a 40-year amateurization on a two or three year arm With a two or three year prepayment penalty. If you don’t know what that is, that means that

it is spread out like it’s 40 years, but it has a low fixed interest rate for the first two or three years and that interest rate adjusts up. never go down. They adjust up accordingly. So what happens is if you’ve spread that out over 40 years and it’s interest first, means that 50 years, whatever it is, that additional interest that you’re paying on that lump sum for an additional 10 years and 40 years instance and 20 years in a 50 year existence that you have to

Because there’s no other way to do this. You have to pray that the appreciation in your marketplace outpaces the cost of the interest. So in other words, if you’re paying 6 % interest a year on the price of that home, you have to pray. And the only way that you’re ever going to build equity in this thing is if the prices of properties in your area increase more than 6 % a year.

If not, you’re going to be in serious trouble because 15 years from now you go to sell your house and you don’t even have enough equity in it to pay for the 6 to 9 percent in closing costs and real estate agent fees. that’s a serious concern. The other thing they did in the 40 year mortgage was they said if you take a 30 year mortgage, the interest rate was, say, five percent. Right. But if you take a 40 year mortgage, bigger risk on our end, the bank. So it is a five point two five percent hit because you’re extending it out.

Just like if you go buy a car the best terms and rates are on two to three year notes, right? Most people take a five-year note out on a car and they’re still pretty favorable But the guys that take the 72 month loans I’ve done that on Lamborghini’s before like it’s all interest first and you’re not really knocking anything off of it, right? And so it’s the same with houses imagine paying ten years on a home and then you go to sell it and it costs you money to sell it because you have to pay for title origination closing costs and

percent real estate fees. And you’re like, I lived, I might as well have been renting, which brings me to my point. I know it’s a long winded start of an answer here, but Klaus Schwab, the world, they’re now retired, but a former leader of the World Economic Forum is famous for saying you will own nothing and be happy. And this is a great example because if your house isn’t paid off, you don’t own it. And these days with property taxes, even if it is paid off, you technically don’t own it because you still have to pay for it or you could lose it to some sort of entity. Yeah.

was telling you last week, rentals, our rental portfolio here, it’s for the most part paid off. mean, they should be cash flowing well. The first five months, this is in Dallas, Fort Worth, Texas, taxes are high, insurance is high, Five months of rent for us to break even just to pay off taxes. Taxes and insurance, a year. Yeah, and so I told you I got a couple houses back yesterday. As if nothing bad happened. As if nothing bad happened. By the way, says these are paid off.

So imagine if you had any kind of a mortgage attached to them. These are paid off in Dallas, Fort Worth, one of the hottest, if not the hottest market in the nation. Yeah, it’s tough to make them work now. Yeah.

Ten to five and ten year mortgage At 20 % interest by the way, so how do we go from ten to thirty now? To make housing more affordable

The ⁓ banking institutions are some of the largest lobbyers and financiers of our political action committees and our politicians that make the laws here. We’ve seen the too big to fail when they gave what was that? ⁓ $500 billion or whatever it was to quantitative easing to help every bank. But Chase, I remember just seeing Jamie Dimon speak this week and that was one of the things they said. You were the only bank that didn’t take a bailout. Ford Motor Company was the only automaker that didn’t take

bailout and surprisingly those are the two top bank top auto make you know you keep the government out of your business you can prosper a little bit better but you know think about that if I’m a banker I’m a Jamie Dimon type of person I’m an economic advisor to Trump I’m not gonna say well you know we could lower interest rates and not profit as much as a bank that would be absurd for them to say something like that right yeah instead they go well we just give them give them a 50-year mortgage payments will go down a little bit right you would know this Ryan if somebody sells let’s just say they

sell a 50 year over a 30 year if they sell a 30 over a 15 the mortgage brokers make more money right because no no no no okay so there is something called the Dodd-Frank Act that was passed in 2010 and

⁓ QM is what they call the loans that are done for consumers. So it’s the CPFB, the Consumer Finance Protection Bureau. CPFB, Consumer Bureau of Protection Finance. What are the hell? And so what they did was they changed the commission for loan officers. A lot of people don’t know this. Back in the day, loan officers were like real estate agents. They make a point of origination and 2 % yield spread is what they call it on the backs. They get 3%. And you’re in control of that. You raise the rate, you get paid a little more.

got rid of that. Now everybody gets paid on their volume. So it’s basis points. You originate a million bucks, you get 50 basis points of that. I assume so it’s not based. So but what will happen is there is a cost passed on to the consumer 1 million percent. So the mortgage broker, the guy that’s your loan officer that you have a relationship with the guy or gal that does that, they’re not going to have any upside to selling you a 50 year mortgage, right? Matter of fact, there’s probably they probably the good ones will tell you not to take that they would say you need

to afford one at 20 or 30 years, right? You’re going outside of your budget. The other part of that though, is that ⁓ the bank that services it, so there’s levels to mortgages, right? So there is the broker you go to that you put your application in, they typically have a correspondent line of credit or broker it out to somebody who actually funds it. Then that company pays the money, pays the closing costs, pays the commission, and then either sits on it in a portfolio and has a third party what the investors

would think of as a property manager, but is a portfolio manager that collects all the payments on there, sends the disbursements to where they go within the investor pool, and they put millions of those together and call them mortgage-backed securities. The people that make money are not the sales staff and not the brokers. It’s going to be the servicers because now they’ve got 20 more years of servicing to do. Yeah, yeah. I never knew that, and I always assumed my very first house I ever bought, not even as an investor, when Lindsay and I got married, we bought a house. ⁓

in in Lewisville here as well. I’ve flipped hundreds of houses. I’ve only owned two like personal. Well, I guess three with a ranch now. our first house, we went to sign, we went to sign and we told him we want a 15 year mortgage. This was 2000.

2005 2004 five and we told him we want a 15 year mortgage everything was on track and we got there and they have all these documents the first thing I’ve first time I’ve ever signed for a mortgage there’s a lot of it’s overwhelming like all the paperwork right and even more so and they were 30 year mortgages and they’re like how people they’re helping us sign they’re like well we can go print everything but it’s gonna take us like two hours

And they’re like, well, you could just make a bigger payment, you know, and I was I was always like, yeah, you’re just getting paid more. Like literally, I’ve thought that since that moment. So now, ⁓ matter of fact, like when ⁓ when I was doing mortgages, I would actually get paid more on a 15 year note because there would be less hits. So you know, it would be more if I was really trying to make some money. It’s advantageous for me to sell you that 15 year note because, yeah, like let’s say the interest rate six percent on a plain Jane 30 year fix. Right. It might be

five and a half on a 15 year fix, right? Which I could then sell that to you at 6 % at 15 years and that’s where I would make the most money, right? Because the shorter term, I got a bigger discount because the bank’s less risk on their money. But yeah, the people who stand to make money on this the most will be the servicers because now they’re going to be servicing something for 20 more years in and the servicers sit on the escrow accounts. So they accrue interest on those escrow accounts and they make the disbursements and you know, it stays in your account

or whatever until you sell that house. sometimes property taxes go down. Sometimes they go up. There’s people that never close their accounts out. Think of all the apps that we have where we left like $0.20 in there because nothing that we could buy in the app was $0.20 and we didn’t want to put more money in it. Like gift cards. Dude, that is a gazillion dollar way to make Somebody’s benefiting from all that float. Absolutely. Yeah, yeah. So we don’t know what this will look like yet.

The question is, will they have 50, do you think they’ll have 50-year mortgages for investors? Kevin, what do you think? You know, I was, when we were just talking about the 50-year mortgage for everyday consumers, that made me think about on the investment side.

I think it’s going take some time before we get to that point because anytime you’re on the investment side, no longer think about, how can I maximize what I’m going to keep in my pocket? But at the same time, how can I make sure that this is really good for me? And then, like Ryan said, at some point, is this really the best thing for…

for the consumers is really the best thing for me as an investor. Because if we’re breaking down the numbers, and let’s be honest, if you can break down the like you were Ryan, are they really looking at that cost, or are they looking at how most consumers look at it? Like, oh, it’s 50 years, hey, it’s cheaper right now. But when I need to sell that property, heck, what does it look like when I try to do a 1031 exchange? Do you really have that value in saying it anymore? A lot of investors, they say things like,

marry the house, date the mortgage, like that. I can see that being next. Like, well, just date this rate for a little while. And when rates come down, then you refinance into something else. Or when it appreciates, then refinance it. People will start to find ways to justify that, right? Well, ⁓

Like I was saying earlier, you’re gonna have a rate hit for this. So if the interest rates are 6%, they’re gonna be six and an eight, six and a quarter for a 50 year, 40 year term. ⁓ I did the math on this yesterday with the help of ChatGPT on average at a $280,000 home, which would be cheap here and in most markets in the US at this point, that’s an ⁓ average of three to $600,000 more in interest that you would pay over the term, okay?

So if you’ve ever looked at a truth and lending statement, borrow 400, 1.2 is typically what you’ve actually financed over 30 years. So add another 20 years to that, you can add another 50 % of what the actual price was that you’re coming in on that. Because it’s, again, 6 % a year for 20 years. What’s 20 times 6? 120. This is 120 % just right there. Yeah. Yeah. So we’ll see how this plays out, But if I’m an investor,

Okay, then it’s different if I’m a consumer, I have to put 5 % down, maybe no percent down to buy a home, right? Veterans can get in for 100%. That’s probably a terrible idea for them. But an investor putting 20 to 25 % down, there is some equity already there because of our cash. Okay. But if a investor is trying to, you know, play the, I’m going to hold it for 10 years and sell it and make profit, probably not because it’s going to be so much front end. But if an investor like

Zach Sasser who is a good friend of mine. He’s 26 and he probably owns seven or eight homes now. He’s still in his 20s so he could buy something for 50 years and sell it 30, 40 years from now. Just like a 401k, I’m buying this house and I’m not touching it till I’m 62 and a half. You know what I mean? So and at the longer terms they might be able to cash flow it better, right? Because it is going to be a cheaper payment so if rents go up and that payment’s locked in at some point maybe interest rates go down and they

refinance it from 50 to 30. As an investor, it’s something to look at, but here’s what I think. I don’t think they’ll roll it out to investors for a while. Probably not, It’ll be a special finance, consumer only, high qualifications, 30 % DTI, that kind of stuff, debt to income ratio. But once they get it established and have a baseline, then they’ll open it up to probably 20 to 30 % down on those 50-year mortgages, which isn’t too outrageous. And it might work

for cash flow. But if you’re somebody who’s like it my age, 46, it’s probably not a good idea. But if you’re, you know, 40 and below, yeah, you could probably run a 50 year mortgage and pay on it the next 30 years as a long term retirement plan. Yeah, I think investors will find a way to make things work. There’ll be some investors that make it work somehow that make you were counting on a lot of high appreciation. Maybe like the appreciation. I had a mentor here early on that was like, you’re never going to get any appreciation in Texas. Like just count on three percent a year.

He’s got a cash flow. This is a friend of mine that has like a thousand houses here in Dallas and he was wrong. That’s changed. like I, my properties have never really cash flowed that well but the appreciation has been insane. Like I could have, nobody could have imagined that. Yeah, you, he was right when he told you that though. Well, that’s what I should have. Yeah, you need to buy them. for a long time. This was like the S &P 500. It was stable as hell and you know, my house, I’ve lived in it for, how long have you lived in your place? Like 15 years now. Okay, I’ve lived in mine for eight and

double what you know the houses around me that sell that aren’t even rehabbed like mine is sell for double what I paid for mine. Yeah, that’s just eight years, Yeah, you gotta think though, but I have a 10 year mortgage. I refinanced in 21. So you know, then won’t be long for it’s paid off. I don’t have to worry about it. Well, you gotta think if we we get the 50th mortgage a couple things if you’re if you’re gonna push that product as a mortgage company, how do you how do you incentivize your team number one?

How are they even going to underwrite that for insurance moving forward? We have the whole, we’ve got obviously closer coverage. Let’s say if it was Todd, and he’s like, right, we can insure this. But now as of 50, he’s like, well, that changes all the underwriting for us. It might, yeah, because they’re probably presumed to have less equity. and know, insurance.

I happen to own an insurance company, but I don’t know a lot about insurance. have a great team over there and I’m just an owner manager. ⁓ in insurance recently, they have changed the deductibles from one to 2%. You know, it’s really been rough on the roofing industry because the folks in the roofing industry used to save you a deductible. You know, it’d be like in cars, I can save you a $500 deductible, a $2,000 deductible. I may not be able to save that on some auto body work, you know.

the same on on roofs and so ⁓ that is interesting because in 50 years who knows what insurance rates could be you know and what’s crazy is 50 years from now who knows what property taxes may be or or they may not exist some places are starting to get rid of them so ⁓ there is a lot of infrastructure it’s a good point Kevin there’s a lot of infrastructure that’s got to be put in place to be able to you know hey I can give you a 50-year mortgage but if there’s no 50-year insurance

insurance. Yeah. know, then there’ll have to be an exception. Hey, you gotta renew, you gotta re-up your insurance every 10 years cuz that’s they’ll only give you a 30-year policy or something like that. Well, we’ll see how this plays out. You know what sounds worse than this though is a 15-year car loan. Yeah. Talk about I don’t have an equity. Yeah, no kidding. And it’s the same play though, isn’t it? Yeah. In in the same thing. I to pay.

What car do you know they make right now that’s going to last 15 years? Did you imagine the car is busted and disgusted and you’re still paying on it? You know who’s going to take out 15 year car notes?

the Chicks that drive those Nissan Altima’s with like every door ding and every door panel those you’re going to start seeing Altima’s down the road you’ll be fifteen fifteen fifteen you know they still run like a top though dude yeah can’t break them that’s what I’m saying those will wait Toyota Camry’s those will work because they’re the only cars that last fifteen years you know yeah it’s hard to imagine that hopefully that one does not happen that’s a little crazy

Yeah, I just traded out of a truck that I’ve had for six years long as I’ve ever had any vehicle. First vehicle I ever paid off and owned. And now I all my cars, but that was my first one. ⁓ six years into it, 80,000 miles, shit starts falling apart being expensive. had to get rid of it. I couldn’t imagine if I’d financed that thing for… But when I traded it in, this was great. I paid 70 grand for the truck six years ago. They gave me 50 grand for it at the dealership. So I felt like that was a pretty sweet deal.

know? And I bought a $90,000 truck and the there’s no way it like I was looking at them just payments on the the difference between the $40,000 was like 1800 bucks a month or for 1500 bucks a month on a on a three-year note. I end up paying cash for it but I’m like dude that’s crazy. Could you imagine having to pay 1500 bucks a month for 15 years on something? Like wow. I my first of course I just paid him outright you know.

Hey, my first car, come out of college, second car, outright. My Jeep, all right, we have a few years left on it, 15 years. if you Five feels like forever. Yeah, absolutely. I’m looking, like, stop calling. I’m looking, like, man, I’m so tired of giving y’all money. Yeah. You know, like-

What is the cause? Do I get a discount if I pay you off early? Oh, hell no. No, no, no. Do I get a discount You’re making too much sense, sir. Please stop having logic on this call. know, entrepreneurs use these as tools, right? I remember you just talking about, you said a Jeeve, and I thought of my wife has a Rubicon that we just paid off. it was a five-year loan. But it was 0.9 % interest when we got it. And I was like, that makes sense. We could have paid cash for it, or we could have whatever. But it’s like, this is like free money. clearly, has been over the last five years.

of inflation, right? But let’s talk about like, let’s kind of shift and talk about just entrepreneurs using debt, like how they use it. Obviously, you guys help a lot with working capital and a lot of other stuff that entrepreneurs need. And so we started this off talking about the 50 year mortgage that really is probably more of a play for owner occupants, right, to make it more affordable investors find ways to use different tools and still make their business move forward. So like, what’s what’s working now? I know you you you talked to people a lot about obviously, people to be smart with debt. But it’s a it’s a tool that

most entrepreneurs need one way or another to fuel their business from where they’re at to where they want to go. Yeah, you know, ⁓ to consumers, debt is a shackle to investors. Debt is a tool. And ⁓ I’m sure your audience is who’s largely investors use debt as a tool. ⁓

what most people end up, especially in the real estate world, what most people, they got a hard money lender that they use and they’ve got their ratios and qualifications that the property must make and down payment and all that stuff. And I see a lot of people get put in the, man I would buy, man, I would buy more houses, but I don’t have access to more capital. All my money’s tied up over here. All my money’s tied up over there. And I go to Bank of America and they won’t give me any money. I go to Chase and they tell me that they don’t like the type of

business I’m in because we do fix and flips and holds or whatever the case, right? It’s the same old story for every entrepreneur, whether you’re a real estate investor or whether you’re a plumber, right? And so there are a lot of, and this is the fastest growing segment of the financial industry right now. Like last year alone, it was only $8 billion in business that was done, right? So this is still in its infancy stage, but there is private, a lot of talk about private

equity in the real estate and the business market lately. There’s a lot of private ⁓ lenders out there that aren’t Chase Bank, aren’t Wells Fargo, that don’t have a fancy website, that aren’t running Facebook ads, that have a lot of money to lend to owners and investors and operators. And like at Closer Capital, we tapped into

You know, I wanted to build something that was the go. You can go to us for all things money. You know what? What always bothered me was I’ve got a mortgage guy and then I’ve got a commercial lender and then I’ve got a hard money guy. It’s like and I don’t. They’re all cool three friends of mine. They’re all guys. It would be much easier for one person to have all my stuff central command for everything that I need. And so that’s what I set out to build two years ago. We’re fairly young company closer capital, but that’s why I set out what investors.

haven’t had prior to this conversation that we’re having now, what they haven’t had access to was to be able to borrow for their down payments or to be able to do creative financing things. So let me give you a scenario here. So if you’ve been an investor for two years, the same LLC. Now, I know a lot of us will get an LLC per property, right? Just for protection, personal protection on that property in case something goes wrong on the job side or whatever the case may be. But typically you have some blanket LLC that all your

cash is eventually traveling up to. You can go take that to a company like Closer Capital and we will loan you typically 125 to 150 percent of your average monthly gross top line revenue. if you are we take six months to 12 months of your bank statements, if we take six months, we average it out and you make $100,000 a month on average deposits into that bank account, then we can give you either working capital or a line of credit of up to $150,000.

$100,000 somewhere between 100 and 150 depending on what your bottom line cash flow and some of these other factors Well, what does that matter for an investor? Well, if I can go get if I can go get a line of credit or just a lump sum term loan of money and I’ll use the line of credit as an example if I go get a line of credit and let’s say that the interest rate on that line of credit is 12 % annually, that’s 1 % a month per whatever you’re drawing on that line So if I go and I put 35 % down on a fix and

I borrow the money against my line of credit as the down payment. Okay, put because it’s cash whenever you want it in your bank use that as down payment I’ve got it in our case our hard money rates are about 8 % So we got about an 8 % interest rate over here that we’re only gonna pay for six months max anyway So it’s really 4 % interest rate if you actually annualize it and think about it that way And if you sell this house in four months You’ve only paid about 4 % in interest on the down payment money that you came in there all the while you’ve got

your

own capital, still sitting in the bank account. Now you’re playing with the house’s money and you’ve got your money sitting in the stock market, sitting somewhere where you can pull it in and out of quick if you need it. Now, then the line of credit that I give you for $100,000 in this instance, you paid it off in four months, you go find another house, do the same process again. That $100,000 line of credit could be three, $400,000 worth of line of credit before the end of the year. And on top of that, it could have made you another 100, 200, $300,000.

and flip money or whatever it is that you’re using it for. I call that building a moat. The moat ⁓ is something I took from Warren Buffett. You he says you got to build a moat around your finances, right? So you got your main finances and you have to build layers of protection. I even wrote a book with my own thought process around this called Bulletproof Business about 10 years ago. And so an investor moat needs to be and we call it the investor arsenal. It needs to be a line of credit or working capital.

like so let’s say you don’t need the working capital right now so it would be foolish to take it and be making payments on a term loan but but we can close in three days or less so you’ve got a contract on a property that needs to close in a week you hit a term loan with us it’s the down payment money by the time that contract closes over here and now you’re off to the races pay both of them off when you sell the property minimum in a lot of cases even on term loans you get 20 to 40 percent discount on the interest for paying it off early so and so this is ideal on

top of that, offer business credit cards at 0 % for 12 months locked in around a quarter of a million dollars, even for sometimes startup businesses. So if an investor can have a quarter million dollars at 0 % here, they’ve got a line of credit for $100,000 over here, and they’ve got hard money between 8 and 12%, depending on if they use us or the competitors, then they’ve got an arsenal of playing with monopoly money. Meanwhile, every time you get real cash, put that back in your bank account and don’t use it on any of the projects.

so

that if all else goes to fail, our loans are non-recourse, they’re non-collateralized, they don’t report on your credit. So if all else fails in a project, the bank’s holding all the chips and you still got your cash over here.

Yeah. You ⁓ mentioned my son up front. was talking to him. Surprisingly, he’s 18 years old now. We started flipping houses when he was one. So we flipped hundreds of houses, but he didn’t pay very close attention. Now he’s paying a little more attention because he’s trying to ⁓ figure out what he’s going to do with the rest of his life. And so we just had this conversation a couple of days ago about how just the money thing came up. And I was like, well, we’ve almost never used our own money. We have on some smaller deals, but we always borrow money. Usually from private investors or hard money or whatever, some local.

And he just couldn’t get over it. Why don’t you use your own money? was like, well, why would we? And by the way, for entrepreneurs, you’re generally not sitting on a bunch of cash. My money’s busy doing something else. But you’ve got to use it wisely. It’s easy for entrepreneurs to start to commingle stuff. And next thing you know, they’re paying for stuff that they might not get back. They could be paying for it to cover overhead costs instead of investing in equipment or investing in other things. So what kind of guidance do you give entrepreneurs?

Doers to use it wisely and not get not get you know hooked on that cheap credit there there was a study done by Kipling I believe and ⁓ Recently and they studied a bunch of people with five million dollar net worth like like no more no less This was the batch that they picked from the average balance they had in cash was 280,000 bucks. are people with five million you think shit. He’s worth five million dollars He’s he’s ballin in in equity. Yes on paper ⁓

matter

of fact, there’s an interview, I think it’s the same one we were talking about earlier with Elon Musk and they were like, but you have a trillion dollar paper and he goes, yeah, paper. don’t have a trillion dollars in in I don’t have a trillion dollars in my vault somewhere with cash. Yeah. Yeah. I remember there was a time where I mean, I was going through some real financial struggles. had crazy tax bill. had a crazy overhead of my construction bill in my building and I had like 15 to 18 million dollars worth of debt that I’m paying on real estate.

debt, obviously not like personal debt or whatever, but real estate debt that I’m paying on and ⁓ going through a really, really tough time financially and ⁓ that was enough for me to be like, you know what? I don’t like the pressure of having to deal with all of that, right? And in the last two years, man, I have gotten out of almost 20 million dollars worth of debt just selling real estate. You know, I’m down to my last two houses, got rid of my building. ⁓ I say all of that because, you know,

So.

My kids are kind of same way. They’ve seen us flip houses our whole life and been on a lot of, you know, projects and stuff. And just now starting to pay attention there in their teenage years. And, you know, I think discussing what you’re doing with them and showing it to them and letting them understand the flow of money and how it works and explain like, why wouldn’t you use your own money? It’s like, well, because this is how I teach mine, because there’s these things called margin. And that’s between the margin of the money that I can use from somebody else.

and what I can make in the profit. And if I use my money, I might have a 10 % margin. But if I use the bank’s money, I might have a 6 % margin, but I don’t have any risk. my risk is eliminated. it’s like an insurance policy. And I explain it to them in detail like that. They’re starting to get it, ⁓ you know? what’s crazy is a lot of business owners and even a lot of real estate investors, they think they know finance, but they know from their one small corner of it.

I’ve

done a bunch of hard money deals, so I know exactly how this is. it’s just like anything else. We get in a routine, and then that keeps us from thinking outside of the box. I think, being a finance guy, you think you know finance like you’re talking about until you start working on the lending side. then you see how not just real estate investors, you see how roofing company owners, you see all these different owners

talking about the cost of the money that they’re leveraging, right? That’s always the number one topic. Anytime we’re right about to close a deal, I know it’s coming. I’m like, hey, if we didn’t pre-handle this question right now, it’s coming up. I know it’s coming.

so how much does it cost for us to hold another in their own math, know, trying to APR and you’re thinking like this guy must be smart. He, you know, his, his, roofing company is worth 250 million. And then you start seeing how he breaks down the numbers. Like, wow, he’s really not that not disrespectfully, but he’s not that smart of a guy. What he’s, going back and forth with He’s looking at it through the wrong lens. Yeah. And he’s going back and forth. We’re like, you’re not, you’re not understanding what I’m saying to you, This is not how much it costs. Well, it says it on paper. Yeah. If you go that far, it’s going to cost that much.

But don’t, that’s too much for me. You just said you’re gonna keep this for four months. Can you put that in writing? It is in writing. You’re just looking at it from the whole perspective. And then you also gotta think about when you’re older. I don’t know about you guys, my family, I’m a first-generation American. I was evicted twice as a kid. So the level of financial competency in my family, love them, it’s really not that high, okay?

So these conversations, I have to go into work to talk about these conversations because anywhere else it’s like…

the basic, I’m talking about base level conversation. So when you start breaking down the margin of why you want to borrow money, if you say it to the wrong person, they’re thinking, oh my God, it’s so expensive. Even to investors, there’s levels to that. There’s levels to what they know. They think like, hey, this is 10%. That’s all they know is 10%. What are you going to do with that 10 %? If it’s 10%, it might be actually good for you. remember one time you said, hey, look, what the hell is 10 % if you’re going to make, what the hell is 100

and

pay back a hundred grand if you can make a million off of it. You know, they’re like, yeah, but it’s still this like, you made 900,000, what are you, what are you? Yeah, don’t get caught up on that. What are you mad about the numbers? You know, I could get if it was like there was no margin, but bro, you’re making, you’re 10Xing your money. So just the dichotomy of like how money works, it’s, don’t care who you are. Now that I’ve seen it from the lowest of lows to this guy’s making half a billion.

And he’s done nothing. There’s some people that just step over dollars to pick up pennies. know, cool. Well, the now you know the ham story from Zig Ziglar and now you just see you’re just you’re just like, let me tell you the story about a ham. And you just tell them that story and go, who told you to ask me about interest rates? Are they a financial expert? Allow me to enlighten you. And I’m going to make you a better I’m going to make you better for the next bank, too, with what I’m going to educate you on, you know, because that’s what it is. It’s like get them fixed on this this interest rate.

50 year note is like a 400 % interest rate, you know, so yeah Hey, so if folks want to more about closer capital or connect with you guys, where do they go? closer cap comm every question that you could possibly have anything you need to know about a loan what it takes what the qualifications we have calculators on there Everything you could possibly this this website is an arsenal for people that need Financing so any question you have it’s right

They’re easy to navigate can also apply and get instant approvals with us closer cap calm awesome Thanks for joining me today guys good to see you. You probably get a call from Kevin yeah Mike thanks for having us man, and I want to say this before We end the show because I think it’s worth saying in front of everybody. You know I’m a very judgy person and ⁓ Because of my past and you know but one of the ways that I judge a man specifically is by their children, and you have an exceptional

son so that that really in my eyes means that you’re a very high quality man because Sometimes you know somebody like you and I had events and stuff and you you don’t know what you do when you go home or whatever But then you can meet somebody’s kids and see really how they are and how they showed up for them So I just wanted to honor you. I appreciate I appreciate that I was gonna try to sell you a 50-year mortgage, but I’m not gonna do it now. Appreciate it. Thank you. You wouldn’t make no more money off. Yeah, I guess not I thought I Awesome. Well, thank you guys guys. Hope you enjoyed today’s show There’s a lot of ways to use credit in your business ⁓

gasoline to fuel your growth, right? So if you want to learn more about Closer Capital, make sure you check out the link down below, closercap.com. Appreciate you joining us on the show. We’ll see you on the next one.