Assumable Loans Explained: Cash Flow Secrets in Today’s Market

Justin Humphries (00:00)
I had this come to Jesus moment where I just said, look, if I do everything I need to do to be successful and I fail, okay, I can live with that. What I can’t live with is quitting because the industry got hard and throw away this opportunity and a career that I love helping people in a very unique way. And and a skill set that frankly I’m really good at, right?

Dylan Silver (00:12)
Yeah.

Justin Humphries (00:22)
So I said, I can’t live with throwing that away because it got tough and I didn’t do what I said I needed to do. So I started executing on that plan I made and I started having really good results and have seen 40 to 50 % year over year growth over the last three

Dylan Silver (02:06)
Folks, welcome back to the show. Today’s guest is a Nashville-based lender who focuses on mortgage planning and strategy to help clients navigate their home financing with confidence. Please welcome Justin Humphries Justin, welcome to the show.

Justin Humphries (02:21)
Thanks, Dylan. Thank you guys so much for having me. Looking forward to the show today.

Dylan Silver (02:24)
It’s great to have you and I always like to start off at the top by asking folks how they got into the real estate space.

Justin Humphries (02:31)
Yeah, I would say in the mortgage industry especially, nobody falls into mortgage on purpose, right? There’s very few kids that grow up, and you may have heard this before, but that grow up and say, I wanna be a mortgage lender because it sounds boring and it sounds like I stare at tax returns and type on a computer all day. And for sure I do look at tax returns and I do type a lot, but it’s a lot more dynamic than people think it is. I got involved in the mortgage industry just over four years ago when my wife and I purchased our first home.

And we had such a positive and amazing experience with our lender, our local lender who was a family friend, that he had invited me to become a loan officer. So it was interesting. I was recruited fresh. And he said, hey, this is his words exactly. Hey, I figured you’d be a millionaire by now. I’ve seen all your finances. You’re not. I think you would love this. And I think you’d thrive. I would love to teach you how to be a mortgage lender.

And that’s how I got started. It was a fantastic start. And I had a great experience buying my first home. And I want to give that great experience to first time home buyers and next time home buyers and investors along the way to pay for it.

Dylan Silver (03:36)
I think it’s such an interesting part of the business to be a part of and it’s critical. And I think for a lot of people listening, they might get it if they’re in the business, but a lot of people who may be on the outside looking in or thinking, well, you know, I’m a realtor for instance. And so, you know, they might think, okay, well, the first stop is the realtor. The realtor is gonna send you immediately to get qualified. And on the investor side, as I, you know, involved with a lot of investors, how many deals have I seen fall apart? Cause the

Justin Humphries (03:56)
always.

Dylan Silver (04:02)
financing or the hard money loan doesn’t go through or there’s an additional appraisal or an inspection or something that’s needed and it falls through. So the lending is everything.

Justin Humphries (04:11)
Yeah, well, it’s it’s really I call it for approval of somebody’s golden ticket to say that the money’s coming right and and on that front doing a high level of due diligence and working with a local lender that does an incredibly high level of due diligence on the front end is crucial

you whether you’re purchasing a home for yourself to live in as a primary or you’re buying an investment property, the last thing you want is to waste your time, energy, earnest money, inspection, appraisal money, because I as a lender or your lender didn’t do their job vetting on the front end and setting expectations for what does this process look like? What kind of documents are we going to need? And what are the roadblocks that are going to that we’re going to have in the middle of the process? The hard part about that conversation up front is a lot of times

really dissuades folks from wanting to get per-proof because it’s hard, right? It should be hard. It should be a deep dive into your finances. Now again, if you’re a high W-2 earner that’s salaried and has a lot of cash in the bank with excellent credit, you know, it might be pretty easy. But for some people that that’s not their reality, it can be a tougher, more vigorous process. You may look at doing some credit repair. We may do some different things to get you ready before you can just go in and jump and go on a contract on a house.

Dylan Silver (06:05)
Yeah, I mean, I can tell you in the part of New Jersey that I grew up in, I’m in Dallas now, I mean, the income that you need to qualify for like any home in Northern New Jersey is like $225,000 a year. And that’s just where the market is. And it’s a huge part of the reason why I’m in Texas, right? We’ve got slightly different, slightly different market out here, to say the least. I wanna pivot a bit here and ask you about…

Justin Humphries (06:24)
Yeah.

Dylan Silver (06:29)
Nashville specifically because I love Nashville.

I’ve been through Nashville once. I wish I could say I’ve been through there five times, but it’s such a great area and it’s also a hub of real estate investing, which I think sometimes when people think about, you know, which areas to invest in real estate, they might not immediately snap to Nashville, but they really should, right?

Justin Humphries (06:38)
Thank

Yeah, Nashville over the last 10 to 15 years has been an incredibly appreciating market and that’s been the biggest tailwind that we’ve had and so great area. You get a lot of companies that are moving here too. So a lot of companies are looking at Austin and Nashville kind of a sister cities, right? So we have a larger Amazon headquarters here. We have Bridgestone America’s headquarters here. Oracle is building a campus that opened

And over the next probably three to four years later this decade, multi-billion dollar campus moving 8,700 jobs to the Nashville area. Tech jobs. mean, so, you know, 150, 250, $300,000 a year salary paying jobs. I think Nashville is going to continue to appreciate. Now the backside of that was challenging right now is because of the appreciation here over the last 10 to 15 years.

Dylan Silver (07:20)
Incredible.

Justin Humphries (07:34)
Prices are pretty high, which means the cash flow here is tight. You know, if you’re 20 to 25 % down doing a regular conventional or a DSCR mortgage here, then you’re not going to cash flow on probably 90, 95 % of properties, depending on the size and whatnot too. So that’s the the headwind on the investing side is the cash flow because prices have appreciated. But for people that bought five to 10 years ago or that are looking in specific areas right now. So I think

The biggest thing with Nashville is there’s different areas that are going to continue to appreciate at a higher rate than surrounding areas. And working with a local real estate pro agent that knows the market and can point those out to you is crucial for success. So if I were looking at a key success factor to have success investing in the Nashville market, would be, you know, essentially pick your area. In 2020, 2021, 2015, you could throw a pin in a map or throw a dart at a map and you’re going to hit a profitable deal.

Right? That’s

Dylan Silver (08:32)
Yeah.

Justin Humphries (08:33)
not the case right. So it’s a skills-based market, which I find really challenging and fun. Some people don’t like it. But I find that to be a really, really good market to be in because it means that, you just have to know and have more knowledge, and most of your show listeners probably do, than 80 % of people that are buying investments in Nashville. If you top 20%, you’re going to make money.

Dylan Silver (08:55)
I want to ask you about, pivoting again, about scaling in the lending space in general. So going from being on the outside looking in, you get recruited first year, you’ve got experience, get some more experience now you’re into your career. What was it like and what advice would you give maybe people who are thinking about being a lender or maybe people who are in their first couple months or year as a lender?

Justin Humphries (09:55)
Yeah, I would say the best advice I could give is that execution is everything, right? So it’s very important to plan and have a plan and to work on the plan and make sure that your market plan, whatever that is, marketing to referral partners, direct to consumers, social, just different channels that you can identify and go after as a lender here. But you got to execute the plan. And if you don’t execute the plan,

the best plan is not what the paper is printed on. So that would be my number one. And just to take it back to kind of my start four years ago, it middle of 2021, business was falling from the sky. It’s like, I didn’t know anything. I didn’t know anybody. I came in the industry cold and without, know, I didn’t come into a development program or anything like that, or started rocket mortgage, cold calling, inbound leads. No, I just started with, hey, you get licensed, go get some business. That’s how I got my start. So.

You know, 2021, that second half of that year was great and amazing because I could pick up deals that would literally be walking in the park and somebody would be like, I got a 5 % loan. I’m like, great, rates are three, let’s do a refi. You know, it’s that easy. It’s not like that anymore, obviously. So 22 happened and I kind of made my marketing plan and rates went up. And so that was something that nobody had really counted on it happening that quick. Rates started at 3 % in January, by June they were six.

Dylan Silver (11:00)
Yeah.

Justin Humphries (11:13)
So that’s a complete tailwind shift where in six months the faucet turned off, period. And I think a lot of people in the industry, yourself included, may have kind of felt that just almost instant pullback. So I had to redo my business, re-plan to the point where I didn’t have a paycheck for four or five months. I had two kids under one year old with no paycheck. have good twins. So it was a difficult and stressful time where I almost bailed on the industry.

And 50 % of loan officers have, 50 % of us are not. And similarly with agents too, 73 % of agents did what, zero or one transactions last year. So I thought about bailing, I took a couple interviews here and there, and then I looked at it and I said, look, did I execute on what I said set out to do and what I said I needed to do to be successful? I looked at my plan, did I do that? No, I didn’t do that. Did I do that? No. Did I do that? No.

Dylan Silver (11:41)
Yes, Ryan.

Yeah.

Bye, sir.

Justin Humphries (12:06)
Did I do that? No. So I had this, I would call it come to Jesus moments Nashville speak, but

I had this come to Jesus moment where I just said, look, if I do everything I need to do to be successful and I fail, okay, I can live with that. What I can’t live with is quitting because the industry got hard and throw away this opportunity and a career that I love helping people in a very unique way. And and a skill set that frankly I’m really good at, right?

Dylan Silver (12:23)
Yeah.

Justin Humphries (12:33)
So I said, I can’t live with throwing that away because it got tough and I didn’t do what I said I needed to do. So I started executing on that plan I made and I started having really good results and have seen 40 to 50 % year over year growth over the last three

compounded. So.

Dylan Silver (12:47)
I think ⁓ listeners

who are tuning in and hearing you talk about this, maybe without giving away all the gold, Justin, just a nugget, let’s get a little granular if we can and talk about what that plan was like. Again, without giving away all the gold, but maybe some of it. What was that plan like and what were you doing, or maybe what did you think that you needed to do that you weren’t doing beforehand?

Justin Humphries (13:09)
Yeah, so I mean, as put down as this can be, the cold calling sucks and it works, right? And so I cold called producing agents, I met with them, you I started to get leads and I closed leads that nobody else got closed. I closed the turn downs and I still close a lot of turn downs, right? So when you close the turn downs as a loan officer, you create, you know, if it’s a $400,000 deal, you know, actually, I’ll just give a really simple, I closed the turn down earlier this year.

for a physician loan that was a $795,000 purchase, right? And he had a sale. I created on that one deal $30,000 in GCI for that agent, husband and wife team. So that’s incredibly valuable. When you have that skill set and that ability to close deals that others can’t close because you work harder, you dig deeper, and you know your guidelines, then it can work. It’s a hard thing to do because when you do cold call, you’re gonna get

Dylan Silver (13:47)
Wow.

Justin Humphries (14:43)
you know, the muck, right? So you get a way through a bunch of unqualified buyers. They’re like, well, if you close this one, I’ll work with you. Okay. You know, but it does work and it does, it is scalable over time. So that’s how I got started is just, Hey, let’s, let’s do the hard stuff. Let’s learn, let’s learn, let’s learn. Let’s really focus on alternative loan products too. think most of the lenders right now, they’re so heavy on conventional and government stuff, know, FHA VA conventional.

Dylan Silver (15:10)
Right.

Justin Humphries (15:11)
that that’s 98 % of their business. And it’s the majority of my business, but it’s not 98%. It’s probably 75 to 80%. The rest, I’m doing physician loans. We do reverse mortgages. We do DSCR loans for investors. there’s a lot of bank statement loans. There’s a lot of non-QM and alternative financing out there that if you know how to leverage that, you know your products that you have, and you’re somewhere that you have good products, and competitive rates matter. People say they don’t. They absolutely do.

and you’re somewhere where you’re competitive and you have good products, you can leverage those if you have the knowledge. And you’ve got to work, right? That do it, knows deals is hard, is very difficult, very taxing. Two or three K and homestyle renovation financing, for example, too. That’s a couple, we’re in the middle of a couple of those right now that most people around me, even at my company won’t touch. I just don’t want to fool with it. I’m like, let’s do it.

Dylan Silver (15:59)
⁓

It’s a different vertical to be involved in, right? And I think, you know, from the realtor side, most realtors do not want to interface. And I think I can say this, being a former wholesaler, still active, and then also working a lot with investors. Most realtors are not super gung-ho about interfacing with investors because it’s a different ballgame. Investors can be tricky, right? They can be a little prickly.

Justin Humphries (16:23)
Mm-hmm.

Dylan Silver (16:25)
⁓ And I think one of the things is is also a different lingo, right? And so you talk about a lot of the more creative like DSCR for instance and If you’re not kind of approaching it like a contact sport Which I think real estate is then you’re gonna miss out on 25 % that 25 % could be the difference between make or break and honestly It’s just good for momentum because like when you go however long time without getting a deal or

Justin Humphries (16:44)
Okay.

Thanks.

Dylan Silver (16:51)
without getting some significant lead flow. It’s just demoralizing. And as people, we like to have at least some wins lined up. I think a lot of people, too, would just say, well, I’m not going to do that. You know, my broker doesn’t really specialize in that or, you know, I don’t know how to do that. And I think it’s it’s the people who can pivot. Those are the people who I think have a ⁓ long career in real estate. I don’t know however many of these podcasts that I’ve done, you know, one hundred and seventy plus or whatever the

Justin Humphries (16:59)
Okay.

Dylan Silver (17:19)
number is at this point. don’t know any of them that have been in the business for 20 plus years that had the exact same business model for even longer than like a five year period. Like everyone pivots.

Justin Humphries (17:29)
Yeah.

And that’s what I’m in the middle of. Hey, I don’t necessarily cold call as much as I used to, but I’m doing things like this and looking at social media content, doing a content day tomorrow that I’m really excited for that will drop over the coming months. you you pivot as the market needs you to pivot. And I think it’s a, to go to kind of just piggyback off what you were talking about, it really is a skills-based market for lenders and then for real estate agents too. So it’s stuff like you need to know these alternative products, even as an agent.

And as a buyer, as an investor, think, again, skills-based market across the board, where those that have the skills and the knowledge and execute are building the relationships that others are not building in this market right now because they do things that others either can’t do or they won’t do. you know, a lot of the agents I’m working with are thriving and they’re scaling at a comparable pace that I am because they have that skill, knowledge and base where they’re getting a ton of inbound referrals because they’ll do things like assumptions.

Dylan Silver (18:13)
No question.

Justin Humphries (18:26)
you know, which is a niche, a niche strategy right now that, you know, doesn’t benefit me at all, but it’s still very beneficial for the home buyer on the right property. But most agents don’t know that assumptions exist and a lot of lenders don’t know that assumptions exist or how they work.

Dylan Silver (18:38)
Are they…

Can I ask you to get a little granular again about that? I’m personally curious. Are they, when they’re assuming it, are they reaching out to the lender and informing the lender, hey, I’m imagining they have to be, but I also know that in the wholesale world that that doesn’t always happen.

Justin Humphries (18:57)
Yeah, so they have to reach out to the existing lender on the property, right? So the service or the existing lender, and I’ll jump back to maybe getting a tag granular on assumptions, but really it’s only government loans. So FHA, VA, USDA loans are all assumable, right? FHA, you have to do owner occupied for investors. That’s not obviously an option if you’re real estate investor, but VA, you don’t, right? And you don’t have to be a veteran.

And that’s something not a lot of people have the knowledge and the skill set around. call me if you want to learn a little bit more about assumptions, I’ll leave it there. there’s a lot of agents that really how it works is a lot of properties are mis-marketed. They’re not marketed as assumeable. You’ve seen the ones that are, and typically they’re getting a lot more traction in the marketplace because that 2.875 FHA, Assumeable Loan, is very attractive right now.

Dylan Silver (19:25)
Yeah.

You

Justin Humphries (19:49)
If for an investor, if it’s VA, obviously no FHA, that means instant cash flow, right? You rewound the clock four years to where you can cash flow on almost anything you buy, right? There’s challenges with assumptions and it’s a niche strategy and identifying the properties can be difficult and getting the seller to agree. That’s difficult too, but it is something that does work, right? So go ahead.

Dylan Silver (20:08)
I

gotta ask you more about that when we hop off the podcast here. I’m about to go hop on the MLS and figure this out for myself, because I said I should know maybe a little bit more about this. we are coming up on time here, Justin. Where can folks go if they’d like to reach out to you, or if maybe they’re in the Nashville or greater Nashville area, or if they have a deal that maybe they want your feedback or opinion on?

Justin Humphries (20:13)
Yeah, it’s pretty cool.

Yeah, and I’ll say, I’ll give a couple contact pieces and I also want to say my markets too. So Nashville is my primary, I live here. About 30 to 40 % of my business is in the greater Atlanta area as well. So that’s an area that I do a lot of business in. have relationships built over there. So if you’re looking there, Cleveland is another one, but I’m licensed in six total states with the ability to refer out. So.

If it’s something where you want to have a conversation but you’re not in the Nashville area or in Tennessee, please reach out to me because I do have other licenses and resources. Best way to get a hold of me always is going to be my cell phone. That’s 615-438-8125. You can also go to my website, which is justinhumphreese.org if you want to see some more information, different things about me. And then I have a LinkedIn as well if you want to check that out. But I’m pretty findable if you search Justin Humphries mortgage, you’ll find me.

Let’s see. Anything else, Dylan?

Dylan Silver (21:21)
That is it, man. I was just going to say thank you for coming on the show here today. And congrats on your success and to your continued success,

Justin Humphries (21:30)
Yep, appreciate it. Thank you so much for having me. It’s been a pleasure.