Cash Flow Gets Funded: Investor Lending Strategies Beyond Traditional Banks

Dusty Lloyd (00:00)
Yeah, no, that’s a good one. ⁓ I do non-layups. I like the tough deals. Yeah, I can replace you if your job is just to say, your rate’s six and a quarter today, ⁓ take it or leave it. ⁓ But we do construction lending, and that can be a year-long process from initial talk to a client to ⁓ actually closing and being able to break ground. ⁓ That’s not an easy layup.

⁓ I deal with divorces. So these are people that are not happy with each other decided to Leave and who gets the house? ⁓ and that’s a long conversation and Strategizing and figuring out with where rates are at what they have what’s the best thing and maybe telling them you don’t want alone you guys want to figure out how to deal with it.

Dylan Silver (02:21)
Hey folks, welcome back to the show. Today we’re joined by Dusty Lloyd, a lending executive and partner at Promise Home Loans with more than 25 years of experience in housing finance, specializing in investor lending, DSCR loans, bank statement lending, and spec construction financing across multiple states. Dusty, thanks for joining us today.

Dusty Lloyd (02:43)
Thanks for having me. I’m honored to

able to talk to your audience and see if we can come up with some fun and interesting ways to make ⁓ home finance ⁓ better for everybody who’s investing in real estate.

Dylan Silver (02:54)
Now, speaking of, there does seem to be a lot of investors who have felt over the last couple of years may be trapped out of traditional financing, but it seems like some alternative products, including DSCR, have stepped up to fill the gap. Are you seeing that change as well?

Dusty Lloyd (03:17)
Yeah, so I’ll tell a little story. Back in 2009, I worked at Indymac Bank and I remember my boss coming out of a meeting and he was just ashen white. He said he was talking to Fannie Mae and the lending landscape would never be the same. And that’s kind of a sketchy thing from the head of capital markets to say. And not long after guys in black SUVs from the Secret Service came and…

shut down any Mac bank that was pretty surreal. ⁓ But we’ve had to document that everybody who can buy real estate can ⁓ qualify based on their income for real estate. And then another story is ⁓ I had a client who had $4 million in his trust account ⁓ and he wanted to buy a house and get a $800,000 loan. And ⁓ if you send that to a bank, ⁓ you know, like a Wells Fargo or a Chase, they look at you like there’s no way.

But if you think of it from ⁓ the person investing in those securities, like the guy with $4 million is probably a better bet than the guy who has a low debt to income ratio with no nickels in their pocket. ⁓ so flashback about five years ago, they started coming out with this debt service coverage. That’s how we handle all apartment buildings, strip malls, ⁓ commercial financing. And if somebody has the reserves and the wherewithal to make the payment, ⁓ let’s just look at the property.

property cash flow. And we started with like a 1.25 debt service coverage. So that’s, you know, if the mortgage payment is 10,000, we want 12,500 coming in. And that got whittled down to one to one. If you’re making 10 grand, you’re probably going to make your $10,000 mortgage payment. And now we have options that go down even lower to 0.75 % or even in some cases, none. And we can do lines of credit that way. So people can tap equity to buy something else.

⁓ If you’ve got the cash flow in a property and it ⁓ breaks even, what would be the reason for you to stop making the payment?

Dylan Silver (06:09)
You know, this is something that often comes up. I’m a realtor in Texas. When talking about not just folks who may have purchased a home before and are looking at, you know, potentially, you know, downsizing or upsizing or moving, but also for first time buyers who may have never had an interaction with a lender, right? And it can be…

in many cases a discouraging conversation when you go to a lender and they don’t follow up or they feel like they’re unable to have a path forward. What I’ve realized now being licensed is that the ⁓ loan officer themselves has a huge role in that person’s life. I mean, it could be two loan officers at the same company, but just a different methodology, a different system and a totally different out.

Dusty Lloyd (07:02)
Right, ⁓ and think of it this way, a lot of these mortgage companies are trying to do away with the loan officer. They’re trying to ⁓ use AI to do it. Rocket is putting cheaper and cheaper people in those seats that may have tended bar six months ago, and now they’re a senior loan officer. I call them senior loan officer. And ⁓ they haven’t sat down on either side of that desk to get told.

how to go through their first time home buyer process. I bought a couple of homes, which is an arduous task in Southern California. Starter homes about a million, two. And I’ve sat on the other side where we’re helping somebody buy, I think my lowest is an $80,000 manufactured home in the desert here in Southern California. Like you’ve got to be able to ask the questions that elicit the information that they might need. Cause people are afraid.

Hey, I rent my place for $1,400 and you want to put me in a $2,500 mortgage payment. That’s sketchy. But when we talk to them about, hey, I put this person in that same scenario, we set the ceiling on their mortgage payment and it came down and down. during COVID, just plateaued at $1,200. And now they’re cheaper than rent.

Dylan Silver (08:09)
Yeah, I think there’s a lot of it.

Dusty Lloyd (08:29)
And we know what happens to rent, it always goes up. And with the exception of insurance and property taxes, which are usually pretty nominal, your mortgage payment is gonna go down over time.

Dylan Silver (08:33)
Yeah, I mean.

Now, what are some of the common misconceptions that you see when working with investors specifically? Is it something as simple as not realizing that they don’t need to have lots of income showing on their tax return in order to qualify?

Dusty Lloyd (08:45)
you

Yeah, the two biggest things I get here in Southern California, they think if I just bring 20 % down, I’m going to make a bundle on cashflow in real estate. And down here, you know, you might rent for $4,000 a month and it costs a million five to buy a place. That’s not going to make a whole lot of money. ⁓ And they’ve got to be looking at the asset appreciating in value to make that make sense. ⁓ And on the income qualification side, yeah, they think.

I can’t buy a rental property because I don’t show a million dollars a year in income. And we can get over that with a debt service coverage loan. just was talking to my insurance agent about one we did in LA where he was a little negative on the monthly, but nothing major. And he was that guy who had $4 million sitting in his trust account. ⁓ He’s fine with it. That value in West LA is going to continue to go up. ⁓ And that mortgage payment eventually will come down like

getting a rate in the high sixes is not his forever mortgage.

Dylan Silver (10:03)
I’d like to get some clarity on what the down payment requirements are for DSCR. I’ve heard 20%. Is it always 20 %?

Dusty Lloyd (10:46)
There are lenders coming out with 15 % down options. ⁓ I’m a little afraid of those things because in my market, there’s no way that’s going to cash flow in Texas, Tennessee, ⁓ other parts of the country, ⁓ parts of Florida, those will cash flow. ⁓ But I’m afraid with somebody with not a lot of skin in the game, getting a property like that and maybe being a first time investor or something like that, are we really do have a big service?

But when you have somebody who has high net worth and they just want to keep leveraging that totally makes sense and so we have that conversation like What’s your plan? What’s your exit strategy? What can you hold long term? Are you fine being $300 a month negative when? ⁓ Five years from now you’re gonna have $100,000 worth of equity like those are the things we need to talk about ⁓ And it’s not so much just quoting a rate and saying ⁓ I can do it for this price ⁓

and they complain somebody else can do it at this price. We’re all fighting over that. Really it’s an advisory situation where I need to consult and figure out what are their goals and how do we get them there? ⁓ And if I’m just quoting rates, I’m not really doing a great service. And if we’re putting people into investments that aren’t good long-term for their strategy, ⁓ maybe we’re not doing the best ⁓ by them.

Dylan Silver (12:07)
Pivoting here, Dusty, you’ve helped build teams and manage loan officers. And there’s so many folks who are focused on production that they think, you know, team building is not for me, or this is not something that I want to do, or I’m going to train this person up and then they’re going to leave. I see this both on the lending side and then as a realtor in Texas. What feedback do you have for folks, wherever they are in the real estate space, who may be thinking about scaling teams?

Dusty Lloyd (12:35)
That’s great. So on the lending side, ⁓ I’ve seen it done well and I’ve seen it done very, very poorly. I was talking to somebody at ⁓ a competitor down here that’s in the broker space and the company is dragging them to put a huge amount of lead cost on their credit cards ⁓ and measuring that ROI. But a lot of the people are not very experienced. So for them to be shelling out 5,000 a month for lead spend to make.

$8,000 a month really is just doing something by the lead provider and not by the loan officer. That’s not a good scalable model, but ⁓ on the purchase side, right down the street, there’s a loan officer who has, I think, eight people on his staff ⁓ and three of them are licensed people ⁓ hashing out loans and ⁓ doing a great job of servicing that clientele.

He’s got all kinds of operational staff and his job is to go out there and ⁓ open doors with realtors and make that the phone ring and that’s on him. ⁓ from my standpoint, I’m an owner operator of a business as well as a hands-on load originator. ⁓ I find that that works best because I can answer all the questions ⁓ and he shakes with stress trying to fill that lead funnel and

that drives you to do things that other people might find objectionable. So it’s about what’s right by the situation. If you meet a realtor who ⁓ spends $20,000 a month on Zillow, needs to handle the leads and work through them ⁓ and needs a staff to do that, great. Having that big staff, that big team to do it is the right answer. If you like having belly to belly relationships with realtors that ⁓ you…

know their kids names and you’re ⁓ working through things. I find that that personal ⁓ relationship is really the best thing and ⁓ scaling a team is really getting more independent contractors that are out there meeting with agents, servicing those agents and their clients one-on-one is the better way to scale and that’s what we’re doing at Promise. We’re finding people who know the business and ⁓

want to create their own business and have something that they can scale for themselves as opposed to this big team where ⁓ somebody’s stressed out trying to make the phone ring.

Dylan Silver (15:03)
A full pipeline solves almost all problems. But for folks you mentioned, you know, who may be starting out or joining a team or, you know, getting into the on-ramp of this business, there’s ⁓ almost overwhelm. Where do I start? How do I gain consistency? For folks who are starting out now, we’re talking in June of 2026 as lenders. What would be your feedback to those folks?

Dusty Lloyd (16:10)
See a lot of files. ⁓ Look at a lot of problems. ⁓ Be in the mix of solutions and then you’ll be a good loan officer. ⁓ When you have a green loan officer who has very little support and has seen a handful of files, you’re going to get in trouble and you’re not going to know how to get through it. ⁓ Whereas I tell a lot of people, find somebody who does ⁓ loans at a high level and be their assistant for six months or a year.

grow into the business, see a lot of their problems and solutions and mirror that. ⁓ That’s the way that you understand belly to belly with a client, how to advise them is ⁓ and have the confidence to tell them how you got through situations that baffle a lot of people in the mortgage space. ⁓ So that, know, as a realtor, like you call a lender and they have no idea what you’re talking about when it’s a ⁓ real difficult situations.

It’s a problem. had a realtor yesterday get all ⁓ up and huffy that we’re not closing ⁓ tomorrow. And I said, well, you have SB 26 inspection issues. We need to work through those. And the escrow officer was like, the last one didn’t have to do this. So we broke down what that last deal was and what we’re doing. We’re helping a ⁓ African-American nurse by her first place with 3 % down. That’s different than

$146,000 loan on a $450,000 property and we have to really dive into that issue. When I talked to the listing agent, he was like, this is amazing. You have written a letter that the HOA could alter and sign and tell us exactly where we’re at with those SB 326 issues. I didn’t even know what an SB 326 issue was, let alone how to solve it.

we found a solution and I’m like, I’ve worked through this with a number of condo complexes. We just need to work through it and we’ll all get to the finish line together.

Dylan Silver (18:09)
You know, one thing that immediately comes to mind hearing you talk about, you know, really working through these issues is a lender, a good lender should be willing to go to the mat for their client. They should be willing to exhaust every possible option. But what I’ve seen both as a consumer and now as a licensed realtor is you have a lot of lenders that are looking for layups. And I don’t think there’s anything wrong with that if I’m trying to develop a full book of business.

but it does certainly leave a bad taste in the mouth of the general public who then thinks, okay, you I’m going to throw my hands up in the air and I’ll just rent, right? Or, you know, I’m, can’t become a real estate investor because I don’t have enough, you know, debt to good debt to income ratio.

Dusty Lloyd (18:53)
Yeah, no, that’s a good one. ⁓ I do non-layups. I like the tough deals. Yeah, I can replace you if your job is just to say, your rate’s six and a quarter today, ⁓ take it or leave it. ⁓ But we do construction lending, and that can be a year-long process from initial talk to a client to ⁓ actually closing and being able to break ground. ⁓ That’s not an easy layup.

⁓ I deal with divorces. So these are people that are not happy with each other decided to Leave and who gets the house? ⁓ and that’s a long conversation and Strategizing and figuring out with where rates are at what they have what’s the best thing and maybe telling them you don’t want alone you guys want to figure out how to deal with

I deal with probate situations where ⁓ six family members are fighting over the estate and ⁓ dad

this sister more than that brother and ⁓ You got to figure out a solution where everybody’s mad at each other but we get to the finish line and they get a check for $25,000 but grandpa said that we were gonna get $35,000 and ⁓ Well, you went to court and you spent $100,000 litigating that came out of your your all your your end So let’s just close this thing move on and be happy

Dylan Silver (20:16)
Yeah, I mean, you mentioned the family issues as a wholesaler, when I cut my teeth in the real estate space, I felt like my actual labor that I was getting paid for was being like a family triage coordinator, bringing family together that hadn’t spoken in a while or at odds. And that was what the bulk of the work was. But I do want to ask you, you mentioned construction financing. What

do these deals look like? I haven’t spoken with anybody who’s a lender in the construction space, but I know that there’s a lot of our

and investors who wanna know what these larger deals entail.

Dusty Lloyd (20:55)
Yeah. So, ⁓ the way I’ve gotten more active in this space, ⁓ well, let’s go back to the, way I got into the space is, I worked at a place called prospect mortgage and we went from not doing it or renovation loans being number one in the country. And so I learned how to do renovation financing. That’s like a two or three K or homestyle property is, ⁓ uninhabitable. It’s Florida and they turned off the HVAC for two years during a short, you know, during foreclosure.

And ⁓ now it’s green inside. How do we deal with that? And so you renovate it. You get a contractor to give you a bid to fix it up. And right now we have a housing shortage. I think it’s somewhere around 4 million units need to be built in the next 20 minutes in order for us to have enough housing. it’s, ⁓ Southern California is one of the worst because nobody wants to build anything in their backyard. And the infrastructure isn’t really there to support. ⁓

where we want to build. so somebody finds a vacant lot is what we like and there are services coming to the property, know, electrical, water, all that stuff, sewage, and ⁓ we get a plan to build. We get that in front of ⁓ the planning office. They stamp it. ⁓ We provide funds to buy the lot or if they already own the lot, we’ll

⁓ payoff, whatever underlying financing is on there. And we put together a big escrow account to pay that contractor when it’s inspected and the work has been done. And like we’re doing one right now, I have a modular home builder. They build everything in a factory in Utah. So they get metal framing, ⁓ siding, appliances, everything put into the storage or shipping containers, delivered on site. And ⁓ somebody does the site prep work.

building the foundation tying into the services and ⁓ we pay as the project continues on. Somebody comes out and inspects it, says it’s been done. We write the contractor a check. At the end, we get a certificate of occupancy and it just rolls into permanent financing. And ⁓ that’s the way we’re going to solve this quagmire that we’re in. Pacific Palisades and the fire in Altadena, like there are thousands of homes that need to be built.

And there’s only so many contractors, there’s only so many architects in Southern California, and we’re looking outside of those areas to do the building, the pre-build, and do the design work in order to solve that problem of limited resources.

Dylan Silver (23:34)
Do you see that currently there are or is significant interest from modular home builders, from lenders and realtors and helping everybody get together and get financing so that they can put the modular home on the land and solve this problem at scale as opposed to, hey, I have this vacant land that I already own and I have some money to put down, a couple $10,000, can you finance the rest? That’s a little bit of an easier.

situation that I don’t have the land, I don’t know a lender, and hey, help me find a module at home. Do you think we’re gonna see more popularity with

putting all these pieces of the puzzle together?

Dusty Lloyd (24:13)
Yeah, scale is hard. ⁓ If you’re ⁓ going to Ganahl Lumber and ⁓ buying the materials and getting it on site, like that’s a arduous process to build. And for a contractor to take on more than 20 or 30 homes in a year, like that’s a lot. And so you have ⁓ these big giant home builders that are at scale that can produce a lot of properties, but.

Not everybody wants to buy those new constructions. see inspector videos on Tik Tok all the time where they just do a piss poor job and ⁓ they’ll deal with it once the homeowners in the house and they own it. And maybe there’s some warranty work really at scale. You need somebody who can ⁓ drop off a huge amount of ⁓ stuff to make it a three or four month bill process as opposed to ⁓ a 12, 18 month bill process. ⁓ And we have a partner, happy homes.

HAPI and they have already ⁓ taken Martha Stewart’s kind of picture perfect homes and put them into a package where they can ⁓ design and do the build in Utah, ship it on site and have that long build process turned into something easy for ⁓ a contractor to do a lot more work. And that’s what we’re focusing on in ⁓ Florida and California.

mainly is where we’re going for that and there’s a huge need. ⁓ In Florida, they’re two million dollar homes. ⁓ In Southern California, it’s a million and quarter homes, but we get interest in Texas, in Arizona, in Oregon, where there isn’t a contractor building homes in their area. If they get something on site that somebody just has to put together and do the site work, ⁓ that’s easy.

Getting somebody to build and get the sticks and get everything to put in place is unreasonable. It’s not going to happen. And it’s a better product than a manufactured home that could be shipped and dropped on site. But then you have, think of that as like buying a fancy car that depreciates in value, where something that’s a real home with ⁓ metal framing in Florida, like it’s not going to get ⁓ taken away in a hurricane or in Texas.

in a tornado isn’t just going to do the Wizard of Oz to it.

Dylan Silver (26:38)
Yeah, no, those tornadoes are dangerous. I lived in DFW for a year in Denton and experienced one of them. We are coming up on time here, Dusty. Any new projects that you’re working on and then also anything you’d like to mention directly to our audience.

Dusty Lloyd (26:47)
Yeah.

Yeah, so I have a lender now that will do a bank statement and DSCR financing for new construction, which is a huge thing. I’m talking about those $2 million builds in Florida using this modular product. And we’re going to be able to put several homes on a lot and make something that is sustainable and buildable quickly so that it can turn from an idea into cashflow very fast. So if anybody is looking for something in that space,

We’ve got one ⁓ bank in Georgia that is happy to do that kind of financing and we put it together for you. And that’s a long consultation process, but I’ll guide them through it. And ⁓ what I’m kind of plugging today is I want to ⁓ grow my Salesforce. So like I was talking about those people who know the business, have a clientele, want to get more products and support, Promise Home Loans does that. And we’re a flat fee model. So ⁓ where a lot of people are a retail shop.

and the companies charging 300 basis points and giving the loan officer 100 basis points. ⁓ We give them whatever they charge, it’s 250 basis points, we just take 5 % of the commission and 995. And that allows them to scale their business without paying for some suit in ⁓ Illinois to give them a pricing exception here or there to take care of their clients. And ⁓ that makes it so they can really scale that business of their own.

And if they want to reach out to me, [email protected] or my cell phone 949-371-5363. We’ll take good care of them.

Dylan Silver (28:32)
Dusty, thank you so much for joining us today. Thank you for your time.

Dusty Lloyd (28:36)
And I’m really grateful. Thanks for opening up a line with your ⁓ audience. They’re smarter, ⁓ hardworking investors trying to find a future that ⁓ has a sustainable income. I’d love to talk to any of them.