Do Realtors Understand Investor Math? What Real Estate Investors Need From Their Lender

Lonnie Glessner (00:00)
I think it depends on how many investors they want to serve. If it’s just onesies-twosies every once in a while, they’re probably okay not knowing everything if they’re working with a loan officer like me. If they really want to specialize in it, they really need to know it. But here’s the problem I have learned over many years is most—probably eighty to eighty-five percent of Realtors suck at math.

Okay? They can’t do 200,000 times 90%. They cannot do that.

Dylan Silver (01:59)
Hey folks, welcome back to the show. Today we’re joined by Lonnie Glessner, loan officer in the Greater Denver, Colorado area. Lonnie, thanks for joining us here today.

Lonnie Glessner (02:09)
Yeah. Well, thanks for having me on. I’m—I’m excited to be here. It’s—it’s always cool to be on a podcast. So.

Dylan Silver (02:16)
What—what types of deals are coming across your desk these days?

Lonnie Glessner (02:21)
I mean, on the mortgage side, I mean, my two biggest client bases have always been first-time homebuyers and real estate investors. Two very distinct groups, but two different groups of people I love to serve, okay, both of them, because especially I love working with newer investors because I get to help train them and educate them, ’cause a lot of times they don’t know what they don’t know.

And it’s the same thing with first-time homebuyers.

Dylan Silver (02:48)
You’re exactly right. I mean, I, as—as someone who interfaces with both of those segments myself, it can sometimes be challenging to unpack exactly what we need to do to get an approval, and it can feel like you’re right on the one-yard line and then something happened and something comes up. One of the difficult things, if I’m speaking for consumers as a whole and retail buyers as a whole—and we—we—we put the investors in our pocket—is

sometimes they can feel like, “I have everything in place, but you’re just right at the—the—the one-yard line.” And it feels like there’s not enough people who are willing to go to the mat to get a deal done.

Lonnie Glessner (03:26)
Yeah, I mean, I’ve—I’ve heard that. There’s a lot of, I don’t know, lazy, quote, “professionals” out there in both the mortgage world and the real estate world, just to be perfectly honest. And I have discovered, I mean, there’s a lot of Realtors I work with that don’t really specialize much with investors, but they love to have me as the loan officer involved because they know I do and I can fill the gaps,

because I can help educate and talk numbers with their clients like they may not be able to do.

Dylan Silver (03:56)
Let’s—let’s dive in there, right? Because as a Realtor, but also as someone who has interfaced with investors in the past and understands that language, it’s a totally different thing, right, than the residential lingo—lingo and working with residential buyers and residential Realtors, because one is emotional, one is almost entirely mathematical and kind of understanding, can you hang? Can you have this conversation? And so

if you compare that—that Realtor who—who may themselves be having that conversation with the investor versus the Realtor who’s coming to you and saying, “Lonnie, I need you—you—you to—to step in here and help me with this—this client,” you can speak their—their lingo. Can both be effective, or do Realtors really need to be able to themselves have those conversations?

Lonnie Glessner (04:47)
I mean, I think it depends on how many investors they want to serve. If it’s just onesies-twosies every once in a while, they’re probably okay not knowing everything if they’re working with a loan officer like me. If they really want to specialize in it, they really need to know it. But here’s the problem I have learned over many years is most—probably eighty to eighty-five percent of Realtors suck at math.

Okay? They can’t do 200,000 times 90%. They cannot do that.

They can’t do math in their head. They can barely do it on a calculator. Maybe they can now on AI, I don’t know. But most Realtors aren’t very good at math. Like, I teach a real estate stats class for Realtors. I just call it Real Estate Stats Made Simple. I cover eight key metrics with them, and they

told me I called it that because they said, “Lonnie, you make it simple where me as a non-math person can understand it and explain it.” So, great. So that’s what, you know—one the—I don’t know, one of my superpowers, I guess, is I know how to make math and stats easy or simple for people to understand. And so, for—

for real estate agents, they really need a lender like me if they’re gonna be working with investors, ’cause most of them don’t understand. And I’ve been doing this for—gosh, we turned our first primary residence into a rental in 2002.

Dylan Silver (06:55)
Mm.

Lonnie Glessner (06:56)
Started the house hacking thing back then before house hacking was even a term.

So I’ve been doing it a long time. I started learning about it in ’98, my first year in the business, as I started working with investors. I worked at a bank that I discovered we had a flipping amazing loan for investors. And I remember it was ten percent down, no—no points, no prepayment penalty, it was just a one-year ARM. So I used it with fix-and-flip investors, because they’re like, “It’s cheap money.”

It’s true. But then I also discovered with that loan, I—I could do blanket mortgages,

Dylan Silver (07:32)
Hey.

Lonnie Glessner (07:33)
where I remember I did this for a guy: he bought sixteen fourplexes with me in Dallas. I put four properties on each loan.

Dylan Silver (07:41)
I want to get a little bit granular here about investor loans. As you’re talking, I was thinking about the—the—the prevalence of DSCR these days, and it feels like every—everyone is a DSCR lender, literally—even the people who maybe more traditionally work with just the residential side and not with investors.

But there’s, of course, other ways where you can creatively finance an investment. And you talked about, even in—in those early days, looking at things through this creative lens. I’d like to dive in there. When folks are trying to finance their first investment property, or their second, or their third, or their 10th, right, is DSCR gonna be the—the—the best product for them if they’ve maxed out what their credit can hold?

Lonnie Glessner (08:25)
Yeah, al—almost always. And DSCR loans are so much easier for them as well, ’cause so many investors are self-employed as well. And with DSCR loans, I don’t need tax returns. We don’t care about your employment, income, other debts, and stuff. It’s all about the property you’re buying. So it makes the process easy, and often the rates are similar, sometimes better.

Like, I was pri—I priced one out yesterday of where—okay, ’cause you can do a three up to a five-year prepay on, and stuff, even just a three-year prepayment penalty. Like, I was pricing one out yesterday: the rate on a—it was a $500,000 loan amount, the rate was in the mid-6s with a little about one and a quarter points. And I go, “I—

that’s better than what I can do with Fannie and Freddie.”

Dylan Silver (09:14)
Right.

Lonnie Glessner (09:15)
And I go, “It’s a hell of a lot easier loan for my clients and for me.” And it’s ’cause a lot of the times you can put into an L—they can be owned by an LLC, which is how most investors want to own them.

Dylan Silver (09:28)
A very basic question here, Lonnie. Forgive me for—for not knowing this off the top of my head, but when we talk about points, these are different, of course, than rates. Let’s break this down. I should have had this conversation probably a thousand episodes ago, but for myself and our—our audience, what are points, especially as they relate to investor products?

Lonnie Glessner (09:48)
Yeah, they’re a p—one point is one percent of your loan amount. And just know this, like, Fannie Mae and Freddie Mac charge points on every investment property loan. I think the minimum they charge is what, 1.625%? And that’s with what is it, twenty-five or thirty percent down? And so investors are just used to paying points, because that’s just how it’s always been. It’s been that way for decades. And so, they’re used to doing that.

Another benefit with DSCR loans compared to Fannie and Freddie, we can have a lot more seller concessions. Fannie and Freddie only allow two percent of the sales price for concessions, where DSCR investors will allow three, four, even more percent. Like when I bought a short-term rental in December using a DSCR loan, I got, gosh, three points from the seller that I used to buy down my rate.

Dylan Silver (10:42)
Is there a secondary market for these DSCR—

Lonnie Glessner (10:45)
Oh yeah, there’s a big market for them behind the scenes and stuff. A lot of Wall Street firms and stuff are buying them and stuff. I wouldn’t be surprised—hedge funds, I—I—I’d be shocked if hedge funds don’t own some of them. Probably REITs are into some of them, that kind of thing, as well, just because they can pay out really well. And you go, with these DSCRs, you get a prepayment penalty on a large portion of your portfolio. You’re eliminating one of your business’s—

biggest risks, which is early payoff.

Dylan Silver (11:13)
Yeah. And—and on top of that, too, I mean, you talk about the—the cash that’s at stake for the owner of—of that investment property. It’s on the minimum, I think, what is it, fifteen percent, right? So people are—are gonna be less inclined to walk away from that.

Lonnie Glessner (11:28)
Right. Yeah, ’cause I mean, yeah, you can—you buy sometimes, I’ve heard, ten or fifteen percent down. Here in Colorado, realistically, you gotta put twenty to twenty-five percent down almost always to break even on it, ’cause the prices are so high. Although, like, this morning I was running numbers for a Realtor on a two-bedroom, one-and-a-half-bath condo in Southeast Denver.

She was wanting some information from me, and I was shocked when I looked it up: the price was 143,900.

Dylan Silver (11:57)
Mm.

Lonnie Glessner (11:57)
And I go, “It’s almost a thousand-square-foot condo.” Yeah, it was built in the ’70s. Yeah, the HOA dues are 570 a month. But I go, “Shit, an investor buying—let’s just say their loan amount’s a hundred thousand, they put enough money in to have a loan amount of a hundred thousand.” Okay, their payment’s gonna be 650 a month. Throw in taxes, insurance, and the HOA dues, it’s 1350, 1400. Even in today’s

downturn in Denver, that property should still rent for seventeen, eighteen hundred a month? It’s rare you see a property cash flow that easily in Denver.

Dylan Silver (12:30)
Yeah. We were talking about this in the green room, and you gave me some good information that I was unaware of. So in—in recent memory, there hasn’t been a time where there’s been net migration out of Colorado, but you—you informed me that this has happened now recently for the first time in a while.

Lonnie Glessner (12:50)
Right. Yeah, last year, I think the number, according to the State Demography Office, net migration was negative for the first time since the late ’80s. I think it was a negative twelve or thirteen thousand people left the state. More people left than moved in for the first time. We—

Dylan Silver (13:07)
We don’t, of course, control nor—nor can we predict the future when it comes to this, but I’ve had many investors from Denver on, and it’s sometimes tricky investing in Denver ’cause it’s a very tenant-favored area, right? And so if you need to conduct an eviction, that can be a potentially year-long court fight and all the legal fees that—that go along with that. When folks are considering

therefore investing in the Denver Metro, they have to put into their pro forma like legal fees that could come up if they have to do an eviction at this point.

Lonnie Glessner (13:41)
Yeah, I mean, when I talk to newer investors or really any of them, I’m telling them two big things to mitigate or reduce your risk. One is, you—no one should personally manage their rental properties in the state of Colorado. I wouldn’t e—I wouldn’t even consider it anymore, and I used to for many years. I would always hire professionals now. There’s too much risk. Too damn many rules and restrictions.

Second, I tell them you gotta know it’s gonna take a minimum of six months to evict someone. So you gotta have at least six months of mortgage payments saved in the bank, plus legal fees. And please just know, having gone through evictions, they’re gonna damage your property. No

question about that. You could easily spend thirty, forty thousand dollars to evict someone.

Dylan Silver (14:27)
You mentioned, and I wanna touch on this for a moment, having a property manager in place even if this is in your backyard. And I wanna highlight this because you mentioned that that—that arm’s length is gonna be to your benefit because of all the issues that can arise from self-management. Let’s dive in there. Where can this thing go off the rails if you’re managing it yourself?

Lonnie Glessner (14:49)
I mean, there’s just so many laws, and making sure you do everything correctly here in Colorado about—oh shoot, just how you screen them now is—is complicated. Like, I used to use TurboTenant, and I don’t know if I could even use a product like that anymore. And like, I was just—saw a story this morning of how our legislature is coming up with new laws on AI that’s gonna impact the mortgage industry even,

and of how we do—and how we do underwriting. And I’m going, “God, it’s gonna be interesting to redact,” because everything for us is behind the scenes. Yeah, Fannie Mae, Freddie Mac, everyone else is using AI behind the scenes, but if the state’s gonna restrict us, okay, it’s gonna make it more difficult, more expensive for us to do our jobs.

Dylan Silver (15:35)
No question about that. And I think everyone is hoping that rates will go down—investors and—and lenders and loan officers, Realtors, residential buyers—but of course, we—we can’t rely on that. So in—in the face of that, I think people are being more creative, right? And—and from my vantage point as a—as a Texas Realtor, I’m seeing more people doing DSCR. I’m seeing more people

get into investor niches like seller financing and Subject-To. On the residential side, I’m seeing so many buyers get into new construction, and it really feels like you can’t possibly beat the—the environment that they’ve created—the corporate builders have created—with lower rates that they bought down, and then even more cost-effective in newer communities than you would get in a pre-owned property.

Lonnie Glessner (16:30)
Right. Yeah, and that’s the same thing here in Colorado. I mean, honestly, the—the Richmond Americans, the D.R. Hortons, the Lennars, they honestly cannot sell a home in Colorado without huge financial incentives. They’re—for the last three, three and a half years, they’re all typically always marketing rate buydowns into the—at least into the 5s, but honestly, often in the 4s, sometimes the 3s.

And I go, “Okay, that—that forward commitment they’re buying is sometimes costing them eight to ten percent of the loan amount.”

Dylan Silver (17:00)
I mean, they must have to do it, right? If they’re doing that—

Lonnie Glessner (17:03)
Yeah.

I mean, I mean, it’s just hard of where, for builders, they’re a hammer and everything they see is a nail. They only—they only know one thing, and that’s to build homes. And I’m a little worried in Cal—here in Colorado that they may be building too many.

Dylan Silver (17:17)
Yeah.

Lonnie Glessner (17:18)
So.

Dylan Silver (17:18)
That—that’s an interesting one, because we certainly saw that—to use the Texas analogy here, we certainly saw that in Austin with multifamily housing, right? Apartment complexes. There’s so much of a surplus that they’re—they’re—they’re literally paying people like a Visa $500 gift card or Amazon, or they’re giving two months’ free rent or prorated rent so that your overall rent over the year is reduced. And then they’re paying Realtors

finders’ fees, right, for—for apartment locating, which historically hasn’t always been the—the—the case on a lot of these properties. And so you do naturally wonder, what’s the progression of this like in the residential side? Can there be a—a surplus of—of housing where these homes could sit, even new builds, for potentially months?

Lonnie Glessner (18:04)
Yeah, and I think it’s happening. I’m hearing from different Realtors here in Denver who work with the builders that some of them, they’ve just—one was telling me in our stats committee a couple weeks ago, because she’s on the—for the City of Aurora planning commission or something like that, that they’ve had several builders tell them, “We’re not pulling any permits. We’re not doing anything for twelve to twenty-four months

Dylan Silver (18:27)
Mm.

Lonnie Glessner (18:27)
because we just have built

too much,” I assume. They got too much inventory. And I’m going—I was honestly excited to hear that, ’cause I’ve been worried about this, because I know from 2002 to 2005, those four years, here in Metro Denver, home builders built nearly eighty thousand homes, okay? Net migration combined for those four years was ten thousand people.

So we’ve—we built enough homes for, God, for three hundred thousand people

Dylan Silver (18:57)
Yeah.

Lonnie Glessner (18:58)
to move here. And I’ve been worried about that again here happening in the—in Colorado. So I was excited to hear that the builders are really starting to pull back, because I can’t imagine they’re making a ton of money right now.

Dylan Silver (19:13)
It’s interesting, right? Because the builders are—it seems like they’re expanding everywhere. There’s some really interesting pilot communities happening in Texas. We have probably the most cost-effective single-family homes that I can tell in the country—homes priced under a hundred and forty thousand dollars for a two-story home with a garage. It’s pretty remarkable, right? But then on the flip side, you have what—what you’re describing, which is really,

from the outside perspective looking in, a huge surplus, right? And then if you have net migration out of Colorado, what does that say about what’s going to happen with these communities? I’ve heard lots of interesting takes from people. Some—sometimes people say, like, “Look, if you’re buying anywhere and you’re developing anywhere within the urban sprawl of a major metro, it’s not necessarily gonna make money immediately, but if you can afford to hold on to it,

it’s basically a sure bet. It’s just how long can you swing this investment initially?” And there is a little bit of that there, right? It’s like, well, can the builders afford to hold on to these properties? Potentially, they may have to bite the bullet here and turn them into rentals if they’re not selling at this point. But the—the long-term outlook is—is still bullish, I think, for many, but it’s what’s gonna happen in the short term, right?

Lonnie Glessner (20:29)
Yeah, I mean, it just comes down to, most of them are—they’re all for-profit companies, and most of them now are so big they’re traded on—on the stock market. So they have owners like you and I—millions of us—who are going, “Hey, how come you’re not profitable?” Yeah, they—they trade out there just like Amazon does, and—and stock investors expect returns on their investment. So it’s not like they’re mom-and-pop

home builders anymore where they can say, “Hey, okay, we can lose money for a year or two, possibly.” When you got public investors behind you, you can’t do that.

Dylan Silver (21:03)
Yeah. SEC regulations are definitely g—you’re—you’re gonna be feeling—they’re gonna be bearing down on ya, as well as the scrutiny of your investors. I wanna ask you about the—the demographic of the home buyers in Colorado. Is there a—a set age? I think nationally, what is it, late 40s or 50s? It’s unbelievable.

Lonnie Glessner (21:23)
I know they said last year the average age of a first-time homebuyer was like 40, okay? I don’t see that personally. I mean, I still—like, I had a young couple buy in—in July that were in their late 20s, and helped them—one of our great loans is we provide a $6,000 grant for—for buyers under a certain income level. And so, which

excited them, because they used the money instead to pay off a credit card.

Dylan Silver (21:48)
Yeah.

Lonnie Glessner (21:48)
There’s a lot of first-time homebuyers here in Colorado still in their usually late 20s and 30s. I see a lot more—I’ve always had single women are two to three times as likely to buy a home as a single man.

Dylan Silver (22:00)
That’s the truth, and we’re seeing that nationally, right? Yeah.

Lonnie Glessner (22:04)
And just, hey, women are more responsible, us as single men. When we’re young, we’re out buying cars, motorcycles, boats, and stuff instead of homes.

Dylan Silver (22:13)
We should get the home first. Everything else is depreciating in value, right?

Lonnie Glessner (22:16)
Right, right. Here in Colorado, I’m seeing a lot of families gift a ton of money. I had, I think, three young ladies buy homes last year—I think one was a nurse, two were teachers—and their parents or grandparents gifted them each at least a hundred thousand dollars. Basically—basically, it was early estate money, which I love. Like, I read a book this summer called Die with Zero, where the author proposes

you should die with zero dollars in the bank, ’cause you can’t take it with you. So spend it on experiences or whatever you love, but also give away your inheritance before you die, ’cause like you said—and, you know, my parents both passed away last year and I inherited quite a bit of money here in my mid-50s. And he said, “Yeah, the average age people receive their inheritance is about 60.” Well, they don’t need it then. They need the money when they’re in their 20s and 30s to get started.

And this is—

Dylan Silver (23:10)
A great point. I, honestly, I have mixed feelings on this because as a—as a Realtor and interfacing with lenders, at this point, it’s literally one of the questions I know lenders—many lenders will ask is, “Well, who in your family can gift you a bunch of money for—how are we gonna figure out tens of thousands of dollars potentially in—in a down payment?” Now, Texas, it’s typically not that much, but I’ve just become accustomed to hearing this.

And I do cringe on some level when I hear this, because I’m like, this shouldn’t be the only way to get into a home. But—but when you have teacher salaries that are—I’ve heard $40,000, I’ve heard $50,000, I’ve heard less than that—a down payment certainly goes a long way. And then having those reserves from an inheritance certainly goes a long way. So those people who do have the ability to pass down that

kind of a nest egg for their kids or grandkids, it’s a wonderful thing.

Lonnie Glessner (24:05)
I mean, it is. And what’s amazing, when I ask, especially first-time homebuyers, “Is gift money a possibility?” ninety percent of them never even thought about it, because they didn’t know that it was allowed. And—and I ask them, “Hmm, yeah, maybe, possibly.” And sometimes when they think—I’ve had someone tell me maybe a few thousand dollars, and their parents gift them fifty. They just don’t—most of them don’t realize

maybe how much money their parents or maybe especially their grandparents may have set aside.

Dylan Silver (24:34)
This is so true. This is so true. One of the things that this also makes me think about is this idea of these real estate conversations within families, right? And you mentioned, dying with zero, right? But if that money ends up in probate, then you’re not going to be able to use it for a real estate transaction of any kind that’s going to create this kind of, potentially, infighting between the family, which we see all too—all too often.

I would like to think that people should be having these conversations regularly, but it feels like almost universally people avoid this in—in their family until they’re about ready to buy a home. Do you, as—as someone who’s seeing this day-to-day, is there a reason for that?

Lonnie Glessner (25:16)
Well, it’s just we’re conditioned here in America to not talk about a few things: money, sex, politics, and religion.

Yeah. We just don’t talk about those four things, and each of them we probably should be talking a lot more about. Politics is, my God, that—that—that’s—I—I would say try to avoid that one still, but there’s nothing wrong with talking about the other topics and stuff, because sometimes, I mean, especially like, say, with kids, how are they gonna learn about money? I mean, yeah, they can watch you kind of thing,

but hopefully you’re teaching them some. Like, I’ve tried to do with my kids, of like, our daughter’s twenty-one and a senior now in college, and I’ve been using—we funded a Roth IRA for her, and I take half of what she makes every year and put it into a Roth IRA for her. And she’s twenty-five—after I’ll fund it some more this year, and by the end of the year, she’ll have at least 30K in there at age twenty-one.

Dylan Silver (26:12)
But

yeah, these—these conversations, right? And—and people will avoid it. But I think one of the things that—that we can start to do just to kind of open the first layer of the onion here is, without saying, “Where’s the money gonna come from for me to buy this home?”, talk about like, “Hey, I’m looking at owning a home at some point in time.” And I think just that conversation—I’ve even felt this—

people don’t wanna even have that conversation, ’cause then it’s like, “This person’s gonna buy the home this way; this person’s gonna buy the home this way.” And people wanna feel like in control, too.

Lonnie Glessner (26:47)
Yeah, it’s just teaching. I remember when I showed my boys just even just on paper—I’m old school—the Rule of 72s of how fast money can double, and their eyes were like, kind of thing, especially when you start young. You start with a couple thousand dollars, well, forty, fifty years from now, that could be a couple of million dollars.

Dylan Silver (27:07)
That’s exactly right.

Lonnie Glessner (27:08)
It’s just teaching them some about investing and about the money and trying to get them to understand real estate, and they realize that—they’re both twenty-five, and I think once they get married, they may get married in the next year or two, they’ll probably both be buying homes and stuff, ’cause they know that real estate’s a great investment long term.

Dylan Silver (27:28)
Yeah, and at the end of the day, as they say, it’s one thing to be living out of an apartment, but it’s pretty tough to have a family out of an apartment, right? And there’s many people who do do it, but it is challenging. And I think having that space is just better overall for everyone’s well-being, I believe. We—we actually are coming up on time here, Lonnie.

Any new projects or activities that—that you’re working on these days, and then also anything you’d like to mention directly to our audience?

Lonnie Glessner (28:37)
Huh, I mean, good question. I just joined CMG Home Loans in June, so I’m—I’m still learning. I mean, there’s so many incredible things that we have here. And like, one thing I’m honestly working on that’s outside of investors is for first-time homebuyers. We have a program that’s designed for couples getting married

to help them raise and receive gift money. It’s a secure website link that they can share anywhere and everywhere: with wedding guests, invitations at the wedding, social media. And they can raise gift money to buy a home, because most first-time homebuyers now are about 30 years old. They don’t need another toaster, or dishes, or a blender. They need a down payment to buy a dang home! So we’re the only lender that offers this that I know of,

and so I’m actually gonna be visiting, doing a booth at two bridal shows this fall.

Dylan Silver (29:28)
Well, amen to that. Lonnie, thank you so much for—for joining us here today on our show. Thank you so much for your time.

Lonnie Glessner (29:35)
Yeah, well, thank you.