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Show Summary
In this conversation, Paul LeJoy, a mortgage broker and real estate investor, shares his journey from being a tech professional to becoming a successful mortgage broker in California. He discusses the importance of understanding various loan programs, particularly DSCR loans, and how they can benefit both investors and first-time homebuyers. Paul emphasizes the need for community-oriented real estate development, aiming to create multi-generational living spaces that foster connectivity among residents. He also highlights the evolving landscape of real estate financing and the potential for innovative loan structures to support diverse segments of the market.
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Investor Fuel Show Transcript:
Paul LeJoy (00:00)
Yeah, so basically, again, it just goes to what I call the expense ratio, and that’s why it’s called DSCR, Debt Service Coverage Ratio.Okay, you just look at, let’s say you buy a property and everything is vacant or for flippers, okay? I’ve seen a lot of flippers, you know, like, okay, you buy a property and the market is changing, it’s changing on you. And what you do is basically, hey, I’m gonna dump this property. Okay, how about if you could cash flow on it? How about if you could hold it for some time?
Dylan Silver (02:06)
Hey folks, welcome back to the show. Today’s guest, Paul LeJoy is a mortgage broker in California. You can find him online by searching Paul LeJoy on various platforms, including YouTube and LinkedIn. Paul, welcome to the show.Paul LeJoy (02:07)
Thank You Dan, is it right Dylan? It’s Dylan Dylan, okayDylan Silver (02:23)
It’s Dylan, Dylan, it’s great to have you on here, Paul. And I’m a realtor licensed in Texas, and I’ve had so many guests from California on the show. Oneof the interesting things I think, especially as a realtor is people often go to realtors first, but where do we always direct people to the lender to the mortgage broker? So I always like to ask lenders and mortgage brokers on the show how they got into
Dylan Silver (02:50)
that side of the business? How’d you get into mortgage broker?Paul LeJoy (02:51)
Actually, yeah. So I got my real estate license in 2005. I came here in California as a tech guy. And so…I started by having university license. And because a commute was too much for me, one day I went home and I was watching this information show by Carlton Sheets talking about how he’s buying properties across the country, no money down, cash back at closing. So I was very intrigued by that and so bought a set of CDs. And every time I was driving to the Bay Area, I was just listening to him.
And so they also advise to get a real estate license. got that in 2005. 2007, I got my focus license. Fast forward, 2010, 11, there were a lot of bank owned properties. So I started buying bank owned properties, a lot of them, and started flipping and stuff. 2017, so a lot of people have bought properties from us. 2011, 2013, they had a ton of equity.
So I thought, man, I’m leaving a lot of money on the table. So why don’t I go and get a license as a mortgage broker? So I got that license so that I can approach those people and say, do they want to refinance? If they bought properties from us for 200,000, now the properties are worth 600,000. They don’t want to sell the properties, right? But they would like to refinance. And that’s how I got involved in the mortgage business of it. So I’ve done real estate sales, real estate investment, and then of course, you know, mortgage licensing.
Dylan Silver (04:18)
As an investor, was there a specific segment of the real estate space that you were focused on? Single family, small, multifamily. What were you looking at?Paul LeJoy (04:18)
It was mostly single families, know. Yeah, mostly single families. The in and out is just in and out. So that was it. I wasn’t doing condos. Maybe of all the properties I’ve done, maybe one or two condos, townhouses, no, they were single families.Dylan Silver (04:41)
Single family was focused. Okay. Going from ⁓ being a real estate agent to then a broker, mortgage broker, did you see ⁓ a clear path? Hey, I’m going to pivot my business or did you still continue to be active as an agent?Paul LeJoy (04:41)
yeah, I’m still active as an agent. I’m still active as real estate agent and mortgage broker. And also one of things is basically I’m able to do more things.Like for example, let’s say there’s seven loan programs I didn’t know about before. Let’s say if I knew about those things back in 2013, 2011, 2012 and 2013, I wouldn’t have sold everything. Okay. Because I was always doing bank loan. I mean, I was always doing hard money lending, buying properties using hard money. But I didn’t know there were programs like DSCR, which is their service coverage ratio. I didn’t know that you could just use your bank statements to do a loan.
I didn’t know that you could just do your P &L, the profit and loss. So by knowing that, now you’re able to have real estate agents say, listen, how can you close more transactions using non-conventional ways? Okay, so if you go like the street mall, you can see all these people are business owners, but how do they buy houses? Okay, mean, most small businesses, they will declare very little in tax, I mean, in income.
Dylan Silver (06:46)
ThankPaul LeJoy (06:48)
including real estate agents. But how do you make sure they close transactions? Okay, of course, if they use the P &L, which is just profit and loss, or they use, ⁓ if they’re doing investment properties, they can just do a DSCR, which is debt service-conflict ratio, putting down 15%. Put down 15%, you can get that transaction, you can get that deal closed. So they can do it for themselves or advise other people, the investors, okay?So I remember doing one transaction and the guy was limited to four. Okay, was buying, this guy worked at Amazon and his bank limited to four investment properties. They can only do four loans. But when you do DSCR, there is no limit to how many properties you can buy. So long as the cashflow, right? So I think basically real estate agents can close more transactions if they know what I know now. And that’s what I did not know before.
Dylan Silver (07:30)
great.Yeah, and when
we talk about DSCR specifically, I think there’s a lot of interest, not just from investors, like you mentioned, from also the general public, right? Because you’re now seeing it being used in the traditional space for folks to qualify where they might not have previously for a home for themselves, not just as an investment.
Paul LeJoy (07:42)
That’s correct. Like I was saying, also bank statements. If somebody does bank statements, a real estate agent may be closing more transactions, you know, and…They can use your bank statements, like a broker. When I was a big time, I really say broker. Okay, all the deposits are going to my account. Right? But the agents are 90%. 90 % commission ⁓ splits. But of course, if I use my deposit, I could qualify for any property. Let’s say I’m sharing $2 million deposit into my business account. Okay? Of which…
the lender can expense 50 % of that. That means they’ll assume that I’m making $1 million. And so they can give me a loan based on the fact that I make $1 In a sense, I’m not making $1 I’m making way less than that. Okay, because if I’m paying every agent, okay, 90%, that means I’m only getting 200,000. Out of that 200,000, I have other expenses. I have an office manager, have blah, blah, blah.
Dylan Silver (08:57)
Right.Paul LeJoy (09:04)
you know, but using these kinds of loans, of course, I can qualify so long as I can, I’m able to make the payments, see? So many areas where real estate agents can therefore code more transactions if they knew about these loan programs.Dylan Silver (09:20)
One of the areas where I think this is not often mentioned is in the ability for individual retail buyers to qualify for like small multifamily. So you’re looking at like duplex, triplex, quadplex. It may actually be easier to qualify for a DSCR loan for yourself, right? If I want to go buy a quadplex, in some cases, the bank is going to favor that versus even a single family home.Paul LeJoy (09:21)
Yes, exactly. Because of course it’s better to have more units thanhave just one single family, because if that ⁓ tenant’s not paying you, then that’s it. Now, there’s what they the ratio, right? So the ratio is always one or better. That means basically your PITI, your rent must be equivalent 100 % of what your PITI or better. So we give you a loan based on the fact that your rent covers your PITI, okay?
So now in a single family residence situation, if the tenant, especially in California, if the tenant doesn’t pay you, and now you have to start evicting the tenant, that means now you have what? You have no income, and therefore you’re gonna be in default. As opposed to if you have three units or four units, and one tenant doesn’t pay, you got income coming from three other tenants. And there are other ways that you can even in California circumvent some of those things that…
I mean like the rent control and all this eviction things, know, by maybe what I’ve seen some people do right now is instead of having a contract with, you know, tenants directly or consumers directly, they have contracts with organizations, with agencies, right? So let’s say an agency is catering to sober living, right? So your tenants are not ⁓ the sober, people are trying to get sober.
client is basically all your, the person you have a contract with is that agency that takes care of those people. Okay? In many ways, it’s gonna cap, right?
Dylan Silver (11:52)
Yeah, I mean, when we talk about some of the ways where these loan products are benefiting multiple different segments, I think we’re going to start to see if it’s not out there already, some of these other creative loan structures and loan types for other segments of the real estate space. I know right now there’s a lot of action in one to four, maybe even one to eight or 10. But then beyond that amount for ⁓ multifamily investors, they’re either having to get a ⁓Paul LeJoy (11:52)
⁓Dylan Silver (12:21)
traditionalbank loan or syndicate or raise capital in some other form. But I think we may start to see some other structures even for those larger assets as well.
Paul LeJoy (12:22)
yeah, of course. So you do have commercial lenders that will cater to eight plus, 10 plus units. know, just like you have residential lenders, okay, into one to four units. some of the residential lenders will not touch five units.Some of them will go to eight units, 10 units using the DSCR. But then you have commercial lenders just like you have residential lenders, a whole boatload of them. I’m actually going to go into contract with one of them. So basically where we can do the pricing ⁓ for commercial properties and bidding just like we do in the residential space.
Dylan Silver (13:09)
Now as a baseline, if someone was looking at the DSCR for themselves and maybe this is their first investment property or first property for themselves, what are the baseline metrics that they need to have reserves, credit or experience in order to qualify?Paul LeJoy (13:09)
Yeah, so basically, again, it just goes to what I call the expense ratio, and that’s why it’s called DSCR, Debt Service Coverage Ratio.Okay, you just look at, let’s say you buy a property and everything is vacant or for flippers, okay? I’ve seen a lot of flippers, you know, like, okay, you buy a property and the market is changing, it’s changing on you. And what you do is basically, hey, I’m gonna dump this property. Okay, how about if you could cash flow on it? How about if you could hold it for some time?
The key thing is basically you look at, and the rates are going down. Interest rates are going down. So you just look at,
what is, and even if the property is vacant, we’ll look at what is a market ratio. What’s market rent in that area? So based on market rent, they’re now be able to qualify for that property, only 15 % down. So whether you are a seasoned investor or a newbie, the ratio is the same, 15%. Because they’re just looking at the income, the potential income, whether it’s current or it’s market rate. You’re okay.
Dylan Silver (14:32)
Right. Right. Right. And I do want to pivot a bit here, Paul, and ask you about ⁓ looking at these deals through the lens of not just as a real estate ⁓ agent, not just as a mortgage broker, but then also as an investor. So you now have worn three different hats, and they’re three different arenas. ⁓ But being able to have knowledge from each of them, I’m sure it affects the way that you look at deals and you underwrite deals.Dylan Silver (14:58)
Right now, if you’re looking at deals these days, is there a specific segment or gradeof property that you’re looking at? you looking at distressed property assets? Are you looking at turnkey? Are you looking at short-term or long-term rentals? Any specific asset class that you are preferential towards these days?
Paul LeJoy (15:04)
yeah, my asset class is basically development. Okay, so because I think I have more control when I do development. And it’s also, it’s a legacy. I call it Big Silicon Valley Dream Village Legacy.So what does that mean? Okay. So I’ve been in Silicon Valley for more than 20 years and I’ve seen companies like Facebook, YouTube, Zoom, Airbnb, you talk about Uber, all these ones that were coming to me, Nvidia. And it’s like, I’m sitting there doing what? I came as a tech guy and it’s like, I need to leave my legacy too. And my legacy is basically what I know for the last 20 years. Okay. It’s real estate. So.
I’m not saying how do you techify real estate, real estate is something that is going to be with us forever, right? Tech technologies will come and go, they’ll change. Like now everyone talk about, you know, just AI, you know, many years ago, we’ve always had AI, but now it’s like, it’s just gone to a different level, whole new level. And it’s going to make a lot of people rich and all that kind of stuff. But you see, a few years back, people talk about Bitcoin and all that kind of stuff. Okay.
Dylan Silver (17:05)
Yeah.Paul LeJoy (17:06)
Real estate is something that is going to be with you forever. Okay? And ⁓ even after you’ve gone, after people die and stuff that, they’re going to leave. So like the house I’m in right now, this subdivision was built in the 20s and 30s. 20s and 30s. It’s a long time ago. The developer, who knows who the developer was. Okay? But the subdivision is still here. And we don’t know what the technologies were back in the 20s and 30s. Okay?But estate, the structure is still there. The subdivision is still there. And so my thing is, how do I then leave a legacy? My legacy would be, I’m not gonna build like KB Hall, a DR Hall, or in Toe Brothers. I build clusters of homes, not to exceed 30. And my key thing is that people in America, you live next to each other, but you don’t really know each other. So now the way people are building is I could build this three story small…
tiny stuff going through stories. There is no backyard. There’s no front yard. Okay. And that’s what the building and Silicon Valley. So you live next to people, but you really don’t have a community. So my thing is basically, I, want to build communities of homes. Okay. Like villages where people live with one another and they know each other like in a village. Okay. So the example here is, and I created a really short AI movie about that. Okay.
Dylan Silver (18:11)
Right.Paul LeJoy (18:28)
This woman lives in Cameroon Africa, and she comes here, gets a master’s degree in nursing. She gets a job at Kaiser in San Francisco, but she cannot afford to live in San Francisco. So what she does is she buys a house 45 minutes away from San Francisco, right? Now she finds love. Her husband, okay, works at Google in Mountain View. The commute is one and a half hours.They have their first child and they have maternity leave for six months. What happens after six months? The baby is someone new. So they have to take care of this baby. So they take this baby to a daycare center every morning. That means they have to get up very early, take the baby to a daycare center, a stranger’s place, and then go to work. And then they have to come back by six o’clock to pick up the child. I mean, that’s the rat race.
They’re stuck in traffic for one and a half hours going to work and going back. So I create clusters of homes. So what does she do? She goes back home, brings her mother. So the money comes here, lives with them. But the mom has no friends. She loves, okay, new life and blah, blah, blah. She’s happy. She has a grandkid. But when they’re going to work, Monday to Friday, she’s just there with the grandkid. No friends. So she’s homesick. She wants to go back to Africa.
Dylan Silver (19:24)
Yep.Paul LeJoy (19:47)
How about if I build a okay, cost of homes not to exceed 30, where you have multi-generations. So you have grandparents who are retired and you have the toddlers. And the toddlers will keep the grandparents healthy because the toddlers will be running around blah, blah, blah. So now you have a healthy multi-generational community as opposed to where in America your parents get that.70 years old, 75 years old, 80 years old, and now they become a burden. Right? And so what do you do? You take them to an old people’s home. Everybody’s old. Everybody’s just looking forward to dying or something. No. How about build a multi-generational village community where you have the old, okay? People in their 70s, 80s, even 90s. And then you have the working class people. People are going to work, or people are going to work, working professionals.
and they have the ones that are the grandkids, right? So now the working professionals don’t have to rush to work through. They don’t have to wake up very early in morning, wake up the child to take the child to daycare center, okay? And they don’t have to rush to come back home to pick up the child from daycare center because the grandparents are there. Even if your parents are dead, you have some other grandparents that are there who will cater. It’s a village. That is what I want to build in terms of investing.
Dylan Silver (21:04)
Yep.Paul LeJoy (21:08)
I’ve done a lot of flips, I’ve a lot of that stuff, but that leaves me no legacy. There’s no legacy. My legacy is based on my legacy product. Can I build these clusters of communities, urban village communities, right? That modern, everything is great. It’s actually more ultra modern, but also modern in the fact that the whole song, right? And that is my passion in terms of investing. I couldn’t agree any more with what you’re doing. And I live in Santa Domingo.Dylan Silver (21:26)
Yeah, you know, I couldn’t agree any more with what you’re doing. And I live in Santo Domingo, capitalDominican Republic. And one of the things that I’ve noticed from living out here versus where I moved from Dallas, Texas, and I grew up in northern New Jersey, right, 30 miles outside of New York City, is that we lose in some way this element of community, of connectivity, ⁓ multi-generational housing.
Dylan Silver (21:55)
by being in the United States, that if you go outside of the United States, you may sacrifice some first world amenities, but there is, ⁓ I would say, almost in some ways, superior community, superior ability for people to take care of each other in all the ways that you alluded to. So I think it’s great what you’re doing, Paul.Dylan Silver (22:16)
We are coming up on time here, though. Where can our audience go? Where can folks go to learn more aboutPaul LeJoy (22:16)
⁓ good, so they can go to fat.homes. Okay, FAT, that’s for my development and stuff. fat.homes. Okay, they can go there and they will see that clip, movie clip I’m talking about. Yeah, that’s my passion. And then from there, mean, if people are watching this and they wanna…Dylan Silver (22:22)
the projects that you’re working on, how can folks maybe reach out to you or your team?Paul LeJoy (22:43)
do alone or something like that. mean, yeah, my day-to-day thing. ⁓ Basically, they can go to our website too. And from there, they can reach out to me. right. ⁓ My number is 415-510-00127. 415-510-00127, yeah.Dylan Silver (22:58)
Paul, thank you so much for coming on the show today.Paul LeJoy (22:59)
Well, thank you, Dylan. Thank you so much for having me.
