Hard Money Lending Explained: Funding Real Estate Deals with Darryl Clements

Darryl Clements (00:00)
Hard money is just a stepping stone to get you to the next level. don’t get so bogged down with the rates the fact of the matter is if you can get in and get out of a deal fast enough, those rates don’t matter. the main person that complain about a rate is somebody that’s gonna BS through the deal. They’re gonna drag it on. So instead of them go getting in,

knocking it out, finish the project and refinancing out of selling it, they might get the initial money, money is used for everything but what it’s intended for. don’t be married to the rate. Use hard money as a stepping stone to get you to the next level, to you go after better money.

Dylan Silver (02:05)
Hey folks, welcome back to the show. Today’s guest is a Detroit based investor and hard money lender. His company, Inter Capital Funding is known as the bank for the unbankable. Please welcome Darryl Clements. Darryl, welcome to the show.

Darryl Clements (02:21)
Thanks Dylan, thanks for having me.

Dylan Silver (02:23)
It’s great to have you on here. I always like to start off at the top of the show by asking folks really how they got into the real estate space.

Darryl Clements (02:34)
I got started into it about quite a while back. My mother bought her first hud house for a hundred bucks. This is about this in the seventies. So then when she did that, she just started buying them. She started acquiring them, selling them, getting rid of them. We was moving at them. Cause when I was a kid growing up, we moved like every six months. whether good, reason or bad, we was ended up moving. But anyway, so I just liked the fact of buying houses, fixing them up. then.

As I got older, I started buying my own, fixing them up. I love to see the finished product. I love to see the beginning and the finished product. I just hated the middle part of it. at the end of the day, not the middle part, the end when they tear it up or try to tear it up. But I started off in real estate ever since I was a kid. It was just in my blood. every time I tried to do something else, I always ended up coming back to real estate for some shape, or fashion. So I like, all right.

but this is my guy calling, so let me just go ahead and stick to it, because he ain’t gonna let me run the other way.

Dylan Silver (03:32)
How much of an influence was family, you mentioned your mother being an investor herself, in ⁓ your decision to pursue real estate as a career? And was family and your mom able to give you guidance, or were you still having to figure out a lot of these things on your own?

Darryl Clements (03:50)
My mother’s main guidance is don’t screw up.

That’s it. Look here. My mother was my mother’s type of mother She’s like and I guess it was good. It was good and bad as a kid But my mother guys was like I say, um mama like that. Yeah, I like that too. Mama. I don’t like that. No, I don’t like it neither So she let you make your own decisions and then you figure out then you’ll figure out real quick whether it’s a good or bad one I mean she won’t let you she would let us go too far off the rail But for the most part she got us in the fact that you know Be your own person and make you know make call your own call your own I guess lack of better word in basketball

Dylan Silver (03:54)
you

Darryl Clements (04:23)
call your own files. So she let us, yeah, she let us be able to do our own thing and grow that way. My father was more along the lines of, he was, my father was tight with a dollar. Funny story. My father still had a…

Dylan Silver (04:25)
Thanks Ryan.

Darryl Clements (04:38)
He started forward back in 66, right? He had his first receipt when he bought his first pair of shoes. He kept every receipt, he was just that tight with a dollar. So he taught me, he taught the money side of things, how to watch every dollar. So I guess that was it.

Dylan Silver (04:54)
Asset management, I mean that’s one

of the key aspects of being a real estate operator for more than a handful of years. I mean if you gotta survive different markets, different conditions, you gotta be able to know where every dollar’s going to.

I wanna pivot a bit here, Darrell, and ask you about getting into the hard money space. I mean, I’ve seen a progression for some people who might go from wholesaling to fixing and flipping to then maybe doing long-term or corporate housing midterm and then getting into hard money lending. Did you follow a similar path or did you go straight to hard money?

Darryl Clements (06:16)
went straight from investment because my biggest problem was I was always looking for money and then like me as an investor, all my books wasn’t tight. Tax returns W-2, so we tried to go to the bank and get money. They’re like, yeah, but no, we’re not doing that. So what I ended up doing was I said, we got to be a better way. So I’m the type of person always like…

Dylan Silver (06:29)
Yeah.

Darryl Clements (06:42)
I always got to figure out a way to make it work. So what I did was I was like, all right, I’m going to go get the money where they get it from. then I started finding I had private investors at first putting out money. Then what I did was me and a wife ended up getting our own license. we got actually because we have a mortgage and lender’s designation. So we can kind of facilitate on both sides. So that way, because a lot of times what people are not familiar with is that.

As a private lender, you’re really only allowed by law to do about five deals a year. But if the law don’t say nothing, then no harm, no foul. But when they find out, it’s a whole different ball game. So I just said, OK, I’m going do it differently. I’m going to make sure that I have a license to cover that. And then also, my private guys, if the deal flows through me, they can hold the paper that way. So I read a lot of books. But here’s the funny part. As reading a book,

Dylan Silver (07:36)
Yeah.

Darryl Clements (07:38)
I get the first one or two ideas I might not go back to it for like two years because I didn’t get what I was for. I said, all right, okay, I needed that. Then I go on to something else and just tie it off that way.

Dylan Silver (07:48)
want to ask you about getting into the hard money space. I think there’s a lot of competition depending on when people are getting in and how early they were in. There might have been less, there might have been more. But I think right now if people are getting in it could be tricky because there’s so many operators that are operating not just regionally but throughout the country. What was it like in your experience getting into the space and then maybe what advice do you have to other folks who may be looking at getting in a hard money?

Darryl Clements (08:16)
I ⁓

Hard money is just a stepping stone to get you to the next level. So don’t, tell clients all the time, don’t get so bogged down with the rates because everybody worried about, hey, they charged me 15, 20%. Even if they charge you, I mean, we don’t, but even if they charge you above those numbers, the fact of the matter is if you can get in and get out of a deal fast enough, those rates don’t matter. The only time, the most people, the main person that complain about a rate is somebody that’s gonna BS through the deal. They’re gonna drag it on. So instead of them go getting in,

knocking it out, finish the project and refinancing out of selling it, they might get the initial money, go buy a car, get that girl from the new outfit. So money is used for everything but what it’s intended for. And then they dragged along trying to use somebody else’s money to fix it. So I tell them all the time, don’t be married to the rate. Use hard money as a stepping stone to get you to the next level, to you go after better money. And when you first get into hard money, here’s the thing.

You can’t expect to get four or 5 % interest rate. It’s just not gonna happen. It’s like it’s an initiation, right? So when you first get into anything, when you first learn how to play golf, play anything, you’re gonna spend a bunch of money on lessons and all that because you just don’t know. But once you get it, but once you got enough experience and enough transaction under your belt, then you can command the stage now because you dictate what you will or will not accept. I tell them the first,

Your first deal is probably going to be hard because you don’t know. But you don’t dive in too quickly to where you can’t protect yourself. So you always got to protect yourself. And all hard money lenders are not created equal. What we do is we take the client already from beginning to end. So before you sign the PA,

We tell you to give us a call so we can pencil out the numbers and then pretty much figure out the deal works. Because I tell all clients, always work the deal backwards.

Don’t go straight in the deal with thinking, I’m buying it for $10,000. It’s going to be worth $300,000 when I finish. Know what it’s worth before you buy it. Because if you know what it’s worth before you buy it, then you build everything in that number. Say, prime example, say if the house is worth, when it’s completed, it’s worth $200,000.

conservative numbers and then they’re gonna give you 70 75 percent LTV right if you’re gonna refinance it so that’s 150 out of that 150 all your expenses and acquisition rehab and costs you should be built into that 150 everything you save from that 150 is additional profit if you go past that 150 you know you kissing the bear right now cuz gonna be a problem

Dylan Silver (11:14)
Mm-hmm.

I wanna ask you about refinancing. I’ve never personally done a hard money loan, but I’ve seen many lenders do them on deals that I’ve had under contract as a wholesaler. I’m curious, do you ever run into, or have you ever seen people who get the hard money loan and then they try to refinance and for whatever reason they can’t refinance out of that? Does that ever happen?

Darryl Clements (11:53)
No, because I’m already I’m getting you out of before you get for I get you in it

I know how to get you out of it before we do it. Because I’m going tell you what I can get you out of it as. And I have lenders that, like say if you want to sell it, right? If you want to sell it, but now it’s staying on the market longer than usual. I have lenders that require no seasoning. require, you know, no seasoning. can list it. You can list it and still refinance it at the same time. So we build our, we build our model based on figuring out the problems that you incur. We figure out how we got to figure out how to make it easier for you. Just like as a wholesaler. A lot of times that you,

Dylan Silver (12:04)
Yeah.

Darryl Clements (12:26)
You find a property and the guy won’t close out right there as wholesale so you might miss out on the deal So what we do is I said, okay, here’s a better way. Let’s just cash it out Let’s get a private lender to cash it out So once we cash it out, then you are you control the property you can move it as you need to move it So it all depends right? So if you can move it if you can sell it quick as a wholesale It’s a great deal. But say it might have some hair on it or whatever

Dylan Silver (12:42)
No question.

Darryl Clements (12:49)
If you sell the Quicks Hold here, sell it. But if it’s a great deal and it’s moving slow, don’t lose the opportunity because you can’t find the capital to take advantage of it at the present time.

Dylan Silver (12:59)
I wanna ask you about the slogan, the bank for the unbankable. I think when a lot of people think about hard money, they think about, well, if I’m investing in a fix and flip that I’ve gotta have a big track record and so on and so forth. So it’s probably a niche that you’ve carved out, especially with the slogan like bank for the unbankable.

Darryl Clements (13:17)
Well, our main thing is with us is you have two or three things credit cash or the asset if you got two of those three we go work so if your credit bad, but you got the you got the Asset and the cash we can make it work So I can on the most part we can give most deals to the table The problem is is are you willing to pay what it’s gonna cost? Far as like the what they asked him for and I tell all people all the time

If the deal is not comfortable, if your gut and your heart tell you don’t do it, don’t do it. Don’t, because every time I didn’t follow my gut and my instincts, I screwed myself every time. Every time I said don’t go. And so I tell you what, they have to be all the time. If you don’t feel it, if you don’t feel it, don’t do it. So, because I’m not really impressed. Go ahead, I’m sorry.

Dylan Silver (14:01)
It’s true.

I tell people,

no, I tell people this and I think a lot of people are aware of this, especially with like chat GPT, but I think it’s like neurons they find not just in your head, but also in your stomach.

And so when people have literally a gut feeling it’s because they’re getting a literal potential thought that they’re saying I don’t know hold on let me let me Slow the roll here. So I think it’s an interesting thing talking about well the numbers seem to line up But I just don’t know I’m not getting a good vibe You should tend to trust that especially if you’re just starting out I can’t tell you Darryl how and I’m sure you have the same experience how many flippers I know who have a bad story about their first flip and then how many other people that I don’t know probably did one flip

but didn’t go well and they never got back into it.

Darryl Clements (15:35)
And I tell people all the time, you gonna kiss some frauds, just like I’m sure the girl you dating wasn’t the first one. So, you’re right. So definitely believe. But the thing is, gotta, cause when the first girl or guy told you no or broke your heart, you didn’t jump out of the game. You just, okay, you went home, licked your wounds and then just tried again. So the thing is, don’t put risk more than you can lose. That’s what I tell people all the time. And then also I tell them,

Dylan Silver (15:41)
You’re gonna kiss some frogs,

Darryl Clements (16:02)
If don’t use your own money, that’s that’s the main point of about hard money if you got If you got starting out 20 grand sitting in the bank, right? So now camera buy a house for whatever put put money down over put money down on it But the thing is you leverage that 20 so the hard money if a hard money guys say I want to be 50 50 partners Let him be it because you’re not spending your money See people get people get so caught up on the back end profits, you know

the imaginary profits because you don’t know if you’re going to get it or not. But the end of the day is if you if I’m giving you if I’m giving you 50 % of my profits and I didn’t put up a dime, I’m way ahead of the game. Now, if I’m getting now, if I’m if I’m taking on all if I’m taking on all the risk, putting up all my money, cashing the property out, fixing up my own money. God forbid, say catch on fire.

Dylan Silver (16:53)
You

lose your money.

Darryl Clements (16:54)
you catch them fighting, you lose your money, you lose your wife mad at you. It all gets bad all the way around. Kids looking at you crazy because, hey, we can’t get no more gym shoes. It’s all bad. So think about Hard Money Linda as your financial partner. And every partnership don’t last forever.

So it’s just a quick in and out. So I’m just meeting you for the first time, you’re a money lender. I’m gonna look at you, I’m gonna search around and I’m gonna get, know, compare codes or whatever. But people biggest thing is that interest rate too high. Yeah, but you starting off broke. I mean, how’s you worried about the rate? You don’t have any money? Right, you ain’t got no money in the first place. So that’s.

Dylan Silver (17:28)
How are you gonna do that? Yeah.

It’s a risk

on all sides. mean, you’re not gonna lend to someone who’s got no track record, no credit, and so on and so forth, and they can’t expect for the rate to be low on top of that. And the rates aren’t low in general, so it’s not like it’s gonna be any lower with hard money. I wanna ⁓ pivot a bit here and ask you about what I see as a trend in real estate in general, but definitely in the hard money space, where you have a lot of people doing deals remotely in areas where they might not have tremendous…

subject matter expertise, but they might know, you know, based on stats and numbers that they’re able to see, but without having boots on the ground. Do you have a perspective on hard money lenders that are regional based on where they’re at versus people who may be loaning across states without boots on the ground?

Darryl Clements (18:19)
We land all across the country for one, but I say on the investor side, the client side, and I’m saying this for maybe I’m hurting myself, maybe I’m not, but I tell clients all the time, if you’re not in the state that you buying your first property in, be prepared to take a loss. Because if you can’t touch it, fill it, and go to it and check it out when you first doing it.

be prepared to take a loss. Cause now you putting all your faith in other people that you’ve met through chat, you know, through the social media and all that. Hey, and everybody got a great, listen, everybody got a great story to the check clear. When the check clear, it’s a whole different conversation. Then now you got to worry about it. The guy said, first it’s to cost you 60 to put this back together. Now all of a sudden, nah, I was, my estimates was off of nine is 90.

So you have to be willing to take that bus ride plane to where your property is and then check it out and then stay there a couple days and see the neighborhood, what you’re buying because on camera and in the videos, it looked great. But it’s the vaccine that they’re not showing you. The next two blocks over, how did the neighborhood really look? So you have to touch your investment. If you got it.

Dylan Silver (19:13)
There he

It’s huge thing.

Darryl Clements (19:42)
Yeah, you got $100,000 in the box up under your bed, right? I guarantee you every two, three weeks, you’re gonna go touch it to make sure it’s there, Same thing. Same thing with your house. Make sure your wife ain’t took a couple of dollars without telling you. You’re gonna check on your investment. It’s the same thing.

Dylan Silver (19:52)
100 %

It’s funny that you said

that, because I had that exact same experience as far as touching money, because I had, before I moved out to Santo Domingo, which is where I’m at right now, I had a safe with some money in it that I was gonna keep cash as kind of like a reminder to me that not all my money’s sitting in the bank. And I would literally go, it was in the safe, I knew where it was, I would still go check that it was there periodically, and I’m living there.

Darryl Clements (20:24)
You have to, you. Hey,

go, go peek around the corner. Okay, yes, still there. good.

Dylan Silver (20:29)
It’s still there. I was

like, okay, good. I don’t know what would have happened. It’s not like anyone can hack into my safe on a ranch in tech. No one knew, but we are coming up on time here though, Darryl. Where can folks go if maybe they have a deal that they’d like you to look at? Maybe they’re looking at getting a hard money loan or maybe they’re in the greater Detroit area and would like to reach out to you.

Darryl Clements (20:37)
It was just a thought.

Oh definitely. My website is www.icfundings.org or you can call me directly. The office number is 248-955-1234. But I’m hands on kind of guy. You can call my cell phone 248-978-5199. I’m not one of type of people that you can’t talk to. I’m still like, if you can’t talk to your preacher, that’s the wrong preacher. So if you can’t talk to your loan officer, that’s the wrong loan officer.

Dylan Silver (21:20)
Amen to that. ⁓ Darryl, thank you for coming on the show here today.

Darryl Clements (21:24)
Alright, thanks. Appreciate it, Dylan.