How Real Estate Investors Get Funded Without Income Verification or Experience

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Show Summary

In this conversation, Fred Shatzoff, a commercial lending advisor, discusses the intricacies of real estate financing, particularly for new investors. He emphasizes the importance of understanding the fix and flip process, the benefits of buy and hold strategies, and the necessity of adapting to market changes. Fred provides insights on managing contractors, the significance of numbers in real estate investing, and offers guidance for those pivoting between investment strategies. He also shares his contact information for further assistance.

Resources and Links from this show:

• • • Investor Fuel Real Estate Mastermind
    • Investor Machine Real Estate Lead Generation
    • Mike on Facebook
    • Mike on Instagram
    • Mike on LinkedIn
    • Fred Shatzoff Commercial Loan Officer’s Website
    • Fred Shatzoff Commercial Loan Officer on Facebook
    • Fred Shatzoff on Facebook
    • Fred Shatzoff on LinkedIn
    • Fred Shatzoff’s Phone Number: (551) 272-9067

  Listen to the Audio Version of this Episode

  Investor Fuel Show Transcript:

  Fred Shatzoff (00:00)
  That’s very true. Although, you know, let me say the following, if you know what you’re doing and you work with the right lender, things can be fairly simple. And the reason that I say that is, you know, prior to doing this, I had been on the residential side working with first time home buyers, FHA, VA, conventional loans.

  And if I compare this to this type of lending, it’s fairly simple because what it really comes down to is the following. First of all, we don’t loan to individuals. So you could technically set up an LLC today and buy a property tomorrow.

  Dylan Silver (02:20)
  Hey folks, welcome back to the show. Today’s guest, Fred Shatzoff is a commercial lending advisor out of New Jersey who helps investors secure fast, flexible financing for real estate, specifically fix and flip, BRRRR and buy and hold properties. He specializes in common sense underwriting, fast closing and investor focused funding solutions. And he’s active across multiple US markets. You can find him at FredBizLoans.com. That’s FredBizLoans.com.

  Fred, thanks for taking the time today.

  Fred Shatzoff (02:52)
  Thank you very much. It’s nice to meet you. I’m glad to be here this morning with you.

  Dylan Silver (02:57)
  When we talk specifically about folks who may be newer to this space, there’s so many options for lending. can often seem like analysis, paralysis, where do I turn to? As a commercial lender, I know that you’re involved in a number of ways for investors to get help, really from setting up their entity in a way to then even these specific loans and guiding them through that process. I tend to think that a lot of times people make mistakes

  that first portion of it, right, which is, I’ve got to have everything set up properly.

  Fred Shatzoff (03:30)
  That’s very true. Although, you know, let me say the following, if you know what you’re doing and you work with the right lender, things can be fairly simple. And the reason that I say that is, you know, prior to doing this, I had been on the residential side working with first time home buyers, FHA, VA, conventional loans.

  And if I compare this to this type of lending, it’s fairly simple because what it really comes down to is the following. First of all, we don’t loan to individuals. So you could technically set up an LLC today and buy a property tomorrow.

  That’s number one. Number two, if you don’t have experience, that’s fine. We can guide you through.

  the process. Third, we don’t verify income. Because I have a lot of people say, well, I make $120,000 a year on my primary job. That really does not matter at all. We’re not looking at your personal income. So A, you’ve got to qualify credit wise. I I have some programs that can go down as low as $640.

  Obviously the better your credit score is, the better rates and terms that you’re going to get. You’re also going to need to have the money for down payment and closing costs. You’re gonna need skin in the game. But what it really comes down to is do the numbers work? And what I mean by that is on a fix and a flip is the ARV, okay? So basically if…

  If you are a real estate investor, first thing we want to know, obviously we want to see what the address is. Make sure it’s not a rural area. Make sure it’s an okay area where we will lend. The next thing is what is the purchase price? And we want to know what the repairs are, what the after repair value. Once we have that and you give us an approximate credit score, an approximate

  money that you have in the bank for the project, from there we can analyze the deal and we can determine do you qualify. Again, it’s all based upon the numbers.

  Dylan Silver (06:41)
  I want to ask you specifically about experience level when dealing with newer fix and flippers and investors in general. I think a lot of people coming into this space and looking at lending deal with, I haven’t done a deal before. And in a lot of cases, that tends to create challenges for them, whether it’s finding a lender who will work with them or just understanding the process in general. What’s your approach to folks who have not done a fix and flip before?

  Fred Shatzoff (07:10)
  Well, the first thing I’m gonna tell them is, if you’ve not done a fix and flip before, I can definitely help you. can hold your hand and walk you through the process. Now, obviously, if you’re experienced, by that I mean two or three flips in the last 36 months, you may get a little bit better of a rate and a term, but if you’re a new investor, you can still qualify. You just have to…

  A, be set up correctly. You have to have an LLC. You you have to have some skin in the game. You have to have, you know, verifiable assets. And you also have to, you know, have a little bit of an understanding of the real estate investment market. Sometimes I’ll say to somebody who’s not done it before, maybe you may want to partner with somebody on the first deal. So someone can work with you, you know,

  and make sure that the numbers are correct because the biggest issue is, they’ll say, okay, we got $40,000 in repairs on a fix and flip. And then next thing you know, they end up spending $60,000. And once the terminal loan is set, there’s really nothing you can do. Now, obviously we build a contingency in there of 10 to 15 % above.

  what they say, but you know the lender also reviews the budget and may say to them you may want to increase this you know because you’re too low on it. But you you need you really need to have a contractor involved you know if you’re gonna do this on a part-time basis because they’re gonna know better what are the repairs and try to establish a relationship with the local contractor so at least you know your numbers make sense.

  Dylan Silver (09:06)
  Now, one of the things that people have difficulty with when they’re getting started, if they’re not doing the work themselves, is managing timelines, managing contractors, right? And so for someone who is not personally swinging the hammer, how important is it to find someone almost in-house or partner with someone who may be a contractor versus, you know, sub it out basically and oversee the project?

  Fred Shatzoff (09:32)
  Well, definitely want to look if you’re not doing this full time, you’re not a contractor. You definitely want to have somebody overseeing the project and working with you. Even if you even if you’re going to pay them a management fee, because if you’re not there overseeing and watching what the contractors are going to do, you know what? Things are not going to get done. They’re not going to move at a speed. I mean, it’s much like if you own a business and you’re not active in the business, you know what?

  People steal from you, people rip you off. And that’s really where you gotta really be careful. So you really need to establish a strong relationship with.

  a contractor and someone that you feel comfortable that can oversee the project or partner with someone who maybe is a full-time investor because that’s the only way you’re going to learn because the numbers are really the most important thing here in real estate investing. Don’t fall in love with the house. Don’t get emotionally attached. It’s not like when you’re buying a house, you know, it’s a little bit different.

  Dylan Silver (11:16)
  Now I understand that you’re active across several markets. I know that you’re based out of New Jersey. I’m from New Jersey. I certainly know that the barrier to entry in New Jersey, just the price points to get into these deals are going to be higher. Are you seeing less, less newer investors doing flips in New Jersey just because of that higher price point?

  Fred Shatzoff (11:37)
  Absolutely. mean, I see investors that live in New Jersey, but you know, sometimes they’re investing in Texas or Georgia or Alabama because, you know, the price points are a lot cheaper, let alone it’s very, very competitive here in the New Jersey, New York market, especially if you’re, you know, a new investor.

  You know, and you don’t want to lose your shirt on your first deal.

  Dylan Silver (12:07)
  Yeah.

  No, that would be very disheartening. And I know a lot of people who may have had that experience and they consider it a learning experience. I do want to pick it a bit here though, Fred, and ask you specifically about buy and hold. I’ve seen now more and more people kind of pivot away from fix and flip. I can’t speak for New Jersey, but I can speak for Texas where I’m licensed as a realtor. And it’s not that fix and flip is impossible to do by any standard, but it is trickier because you’ve really got a time thing.

  Fred Shatzoff (12:15)
  Absolutely.

  Dylan Silver (12:36)
  right, you’re not exactly certain if it’s gonna sell in the time frame that you think it might sell in. So I’ve seen more people go to like a fix and hold or put it out as a short-term rental or a long-term rental. When people are doing that strategy, the buy and hold or rehab buy and hold, is there anything specific that they need to take into account that might be different than let’s say fix and flip?

  Fred Shatzoff (12:57)
  Well, they do want to become familiar with the rental market and see what current rents are. The other thing I would recommend, if you’re planning to hold on to something long term as a buy and a hold, I would recommend getting a two family or a three family or even a four family because if you buy a single family and your tenant leaves, now you have no rent for maybe 60 days. Whereas if you have a multi-family, you still have the rent from the other

  apartment so that’s something to keep in mind as well to do that. That’s why lot of investors really like the BRRRR strategy because you do want to hold on to it because you want to create residual income for yourself as far as the rental coming in every month.

  Dylan Silver (13:51)
  Yeah, I mean, it’s a big differentiator there, right? If you’ve got two doors, three doors, four doors versus one door, that’s going to be a game changer. And I think a lot of people, too, coming into the space might think, four doors is maybe a lot for me if I’m doing my first deal. But the price points are not necessarily drastically more for a quadplex versus a single family home in some cases. It can be shocking that you would think it would be four times more because it’s four doors, but it might not be the case.

  Fred Shatzoff (14:17)
  Right?

  That’s true. It really is a lot of times, not four times more. And you know, you have to really look at, know, how much money am I going to make on this property? Does price point matter to a point? Yes. But look, if you have the money for the down payment or you buy something relatively inexpensive and that does not need

  major work. That’s really the way to go because a lot of times what happens if you buy something that needs your major rehab it ends up taking a lot longer. You better try to buy something where there’s not a lot of major rehab. Maybe it’s carpeting, flooring. Yeah maybe you need to upgrade the plumbing and the heating but you don’t want to do something where you got to do almost a tear down because

  That’s where you really can end up losing your shirt.

  Dylan Silver (15:57)
  I’d to ask you about folks who may be pivoting from one strategy to another. Let’s say they’re fix and flippers and they’re realizing, hey, we’ve lost money on some deals. They’re sitting for a while. Now they’re looking at some other segments of real estate. Maybe they’re thinking, hey, we’ll do some larger multifamily, more than four units. Or maybe they’re thinking, hey, we’re not going to do fix and flip, but we are going to do maybe a buy and hold strategy. Do you have any feedback for those folks who may be finding themselves having to pivot right now?

  Fred Shatzoff (16:27)
  Sure, mean, yeah, you could certainly do a five plus unit building. I wouldn’t necessarily do, you know, a mixed use. I would probably do an apartment building because, you know, there’s a lot of businesses going out of business. Again, the plus there is now you’re going to have rental coming in from six, seven, eight units. And that’s really where you’re to make a lot more profit on.

  something and you know we can also help people like that I mean I actually have some programs where you know we’re not going to verify assets obviously before you apply even though we’re not verifying assets the lender

  I’m going to ask you to send me a bank stamp because I want to see that you have the money. Because I certainly don’t want you to get to the closing and you represented you have 60 grand. Now all of sudden you’re at the closing. You have $10,000. Now you wasted everybody’s time. So even though they’re not verifying that, know, but you also want to be a little familiar with what is current rentals in those areas.

  You know, there could be some very good opportunities in the future with some rental properties coming due because there’s a lot of balloons that are coming due. There are some people that want to get out of the market. you know, timing is everything. But again, it really comes down to the numbers more than anything else. know, you know.

  What is the rent compared with what the mortgage payment is going to be? Certainly the only time you might want to lose money on a property, suppose you own the single family and now you got relocated from New Jersey to Florida, but you can’t sell your house right away and you rent it out and maybe you lose some money temporarily. But if you’re on the investment side, the numbers have to work.

  Dylan Silver (18:28)
  Yeah, there’s no question, right? mean, at the end of the day, each market is going to be different and you’ve got to be able to underwrite for that market. And then also you have to be able to understand, hey, am I being conservative here? If this plan A does not work, what’s the plan B, right? And so I think a lot of people may have found themselves in trouble because they really thought, hey, this is going to work. It’s been working for five years, right? Why would anything change? And so, of course, it inevitably does. And that’s kind of the cyclical nature of this game. We are coming up on time here, though,

  Fred Shatzoff (18:43)
  correct.

  Dylan Silver (18:58)
  Any new projects that you’re working on and then also to what’s the best way for folks to get in contact with you?

  Fred Shatzoff (19:04)
  Okay, well, you know, one of the things we’ve now hooked up with a number of lenders out there, especially on the fix and flip side, who do not require an appraisal. So we could literally have, you know, your approval and have you ready to close in 48 hours. And then obviously as quick as you get the title back to us, you can close.

  very quickly because obviously in the past when you needed an appraisal you had to go to an appraisal management company and you really don’t have a lot of control over that. So with no appraisal you know I can submit the property to the lender and they can tell me usually within 24 or 48 hours you know will it work are the numbers okay.

  You can reach me in number of different ways. You can call me 551-272-9067. You can obviously go to my website, fredsbizloans.com. Or you can email me fredsbizloans.com. You can reach me after hours as well. I typically pick up the phone, you know.

  seven, eight o’clock because sometimes I know that’s the only time someone can talk.

  Dylan Silver (20:22)
  Yeah, Fred, thank you so much for coming on the show today. Thanks for taking the time.

  Fred Shatzoff (20:26)
  Thank you.