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How Real Estate Investors Use HELOCs, BRRRR, and DSCR Loans to Scale Faster | Matt Graham Interview

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Show Summary

In this episode, Dylan Silver interviews Matt Graham, a former banker turned small-shop mortgage banker and investor based in the Ozarks. Matt shares insights on real estate investing opportunities in the Ozarks, including affordable entry-level properties, long-term rentals, and short-term vacation rentals in areas like Branson. He explains financing strategies such as HELOCs, the BRRRR method, commercial lines of credit, and DSCR loans. Matt also discusses the importance of choosing the right investment strategy, surrounding yourself with the right team, and understanding market factors like interest rates, inflation, and unemployment when making real estate decisions.

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    Investor Fuel Show Transcript:

    Matt Graham (00:00)
    A lot of times I tell people, I’m not a greedy lender. I’d love to do your cash out refi and make a couple thousand dollars, but I’m not that guy. I tell every single person, if you’ve got the equity and you’re at 50%, 60 % equity, it still leaves a little bit of meat on the bone. But if you’re down below 50 % loan to value on a property, that’s probably your best time to get a HELOC. I love HELOCs. I think everybody should have a HELOC.

    Dylan Silver (01:57)
    Hey folks, welcome back to the show. Today’s guest, Matt Graham, long time banker turned small shop mortgage banker, investor that helps investors. He’s based out of the Ozarks. You can find him at HMGlending.com. Welcome to the show, Matt.

    Matt Graham (02:12)
    Thanks for having me, Dylan. Very appreciative. I appreciate the introduction. That was a good introduction.

    Dylan Silver (02:17)
    Appreciate it. Thank you for coming on the show here today. And, you know, I’d like to start by talking about, you know, what good looks like in the Ozarks. We were talking before hopping on here. ⁓ There’s a number of different strategies, which you mentioned, you know, are certainly viable out there. But if you had to get started maybe doing one, if you were making your entryway into real estate investing in the Ozarks, where might you start?

    Matt Graham (02:41)
    You know, being in the Ozarks, we have a myriad of ways to get into this business, depending on what you’re, you know, where you want to be as far as entry level. I mean, you can start out with the $79,000 house, $69,000 house. We’ve got a resort town from about 30 minutes away from Springfield called Branson, which some people might know.

    It’s kind of an Ozarks treasure. Silver Dollar City is right there as well. But ⁓ with the advancement of Silver Dollar City and the popularity of that, ⁓ it does have a lot of people that ⁓ are employed there that live in Springfield or the surrounding areas. ⁓ Springfield is a little bit older town and used to be a big deal back, you know, 100 some odd years ago. And so you had a big influx of these houses that are now 100 some odd years old that

    people are still able to get a pretty good deal on it. mean, I still see some pop up every once in a while that are in the, you know, like I said, 69, 79, $89,000 price range. Yes, they need to be completely fixed up and turn into, you know, $150,000 house on the average market. But that would be probably where I would say a lot of people start is by starting with that lower price tag, which is luckily still available in this area. Then you have some people that, you know, like we talked about, they go on vacation.

    and they’re at an Airbnb and they start looking around, they start running numbers and they’re like, gosh, you know, I could do 20 % down and maybe do a cash out, refile my personal property. And then maybe I go buy this Airbnb and maybe that’s where they want to start because they someone else manages it all for them. So it really just depends on your level of wanting to be involved or do you want to burr and just kind of keep the property, build up more assets, things like that.

    ⁓ But I do love having leased a couple of long-term rentals and you gain equity in those rentals, let someone else make the payment and you can use it, you know, like a commercial line of credit. ⁓ Get that commercial line of credit. A, you can use it for no tax income because it’s a loan. Someone else is making the payment again. Take that money and you can either pocket some of that or you can go buy another rental property. I mean, that’s what I did with my rental property that I held for

    Dylan Silver (04:30)
    Right, right.

    Matt Graham (04:58)
    16 or 17 years and built a bunch of equity in it. And then after COVID, I realized that it was worth double what I bought it for. Took a commercial line of credit out and I paid myself a little bit of money. And then I went and bought some other properties with that money and then turned around and sold it after that and still made another $79,000, $89,000 off of it. there are so many advantages to being in a good market where prices are still fairly low.

    Dylan Silver (05:05)
    Yeah, yeah, yeah.

    I’d like to ask you a granular question for folks who are trying to access the equity in their home. When does it make sense to do a cash out refinance versus taking out a HELOC? Is there a time where one makes sense versus the other or would you maybe advise against one entirely?

    Matt Graham (06:27)
    You know, that man, you know, I have this conversation probably every day, at least one time a day ⁓ where friends call me they’re like, hey, you know, after COVID, I realized that I could sell my house, but I have a 3 % interest rate. So why would I sell this house? But I want to do XYZ. And a lot of it is I want to invest or, you know, send my kid to college depending on your age, but

    A lot of times I tell people, I’m not a greedy lender. I’d love to do your cash out refi and make a couple thousand dollars, but I’m not that guy. I tell every single person, if you’ve got the equity and you’re at 50%, 60 % equity, it still leaves a little bit of meat on the bone. But if you’re down below 50 % loan to value on a property, that’s probably your best time to get a HELOC. I love HELOCs. I think everybody should have a HELOC.

    It’s an emergency fund.

    You don’t pay any payments unless you take money out or spend that money. And a lot of times they give you a checkbook that goes along with it. So if you need tires or something or something bad happens and you don’t have that cash sitting around, a HELOC is the best thing you could ever have. So I do feel like as far as emergency funds, people don’t really have that. If you follow Dave Ramsey, it’s more about taking your cash, putting it in the bank, letting that sit there and accumulate, which yes, you need that too.

    Dylan Silver (07:21)
    Yeah.

    Matt Graham (07:46)
    But if you’ve got equity in your house, use that equity as a HELOC, as an emergency fund, and do whatever else you want with that money too.

    Dylan Silver (07:53)
    So when, and this is coming from a place of ignorance because I haven’t, I haven’t done this before full disclosure, right? So if people are burning out of their properties, right? Could they also be looking at, well, rather than maybe burn out of the property, if the interest rates going to be higher, maybe I just take, take a, a heat lock or a heat loan on this property.

    Matt Graham (08:11)
    Absolutely. And that’s where I feel like, you know, if you’ve got the equity in it, I say 100 % go get a home equity line of credit. ⁓ And I do home equity lines of credit, but I also know that, you know, at my former bank that I used to work for for a number of years, they’ve got a killer deal on theirs and it’s going to be a much better interest rate and stuff like that. So I tend to drive people to the banks to go get those HELOCs because like I said, I’m not greedy and I’m not going to stick you with the

    eight or nine percent interest rate when I know you can get it for six or seven, you know, so. But to have that, you know, a burr method is good, but it’s no two totally different things. Right. So you’ve got your personal residence. You’re going to do a HELOC on it on a rental property. If you do a burr method, which that’s fine because the bird is going to get it onto the permanent financing at least get you out of the construction loan or the rehab loan. You’re going to burr out of that. But sometimes you might not want to take the cash right then.

    A lot of times what I tell people is if you want to do the BRRRR method, that’s fine. At least get it on a permanent loan. Now, now that you’ve got an appraisal, you know what it’s worth and it’s an income producing property. Now, the biggest thing with a commercial line of credit is you have to own it at least 12 months. It’s got to be income producing and some have different criteria of if it’s been, you know, already rented or if they’ll take a market rent analysis to see what that market rent is for a property like yours.

    And they’ll base it off that and they’ll give you a commercial line of credit up to 70, sometimes 80 % of that home value. And that is going to be revolving. So now when you gain the equity in that line of credit, A, you can use it as tax-free income because it’s a loan. Someone else is making the payment for you too. And then B, you take that equity every single time you pay that down. Now you can keep going back to that 70 or 80 % and buying other properties with it or

    Now, if that’s how you want to pay yourself every single year, you can do that too. ⁓ It takes your tax implications down because now you can say, I make less on your taxes, but you still are having some income come in that’s tax free because they can’t tax a loan. So there’s a little bit of a caveat there, but ⁓ I do love having a commercial line of credit on rental properties and they do it on condos. They do it on ⁓ single family duplexes, quadplexes, apartment complexes.

    Dylan Silver (10:19)
    friend.

    Matt Graham (10:30)
    And not a lot of people know that. I talk to investors every day that didn’t know that they could take a commercial line of credit out and they can use it as income and things like that. So a lot of these guys, they’re doing the Burr method. That’s great. Do the Burr method if that’s what gets you by for now and you can cash that money out and immediately go to the next one. But if you can hold off for 12 months and have a little bit of patience or maybe you do both, maybe you do the Burr method and you’re still going to have some equity in it.

    Dylan Silver (10:47)
    Sure, sure.

    Matt Graham (10:58)
    and then say in 12 months, two years from now, now you’ve got access to the rest of those funds and you can take that line of credit out at that point. Now you’ve really taken as much as you can out of that one property and you’ve turned it into multiple streams of income basically at that point.

    Dylan Silver (11:49)
    I would like to pivot a bit here, Matt, and ask you specifically about some of the other segments of real estate, like fix and flip and short-term rentals. These are sometimes, ⁓ they get a lot of attention, right? You might see a lot of people online doing fix and flip or getting into Airbnb specifically. But on the flip side, that doesn’t mean that just because you start a project that it’s a sure thing. could be the furthest thing from that. In fact, it could be like a learning opportunity.

    going to do right if you buy the deal wrong. Do you have any preference either for or against starting out in either of those spaces? know, your first property, your first investment being a fix and flip or your first investment being a short term rental?

    Matt Graham (12:31)
    Gosh man, you know, I’m a loan officer, but I’ve also been in construction a long time. you know, fix and flips, gosh man, it depends. If you’re married, good luck. It’s gonna take a lot of your time and your wife’s gonna be a designer by the time it’s all said and done. ⁓ She’s either gonna love it or she’s gonna hate it. But most women are risk averse and most men are like, I wanna take every risk that I can while I’m still able to.

    So it just depends on your pain threshold is what I tell a lot of my clients and people is if you have the resources to do a fix and flip by all means, ⁓ go try it if you want to. I’m not a big fix and flip guy. I’ve been through that. I’ve done it. And some people, though, they have they you you’ve got to start somewhere. But maybe it’s you buy a rental property that doesn’t necessarily need to be fixed up. Maybe it’s something that’s already been fixed up. You go in and you buy it as

    Dylan Silver (13:27)
    Yeah.

    Matt Graham (13:29)
    low as you can, or maybe you network with people and you found a good property that’s been fixed up, but they just want out of it. And you walked into someone that’s already got a lease on it. And that’s the way you go about it. If you’re starting out, I tell people that I would usually go that route, gain some equity in it, get that commercial line of credit, then maybe go try a fix and flip. ⁓ It’s really not that hard, but too many people watch HGTV is what I will say right off the bat. So they think they can go out and do these things.

    Then they get in over their head then we get into a lot of hidden issues that might pop up after someone buys it that you know to me I’m all about the long run and reputation so but like I said, you got to start somewhere So if you do a fix and flip by all means go try it but make sure you surround yourself with the right people Far too many times people get taken advantage of. Yeah

    Dylan Silver (14:18)
    the right people.

    That’s so key, that’s so key, right? Because especially if you’re not a general contractor, you don’t have any experience swinging a hammer, now you’re depending on a crew to potentially do a substantial remodel. And so it may be better to buy something turnkey than versus buy something where you’re gonna have to float the foundation in order to get it to a point where it could be sellable. I would like to also ask you about the short-term rental space.

    Matt Graham (14:46)
    Exactly.

    Dylan Silver (14:49)
    You know, when we think about, you know, the Ozarks or really any destination area, oftentimes people think of, okay, well, this must be a great opportunity for short-term rentals. But on the flip side, I’m also thinking, well, it could also mean that there’s a lot of competition out there as well, right?

    Matt Graham (15:03)
    Gosh, 100%. You hit both sides of the coin. ⁓ Which really means it boils down to the property. ⁓ I’ve got a couple different properties down there. One is at the Hilton, which is actually, we’ve got the Hilton Convention Center. That’s a big high rise convention center. And then we’ve got the Branson Landing, which is a big strip that runs through there. ⁓ And I own a condo that’s inside the landing side of it, not the convention center side.

    And I love it because the Hilton manages everything. The fees are a little bit high, but still I go out to my mailbox every quarter and I’ve got a pretty good size check sitting there waiting for me. So I love that because I don’t have to touch it. I can go down there whenever I want to with the family and enjoy the landing and have fun at the arcade, do all the things and I’m not paying for it. Thank goodness. I’m getting paid to own it to go down there. And that was the goal in the first place.

    ⁓ And then I also own for another example would be I own one that’s right outside of Silver’s Silver dollar city’s door. ⁓ And so that’s a key place to be because it’s probably the busiest place in Springfield or even in the tri-state area. And so I’ve got both sides of Branson that I like. Now it becomes a, better have a good property manager that’s going to make sure that they exploit the Silver dollar city aspect and get you as many people in that rental as possible.

    and also have people on the back end that can go fix things whenever things come up that need to be fixed. So I think I’ve positioned myself to be able to be lucky enough that I’ve got both ⁓ and a couple of other ones too. But the ones that are the good examples I like is the Hilton and the one by Silver Dollar City. So as long as you surround yourself with right people, you’ll probably be okay. The average I find, so I do a lot of DSCR loans down in this area.

    and we’ll do single family, we’ll do duplex, quadplex, and then condos and stuff like that. And from what I’ve found with the market rent analysis that goes with these DSCRs, that is the biggest reason why we do these DSCRs is because they’ve got to go out and do a market, ⁓ market rent analysis of it and see what that market rent will look like. And I have found that usually,

    Most people are going to be at about $3,500 per month income on a property like that. And that’s not bad money. That’s at least going to make their mortgage payment for you for sure. And then it leaves you having some more on top of that. But I’ve seen people perform where they’re pulling in between 40 and $70,000 per year on their condo that they own down in Branson.

    Dylan Silver (17:25)
    ⁓

    Matt Graham (18:19)
    It’s a big spectrum. It depends on who you’ve got managing the property. It depends on the property itself, the location of it, how often it’s going to get used. And Branson’s a big resort town. So it depends on which side of town you’re on. So you’ve really got to do a lot of research and find out where the best places are to be. And then can I afford it? And then how much is it ultimately going to make me every month? And so being that we average 3,500 bucks a month, that’s not bad. It’s not huge, but it’s better than a lot of long-term rentals for sure.

    Dylan Silver (18:46)
    Do you think, mentioned DSCR and we talked before hopping on the show here, DSCR seems to be getting bigger and bigger and bigger. Do you think that we’re going to continue to see the increased popularity in DSCR or do you think maybe there’ll be some more traditional products that may open up for people who may be taking lots of…

    ⁓ tax deductions and therefore might not have a huge bottom line income on their tax return at the end of the year or some other scenario.

    Matt Graham (19:17)
    You know, I love that you asked that question because I get that a lot from people and which way should I go? You know, and that’s the biggest question of all, but it just really depends on the person and how they’re set up. So, I mean, I’ve got some people that make, you know, 400 grand a year. Traditional loans are just fine for them. They can make all the money that they make yearly. They don’t write off a lot of them. A lot of them are W2 and they don’t write off a lot of stuff, but.

    But then I’ve also got people that are doctors and lawyers and accountants and stuff that they make a bunch of money, but they write everything off and they show very little income at the end of the year. And that’s what those those DSCRs are designed for for those people right there. ⁓ Now, I do have some people that make a bunch of money and they’re kind of tapped out on how many loans that Fannie Mae will allow them to have all at one time. And these DSCRs play outside of the Fannie Mae and Freddie Mac guidelines. So

    Once they get up to 10 properties, they’re kind of almost where they’ve got to go talk to a commercial lender at that point. With these DSCRs, you don’t have to play that game. you know, the rates right now, the rates are somewhat similar. DSCRs are probably a little high right now. But, you know, the last few years, they’ve been pretty neck and neck from what I’ve seen with my investors anyways. I’ve seen some people paying 10 % for these, but my investors have been pretty close to what the average conventional loan is. Thank goodness.

    But I would say these DSCRs are gonna get more popular because I feel like we’ve got more people that are starting businesses too. ⁓ After COVID, people realize I can go start a business now. I can get surrounded by the right accountant and the right people in business to mentor me. And there’s so many resources online ⁓ with virtual assistants and AI coming out that people are starting businesses and these DSCRs are…

    Dylan Silver (20:44)
    Yeah. Yeah.

    Matt Graham (21:03)
    meant for people that own businesses, yet they write everything off and they can’t show the income. So let’s do a DSCR instead.

    Dylan Silver (21:11)
    Yeah, I think you hit it. You know, there’s so many businesses that are being started and the access to information, the discoverability of who to go to, right? To assist in that next step, whereas not even that long ago, like four or five years ago, people might not have been able to get to that next step, not been able to make that connection. Now, AI isn’t going to make that connection for them yet, but it will point them there. So there’s more of this happening and then more people realizing, hey, I’m a doctor.

    I’ve got this large W-2 income, but if I start a real estate business and I’m able to show that I’m a full-time real estate investor status, I can actually recoup $100,000 of my W-2 salary because I can write it off over here. And so more people are hip to this, I’ve noticed, with time and with AI. We are actually coming up on time here though, Matt. Any new projects that you’re working on, and then as well, what’s the best way for folks to reach out to you?

    Matt Graham (22:10)
    I’ll answer the last one first. So ⁓ Matt Graham, so it’s Matt, last name is Graham like Graham Cracker. So it’s matt.gram at HMG lending, that’s home mortgage group lending.com ⁓ or 417-209-8532. And, ⁓ you know, as far as the first part of your question, ⁓ you know, I feel like as far as where I’m at right now, personally, is I’m getting ready for all these refis.

    ⁓ you know, we’ve been doing some refis, but again, I’m not that greedy guy that’s like, Hey, you know, it’s been, it’s been eight, nine, 10 months and rates have come down. Let’s, let’s, let’s refi you right now. And then let’s do it again later on down the road. I don’t really feel like that’s a service to people, especially when they’re friends of mine or, know, whatever. I know so many people that I don’t want to direct them in a, fashion that’s going to put them up.

    Dylan Silver (22:41)
    Yeah.

    Matt Graham (23:03)
    to where they’ve got to redo their escrows and they’ve got fees and they’ve got all this stuff that goes along with the refi that unless they want to and they approach me about it and they’re like, hey, I need to do this right now to save a hundred bucks, 150 bucks. Sure, I’ll do it for you, but I’m going to advise you to wait until we get to about the lowest we can with interest rates, which I think is coming in the next few months. I mean, right now it’s March, 2026. I kind of thought rates might’ve moved a little bit faster in the downward direction, but they have moved quite a bit downward.

    You know, I’m seeing some FHA loans and stuff where I’m able to get them down in the upper five interest rates, which is great. Sometimes mid fives, depending on a lot of different factors, but I’m always telling people right now, hey, just hit pause for a minute. Let’s see what happens. We’ve got a new Fed chair that’s coming in. We also just ⁓ started lobbing bombs across to Iran. So that’s affected interest rates along with some other things. So right now I feel like we’re in kind of a volatile spot again.

    which I kind of thought we’d be on cruise control right now. But I think that we’re kind of in a volatile spot that I’m telling people, let’s give it a few weeks. Let’s give it a couple months. Let’s see how rates respond to this. Let’s see what happens with the new Fed share. And then give me till, you know, May, June, July. Let’s start looking at what rates are for you. And then let’s maximize what your savings would be on some type of refinance, whether that’s cash out or whether that’s just doing an average refinance. So.

    I’m just always trying to save him as much money as I can and that means sometimes it means weight.

    Dylan Silver (24:28)
    Yeah.

    Yeah, I mean, look, you mentioned, you know, there’s a lot that’s going on, right? And so for folks who are trying to figure out exactly when to time the market, right? It’s like, when’s the best time to plant a tree? But on the other hand, you know, we may we honestly may be right around the corner from rates dipping ⁓ into a spot that will be very.

    Matt Graham (24:50)
    Yeah, and I tell every one of my clients,

    yeah, and I tell all my clients, you know, keep an eye on the market, keep an eye on what inflation is doing, keep an eye on what unemployment is doing. Let’s look at the factors. So I try to educate some, you know, most of my clients, I’m trying to educate a little bit along the way without giving them too much information. But if you keep an eye on those key factors, just those two factors alone, you’re going to be able to not predict what’s going on, but you can kind of keep up to speed.

    I’m hearing that inflation is down close to two. I’m hearing that unemployment is up above 4%. Those are the times that you’re going to start seeing interest rates coming down quite a bit. And that’s when you also see the Fed will usually step in and they will force them down. keeping an eye on those certain marketability items, that’s really where it number one, it keeps my phone from ringing so much, but it also educates people to where they kind of can take control of that and kind of have some ownership of when they feel like they should pull the trigger.

    because it gives them just a little bit more ownership in the process. And I love that for my clients.

    Dylan Silver (25:52)
    Matt, thank you so much for joining us today. Thanks for coming on the show.

    Matt Graham (25:55)
    Dylan, thank you so much. This has been great.

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