Subscribe via:
Show Summary
In this conversation, Michael Gifford, CEO of Splitero, discusses the challenges homeowners face in accessing home equity and how Splitero offers innovative solutions. He explains the differences between traditional home equity loans and Splitero’s home equity investments, emphasizing the flexibility and accessibility of their product. The discussion also touches on market trends, the impact of competition in real estate, and the importance of empowering first-time homebuyers with knowledge about equity options.
Resources and Links from this show:
-
Listen to the Audio Version of this Episode
Investor Fuel Show Transcript:
Michael Gifford – Splitero (00:00)
Yeah, so we’re making a home equity investment. So we’re giving them a lump sum of cash now for a share of their home’s future value. ⁓ A typical loan will say, hey, we’re going to give you this money right now. You’re then going to either pay it down or pay just interest only, not locked to any future event. We’re looking for and making an investment in the future value of that home.Dylan Silver (01:52)
Hey folks, welcome back to the show. Today’s guest, Michael Gifford is the CEO and founder of Splitero. And he’s also a career real estate expert who’s witnessed firsthand how the lack of resources available to homeowners can impact them, especially when they need it most. Michael, welcome to the show.Michael Gifford – Splitero (02:12)
Thankyou, thank you for having me on.
Dylan Silver (02:15)
It’s great to have you on here. And I always like to start off at the top of the show by asking guests how they got started in real estate.Michael Gifford – Splitero (02:23)
Yeah, I got started early on in my career working for a family office here in San Diego. ⁓ This was during the GFC. So we were buying houses at the foreclosure auction back then. You could buy as many as you had cash for.Obviously, inventory and things have changed these days, but that’s how I got started. So we were buying a lot of houses, mostly fix and flip, some infill development, bought over thousand houses between kind of San Diego and Seattle. That did some hard money debt for investors, learned that side of the space. And then really as the market was changing ⁓ in coming out of COVID, ⁓ realized how difficult it was for homeowners to access the equity in their homes and started Splitteral.
Dylan Silver (03:07)
Now, when we’re talking about, you know, folks having access to the equity in their home, to me, when I think of this, I’m mostly of real estate investors who are aware of this, but also with people, you know, becoming cash strapped at any point in time, they’re going to be looking for, you know, ways that they can make ends meet. When looking at home equity loans, is there one common theme that you see? Is it is itpredominantly folks who are cash strapped. Is it folks who are investors or is it across the board?
Michael Gifford – Splitero (03:40)
Yeah, Iit’s across the board right now, to be honest. And really, the other side of that coin is if you bought a house in the last really 10 years, you’ve amassed a ton of equity. That’s a lot of people’s, know, majority of their net worth. That’s difficult for them to access.
When someone thinks about accessing the equity in their house, they have a few traditional options that if you’ve looked at it over the last few years, have gotten more and more difficult to qualify for, right? So home equity line of credit is the biggest vehicle that people will use. The qualification standards for those have gotten really tough. so whether it’s people’s income or DTI, Cal can’t keep up with it, whether it’s their FICO score has slipped. There’s a variety of reasons, but it’s more and more difficult now to access the equity.
in the house ⁓ unless you use a product like a home equity investment, which is what we do.
Dylan Silver (04:34)
Let’s talk about some of the differences between what’s what’s Harrow does and what folks who have a he lock do.Michael Gifford – Splitero (04:40)
Yeah, so I think first it starts out with that qualification that we were just mentioning, right? So we can work with a homeowner with as low as a 500 FICO and there’s no income requirement. So if you go to a bank right now, you’re probably gonna need 720 or 750 FICO plus a great income because you have to cover a monthly payment with the debt.So, Spatero doesn’t have a monthly
there’s no income requirement, there’s no tax returns, it’s really low-doc is kind of the term that people will use in the industry, but it’s much easier to qualify for if you have equity in your house. The second thing that…
Dylan Silver (06:01)
Now,go ahead, go ahead.
Michael Gifford – Splitero (06:02)
monthly.So after you get a heat lock, you take out all the money, you immediately start making a monthly payment on it. And that is a big thing across the qualification spectrum. Homeowners are struggling with cash flow. And so not having an additional monthly payment is a huge selling point.
Dylan Silver (06:19)
So when folks are hearing this, saying, well, I’ve got equity in my home. I can take out a loan. I don’t have to pay monthly payments. How does that work? Explain that to myself and our audience.Michael Gifford – Splitero (06:27)
Yeah, so we’re making a home equity investment. So we’re giving them a lump sum of cash now for a share of their home’s future value. ⁓ A typical loan will say, hey, we’re going to give you this money right now. You’re then going to either pay it down or pay just interest only, not locked to any future event. We’re looking for and making an investment in the future value of that home.at some point, the homeowner is either going to sell or refile, or they just will have cash around to repurchase it. We’re going to figure out what that is based on the home’s future value.
Dylan Silver (06:59)
Now, for investors who are listening to this and they’re thinking about, okay, well, I don’t have to make payments on it. you know, someone is going to effectively be a partner with me when I go to sell this property. Do you think that there’s an avenue here for investors who are specifically looking for, like you mentioned, you know, not having to make those monthly payments?Michael Gifford – Splitero (07:25)
Yeah, investors, top of mind is usually cash flow, right? They have tenants in theThey’re getting in rents. likely have a lower rate mortgage at this point, right? They don’t want to refi that mortgage. Even if you go through kind of the DSCR process here, you might have a higher monthly payment. You get some cash out, but ⁓ investors typically don’t want to change their cash flow. And so it’s a great product for investors because honestly, they have as much equity built up in these properties as anybody else does. And they need to access it too. And the big thing with with this and a lot of homeowners, investor or homeowner is
they have that lower rate mortgage that stays in place. That doesn’t change with this product. If you look at a DSCR, they’re gonna refi you out. If you look at a reverse mortgage, they’re gonna refi you out. So keeping that low rate mortgage in place is important for a lot of people. It’s really two assets. You have the house and the low rate mortgage at this point.
Dylan Silver (08:18)
Now, when we’re talking about, you know, who would be a great candidate for this, it sounds like it really sounds like a no brainer. Like why? And I know not maybe not necessarily wanting to get people alternatives. I want to drive businesses with terror. But is there is there a reason why people would consider a HELOC when they have the ability to get a home equity loan without those monthly payments?Michael Gifford – Splitero (08:43)
Yeah, I think that every situation is different. So certainly qualification comes into that. The monthly payment thing comes into that. The ⁓ effective rate is gonna depend on how long you hold the product for. So it could be cheaper in some circumstances to use a traditional financing vehicle if you can qualify for it.But yeah, is, as far as we’re concerned, is a no-brainer. It’s a product that everyone needs to know about and at least put it into consideration when they’re thinking about accessing equity.
Dylan Silver (09:15)
Now if people have duplexes, triplexes, quadplexes, is this something that a splittero would look at or is it strictly, you know, single family, one, one, one door homes?Michael Gifford – Splitero (09:24)
No, we go one to four units.Dylan Silver (09:29)
I’m thinking, going back to your background in acquisitions, this is really now a way for folks who are distressed to stay in their homes. But then also it’s potentially an opportunity for, and I’m just talking out loud here, for investors who are looking at doing those acquisitions to have another tool in their tool belt. Because not only can they make ⁓ offers on these properties, butThey can also potentially, you know, JV with people in other ways and access the equity in there. And I’m just talking out loud.
Michael Gifford – Splitero (10:41)
Yeah, we hear some incredible stories of what people do with the funds. It’s pretty rare that you have the opportunity to access up to 500,000.dollars without a monthly payment. So we hear some awesome stories. There’s certainly the folks that we’re helping save from foreclosure, ⁓ the folks that are in some sort of distress scenario, paying off debt, know, credit card debts going crazy. But then there’s also the I’m starting a new business, I’m buying another home, I’m flipping a property, you know, repairing, renovating my property, there’s a lot of really cool uses of funds. And really that flexibility comes from the no monthly payment, right, you can take that extra
risk or do that extra thing that you might not if you have a large monthly payment with another vehicle.
Dylan Silver (11:25)
For Splatero users, there, you mentioned a couple different like exits that folks have selling the home, right? Is there one main that you see or is it different in every situation?Michael Gifford – Splitero (11:36)
Yeah, primarily it’s it’s sailor refi, right? So somebody is going to refi and then pay us back or they’re going to sell their property. ⁓ You know, homeowners now.feel like they’re fairly locked in, right? They have this low rate mortgage, prices are still high, there might not be a lot of inventory in their neighborhood. so accessing the equity now to bridge the gap of whatever they’re trying to do financially, ⁓ we make it easy for them to do so. But then, you know, they’re going to sell or refi eventually, typically, you know, depending on the market, five to 10 years and life happens. And so then they’ll pay us back.
Dylan Silver (12:14)
I’m thinking I’m thinking as an investor, like this is a way where people could incorporate this into their strategy, right? So they’re going to be able to access the equity in their properties without having to sell them. then, you know, it’s cutting and of course, nothing is going to be a perfect scenario, but it’s cutting the exit strategy, maybe down to some degree, because then you can roll that that into another property. At the same point in time, you don’t have to sell the property entirely.I mean, you don’t have to worry about that that monthly payment. So it’s adding almost another dimension to single family acquisitions.
Michael Gifford – Splitero (12:51)
It certainly is. mean, when I was running a single family acquisition business, fixing and flipping properties, it’s a lot of cash that goes out the door, right? You have a lot of cash tied up in these deals until they turn. This is something that people can use to source more deals.Dylan Silver (13:07)
Now, are you are you active in all 50 states of splateros specific to certain regions of the country?Michael Gifford – Splitero (13:12)
We are not active in all 50 states. We’re in 14 states right now looking to expand next year.Dylan Silver (13:20)
⁓ Which states are you most active in? I’m in Texas. I’m licensed in Texas. Are you in Texas?Michael Gifford – Splitero (13:25)
We are not. Texas has some finicky home equity laws, so nobody’s active there. But we are active in very large transaction states, the Southwest, the Southeast, some of the Northeast, and the Northwest as well. We’re in Arizona. Yep, Arizona, Nevada, Colorado, Utah, ⁓ Oregon, Washington, California, lot of the Southeast and some of the Northeast.Dylan Silver (13:39)
Arizona?I’m a big fan of Arizona being, of course, close to Texas. But it’s interesting that you mentioned some finicky laws ⁓ in Texas. That doesn’t surprise me because it feels like everything is a different ballgame in Texas, sometimes for better, sometimes ⁓ for worse. you think that when we’re talking about the real estate space in general, I’ve noticed this trend, and I don’t know how true this is in Arizona, but I’ve noticed it in Texas.
that there’s a lot of single family fix and flippers specifically who are now effectively competing with with builders with ground up construction because you can get you know a brand new home in many places throughout Texas brand new for 240 to bless you between 240 to $260,000 brand new. So when you’re flipping homes, it just becomes incrementally more challenging because your your exit is is competing with that. Are you seeing that?
Michael Gifford – Splitero (14:33)
Yeah.Dylan Silver (14:47)
as a trend throughout the country as well.Michael Gifford – Splitero (14:51)
⁓ We do, we don’t often deal with new homes too much, right? Our average homeowner’s been in their house for like 15 years. They’ve refied in the last eight to 10 years.So we were predominantly working with existing homeowners, whether they’re an investor or owner occupied. But we are seeing that, yeah, we’re seeing the newer product come and be pretty competitive with the flows.
Dylan Silver (15:53)
Now for folks who may be thinking about, well, man, I’m about to purchase this home. I’m going to be locked into this payment for 30 years and this is a huge commitment. So on these are the thoughts working with first time buyers that I hear. It’s as much about what’s going to happen in five years and 10 years versus what’s happening right now. And especially as a realtor working with first time buyers, I’m realizing it’s as much aboutdealing with some of their long-term concerns as it is their concerns right now. Are you seeing that some of this, I would call it, real estate investing mentality and being able to access the equity in your home, are these conversations that even first-time buyers and folks who are maybe thinking about purchasing a home should be having, should be getting acquainted with so that the whole concept of home ownership seems less daunting?
Michael Gifford – Splitero (16:51)
Yeah, I think so. think home ownership over the last…Decade has become very daunting right people are wondering if they’re ever gonna be able to buy a home if they do It’s a major commitment. It’s a big change in their lifestyle There’s a lot to get comfortable around because of kind of the state of the economy. Everything’s still expensive They’re still inflation. Maybe we’re going in a recession. Maybe we’re not I think that there’s a lot of factors that go into that and there you know when you’re a first-time homebuyer looking at buying first houses It’s a major commitment, right? It’s the biggest investment that most people are ever gonna make and so
⁓ It is daunting. think that what we’re trying to do Working with the homeowners that we work with is make it less daunting make them know that they have some flexibility Right you built up all this equity It’s like a savings account like there’s flexibility that we can help out with so that you can better your lives when cash gets tough or you want to start a new business or something like that is happening
Dylan Silver (17:48)
You know, it’s an interesting conversation to have because when we’re talking about, again, these long-term loans, right, people are thinking, I hope I’m able to keep this job. hope I don’t have to move at some point in time. Life circumstances happen. But to be able to have options, least an option, ⁓ enables people to make a more educated decision, I think, long-term.We are coming up on time here though, Michael. Where can folks go to either reach out to you or your team or if they’re interested in learning more about Splitero?
Michael Gifford – Splitero (18:23)
Yeah, Splitero.com. We have a very quick and easy application. One of our homeowner advisors will reach out and discuss the product, how it works, answer any questions you have. Splitero.com.Dylan Silver (18:36)
Thank you so much, Michael, for your time today and thanks for coming on the show.Michael Gifford – Splitero (18:39)
Thank you, this has been great.
