How to Finance Rental Properties Using Cash Flow & Equity | Ty Burbidge

Ty Burbidge (00:00)
We actually did this program for a while before I had a client come to me and say, “If I can get this on multiple properties—I already own three and none of them have a lot of equity in them, but combined the three of them have enough for me to go get another property. Can we use the equity spread across the three different houses, the three different doors, and combine them into one down payment for a new one?” Hell yes, let’s do it. And so we’re able to take the equity, even if it’s spread amongst multiple doors, and use that to continue to grow your portfolio just by wrapping the purchase in with a refinance. You’re doing a purchase and a cash out refinance at the exact same time.

Issa Hanna (02:15)
Welcome back to another episode of the Real Estate Pros show. I’m your host, Issa Hanna, and today I have Ty Burbidge with us here to share his knowledge on creative financing strategies for buy and hold properties. Ty, welcome to the show.

Ty Burbidge (02:26)
Thank you, appreciate it.

Issa Hanna (02:27)
Appreciate having you. We were talking earlier, man. You’ve got some good creative ways, good products out there as a lender for our investor network. So with that, can you kind of give what you’re into, your day-to-days, and the aspect of real estate that you’re in?

Ty Burbidge (02:43)
Yeah. I’m currently a CEO of a mortgage company, RANLife Home Loans. We’re based out of Utah, Salt Lake City, Utah. I currently live in Phoenix, just a suburb of Phoenix. And you know, I’ve been doing mortgages for 15-plus years, and several years back I found myself as a loan officer just finding a niche with investors. I had a passion for becoming an investor myself, the opportunity that investment properties, specifically buy and hold, has for long-term wealth, and just found myself in a niche helping a lot of different investors with financing. And you know, you say creative financing, and I remember when I was young thinking about investment properties and reading books or going to seminars about the creative financing that is out there. And I think a lot of that works, but I remember being nervous to do something that was like outside of the box necessarily. And so, you know, what we do, it is creative, but it’s actually very traditional. And so I kind of coin it creative traditional financing because it’s done through a mortgage company. It is 30—typically 30-year fixed or adjustable—but it’s not anything that a regular Joe Schmo can’t find, right? You can jump in and get a mortgage for the properties, and it’s not hard money. Some of that stuff, again, like for people who know what they’re doing, it works really well. It’s got its purpose, but what I really like about what we’re doing is, you know, more conservative investors can feel really comfortable knowing that it’s more of a traditional creative.

Issa Hanna (04:45)
Definitely, it’s not a hard money loan. You don’t have to refi it. It’s a 30-year traditional type of financing loan. And the way it works is, you know, you cross-collateralize different properties—some of the products you have. But for our viewers at home, if you could just give them an example of one of the products and how it works.

Ty Burbidge (05:54)
Yeah. All right. So, you know, typically when you want to buy—like a lot of first-time investors, when they want to buy an investment, they call a mortgage company, they get pre-approved. What a pre-approval does with a mortgage company is they’re going to look at your credit, your income, your employment history, things like that, right? And sometimes that’s hard to get into the game that way because unless you’re making a lot of money and have very low debt, you can’t qualify for a second house. It’s not like not everybody can just have that extra cash flow and be able to afford paying for a second mortgage, right? And so what this does is it actually doesn’t look at any of your personal income. I have a lot of self-employed clients who, you know, they make good money, but excuse me, they write it all off. And so they’re like, “I want to get in, I want to diversify my portfolio and get into real estate, but nobody will give me a mortgage.” And so this solves that problem by underwriting the property more so than the actual borrower, right? We’re going to look at how much the mortgage is obviously going to be on a monthly basis. We’re going to look at the potential rent that you can make from that property, or if it’s already a rental, like if you’re refinancing, we can look at your pro forma and see if it’s cash flowing. And as long as it’s cash flowing, we can do a loan for it. And we can close it in the name of an LLC. I know a lot of investors, if you’re experienced, you’re thinking about corporate piercing and making sure that if there is a liability on the property, it’s not coming after your personal assets or even your other investments if you got multiple doors. So we close it in the name of an LLC or a business. Like you said, one of the things that I love about it for experienced investors is the cross-collateralization. You know, I know even when I got to three doors, it was kind of like, “Man, I got four mortgages now with four different mortgage companies. Like, I got to make sure they’re all set on autopay, I got to watch that, I got to monitor it.” And when you’re cross-collateralizing, it’s like if you got 30 doors, I can do a loan for you on all 30 of those, wrap it all into one simple payment, all you have to do is make that one payment every month.

Issa Hanna (08:13)
Much more simple, much less stressful, y’all. And the DTI is a huge problem, right? So like you said, I know a lot of self-employed guys, they love those write-offs. So they might gross a million bucks, but they’re not netting it. And then, you know, when they go in to get approved for one of these investment loans, their DTI is—and DTI, guys, for new guys at home, stands for debt-to-income ratio—their DTI is off. And they might have all the money in the world or they might be, you know, doing well, but they cannot get approved for this loan. What Ty does is totally takes that out, and he uses the actual—he qualifies the actual property. And another little aspect, because I was a buyer’s agent, another little aspect to make it easier for even first-time homebuyers that want to get into something: you buy a multifamily property, guys like Ty are going to use that rental income to qualify you. So you might not have to make as much money. Your DTI will be lower. So just a little tip to even people trying to get in: if you get a multifamily, you live in one unit, you rent the other, it’ll be easier to get in. It’ll be easier to get approved for a higher price. So man, already oozing knowledge today, Ty.

Ty Burbidge (09:28)
I’m so glad you brought that up. Not that we have time for fun stories, but I’ll share one anyways. You know, one of my favorite clients, first-time investor, you know, works basically at a gas station part-time. And when I first started talking to him, I’m just like—a real estate agent, a friend that’s a real estate agent sent him my way and he’s like, “Yeah, he wants to get into investment properties.” And I’m just like, “This is a kid. He doesn’t even have a real job.” Well, he’s intelligent. He’s got time on his hands to go look for the deal, right? So just a little coaching between me and my real estate friend, we were able to help him find a deal in multi-property. Sure enough, a duplex, you know? And he ended up living in one side of it, renting the other. And recently he started renting both sides and he’s moved on using a little bit of the house hacking combined with the program that I’m looking at with counting the rental as income instead of your personal. And so we took this guy that’s making thirteen, fourteen dollars an hour part-time, turned him into a real estate investor. Right? And this is like—he’s kind of like just a ski bum, you know? He’s got the long hair, he says “bro” a lot, and you would look at him and not think he’s a real estate investor, right? But now he is. And so—amazing, man. You’re exactly right with that.

Issa Hanna (11:41)
Yeah, dude, amazing story, perfect example. And you started smiling. You said he’s one of your favorite investors. We talked earlier and you said, “I love dealing with the new investors. I love, you know, how excited they get.” And the one thing that’s super important for every investor is underwriting. So you’ll actually, because you’re so good at it, you’ll underwrite one of these new investors’ files and tell them, “Hey, this is how much money,” and you’ll teach them how to look at the numbers. So can you kind of give a little bit more on that aspect?

Ty Burbidge (12:16)
Yeah, a hundred percent. I mean, well, one, to do the mortgage, we’ve got to underwrite it, right? So it kind of has to make sense in order to get it anyways. But on top of that, I feel like whether it’s investors or first-time homebuyers or whatever, I’ve built my business on repeat clients and growing repeat clients. And I think the best way to do that is through education. People, they don’t want to know too much; they want to know enough. They want to know what’s going on with their finances. And so being able to kind of teach them—this one in particular, you know, it’s like we kind of had to start from scratch and talk about what cash flow even was, you know? It’s like your mortgage is going to be fifteen hundred bucks. So, yeah, you’re going to want to make sure that when you rent it out, you’re able to make twenty-two hundred bucks minimum. And as silly as it might sound to some of those that have bought multiple properties, a lot of first-time investors are like, “Well, if it’s fifteen hundred bucks, why don’t I just need fifteen hundred dollars in rent?” Okay, well, then you’re going to have the utilities, you’re going to have some sort of liabilities come up, HOAs—HOA dues are going to go up, taxes are going to go up. There’s all these things that you got to be thinking about as well, right? You’ve got to have—I mean, even if you don’t want profit, which we do, but even if you didn’t, you’re going to have to have that rent a little bit higher than what the mortgage is for it to make sense for you. It’s funny, you know, I said as long as the property’s going to cash flow, we’ll do the mortgage. And there are—I guess there are times where it’s barely cash flowing and I’m talking to the buyer or the borrower and I’m just like, “Are you sure you want to do this, man? Like, you’re putting your life savings down as the down payment and you’re making a hundred bucks a month. Like, that doesn’t seem smart, right?” So we’ll go find another property hopefully and, you know, if they really want to do it, if they have some thoughts of their own, like, yeah, of course I’ll do it. But I want to educate them because I think that’s what keeps people coming back, right? And I want to stay sharp myself because, you know, if I’ve educated somebody for a year and a half, two years, I don’t want them coming back know more than I do in another year, right?

Issa Hanna (14:30)
Definitely. You got to stay the expert. You gain credibility by educating your buyers or your clients, you know. So the more you can educate, the easier it is for you to actually do future deals for them, too. Man, we are just rolling on the knowledge today, dude. I love it. Importance of underwriting. I have also—I pulled out of our conversation—right now, a lot of investors are sitting on the sidelines, right? ‘Cause interest rates are so high. You know, they might not know where to go. You know, their original philosophy of investing is just not working. It’s not cash flowing. One thing you told me, though, is when stuff like that happens, you got to—what is it? You got to say it: other people zag, you zig—or you zag. So, yeah, give me a little bit more on that.

Ty Burbidge (15:21)
I mean, to your point, you know, if you’re an investor that’s kind of sitting on the side waiting for either rates to come down or values to stop climbing as much, you know, there’s reasons you can believe that. A lot of times, especially, you know, 2022 is when we really started seeing rates go up, and when they hit like seven percent, it kind of dawned on me: everything was slow. And I started just asking clients, like when they said, “You know, I’m waiting for rates to come down,” and if that’s something that’s holding you back right now, I would just pose the question: when, if and when rates come down, what are they going to get to? And a lot of people, when I first started asking that, in their mind they were thinking, “Yeah, I’m waiting for rates to get back to three percent.” When I asked that question and they had to choke up three percent verbally, they were just like—they couldn’t say it, you know? They know they’re not getting back to three percent. Maybe 20 years from now, I don’t know. I don’t know what’s going to happen in 20 years from now. But in the next five to ten years, no. Like, maybe they get to four and a half, but I don’t believe they will. They’re going to be mid-fives for a really long time, and so that’s not something to wait on. Think about the appreciation you’re missing out on over the next 10 years while you’re waiting for a 3% interest rate, right? It’s not going to happen. On top of that, you know, like if you do have money that you’re looking to invest, I mean, there’s so many different places you can invest. But a lot of times, going back to kind of the education piece—and if you’re experienced, you should probably know this—if you’re buying a, say, $400,000 house, right? 20% down, you’re going to do $80,000 down. Like, the investment you’re making in the house—a lot of times new investors will look and say that they’re investing $400,000 because that’s what the purchase price was. Like, you’re not, right? You’re using the leverage of a mortgage and you’re only investing $80,000. So if you look at your returns, you’ve got to map out your ROI based off of what you put into the deal, not what the leverage was. And right now there’s just a huge opportunity to do that. You know, you asked, “If I’m an experienced investor sitting on the sidelines, why should I zag right now while everybody else is zigging?” Well, most likely you have equity in your properties. And this is where this cross-collateralization gets really cool. We actually did this program for a while before I had a client come to me and say, “If I can get this on multiple properties—I already own three and none of them have a lot of equity in them, but combined the three of them have enough for me to go get another property. Can we use the equity spread across the three different houses, the three different doors, and combine them into one down payment for a new one?” Hell yes, let’s do it. And so we’re able to take the equity, even if it’s spread amongst multiple doors, and use that to continue to grow your portfolio just by wrapping the purchase in with a refinance. You’re doing a purchase and a cash out refinance at the exact same time. If you do have equity—like, more equity in one property—what’s also really cool is we’ll use that same income calculation to do a home equity line of credit. And so if you do have properties that are sitting at the two and a half rates and you don’t want to touch those, like, that’s cool. Let’s get you a home equity line of credit based off of the cash flow of those investment properties. Because I know, you know, we would talk about this stuff a little earlier, and investors are the same way, right? Like, you might be making fifteen, twenty thousand dollars a month on investment properties and no mortgage company wants to count that. They look at your taxes and you’ve written it all off and they’re like, “You make a thousand bucks a month, like, nothing we can do for you.” But all we’re doing is looking at: does that property or this bundle of properties cash flow? If it does—and when I say cash flow, you know, we do have to look at any HOA, we have to look at taxes, we have to look at—or the property taxes, not income taxes. But property taxes and homeowners insurance. And if it rents for more than that, you’ve got yourself a home equity line of credit or a mortgage.

Issa Hanna (19:55)
You know what? I’ve been saying this ten-plus years, since five years into my real estate career, and it applies to almost everything in real estate: if it makes dollars, you guys, it makes sense. So don’t be afraid of those interest rates. It’s making you that six, seven hundred dollars profit after the mortgage, buy the property because you’re cash flowing, you’re able to take on repairs from that surplus money, and then like Ty said, over time you’re paying that mortgage down. When you’re 60 years old, you know, you’ve got so much equity in that property that you were a little scared to buy because the interest rates were high. They’re not going to hit three percent again, y’all. You’ll never see those interest rates again, like Ty said. And this is coming from two people who’ve done a lot of deals. So jump in. As long as it’s making money, don’t worry about it. The equity in the future is more important than that extra half a percent you might pay now. You can always refi if they do drop to three percent. So man, I love it, man. Ty, you’re giving us so much different knowledge because you’re giving us the financing aspect of it. You’ve got the cross-collateralization product, you’ve got just tons of products for our community, for investors just like us. So man, I’m loving this. And now I want to shift gears a little bit. I want to talk about you. I looked you up yesterday, I read your bio—very accomplished. Five years down the line, where am I going to see you at?

Ty Burbidge (21:24)
Man, I probably need to go back and look at what my bio online says. I don’t even know that I wrote it; probably needs to be updated. But five years down the line from now, you know, my goal—RANLife, we’re a larger company, we’ve got a really good foundation, but my goal is to take our company to the next level and be doing a billion in funding every year and become like a household known name. You know, you’ve got a number of larger lenders that people see on golf courses and et cetera, stadiums, baseball stadiums, basketball stadiums. I mean, I want to get our name out there doing that, you know? Like I said, we’ve got a really good foundation and we’ve got a decent house on it, but we’re tearing that down and building a mansion. And a big aspect of that is, you know, these—not just these types of investor loans, but like helping out the investment community. Fannie Mae and Freddie Mac, FHA, these—they all have a mission statement that includes primary occupancy, right? And not to say they won’t do investment properties, but it’s just not their primary mission. And so we’re bringing on different products all the time that help out in both aspects because a lot of us have the investment mindset and we want to grow in that space and do—we love products. We love products. We want to be able to do products that nobody else even knows about. And so we’re bringing them in all the time, and I think that that’s going to take us, like you said, over the next five years to a mortgage company that isn’t just known on the West Coast or in the western United States, but across the nation.

Issa Hanna (23:12)
And I love that plan. With your knowledge and all these different products that you offer to, like you said, investors… Fannie Mae, Freddie Mac, all that, their mission statement is to get people into homes and living there. All these extra products geared for investors… Not a lot of loan people know these products, offer these products, let alone have mastered most of them like you. So investors sitting at home, your ears perk up. A guy like Ty can take you to the next level. So make sure you guys get your notes, notepads out, take it. I’m going to ask him to plug himself really soon. But before that, I want to get one thing, one piece of advice for some new guys, right? So a lot of guys are just starting out. They got their real estate license. They just became licensed loan officers. Our business is all about establishing those relationships, growing networks, or you’re never going to make any money. So if people just got their license and they’re like, “Okay, now what do I do?” How do they get the ball rolling?

Ty Burbidge (24:12)
Get on the phone. You know, over my years I’ve seen a lot of new sales guys come in and out. And I think the big difference is activity, right? And it’s no different whether you’re an investor or you’re a sales guy—like, activity is going to create momentum and momentum just compounds itself to create more momentum. Doesn’t matter even if in the beginning if your conversations are even effective, because it’s what it does to your psyche and how that’s going to just keep you in that flow and the things you’re going to learn from it. You know, I’m a big—I listen to podcasts, I read books, I’m big into all that stuff. But I’ll tell you, where the most knowledge is is in actual conversations with people, right? You’re able to ask the questions. It’s not like if I’m listening to your podcast I can just pause it and ask you a question, right? And not all of it’s going to pertain directly to me. So getting on the phone, talking, making the connections, networking—just make actions. It’s crazy how many… It was about 10 years ago when this really hit me. Like, I saw some guys having some success in sales, and I was—not to be rude, but I was just like, “They are not bright individuals. Having a conversation with them sometimes bothers me because they’re not intelligent, but they’re having huge success. What is going on?” And so I started looking at that, and that’s why I say activity, man. Sometimes they were too dumb to realize like they shouldn’t be making that many phone calls. They shouldn’t be talking to that big investor that everybody else is worried about talking to. They were like, “I don’t know, what’s the big deal? Let’s do it,” you know? I had a—sorry, I had a high school teacher who told me that that’s why professional athletes kind of get that meathead persona, I guess, is because they’re too dumb to realize they shouldn’t be able to jump that high, they shouldn’t be able to lift that much weight, and they just do it. And I apply that to business, too. Like, sometimes we overthink it. Just do it. And if you fail, you’re going to have another chance and you’ve learned something. So just keep going.

Issa Hanna (26:33)
Definitely, guys. You never lose, you never fail in our business. You fall down, you get back up. That’s a lesson learned. It makes you a little bit more harder and you know what to look out for, you know to spot that problem. So, man, Ty, great advice. I always ask our big operators when they come on to give our young guys some advice. That is golden, you guys. And now for our viewers at home, like I said, we’re Investor Fuel, one of the largest investor networks in the nation, right? We have a lot of our investors that watch this. We have a lot of investors that are not with us that watch this. So if their ears perked up and they want to get ahold of you to do their loan, where could they reach you?

Ty Burbidge (27:11)
Yeah, and I caveat, not even just to do your loan. You know, if you don’t need a loan but you want to, again, just kind of bounce ideas off, just chat, like whatever… You can—probably the easiest way, I mean, you can hit me up on social media. It’s ty_mortgageguy, or you can just shoot me a text: (801)478-4574.

Issa Hanna (27:36)
So, guys, make sure you—great guy. You know, when you reach a certain level in the real estate business, you want to give back to the community. Somebody as busy as Ty, a CEO, willing to take your questions and teach you guys is something that doesn’t really come along very much. So make sure you guys hit him up, whether it’s social media or his phone number that he gave, because he can really help you. And then investors, like I said, somebody like Ty can take your game to the next level. So, you know, if you’re over here searching for different products for investing and whatnot, one of the most knowledgeable people in the country on investment loans. So with that, Ty, I’d like to thank you so much for coming on the show. It was a true honor to host you, and I’d like to invite you back on the show at a later date just to pick your brain a little bit more, if you’ll have us.

Ty Burbidge (28:29)
Sounds great, man. It was fun. I appreciate it.

Issa Hanna (28:32)
Definitely a great time. Enjoyed our conversation. And to our viewers at home, if you guys enjoyed the conversation with Ty and want to see more like it, make sure to hit likes and subscribe. I talk to people every day that can bring us different knowledge on every aspect of the real estate industry. Until next time, the Real Estate Pros are out.