How to Fund More Real Estate Deals Without Traditional Mortgage Approval Holding You Back

Ben Stef | Funding Freedom (00:00)
I would say biggest opportunity is leveraging home equity lines of credit. If you don’t want to do a cash out refinance, you don’t want to pay off the first lien. We have HELOCs for rentals that are extremely effective right now, that don’t require traditional income verification. So if you want to use those HELOCs on your old rentals that you’ve had for a while, or ones that you bought pre-COVID, or ones that you’ve done value adds on, these are really effective right now because instead of doing a cash out refinance, you and I both know if you pull money out of a property,

as a fixed loan, typically you spend the money, that’s it. Whereas a line of credit, right? Like a credit card, you spend the money, you could pay it back and then spend it again,

Scott Bursey (02:09)
Welcome back to the Real Estate Pros podcast powered by Investor Fuel. I’m your host Scott Bursey. And today we’ve got a guest who is supplying the high octane fuel we need to navigate the current lending landscape. Benjamin Stef from Nexa Lending is a true market master who is constantly helping investors. Our Pros structure deals that others say are impossible. Get ready to download some serious financing wisdom because Benjamin

is bringing the fuel you need to keep your deals flowing and your portfolio growing. Benjamin, welcome to the show.

Ben Stef | Funding Freedom (02:44)
Hey Scott, thanks for having me. I’m excited.

Scott Bursey (02:45)
We’re thrilled to have you here. And for our listeners who may not be familiar with your journey, please tell us, where did your career begin and what is your main focus now?

Ben Stef | Funding Freedom (02:55)
Yeah. So growing up, coming from an immigrant family, ⁓ came from Romania growing up. We, all my aunts and uncles are business owners and we did, I, drew, grew up on a job site doing construction and I would notice we would obviously be, you know, helping out a lot of flips, a lot of investors that wanted to do buy and holds. And so we were on the boots on the ground with the projects. And I would always notice like these very expensive buildings where people would, you know,

I’d be carrying drywall and summer heat, killing myself. And then guys in suits would show up for like an hour and then leave. But then I knew that they were making all the money. So I was always curious growing up, like, how do I be that guy? Right? How do I be the owner of the building? I was always wondering, like, who owns this building? Because someone has to own it, right? Somebody is generating income from this building or from this business. And so one thing led to another graduated college.

And started working at a, started my mortgage career at a big like corporate, ⁓ like corporate job, essentially. And then didn’t, I’m not fit. I’m kind of unemployable. Like I’m not fit to be an employee. I’ve noticed I kept butting heads with management, because I would have all these crazy ideas and they were like, no, this is how we do things. And so my career progressed from that. went from like, you know, the typical corporate job and slowly every company after that was smaller and smaller. Eventually we kind of started our own.

company within a company. And then I always, I always loved real estate investing. I’ve always been interested in that. And so I wanted to basically bridge the gap between lending and investors to teach other investors on how to leverage programs that a lot of people don’t know about to be able to buy more real estate. And so that’s kind of my journey and how I ended up here.

Scott Bursey (04:36)
Ben, that is incredible. And what really caught my attention about you is the way that you’ve been able to structure complex financing solutions and scale a brokerage that successfully navigates major market shifts. That’s not easy.

Ben Stef | Funding Freedom (04:51)
Yeah, it’s hard because yeah, we’re in a very cyclical industry, right? It’s very up and down. Labor costs go up, inflation rates go up, rates go down. So it’s almost like a stock market, right? We just have constant changes daily. Yeah.

Scott Bursey (05:05)
Absolutely. Let’s jump into strategies about the current lending environment.

Ben Stef | Funding Freedom (05:10)
Yeah.

Scott Bursey (05:11)
In your view, what is the biggest advantage Nexa Lending offers to real estate investors at the present time?

Ben Stef | Funding Freedom (06:04)
You know, I think, ⁓ there’s a lot of companies out there. The one that we’re aligned with was the most bullish in regards to beta testing and starting new programs that don’t really exist. Like we have, ⁓ one program that, ⁓ was in beta for awhile is the no appraisal DSCR program where you can take cash out of a property without even appraiser visiting the property, right. And closing like a week and a half.

And so we aligned with this company because they allowed us to give us the tools and the products that were very unique and very modern. The lending industry as a whole is very old school. Right. And so ⁓ there’s a lot of things that are out there now that didn’t exist years ago, that didn’t even exist pre-COVID that are available now. And so we aligned with that company because they were just the best fit, I think, like for investors and fits what we were looking for. Yeah.

Scott Bursey (06:56)
That agility and access to diverse products is exactly what today’s market demands. And on that note, what is the one common misconception investors often have about the current mortgage application or approval process?

Ben Stef | Funding Freedom (07:12)
Most investors think that they need a lot of experience to get started investing or that they think they need to have a existing portfolio or they need to have a lot of money down and there’s options, right? If it’s buying a four unit property with 5 % down, you could do it that way. If you have 20 % down, you could buy a lot of investment properties using DSCR loans where they don’t require personal income verification. So I say the common misconception really is a lot of investors think that they don’t qualify.

or they don’t know how to structure themselves to get qualified. And so they just don’t even try or they don’t even attempt or have a conversation with us. And there’s so many investors I talked to that didn’t think that they would get approved to buy a certain building. And they did, right? Because of what they had. Not, not all, you know, guys, a lot of guys know that they’re qualified, but there are a lot of programs out there to help first time investors get started. And they’re just not quite aware of what’s available to them. I would say DSCR loans are the most prevalent though, right now where you can buy

Scott Bursey (08:09)
Sure.

Ben Stef | Funding Freedom (08:10)
as many times as you want, as many deals at the same time, as long as you have the down payment, 20 % down, you could buy as many without any, because it doesn’t verify personal income, just uses rents from the property. So yeah.

Scott Bursey (08:22)
Where do you see the greatest untapped opportunity in alternative or non QM financing this year?

Ben Stef | Funding Freedom (08:29)
Yeah. So non QM financing is just a fancy way of saying, you know, loans that aren’t traditional like Fannie or Freddie, right? They’re more creative. I would say right now the untapped market for the real estate investors is there’s a lot of people out there that do not want to do the gut rehabs that are tired and they’re getting lazier. And so I’m noticing that

Yes, labor costs have gone up, materials have gone up, right? Like it’s not as easy. In my opinion, I think real estate investing has gotten a little bit more difficult, but on the flip side, because of how much information we have access to, it’s actually also gotten easier in some respects. It’s just that some people prematurely buy deals that aren’t good deals, and then some people don’t buy deals because they don’t want to do the work. And so if you are an investor that you can, you’re not afraid to get your hands dirty, right? And do the work consistently.

I think those just at a high level, like those are the guys that are pretty much winning right now. They have a dialed in construction crew, very, very well oiled machine. And if you could build that system for yourself, you’ll never run out of capital.

Scott Bursey (09:32)
Speaking of learning Ben, if someone’s listening to this and they’re thinking, hey, this is someone that I like to learn from. What would you like them to know first about you and the business?

Ben Stef | Funding Freedom (09:43)
So I would say that the lending industry and specifically like mortgage was not built for the investor. It is not made for you. You as the real estate investor, the mortgage and lending industry was built to scale and it’s built for John and Susie to buy a house. It’s built for the easy loans, right? FHA conventional VA. Those are what we call scalable because they take less hours per client, right? All these creative financing programs, they require more work.

more touch points, more review on our part, right? And so because of that, there’s a lot of programs out there that are starting to come up that are built for investors and people don’t know about them. And so I think it’s important to know your options as an investor, whether you’re financing the Airbnb, whether you’re doing a flip, for example, we do 100 % financing for fix and flips now. So you only have to pay closing costs, which is insane. So if you have enough experience as an investor,

You could buy a single family home or a four unit property without putting any money down, only closing costs that you need to cover. And so there’s a lot of things out there that people just don’t know they have access to because we’re kind of a one-stop shop because we have so many different things for investors, whether it’s flipping, whether it’s buying a short-term rental, midterm rental, whether it’s taking a HELOC on an investment property, right? Which I talked to you about Scott, that’s really big now. We have your information as an, right? If you fill out an application, did business with us. So

It just creates an easier process from that point on. that’s my whole, answer your question. What I want to do is create a world where we make it easy for investors because it’s not easy because people also, especially lenders and loan officers, they’re like, Scott, you don’t fit in this box. You’re too much work. You’re too much of a hassle. Go somewhere else. Right. We want, we want this. Wait, we want you to fit in this box. And so we know that not everybody fits in that. So yeah.

Scott Bursey (11:32)
And on that note, what do you feel is the biggest opportunity for investors right now?

Ben Stef | Funding Freedom (12:12)
I would say biggest opportunity is leveraging home equity lines of credit. If you don’t want to do a cash out refinance, you don’t want to pay off the first lien. We have HELOCs for rentals that are extremely effective right now, that don’t require traditional income verification. So if you want to use those HELOCs on your old rentals that you’ve had for a while, or ones that you bought pre-COVID, or ones that you’ve done value adds on, these are really effective right now because instead of doing a cash out refinance, you and I both know if you pull money out of a property,

as a fixed loan, typically you spend the money, that’s it. Whereas a line of credit, right? Like a credit card, you spend the money, you could pay it back and then spend it again, right?

So can keep using it over and over again. So that’s why investors love it because they have this capital machine that they can keep recycling using over and over again. And so I think right now that’s your biggest opportunities leverage that, especially if you, let’s say you buy a rehab to property.

and you increased its value, you can leverage that HELOC instead of just doing a cash out refinance. You can pay off the hard money lender if you want. You could pay off the hard money or private lender with the HELOC, have it be the first lien as well. So you have so many options. So it’s just a nice tool in your back pocket.

Scott Bursey (13:19)
It certainly is, and Ben, I just love how you frame that. Let’s shift gears here. What market factor, be it regulatory or economic, currently presents the biggest threat to investors seeking financing?

Ben Stef | Funding Freedom (13:33)
Yeah. So I, ⁓ I know I gave you, talked about this before, but as I was thinking about, think, ⁓ I have an improved version of this answer. would say number one, actually lack of inventory, right? Which you can get creative and find, ⁓ but you know, a lot of people don’t want to let go of their houses because they locked in those COVID rates of two to 3%. I would say the second thing that’s a threat right now to the real estate industry is if, mortgage rates actually go up to where they’re like really high. And to me, you know, really high is.

above the 50 year average. Right now, the 50 year average is like seven and a half. So in the last 50 years, 50 plus years, the average mortgage rate was seven and a half. So that’s why rates right now, in my opinion, aren’t high. But I would say if they went that high, that’s going to change cap rates, that’s going to change NOI, right? Now operating income. And so those factors, would say inventory, rising rates, and then tightening guidelines. Those are the three things. So if lenders tighten guidelines because people are committing fraud, or there’s a lot of issues that

that are coming up, people aren’t making their payments anymore on these loans. They’re going to start tightening these investor requirements, which is going to prohibit or make it more difficult as an investor to get access to the money that you need.

Scott Bursey (14:42)
Certainly, and thank you for highlighting that Ben. Thinking about emerging technology, what tool or system is most critical for successful loan officers today?

Ben Stef | Funding Freedom (14:53)
Yeah, so we use a lot of AI that we’re coming out with some programs to help AI agents. So we’re developing AI agents that underwrite with us that help pre-qualify the loan with us to actually speed up the process. So what we’re noticing now for, we have it already integrated in our HELOCs and DSCR programs. So we’re actually funding them a lot faster, especially the fact that now we don’t really need appraisals for some of them. And so we’re kind of…

right now fighting with the industry because we’re using AI and modern technology, but the industry needs to catch up. And so we’re using what we call agent agentech models that sort of do a lot of the tasks and work that we would take us hours to do, you know, five years ago. And so, yeah, it’s really cool stuff right now. What we got going on.

Scott Bursey (15:39)
Leveraging technology is so critical for efficiency. And I love how you framed that. ⁓ What long-term vision do you see here as it pertains to the business?

Ben Stef | Funding Freedom (16:34)
Yeah, my long-term vision would be to deliver at a high level, continue to deliver at a high level. ⁓

money and capital that investors need to be able to scale and buy more real estate or to get capital that they need to retire early, right? Whichever the case might be. So my goal is to serve more investors at scale that just don’t know about their, cause I’m still to this day, there’s so many people coming to me, Scott, they’re like, my gosh, like I didn’t know about this program. Like I didn’t know this existed, you know? And I think it’s it, it,

It’s very, it’s good to know that we’re on the right path because so many people are like hungry and like almost desperate to know about these programs that we’re utilizing today. And so I would say my vision is to help them. And then eventually maybe even have our own private capital fund where we’ll, you know, become our own private lender and have, we’ll still do the traditional or the more, I would say, bureaucratic lending style of things, but then also we might have a private fund that we lend out.

for people that really don’t fit in a box and that need that kind of private money.

Scott Bursey (17:39)
Ben, when you talk about serving, how big of an area, what markets are you serving?

Ben Stef | Funding Freedom (17:44)
So we’re pretty much nationwide, with the exception of, I want to say probably like Alaska, Puerto Rico, and New York, I would say are the states that we’re not, ⁓ places that we’re not in. But yeah, other than that, like I have, we’re doing deals right now in Florida, in Texas, California, Tennessee, North Carolina, South Carolina, Virginia, all over Wisconsin, especially Illinois, because that’s our area. we are, what’s nice is we kind of have an idea of how each of the states operate in the counties.

because we’re just doing deals all over and yeah, they’re all pretty similar. yeah.

Scott Bursey (18:19)
That’s

awesome. And given the current cycle of economic uncertainty and fluctuating rates, what’s the most critical financial strategy a real estate pro should implement today to secure long-term financing?

Ben Stef | Funding Freedom (18:33)
I would say managing liquidity. So keeping your expenses low, low to the floor. ⁓ and I’m not going to say anything revolutionary here, I think continuing to have a strong defense and have a strong position where if something happens, you are not in trouble. For example, one of my investors now just got sued, ⁓ because the tenant like slips and fell or whatever. And so, there’s, there’s a lot of cases, especially if you are an owner, right? You are entitled, you’re responsible.

for certain things. And so if there’s vacancies, if tenants don’t pay on time, right, whatever the case might be, I think it’s important to have, know, six months, my rule is six months reserves for every one of my, like our rental properties, we want to have six months set aside liquid in case something happens. That gives us six months to sell, to find a new tenant, to whatever we got to do. Right. So I’m really big on cash on hand. I really never want to over leverage myself to where I’m really like going to run out of money and have nothing left.

both on a personal and business level. And so that’s why I think, Hey, if you need to take cash out, you need to take out 200 grand, but you have a $2,000 payment. You know, maybe that’s worth it. Maybe that’ll give you the breathing room you need to get back on track or whatever the case might be to buy a property that can pay off that mortgage. yeah, I’d say that’s the biggest thing.

Scott Bursey (19:45)
That’s, yeah, proper

planning, alignment. ⁓ That’s just, that’s so smart. And Ben, you’ve given us so much pure gold already here today. What additional advice or golden nuggets could you leave with our listeners?

Ben Stef | Funding Freedom (20:02)
I would say don’t try to figure it all out on your own, right? Like that’s what we’re here to do. I will always provide value, especially on my YouTube channel, Funding Freedom, and on our website, fundingfreedom.net. Like we’re always going to provide value and help people there, but you don’t have to figure it out. know, we want to help our investors with our, we do schedule one-on-one calls. We get together and we see like, what is your situation and where are you trying to go? But I would say as far as like general advice, because obviously it-

depends on the investor that I’m talking to. I would say, ⁓ know your options, like know what’s out there, because you’d be surprised that there’s a lot of things you can use. If you have equity, especially there’s a lot of Helox right now that we’re using for our investors that let them take the capital that they need to go and then invest and get more rental. ⁓ I would say speaking with a professional like us that thinks outside the box understands your situation, that thinks like an investor, right?

I joke that I have a like loan officer hat and then I have an investor hat. And then we kind of like, switched back and forth. ⁓ So I would say having a team, like the overall point is having a team in your corner, like having a real estate agent. That’s really investor focused, having an attorney, a CPA, right? A lender. These are key people that are not on your payroll, right? Cause they get paid when the deal closes, at least for lenders and realtors. so having that, that they understand you, that they’re creative.

They think outside the box, right? They’re hardworking. They’re competent. think if you have an excellent team, sky’s the limit.

Scott Bursey (21:36)
Ben, this has been an absolute clinic. For those of our listeners that want to follow your journey or collaborate with you, what’s the best way for them to reach you?

Ben Stef | Funding Freedom (21:40)
Yeah.

Yeah.

Yeah. So they could reach out. My YouTube channel is where we put the bulk of our content. If you want to learn more about ⁓ just programs and financing options on how to buy and scale and burn and flip and all that. So ⁓ YouTube channel is Ben Stef, Funding Freedom, or you can go to our website, fundingfreedom.net and you’ll have some more resources there as well. But those are the two places. And then once you get there, you’ll have my email information, can me an email ⁓ or you can book a call.

on our calendar right now as of this recording I’m still keeping it open to the public where people can book directly on my calendar.

Scott Bursey (22:19)
And Ben, thank you for joining us today.

Ben Stef | Funding Freedom (22:22)
Yeah, Scott, thank you so much for having me. Appreciate it.

Scott Bursey (22:26)
And to our listeners, we appreciate each and every one of you. If you got value from today’s episode, please subscribe. We have a lineup of exceptional guests, just like Ben Stef, who are making huge moves in the market. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.