Craig Hill

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260-TNGRadio – Craig Hill 1-14-12

Friday, January 13th, 2012

Hard Money Lender for The Norris Group

(Full Bio)

This week Bruce is joined once again by Craig Hill of The Norris Group. Craig has worked with The Norris Group since the company opened in 1995. Craig has worked with the real estate investors, helping them access money for their deals and trust deed investors who want to get a very safe yield on their money. Prior to working with The Norris Group, Craig was in the hard money loan business for years prior to that; and the expertise he brought with him has proved him valuable to the success of the company.

Today’s radio show focuses on the borrower side of loans. Craig deals with calls all the time and goes through the terms of the loan, and there will be some callers who are connected to the advertisements of 4% and are completely shocked when Craig tells them it will be 12.5%. They do not understand this side of the world at all. However, Craig said these calls usually come from people who have never done it before, so usually whenever Craig gets into a situation like this he tries to ask them how they funded the last deal they did. You really have to establish that this is a different world, and if somebody has been a property buyer for a long period of time, they have a better understanding. Sometimes if you get that person who feels they can do it, it might be best for them to pursue a loan at their bank under a non-owner occupied program. Craig tells them they might be able to get it if they have perfect credit and other things. There are a lot of different ways to handle it, but Craig said The Norris Group usually deals with investors who do this for a living and have an understanding of what the costs are going to be.

The real education is to go ahead and try whatever you think is easier or less expensive because the lending world is really not working very well right now. Bruce worked with a major bank where the manager told him the frustration they have right now where they cannot fund owner-occupied loans inside of 75 days. In the investor world, if you do not have speed, you don’t find deals. They have to be able to close their loans quickly, and they have to rely on the fact that the deal will close. People are always asking how they can save money, so they either try to list the house themselves or find their own money source. People even hold seminars about how people can find their own money, but it is really not that easy. It is not that easy to get trusted with money. You always have to ask yourself whether it is really cheaper or not because there is always something attached to it, including a no answer when you thought you already had a yes. The Norris Group gets a lot of these kinds of calls where someone calls at the last minute and only has three or four days or less and they need to close it. Someone had told them something didn’t perform. It is so competitive out there now, so you have one loan that does not perform then you can forget about doing business with your agent again or anybody that agent knows. You have to see that this was really the cost of not getting a loan as it exceeded far the cost of getting one. It is not easy to watch over the years people going through a process of trust. As a person, to start from scratch is just not a reliable source.

Bruce came through the hard money business first as a borrower of considerable amount of money on a regular basis. He really did not consider the cost as onerous at all; he just needed access to it. With reliability comes the ability to grow. It’s the same way with The Norris Group business as a whole and just like how it is with an investor. If an investor has either his own money, such as a limited amount like $200, they really are working under constraints. Once they have access to somebody who might have, for example $1 million, they can start and tailor their business knowing they have access to $1 million. There is a cost to this, but you also have to look at the benefits of this. The benefits are you can up your marketing and do many more types of projects. It’s like being a construction lender without having a lender. A construction worker has to have some leverage, or he is only going to build ten homes. This has been the same way with The Norris Group; the borrower side has always grown along with the money side because the money side is there and the borrowers need the funds. This is what a hard money lender is.

When Bruce and Craig met, their meeting came about because Bruce was seeing more opportunities than he could personally handle. He had a fair amount of cash and a credit line, and all these were active on free and clear things. He had a chance to go to HUD auctions that were tossing out $.50 deals a half a dozen times per auction. He also had the chance to buy a track of homes at the same number. He looked around and saw how he could not take advantage of it, and this was the start of their meeting. When Bruce and Craig met, this was not the typical loan for a hard money loan business. It almost did not exist, and this was in about 1992 or 1993 when for hard money lenders the rule of thumb was a house was worth what you paid for it. If one next door sold for $100 that was fixed up, then you bought one that was exactly a model-match right next door for $50 or less, then you could borrow $30 or $40 on that one. At the same time, The Norris Group could lend somebody who had never made a payment $60 grand on the other one. When Bruce first came to Craig, he had to fight very hard to get the first few deals through because it was not done that way. Now, in a lot of ways hard money is synonymous with that exact function for investors. Back then, however, it did not even exist.

Bruce said he remembered for one of the properties he bought at a HUD auction that was appraised, they had not discussed what he had paid for it. He asked for it to go ahead and be appraised and would be able to borrow X-amount of percentage on the value. When Craig told Bruce the value, he asked Craig if it bothered him that he would be giving him money back more than he paid. The first thing Bruce thought of was they had a really unique opportunity there and Craig was probably dealing with his type of the world for the first time, and Bruce had access to a lot of dough for the first time. Bruce told Craig he could rest assured and made six payments on the first loans, and all of a sudden it dawned on the owner of the company that they had never had anybody do that prior, so they either understood that Bruce understood it or he was capable more than their other clients had been. This was an important transition for the hard money loan industry because it followed with Craig hoping there were more people like Bruce. Craig spent three or more years until he had all the other loan officers ask him when he thought it was going to be done. Some of them never transitioned into doing that and Craig strictly transitioned into doing only that because he got used to the facts from Bruce and others thinking the process was very efficient. They knew how to make the most happen with the least effort.

Bruce has always been surprised because he remembered thinking when 1995-97 passed and it was the end of the REO world, they were really thinking from where all the deals were going to come from, and they did. The private party purchasing and construction started, and all of a sudden The Norris Group was even busier. Craig said this has been the one important thing that there has always been a niche for good borrowers and private money. If good people are out there doing something and making a profit at it, whether it be buying off private parties or lots when the time is right, there is always an opportunity and a surprise that no matter what the real estate market is like, there is always a space for hard money loans. Bruce is so convinced about this now that he has had the chance to go back and rub shoulders with the people who make decisions in the normal world and see how they view investors. He came back with a self-assurance knowing there will always exist a need for a private loan business because we just make decisions that are common sense, yet the infrastructure prevents this. For example, The Norris Group is not afraid of a home that does not have a kitchen because they have dealt with 1,000 of them and have not been damaged by any of them because they know a kitchen can reemerge for a certain amount of money. In the loan process, they retain the money that would cause a kitchen to show up if the borrower stopped paying. You start putting the pieces of the safety together and think you can make the loan, but it does take private money to fund it quickly and accurately. Bruce does not think we are ever going to have a lot of competition from the other side.

Craig is amazed how much conventional lending will not do. There are so many hoops to go through, and the borrowers The Norris Group is loaning to have wealth and credit. They have everything where you think you can walk in and get any amount of loans you want, and they can’t even get loan #1. Craig received a call from a borrower not too long ago who owned about 4 houses free and clear for about $120-$140,000 each. This is his money he put into them, but the bank will not work with this because they consider it cash out. Craig wondered if he would be a stronger borrower if he leveraged at 100%. Here is somebody with perfect credit with four free and clear houses and the bank will not work with him because they see this as cash out. It does not make sense to him. Somehow this puts him in less of a safe position that he owes, for example, $200 grand at 50% and has $200 grand of liquidity to make sure it gets paid. This is a decision-maker you’re competing with and you think you will be okay. With The Norris Group on the other hand, their response is how quickly they can get their appraiser out there.

Some people are disappointed that there are more hoops than they thought. They attend a seminar and get told that hard money only looks at one thing, and then they go elsewhere like The Norris Group and see that this is not the case. They were not really told what was really going on. Because of the nature of loans and more recent history, Craig said one thing that is very difficult for people to understand is if you are brand new, it is very hard to delicate the whole process and think you are going to have a good result. You don’t even know how to protect yourself. This is the most frustrating thing Craig sees from some of the national seminars because it is almost like they are a part of a group and are dealing with a mentor, while The Norris Group takes a look at the deals and sees they are not deals. The number one thing The Norris Group wants is to make sure people have a deal, or they are going to talk them out of it. Bruce said this is an important thing for people to know that there are companies that are built that way and companies that are not. It has to go through some filters. If The Norris Group is going to make a loan on it, then there is probably a very high success rate for the investor.

There are several filters. For one, you might look at the sheer numbers and say it is not a deal, and then you have an appraiser who goes out with a lot of experience in investing and says that the numbers make sense but it is really a dangerous property for specific reasons. The filter The Norris Group has for people who borrow money from them is second to none. Bruce trusted himself and said he would actually have cause himself if he had found a deal. If someone like Rick Solis had gone out there and told him he really needed to take a second look, then he would. You really cannot put a value on this type of filter, and sometimes The Norris Group will get calls from people who are thinking of buying all cash, and Craig tells them to call him when they have their numbers. If they have something in escrow that they are thinking of doing, then they need to take a quick look at it because it is very easy to see where somebody can make a mistake.

For people who don’t have experience, they really don’t realize how expensive the journey will be, so there are surprises and repairs. All these things start taking away, whether it is a percentage here or there, and all of a sudden a deal at, for example, $.82 on the dollar that seems like it is going to make you a lot of money actually costs you a lot of money. If you get over 75% of what the house is worth in repairs and the purchase price, you are really starting to deal with a very thin margin. Craig will back out everything and start at 100%. He will ask them if they are going to sell it themselves or if they are going to have a commission, because now more people are paying incentives such as 2 or 3% of the closing cost. If you have something and then you have the cost of the loan, pretty soon they can see that what something is costing and being sold for is not leaving anything in the middle. You are going on a 6 month journey, and this is where the experience comes in. You are going to hire a construction crew you have never dealt with, and the odds of this not working out are higher than dealing with one you have dealt with twenty times. Everything that potentially goes wrong in the business is especially likely to occur to the first-time person. For that individual, having a deal is critical. The first step is the person needs to have a deal.

The second most frustrating thing for people is they really are told that they don’t need to have any money or need only a very little money. We are looking at things in terms of the borrower needs to have survivability and a successful outcome. Years ago Craig had a client who had a house and made payments like clockwork, then all of a sudden he stopped making payments. He called in and said he had a specific amount allocated for that, and Craig said it was quite a surprise. This was years ago; so more and more The Norris Group has had the philosophy that the really liquid cash is very important because it gives them survivability to only to protect The Norris Group and their investor, but it really protects their down payment and what they put into the property. It gives them the ability to get out of a situation instead of lose a situation. It is also really a benefit for them to make a monthly payment.

Craig has always been asked if the payments can be included in the loan, and he learned years ago from making an unwise transaction with his baseball cards that once the money was long gone he made payments on it every month. Every time he wrote the check it was a lesson to not do it again. In the same way, if you are making a payment on a property you realize that it is costing you money. Just because you might have payments for six months, you cannot just sit around and wait. You have to take action since the problem is not going to solve itself. The payments are either not a high priority or the borrower has a tendency to not think about making payments. The Norris Group used to do seconds for people so they would not have as much in, although this is something they do not do anymore. They realized that not everyone is disciplined. The Norris Group not only looks at the deals, but they also try to help people be disciplined so they have successful outcomes. You cannot try to do three if your limit really should be one. Stick with the one because you are really going to have a successful result on that one. One of Bruce’s favorite statements Craig has made is, “Lost another loan; made another client for life.” In this case, the client was told the truth they actually needed to hear to see that they now have confidence that they have a backup system they can trust and will not get hurt by their loan officer.

There is almost as many people out there who would thank The Norris Group for not doing deals, talking them out of a deal, or explaining how it works. It is very satisfying because what Craig tells people when he is talking to them is he can tell by their voice when they are a little disappointed, but he tells them he can deal with that. Being a little disappointed right now with Craig telling you no or what is the real deal is much better than the client having a deal three weeks from now where they are going to lose the deposit or having a deal nine months from now where you lost $20 grand. This is going to be a lot more disappointing. The philosophy at The Norris Group is to deal with it as it comes, and people are usually very appreciative of the fact that TNG tries to give them good advice.

Bruce mentioned the home shows and how one of the things he noticed was how frustrating they were because some of the reality was missing. On the show, you are shown a property in the beginning that needs a lot of repair. It’s a perfect opportunity for two investors, but then you come back four months later and they look like they want to get a divorce. Then, the realtor comes back in and tells them what they left out. Going from A to B is an expensive process, and it just shows there are deals that do not fit the level of experience of certain buyers. Craig always tells them when they get their first deal; he tells them they did not find the deal, it found them. There were several people who passed on that deal who were experienced investors, and the newer people need to stick with what they know and what is the simplest process. You have to leave the other things for the other people, and conversely in their group of clients they have a lot of clients who are experienced. They have one right now out in Orange County who is buying a property for $220,000 and are putting about $125 grand into it. This is a very experienced investor, but it is also a niche because not a lot of people are going to be able to accomplish what he is going to accomplish. You have two sides of the scale; one that can tackle these kinds of things, and the newer group that needs to stay away from this. Most often these are the deals that the new people find that other people had passed on originally.

Be sure to visit our website, www.thenorrisgroup.com, for more information on trust deed investing and our loan programs.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Tags: 12.5% loan, appraisal, bruce norris, Craig Hill, hard money loan, HUD, loan officer, norris group, owner-occupied loans, real estate investor, realtor, reo, Rick Solis, riverside
Posted in News, Radio | No Comments »

259-TNGRadio – Craig Hill 1-7-12

Friday, January 6th, 2012

Craig Hill

Hard Money Lender for The Norris Group

(Full Bio)

This week Bruce is joined by Craig Hill of The Norris Group. Craig has worked with The Norris Group since the company opened in 1995. Craig has worked with the real estate investors, helping them access money for their deals and trust deed investors who want to get a very safe yield on their money. Prior to working with The Norris Group, Craig was in the hard money loan business for years prior to that; and the expertise he brought with him has proved him valuable to the success of the company.

Bruce said it never ceases to amaze him that their client base keeps on finding deals that keep giving them record years. Craig said it seems that regardless of what you hear out there about there not being any deals, The Norris Group is very fortunate because they have wide enough base of clients that they seem to find enough properties to keep The Norris Group hitting record levels every year. They have an expert base of clients that finds things when most people don’t. Bruce has a feeling next year might be a blockbuster year and that there will be inventory in excess of what they had this year. Craig said for most of his clients, the perception ranges from no deals to a blockbuster year. Their base of clients, both buyers and trust deed investors, will be ready for whichever one it is.

The mood has definitely shifted, but at least now there is a safety in what people think has happened to prices. Craig thinks there is definitely not a huge issue with a large price drop, especially in the inventory with which The Norris Group is dealing. They are dealing in the starter homes, whether it is L.A., Orange County, Riverside, or San Bernardino. It is the lower priced homes. But Craig said people definitely do not see a sharp drop in the prices. This would be hard to imagine because when they deal with one of the long-term loans, it is not uncommon that the rents are 2x the interest payment. This is a 9.9% interest payment, not 4%. You would have to think there would be an interested buyer at some level. It is almost like with the investment side and the trust deed side, it is hard to imagine a real worst case. Craig had talked to a gentleman earlier who talked about how the only real issue is it would go from passive to a little less passive if you ever had a situation you had to deal with, but not something where you have a major loss of funds or would not have 2 or 3 solutions.

Back in 2007 and 2008 was not normal, it was really a Great Depression for real estate. It was hard to not get damaged somewhat in that, but for the ten years prior there are so many solutions, including the client base that deals with the inventory. When The Norris Group has one client that might have an individual problem, it seems to be easily resolved by multiple sources. Since a lot of the buyers concentrate in the same areas, Craig cannot imagine that if somebody were to get a house back or if a borrower was to have a problem that he would have any trouble finding somebody who would either take over the mortgage or take a similar mortgage on a house where it cash flows by twice of what the payment is. The Norris Group has had very few problems, but when they have they have had cooperation from the borrower. It seems like most of the time they are interested in a solution that does not force them to take it into foreclosure. The cooperation The Norris Group has had has been very fantastic.

The easiest case here would be if somebody wants to do a deed in lieu of foreclosure, this makes the process very simple. There have been a couple cases where someone has allocated a sale to another investor that then put the trust deed investor back on track receiving payments. A lot of things really come with the base of the clients that they have. The Norris Group has really grown to become the company it is today, and there are not a lot of people who want to burn that bridge. It is a lot of fun when you are associated with a company that has that reputation. Both Bruce and Craig receive the calls where people tell them they have heard of The Norris Group from so many different directions and want to know what they do. This is a fun phone call for them. The calls are definitely warm if not red-hot depending on how many times they have heard of Bruce Norris and The Norris Group. It is an advantage to take those calls. What is nice is there is no other place you can go to where they are treated the same way.

The concept of loaning money out to someone seems fairly simple. You find someone with a unique situation where normal lenders would not loan on it, so you step in, put up money, and get a higher interest yield. It sounds simple except for when people try to do it themselves. This is when the failure rate is astronomical. This is why they do loans and not situations because the situations are the dangerous ones. Their focus has always been on investors buying properties, so they really focus on doing loans. The people who only lend to people who have a situation, such as someone in foreclosure, currently do not have the ability to pay, or they would be paying. Therefore, somebody steps in and thinks they are protected by the equity and if they give a certain amount, such as $30 grand, then everything will be okay. However, what happens is that $30 grand has a home probably 5 minutes after you give it to them. Now you are dealing with the only security you have, which is the property. You really cannot rely on the borrower to make you good because he really could not make payments before you met him, and now he has all the payments plus The Norris Group’s payment, and the $30 grand did not really solve the problem the way the customer thought it would. If you are protected by the property, then this is a situation where you can be tied up by the borrower with litigation; and this has never been something The Norris Group wanted to do.

The word Craig uses more than anything because it applies to how he feels as an investor is passive. Their group of investors really gets spoiled by the passive nature. When they first started, the investors at the beginning felt like the company was a big warehouse filled with loans. People were asking for loans that were, for example, $200,000 more than what they originally asked. For a long time this may have worked because they were growing as the money base was growing, but then when the market got a little more difficult, they really backed off on the number of loans they did. Unfortunately, this was when clients found out it was not a warehouse, but rather a process. The clients went elsewhere thinking the process would be the same and they were drawing the loans from the same warehouse, but unfortunately this was where a lot of people got hurt. They have had so many people who want to invest, and Craig has had to tell people they will never change their criteria, no matter how many people want to lend money through The Norris Group. It is better for them to be a little disappointed than for The Norris Group to change their process.

What people have to understand is The Norris Group spends no time on negative situations in relationship to a lot of other companies. A lot of companies have foreclosure divisions, and Bruce said he just cannot imagine the stress of this. Earlier in the year, they did have a house that went all the way through foreclosure that was 600-700 loans in the past. This is something Craig can deal with; but when you are dealing with loans from 2 or 3 years ago and you have only had one, then it makes things a little more difficult. As a business model it is very good because they are spending all of their energy on positive things, such as new programs and ways to service people better and fund deals more quickly. It really helps the Norris Group do a better job too because when everyone is making their payments on time, the base of investors who have trust deed investments feel safer to make more quick decisions saying that what they have is just like the one they had originally. Craig said he sometimes wishes he were like the Ghost of Christmas Present when dealing with the new investor and show them how a deal had worked out originally and what they could do this time. Unfortunately you can’t, so it is understandable for new people. Everybody is new at something at some point, but usually with the success and consistency of things, everybody wants to get in and they’re only frustrated by the fact that maybe The Norris Group does not have enough loans for everybody.

Sometimes we get into situations where there are multiple decision-makers, a lawyer, and there was even one incident they dealt with where it was trumped by somebody who had a bad sense about the investment, and the investment they put in has not worked out. You can go a year out and look back to see how you really liked the decision you made. This is one thing that is a hard decision for people because sometimes they just have the wrong perception because hard money for years has been tied to people lending to people in situations Craig had talked about earlier, and it is not real easy for them to separate that somebody may actually have a different process. On the surface, with interest rates are 4% and the Norris Group is loaning at 12.5%, the borrower has to be risky; and his is not. It almost does not make sense. Interestingly enough, you have two groups of people, some who think they can do better with their own money and can get a 15-20% yield, and others who are completely the opposite and are earning under a percent in a CD and when they look at a yield of 9% think the money is being taken to Vegas. Whenever somebody comes into the office, he always shows them a list of all the 9% loans they have. He shows them how they have not had to foreclose on any and only might occasionally have a couple that are 30 days late. It is real comforting to know that on any given day he can have somebody in the office he can show his computer to and not be embarrassed.

Bruce also discussed the time he had the opportunity to speak in front of Fannie Mae and Freddie Mac about the safety of loaning to investors. At that time we had a pool of $15 million loans with absolutely no late payments, and he said you could see the look of shock on their faces that there could be a 9.9% interest rate and no late payments. It was so out of the box of their thinking because they were looking at the investor as the risky borrower as opposed to the owner-occupant, and The Norris Group has found just the opposite to be true. This is why they have always pushed the envelope on the yield vs. risk side. They have never been the highest in yield to an investor, but they have always been by far the less risky. Sometimes people ask Craig if he could lend a little less or try to custom-fit the program, and Craig always responds that what they have to realize is this is a very given and take situation because if we want to continue to have the absolute best clients, we have to be on the cutting edge. It has to make sense for both sides, but The Norris Group cannot make it to where it absolutely does not make sense because what happens is instead of getting the A quality borrowers that they are filled with, they have to start fighting for lower than this. They always have to keep the clients they have because this is what makes them successful.

The type of people who always want to chase the higher yield is interesting because Bruce has had the same conversation with them where you finally figure out that they are in fact getting a higher yield and are foreclosing on 50% of their properties while they have 20% of their money active. The active part is really the key because Craig has had conversations with people year by year, and they just cannot pull the trigger. One instance might be the 9% program because it is an 8 year program. They think they are going to be looking at a higher interest rate and more nervous about committing their money. They will call Craig a year later, and he will finally tell them that for two years they have not been getting any yield, so going forward it would really have to obtain a yield. You really can’t take riskier investments or wait for some kind of better yield, especially someone who has wealth already. Sometimes it may not be a good fit for somebody that has to create wealth.

Craig was having dinner with a client recently who had been with them a long time, and she had somebody she knew who came up to Craig and asked him how they could make $1 million. He said he could not tell her how to do it, but if you try to do it you might lose $1 million. Sometimes not everybody is a fit for everybody, so they have really found a nice niche for people who have some wealth and want to consistently build it with very low risk. With the price points we are at right now, we are making loans based on 1990’s prices. Common sense tells all of us that that was before it even went up this last time. If we feel that 1995 was a realistic value, these loans are being made at 60-65% of 1995 prices. All that tells us is historically we would not know what would have to happen for this to make sense and it also does in a second way because the rents are already covering the payment by double. It is one of those situations where the smart money is actually on both sides of the table because the investor, or the person buying the property, is a skillful investor buying something below market by today’s value. However, if you look at the whole picture the investor is buying it with a starting point of half of what it was worth four years ago, and he is receiving a discount and a cash flow. He is making money monthly and buying something below replacement cost where the history says we will probably accelerate in the future. He cannot borrow money through standard lenders because they are not interested in that loan. On the other side, he has the choice of receiving a ten year t-bill that is at 1.9% today, the stock market that goes down or up 300 points every other day based on what happens in Greece, or a 9% trust deed. ]

The Norris Group has some very large commitments from people, who have money managers and overseers, and from talking to these people one year apart Bruce has seen that they are astonished that their yield had performed perfectly. They were warning their client that there is no way that the yield could be so riskless, and then it turned out to be so. The best and most satisfying thing about what The Norris Group does is what they see happen in the long-term. Before going to The Norris Group, Craig was working with a friend and was funding deals with hers and her father’s funds. She told him a story about how she went to her account year after year for 6-8 years in a row. Craig told her he did not know what her investment was but she needed to get out of it because it was too risky. Meanwhile, with her father’s insistence she has also diversified into some stocks, which had netted a 0 yield over the last 18 years. However, by the ninth or tenth year she was told to keep doing what she was doing. It was very rewarding. The Norris Group has a process in place that is second-to-none in picking clients that are worthy of borrowing money.

Bruce and Craig talked about the process and why it was different from other people. The main thing you have to do is rule out people to make sure they are qualified when you get a call from a borrower. The first thing you do is try to establish right away whether or not it is a situation. If it is a situation, then you have to rule that out. Secondly, you always try to find out if it is owner occupied. Most hard money companies will not do owner-occupied loans any longer, so you also look at this. You also have to get an idea and see if they have any experience. The Norris Group really relies heavily on liquid cash because one thing they have found in the business is you really need to have liquid cash because you cannot have a situation where a $10,000 or $20,000 problem throws your whole world upside down. This is probably the most frustrating thing when somebody calls in to borrow, they might have $800 credit but only $10,000 in the bank. You can usually tell by their credit report and what they state their income is to see that it would not take much to flip the whole thing over. This is compared with someone who is a business person who went through a situation 4-5 years ago where he had a bankruptcy and so his credit is not as good. However, he currently has about $200,000 in the bank to back him up. People with better credit don’t like to hear this, but in our world this is a safer bet.

When we make loans, we are actually using common sense and asking ourselves what are the odds that we are going to be paid monthly and get paid back. We are really not guided by any 1,2,3,4 rules. The bottom line is if it really makes sense and it is a good loan, then it can be done. Bruce said that Craig also has kind of a sixth sense in that there are times when he has come to Bruce showing him something that looked good on paper, but he knew there was something about it that he felt uncomfortable with, and he was right. This was probably one of the things that he has always appreciated from the very start, whether it was from a trust deed investor or a borrower. There will be times when he will come to Bruce, and he can just feel that there is something not right. Craig has learned that he if gets that feeling to try to catch somebody in a little bit of a situation where he can tell they are not being up front with him.

Tune in next week for the second part of Bruce’s interview with Craig Hill on The Norris Group Radio Show.

Tags: 9.9% loan, bruce norris, Craig Hill, experienced investor, fannie mae, foreclosure, freddie mac, hard money loan, interest payment, interest yield, long-term loan, mortgage, norris group, passive, property, real estate investor, safe yield, trust deed
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227-TNG Radio – Craig Hill 5-28-11

Friday, May 27th, 2011

Craig Hill

Hard Money Lender for The Norris Group

(Full Bio)

This week Bruce is joined again by Craig Hill. Craig has been with The Norris Group since its inception in 1995. He has helped The Norris Group invest in approximately $40 million worth of trust deeds.

Many investors do not understand the concept of putting up money for loans. This is a very unusual idea for many investors, and mentioning it to investors may make them feel like you are asking them to take a suitcase full of money to Vegas and spend it.

A trust deed is attached to real property, and that property covers a large gambit and many different lean positions. Many people falsely assume that a trust deed is the worst case scenario. Trust deeds have different yields and different risk rates. Bruce and Craig have been investing in trust deeds for a long time. Craig has found it is very difficult to persuade people to invest in trust deeds. Bruce feels that trust deeds are a better investment than a stock or a bond, because trust deeds allow him to have some control over the outcome of his investment.

Craig has been monitoring TNG’s investor base for a long time, and he has noticed that the longer these people work as investors, the more money they invest in trust deeds. The longer you invest in trust deeds, and the more you understand them, the more you appreciate them, because they have a great risk vs. return rate.

When trust deeds are mentioned, many people assume that you are investing in a second or third position loan. The Norris Group only invests in first trust deeds. Trust deeds can be used to lend on anything from a single family residence to raw land on a slope. TNG only lends on single family residences. These residences will be fixed by an investor, and then either sold or rented.

Borrowers interested in using TNG’s 12% return program are borrowing to flip a property. TNG also has a 9% yield to investor program. Borrowers using the 12% program will receive a larger yield, but their money comes out of the property, so they do not receive any more interest until they find another trust deed. If the 12% program users do not have a trust deed investment for just 2 months out of the year, then their yield will drop to the 9% level. Craig uses the 9% program almost exclusively, because his return remains consistent over multiple years, and he doesn’t have to waste time searching for more investments. Also, many of the trust deeds being invested in right now are at the bottom of the market, which provides a safe LTV. The LTV ratio will get more absurd later on.

Craig loaned a $40,000 trust deed on a $65,000 house in Apple Valley. During the peak of the market, that house was selling for approximately $250,000. This means that Craig now has a $40,000 loan on a property that was once $250,000. Even if this property only went up to half of the value it once was, that value would be $125,000.

TNG’s trust deed program has never had a property come back, but if a property did come back, there would still be many profitable options for TNG, because renting is very profitable in the current market. If a property comes back in today’s market, you then own a home free and clear, and you can collect rent from the property, which is even more valuable than the original trust deed payment.

People who are new to trust deeds are very concerned about what happens when they do not receive payments. When a new client comes to Craig, he shows the client all the loans TNG has, so they can see how few of the loan payments are late. If you went to Bank of America and asked to see their list of loans, you would find far more delinquent loans. People get too concerned about “what if” scenarios. They think of trust deeds like stocks that can dramatically devalue very quickly. When the “what if” scenario is a free and clear house, your level of risk is significantly lower than a stock.

Typically, people who invest in trust deeds have established some wealth. At some point, you don’t want to risk principle, and you want to get a safe return. Bruce does not know of a safer and more passive way to get a good yield.

90% of TNG’s trust deed properties are bought with cash, and then refinanced. Generally, TNG loans 60% of a property’s worth.

Craig always checks to see if the title on a property is ok, and he always purchases fire insurance.

If Craig is working with a new investor, he sends them a copy of the appraisal. Once the new investor looks at the appraisal, Craig will allow them to ask questions about the deal.

Some trust deed investors like to try and work on their own. This is hard to do if you do not have experience. The Norris Group has performed 2,600 loans, which have come from 20,000 conversations. This is the one industry where working with a broker makes more money than working on your own. Also, people who try to work on their own often come across legal issues due to usery.

Craig had the good fortune of being contacted by another lender who was going out of business. The lender was contacting Craig because he thought Craig could help his former clients. After receiving a list of 200 clients from the lender, Craig decided that only 2 of the listed clients were capable of fitting in with The Norris Group. The people who invest with The Norris Group are not speculators; many of them are full time investors and are highly educated.

When you invest in a pool, the leader of the pool can attach any property they want to onto your pool. This can be a good or a bad thing depending who is leading your pool, and their motivations for investing your money.

The Norris Group’s website is www.thenorrisgroup.com

You can download our trust deed investment booklet and other investor training material.

Tags: appraisal, appraiser, borrower, bruce norris, cashflow, Craig Hill, experienced investor, hard money, hard money loan, lending strategy, norris group, owner occupant, real estate investment, REO property, Rick Solis, short sale
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226-TNG Radio – Craig Hill 5-19-11

Thursday, May 19th, 2011

Craig Hill

Hard Money Lender for The Norris Group

(Full Bio)

The biggest misconception about hard money loans is that you don’t need any of your own money to complete the deal. Many people also assume that hard money loans do not involve qualifications and guidelines. This is not true for The Norris Group. However, there are some lenders who have less strict guidelines.

In 2005 and 2006, many people were lending on equity only, and they were lending on odd properties and land. This lending strategy worked all the way until the market dropped.

When Bruce and Craig started working together, the concept of loaning to investors had not been established. Craig had to fight to get his first few deals finished. Now, hard money is synonymous with real estate investment. This is one dramatic change that has occurred over the last 15 years.

If you asked an inexperience person whether they would rather loan to an investor or an occupant, they would probably say an occupant 95% of the time. There is a misconception about lending to investors.

When an owner occupant is borrowing money at 12%, there must be a problem. In the case of an owner occupant, the borrowed money will probably not be spent in a way that improves your position as a lender. On the other hand, an investor will be using borrowed money for a business purpose.

A true REO property is typically not lendable. It will probably need new paint, carpet, appliances, bathrooms, kitchens, and possibly a new roof. If an REO is sold through a short sale, there are often people still living in the property, and the property’s condition will probably not be as bad.

The Norris Group turns down many borrowers. The biggest reason for rejection is lack of liquid funds. The majority of our problems have come from people who do not have enough cash to support their goal. We need someone who can handle a $10,000 problem that was overlooked. Craig is willing to explain to people why they are being rejected, and many of them appreciate Craig’s willingness to talk to them, because Craig often helps them avoid bad deals.

Rick Solis is one of The Norris Group’s appraisers. He has helped many people because he is willing to explain why he values properties the way he does. There may be occasions where his appraisal comes in lower than someone else’s, and in that case, he is willing to explain to an investor why he believes his opinion to be correct. Bruce knows of experienced investors who refused to believe Rick’s appraisal, and regretted their choice 6 months later.

Many people get scared when they hear statistical claims such as, “the market is 90 days behind”. Many times when people claim the market is slowing, Craig can look at the same information they have, and conclude that the bad times have just passed. Craig bases his opinion on whether or not The Norris Group is making pay-offs on their loans. When TNG is getting multiple pay-offs within a day, Craig knows the market is good.

50% of Riverside’s real estate market is REO, and 20% of its inventory is in short sales. That ratio would typically drive prices down, except there is not enough of this kind of inventory. Riverside’s properties are in high demand right now.

Occasionally, Craig has to reject someone from a hard money loan who seems qualified. They might have an 800 credit score, but only $5,000 in liquid funds. If they have never dealt with a hard money lender, and if they are in a good position as a borrower, they may be astonished by the rates TNG will offer them. These people may feel entitled to a low rate, but that just isn’t how TNG’s hard money program works. Most lenders will not work with lenders, and that is why TNG’s hard money program has more value.

Standard loans cannot compete with the transaction speed of a hard money loan. This can be very beneficial to investors who want to resell quickly.

The Norris Group started an 8 year loan program for buy and hold investors. It is unusual for a California loan with 9.9% interest to cashflow, but this program has become surprisingly popular. In March, The Norris Group received 30 applications for the 8 year loan, and only 20 for the short term loan. Craig says this program is so popular because no one else is offering a program like it.

The Norris Group’s website is www.thenorrisgroup.com

On the website, you can access a California trust deed investing book and video. The material will answer many of your questions about being a borrower and a lender.

Tags: bruce norris, Craig Hill, hard money, hard money loan, investor, owner occupant, property
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208-TNG Radio – Norris Group 1-7-11

Friday, January 7th, 2011

Greg Norris

(Full Bio)

Craig Hill

(Full Bio)

The Norris Group

This week Bruce is joined again by Greg Norris and Craig Hill. Greg is the vice president of TNG Auctions. He buys properties and resells them. Craig has been working with Bruce for 15 years, and is responsible for speaking to all potential borrowers for The Norris Group.

TNG gets many calls from new investors who tend to have some misconceptions. One of the biggest misconceptions these investors have is that they don’t need to use personal cash when using hard money loans. Craig suggests that borrowers have $30,000 for every $100,000 you desire to borrow. Also, many people believe that having credit issues will disqualify them, but credit issues can be ignored if they have an appropriate amount of cash. On the other hand, there are some investors with 800 credit scores and minimal cash reserves who will probably be disqualified.

If a house is worth $100,000, $75,000 should be the total between the purchase price and repairs. People do not understand that you cannot effectively invest in a house with very little money.

There are many lenders who will make a loan regardless of whether or not it will be profitable for the investor. The Norris Group offers investors another level of protection, because we have an appraiser with an investor background. Craig estimates that TNG’s appraiser prevents 2 to 3 investors every week from getting a bad deal. Once someone gets a deal, Craig prefers that the investor send him the property info immediately. There are many people who overlook details like “year built” or “lot size”. People treat investing in real estate like people who gamble in Vegas; they believe they cannot lose.

Sometimes investors start with something that is above their level of experience. In Bruce’s bootcamp, he takes his students to a home that is above their experience level, and asks them to estimate repairs, so they can learn to stay away from those homes. Craig has noticed that many investors tend to undervalue the cost of repairs and overvalue the sale price. People have come to Craig with an interest in buying property, but he can easily tell whether or not those properties are profitable by seeing who is selling them. If Craig notices that the seller is an experienced investor, that gives him a clue the property is not selling undervalued.

Relying on other people to give you all your buying, repairing and selling numbers is probably not a good idea, especially if those people are on commission. If an agent claims he can sell a property for a certain price which is contrary to Craig’s judgment, Craig suggests the realtor should not charge for the purchase of the property, and only take commission after the sale.

Appraisals have gotten better, in Greg’s opinion. This is partly because of a more stable market. Many short sales are pristine. To determine whether or not a property’s value is accurate, you need to look at all the properties sold within the last 3 months and pending sales. Sometimes you will see houses pending at a high number, but are also short sales; that is obviously not the right number. Sometimes the sold properties in the MLS are not actually sold. You need to know when to speak to a Realist about whether or not a sale occurred.

One of Greg’s most difficult jobs is to appraise a property for the future. He has to take into account which season he will be selling in. This winter has been odd for TNG, because half our properties are pending. Usually properties take longer to sell in the winter. Greg attributes this to the lack of inventory. There are not an overwhelming number of REOs on the market, so sellers still have some power. Also, TNG probably has the only fully repaired product. Greg has gotten better at pricing as well.

It is still hard to know what an appraiser will appraise a TNG house for. Currently, Greg’s least likeable appraisers work for VA, and FHA appraisers are now better to deal with, because FHA allows Greg to use appraisers that understand how to properly appraise a fully repaired house. Appraisers have recently taken a cut in their pay, so they may not look closely at your property unless you get their attention.

Getting a hard money loan is very costly. Craig has received calls from investors who hung up immediately after hearing his hard money interest rates. However, using hard money over a regular, cheaper loan gives you more freedom to do more and make more. One benefit of using hard money loans is that you don’t have to fear not finding necessary cash. When you have a business relationship with someone who is counting on your closing, you cannot go knocking around the neighborhood to find a quick $100,000.

There are some occasions where people receive a “yes” from a lender, but later get cancelled on. If TNG says yes to a deal, the deal is done and funded. TNG only gives borrowers a hard time during the initial process, so that we can know the deal is going to be profitable. This is why agents and escrows like working with TNG, because they know that if TNG gives a commitment, then the deal is going to work.

People might think that TNG’s business model is very simple and easy to replicate, but it isn’t. We have built good relationships with our business partners, which allows us to do business with ease. TNG even passes on a few deals just to maintain respect from its partners. Building a team that trusts you can take years.

When Bruce and Craig first met, the common idea of value was what someone paid for it. If a piece of property was said to be worth $90,000 but was sold for $60,000, then the value was believed to be $60,000. Bruce and Craig disproved this idea, but it was very difficult for Craig to approve Bruce’s loan.

All of Bruce’s seminars make it easier for Craig to do business, because many of TNG’s new clients know a lot about the company. Many of TNG’s clients have had the opportunity to hear Bruce speak, and they’ve researched TNG through our website. This helps Craig as a lender because not only do his clients know how TNG conducts its business, but they also know that we are trustworthy. Some of Craig’s clients trust TNG’s decision making ability more than their own, and that is why they work with him.

Greg’s favorite type of inventory are standard track homes. Greg does not like properties on large lots. Anything over 20,000 square feet is usually bad inventory. Also, he does not like areas that are poorly planned. For example, there are some neighborhoods where there may be one property built in 1960 next to another property built in the 1970s. There are exceptions to this, but Greg prefers to buy safer inventory with more mass appeal. Newer homes are typically more attractive, and they require fewer repairs. Greg has been surprised by how many people are still more attracted to larger homes. He does not mind buying properties on small lots so long as that kind of inventory is selling well in its area.

When Greg is estimating a property’s value, he tries to think of what a property’s resale value will be after 30 days. He has to consider what it will take to attract a buyer within 30 days. There are occasions when he must cut his values, because 5 REOs drop into the market at one time. Greg reviews his asking price once a week for every property TNG owns.

Greg has had a lot of trouble with pool homes. He has spent $25,000 on pool repairs, which wiped out his profit. However, pool homes are not always problematic, and Greg has profited from buying them.

Greg prefers to rely on his own knowledge at a trustee sale. Sometimes he receives friendly advice from other people, but not often.

For m ore information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Tags: appraiser, auction, bootcamp, borrower, bruce norris, Craig Hill, credit, FHA, Greg Norris, hard money, investor, loan, MLS, norris group, properties, property, realtor, reo, TNG, trustee, VA
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207-TNG Radio – Norris Group 1-1-11

Friday, December 31st, 2010

Greg Norris

(Full Bio)

Craig Hill

(Full Bio)

The Norris Group

This week Bruce is joined by Greg Norris and Craig Hill. Greg is the vice president of TNG Auctions. He buys properties and resells them. Craig has been working with Bruce for 15 years, and is responsible for speaking to all potential borrowers for The Norris Group.

Craig’s business was extremely busy during the first part of the year, but it became even busier toward the end as inventory decreased. Inventory is down 75% for REO buyers.

When Bruce and Craig first met, most of the business revolved around doing seconds for owner occupants in financial trouble. At this point, most of Craig’s business involves doing short term loans for investors who buy fixer properties and long term loans for investors who hold rental properties. This business works well for TNG, because banks do not want to loan money out to investors. Banks have stopped making common sense loans. The TNG hard money program allows investors to own property at 9.9% interest. These properties often cash flow well, and the monthly payment is often cheaper than rent.

Greg has discovered that most homes found at trustee sales involve smaller rehabs, newer homes and bidder areas. Trustee sales have made Greg’s job simpler, because the best deals for REOs usually involve heavier REOs. Discounts on trustee sales are smaller than on REO sales, and trustee sales are much more competitive.

The number of people who attend trustee sales depends on the amount of inventory and the kind of inventory. The largest number of people Greg has ever seen at a trustee sale is 50 to 70, but out of that group only about 8 to 10 were big investors.

10 years ago, trustee sales did not involve drop-bids, people had equity, and the investors involved in the business had been doing it for a long time. In some ways, Greg thinks the changes that have occurred in the trustee sales have made it more difficult for individual investors, but in other ways, it has become easier. Some of the individual investors are using their own money, so they don’t have another investor they need to repay, and they do smaller volumes. Sometimes you cannot compete with those people, because they are doing their own rehabs and they only buy a few properties every year. Some of them will buy properties for $20,000 over what Greg would be willing to pay. Because those buyers have limited research ability, Greg prefers to simply wait for those buyers to leave.

Greg’s typical day begins by doing research on properties with open bids, and other properties that may potentially drop into open bid. At 9AM, he attends the sales. After he attends the sales, he deals with real estate and repair contracts, and then prepares for the next day’s sales.

TNG’s loan clients have an unmatched level of experience in the industry, and Craig truly appreciates this. Craig’s phone is nearly constantly ringing. Many people discover TNG’s program through the internet, referrals, and from Bruce’s many speeches. TNG has gained a lot of respect for being a Southern California only real estate business and for being in the investment business for a long time. The most rewarding referrals come from people who have heard about TNG from multiple people, and decide to talk to us out of curiosity. Sometimes investors in the field are referred to TNG from agents who tell the investors, “If you can get a preapproval letter from The Norris Group, I will accept the offer.” That speaks more than any referral, because it means people know that TNG only approves of deals that are closable.

This year, Craig was surprised by how much volume picked up on long-term financing. There is a huge demand for this. Bruce believes TNG’s long term financing will perform at a very high level, because a lot of inventory will come out. This kind of financing will not work as often with an owner occupant as it will with an investor. A lot of rehabs and lower priced properties are turning into buy and holds, rather than flips. Craig believes it is challenging for investors to flip $100,000 to $150,000 homes in this market, because there are many investors willing to buy and hold. An investor who can buy and hold can probably pay more, because they will receive a cash flowing property that will give them a profit for 10 more years.

Bruce believes the 203K FHA loan program will probably return next summer. The problem with that program is that it probably takes 45 days to fund it. That makes the loan hard to sell, because a deal can be closed much quicker than that. In some cases, TNG will do a deal in 7 days or less. The speed of the deal makes a big difference in an investor’s willingness to buy.

The automation of TNG’s website has helped Craig tremendously, because it allows him to handle phone calls and it has automated TNG’s loan process. TNG’s loan business has doubled over the last 12 months, and the time to fund those loans has gone down.

Greg only gets to see the inside of his potential property purchases about 5-10% of the time. Only 10-15% of those properties are unoccupied.

Two of Greg’s employers, Joe and Kenneth, are responsible for going to every house, evaluating repairs, and talking to the owners to determine whether or not they are difficult to deal with. When Joe and Kenneth are not viewing houses, they are doing construction contracts.

Guessing the cost of a rehab when you cannot see inside requires a lot of experience. Greg often guesses based on the age of the home. For example, a house built in the 80s will probably require more cabinets than a house in the 1990s or the 2000s. You can learn a lot more about this if you come to a TNG bootcamp.

Realtors are very pleased with TNG homes, because they are in great condition and they are standard sales. Realtors get tired of wasting their time with REO and short sales. Also, TNG is easy to deal with so long as they do their job. Bruce Norris once attended a Realtor group meeting in which an agent stood up and said, “We wish The Norris Group would buy every REO in town, because of how they deal with properties, and how they turn out.”

Finding a reliable contractor can be tough. TNG has improved its business because of the relationships it has built with contractors over an extended period of time. If you keep your rehabs consistent, then your rehabs will get easier for your contractors, and they will have your same mentality. When a contractor has done enough repetitive jobs with you, they can advise you on how to best rehab your properties based on previous jobs.

It takes a while to build a good investment team, and your team doesn’t just involve your contractor; you need to have lenders and escrow partners. All those people will help you get to the finish line faster, and if you aren’t going to get to the finish line, then you will be notified sooner, so you don’t waste time on the market. Dishonest lenders do not want their deals to fall out, and will lie with the hope that some money might show up. Greg tries to make sure that he is working with a serious buyer by making them spend money to finish the deal.

When Greg first started doing trustee sales, a lot of people were using all cash and conventional loans. A lot of people got fooled into feeling that they had to buy because of the government incentive. If they had waited 6 months, they would have gotten more than $10,000 back, because the market adjusted down. Right now, Greg is seeing a lot of VA and FHA offers, and very few conventional offers. Only 1 out of every 10 of Greg’s deals fall out. Greg does a good job of weeding out bad buyers before escrow. Bruce feels that Greg has made a wise decision to force potential buyers to put effort into the property before it goes to escrow.

Every year or two, trends change in the loan business. In 2009, TNG dealt almost exclusively with REO. In 2010, we got more trustee sale buyer refinances. Those were people like Greg who would attend trustee sales, and then refinance to leverage the property. In the last six months, Craig has noticed an increase in people buying short sales. The short sale process is no longer a half year long process. Some short sales can be completed in less than 60 days. The bulk of TNG’s business is still REOs. This is probably due to the fact that TNG’s clients are experienced, and they have relationships with REO agents.

Short sale agents do repetitive business with buyers they are comfortable with, so developing a relationship with an agent can lead to repetitive purchases. The nice thing about a short sale is that you get to see the inside of the property, title insurance, and it is less likely to be in bad condition.

Tags: borrower, bruce norris, buy and hold, contractor, Craig Hill, equity, escrow, FHA, Greg Norris, hard money, inventory, investor, lender, loan, owner occupant, properties, rehab, rent, reo, short sale, the norris group, TNG, trustee
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150-TNG Radio – Craig Hill 11-28-09

Friday, November 27th, 2009

Craig Hill

Hard Money Broker

(Full Bio)

This week Bruce is joined once again by Craig Hill. Craig has been handling The Norris Group’s hard money loan business for over ten years, and he is a trustee investor.

Many new investors think that it is easy to get into the real estate buying business. To reduce risk, The Norris Group uses Rick Solis to appraise properties through the eyes of an investor. Sometimes new investors will find a property, and they think they have a good deal, but then Rick will look at the property and find problems with their deal. For an example, an investor might try to buy a property in an area with comparable sales located on 8,000 square foot lots, but the property they are trying to buy is on a 4,000 square foot lot. That 4,000 square foot difference could make a $20,000 dollar difference. Rick can easily spot these devaluing problems and save these new investors money. Craig has received multiple responses from investors who are thankful for Rick’s services.

A new investor wants to get their first house under their belt. One of the things a new investor may do is try to prove that a house is a good deal, rather than let the evidence speak for itself. These people might feel that if they can just buy a house and sell it for a profit then everything will be a little bit better. Those are the kinds of people that will typically make a mistake. When people are trying to make up for lost time, they often try to do too much too quick. You cannot become a millionaire in one deal, but you can ruin your finances in one deal. Craig has met many people who tried to be too aggressive, and then lost a lot of money. During the boom, people felt like they couldn’t lose, and they didn’t want to believe that the up cycle would end. Now people are starting to have success again, and Craig fears that they will go back into that same mentality. Craig warns that you should be able to handle a rental property. If a rental property is going to ruin your life then you shouldn’t be investing.

If someone came to The Norris Group with a great deal on a $1.2 million dollar house, The Norris Group would probably not help that investor, because there is a lot of risk involved in that deal. If an investor discovers that his $1.2 million house is not really worth $1.2 million, or if the investor starts making $7 grand payments, they can severely damage themselves.

If Craig had to choose between a borrower with a high credit score and low cash reserves, or a borrower with a lower credit score and more cash reserves, he would choose to loan to the borrower with high cash reserves. When you are dealing with investments, you need to have cash. If an investor doesn’t have enough cash reserves, he may want to think that he can make the investment work with only six months worth of reserved payment. His property may take more than six months to pay off, and his credit will not help him, because The Norris Group’s program is not credit based. They cannot get a loan to improve their situation. If a person has a lot of cash reserved, it makes it better for both the investor and the lender.

Many unexpected problems can occur when you invest in a house. Craig bought one house to fix up and flip, but the sewer immediately needed to be fixed. If an investor cannot handle those kinds of surprises, then she is jeopardizing herself.

If Craig had to choose between a borrower with cash into the deal, or a borrower that got a superior discount in the purchase who is looking for a zero down loan, he would still choose the borrower with cash in the deal. There might be a reason why the other client got a superior deal that won’t reveal itself until later. Also, the zero down investor may not be capable of handling the monthly debt on the investment. If you have $50,000 in cash reserves, you will be much more comfortable making an investment. When you do not have that kind of cash in reserve, you may feel a need to make a deal, and that causes problems. People often get caught up in the idea of making a property investment, but their ideas may not work out in reality.

If Craig had to choose between a borrower who is an experienced investor with a 650 FICA score and has a proven track record with The Norris Group, or a new borrower with a 750 FICA score and the same amount of money, Craig would choose the experienced investor with a good record. Many people have had troubles within the past few years, so a 650 FICA score may mean that they have also had trouble, but they are working through it. A track record with The Norris Group is important, because that experienced investor respects their business relationships. Dealing with a lender who knows their track record allows them to do their business, and if their investments are their livelihood, then they will probably not sacrifice their relationship with their lender.

When loaning to an owner occupant, there is never an intention to develop a relationship for future business. An owner occupant might be taking a severe risk with the $20,000 they take in a loan.

If Craig had to choose between a borrower with a job, good credit score, and a money partner, or a borrower who is a self employed, full time investor using their own money, Craig would choose the self employed investor. People who use money partners are historically known to cause problems. They may not take into account that surprises will come up, such as unexpected repairs or a delay in the selling process. The Norris Group will do business with money partners, but Craig is much more involved with those people. Craig often requires the partner to sign the deal along with the borrower, because they need to know that a property is a responsibility.

If Craig had to choose between a borrower who is a cocky and experienced investor with lots of money, or a new investor with less money and a humble attitude open to learning, Craig would probably choose the humble investor. He strays away from the know-it-all attitudes. Craig has had thousands of conversations with investors, and he has a good sense for the kind of person who will work hard to protect his investment. The cocky, know-it-all investor is often a one-time deal. The cocky investors will often call Craig, give him a big conversation about how this deal is an opportunity for him, but their “deal” is really only borderline. Sometimes these cocky, experienced investors will be trying to use Craig after their other lenders reject them.

Over the years, Craig has developed a good sense for when people are not telling him all their problems. When you have had thousands of conversations with borrowers, you develop a sense for conversation patterns, which lead to certain outcomes. It would be difficult for Craig to have an original conversation at this point. He has probably heard what any new investor will tell him many, many times. The Norris Group does not want to do deals with just anyone who can qualify. The Norris Group wants to do deals with people that make good matches with the company. Craig deals with both borrowers and investors, and he wants to make sure that his deals are winning deals for both ends.

The Norris Group does not work with pooled trust deeds and never will. If you used pooled money, you have much less control. When an investor buys a trust deed, he knows the property it’s going to be on, the amount, and he knows what the appraisal on the property is worth. The investor can easily find out what his investment is. With pooled funds (fractionalized trust deeds), the manager of the pool has a lot of discretion. You might have some possible investments that you would not take if you personally inspected them.

The reality of what is happening to your investment can be masked in a pooled trust deed. In a pooled trust deed, you make regular payments. You can make these regular payments for a long time, but by the time your investment is not worthwhile, your investment may be upside-down. With an individual investment, you are receiving monthly payments from one person on one trust deed, so you would know after 30 days if the borrower was 30 days late.

There are some lenders who do not require monthly payments, but Bruce always does. He wants them to know that they have a debt, and it prevents them from getting overextended.

A pooled investment might attract a smaller investor. The Norris Group does not usually give out loans that are only worth $30,000 to $40,000. A person who has $50,000 they want to invest, but they require the $500 dollar payment every month to live on, then they are not a good candidate for a trust deed.

Bruce asks Craig to explain how he makes people feel comfortable investing. Craig likes to show people examples of what The Norris Group does. Craig sends new investors a copy of a The Norris Group appraisal, so they can see what The Norris Group does to calculate value. Once Craig makes people feel comfortable with what they are lending on, they are anxious to invest in a trust. The majority of the people that work with The Norris Group trust deeds want to ramp their investment up as high as it can go. When they do ramp it up, the majority of them have chosen that as one of their main investment vehicles. Many people who deal with trust deeds have a diversity of investments. They do not want to put all their eggs in one basket.

The Norris Group sees trust deed investments as a great way to offer diversification of a retirement account. You can also diversify your trust deed investments by selecting multiple areas.

The Norris Group has a new 8-year loan program for investors who plan to buy and hold a property as a rental. This new program has opened up a new investment at 9% for 8 years. This program is great for people who have IRA money, or money in 401Ks, because they can earn 9% tax free. The nice thing about this 8-year program is that the loan is intended to go on for an extended period.

Craig can be reached at 951-780-5856. He will be glad to talk to you about borrowing money.

See Craig’s full biography HERE.

Tags: 401k, bruce norris, California, CALIFORNIA FORECLOSURES, california hard money, Craig Hill, diversity, fractionalized, IRA, lending, pooled, private money, retirement, risk, the norris group, trust deed investing, trust deed investments
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149-TNG Radio – Craig Hill 11-21-09

Friday, November 20th, 2009

Craig Hill

Hard Money Broker

(Full Bio)

This week Bruce is joined by Craig Hill. Craig has been handling The Norris Group’s hard money loan business for over ten years, and he is a trust deed investor himself.

Bruce begins by asking Craig what the difference is between Craig’s California private lending business and other lending businesses such as Bank of America or FHA. Craig says that there is not as much of a difference as people think. The main difference is that you are lending to a different client and for many reasons. Craig has the ability to lend within a shorter time frame, and he will lend on properties that banks would lend on due to conditions. Craig’s business deals to people who have more need for a quick loan.

The funding source in Craig’s business is very different from a bank. Banks have a pool of money, but with Craig’s hard money, there is an individual who has money to lend and they get a good return on the loan they end up making.

Hard money lending is a generalized term for private money and private loans. The Norris Group is a private broker for investors. Hard money has a negative connotation to it because it can be expensive and, in the past, it was given to people with bad credit.

When Bruce and Craig first met, Craig was working for another company in Orange County. Bruce asks Craig what his typical client looked like in that environment. Most of Craig’s clients were delinquent on their trust deeds. They had poor credit because of some sort of problem they had been affected by. Hard money was a way for those people to get rid of some of their problems, and move on.

When Bruce and Craig met, Bruce was an investor. He had found a couple properties, but he had maxed out his credit line. Bruce had never met with a hard money lender, and Craig had never met with an investor. If you have a house that is worth $100,000, hard money lenders are typically willing to lend 60 to 70 percent of what that house is worth. Bruce had two houses that he wanted a loan on, but he was only asking to borrow 50 percent of what those houses were worth. This made Craig realize that working with Bruce was a great opportunity. Craig had a hard time finishing those loans though, because at that time, people had the mentality that a house was only worth as much as what you were willing to pay for it. Even if two houses were appraised at equal value, the lender would have still wanted to lend to the person in foreclosure.

In the 1990s, there was usually a first deed on a property when a hard money was asked for. Most of the hard money loans that Craig did at that time were between $10,000 and $25,000. 80 percent of the home was typically covered in the borrower’s first loan, and Craig gave them a small loan behind that first loan. The interest rate was typically 15 percent. Most of the companies that did hard money dealt with brokers. Craig’s company worked with brokers who would refer loans to them. If there were 10 or 15 points, those brokers would receive half of that value. There were a few more people involved in the transaction.

Bruce’s company does not rely on referrals. The Norris Group has a great network, so they do not need to use referrals. Craig had to frequently persuade brokers that it was better for borrowers to get a $15,000 second loan. The brokers wanted Craig to give them a new $80,000 first loan, because that generated more income. With The Norris Group, Craig does not have to worry about this problem, and he can choose the best option for each client.

Most hard money loans are still very referral based. If you are not talking directly to the borrower, a broker may not give you all the information you need, to make the best decision for the client. The broker may try to make you believe a false story.

Bruce and Craig quickly became comfortable with talking to each other, because they were dealing with the same people. Bruce was talking to people in foreclosure who wanted to sell their homes, and Craig was talking to those same people about making a loan.

Investors had come to Craig before Bruce, but it was with a concept rather than a property. People would ask Craig what he might do in made-up scenarios, but Bruce was the first person to come to him with his two properties. Craig thought Bruce’s idea gave a lot of security to the investor. After Craig’s experience with Bruce, he chose to only give loans to investors. The second investor Craig dealt with was Mike Cantu, and this loan plan worked well for Mike as well.

Mike Cantu is still borrowing from The Norris Group. That consistency would not occur for a loan business, or for people who were invested in trust deeds. People who loan to those kinds of borrowers will have to work very hard just to get them to borrow money once. Lenders who deal with investors will only have to find a few people who can borrow 40 or 50 times a year for them. It did not take Craig very long to realize that this was a very sensible business plan.

Most people think of the investors as the risky borrower, and the occupant as the safe one, but this is not true. Bruce asks if there are different rules for loaning to occupants. There is more protection for occupants, and there are different regulations on loan amounts. When Craig is doing a loan for an investor, he understands that the investor needs money to fix a home and sell it. When you give a loan to an owner occupant, you probably never know why that person needs the money, and Craig has been shocked in the past by the ways owner occupants will use their loan money.

Hard money loans are not a cheap resource. An owner occupant would not want a hard money loan unless they have no other choice. An investor taking a hard money loan probably has the option to use another loan option.

When checking to see if an investor is qualified for The Norris Group’s hard money loans, Craig checks their credit, the amount of debt leverage they have, and cash reserves. Someone with good cash reserves is a good candidate for hard money loans. Most investors take these loans for single-family residences and small units. The Norris Group is currently not offering loans on land, and tends to stay away from commercial real estate. In the future, The Norris Group may give loans for construction. Craig asks people how they found the property and how long it has been on the market. If an investor finds a property that has been on the market for 60 days with no price change, Craig will be cautious, because there is probably a reason why that property has not been sold.

Some passive investors are really looking to get involved in the market by getting properties flipped to them by a wholetail investor who passes it on to them for a small fee. The fees being tacked onto these deals sometimes wipe out a lot of the profit. Most wholesalers get a nominal fee for the work they have done. Craig recently talked to a man who was buying a $400,000 house for $349,000. He though he had a good deal, until he discovered that the original buyer had just paid $249,000 for it.

It is very important to predict real estate cycles. We are currently in a good cycle, but you still have to be careful when buying. If the cycle is going up, lenders can do deals according to a loan to value scale. In the current cycle, Craig stays away from deals that can take 6 months to complete, because a lot of things can change within 6 months. In the last six months, investors have had a “can’t lose” mentality. This can be problematic, because if investors feel like they cannot get a bad deal, then they may pay too much. The Norris Group encourages people to not get involved with long-term project houses, unless they have experience. Craig often asks his client if they have a background in construction. Craig thinks that a new investor should not try buying a house that has been red tagged by the city.

There are many people who come to The Norris Group expecting to receive a loan, because they have attended clubs and seminars in the state. Other people have told them that they can get a loan without a credit score, and without a down payment. This is not true. Craig has disappointing conversations with these people, but most of them are thankful, because Craig informs them on how they can get qualified for a future loan. Some of these people will put everything they have into a deal because they’ve been told that it is easy. This is a difficult and volatile time for real estate, yet people are willing to go “all in” on a property investment. People are coming from a 2006 mentality, where any property you got your hand on would get you a big check, but now things are much more difficult than that.

Craig can be reached at 951-780-5856. He will be glad to talk to you about borrowing money.

Bruce speaks with Craig Hill about the hard money loan business, how they met, how they work together, and what Craig brings to the table as a money partner. The Norris Group only loans in California so The Norris Group offers local insights and prides itself on a very good track record. Video on the program can also be seen at http://www.thenorrisgroup.com/hard_money_loans/ and more on trust deed investment in california can be found at http://www.thenorrisgroup.com/trust_deed_investments/

In 1984, Craig took his first job in the lending industry working for Vanguard Mortgage as a loan officer and loan manager. While employed there, he met and began funding REO purchases with Bruce Norris. When Bruce officially started the Norris Group in 1994, Craig came aboard as both loan officer and investment manager and never looked back. Since that time, they have arranged over $150 million dollars worth of investor loans.

See Craig’s full biography HERE.

Tags: bruce norris, California, CALIFORNIA FORECLOSURES, california hard money, Craig Hill, lending, private money, the norris group, trust deed investing, trust deed investments
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103-TNG Radio – The Norris Group 1-3-09

Saturday, January 3rd, 2009

Craig Hill

Loan officer

(Full Bio)

Greg Norris

Property Buyer for TNG

(Full Bio)

Bruce Norris is joined once again by Craig Hill (hard money loan officer at The Norris Group) and Greg Norris (full-time property buyer for The Norris Group.

Bruce asks Craig about calls from first time investors purchasing homes with structural damage and mold. Craig says he steers newer investors with no construction background away from heavy fixer uppers. Houses don’t have to be a complete disaster. You don’t want their first house to be a bad experience.

Bruce asks Greg what he is doing differently from one year ago to buy and sell properties. Greg says he hasn’t changed that much but has gotten more efficient. At the very beginning he was doing cheaper repairs but now there’s a little more upgrades. Instead of linoleum we use tile in some areas and instead of tile on counters he puts in granite. We need to be the best on the market.

Realtors that deal with buyers are saying great things. One in particular isn’t wasting any more of her time on REOs and has decided to only show our homes because of the quality.

Greg says price and condition are really important in this market. Greg says the higher end listings have disappeared and TNG is typically the highest. Inventory is very low. Even though The Norris Group is the highest, the homes still sell. Consumers don’t want to deal with the fixers and want a nice home.

Appraisals are a bit of a problem. Greg says he’s having to set a top level. Buyers are wanting to see a top payment to be $1200-$1400 per month which is similar to rent if not a little less. Greg talks about the staging of the homes and how it helps with presentation. It helps online showings.

Bruce and Craig talk about the hold ups with selling. Craig says financing and appraisers are the biggest issues. There seems to be willing buyers for fixed homes. Craig says homes are being fixed better than they were in the 90s. More is being spent.

Craig is having to tell people not to chase the market and get very realistic on price. He often calls clients if a loan has been going more than five months. He wants to make sure the investor gets to the finish line. It’s difficult when prices are declining.

Bruce asks Greg about appraisal issues. Greg says the last 30 days has been much more difficult. Banks are so scared they are overcompensating. Appraisals over one month are considered old. Three months is considered too old.

Bruce asks about FHA transactions and the 180 day rule. Greg says he’s never been asked for a second appraisal. Bruce thinks maybe the review appraisal is the second appraisal. Bruce says that some of these appraisers are sitting 500 miles away.

Bruce asks Craig about loans that can’t seem to close. Craig says there is willingness on the side of the buyer but it’s the financing piece that’s causing problems for California real estate transactions. The checks and re-checks of the buyers stall closings.

Bruce asks Craig about the many new trust deed investors The Norris Group has had come on in the last 90 days and what makes them feel secure about doing investments. Craig says perceived safety is key. Craig makes small loans amounts, the investor is a special borrower, and typically the worst case would be the money lender ends up with a property.

Bruce brings up the fact The Norris Group was very conservative over the past few years so some of TNG’s main money investors placed their money elsewhere. Bruce asks about some of the uh-oh stories Craig has heard about. Craig says money investors are attracted to the return and sometimes forget there’s risk, especially if they had been working with TNG who has a very good record.. He told some to be patient and that TNG would be busy again soon. Some of these investors didn’t wait, went elsewhere, and now have a small portfolio of non-paying loans.

Bruce asks Greg what the secrets are to keep good contractors interested in doing our work. Greg says that it’s important to be easy to deal with. We don’t stand in their way and we have work. Consistent work is a big deal.

Bruce asks if there’s red flags when dealing with contractors. Greg says when contractors ask for money before work is done it’s a red flag. Greg typically pays every two weeks. The Norris Group pays for the parts. TNG knows what parts we want installed and we’re really just contracting labor. Greg says contractors resisted his method of buying all the parts at first but later said they liked the system. It allows them to have less money out of pocket and actually take on more jobs. Home Depot was difficult to work with at first but now after dealing with them for a year, it’s really easy and everything happens over email.

Craig says repairs is still a big hurdle but they get used to it. Sometimes Craig forwards them before and after photos and videos of an investor’s work. He’s had money investors turn down a project but then they see before and after videos of an investor’s work and they sign up for several. Once they see what investors do, they feel more comfortable.

Craig talks about holds for repair money. Most houses are needing major repairs so almost all loans have money held for renovation. Red flags for Craig are investors who want money before repairs are finished. Draws are given after things are completed. This protects the money investor and also makes sure the investor stays on track.

Bruce asks Greg how he handles all the showings of the properties since he lists all of the properties for The Norris Group. Greg says he doesn’t show them at all. If interested buyers call, Greg used to tell them to call their local agent after figuring what they were looking for. Greg wants buyers to be pre-qualified and doesn’t have a time deal all of that. He really relies on buyers agents.

Bruce asks Greg how we protect ourselves during escrow. Greg says he does all of his due diligence up front now to make sure he doesn’t go into escrow with someone who can’t close. He wants all buyers to be pre-qualified and not just pre-approved.

Craig Hill has been in the hard money loan business for over 25 years. Greg Norris has been working as the Norris Group’s full time property buyer for going on two years. More information about The Norris Group at thenorrisgroup.com and tngproperties.com

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Tags: appraisal, appraiser, bank, bruce norris, construction, Craig Hill, FHA, Greg Norris, hard money, house, inventory, investor, lender, loan, norris group, officer, property, real estate, realtor, reo, repair, TNG
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102-TNG Radio – The Norris Group 12-27-08

Friday, December 26th, 2008

Craig Hill

Loan officer

(Full Bio)

greg_norris

Greg Norris

Property Buyer for TNG

(Full Bio)

Bruce Norris is joined this week by the loan officer for the Norris Group, Craig Hill, and the full-time property buyer for the Norris Group, Greg Norris.

Bruce asks Craig about how long he’s been in the hard money loan business and who the typical borrower was when he first started. Craig talks about buyers he used to work with and how it changed 20 years ago because of rule changes. Craig then talks about how he started working with Bruce and how it made much more sense to lend to investors. Craig says the investor has made not only more sense but are better at making payments.

Bruce then chats with Greg about his past year and a half as a property buyer. Greg talks about his early experience watching trustee sale buyers and what they liked to buy. Greg talks about loans available for investors and how conventional loans are currently at a liit of four.

Bruce asks Craig why lenders are hesitant to lend to investors. Craig says lenders have a false perception that investors are bad to lend to. An investor has more money down and has just as many reason to stay in a home as an owner occupant but lenders don’t want to be involved in that transaction.

Greg talks about how long ago he started making offers straight out of the MLS. Greg says making offers straight out of the MLS was not successful in early 2008 as the lenders wouldn’t budge. In the first six months of 2008, zero deals came out of the MLS, most were coming from auction. Now towards the end of the year, almost all came from the MLS that The Norris Group purchased. Now, The Norris Group is buying about 5% of the offers made.

Craig talks about last minute funding calls and why these investors are in a rush. Craig goes into detail why people with money make these investor loans. Craig says our main target market are seeing loans being made of $85,000 to $120,000 where last year those same homes were being bought for $200,000. There’s been a big change in price. Money sources have become a little nervous.

The perception right now is everyone wants a cookie cutter deal. Everyone wants a $100,000 loan and money sources do not want to be aggressive. Those that want larger loans or are buying in areas out of comfort zone areas will need more in money in the transaction. Money sources in Northern California are wanting to invest in smaller loan amounts and also invest in Southern California where they feel TNG performs best.

Most hard money loans have to have investors put more money into the deals right now. Different sources have gone out the window because of the market.

Bruce asks Greg what he is looking for now as he is making offers on things inside the MLS. Greg says he is looking for anything within a $30,000 range where he thinks he can buy it and make a profit. Sometimes these are short sales and sometimes his offers don’t get accepted for months. Sometimes he gets deals because other investors fall out and he’s the only one left.

At this point, Greg is not being able to talk with people directly often. Right now, banks seem to be dictating to REO agents where before there was much more relationship involved. Greg says he sometimes gets no reaction from REO agents when making offers. Every agent reacts different. Some email when we didn’t get a deal and some do.

Bruce says between 2000-2006 most of our hard money loans came from investors purchasing from people directly. Craig says it’s now changed almost completely where 100% are bought out of the MLS, through auctions, and occasionally from trustee sale and probate. The MLS at this point is creating the most real estate opportunities.

Out of the 40 properties Greg has purchased this year, 30% of the deals were auctions, the rest were from the MLS. Greg is not looking forward to attending auctions. It’s a lot of work for sometimes no results. REDC and Hudson and Marshall have been mixed this year.

Craig says the inventory he is making hard money loans on is different form the 90s. In the 90s there were more 30s and 40s built home located in San Bernardino and Moreno Valley. This time, the investors are being savvier. Investors are buying a little bigger homes and newer homes. The inventory is much better.

Craig talks about why some investors get frustrated because they can’t participate in our money program. Credit issues aren’t the biggest issue. Liquidity is just very important right now. Most people don’t mind hearing “no” because we’re trying to set them up for success. Some investors just don’t understand the process.

Bruce talks about deals Craig turns down and investors coming back later thanking him for now allowing them into the deal. Craig finds that very gratifying. More next week.

Tags: agent, auction, bruce norris, Craig Hill, Greg Norris, hard money, Hudson, investor, lender, loan, Marshall, MLS, officer, owner occupant, property, real estate, redc, reo
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