Trust Deed Investing with Craig Hill

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Born and raised in Lakewood, California, Craig Hill attended Lakewood High, Long Beach City College, and received his Bachelor of Science degree from California State University, Long Beach. While attending CSULB, he followed his love of baseball by making his profession buying and selling baseball cards.

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, we met and began funding REO purchases. When I officially started The Norris Group in 1994, Craig came aboard as both loan officer and investment manager and never looked back. Since that time, we have arranged hundreds of millions worth of investor loans.

Episode Notes:

 

Narrator  This is The Norris Group’s real estate investor radio show, the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever-changing real estate market hosted by author, investor, and hard money lender, Bruce Norris.

Bruce Norris  Thanks for joining us. My name is Bruce Norris and today our special guest is Craig Hill. Craig, and I go way back.

Craig Hill  Yes.

Bruce Norris  And I remember thinking, well, I’ve got to find source of money is buying too many deals, I was going to auctions and actually had somebody that worked for me at the time, and I had him door knock lenders. And you were the only one that said, ‘Yeah, I’ll talk to the guy.’

Craig Hill  Right.

Bruce Norris  And so that’s, that’s what started this. So, we’ll go over some of that. But why you’re, why you’re with The Norris Group was an interaction you and I had me as a borrower, you as a supplier of money, where the appraisal came in wrong.

Craig Hill  Right.

Bruce Norris  It was off by 20% easily. And at that time, I felt like I was certainly probably your best client. And I just thought, Craig, can we ignore that appraisal and just do the loan that we, that I thought was gonna happen?

Craig Hill  Right.

Bruce Norris  And you said, Bruce, not for you or anyone else, why ever push a value to accomplish a loan? And when I hung up, I actually made a mental note. If I ever start a company, I’m going to, I’m going to have you with me.

Craig Hill  Right.

Bruce Norris  That’s a big deal.

Craig Hill  Oh, it’s absolutely…

Bruce Norris  You know that what you showed me there was because if if you were paid on volume, I represented a fair amount of a paycheck. And you stood with what you believed in. And in face of that. I don’t think there are very many people that would do that. And I can tell you, you know, for the last 25 years, and I don’t know how many hundreds of millions of dollars, I haven’t lost one moment asleep thinking I hope Craig does what’s right.

Craig Hill  Right.

Bruce Norris  And that’s a big deal.

Craig Hill 

Well, that’s because I didn’t want to lose any sleep either.

Bruce Norris  Yeah, it is kind of funny. We’re built, we’re built a lot that way. We there’s the 80/20 rule. And you and I have developed a pattern of just not doing the 20% that cost you 80% of the problems.

Craig Hill  Exactly. Because that really, it just monopolize your time. If you have problems that you’re dealing with, instead of just focusing on business.

Bruce Norris  Yeah. And the way you and I are rigged, it occupies our head.

Craig Hill  Yeah, 100%…

Bruce Norris  100% of the time, so you could have 95% of it good. But if 5% of it was not paying or in default, or oh my gosh, I got caught on fire. It’s in such a bad area.

Craig Hill  Right.

Bruce Norris  We’d be a wreck.

Craig Hill  Yeah. Yeah, exactly.

Bruce Norris  So, you just have to realize, okay, that’s, we’re both, we’re both built like that. Now, going back to those first loans, the hard money lenders, and first of all was completely different. How many investors did you loan to at the time I showed up?

Craig Hill  Yeah, exactly. hard money now is almost synonymous with the…

Bruce Norris  Investors.

Craig Hill  Investors.

Bruce Norris  Yeah.

Craig Hill 

When we met. It had nothing to do with investors. As a matter of fact, most companies really had a rule of not dealing with investors, because their philosophy was the property’s worth what you pay for it.

Bruce Norris  Exactly.

Craig Hill  So, you’re dealing with somebody that’s buying a house at 40, 50 cents on the dollar. It just kind of made everybody’s head spin. Because they couldn’t comprehend that now the house next door sold for 100.

Bruce Norris  Right.

Craig Hill 

You bought the exact same house for 50. Well, that one was worth 100, yours was worth 50. So, it was a challenge, as you know that first, those first deals getting investors to comprehend that.

Bruce Norris  Well, we did three simultaneous loans. And I remember signing the loan docs, and it was a house I bought at HUD auction.

Craig Hill  Right.

Bruce Norris  It was worth 85 grand, it basically needed to hedge trimmed. That was it.

Craig Hill  Right.

Bruce Norris  I bought it for 34 grand. And so, whenever we talked about what you could loan, it was like 60 or 65% of the appraisal and, and I said is it does it bother you? You’re going lonely more than I paid for it? And you just like, yeah, there was a little pause there.

Craig Hill  Right.

Bruce Norris  And I realized that there was someone that owned the company that this was new to as well.

Craig Hill  Right.

Bruce Norris  And so, I probably made a pretty good strategic decision by making six payments on each of those loans in advance.

Craig Hill  Oh, yeah, absolutely. Peace of mind.

Bruce Norris  Yeah. And then I think what went often to in the owner said, and probably yours is like, Okay, this is a different group of folks.

Craig Hill  Right.

Bruce Norris  And that’s a man. We haven’t looked back since. You know, it was fun as you guys gave me a million dollar credit letter.

Craig Hill  Right.

Bruce Norris  And so, I’d go to the HUD auction I buy something for 40 grand, and they’d cross it off.

Craig Hill  Yeah.

Bruce Norris  …and I got a kick out of it.

Craig Hill  Right. Yeah.

Bruce Norris  I thought, wow, that’s pretty, pretty powerful stuff. I guess I can I get two of those?

Craig Hill  I was actually going through my desk a few weeks ago, just because we’re going to probably move offices around. I actually found some of your old letters.

Bruce Norris  Oh, wow.

Craig Hill  Some of your old pre approval letters from way back.

Bruce Norris  Talk about not throwing away?

Craig Hill  Yeah, I’m getting better.

Bruce Norris  I might want to see that myself.

Craig Hill  That’s pretty hilarious.

Bruce Norris  Now, back then, the impetus for the volume was lender on stuff. So let’s go into auctions. And it was all lender own. And in a way that’s different is a different lending environment. Because title is usually pretty simple, right?

Craig Hill  Right.

Bruce Norris  That’s one of the things okay, if lenders own it, it’s there’s no first there’s no title issues, it already went through the foreclosure process.

Craig Hill  Exactly.

Bruce Norris  So, and then there was, everything was being bought pretty good discounts at the time. And then that, that lasted about 91 to 96. And there was a, there was around of that. And then I remember thinking after 96, okay, what will we be doing? The lending business, I thought, probably would not do as well. And it turned out to be just another, another round of deals that came from different sources, gradually, it all came from private owners.

Craig Hill  Exactly.

Bruce Norris  And so, you know, the courses that we taught at the time started to reflect that realization that okay, all you do is okay, if you’re dealing with REO agents, that’s great in that 91 to 96. It won’t be usable again until 2008. What do you do in the meantime?

Craig Hill  Right.

Bruce Norris  Okay. Well, then you start doing mailers and talking to human beings that own houses.

Craig Hill  Exactly.

Bruce Norris  And all of a sudden, okay, the loan business thrived and did it completely different.

Craig Hill  Right.

Bruce Norris  And also did construction loans. So, we had a chance to build 93 homes, which The Norris Group funded. So, that was pretty cool. A lot of times, you know, this has always happened to us, as we’ve grown is that you’ve had to have conversations for the first time with people with money on particular type.

Craig Hill  Exactly.

Bruce Norris  So, like, okay, he bought it for, you know, 43 we’re loaning him 60 that’s, this is why it’s okay.

Craig Hill  Right.

Bruce Norris  Okay, he bought this building lot, we’re going to do a construction loan for the first time.

Craig Hill  Right.

Bruce Norris  Those discussions are almost impossible to happen unless the basis of trust is as solid as a rock.

Craig Hill  Yeah, they’re really impossible because you can’t talk to somebody for the first time as an investor, money investor, and present them with something that they just can’t wrap their brain around.

Bruce Norris  Yeah. Or it’s just they’re, they’re, it’s a repetitive nature. In other words…

Craig Hill  Right.

Bruce Norris  And I know that even if it’s, if it’s a price difference, or if it’s an area that’s different, there’s always that moment of, okay, you know, why are you doing that product? Or why are we doing this location?

Craig Hill  Right. And a great example of that is you remember when we went from my previous position to when it was now The Norris Group, everything I presented to the investor was exactly the same, exactly the same. But they looked at it like it was from outer space, just because something was different.

Bruce Norris  …different. And that was it. Wow.

Craig Hill  Yes. So, it is interesting that the thought process behind the money side, you just have to have a certain way of looking at it from their point of view.

Bruce Norris  Yeah.

Craig Hill  And try to see what their their questions are going to be before they ask them.

Bruce Norris  That’s one of the things that it’s been very interesting, because as you know, we had somebody come in with a check one time, I had lunch with that he was going to fund alone.

Craig Hill  Right.

Bruce Norris  And he actually went home with the check.

Craig Hill  Right.

Bruce Norris  Now, that would be an interesting recording as a how did I do such a bad job? And what I did is I asked for a second one.

Craig Hill  Right.

Bruce Norris  We had remember I was buying fourplexes up a storm.

Craig Hill  Right.

Bruce Norris  And so, he was going to fund a fourplex that was worth 140 grand, I bought it for 60 grand or something. And that was the basically the trust deed, but then I probably said, Well, I have a, I have another one and another one another one.

Craig Hill  Right.

Bruce Norris  And I think,I think it scared him. So, it’s not easy raising money for trustees.

Craig Hill  No, I mean, obviously I have a longer build up to be able to do it. But one of my strategies with people that I’ve dealt with is especially initially, you just kind of talked to him about it, here’s what I’m doing. And usually you can wait for them to ask you, is this something I can do?

Bruce Norris  Okay.

Craig Hill  If you’re talking to the right people. In other words, it’s just got to be something that is a natural conversation, and it’s just built right into it. Once again, we’re doing a little history here. But you may remember, in the early days, we were much busier than we thought we were going to be at The Norris Group.

Bruce Norris  Right.

Craig Hill  And we had a couple of those Reno Valley loans. And I felt like I had one more call, from my list of people that I knew with with funds.

Bruce Norris  Yeah.

Craig Hill  And I had to make that call. without showing any urgency that you know, this, this call has to go really well. Unfortunately, it did.

Bruce Norris  Yeah.

Craig Hill  The gentleman turned out to be one of our better investors for a long period of time.

Bruce Norris  That’s right. You know, if somebody was here in the office, and I have been here now for same time, length of view, basically, and listen to you, your conversation, the initial conversation with a borrower, right. So, if somebody thought, Okay, well, that what’s the conversation? What’s the initial conversation with a borrower? If they think it’s a sales pitch? They haven’t sat next to your office?

Craig Hill  Right.

Bruce Norris 

It’s it’s kind of exactly the opposite. It’s an, it’s an interrogation almost.

Craig Hill  Well, it is. Because when you when, you talk to a client like that a borrower, you’re really doing it for two reasons. One, you’re doing it for the investor that’s going to put in the money, of course.

Bruce Norris  Absolutely.

Craig Hill  But also, you’re kind of doing it for that person.

Bruce Norris  Absolutely.

Craig Hill  Especially when you get somebody that’s relatively new or something, you try to ask all these questions, because you just can sometimes see that they’re not looking at the whole picture. And you want to make sure that they’re looking at the whole picture, even before they agree to do it.

Bruce Norris  Yeah, and a lot of times, there’s you know, that’s what’s nice if you have a hard money loan business that’s got levels of protection, if you will, so you’re not going to physically go out see the property, but you’re looking at the situation, first of all, you can see, well, where is it? Okay, well, shoot, it’s in the middle of nowhere, or it’s next, commercial buildings and apartments and across from a school. You know, you can see that now on zoom.

Craig Hill  Yes.

Bruce Norris  There’s a protection there where you go, Okay, well, maybe you really should not do that, or the margin is so tight, that, you know, after you pay this and this and this, you’re just going to practice.

Craig Hill  Yeah, exactly. Because usually people when they first are starting to do deals, they’re really not adding the numbers up, right. They’re kind of looking at gross numbers. Highest, you know, whenever it benefits and to be highest, their highest. whenever it’s a cost or a negative, they always go lowest example. So, and a lot of times, I would say almost every time they have a false sense of how much there is in the property.

Bruce Norris  And a lot of times what investors try to do is reach an appraisal number rather than let the number just emerge. And that’s another, another barrier that’s really important to have is to have really experienced appraising done like Rick Solis, for years, you know, he had flipped many homes.

Craig Hill  Right.

Bruce Norris  And when he went out and looked at a property it was through the lens of I wouldn’t buy this myself, if it was not gonna, you know, it wasn’t an exact deal.

Craig Hill  Exactly. Because so many people I had one recently where it was, um, everybody’s trying to say, push is the right word, maybe here, but because we know houses are selling for more…

Bruce Norris  Yeah.

Craig Hill  …than you can get an appraisal for in a lot of cases.

Bruce Norris  Correct.

Craig Hill  But sometimes you’re taking the highest numbers, and then, like not realizing that there might be views attached with that. Yours doesn’t have a view. You just got to make sure you’re comparing it to comparable properties. And it’s really easy once we send it, you know, to Shawn, now, Shawn Solis is Rick’s brother, he’s doing a lot of our appraisals, as is Holly. So, they’ve kept up the tradition. And they’re both fantastic and able to spot a lot of things that people might miss when they’re trying to say force a deal in a market like this.

Bruce Norris  Yeah. And that’s so important as an investor because you’re you’re just going to mess up some you’re going to have to say that if you looked at it, or if you’re the only person that looked ever looked at all the scenarios, you’d be right and some checks, probably covering your mistakes.

Craig Hill  Right.

Bruce Norris  So, it’s nice to have a few people looking out for you going yeah, that’s I, when Rick has said this, which is not in common, but he was he would say that is not a trust deed I would invest in.

Craig Hill  Right.

Bruce Norris  You know. That’s the end of the deal.

Craig Hill  Yeah, exactly. And even one, once again this week that the appraiser was looking at it. And they made the comment. Yeah, this house is built in the 70s. You definitely want one built in the 70s. Because anything under the 70s is not nearly as desirable.

Bruce Norris  Okay.

Craig Hill  And somebody might see 62 and 74. And that well, you know, that’s close enough, right. But the appraiser knew that that wasn’t the case.

Bruce Norris  And then that’s a special thing that every area is different.

Craig Hill  Right.

Bruce Norris  We, when we did boot camps, we would have some appraisal examples, for instance.

Craig Hill  Right.

Bruce Norris  You go to Mira Loma, and you look at a 1985 built house, two car garage, and you go to a 1960 built house with a quarter acre of land and chicken coop, and it would sell for more.

Craig Hill  Right.

Bruce Norris 

You’re going What the heck, well, that was consistent. So, what was important in Mira Loma was dirt land.

Craig Hill  Right.

Bruce Norris  And that’s the appraisers job is to go, okay, it’s a clean slate every time. What’s important here could be very different.

Craig Hill  Exactly.

Bruce Norris  And so, that’s why an experienced, experienced team is important. And yeah, and that’s what’s interesting, too, you know, a lot of times it’s not easy investing successfully in trust deeds, by the way, because I know smart people that have earned the money and put it in trust deeds, and sometimes almost 100% failure rate, they had to foreclose.

Craig Hill  Right.

Bruce Norris  So, it’s not an easy thing. So, there’s, there’s definitely, well, of course, I mean, since you and I have known each other gosh, a lot of money is left institutional control, if you will, and they’ve gone directly to the borrower, people with money, directly. And yeah, that’s just that’s a barrier without it being there. That’s a dangerous to me.

Joey Romero  Bruce I have a question?

Bruce Norris  Yes.

Joey Romero  So, not really question, this will just comment to, to Craig’s experience, you know, I take some of these loan calls, sometimes, you know, because he’s on the phone, talking to people. So, you know, somebody who, you know, maybe just has a few questions, I’ll take it down the line, and I think I’ve got this wrapped up, you know, like, oh, man, I’m gonna hand this over. And this is gonna be a loan, this is gonna be a letter of credit. And then I head over to Craig. And I’m like, hey, so and so called, and then bang, bang, bang, like four questions later, I’m like, why don’t you give him a call? Because he just, he just hits me with things I never would have thought of, you know, whether it’s like, you know, whether it’s from where the location of the places is, two stories, is it you know, all this, that he’s just, you know, for all those years of experience, he just, it’s natural, you know? And so it was just like, Yeah, I got a long way to go.

Bruce Norris  And when someone asks…

Craig Hill  Can I actually, I have a good comment?

Bruce Norris  Okay.

Craig Hill  I do, I think this fits perfectly.

Bruce Norris  Okay.

Craig Hill  I think what can happen is, when you’re dealing with the first time borrower, whether. Whatever the case, you’re a first time, even if it’s not first time that you’re dealing with the deal that comes in, sometimes you can get caught up in like, okay, here’s the pre determined outcome. And maybe you go through a series what you think or checklist, and sometimes you get caught up in checking things off instead of listening. So, with me, I kind of start off, and then based on the answers, it moves me to the next set of checklist.

Bruce Norris  Right.

Craig Hill  So, that’s why I might come up with a little thing different because I’m not looking for, say, ABC equals, okay, we can do this.

Bruce Norris  Right.

Craig Hill  I’m starting at a but then I might go over to 123. And you just really develop a sense that either they, the property might not be worthwhile, you might get a sense, and this comes up, I know, I hope most people would not want to buy this property. But sometimes it’ll come up and I just get a feeling that maybe the client that’s selling the property is older and might not be in full capacity.

Bruce Norris  Yeah.

Craig Hill  Well, obviously, that’s just the you tell the guy and hey, just, you know, obviously, we’re not going to do that.

Bruce Norris  Right.

Craig Hill  So different questions you asked, just bring up different concerns. And sometimes you don’t even know where they’re going to come from. Like you just ask a question thinking it’s going to be this answer. And it’s something completely different. It takes you down a different direction.

Joey Romero  Well, I’ve heard you say, is it a deal or is it a situation? Right?

Craig Hill  That’s, that’s step number one. If they leave a message, it’s a situation. Usually you start with what is the situation?

Bruce Norris  Yeah, and those are the ones that people who chase yield fund.

Craig Hill  Right.

Bruce Norris  And have a very busy life thereafter.

Craig Hill  Right.

Bruce Norris  I remember years ago, somebody asked me about, you know, what, how you made loans. Or if I was familiar with the loan business, something like that. I so, I’ve said I’ve sat next to Craig Hill for 25 years I could probably answer or ask almost every question that I’ve heard him ask the difference is he knows why he’s asking the question. And you know, there’s something about the hair on the neck going up.

Craig Hill  Right.

Bruce Norris  There’s an instinct that you have. That’s okay, because I remember you saying, Yeah, we you know, like, look at it all looks perfect. But there’s something that’s non at me and sure enough, remember that thing? We didn’t fund it. And there was a call, it was a flip to somebody else.

Craig Hill  Right.

Bruce Norris  And it was it was something dishonest had occurred prior to that, right. And had we funded that that person that borrowed the money would have been in big trouble, and we wouldn’t have been getting paid.

Craig Hill  Exactly.

Bruce Norris  And we couldn’t point to black and white. Why? at the time. Yeah. But there was just in your brain. It’s just like, something’s not adding up.

Craig Hill  Yeah, something’s not right.

Bruce Norris  Well, that’s when you know, those 10,000 conversations come into play, and it didn’t add up. And that’s, that’s invaluable. And if your intention is let’s just fund alone, you’re going to have a lot of those situations that you wish you hadn’t.

Craig Hill  Yeah, absolutely.

Bruce Norris  When I first borrowed money, you correct me if I’m wrong, but this is what I think I recall five points. 12 and a half percent interest.

Craig Hill  Yeah, that’s about right.

Bruce Norris  And I think I could have cared less, right, because what it did is allow me to fund another deal. I was buying below 50%.

Craig Hill  Right.

Bruce Norris  I thought I just had died and gone to heaven.

Craig Hill  Yeah, me too.

Bruce Norris  I really don’t like that. Because I thought, wow, I just have to perfect the skill of buying them. But now it was interesting. As you know, behind my desk, there was always 24 files.

Craig Hill  Right, exactly.

Bruce Norris  So there was 25 payments of, of hard money loans. So, you were you were making money on each property. But sometimes the closings were like not quite peaking phase of the payments. That’s just one of those things. In, in the 2008. And 2009. That was a big deal, because prices really crashed. And you came up with a great loan program.

Craig Hill  Right.

Bruce Norris  And that was, that made some of our clients, multimillionaires, for sure.

Craig Hill  Right. And how we started it was the rental program.

Bruce Norris  Right.

Craig Hill  And we first started it was, believe it or not, it was 9.9. And it was eight years.

Bruce Norris  Yeah.

Craig Hill  So. But at those prices, as you mentioned, it allowed people to cash flow.

Bruce Norris  That’s right.

Craig Hill  And they’re able to get in and you know, carry it carry the property. And now all the appreciation they’ve had over the…

Bruce Norris  Yeah…

Craig Hill  Geez, how long that’s been?

Bruce Norris  Well,

Craig Hill  12, 13 years.

Bruce Norris  Have passed that. So, that was a big deal. You know, because, once again, sometimes the loan business surprises you. So, what are you going to, what are you going to do when, you know, this situation comes up? And we’ve always adjusted, but that was really smart, because obviously that was a long term loan in place.

Craig Hill  Exactly. And that was a circumstances that benefited the borrowers greatly, because really, nobody really was doing that time.

Bruce Norris  No, no, that was a big hole in the market.

Craig Hill  Yeah. And one thing that we do, whenever we have a program, it is truly hard money, meaning it’s exactly the same process, same investors, there’s nothing different about it except for the program.

Bruce Norris  Correct.

Craig Hill  You know, and that was another circumstance where it was a little bit interesting on the money side. Okay, here’s what we got for you now, you know, sounds good. You’re used to one year loans. Well, this is going to go eight years.

Bruce Norris  Yes.

Craig Hill  And you know…

Bruce Norris  The yield was probably less than the hard money rate at the time.

Craig Hill  Right.

Bruce Norris  But, but the interesting thing was it was of it had duration, which means, you know, you didn’t get a payoff. And then three months later, you get the money reactivated that type of thing.

Craig Hill  Right. I’ve always used the term with investors, you can go, would you like more yield or more money? Because you keep money busy 12 months out of the year at 9%. That’s going to clobber 11% in and out.

Bruce Norris  Yeah, absolutely.

Craig Hill  No doubt.

Bruce Norris  Well, that was a big deal for our clients that got the hold and both both sides of it.

Craig Hill  Right.

Bruce Norris  What’s the, what’s the basic difference between the trust deed investor and the property flipper or the property guy that holds a rental? I mean, what’s far as why they land on the square they land?

Craig Hill  Yeah, one, probably a lot. One difference might be the property and the money investor, maybe has gotten there already, right? Like they’ve already done those things, whether sell a lot of rentals, sold a business. So, they’re more in a situation where where they’re just trying to retain wealth.

Bruce Norris  Right.

Craig Hill  Rather than gather it. And that’s why we’ve been a good fit over the years because we’ve always focused on Security first and yield, second, although both are very good. We really understand that our clientele on the money side, they definitely do not. They don’t want to take risk or they’d be doing something else.

Bruce Norris 

Right.  Yeah, it’s interesting, you know, hard money loans, sometimes the people get the impression that you’re kind of funding alone hoping for the person to default. I mean, there’s no way we ever make a loan thinking that way at all.

Craig Hill  Yeah.

Bruce Norris  And most of our borrower or excuse me, lenders certainly don’t think that way. They just want to check.

Craig Hill  Oh, yeah, exactly. Yeah. We’re just on the mild side of that. I mean, once again, it’s just we want borrowers that make payments, investors want to get payments,

Bruce Norris  What’s the biggest thing that you think has, when you when you get a, an application or you have a first conversation with somebody? What do you need to see that you say, Okay, I’m comfortable with?

Craig Hill  Yeah.

Bruce Norris  What’s going to go on?

Craig Hill  Yeah, you kind of get it just the general sense of somebody’s knowledge, I guess, would be first, you know, because that’s just from a conversation you do that you just kind of what kind of knowledge do they have? Are they really even familiar with what they’re trying to do? then probably from there, you really want to make sure they’re capable of doing it.

Bruce Norris  Yeah.  Right.

Craig Hill  So, that you kind of jump into that pretty quick, because I don’t think a lot of people, maybe they hear something on the they’ve heard something at times where you can get into a property with no money down. And you know, you really can’t, unless you have a friend that wants to do it with you. I mean, which, okay, maybe you can do it that way. But whenever you’re using a lender, you are going to have some money into the deal. You need to have some reserves, you need to be prepared for like, consequences that you weren’t expecting. So, I think that’s probably the number one thing is just the liquidity to handle a deal. You are looking at credit somewhat, not per se a score, but you want to see, is there anything that would prevent you from getting clean title, bankruptcies, judgments, you might want to look at somebody and on a rare occasion, you see somebody that, you know, this is just a general example. But they might have $100,000 of available credit debt, credit cards, and they have 99 800 owed against.

Bruce Norris  Yeah.

Craig Hill  Well, they’re just one missed payment away from probably having a real problem all the way around.

Bruce Norris  Right. That’s and see they, they need to get a no answer for their own sake.

Craig Hill  Right.

Bruce Norris  This isn’t Yeah, this isn’t a good additional risk, if you will.

Craig Hill  Exactly.

Bruce Norris  Yeah.

Craig Hill  Exactly. One thing just to go back to the rental program.

Bruce Norris  Okay.

Craig Hill  Because we still have it now. And a lot of people know that maybe. But if they don’t, we don’t we only go three years now.

Bruce Norris  Right.

Craig Hill  But the rate is only 6.9.

Bruce Norris  Yes.

Craig Hill  So, that’s still been a popular program. And it’s probably been that way for probably close to five years now. It’s been that particular program. So yeah, we still get a lot of activity on that. And plenty of investors to fund it for sure.

Bruce Norris  Yeah. And wanting to borrow too. So, that’s been that’s interesting of 12.5 turned into 6.9. And we still call it hard money.

Craig Hill  Yeah. Exactly.

Bruce Norris  That’s pretty cool. The conversations that you’re having now, you’ve talked to all the people that call in what’s the, what’s the mood of the participant, if you will, because this is the crazy, one of the craziest markets we’ve ever seen, that’s legit, in my mind, you know, this isn’t 2005 where people were buying homes with nothing down?

Craig Hill  Exactly. I think it is. It’s a very positive environment with regards to how they feel, especially on the ability to say buy and flip.

Bruce Norris  Yeah.

Craig Hill  Because I think they know that if they get a house listed, they’re gonna sell it.

Bruce Norris  Yes.

Craig Hill  So that part of it is very strong. And as you know, because I asked you all the time, a lot of them will just start with what does Bruce think.

Bruce Norris  Yeah.

Craig Hill  You know, so we talked about that a lot. As you mentioned, the financing is much different now than it was. There’s just a lot of different dynamics than there were back then.

Bruce Norris  Sometimes in these markets, investors try to stretch because there’s competition every time they’re making an offer. So, do you find that they’re trying to reach a number? Maybe with a product that they, they don’t really have the same thing?

Craig Hill  Yeah. 100% I mean, that’s, I always try to tell them like you really, you should buy a deal. You shouldn’t have to wait for it to be a deal.

Bruce Norris  Yeah.

Craig Hill  Because that’s kind of sums that up. In other words, they are looking to turn something into something they’re not and a good point that just just popped in. Sometimes you’ll get a client that like has a deal. And this kind of goes back to the conversation. They think their house is worth 600. Okay? which frankly, it could be, then you ask them, well, how much are you going to do on repairs? And they say 20 grand. And that’s going to cover paint and maybe, you know, new cabinet faces. Well, it’s really hard to convince them that the reason that house sold for 600, not 540, is because of the work they did.

Bruce Norris  Right.

Craig Hill  So, that’s a very common thing that they think they can do. Like paint and carpet, as we say, and sell it for top dollar. So, that’s probably a mistake people make is they don’t put all the number, they add the accurate numbers into the deal.

Bruce Norris  Yeah, so that’s, that is one of the flaws sometimes investors they they’re trying to reach. So, they can get a deal. So, I’m doing a deal.

Craig Hill  Right.

Bruce Norris  And then they try to sell it. And it’s Oh, it’s not the same house that it was.

Craig Hill  Yeah, because the the deal works at 600 grand if they buy it for this.

Bruce Norris  Yeah.

Craig Hill  But only if they put this much in.

Bruce Norris  Yeah.

Craig Hill  Yeah. And that it’s unfortunate, but a lot of people do try to try to make things work that way.

Bruce Norris  Let’s talk about the other loan program. So, we’ve got, we’ve got the rental program at 6.9. And people are flipping.

Craig Hill  Yeah, oh, yeah, we still get a lot of flips. And basically, we have a couple different programs. One is based off the purchase price, which is actually pretty popular, because a lot of the lot of buyers do have cash or a lot of it. So, the purchase price flip is 8.9%. One point, and with the right deal that can be as little as 10% down on the purchase price. So, we know that’s competitive. And then we also have a program based on the ARV. And that’s 9.91 point. And once again, that can be as little as 10% into the overall deal.

Bruce Norris  Okay.

Craig Hill  And what we mean by the overall deal is if you add up the purchase price of you know, 250 and 50 grand in repairs, you know, that’s 300,000. So, you’re gonna have 30 grand, but maybe just 30 grand into the overall deal. Okay, so…

Bruce Norris  How do we handle repairs? What do they typically do? Let’s say it’s under under 100?

Craig Hill  Yeah, anything under 100. Most of the stuff is typically probably 20 to 60.

Bruce Norris  Right.

Craig Hill  And usually what we’ll do is we’ll divide it into maybe two or three draws. So, somebody will do, they’ll do the work, send pictures, based on the pictures will release a half or a third. And then they’ll finish the work. And then we’ll release the ballots. So they’re always somewhat ahead of us. But obviously, from the money side, you, you definitely want the property to be making progress.

Bruce Norris  Correct. And if it’s over 100, that’s a difference in situation.

Craig Hill  Yeah, whenever it’s under 100. There needs to be fun control involved

Bruce Norris  Over 100. Yeah.

Craig Hill  Yeah. So usually what the clients that I deal with a lot, and even new ones, usually there’s a way to structure where you can try to get the number under 100.

Bruce Norris  Okay.

Craig Hill  You know, because there’s very few properties that we’re going to do, where there’s a repair bill, much over 100, if even at 100.

Bruce Norris  Okay.

Joey Romero  Is, as we’ve seen in the stuff that we’re doing in Florida supply chain disruption has, you know, impacted the timeframe for, for new builds, has supply chain disruption impacted the effects and flipper that’s borrowing from us.?

Craig Hill  I don’t know that the supply chain has as much as like permits, and things are in some cities seem to have slowed some guys down. But that seems to be correcting itself. So, it definitely seemed like permits, because I had a couple larger projects that I mean, took well over a year.

Bruce Norris  Yeah.

Craig Hill  Yeah. And luckily, in these both these cases, I mean, one, probably because it was a very, one of the larger properties we’ve done, it probably went up close to a million dollars in what they’ll get. So, you know, I mean, that doesn’t always happen. No, but it was shocking. How long the delays were in, in some of the counties.

Bruce Norris  Are we doing, I know, we have clients that are doing ADUs don’t know if it’s come up. Are we are we doing loans with ADUs?

Craig Hill  Yeah, we’re doing some loans with ADUs the, the the roadblocks on some of them, like they want to be owner occupied.

Bruce Norris  Oh.

Craig Hill  You know, so that, that eliminates a lot of that market.

Bruce Norris  That makes sense.

Craig Hill  But the end the other Roadblock, at least for now, when you’re trying to do an after repaired value. If you don’t have ADU comps, right you’re usually just using like your Granny Granny unit, or something like that, yeah, so so you’re you’re not getting the full value, but we definitely have done a fair amount. A lot of them actually have been purchases, where they’re buying it with the intent to build it.

Bruce Norris  Okay.

Craig Hill  So, once again, it’s a little bit of a challenge, because a lot of times you don’t have the appraisal for that. But there’s quite a few clients that are doing that.

Bruce Norris  On a side note, I, I looked up, I don’t know how I ran across in it was in YouTube, where they’ve now built an ADU that gets delivered to your site. And it unfolds, and it’s pretty cool. So, you’re installed in eight hours. So, you have to have the foundation. So, there’s the plan, build the foundation is crane comes in, and this thing unfolds, and you got a 400 or 600. There’s different modules that can be attached to it. But it’s pretty cool. I think it comes furnished and everything.

Craig Hill  Wow, cool. Technology.

Bruce Norris  Yeah.  So, that’s it’s like a new day some some of the things going on. Well, Greg, thank you very much for bringing us up to date on the loan business.

Craig Hill  Sure.

Bruce Norris  All the history we have. Between us. That’s it’s been great.

Craig Hill  Been a great 25 years so far. That’s for sure.

Bruce Norris  Yeah. It’s hard to believe that’s the term we are using 25 years.

Craig Hill  Yeah.

Joey Romero  Can I ask one last question, Bruce?

Bruce Norris  Yeah, sure.

Joey Romero  I get a lot, a lot of calls from investors that are on the flip side that follow you that want to get into the lender side. Craig me talk about, you know, if that’s available, or you know, waiting list, is Florida an option? You know, things like that, please?

Craig Hill  Yeah, it is an option. It really, you know, is it a good option? There’s just so much money, just industry wide, if you will. So, there’s there’s not a lot of opportunity in California. There, there always is some possibility. So, I would encourage anybody to give me a call. We do have some different opportunities in Florida with some of the three party builds that we’re doing. So, that’s something that might work for some people wouldn’t work for everybody, but certainly, anybody that’s interested on the money side, just give me a call and we can see what you’re looking to do and if we do have a fit.

Bruce Norris  Okay. Our office number is (951) 780-5856. And you can talk to Craig. Gosh, 25 years. It’s flown by.

Craig Hill  It really is. It is amazing how fast it’s went.

Bruce Norris  It’s been a ball. Yeah, it really has been.

Craig Hill  Absolutely.

Joey Romero  Craig, the next time we’re gonna do a whole podcast just talking about baseball hockey.

Craig Hill  All right. Sign me up.

Bruce Norris  I’ll have to leave me off the hockey’s. All right, thank you.

Craig Hill  Thanks.

Narrator  For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com. For information on passive investing with trust deeds, visit tngtrustdeeds.com.

Aaron Norris  The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.

 

 

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