Do More Deals - Understand Alternative Real Estate Financing with Kody Wilde and Morgan Smith

Justin Stoddart  
Hey, welcome back to The Think Bigger Real Estate Show. I'm your host, Justin Stoddart, and I'm excited about today's episode because it's going to help you as a real estate agent. And even you, as a lender, put more deals together deals that you were missing opportunities missed that maybe you didn't even realize that you could capitalize on. Before we get into that, let me just remind you that the purpose of this show is to help you to think bigger. My mission personally, is to help you like wake up and realize the potential that's inside of you, and then to live a life in pursuit of that potential. So I have with me today, two good friends of mine, people who are experts really in the lending space, and the alternative lending space. Again, we're going to talk more about what that is. But let me first thank and introduce Kody Wilde and Morgan Smith with direct portfolio lending.

Kody Wilde  
Thanks, Justin. 

Morgan Smith  
 Pleasure to be here.

Justin Stoddart  
Yeah, thanks for being here. Thanks for coming on the show. You know, it's interesting. We were having a conversation prior to the show here, that in the early 2000s, obviously banks had more options, right. They had more lending options than they do today. Some of that's beneficial However, we've realized that there are, there's also a challenge with that right in that in that as credit tightened as options went off the table, there were good people that were in unique situations that needed lending, that all of a sudden the traditional banking institutions cannot help. Is that true?

Morgan Smtih  
Absolutely true. So, you know, Justin, prior to the crash, a majority of the real estate lending for home builders, private contractors, small time inv estors was handled by, you know, the local thrips your community savings banks, institutions like that, where's the big boys, you know, pretty much dealt with large banks and Wall Street. When the financial collapse happened, those banks basically got out of that business and have never really emerged. And so that's really what's opened up the space of of alternative lending. Some people would call like the shadow banking industry, but its investors trying to fill that demand that was basically lost.

Justin Stoddart  
Those who know my story well know that I was a home builder. Right. So I obviously had experienced the downturn of 2007,8,9. Yeah, wasn't a very fun time. Those of us that were in the industry, you know, had some hair on our chest at that point. And, you know, I was actually listening to Gary Keller recently speak about how there was a, because of that period, there were over a million homes that weren't built. And we were having that conversation about how there's just this, this shortage of inventory that will never really catch up to least in the foreseeable future, in part because that those lending options to smaller builders went away. Right?

Morgan Smtih  
 Absolutely. Right. You're absolutely right. So again, large publicly traded home builders have bonded debt and the largest institutional financing. Everybody else has basically been relegated to private or, you know, portfolio type of financing which is just which is what we do.

Justin Stoddart  
Let's talk a little bit about one of the maybe options or maybe some of the opportunities missed. Right, the real estate agents have in front of them, they say, you can't get financing and they walk away from it. Yeah. What would you say? Maybe nice and loud, you're you're kind of a quiet spoken guy, although got amazing things to say. So we're gonna tell us like, what are some those opportunities you see agents missing, that they don't necessarily need to be passing on?

Morgan Smtih  
Good question, Justin. You know, I would kind of frame it like this, the way we the way we do the lending opportunities, that direct portfolio is really an that of a partnership. So I'll give you a quick example if you went out and found a piece of real estate In Lake Oswego. Let's say you had a you got a really good deal on it. You called me up. You said hey, Morgan, I want to buy this piece of real estate I want to buy it for 300 grand, put 50 grand into I think we can sell for 500 grand. That sounds great. Just that's that's that's fantastic. And so you want me to put up all the money and you're going to do the work. It's your deal this, okay, so it will be reasonable for me to say I'll take half the profits, that would seem like a reasonable transaction. Today, what we do in the lending space is we partner with investors, home builders, folks that are looking to acquire those types of property. And we just do it a little differently. We do it in a what we call it portfolio loan. So instead of paying the 50% of your profits, you're going to pay a percentage of your loan.

Justin Stoddart  
Okay? More like a traditional financing option, right?

Morgan Smtih  
More like a traditional financing option. So the rates and fees will be higher than your bank transaction, but they're not going to be that of like equity. So it's really kind of a middle ground, where you can find the financing that you need. You know, on the thing, big concept, I always I always kind of want to put this this point out, there are more deals out there then there are more capital available than there are deals. So if you have the ability to bring a deal to the table, relative to an investor, if it's truly a good deal, there will be capital to fund it . And that's, I think that's part of your think big concept .

Justin Stoddart  
Yeah. Yeah, the people. That's really interesting, because sometimes people think like, there's, like, if I had the money, I could do the deals. That's right. Right. And what you're saying is that you don't have to say that anymore. There's always the money, especially now, right? Bringing direct portfolio lending, bringing great partners like this that will help you see opportunities that that maybe you couldn't see before, right? 

Morgan Smtih  
It's absolutely right. So we manage about 25 million bucks of private capital, Justin. And we are always looking for transactions to finance always looking for deals. And so I just, I harp on that point, because most young investors don't understand it. If you can get out there, you could beat the streets. If you can find a transaction. If you can find a rate of return that's going to work. There will be capital that will come in and partner with you to just that transaction. And I think that's really powerful to see for you. Younger investors. Yeah, and different folks. Yeah. The other concept that I would bring out, kind of pertinent to your question is there is always a little Under willing to make a transaction that the risk component is fine. So, lower loan to value bigger down payment. There are situations where maybe you have a borrower roller has a borrower's got some, possibly some, you know, difficult credit, or had some trouble in the past, with the right down payment, we can make a deal like that happen. So, you know, ultimately we're in the business of doing deals that make sense for our investors. Does that make sense for our realtors and our owners,

Justin Stoddart  
and really the only the biggest opportunity cost is sitting on the sidelines, right? 

Morgan Smtih  
That's right, 

Justin Stoddart  
like you might give up a little more of the margin in order to make it happen. But the opportunity cost is there's zero margin because you're sitting on the sidelines thinking that there is no option. 

Morgan Smtih  
That's right. And you know, maybe the first deal you're not going to get as great of terms as you would get on a second and the th...