How to Lend Money Privately w/ Yoav Gilad

Ever wondered how a single investment gone wrong could pivot into a lucrative business, lending over $20 million? We sat down with the maestro himself, Yoav Gilad, who made this possible, along with his uncensored insights into the world of private lending and real estate. This episode encapsulates Yoav's journey from his 9-to-5 job to his successful transition into the private lending industry, including the lessons learnt from his initial setbacks.

Yoav takes us back to his first loan experience, which unfortunately ended in a loss, but as he rightly mentions, “Failures are the pillars of success.” He shares how this experience helped him make wiser choices and eventually led him to establish a thriving lending business. You'll gain first-hand knowledge of the underwriting process and how he and his wife advanced from a $10,000 loan to a staggering $130,000 loan. 

Finally, Yoav brings clarity to the often complicated underwriting process by sharing his practical tips for both lenders and borrowers. He underscores the importance of credit scores, background checks, project scopes, and having a robust exit strategy. Additionally, Yoav explains how he achieved financial freedom and provides actionable steps, drawing from his personal experiences in risk management. This is one conversation you don't want to miss if you're seeking to navigate the exciting yet challenging world of private lending. Tune in to absorb Yoav’s golden nuggets of wisdom.

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Transcript

Speaker 1: 0:00

These are currently our best practice. This is what I would advise. We do a credit and background check. We want to know what they've been through. If they defrauded, we like to know what the exit strategy is. The more exit strategies, the better. The borrower owns the asset 100%, I think. If you're the one in control, you're the one that make the decisions. You are the owner. I do not own the asset until I have to foreclose that app and for what it's worth, we've only had 2% of our deals go bad.

Speaker 2: 0:31

Welcome to the Financial Freedom Fast Podcast, the show that teaches you how to buy back your time and live life on your terms. Learn how to confidently leave your 9 to 5 from guests who've done it themselves. Whether you want to lay on a beach, travel the world or focus on your passions, this show will give you the tools to do what you want when you want. Now here's your host, matt Emmaville.

Speaker 3: 1:03

What is up? Financial freedom fast bam. Today we've got on Yoav Gillad and we are digging in today. For those of you that are interested in lending money, if you have money, we dig into how Yoav underwrites the people and the properties that he lends on, as well as on the flip side as the borrower. What questions can we ask to underwrite our lenders, our private lenders that we're working with? Yoav has lended over $20 million in the private lending space, so he is definitely an authority on this, so excited for you guys to get in there and hear all this information.

Speaker 3: 1:53

If you know anyone who is doing some type of lending like this and maybe they've gotten hit on the back end before and they're wondering what they can do in the future so that they can continue to lend money and not get eaten up or not get the bad end of the stick, then what I would do is take this podcast, press that share button and shoot them this podcast. What I'm also going to ask of you is to message me if you are curious about learning about things like this. Yoav and I are scheduling to get a masterclass set up on this so you know exactly what questions to ask to lenders when you're dealing with lenders and if you're trying to lend, you know what questions to ask your borrowers and what to look into and dive into on each property. But we do go through some of that in this podcast, so excited for you to hear it. So, without further ado, let's jump into the pod, yoav Gillad.

Speaker 3: 2:56

Welcome to the Financial Freedom Fest podcast. My man, what is going on? Brother? Doing well, how are you Killing it, man, killing it. I'm at my dad's house hanging out here for the weekend, brought my podcast equipment with me and ready to rock this conversation. I've been looking for someone just like you to have this conversation with for about a month now.

Speaker 3: 3:24

Put out a post the other day and the overwhelming response from all of our entire network that said Yoav would be a good guy to talk to on this. Yoav would be a good guy to talk to on this. I must have gotten like five to 10 different responses that pointed to you, so that was a sign for us to talk. I'm excited to dive into your story today. For the listeners that don't know who you are, yoav is a private lender I believe started in the flipping space. I know we're going to dig into the beginning of your story today, some mistakes that you have made and what has led you down the path to being able to lend over $20 million of your own money out there to get deals done and I know you're doing this as a team with your wife, I believe, so really excited to dive in today. Ladies and gentlemen, we have Yoav, gilad and Yoav. Why don't we start off by just digging in a bit to your financial journey, your money journey, and what led you to this point? Where does it all start off?

Speaker 1: 4:35

Awesome. Thank you so much, matt, first of all, and also thank you to all the guys in our network, people in our network that thought that I would be a great guest. Yeah, so I remember not to bring it too far back when I was growing up I saw Forbes magazine, coincidentally, and it was the 500 richest Americans and two thirds of the list was real estate but said what business they were in, and so I always remembered that I was like, ok, so we started growing up and went to college and actually bought my first house in college and saved money. Money was also really cheap. This was around 2000, 2001. I got a house, an apartment, with no dock loans and rented a second bedroom to a classmate of mine, started a house hacking before that was a thing Then, because money was still really cheap and easy and no dock loans were everywhere bought a three bedroom house that I moved into and then rented two bedrooms, and so it started growing.

Speaker 1: 5:32

That way, I actually borrowed more than I needed for that second house and bought a house I was living in California, in Venice Beach, that I lived in for a little while but then started renting out, and that's where I started my trail of mistake learning via errors. I listed it for rent when I moved out and a few people showed up, filled out the application whenever, and I was going to self-manage. And then this guy shows up and looked around. He likes it. He's what do I have to do to rent it? And I was like fill out the application. He's OK, fills it out half-assed. But then he's like how much is the rent?

Speaker 1: 6:07

I was like 2,500 a month, again Venice Beach, and he just pulls out a lot of cash and counted out, hands it to me. He's like how much is the deposit? I was like 2,500, counted out, hands it to me, I'll take it. I was like it's your, no red flags. I was like this is awesome, I'm getting cash. It turned out I later discovered that he turned it into a whorehouse and so my first rental was a whorehouse. He lived there with a prostitute, got a few calls from the police because it was a rental and I was living about an hour away, so every time I had to drive in. And then finally, one of the other headings in the complex sent me a post they found on Craigslist that had the address, had all the info and, sure enough, yeah, it was a whorehouse, so I had to kick them out delicately. Learn the lesson and what?

Speaker 3: 7:02

so your big takeaway from that? What was the big takeaway? There is that don't accept cash and look into your tenants a bit more deeply, do a little bit more underwriting. What was it?

Speaker 1: 7:14

All of that? Yes, 100%. I think the biggest takeaway was actually that I don't want to manage properties because I was living about an hour away and every time something happened, I had to drive my butt over there and deal with it, no matter what I was doing. I realized that outsourcing, getting a property manager, was a lot smarter than me using my time to deal with issues, whether it's a broken hinge or a job being thrown through on screen door.

Speaker 3: 7:43

It's good. So the PM can help you do this who, not how method and it taught you an important lesson of outsourcing, which I am right now in the beginning stages of my business. This is something that I am learning is so important and can free up my own time so I can focus on the tasks that are much higher value for me to be doing, rather than dealing with tenants, editing my podcast, doing all these little menial things that you could pay somebody overseas to do. You could pay somebody a lower wage over here to do and then spend your time on these high value tasks. So, after this or house issue, what was the progression like after that? For after you learn that big lesson?

Speaker 1: 8:34

So I stayed in real estate possibly I was still going to school at the time, getting a second degree and it was just like by a property here it was mostly just passing one or two at a time and nothing's huge, I think. After the big collapse moon, 2008, 2009, 2010 I only had two properties until about 2015 and in between I was working. I also met my wife. We got married and she actually wanted to go into real estate full time. She was a project, a product designer for the NFL. She used to design and manage their websites Super Bowl dot com, pro Bowl dot com, etc.

Speaker 1: 9:18

But after five years she was over it, wanted to try something new, and we had this place in Bedley still where we were living at the time and she was like I want to rehab it and flip it because we were buying another house. So I was cool, do it? Awesome. And then she started looking into tax sales also and coincidentally, we wound up buying a couple of properties in Michigan and then we flipped them without ever holding the keys or seeing them or any of that, and that took a huge leap of faith. But at the same time, it spoke to my strengths and her strengths and we made it work. It was. It was pretty awesome and that title went long just flipping. I was still working full time at that point, so she was running all the day to day stuff which she filled does, yeah, and so that's how we transitioned from me just doing stuff passively to us being more full time, active, invest active investors.

Speaker 3: 10:14

And now I'm assuming that this big lesson of outsourcing really affected your way and your strategy when flipping, because you mentioned there, you flipped without ever holding the keys or even seeing these properties. Now, even your first flip the one that I know you said you were living in it and you decided to flip that one. But you just what? Built a team around this, a team of real estate agents, contractors in the area, and then basically said, yep, that's a pretty killer deal. There's margin to be had there. If the rehab comes in at this cost, I'm just going to buy this, I'm going to send out the team. They're going to get it done. We trust them and let's do it. Was it? That lesson served you pretty well there? Can you tell me a little bit about that experience doing these flips without being in person and seeing these properties?

Speaker 1: 11:16

Yeah, we had an awesome project manager on site and so we were living in LA and all of these flips were going on in Michigan, with the exception of the one that we did ourselves. We found a great project manager who was also an agent property manager and we would basically underwrite, go to the tax sale. If it stayed below our maximum, we would buy it and try to figure out the logistics as we went along. But we found this great guy and he was able to manage all of our flips, eat them at budget and make sure that they came in Okay and got finished quickly. And we still work with him today, although we're not really doing flips anymore. So, yeah, he would basically get the team together, get the contractors going, pay the contractors. We would pay him and go from there.

Speaker 3: 12:06

Amazing, so I assume that this was a good way for you to start building up some heavy capital To get into the lending space that you are now in. Is that where it transitioned from? There you started doing flips, saving up capital, and then you had the money to do it, so you started lending.

Speaker 1: 12:26

Yeah, it's funny, lending was never a goal. I don't know if I imagined that we would just be flipping forever or buying rentals and bombassing while sat wearing. Yeah, lending was never a goal. It happened really accidentally. And again, mistakes were made early on.

Speaker 1: 12:43

People locally, we wound up moving to Michigan because I got a job here and people knew that we were flippers, that we were cash buyers, and one day, out of the blue, someone approached us saying hey, you got cash right. Yeah, will you lend me some money to do Airbnb arbitrage? And we're like what does that look like? Is it even legal? Is Airbnb arbitrage legal? Is lending money legal? What does that all mean? So we talked about it and we went to talk to a couple of lawyers and they assured us that here in Michigan, doing it this way, whatever that is, is legal. And so we went back to the potential clients and said what will you pay us for this arbitrage? 33% a year. And we're like, whoa, that is awesome. And then we discovered that that's actually illegal. It's your growth. And so we did write our first loan, but we had to keep it to 25% to not break the law. And those are the numbers for Michigan. I know a few other states, but everybody listening, please don't assume that applies to your state.

Speaker 1: 13:46

So we wrote this loan and it was relatively small. It was $10,000. We felt that it was an okay amount to take a flyer on. If we lose it it'll suck. But and sure enough, we lost it. We did not realize that there should be some collateral and so we lent $10,000. In about a year and a half later the payments stopped and you know we took a court, they declared bankruptcy and that was the end of it. So lost the $10,000. But, as you pointed out earlier, we now lent over 20 million with much, much better success rates. So while it was an early bad experience, we recovered and kept going and good business.

Speaker 3: 14:28

Yeah, and I'm sure that taught you some powerful lessons on underwriting your borrowers and who you're looking to borrow to, and we will definitely dive into that. That's one of the goals of today's podcast is to really dive deep on digging into the properties that you're lending, on the people you're lending to. I'm curious how much cash did you have when you started doing this lending? So, the 10 grand that you lent out, did you have 100 in the bank? Was it 200, 500?

Speaker 1: 15:01

I think we were probably somewhere around 300. And but that was money that we were using to buy properties and to do the work, the rehab, and flip them. It was taking a little piece of it, but again there was enough where if we lost it it wasn't going to kill us or slow us down.

Speaker 3: 15:16

Yeah, it is a hit right, it's 10 grand. Nobody wants to lose 10 grand, but it's not a huge portion of the total cash that you had sitting. It's still a lot of money, but these little diversified risks that we can take. If you didn't take that risk and didn't jump into it, you might have never gotten into this business. That is a thriving business today. So it is all about creating an opportunity for yourself to be able to put yourself in a position to lend out money and do that, or try some different type of opportunity Find an Airbnb arbitrage and talk to somebody and try and get the money to do it but actually pay them back. So let's talk about this. You did not get scared away from lending once you lost that $10,000. What did it look like after that? What was your next loan? How did that go and what did you do differently?

Speaker 1: 16:17

Oh man, I think we messed up the fun. We both knew what it was, although it wasn't quite as bad, but mistakes were made. Again, it was early on. The next loan, I think, was about 130,000. So we wrote this one loan and people in the community kind of heard about it, the way people do. And we had a couple other people approach us for loans and these were more to our wheelhouse at the time. They were pure fixed from flips and, yeah, we could underwrite them relatively easily. We had done enough that we knew what the business was and so went ahead, lent 130,000 on a flip.

Speaker 1: 16:54

However, we were going to change the industry and we wanted to make it easier for borrowers to do their flip, and so we decided that, instead of holding back the rehab funds, like we do today and 95% of flippers do, we would just issue all the rehab funds at close. And so not only did you get a house, you were walking away with a check for $20,000, $30,000 to get going. They basically demoed the interior, did a little bit of work and then walked away. So we wound up on our second loan having to foreclose, which was no fun, and here in Michigan it takes about 10 months to go all the way through it and I think we got back all of our capital when we sold it. But we had to wait 10 months to get it back. We had to earn earning interest. Yes, it was rough, but again learned from it and kept going. By the time that foreclosure was done we had already written three or four other loans. That actually went really well, and so it worked out and we got our capital back. And where did?

Speaker 3: 17:59

you get the confidence to write $130,000 loan? Did you have a lot more in the bank at that point? Were you borrowing money and kind of building up a fund? You went from $10,000 to $130,000 loan. So where does that come into play here? How much capital did you have?

Speaker 1: 18:20

So I think around that time we still had about $300, $350, maybe $400 steadily growing, and it wasn't that far after the first one that we did the second one. I loved RISC probably a little too much, and my wife is a great partner because she ate RISC and we definitely discussed it and argued about it, but we just decided do it see what happens, keep going. It seemed like a great side hustle at the time to flipping because, compared to flipping, it's a lot more passive. But you have to underwrite it like you would have flipped. You have to write a really big check like you would have flipped, but then you just wait for the interest to show up. You also have a little less control, obviously, because you rely on your clients to make sure it's working out. But it's actually a lot like flipping the way we're doing it, I think. So yeah, I don't know. I saw it as another way to grow the stack.

Speaker 3: 19:22

Grow the stack and get yourself into some assets and some strategies that you understand pretty well because you've already been flipping houses. So if you can just be the one on the back end, that you still have an opportunity to own the asset. If anything goes wrong, as long as you underwrite the asset, you're pretty safe. They're putting down a down payment, so they have some skin in the game. But so for our listeners, we have a situation where you were trying to change up the game here. I assume from how you said it, you're not doing this any longer, but you were giving the rehab funds right off the bat. And for our listeners, why is that? A little bit dangerous? Because if I go to Yoav and I say Yoav, and he doesn't know me or fully yet as an operator and how I do my business and I'm just someone who could squeal out right and I am putting down a $20,000 down payment on a $100,000 house, but he's giving me $40,000 to rehab this place.

Speaker 3: 20:26

I basically just got paid. I'm not really in this property at all. I'm not really heavily pulled towards all my monies in this. No, I actually just got a check to do this property. So if everything goes wrong, they can foreclose, they could take my property and Yoav is left out there trying to recoup all of his money. So a little bit of a dangerous method there, and risky, and try to change up the game. I applaud you. I'm assuming you don't do that strategy anymore. Do you still use that with some investors?

Speaker 1: 21:00

No, we don't. We do in some cases. But it has nothing to do with the investor. It has nothing to do with the client. It has more to do with the way the loan is structured. So we will give rehab funds upfront if we can cross collateralize another property. So you're buying one but you've got this other one just sitting there, free and clear. So we'll put a mortgage on both, the one you're buying and the other one that you own, to ensure that you're probably not going to take that excess and just run away.

Speaker 3: 21:33

And I love that. So those are some good lessons that you've learned there. And obviously, when you're giving out this money, you have to be able to underwrite the person that's doing the deal, their experience, aka track record, and you want to be able to underwrite the deal. So, for our listeners, there could be some out there that have some capital available to lend out. Or there could be some that are saying I'm working on building up this flipping business right now. Whatever I'm doing on my side, that could build me a pretty big capital stack and I'd like to have this in the tool belt or the future if I want to use it.

Speaker 3: 22:11

So let's dive into some of this tactical stuff here. If we wanted to be a lender, right, if we wanted to be a lender, what are some of the tips and strategies that we have? We'll start first on underwriting the individual and then we're going to dive into underwriting the asset, the actual property. But how do we dig in on the individual and gain some confidence in them and clarity into what they're doing as an investor?

Speaker 1: 22:43

So we basically do two things. These are currently what I would advise anybody else who's interested. Number one we do a credit and background check. We want to know what they've been through. If they defrauded Bank of America for $50 trillion, we'd like to know that. If they shot someone in the face, probably don't want to work with them, because I don't want to get shot in the face. But also credit score do they pay their bills? And so we do have minimums established depending on our type of loan. And then the other thing is their experience level. Is this their first flip? Is this their hundreds, Whatever, and that kind of informs how much we're willing to give, how much we're willing to lend.

Speaker 3: 23:26

So do you have a set metric or experience level based? If somebody has a credit score of 700 and they have done 10 deals and then somebody has a credit score of 800 and they've done two deals, do you have set basis that say they would qualify for this amount in this loan and you stick fully to that, or is it on a case by case basis that you are doing this?

Speaker 1: 23:59

It's pretty rigid. The experience matters more to how much sorry. The credit matters much more to how much we'll lend. But the experience matters more I guess almost also for how much we'll lend. Yeah, if you've got a Greek track record and Greek credit score, we will go above 85% for it, which is our default. But you've got a terrible credit score and this is your first loan, maybe 60, 65. So it just depends on where you are, but both of those things matter equally.

Speaker 3: 24:35

I think Now someone like me, who I quit my job in October of last year, I don't have the W-2 coming in anymore and my taxes basically show that I don't make any money. How can someone like myself get solid loan terms if I do have a good credit and I do have the experience? I know these are the two main things that you're looking at, but are you also looking at a debt to income ratio? Are you looking at how much the portfolio is making? Since I don't have that W-2 experience for someone that's just an entrepreneur and doing this and maybe just got into the entrepreneurial space, how are you underwriting those individuals?

Speaker 1: 25:21

Yeah, we actually don't care about your W-2 or your tax returns or any of that stuff. I know a doctor who makes about three quarters of a million dollars a year and is in debt. So I think the fact that you have a job, whether it's lucrative or not, doesn't really determine how well you will spend your money. So, yeah, we don't even bother asking for those. The only financial statements that we do ask for are your two last bank statements, whether it's personal or business or whatever. Not because we want to know that you have tons of cash, but rather we want to know that you have reserves so that if the project takes a hit and you got to move some money around over a month or two, you can still hold the project. It's not like you're immediately going to go into default and you're just done. Yeah, we want to know that you have some money in the bank to sustain the project, but we don't care about personal debt to income 1040s W-2s, as I mentioned.

Speaker 3: 26:17

So is that the typical definition of a no-dock loan? Then you were mentioning in the beginning what a no-dock loan is. You didn't say what it is, but you said you were getting them to buy your properties and I did want to dig in a little bit on what that is. Is what you just explained the definition of a no-dock loaner? Is there a little bit more to that?

Speaker 1: 26:40

No, I think. As I see it, that's pretty much it. The only real difference between 2002 or 2005, before the crash, and today is that you could get a no-dock loan from a big bank like B of A or Chase, whoever. Now it's only private lenders like myself who are willing to take the chance.

Speaker 3: 27:02

And interest rates. As far as if you have that guy who's got let's call it 10 plus properties he's got the experience, he's got 750 credit score when are you coming in? Do you have set interest rates that you're working on, or is that on a deal-by-deal basis as well?

Speaker 1: 27:19

It depends more on the type of loan as well as the individual, as I mentioned earlier. But it's not. Oh, this guy gets 10, this guy gets 14. It's pretty straightforward Good credit, good experience. You'll get the lowest rate Somewhere in the middle, somewhere in the middle.

Speaker 3: 27:36

Yeah, Amazing, amazing. So for everyone out there who is looking at potentially lending out in the future, we've got two main things that we want to look into. These are your Yoav's best practices and that's the look into the credit score and background check, right. And then we look into the experience level and maybe set some tiers on yourself for the type of client that you might be willing to work with from an experience level, what makes you feel safe and have a little less risk in the game and makes you feel good with possibly putting out that first loan. I love that. So we've got the underwriting of the individual, of the borrower. Now let's put it on the back end of the actual asset, the thing that you are secured by. What does your underwriting look like on that deal? Not even like just deal by deal, and I'm sure you have somebody in place right now to be doing this underwriting for you but what does that look like on your end?

Speaker 1: 28:41

It's a lot of things I'd say. I don't know if there's a most important. They're all important. Title work is obviously very important. We want to make sure that there aren't any other liens on the property when we're funding it. We want to make sure that there aren't any liens against the person as well, whatever they might be. What else, then? What the project is? We like to know what the exit strategy is. The more exit strategies the better, so that's something that we ask about. And then, yeah, it's as simple as running comps. Worth this right now. It's going to be worth this ARV in four months. Is that accurate? And so those are the main points. Title work, comps, yeah, and then the project soap and having an exit strategy.

Speaker 3: 29:30

So, as far as comps go, are you ordering, having official AMCs that you work with appraisal management companies for our listeners? Are you working with them and sending out an appraiser to do them? Are you just doing your own comping on your own internal system? How do you get that done?

Speaker 1: 29:49

We actually do both. We do require appraisals on our loans unless we've worked with you many times. And then we also pull comps ourselves, because appraisals do make mistakes, sometimes up, sometimes down. Yeah, so we actually do both in-house and appraisal.

Speaker 3: 30:04

I will tell you what appraisals do definitely make mistakes. I have had some really drastically different appraisals when I've gotten a project appraised. I had one appraisal come in, I think at $1 million on a six-unit that I own and we just ordered another appraisal because from our calculations on our NOI with the cap rates in the area it just seemed low for what we were getting. So we ordered another appraisal. They came in at $1.25 million, so 25% higher valuation when we go to do our REFI and that makes a huge difference. So 100% agree.

Speaker 3: 30:47

So I love that We've got something with the borrower we can dive into our credit and background and experience level and then on the back end with the actual asset obviously title work we want to make sure that we would be the whoever we're borrowing, lending to will be the owner of that asset and then we would have the rights to overtake that asset if we have to foreclose on them and then that we would own it fully. And we want to have that whole strategy with how the project is going, the project scope. What are the exit strategies? Is it a buy and hold property that we can refinance into a longer term hold and then just running comps and making sure that value is actually what they're saying it's going to be when it's all done. I love that we kind of have a full scope of what we need to look for.

Speaker 3: 31:40

Now I want to switch the page up so we have how the lender is looking at the borrower. Now I want to see if you have any specialized tips on what the borrower should be, how the borrower should be underwriting the lender. What are some questions that, as a borrower since you have the back end of it what are some of the questions that we can be asking to a lender to make sure that we're putting ourselves in a good position? What products are you offering out there? What is your LTV that you'll give me on this loan? What are some of the questions that we could be asking and should be asking?

Speaker 1: 32:21

So I think the very first question and this is a great question to ask because there is such a wide variety private lending is largely unregulated to some degrees, so it's a great question, Thank you. I think the main question is what are your fees? Because some lenders say, okay, for example, it's 10%, five points, and that there are some closing fees or document fees or whatever, and they'll be very kind of nebulous about it. They will see it's no closing fees, whatever. And then you get to the closing table and it gets five points, but also $10,000 in closing fees, or 20, like whatever. And so asking what your fees? One of the things that we pride ourselves on is our full transparency. So when somebody comes to us and they're in pitch, then we will give them a sheet that says exactly what they will pay in terms of fees and points and interest rate, depending on their credit and experience. But yeah, so the thing you most want, I think, as a borrower, is transparency. If somebody isn't willing to be very transparent and tell you exactly what it's going to cost you, I would walk away immediately. If somebody tells you that they can't lend on something, don't offer them more money, because there will come a point where they will accept it and then you'll probably get buried by the debt or you'll just do bad deals. Don't do deals just to do deals.

Speaker 1: 33:49

What else besides the fees? What is the process? What documents do you require? The fees should not change unless something is substantially changed with the loan the amounts, the numbers, whatever. But documents can sometimes change a little bit through the process. Usually, when they do change, it's because the lender needs a little more info about something, some clarity from the borrower. But yeah, I think those are the two biggest ones is what are the documents? What's the three biggest documents? Process and fees.

Speaker 3: 34:23

Yeah, 100%. And when we talk about fees as well, a bunch of one lender could have multiple different loan types that they will offer on. So you want to make sure that you have a broad understanding of what are the different loan types that you can put me in and then that can help you. Once you have an outline of those loan types, then you can see what is best for your project and then for each loan type, you could dig in and what are the fees going to be here, and they might have some fees that will be the same and congruent across the entire amount of loan types that they have, but each loan type could be a little different as to what they will have fee wise. And 100%. You need to dig in and find this out on the front side, because the worst thing is when you get the HUD statement and it's two days before close and now you see you need an extra seven grand, 10 grand that you were not expecting to have and it's only $100,000 project and so you just got an extra 7% in cost on your project. You want to make sure you know these fees from the beginning and, like you said, we have a lender that is going to be transparent with us and tell us what we are, what we're actually going to end up paying.

Speaker 3: 35:47

I love that. That is so good. So we've dug in today on how the lender can underwrite the borrower and the asset, and now we know how the borrower can underwrite the lender, because it works both ways, and we always want to make sure that we are working with the most honest, trustworthy and best party that we possibly can. So you have tell me a little bit about where you see your company going in the future. Your lending company are what are you looking to lend on? Where are you looking to lend? What are you looking to grow your lending business to?

Speaker 1: 36:25

So we currently have a bunch of project or sorry product. We can do fixed and flip loans, bridge loans, transactional 30 year loans for rental properties but what we really doing is fix and flip loans. We're primarily in Southeast Michigan, although we can lend in 44 states, and so what we'd really like to do is to grow nationally to go from about 50 loans a year to about 500, 5000. Lending to different fixed and flippers around the US.

Speaker 3: 36:55

That's the plan. So grow the fixed and flip business. And now, on your 30 year loans, are you going out and getting government debt to fund that and then you just you run the loan, or is that your own capital that you're putting in for a 30 year period?

Speaker 1: 37:15

But we underwrite and originate the loan, but then we sell it off to an industry partner.

Speaker 3: 37:21

Got it Understood, so I love it. So you're focusing in on the fix and flip business. So for anyone out there that's listening, if you've got some good experience with fixing and flipping and you're looking to possibly get another solid lender on your tool belt and your contact list, then feel free to reach out to me. I can put you in touch with Yoav and you could see if you might be able to do some deals together. I would love to see that and I see myself working with Yoav in the future. So I will, of course, keep everyone updated on the podcast. If and when we do the deals, I'll tell you about the process, what the deal looks like and what we are doing there.

Speaker 3: 38:04

But I'm going to dive into my final questions on this podcast. Actually, before I do that, I have one last question for you, and I've heard this from. I want to hear this from a lender's perspective. Right, are you a believer that the borrower does not own the asset? The bank owns the asset. I've heard that you don't own that. That's the bank owns that. That's who has the debt on it. What is it? What's your position on that?

Speaker 1: 38:38

The borrower owns the asset 100%. I think if you're the one in control, you're the one that's making the decisions. You are the owner. I do not own the asset until I have to foreclose. If that happens, and for what it's worth, we've only had 2% of our deals go bad, so it's not something we like to do. But yeah, the borrower absolutely owns the project, the asset it's not ours.

Speaker 3: 39:04

And you probably don't want to foreclose, Like, realistically, you don't want to go through all those issues and have to get that money back and like it's just. I feel like it's probably a big pain unless you're getting an incredible asset with a ton of equity built into it. But my assumption is you do not want to have to go through that process because it's a longer process and can take some time and headache. But now we're going to jump into our final questions. What is one actionable step our listeners should take today on their path towards financial freedom?

Speaker 1: 39:39

Oh man, this is actually something that's quite easy and doesn't cost you any money. I would read a book called Psychology of Money by Morgan Housel. I wish I got paid to pit it. I just think it's an awesome book. I think you can always learn more, but that really gives you a great baseline of knowledge and teaches you a lot about investing. I think the most important message of that book that I've always, I think, followed just without knowing, is that you can't get wiped out. If you do deals that are not huge, it's better over time, because even if one goes wrong like our first loan, like our second loan we didn't get wiped out, and so doing deals that are medium sized or smaller is a lot better than doing one huge one that all your hope is riding on. So I would say, read that book, because it's just really smart and informative.

Speaker 3: 40:33

Yeah, I 100% feel that and that's how I built up. A lot of my portfolio is doing these smaller deals. At first it was an FHA loan, right. So I got into this four unit property and I put down 3.5%. That's not a lot of my capital. It was a big project for me to dive into and a big renovation, but everything was lumped into this one loan so I only had 3.5% down on that property right around. It ended up being right around $20,000 of my own money in there.

Speaker 3: 41:04

As a 22 year old it was a good amount of money that I had riding, but I was confident I could get it done and if I lost it it wasn't huge to me at least. I got the risk and managed the risk and then from there I don't really wanna be doing this stuff alone. How can I keep myself as safe as possible? So I started working with partners that had capital to do deals and the experience, so they understood real estate and they could underwrite my deals as well as myself. So I hedged myself against that risk and then ultimately, once I built up those properties with partners over time, I was able to buy my partners out. But there was also a point where I had capital and I had X amount of properties where I was like, all right, I can go buy this $65,000 single family myself and I can do this alone, and just different soirees and areas.

Speaker 3: 42:00

So now I went bigger with a little bit of commercial property, and I did that with a partner to hedge my risk and have somebody else with capital. So it is all about don't give away the farm when you're going in there. I like to take it one small step at a time and leveling up the game as we go. And I do love that book as well. I've read into that. One Amazing book with lots of realizations. Final question for you what is one question that you wish I would have asked or one topic that you wish I would have covered, and how would you have answered that question or how would you have expanded on that topic?

Speaker 1: 42:39

Good question. Tell me, man, I think you had a lot of really great question. I guess one question might be does reputation matter? And especially early on when you're in the real estate game, you meet some people that seem like they've done a lot and maybe they have and they've got like a big name and maybe you're a little starstruck when you meet them. But beware of that. Reputation is what I would say. Some people deserve it, but some people are just so sin that the reputation will disappear very quickly if anything goes wrong.

Speaker 1: 43:17

And so we did a deal like that. That was another mistake, where we got an appraisal that was way lower than what we expected, but because of this gentleman's reputation we decided to fund it anyway and the deal went bad. We had to go to foreclosure but fortunately he managed to pay it off three days before the money was due. So it worked out in the end. But it was all just based on the big time wheeler and dealer. He's got tons of money coming in, everything is borrowed and on credit with this guy, or so it seemed. But yeah, be wary of people's reputation. Trust the appraisals, trust the numbers and crush yourself.

Speaker 3: 43:58

Yeah, trust, but verify right. Let's keep these common practices that we have, especially if you're lending out money, right, guys, we have those two main things that we need to look into on the individual side credit and background check, experience level and then you've got what you need to dig into on the asset side. So be true to that and don't trust possibly what you're seeing out on social media, because everybody's going to put their coolest best self out on social media and they might not share with you that maybe they have 50 properties but they only have 20 grand in the bank right now and it's floating and they're in some issues on some of their properties. So you never know exactly what's going on. So make sure you stick true to what you're doing and what your different metrics are to lend on a property or to work with a lender or to work with a partner. Whatever it is.

Speaker 3: 44:54

I have my own underwriting process for my partners that I need to dig into whenever I am potentially working with a new partner and doing like a small dating period with them to get to know them. But yo, I have had a ton of fun today. It's been really great getting to dig into a lender's side of things and really excited to see where your business takes you. Now for our listeners and watchers where can they find you online?

Speaker 1: 45:27

So our website is greenblockinccom.

Speaker 3: 45:33

Greenblockinccom. You want to reach out to Yoav. Reach out to him from greenblockinccom and from the Financial Freedom Fast podcast. I'm your host, matt Ammobile. Today we had on Yoav Gillad and we had an amazing time diving into lending and we are signing off. Thanks, yoav.

Speaker 1: 45:59

Thank you, Matt.

Speaker 2: 46:02

Thanks for listening to the Financial Freedom Fast podcast, the show that teaches you to buy back your time and live life on your terms. Be sure to subscribe to this podcast wherever you're listening, and follow us online at Matt Ammobile. That's Matt AMA B-I-L-E. Be sure to tune in Monday, wednesday and Friday for our weekly podcast drops. Thanks for listening. Let's retire together.