Hard Money Lending | Everything You Need to Know

Episode 157:

Hard Money Lending | Everything You Need to Know

R. E. Capital, LLC was founded by Mitch Stephen and partner Raymond Braun. Collectively they have purchased and sold over 1,500 houses in the San Antonio, TX area since 1996. They have purchased a very large portion of these properties with private funds loaned to them by private individuals.

The premise is very simple: Private individuals loan money for a fair interest rate and they get the 1st Lien Rights on a property they lend on. Each loan stands alone; 1 Lender, 1 Borrower, and 1 property pledged as collateral.

Conservatism the foundation of the business, the collateral property is always worth at least $35% more than the loan at the time of the loan. In most cases, the equity is worth MORE than 35% of the loan. Lenders either get paid the interest rate as agreed or they get the collateral (the property).

That being said, R. E. Capital, Mitch Stephen and Raymond Braun have never given a property back to any lender Traditional or private. Dealing with houses is nothing new to Mitch and Raymond. This duo has dealt with thousands of properties over the years and they know what to do with properties in distress …lenders are spared the details, they just get paid.

What you’ll learn about in this episode:

  • How Mitch and Raymond got started in the hard money lending business.
  • The importance of establishing a system for success.
  • Why investments in the hard money lending business could be considered more favorable than other traditional investments.
  • Why there is nothing passive about renting houses.
  • The importance of the “Loan to Value.”
  • The importance of third-party appraisals.
  • How to get comfortable with a loan before making it.
  • The benefits of working with a private lender rather than banks.
  • Why you shouldn’t be surprised if a deal needs to be funded really fast.
  • The value of strategies that have survived tough times.
  • Why everyone should have a large portion of their money backed by physical assets.



Free consult with Mitch Stephen or Raymond Braun.

Mitch Stephen

Raymond Braun


Mitch Steven: This is Mitch, and welcome to the Real Estate Investor Summit Podcast. I have my good friend and business partner, Raymond Braun on the line. We have had a hard money loan business in San Antonio, Texas since 2005. On any given day, we have four to six to seven million dollars out on the street of San Antonio. I’m going to explain to you how we got to this point, and you might consider it yourself. Right now, I’ve got to get a word from a few of my sponsors, and we’ll be right back with Raymond Braun and the hard money loan business.

All right. This is Mitch, and I’m back with Raymond Braun, my good friend and my business partner at loans2go.net. That’s loans and the number “2” go.net. We’ve been loaning out money to the local investors in San Antonio, Texas since 2005. How are you doing today Raymond?

Raymond: Man, I’m doing awesome, brother. How you doing?

Mitch Steven: I’m doing good. I’m doing good. Hey, can you tell the listeners just a little bit about your stellar background before we get into all this street smart stuff?

Raymond: Yeah. I guess, “stellar” … Yeah. That might be debatable from some, but I did spend the bulk of my career with a firm called Coopers & Lybrand on the CPA. I was a partner in the Austin, Texas office for Coopers & Lybrand. Today the firm is called PricewaterhouseCoopers. It’s the largest CPA firm in the world. I ran their financial services and business practices over there and business development and so on. When I left there, I ran an international corporate trading company for several years and finally figured out a way to get off of those 100-hour work weeks and that hamster wheel and started my own business about 2002, which was real estate-related. I’ve just been doing real estate-related businesses since then. That kinda gives you a little bit of background.

Mitch Steven: Just to paint the overall picture, we met when you got into the real estate business. He actually lives up at the lake where I live, and he lives only too far. We live pretty close to each other. This is the two pictures: there’s this guy in a suit and tie, he’s about 6-foot-something, very debonair, has on his Florsheim shoes, leather shoes and then there’s Mitch Steven in a baseball cap and pair of flip flops and some shorts. We make a great business team don’t we, Raymond?

Raymond: Man, we do. I remember the first time when I met you. The one thing that I’ve always enjoyed about our partnership is there’s always business sense or book … I should say there’s really book smarts, and then there’s common sense and business smarts. You’re one of those guys that’s got extreme common sense, business smarts, incredible integrity. The partnership has worked really, really well, because you’ve got a lot of the financial background and business background. I’ve never seen anybody do the business that we’re involved with the real estate side better than you. It’s definitely been a fantastic partnership, for sure.

Mitch Steven: Thanks for the kudos, man. One of the things that I saw how Raymond and I might be able to connect, to have a business, was I was beginning to raise so much private money that I couldn’t buy enough houses. One of the things that I learned in the process was, if I let these people sit with their own money too long, they would lose it. They wouldn’t go place it with someone else or invest it someplace else. They would actually … Well, they would, but then they would lose it. They would loan it to Uncle Harry for a snow cone factory in Alaska and then wonder why they’re not getting paid back. A lot of people … I’m not bashing people. It’s just a lot of people don’t know what to do with money when they get it. This money comes from all different kinds of places: inheritances, maybe sometimes they just get lucky, or they sell their house in California and move to Texas cut their cost of living. Some of them have worked their whole life for that amount of money, but the job that they worked in didn’t really teach them how to preserve the capital that they were saving so well.

I came to the conclusion that I was gonna have to do something with these people’s money besides expect them to sit around and wait for us to find a house. I talked to Raymond, “Can we run this money out or something and get it out of their hands and get it into a safe place before they lose it? What can we do?” Raymond came up with an idea. He says, “We oughta get into the hard money loan business and loan money to the real estate investors out there in our town,” which were our competitors. But, that being said, they found a deal and got a contract on a house, on a great deal, before we did, so it was really … It was already past the point of us competing for that house. They already had the house, so we decided to do it. It was a great comfort to have someone like Raymond, who had all this financial and technical and–I don’t know what you say–higher education. Setting up the books, setting up the checks and balances, setting up the paperwork to make sure that everybody in the transaction was covered, you were really instrumental in that, man. I want to take your hat off for making such a good set of documents, because we’ve been using those documents ever since day one, haven’t we?

Raymond: Yeah. We have. That’s the great thing about the businesses that we’re in. There’s always a system of success. Sometimes it take a little while to figure that out, but once you figure it out, it really comes down to doing the same thing over and over and over. We’ve just gotten really good at the different areas of business that we’ve been in in doing exactly that: figuring it out, getting the documents and the system and methodologies in place, and then just doing it over and over and over.

Mitch Steven: Yeah, some people … I tell people, we have about $12 million in private money these days. A lot of it Raymond and I use ourselves to buy houses. Some of it … Whatever we can’t buy houses with ourselves, we loan it out through loans2go.net. One of the … People ask me all the time, “How in the world did you get $12 million worth of private money?” You want to tell them how we did it, Raymond? It’s not that complicated. You pay people back.

Raymond: Yeah. I think it’s like everything else. If you do business the right way, and you protect people’s assets and so on, it gets a lot easier. Really, the way that we started was with just a few people that we knew out there. I mean, there’s a lot of people out there that have money that don’t know what to do with their money, exactly as Mitch said. When I say that, what I’m really talking about is everybody. I remember, when I was partner with Coopers & Lybrand, I had all this money coming in. Yes, I could put it into stocks and bonds. I did all those things and played futures and made a lot of money, lost a lot of money, et cetera. The investments that we deal with, in the hard money lending business, are exactly the same kind of investments that we do ourselves. We look at every single thing that we loan on, and we never loan on anything that we wouldn’t invest in ourselves.

For people that are out there that have investible money, a very high percentage of that investible money should be in what I call very low-risk investments, investments that are highly collateralized, very secure, those kinds of investments. When we started the business, it was with that idea, where we would never loan on anything more than 65% loan-to-value or 65% after-repaired-value minus the fix-up costs. Really, the same methodologies, or what I call “a very conservative lending methodology” was what we used. That’s what we’ve done from day one. People love it, because they’re able to … Investors love being able to be in front of the lenders with us because of exactly that. Because we don’t loan on anything over 65% LTB, there’s already a lot of equity in the deal. Because we put every single private lender into a property … We only have on investor in each property that we do, so they know exactly what they have. They know what the property is worth, so that if anything ever happened to us, if we missed a payment for any reason, they’ve got an asset that’s worth way more money than what they’ve actually put into it. Because we put them into our first lien position, that significantly reduces any risk as well.

Everyone that we utilize on a private lender standpoint, we give them a promissory note and collaterally transfer (i.e. transfer our loan that we have with whoever is borrowing money from us). It puts them in our first lien promissory note [inaudible 00:11:44] trust position. People absolutely love being in that first lien position and something that’s already got a lot of equity built into that equation.

Mitch Steven: Yes, let’s run a real number.

Raymond: Okay.

Mitch Steven: What he’s saying is, if we want to borrow money to buy a house that we know the appraiser says we can sell for $100,000, we don’t borrow more than $65,000 from an individual lender. That individual lender gets a lean on our $100,000 house. If they don’t get paid, they get our house. Now, they’re gonna loan us $65,000 in the first lien position, and we’re going to buy a $100,000 with it, give them a first lien. If for any reason they didn’t get paid, which hasn’t happened to-date, but just putting it out there … What’s the worst case scenario? Mitch and Raymond fall off a cliff somewhere and you don’t get paid. You get our house. You either get or you get. I like to preface it like this, “If everyone in Bernie Madoff’s pyramid scheme … ” People lost billions. Billions with a “B.” “If everyone in his organization would have had $100,000 house as collateral for every 50-, 60-, $55,000 that they loaned him, not one of them would be broke. Most of them would be wealthy beyond compare, because they got the properties back.” Is that right, Raymond?

Raymond: Yeah. Absolutely. I might add, we’ve been doing the hard money lending side of this thing for 12 years together. I know you were taking private money and selling before that, as you indicated. But, we’ve been through the good times and the not-so-good times. When most of our competitors went out of business in 2008 and 2009 and 2010, we actually were picking up more and more customers during that time period. We’re very healthy, and we’ve always been very conservative. When other people are making 80-90% loans, we’re absolutely not doing that. We don’t buy our properties that way, and we don’t lend our money to real estate investors that way either.

Mitch Steven: Yeah. We’re really conservative, and like Raymond said, the bottom line is, if we didn’t want to buy the house for that amount of money, then we’re not going to loan out our private lender’s money at that rate. We are … The house is the last hedge. We’re the hedge in the middle. We really want that house for that money. Not to say that … We’re not going to lend money to people hoping they fail so that we can get their house. We want these investors, that we’re lending to, to be successful. We certainly don’t want to get a reputation that we’re predatory in that way. Of course, you can’t be predatory with private lenders. What I’m saying is, if our private lenders can’t pay us back, then we’ll take over the house, and we’ll make the payments to the private lender and keep the house and move forward. There’s a lot of line of defenses there.

Raymond: Yeah. You’re exactly right, Mitch. If our borrow doesn’t pay us, for whatever reason, our private lenders never even really know, because we take care of whatever needs to be done. Our private lenders get paid every single money, on time, every month, no matter what happens with the property. If we need to foreclose on the borrower and take over the house and resell it or sell it under finance or whatever we’re going to do with it, our private lenders get their money all the time no matter what.

Mitch Steven: Yeah, because the private lenders … Let’s talk about the typical private lender. Our typical private lender is over 60 years old. They may even be in their 70’s or their 80’s by now, because we’ve had some of these lenders for a long time. They can’t start over again. They used to be worth twice as much, but they lost half of their money in the stock market. They decided, on that day, that they were never going back. They had their money sitting around in 1% CDs, and then they were starting to figure out, one, they couldn’t live off 1% and two, that inflation was 3%, so they were actually losing money every year because the cost of goods kept going up every year. Their interest earnings never went up.

They didn’t really know what to do until they met us. When they met us, they said, “Look, we’re willing to pay a real decent rate of return. Like, way, way over the 1%;” between 6% and 8% depending on the deal. They have a real piece of collateral, so they can sleep at night. They either get paid, or there’s this house that will make sure they get paid. That’s the idea behind the typical investor. They don’t want to do the business. The younger investors, that have careers, that are lawyers, doctors, CPAs, they just want passive income. They don’t want to have to deal with learning it out themselves. They could make a little bit more if they learned it out themselves, but then they’d have another job. That’s our job to learn it out. Our investors are looking-

Raymond: Mitch-

Mitch Steven: They’re looking for truly passive. Go ahead.

Raymond: No. I was gonna say, “I think I’m one of those guys that fit in that category when I was talking earlier about being a professional and making a lot of money with Coopers & Lybrand. The last thing I wanted to do was worry about what to do with my money.” Like I said, I made and lost a lot of money. Stock market. Bond market. Commodities. All those kinds of things. I would have loved to have known a Mitch Steven back then, where all I had to do was put my money with him and make a consistent, decent return on my money that’s way better than what I was gonna make in any kind of CDs or US Treasury Bonds or any of those. In highly secured deals where I never have to worry about my money, and I get a check every single month. It takes zero amount of my time to make a better return than what I would have made if I had just put my money in the stock or bond markets. Yeah. I can relate to exactly what you’re saying, because if I had had that back then, I would be much further ahead today than even where I’m at today. Just because I would have started that at a much earlier age and wouldn’t have put a lot of my own money into investments that, yes, some of them worked out, but many of them did not. To your point.

Mitch Steven: You know, they want passive, passive, passive. A lot of people say … They dub rent houses passive. Are rent houses passive, Raymond?

Raymond: That’s not even a trick question. That’s a [crosstalk 00:18:48] on this call. No, there’s absolutely nothing passive about rent houses. God knows we’ve had plenty of those in the past, and I’m not docking anybody that’s in the rental market. God bless you. It just takes a completely different kind of person [crosstalk 00:19:04]

Mitch Steven: It’s just not passive. It’s not passive.

Raymond: It’s not passive, even when you’ve got a management company working for you. We’ve tried everything. We’ve had management companies and so on, but they don’t care nearly as much about your property as you do. Most of the time, when it gets into the harder decisions and what to do, and you’re constantly following up with them, and you’re not understanding why they’re not getting your stuff leased out when you were getting them leased out really quickly … It’s just … Almost … When it comes down to it, no. Rental houses are absolutely not passive. In fact, I’ll go a step further than that and say that probably the largest number of houses that I’ve ever bought from an investment perspective … Mitch and I, as you know, have flipped a lot of houses. Hence, Mitch’s book, “My Life & 1,000 Houses.” When I say this, you’ll understand. We probably buy more houses from investors than we do from-

Mitch Steven: Individuals.

Raymond: [crosstalk 00:20:01] owners trying to get out of their house. People have heard this story a million times over: how to make a million bucks in real estate with rental properties. They get one. They finally get it where it’s $100 or $200 cashflow positive, and so they go get another one. They go get another one. They go get another one. Somebody destroys one of the houses on their way out. All that stuff they thought was positive cashflow turns into negative cashflow, and yet they’ve been working their tale off, because now they have 10 of these, which probably not enough for them to use a management company. They’re trying to handle it all themselves. They’re working all these hours, and they’re constantly moving people in and out of these houses. People are tearing them up, et cetera. They end up with no cashflow. They come to us, and they’re not even trying to hide it. It’s just like, “Make me an offer. I don’t care. Just make me an offer. I don’t ever wanna be in this business ever again. I want to be done with it. Just make me an offer on my houses.” We pick up more houses from real estate investors that are doing rentals than probably anything else we do.

Mitch Steven: Yeah, that’s the true. They’re called “Don’t Want’ers.” I think that the real estate investment gurus have been placing that myth on people for a long time. The first thing they do is say, “Well, you can rent this house for $1,000, and your payment is gonna be $500, so there’s $500 cashflow, right? That’s $6,000 a year.” I say, [inaudible 00:21:25]. You just disavowed every liability, and the whole world is yours on that deal. Including the air conditioner, the hot water heater, the roof, the doors, the windows, the sprinkler system, the plumbing system. Everything that could go wrong with that house is your problem, and they just blew past it like it wasn’t even an issue. Like, “Okay, the spread on the … The subtraction says there’s $500 leftover, so there’s your positive cashflow.” That is completely wrong. Anyways, enough of that. Let’s talk about-

Raymond: It’d be fun to find a house with a $500 cashflow.

Mitch Steven: Yeah, I know. I was being very gracious in that scenario. I was being very gracious in that scenario. [crosstalk 00:22:06] It’s still not gonna make … You still might just break even, even at that number. It only takes one air conditioner to suck up half your year, you know what I mean?

Raymond: Yeah.

Mitch Steven: Let’s talk about how we actually do business with our private lenders. We find a property. We email it over, have some pictures. Usually, we just call you and say, “We’ve got a property over here on so-and-so Street. Do you think we can pick it up for X? All the data says that we’re going to be able to sell it for X times two” or whatever. We ask if you’re interested. If you’re interested, then we can give you some data if you need some data. Some of these things are such no-brainers that you don’t even know … You know, I ran the numbers a little while ago, and we average 58% LTV, which means, if we’re trying to buy a $100,000 house in San Antonio, we average borrowing from our lender $58,000. They have a first lien position at $58,000. That’s what we were averaging the last quarter. A lot of these deals are really no-brainers. Sometimes these investors really don’t need a lot of money. We did one the other day that the house was, like, $230,000 appraisal, and they wanted $50,000 on it. It was an investment house. I don’t know how much safer you can get than that, Raymond. We have a lot of those, don’t we?

Raymond: Yeah, we do. The hard money lending side is exactly the same, because we really use the same measurements in determining whether we’re gonna make a loan on that particular property or not. It’s about the same in our hard money lending portfolio. It’s very close to that same 58%. Don’t get me wrong. We do some loans at the full 65%, but those are always in fantastic areas. We do other loans that are at 50% or less sometimes, loan-to-value ratios. By the way, I might just mention that we’re really talking about two types of transactions that end up working the same for the private lenders that lend to us. Mitch was just talking that we buy the properties out-right ourselves. We’re either going to hold the property, and the owner finance it, or we’re going to fix it up and flip it, or whatever we’re gonna do. Well, we’ve got borrowers from us that do exactly the same thing. They’re either gonna … Maybe they just need short-term financing to flip a house, or maybe they need short-term financing because they need to fix it up. Then, they’re gonna borrow from a bank, take us out. Maybe they’re gonna hold that property long-term as either a rental, or they’re gonna do an owner finance with a [wrap 00:24:49] note.

It ends up working exactly the same for our private lenders, because they still get a first lien position either way. They get a promissory note and a deed of trust if it’s a property that we own ourselves. If it’s a property that we loan to another borrower on, then you’ll get a promissory note and a collateral transfer, which collaterally transfers our promissory note and deed of trust to that private lender. [crosstalk 00:25:20]

Mitch Steven: They end up with all our first lien rights, is what they get.

Raymond: That’s exactly right.

Mitch Steven: All of our first lien rights. In street terms, you either loan it to me to buy a house, or you loan it to me to loan out to someone. Either way, Raymond and I are your payers. You’ll never know if the people that … If we loan out money to someone who doesn’t pay, you’ll never know. No one has ever known, because we don’t loan more money on a house than we wish we would have bought it for. If they don’t pay us, we’re kind of in line to do what we really do best, which is take that house and deal with it ourselves. That’s where the extra layer of protection comes in for everybody. And, the fact that … I can’t reiterate this enough. It is one lender, one house as collateral, and one payer. Every deal stands on its own. Every deal stands completely on its own. It’s not co-mingled with any funds. If you don’t get paid on that account, there’s house backing it up, exactly backing up that house. I’m sorry, backing up that account, or that loan. I don’t know. I can’t say enough about it. We haven’t taken any houses back in how many years, Raymond?

Raymond: Well, because of our conservative nature, it’s been a long time since we’ve … 2008, yeah. We took a bunch of houses back in 2008 and 2009, with loans and so on that we had, but since that time period, it’s been very, very sparse that we’ve had to take back a property on a loan. Even when we do it, as Mitch said, the great thing about doing business with us is our forte is turning properties into money. We either make our money on the hard money lending side, or we make our money on the interest differential. Or, we make our money by taking the property back. We really don’t … Unlike a bank, who never wants a property back because they don’t know what to do with it, we know exactly what to do with that property, and already know what that exit strategy would be when we first make that loan. Yeah. It’s a completely different scenario for us versus a bank.

Mitch Steven: Yeah. In case you don’t know, we do about 100 houses a year in my company, my house-flip company. Raymond does real pretty houses, big houses, expensive houses, and is an expert at remodeling and remarketing those houses. Between the two of us, we just have all these bases covered. We’ve been doing it for so long, and in such volume. We’ve been doing close to somewhere between 77 and 100 houses this year. I don’t know. On any given day, we have multi-, multi-millions worth of dollars out on the street that we’ve loaned to private lenders. Quite frankly, we have no problem sleeping, because if they don’t pay us, we’ll simply keep making the payments to our private lender, and we’ll take over the house ourself at a price we already knew that we wanted to buy that house for. We’re your Plan B, and Plan A might waiver or hesitate or fail. Plan A is the person that we loan the money to, but Plan B hasn’t failed, knock on wood, since the inception. I don’t know how many houses that is that we’ve loaned money out on. Do you know how many houses we’ve loaned money on?

Raymond: Oh man, I don’t, Mitch. Obviously, it’s hundreds and hundreds of houses. We’re probably in the thousands now over the years and so on. The other great thing is that we only deal in the areas that we really know very well.

Mitch Steven: Yeah, I was gonna say that too.

Raymond: We don’t just rely on ourselves, either. We go out and get appraisals on these properties so we know what the valuations are. Anything that we make a loan on, we’re going to have a third party appraisal as well, just to double check what we believe that we know.

Mitch Steven: Yeah.

Raymond: It’s kind of like the belt and suspenders approach. We check, double-check. We just make sure that we’re always going to have a very good, safe, successful business. It’s worked out very, very well for us and for our private lenders [crosstalk 00:29:46]

Mitch Steven: Here’s our rule, from the very beginning. If the house that we’re going to loan money on … If we’re going to borrow $100,000 or less, then one person, me or him, has to go over and see the house. Our personal philosophy is, if we’re loaning someone else’s money on a piece of property, and neither one of us have time to go look at it, then we’ve got no business making that loan. One of us has to look at a house, either he or I, if they loan is $100,000 or less. If it’s over $100,000, we both have to go look at the house. Not only do we both have to go, we both have to go together. We have to go together so that we can talk to each other directly, standing right in the house. This is more of a commitment. This is a bigger commitment. Let’s face it, the people that we’re loaning money to, most of them are up in age. They cannot afford to start over again, and I have to treat this money like it’s my grandfather’s money. They can’t start over. They’re too old. Whatever they did for a living is done. There’s not even a chance, and their money is critical that it comes back to them. When we get into a higher loan, we both have to go. If either one of us say we don’t feel comfortable, then the loan is off, right?

Raymond: Yep, that’s absolutely a fact. We get in those borderline situations once in a while, where one of us thinks it’s a good property, we’re gonna do fine on it, and the other one doesn’t. If we can’t be 100% agreed on it, then we don’t do the deal. Usually what ends up happening on a deal like that is we’ll go back to … We either won’t do the deal, if it was a property that we were gonna buy. If it was one that we were gonna loan on, then we go back to the borrower/investor, and we tell them, “Look, if you’re married this deal, here’s why we have some concerns about it. Here’s the max that we’re willing to loan on this particular property. If you’re still married to this particular property, then you’re gonna have to sink some of your own money into this property as well.”

Mitch Steven: Yeah. Yeah.

Raymond: That’s the best thing about having our own business is that we’re able to make decisions that banks and other people never make. Unlike a lot of the hard money lenders out there, we are our own underwriters. We can literally, within a day or two of the time that we have a title commitment … If we can get a title commitment quick, we can close within a day or two. I don’t think there’s ever been a time where we’ve told somebody that we’ll do a deal at X-Y-Z and then we don’t do the deal. I don’t think there’s every been a time. On the other side, the borrower/investor-side, they love doing business with us as well, because we respond immediately.

If somebody says, “Hey, I got this property. I need to close this week. Can you do it,” we’ll go out there, take a look. We have our appraiser do a quick appraisal on it as well. We’ve already made our decision. As soon as we go out there, Mitch and I already know whether we’re doing that loan or not doing that loan. They don’t have to worry about whether we’re gonna waffle or they’re gonna get down to closing … A lot of hard money lenders get down to closing, and they say, “Well, for this reason or that reason, we’re not actually doing the deal. Our underwriters said they don’t like whatever it might be.” Well, we do our own underwriting, so we can make our decisions and make a deal get done quickly as opposed to a lot of these other parties.

Mitch Steven: I do want to point that out, because at first it makes people sometimes nervous, some of the private lenders, when they first get onboard. People are able to get tremendous deals on houses, because of the speed of closing. Don’t be setback when you get a call saying, “I got a deal, but I need the money in 24 hours.” Don’t let that freak you out, because that’s the nature of this business. People buy houses at half-off, because there’s some kind of pending problem, or some kind of ax is fixing to fall. You’ve gotta get under that … You’ve gotta get through there before that ax falls, or nobody gets the deal. We do move fast, but we move fast for a reason. It’s what our industry calls for. If you happen to contemplate being a private lender with us, and the first deal comes over and we need money in 48 hours … If you can’t do it that fast a time, just pass. We’ve got other people. Don’t be surprised when this money needs to happen pretty quick, because it’s the nature of the business.

Again, we’ve got double checks and balances. One of us is gonna go look at that house, and then we’re gonna send an appraiser out just to confirm what we thought. It’s not our money. When I go out to buy my own houses, I don’t send an appraiser out. I don’t really need to. But, when I have someone else’s money, I think it’s important. Raymond and I believe that it’s important to show that we’ve done our due diligence, and we even hired an outside professional to confirm our thoughts, that we’re not wrong. It’s critical that we don’t loan too much on something. I think we have it beat in two ways. One is we’re going loaning 65%, so if we were ever wrong by a little bit, you’re still way under … There’s just no way to be wrong. I don’t even feel good saying that, Raymond. We’re never wrong about that.

Raymond: No. That’s why, when I say that we do … We do what we would want somebody else to do with our money. We do it as safely and securely as you can possibly do it, and it’s why we’ve had success in this business. Both in the good times … Yes, we’ve made a lot of money in the good times. No question. But, so do our private lenders. Frankly, we do very well in the bad times too, when our competitors are going out of business, because they weren’t conservative enough. They’re going out of business, and we’re just picking up even more customers. We’ve already been through … I can’t think of a time that’s been worse than 2008 and 2009. I think it was the worse recession that the United States has ever seen since The Great Depression. If we can do well during that time period … I’m not saying that there’s zero risk, because every single investment has some amount of risk, even if it’s extremely low. But, we’ve certainly done everything that’s humanly possible to reduce the risk to a very, very minimal amount. I think the proof is always in the pudding. By going through that time period of 2008, 2009, and 2010, we certainly earned our medals during that time period, for sure.

It’s the same thing as the partnership. It’s always the same thing in a business. I actually like going through tough times, because that’s when you find out what you’re really made of. That’s when you find out how good your company is, where you need to make some modifications and changes. It’s when you find out … For those of you that are out there that have never been a partnership, you’ll appreciate this as well. It’s always easy to do business the right way when there’s no negative consequences, but you always find out how good your partnerships is or your partners or your business entity when you actually go through tough times. I always enjoy that aspect, because it helps sharpen what we already believe that we know. We know we’re going to have success and the good times. Values are going up and so on. The proof in the pudding is always when things turn around and get tough. If you can do well during that time period, and make whatever adjustments or modifications that you need to, and be able to do well, then you’ve got a real, solid business. That’s exactly where we’re at.

Mitch Steven: Yeah. We did make it through the recession, and it pointed out to me that if we stay within certain boundaries, we may, if there’s such things a recession-proof business, have one. It’s just because the dynamics of owner-financing houses, which is the end-all, how we solve any problems that we have. We’ll just take the properties back, and we’ll owner-finance them to a deserving buyer who couldn’t afford a traditional loan, or can’t quality for a traditional loan is what I meant. This last recession proved to Raymond and I that if there is such a thing as a recession-proof business, we may have one of them, because we actually did quite well in the recession. It was scary at first, but we got a handle on a few things that were kind of untied. We tied it up, and all of a sudden the business just started running. Now we know what happens in that recession, and how to handle it, and exactly what we do when the recession happens. Mostly it starts out way up front in today’s world. We have to make conservative loans on great properties that we’re not worried about what to do with them. That’s the main thing.

Let me say this, if you’ve got some idle money, and you’re not exactly sure if you want to explore this, it’s real simple. You just give us a call. You can call me at 210-669-4020, or you can call Raymond at 210-288-2040, if you can believe that. 210-288-2040. We had these numbers before we met each other. What we’ll do is just run a couple of potential investments by you when we have them, when they come up. You tell us how much you want to get out, and we’ll keep you on our radar. As deals come across the radar, we’ll fly them over in front of you, give you a call, and say, “Hey, this is what’s going on with this house right here. It’s worth X amount, and we need to borrow this much to buy it.” It’s really not much more complicated than that. We’ll give you some data. We’ll show you … We can get an appraisal on it, if you decide to do it, and make sure that no only do we say that that’s the value, but there’s a professional MAI appraiser who puts his stamp on it and says, “Yeah,” he sees it the same as we do. Then, we’ll proceed with the paperwork.

We’d love to have your attorneys or your CPAs involved. If you’ve got an attorney, or someone you want to bring to the table to talk to us alongside yourself, that’s great too. I would rather you bring your attorney or CPA and sit down right with us, then you to go to them and try to explain it on your own. Most people are not capable of really conveying what we do, and we can answer all of the objections right there from your attorney or your CPA. I’d be more than happy to meet with you. There you go. My number, again, is 210-669-4020. Raymond’s phone number is 210-288-2040. Anything you want to add before we go, Raymond?

Raymond: No, I think that’s great, Mitch. Thank you for having me on the call, buddy.

Mitch Steven: No problem. If you’re sick and tired of having to live by that ticker tape, every morning wondering if you’ve lost your butt or if you’ve made some money, when are you gonna get out, when are you gonna get in … If you’re tired of that, and you’re also sick and tired of staring at those 1% or less CD rates, then let us give you the chance to review a different option. It’s a really different option. You can maybe between 6% and 8% and have some real collateral for your protection. You decide for yourself. Again, we’d love to talk to your CPA or your attorney at the same time. We can go to lunch. We could go to dinner. You can come by the office. We have plenty of references, right? I don’t think references are gonna be an issue. Do you?

Raymond: No. No. That won’t be a problem. You wouldn’t be able to call all the references we have.

Mitch Steven: Yeah.

Raymond: That would never be a problem for you, for sure. As I said, our record speaks for itself. We don’t have anybody except for very happy investors. I promise you, we don’t have a single, negative private lender with us, because we pay, literally, on time every single month, and we’ve been doing that for years and years and years. In fact, since we started our business together in 2005, not only have we never missed a payment, we’ve just flat out never been late on a payment.

Mitch Steven: Yeah.

Raymond: We’d love to, as Mitch was saying … I remember when I was reading “The Snowball,” a book by Warren Buffet, one of the things we was saying was at some point in his life he decided that the only investments he ever wanted to make from here on out were only investments where he couldn’t lose any money. Which sounds kind of funny coming from a guy who invests in stocks, but most of the time that’s why he was buying companies instead of just buying a small interest. He buys the large interest where he has some control over what goes on with those companies. I believe that everybody should have some large portion of their money in investments that earn a very nice return, where the likelihood of them losing any money is extremely slim, because of the security of whatever collateralizes that money.

Mitch Steven: The collateral.

Raymond: Yeah.

Mitch Steven: Yeah. I think another important issue is, if you have money in IRAs or 401Ks, we can help you self-direct that so you can take control of your financial future and quit giving it to the guy who’s over there on Wall Street who really doesn’t even know your name. When you call, they have to look you up by account number. You’ll always be a name at our place. More than likely, we’ll have lunch or dinner about … My goal is to try to meet with everybody about once every seven to eight months. We sit down and have dinner or lunch, and I’ve been real good at doing that. It’s getting a little harder now with more and more people, but still, it’s important. Raymond and I always enjoy sitting down with our people and making sure that they feel comfortable and see if they have any questions or objections. The thing that separates the real deal from the BS is that time-date-stamped filing at the courthouse notarized by the county clerk. When you get those set of documents in your hands, and you can get on the computer and look up that you’re the first lien holder on a property, that’s the real deal. That’s where everyone that goes wrong didn’t get that.

Sometimes people will watch “American Greed” and give me a call, and they get worried. I say, “Here’s the difference. Go buy your papers. You see that time-date stamp on the side of the edge of the pages, and you see that notarized signature by the county clerk? That’s your first lien. That’s the indicator that that property has a first lien by you on it. If you want to further inspect it, go get on the computer and look it up on the computer, the county courthouse records. You’ll see you, your company, or your IRA, or whatever as the first lien holder. That’s the difference. That’s the difference between BS and a real investment with a first lien, which gives you that protection.”

All right, man. I’m gonna cut it. We’ve been a little long here, Raymond, so I’m gonna let everyone go. This is Mitch Steven with the Real Estate Investor Summit Podcast. I am so glad you stopped by to get you some Raymond Braun, and in this case, Mitch Steven and loans2go.net, and hear how we’ve been able to make a side business out of something that really good happens. We were able to borrow a lot of money from a lot of people over a period of time. It’s kind of funny, right Raymond? When you start paying people back on time and doing what you said and no one has any worries and things go smooth, what do they do? They give you more money.

Raymond: Yeah. That’s absolutely right. They give you more of their money. In fact, we’ve got a lot of people’s business [inaudible 00:45:29] with IRAs and so on, where we literally … They’ve got every investible dollar they have with us, because they … They’ve been with us for a long period of time. That’s exactly … If you wanted to start a hard money lending business, yes, start with the people that you know. But, do the right thing every single time. You’ll pay on time, do all those kinds of things, and over time, that’s really where we have been able to grow our private lending money, all through the referrals of all the different people that have done business with us other the years. Yeah. Great point.

Mitch Steven: Yep, and they all become our friends. We know each other on a first-name basis always.

Raymond: Yep.

Mitch Steven: We are a small company. It’s Raymond and I, and what? One assistant, right?

Raymond: Yes, we have two assistants. Uh-huh (affirmative).

Mitch Steven: We have two assistants now. Okay.

Raymond: Yeah, we have two.

Mitch Steven: Okay. That was new. That was just, like, right now. I probably don’t even know who that is right now. Raymond’s a real good hirer. Anyway, it’s Raymond and I and two assistants, and that’s how we run this company. We know everybody by name, and you’ll know everybody in our office by name. Go ahead.

Raymond: We’ll get you over there to Mitch’s ranch. [crosstalk 00:46:42]

Mitch Steven: There you go, Raymond. Giving away my ranch already. That’s cool. I’ll be happy to have you. This is Mitch Steven with the Real Estate Investor Summit Podcast. We’re out of here. Thank you very much, man. Bye.

Announcer: You’ve been listening to the owner-financing master, Mitch “Be the Bank” Steven, on the Real Estate Investor Summit Podcast. Let us now blatantly, and without apology, bribe you towards financial freedom by offering you a whole bunch of free stuff. Go to 1000houses.com and get you some. Y’all come back now, ya’ hear?


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