The Best of the Best
Each week we will seek out the best of the best in every imaginable business and explore the secret to their success. Prepare to gain insights and perspectives that will help you propel your business and personal growth forward. Hear how these leaders started, the stumbling blocks they overcame, and what’s next in their journey.
The Best of the Best
Funding 4 Flippers Don Brown & Rick Brunner
Funding 4 Flippers Don Brown & Rick Brunner
Alright, we are back with another episode of the best of the best Therese who do you have here today?
Speaker 3:I have Don Brown and Richard Brunner here with Funding for Flippers and I wanted them on the show because they have a really interesting way of supplying money for projects. So we wanted to talk to them a little bit about what they did, why they did it. And, guys, tell us a little bit about yourself.
Speaker 1:Well, not much to tell. I'm retired and this is what I do for fun. That's really the short version of it. We started in 2015 and we've been working on various projects ever since. We've done over 300 deals, I guess, from then until now, and it's a lot of fun, a great deal of fun to help Flippers grow their business and, more importantly, help a new family find a new home to move into inexpensively, to start their family and to grow their future. That's really quite rewarding, so we really enjoyed doing that.
Speaker 3:We've used you for several projects.
Speaker 1:Many, many.
Speaker 3:We started all this during COVID and it was a really great opportunity for us because the real estate market was weird. We needed something to do.
Speaker 1:We needed something to do. We were bored.
Speaker 3:So we started fixing houses up and we needed money to do that, and you guys came through in a big way. Tell us a little bit about yourself.
Speaker 2:I started a long long time ago and went through different businesses and what have you. I've worked with the accountant for 45 years. I had worked for a trucking company as a controller. Our first loan was that we provided the funds for the trucking company to build a cross-stock terminal. So we've been lending my wife and myself for the last 20 years. The difference between what we do and what you'll find with the hard money guys is we're using our own funds so we don't have to answer to anybody, so we can pretty much customize a loan to accommodate the borrowers.
Speaker 3:Yeah, that's really great because whenever we have questions, we just pick up the phone while you and whenever you have questions, just pick up the phone and call us. It's a very personal relationship.
Speaker 1:Very.
Speaker 3:Yeah, which is a little different and very hands on, and very hands on, which you know sometimes you could consider that hands on a little bit much, but I actually really appreciate it because it really helps us make good decisions, especially with our personality style, Like yours is opposite of mine. Like I, like I see something, I run and I go do it and figure it out. You're making us stop, as I know. Let's really look at this and is this a great decision for you to be making for your financial future? So tell me a little bit about what led you to decide to do this, like it didn't just happen one day. So what was the Well, okay.
Speaker 1:So, as I said before I'm retired, I've been self employed since 1979 and started and ran a number of businesses. I'm an engineer by training and sold our last business in 2014. My then wife and I, after I retired she was an attorney. She was returning from her practice we're looking around to think what we're going to do for the rest of our lives, because we're not just going to sit at home staring at the walls.
Speaker 1:So my wife is always interested in real estate and so she got a real estate license and we went to a dig meeting, figuring that's where we'll find clients. What we discovered was the last thing in the world that the people at dig needed was another real estate agent, but they told us that they needed money. Well, we had some money as we sold our business and that got us started to do a private loan, and then one led to another, led to another, and we've been doing it ever since. Unfortunately, my wife passed away in 2018 and I've been continuing to do this all my year and ever since. So it's a great deal of fun to interact with folks like you and your colleagues and many others and, as I said before, we get a lot of personal benefit, personal enjoyment at us seeing things happen, and it's a win-win for everybody.
Speaker 3:Yeah, I mean you come and look at the projects you know, and not just once. You don't just check it out prior to lending. You come and look at the progress and even offer advice, and I think that might be a little different as well than most of the hard money lenders out there.
Speaker 2:They really don't care how long it takes, right, and that reason we do that is nine times out of 10. If we tell you we won't lend on a project, it probably means you're not going to make any money, and if you're not going to make any money, you're not going to come back again. So that's our whole premises. We're going to make sure that everybody wins and we'll make it happen.
Speaker 1:And while that honesty piece is important, yeah, there are some lenders not many, but some who are what we call loaned-owned. They'll make a loan and they hope that you fail, or they'll structure it so that you'll fail.
Speaker 3:Right.
Speaker 1:And then they take over the project or take over the real estate and make more money doing that.
Speaker 3:They get the win at the end of the day. That's right. So we've been talking about hard money, like maybe people don't understand what that is, so we should talk a little bit more about what is hard money. So do you want to give a little definition and description of that?
Speaker 2:Yeah. So basically, if you're going to a bank and you've got a home that you're ready to close on and the bank says, ok, let's go through the numbers, oh, it doesn't have a heater in it. That's a shame for you because we don't lend on houses that don't have heat. So ultimately, what we'll do is we can go in and say, ok, this is what is going to cost you to heat it, this is what's going to cost you to make the deal make sense, and we will fund it. And we can do it quickly only because we're using our own money. We don't have to get the bank approval or the board approval or whoever that's in that sequence.
Speaker 3:So what does it usually look for to qualify someone to give them the loans? So what's that kind of base? Oh, that's an interesting question.
Speaker 1:It's as much personal contact and personal feel as anything else. We don't go through the exercise of a credit evaluation or any of that sort of stuff. We just look in your eyes. I know that sounds quaint, but it's true. I like that, though, and we evaluate projects that you've done in the past and we look at the project in front of us and we evaluate whether it's like Rich said, whether it makes financial sense or not, and if it does, we'll do the deal.
Speaker 3:I can attest to that because we met our first meeting was sitting on a parking in a lot over in Norristown at the State Farm Park at a picnic table, and that's our first meeting and we were talking about what it was we wanted to accomplish and we went through the project. You asked a little bit about us background information. We knew each other a little bit too, but we didn't really know that at the moment, did we? I mean, yeah, which was really interesting. So we have a past which is really cool, but I like the way that you did that because it gives everybody an opportunity, especially if they're doing the right things.
Speaker 1:That's right.
Speaker 3:I think that's what sets you guys apart.
Speaker 1:That's right. Like I said, we don't look at your credit score because the project has to stand on its own and we'll turn down deals because the project doesn't stand on its own or in some cases, we discover that for a new potential borrower that they may have a record I mean a criminal record. And while they may have gotten better in life. It's just that's not a risk that we're willing to take. So we try not to work with criminals. We try not to work with criminals?
Speaker 3:Yes, we all try. We all try. How about? How are you finding your investors?
Speaker 1:I guess at this point it's word of mouth. For the most part I don't know. Yeah, I guess at that point. I mean prior to COVID we were very active marketing. I used to run a monthly conference. Pat, rick and Rich used to be on panel sessions together. So we were very active in the local real estate community. But once COVID hit we stopped giving the meetings. So it's now mostly worth a word of mouth.
Speaker 3:So how would someone reach out to you if they were interested in learning a little bit more? There's a lot of people working with hard money lenders and they might have had experiences that weren't the best and they might want something that's a little more personal. So how would someone get in touch with you?
Speaker 2:Basically, if they were to just reach out to us individually or collectively, we would look at what they're doing. Have they got any past experience flipping homes? So if you've never, ever, don't even know what a flip is, that wouldn't be the first people that we would work with. We generally want you to have at least three under your belt and we would look at those properties, what you purchased them for, whether you closed within a year and made sure that you made money. So that's the whole. The whole premise is that we're not gonna lend to somebody and let them fail.
Speaker 3:Right, we're looking for a longer term relationship. Cause we've been doing this for a couple of years now.
Speaker 1:Actually, that's the key. We look for what we call serial flippers. We don't like to do one and done, but rather three, four, five deals a year forever.
Speaker 3:And that's a nice little business. That's a model. Someone's flipping, you know, five to 10 a year is a nice little business, that's right. Yeah, that's what we're trying to aim for. Seems like a slow down a little bit.
Speaker 1:Yeah, but you guys have been enormously successful up to this point and I don't see anything changing in the future. Well, thanks.
Speaker 3:We're hoping we can find another one. So if you have a flip out there, you should let us know. Actually, from our perspective, the stress properties.
Speaker 1:The more distressed the better. So, whoever's listening to this podcast, if you know of a distressed property or know somebody that knows about a distressed property, get in touch with Therese or funding for flippers and we'll make it happen.
Speaker 3:Yeah, and sometimes people get in a situation where their home goes into a distressed situation and they don't know what to do and instead of doing anything, they go into this paralysis mode of doing nothing and they just wait and wait. The longer they wait, the worse it gets. So if you're in that situation and you're really not sure which way to turn, or you're starting to feel like things are getting difficult and you can't pay that mortgage or you can't upkeep the house, that's when it's time to have the conversation. Don't wait, it's confidential. We'll talk to you. We'll always tell you what your best options are, but don't put yourself in that position where it's too late and now it's really hard for anybody to help you.
Speaker 3:And your next option is for closure and you're out, and there's a lot of people, I think, out there that are in that situation right now. So it's good if you're listening, you should definitely reach out. I do want to ask you one last question the market. I know this is like a crazy question to ask anybody, because you'll get 20 different answers, but where do you think the real estate market's headed, with rates going up and everything that we're dealing with?
Speaker 2:Well, we can see the rates going up on a daily basis. That's the hardest thing. So a lot of times when you're looking at the deals that were done in the last 10 years, when people were getting 3% mortgages, you always had that easy exit because the buyers could get a loan that they could afford the monthly payment. Now that 3% could be 7% and that changes the whole dynamic. So we want to make sure that if you're looking at a project and you want to go through and see if it makes sense, we're going to make sure that that exit strategy is going to be okay. We're targeting a $400,000 market. Well, at 7%, you're going to have a crazy mortgage payment on the back end, so you're going to sell less just because of that mortgage component.
Speaker 3:Do you think the rates are going to keep going up, or do you think they'll start to steady a little bit?
Speaker 2:Right, I'm old. So I think our second house, our mortgage rate, went from 11 to 12% while we were driving the settlement oh my goodness. So, yeah, there is a history there, you know? Granted, I think we paid for our first second house. It was $40,000. So, yeah, there's a big difference there. Today we're looking at $400,000. Right?
Speaker 3:What are your thoughts?
Speaker 1:I mostly agree. I think right now the amount of inventory that's available, especially for distressed properties, is much lower than it was a year or two ago, and I think that will remain. I think interest rates will. If they come down, it'll come down just a little bit, not a whole lot, at least the next 12 months beyond that. And then we're coming into the election and who the hell knows what's going to happen at that point. You just have to be diligent in looking for projects and doing more marketing maybe than you used to find projects and be careful, like Rich was saying, be careful about making sure the numbers work and that you have an exit.
Speaker 1:We know several mortgage brokers who can help on the back end, so in your case that's never been a problem. But sometimes the flipper needs help finding a refinance situation and we can help with that as well.
Speaker 3:That's really good. I think that's the big thing. You're a resource all the way around and you're not just one transaction and you're gone. We're looking for a relationship, a longer term, and that's actually a really smart play because you get to know the people you're lending to. You're not trying to get new people all the time, so hopefully we'll be doing business for a long time together. I agree with you guys I feel like the interest rates are going to. I feel like they're going to stay kind of steady. I don't think they're going to go up too too much more and I think home values are going to hold. I don't think we're going to see a dip in home values and if we do.
Speaker 3:It's going to be like a minimal 2% because we're right at that trend line. Over the last 40 years it's been going up and we're not above it like we were back in 07 and 08 when the whole world just kind of went what the heck just happened? We're kind of right there, so I feel like we're safer. So don't panic out there, it's fine.
Speaker 1:Slow and steady.
Speaker 3:Right, and the average 40 year interest rate is 7.3%, so we're not really too far off of that. So it's not as bad as everybody thinks it is. So if you have questions, the best thing to do is ask a professional Guys. Thank you so much for being here. I really appreciate it.
Speaker 2:Glad to be here.
Speaker 1:Thank you very much, Theresa Good luck to you, thank you.
Speaker 3:Thank you.
Speaker 2:Thank you no-transcript.