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

Kody Wilde
Thanks, Justin.

Morgan Smith
Pleasure to be here.

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

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

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

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

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

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

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

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

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

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

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

Morgan Smtih
That’s right,

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

Morgan Smtih
That’s right. And you know, maybe the first deal you’re not going to get as great of terms as you would get on a second and the third deal when you build up a track record direct portfolio. We have borrowers that have done 1520 transactions with us. They’re getting pretty good terms. I’m going to 15 through 20 and transacts got a track with We will also go out on a limb for first time investors and try to help them do that. That’s how we build a relationship. That’s how we build attraction.

Justin Stoddart
Cool. I love it. I love it. So obviously, we’ve talked a little bit about the opportunity cost of not seeing the fact or recognize the fact that there’s always money available. If you have a good deal, right? That’s right. Do you see by chance, like, what’s a common deal that a realtor would pass on or not even see, because they aren’t thinking outside the box of this alternative financing? Like, like, what should they be looking for? That’s oftentimes missed because that they don’t know about you?

Morgan Smtih
That’s an excellent question. So in traditional mortgage, this is no real estate. We’ve been condition for the past, you know, two decades, based on Fannie Mae, Freddie Mac, FHA guidelines, and that’s a majority of what we do. And those large investors those those entities that buy mortgages have certain standards and in particular, are relates to properties. So where do I find opportunity that could be missing transactions like that? Often, if there’s a piece of property that has some deferred maintenance, maybe it has an issue, maybe maybe maybe it’s got mold in the basement, maybe it’s got broken windows, you know, but at direct portfolio, we can look at that transaction and say that transaction has value. If I have value minus a repair cost, we have to add back into it but we can look intrinsically into the value of that transaction. So I don’t really care if it’s rough around the edges if the collateral is right, she was ideal typically would get denied and FHA denied and conventional denied and other types of bank financing so we’re really taking a holistic reports to looking at the asset assets bag,

Justin Stoddart
I love it. So as an agent, right, you’re looking at deals, anything that a traditional lender would maybe balk at at that point is say, let’s take a look at right whether seller loans standalone bridge, builders spec development loans, right investor and commercial bridge loans, like there’s another options here, investor fix and flip owner occupied relationship loans, bridge loans, like I’m reading through some of the things you guys do, and ought to open up an entire new awareness of a whole new reality that they weren’t aware existed before. That’s right.

Morgan Smtih
So fix and flip loans are a great example. And hard for you not to have seen some type of home with great TV if you watch HGTV or you’ve seen the fix and basically revolution that’s going on in the country. But, you know, to your earlier point, there’s a lack of housing inventory. There’s a ton of dilapidated old housing throughout this nation that needs to get renovated needs to come out. There’s there’s a demand for that. And so investor fix and flip financing is probably our most popular financing vehicle ball. And that’s a situation where we will help an investor buy an asset, buy house, also loan the money that they need to repair it, and guide them through the process. And that type of product just didn’t really exist in the traditional financing. Yeah,

Kody Wilde
yeah. And I just read recently came across the gentleman here locally that he’s been doing this but just using his own money. And then he’s he’s to Morgan’s point, there’s more opportunity than what he has money for. And so he feels like on one deal he brought in an investor who, you know, really just came in took the project from him, but he could have done more. And if he had his own wasn’t so you know, straight at his personal capital stretched so thin. And so we’re going to be helping him out with some of the upcoming deals so he can do more and not miss out on those

Justin Stoddart
opportunities. Let’s talk a little bit about from a lender standpoint, right? There’s these traditional lenders. The goal, right as I speak with some of my great lender friends, is to always be the first call when somebody has a financing option. However, sometimes you got people that make a call to you and you don’t have a product for them, right? That’s right, or do you right? I mean, keep here’s, here’s the thing that I want you guys to see is that having a group like this, if you’re a lender, a traditional lender, mortgage loan officer and you You now have the ability to have these guys in your back pocket for their one phone call away. It’s still like the phone call still comes from you to them. And now you remain at the center of the transaction for your clients, because reality is that client, if there’s an option out there and they’re tenacious enough, they’re going to find a solution. And if it’s not, because it came through you, you just become disenfranchised from that lending conversation. Right? Whereas now when they’ve got you guys, it creates a great opportunity for them to be more valuable to their existing clients. Right?

Morgan Smtih
That’s right. And while I’d like to be your first call, always make sure that we’re your last call. More importantly, you know, we we pride ourselves on being the last us that you need to go to, if we can’t get the deal done, I’m kind of probably telling you If you really want to look at that.

Justin Stoddart
That’s actually a great way to do you have any deals, run it by them. If they say no way. You should also be saying no way.

Morgan Smtih
Yeah, because we’re partners and I go back to my partnership conversation. Yeah, we want you to be successful in each transaction, if you’re not successful and you’re not profitable, we’re not going to do another transaction with you. And our goal is to do multiple transactions.

Kody Wilde
Well, Justin, you bring up a great point. I mean, most of the deals that we have in the pipeline right now have come from other mortgage loan officers where they ran into a hiccup with their traditional financing like Morgan was talking about. And so we’ll take a look at it. But the deal together, a lot of our stuff is short term, if they can overcome whatever the issue was from their traditional mortgage piece, six months a year down the road, they can come back and be out.

Morgan Smtih
Cody’s exactly right. So over 60% of our businesses also comes directly from other mortgage professionals. We’re there to help you get that first deal done. We’re not in competition for your long term financing. That’s your job. Typically, if you can come to us that our transactions going to lead to a secondary transaction, whether that’s a refinance into a long term rental, whether that’s they’re selling their property to somebody else, and that loan officer can get in front of them for another transaction. We’re here to assist the mortgage professionals.

Justin Stoddart
I love it. here to assist the mortgage professional not could be one. That’s great, right? Love that.

Morgan Smtih
And then realtors love that too, right? Yes more business closed. Gotta have financing to do it. Yeah,

Kody Wilde
yeah, and I think you know for realtors and mortgage professionals because we all have, we all have the daily challenge of being relevant. For the most part a lot of us sell somewhat of a homogeneous product, I mean a 30 year mortgage 30 year mortgage, a listing agent as a listing agent, they need to differentiate themselves. So what I like about these products for both the realtor and a mortgage lender, it’s like another set of tools in your toolbox that you can bring out for a specialty situation or it’s a great conversation starter when you go into a new office or your client Hey, by the way, I can do all that other stuff that everybody else does.

Justin Stoddart
Yeah, I’ve also got these options. Good stuff guys. How would somebody best get in contact with you guys? We can even put it up here on the screen afterwards but but like if somebody here in the really is it Oregon or Portland metro kind of what are the areas that you guys serve, is it Nationwide?

Morgan Smtih
we serve a nationwide footprint but our primary focuses on the five or six neighboring states so strong in Oregon, Washington, California, Arizona, Colorado, Utah, okay, we do most of our business there. We’re direct portfolio lending calm, very simple to get a get a hold of us online application. Anybody wants to fill one out? Pretty straightforward.

Justin Stoddart
I love it. Direct portfolio lending calm is how you run these guys. Getting in your back pocket again. Of the five closest states in and around Oregon here the Northwest, even down in the California kind of California. You see Nevada,

Unknown Speaker
Idaho would loan to Nevada, Colorado. You know, we’re looking for markets that are commerce for trenders I mean, we don’t before that we go to hipsters markets. It’s kind of true because we’re going to markets in which housing is changing right in Virginia, great marketplace for a Seattle’s been great Portland’s been great. Lots of California. Different parts of Texas have begun so we’re looking for for market that are

Justin Stoddart
that are improving. I love it. Yeah, that’s where the opportunities that equity is going up and so often make sense to partner on those deals. Right? That’s right. makes total sense. All right. A couple last things. These guys happen to also be family, men, fathers. And those that know me, well know that the reason why I do all of this right is to make an impact first and foremost at home. Secondly, in the lives of other people. So let me just each of you just quickly share to the microphone, if you would, your favorite part about being a dad.

Kody Wilde
Favorite part about being a dad. Well, first of all, just in pure isolation, so yeah, that upcoming book and a good trip down to meet with the Keller Williams group. So yeah, that’s, you know, you can read your book to the kids at night. Right. The best part about being a dad, I think it’s just being able to see right the kids grow and I have six children, five boys, one girl, three are already out of high school. And so, you know, it’s like everybody says the time goes way too fast, but it’s just great. You know, being able to see them improve and accomplish their goals and dreams and being part of that is, you know, it’s great. Nice partnership. Yeah.

Morgan Smtih
I thought I thought I had it tough with three boys Kody. Yeah, I would echo that sentiment. I mean watching them develop watching them grow. You know that’s saying it’s such conditional love and watch them at various parts of the development. It’s just fantastic. Love it. Great thing we do.

Justin Stoddart
So okay, final question. This is a signature question of the show you guys are big thinkers, you’ve provided a big solution to the marketplace. What do each of you do? Just Just to kind of have a few sentences, to be sure that you continue to be a big thinker to continue to expand your own possibilities and live a bigger life with bigger impact. What’s something consistently that you do against it to continue to think big?

Morgan Smtih
It’s a good question. Continually. I continue to look for ways to be more relevant and to be more relevant to this industry and to my partner. And it’s been an evolution in the mortgage business, the real estate businesses, continual evolution, and if you’re not changing and progressing, you’re dying. And so I just think constantly be looking for change and looking for the for the next opportunity. But staying relevant and paying attention to the markets is what I do.

Kody Wilde
I think a lot of it has to do with this business as far as being a relationship based. And so always expanding, trying to make new connections, figuring out who knows who I think that’s going to help, you know, Dr. Morgan’s point home is you got to be relevant as far as knowing what’s going on, and what are some of the challenges and being a, you know, a solution provider for those. And that’s, you know, that’s one of the things that I really like about going in and working with a client, especially if they don’t fully understand or this isn’t their bailiwick, you know, and we can come in and say, here’s a solution and really help them helping the guy right now down in Eugene out of a pretty tough spot. Consolidating some debt. He’s got a lot of equity in this property. But you know, it’s just, unfortunately had a lot of side sales so we’re able to put that all together it’s going to save him a lot of money month to month and getting some back where it can be you know doing the dad thing and

Morgan Smtih
you got to create value. I mean, anyone can bring a coffee cup and some post it notes to your office and tell you how great they are

Justin Stoddart
You’re speaking to the title industry. Hear that title reps? That’s why I’m here man. I mean, it’s

Morgan Smtih
Provide somebody’s ability to make money, right? Somebody the ability to close a transaction, provide somebody education, provide some some, something that’s can change their lives. I think that’s what makes us wrong. I love

Justin Stoddart
it. I love it. Great stuff, guys. I want to thank you both for coming into the studio today. fun to have you here to the bigger studio where we’re helping expand your possibilities. My final request of everybody listening in today, three simple words in there, GO THINK BIGGER. Thank you to for helping make that possible today. Have a great day, everybody.

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