To start the episode, Jason Hartman talks about gratitude and how it’s a philosophical key to success. He also gives his thoughts on Warren Beatty and Bitcoin. Then, he welcomes Jeff Ball to the show. Jeff is the CEO of Visio Financial Services and President of Econohomes. During the interview, he shares their company’s background, the types of loans they offer, and how their services differ from other financing companies.
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11, states had hundreds of tenants and been involved in thousands of real estate transactions, this program will help you follow in Jason’s footsteps on the road to your financial independence day, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:04
Welcome to the creating wealth show, Episode 599 599 This is your host, Jason Hartman. I am so thankful that you join me today. And I want to wish our listeners, our American listeners, but listeners around the world a happy Thanksgiving, Happy Thanksgiving to you, you know, even if you are not in the US, we have listeners, of course from 164 countries around the world, if you even if you are not in the US, you know, it’s good to be thankful, isn’t it? In fact, you know, the older I get, the more I realize that this concept of Thanksgiving, this concept of gratitude is, is really one of the keys to success. Oddly, it’s maybe almost counterintuitive, like it doesn’t think, you know, the keys to success would be you know, work hard, get educated, you know, find the right tools and the right people. And, you know, as Jim Collins said in the book, his famous book, good to great, you know, get the right people and get them on the on the bus going the right direction and put the right people in the right seats on the bus. And, you know, these are all like the sort of mechanical keys to success in life. But one of the philosophical underpinnings and I think, you know, we’ve lost these philosophical underpinnings a lot in today’s, you know, all the How to gurus out there. So few of them actually talk about the philosophical underpinnings of success. And that’s why I’m so grateful to have discovered Denis Waitley, Jim Rohn, Zig Ziglar, Earl Nightingale, and later Og Mandino and then Tony Robbins at a very young age, because they really discuss a lot of the the philosophy of success, the mindset, the attitudinal qualities, not that not the How to, but really the bigger picture that the context versus the content in which we can achieve success in life.
Now, our guest today we’ll be talking about we have Jeff ball talking about financing, investment properties REI or real estate investment financing. So we’re going to get to our guest in a moment. But just a few things before we do that, and I will first start with this subject of gratitude. Okay. And, and thanksgiving as I am getting on a plane today, so is Coco, my dog, she loves to fly, and we’re getting on a plane, and we’re flying out to see my mom and family for Thanksgiving, and do that kind of thing. But, you know, I was I was thinking about it. And I was reminded of this wonderful, wonderful poem. I guess it’s a poem that I’ve shared with you on the show before many years ago, but not lately. Not for a long time, for sure. And I know, many of you dutiful listeners, thank you so much. You know, when you discover the show, you go back and you listen to the last 300 episodes, you know, getting in Well, now you have like 600 to listen to, by the way, but you go back and you listen to them. So you may have heard me talk about this before. But it’s this great poem that I remember, when I discovered it in augment the late Og Mandino’s book, Mission Success, which is out of print, it’s hard to find. But this little five minute poem that’s in there called the seeds of success can teach us a lot about gratitude and why gratitude really is one of the keys to success. And that’s what Thanksgiving is all about. In thinking about this, you know, no matter where we are in life, we can be thankful we can be grateful about something.
I remember, maybe, I don’t know, eight years ago or so, or maybe even 10 years ago now, time flies when I was in South Africa. And we were I was with young entrepreneurs. Organization there. And part of the trip was to go on an African Safari and we stayed at this gorgeous resort. What was it called, again, lions, something I don’t know, I can’t remember the name of it. But it was this beautiful resort, where, you know, on your bed every night, you know, they would lay out different shapes in rose petals on your bed, you know, it might be a hard, it might be a lion or something. I mean, it was just amazing. It was a gorgeous resort. And you know, the animals would come right into the resort, it was, you know, it was amazing. And we would go out on safaris. And you’d have to get up really early in the morning or go at twilight, that was the best time to see the animals and hopefully, see the big five on safari. And so we got in the jeep, and, you know, the Jeep was open, and it would totally amaze me that, you know, you’d have these very dangerous animals right next to the jeep. And the Jeep was not enclosed, you know, they could jump right in the jeep and Maul you to death. And it was, it was rather uncomfortable. But they all said as long as you stay inside the Jeep, you know, the animal doesn’t want to mess with the Jeep, they were scared of it. And the driver had one primitive bolt action gun, a rifle. And he had it up next to him. But he didn’t keep it very close, you know, just in case he needed it. And I remember that, one of the days that we weren’t on safari, myself, and another person on the trip, went with the driver, our Safari driver, and he showed us where he lived and he kind of took us around town and you know, outside of the resort. And this man literally lived with his family in a hut that was probably like a mud hut. I don’t know exactly what it was made of, with a with a thatched type roof, and a dirt floor. And he showed us around his his little accommodations and his little village in which he lived. And he said the big challenge was that they were trying to build a well, so that they could get water. And and here this man that drove us around worked at this gorgeous high-end resort. And yet, he seemed very happy and grateful for his his place in life.
Now, I’ll bet you that all of you listening, do not live in a mud hut with a dirt floor where it’s difficult to get fresh water where you have to go get your water in a bucket and bring it along way to your little mud hut with a dirt floor. You know, we went right inside it I met his family and everything and you know, took pictures and just couldn’t believe it. You know, I mean, this is perspective, right? So Og Mandino in his Mission Success, I’ll just share a couple little parts of this poem with you called the seeds of success, that when I discovered it, I got it on cassette tape, and I used to listen to it every day, many, many times a day, just the little five minute part. I would keep rewinding it and listening to it over and over. And part of it I’ll just read a couple excerpts real quick before we get to our guests is it goes, I will treasure this day. For it is all I have. I know that it’s rushing hours cannot be accumulated or stored like precious grain for future use. I will live as all good actors do when they are in stage. Only in the moment. I cannot perform at my best today by regretting my previous acts mistakes or worrying about the scene to come. And now skipping ahead, he says just as any gem is polished by friction, I am certain to become more valuable through this day’s adversities. And if you close one door, you always open another for me. Then he goes on to say I will treat today as a priceless violin. One may draw harmony from it, and another Discord. Yet no one will blame the instrument. Life is the same. If I play it correctly, it will give forth beauty. If I play it ignorantly it will produce ugliness. And then skipping almost to the end. He says, I will work this day with all my strength, content and in the knowledge that life does not consist of wallowing in the past, or peering anxiously at the future. It is appalling to contemplate the great number of painful steps by which one arrives at a truth sold. so obvious and so frequently expressed. Whatever it offers, little or much My life is now whatever it offers little or much My life is now and Wow, those are powerful words. See if you can get the book mission success. You can get it on print Audio potentially it’s pretty much out of print, it’s hard to find it is on Amazon, they probably got some old copies, you can buy us. But it is an incredible little book and amazing story. So, so that I think is ties in well with the Thanksgiving message. So happy thanksgiving to all.
Before we get to our guests, a couple of interesting news bits and two predictions I made, which have come true. Now. I have a question for you. Would you like the serious prediction, or the fun and funny prediction? Which one should we do first? Hmm. How about the Well, how about a friend let you decide which one is serious and which one is it? Okay. I predicted this. And it came true. Two things here. I predicted them come true in the news just a couple of days ago. Number one. Carly Simon. Yes. Carly Simon. The singer Carly Simon. Well, she wrote this famous song. And it’s got these incredible hilarious lyrics. Okay. And she has never told anybody who the song was about what very vain man in her life. She wrote the song you’re so vain. What who was it about? Everybody’s been wondering? And years ago, she actually raffled off the secret at a charity auction and someone bought it for a lot of money. I can’t remember how much but I mean, it was a lot of money. I think, maybe over a million dollars. I do not remember, search it and you can find out. But that person who who bought the secret did not disclose. Well. Carly Simon, just in the news two days ago, said that one, she wrote the song about three, three of her former men in her life, okay. And one that I predicted was Warren Beatty. So there you go, boom, another prediction come true. Okay. Who cares? Right? That’s what you’re thinking. Seriously, though. Bitcoin. Here is another prediction that I made. You know, all of this talk about cryptocurrencies, alternative currencies, cyber currencies? Well, Bitcoin being the most famous of those is under fire. And Business Insider article just a couple of days ago, says Europe is going to clamp down on Bitcoin, to try to stop terrorism funding. So certainly in the wake of the awful tragedy in Paris, where Muslim extremist killed, what was it 129 people a whole bunch more very seriously injured. And, you know, I don’t know what the latest toll is on that. But it’s an awful, awful attack. And so, you know, these terrorist organizations are using these alternative currencies as payment methods. And so the EU, the European Union is cracking down, they’re going to strengthen controls on what they call non banking payment methods, such as electronic anonymous payments and virtual currencies, and transfers of gold, precious metals and prepaid cards, like those gift cards and so forth.
So, folks, once again, another one of my predictions is coming true. You know, we’ve got to align our interest as investors with the most powerful forces the human race has ever known governments and central banks, these you know, even if we disagree with them, they have the power and we are going to do very little to change it. Again. Fascinating. When you talk about inflation, when you talk about deflation, stagnation, economics, monetary policy, fiscal policy, it all relates to what I just told you about Bitcoin. The safest bet, still, in my humble opinion, is our ultimate investing equation. The strategy part of that ultimate investing equation is to accumulate high quality, long term fixed rate investment grade debt against commodities, commodities, the ingredients of these houses and apartments we buy copper wire, glass, steel, lumber, concrete, petroleum products, these commodities finance with three decade long, extraordinarily cheap, possibly negative interest rate, fixed rate debt. Okay. So that’s our part of our ultimate investing equation, proving once again, to be the path to success as a real estate investor as an income property investor.
So, couple events coming up. Of course, we’ve got meet the masters of income property coming up in January in beautiful San Diego, California. Come out for that register at Jason Hartman Come, we’ve got our venture Alliance trip to incredible gorgeous, beautiful Dubai, the gem of the world, literally Dubai. That’s only about what is that about 82 days away, I think, go to venture Alliance mastermind.com venture Alliance mastermind.com. And check that out, you can see a great video and a countdown timer there of the event. And we are making our travel plans for Dubai. And you can join us as a guest if you are not a venture Alliance member. So check that out, and a better way to communicate. So I want to share with you all a million-dollar productivity tool, the killer app, if you will, the killer app. What is the killer app? Well, I think it’s Voxer, V O X E R, and I want you to be able to as listeners, ask me questions that I will air on the show and answer on the show through Voxer. So this is a great little tool. And, of course, you’ve always known you can go to Jason hartman.com, you can send me a voicemail message there. And I will answer those questions on the show. But that doesn’t give the opportunity to number one speed up the message if you’re talking slowly and our listeners are losing patience. With Voxer I can play your message at double speed. And I know some of you listeners do that with my podcast too, by the way, but I talk pretty fast. So the average person talks at 150 words per minute. And a very fast typist can only type it about what 80 words per minute, that would be considered a really fast typist, and I type it about I don’t know, 15 words a minute. I’m terrible hunt and peck method. Awful. Okay, so voice communication is the best way to communicate. Remember, in the old days when we used to use our voices, and we used to actually talk? Well, I want to encourage more talking and less typing, so that we don’t spend our lives looking at computer screens. So download the Voxer app Vo x er, it’s free in your smartphone app store. And send me your questions for the show on Voxer in voice format, you can use it for text, but it’s built for voice. And you can connect with me at Jay h A rt 88 j heart 88 and ask a question that will be aired on the show. The nice thing about this is we can have a little conversation. So if I need to to clarify something, I can ask you on Voxer then you can answer that I can answer the question better, because there will be a two way non real time conversation. And it’ll work much better for the show. I can play that whole conversation thread for the listeners. And whatever question you have, believe me. Other people have those questions too. So you are a contributor to the knowledge base of all of our listeners a contributor to the show. So download that connect with me, Jay Hart 88 on Voxer and ask your questions to be aired on the show there. Let’s go to our guest and talk about real estate investment financing. Happy Thanksgiving to everyone. Here we go. Here’s our guest.
It’s my pleasure to welcome Jeff ball to the show. He is CEO of Visio financial services president of econo Holmes, former Global Head of semiconductor investment banking at JP Morgan. Jeff, welcome.
Jeff Ball 18:36
How are you? I’m doing well. Thank you for having me.
Jason Hartman 18:38
Good. I’m really excited to have you on the show today to talk about one of the big challenges for real estate investors and that is financing. It used to be so easy, but maybe that was the problem. That’s why we had subprime crisis, obviously, because it was way too easy. And then it got you know, after the crisis, the banks, I think they just overcorrected. And it just got too hard. I think investors make a huge contribution to rescuing the housing market. But oddly, the government, the banks, of course, they’re in bed together. You know, they’ve put up a lot of roadblocks and they made it really hard for investors, especially foreign nationals, Ira investors, and those people with more than 10 Fannie Mae or Freddie Mac or agency loans, your company offers some some other financing options. So we definitely want to hear about that. Tell us a little bit of the background if you would.
Jeff Ball 19:36
Sure, Jason. So yeah, we founded VFS, really as a side business initially, to finance properties that we were selling from economy homes and economy homes had bought and sold about 11,000 single family investment properties around the country. And one of the things that we noticed was that you know, for properties, inexpensive properties, sub $100,000 properties, the financing, alternatives were essentially non existent. And so we initially started out as a captive lender to homes that we were selling to small investors around the country. And then we extended into providing financing on properties that investors were buying from other sources, including government sponsored, whether it was Fannie or FHA properties, HUD properties, and even in private transactions. And we also started to provide cash-out financing as a way to provide investors additional liquidity to fund their small businesses, investing in real estate.
Jason Hartman 20:44
Give us a little bit of an overview of the types of loans you do and what makes you unique. And I want to drill down if we can into, you know, rates terms, however much you want to say. But you know, try it try and get specific, and of course, all listeners should know, this is definitely subject to change, it’s at the time of recording, you know, tell us a little bit more about that.
Jeff Ball 21:05
Yeah. So our product family, really family break into two components. The first would be very short term financing, which is really 12 months or less, and we have an interest only product. And that product is really designed for either investors who are doing a primarily doing fix and flip or they need short term bridge financing. Then on this, on the other side, we provide medium-term financing, which is usually a 10, or 15, or 30 year amortization. With a three-year balloon. That product is designed for folks who are interested in building a rental portfolio. And over time, we’re aspiring to offer longer term financing not a three year balloon, but maybe a five or a seven or even a full 30 year loan product. That those loans amortize the shorter-term loans are interest only. Really what differentiates us is we are a no dock lender. So we use credit scores to provide tiered pricing. We have really three tiers of pricing. But we do not require income verification, asset verification, we do not require reserves, we don’t require tax returns, or those sorts of things. So we differentiate ourselves on the speed and simplicity, and the dependability of our financing. And so that’s how we’ve positioned ourselves in the marketplace.
Jason Hartman 22:45
Okay, so let’s take one of the categories. You talked about rehabbers, and people who are fixing and flipping, I believe, and then you talked about the buy in holders, would that be the two basic categories?
Jeff Ball 22:57
Jason Hartman 22:58
Okay. So let’s talk about the buy and hold, which is, you know, I’ve always said, Jeff, oh, over the years that I’ve been in this business, the people who flip properties, they have spending money, the people who buy and hold have real wealth, and and they’re both good, definitely. But the real wealth is even better than spending money. You know, what do you offer for the buy and hold investor? You mentioned the three year balloon and that’s, that doesn’t sound so great. But fill us in.
Jeff Ball 23:22
Yeah, I think so our customer base is really it’s it’s differentiated from some of the folks who are in the marketplace who are providing something much closer to, you mentioned Fannie financing. There’s some large players such as you know, B to R and colony and Subarus first key who are out there, providing long term financing, but those are largely fully underwritten loans, with lots of requirements around. In many cases, the property must be leased. In many cases, the property must be managed by a licensed property manager. In our case, what we’re offering is financing that is, again, done on a no doc basis to an investor. In some cases, these investors have very strong credit. But the property isn’t leased. Or it’s possible, as you’d mentioned, they’ve, they’ve hit the limit with Fannie and they don’t meet some of the other requirements of some of the other capital providers in the market. So that is, that’s where we fit in.
Jason Hartman 24:33
So let me just make a comment if I could on that, you know, we’ve had many clients go to B to R, and they were very excited. And then the reality struck that it was just a lot harder than it looked. And I hear that they’ve had their growing pains and they are figuring it out and making it you know, and think things are getting better in terms of actually funding deals. You know, we’ve definitely heard heard some concerns. They do offer some great programs, you know, offering them and actually getting the Funded or sometimes two different things. But you know, you did mention that. So did you have further comments on that in terms of the fully underwritten versus your program?
Jeff Ball 25:09
Yeah, so the only thing I would say is what you just described as a very real issue for investors, that uncertainty of that process of getting that financing, if they’re seeking that financing, it’s usually they’re seeking that financing, because they have other deals that they would like to do. And so the uncertainty of whether they’re going to make it through that much more documented and more difficult process actually interferes with, in many cases, their ability to execute on deals that they see in front of them that they want to do. So that’s a that’s a place where we fit in our financing is not designed for the investor who is working to optimize their capital costs and who are looking to shop, you know, multibeam across bank and some of these larger capital providers. Our capital is designed for those investors who are looking for, you know, very certain capital that they have very limited requirements in order for them to get it.
Jason Hartman 26:13
Let’s talk specifically about the terms. So if someone came to you today, and wanted to do a buy and hold property, we’re just talking about one property, we can talk more about portfolios of properties as well if you want but say they just want to do one buy and hold deal, or they want to do them one at a time as they’re building a portfolio of you know, 10 20 single-family homes, whatever. What is the loan to value ratio?
Jeff Ball 26:34
Yeah, so on a purchase, we require a 35% cash down payment.
Jason Hartman 26:39
Okay, so that’s a that’s a 65%. LTV or loan to value ratio. Okay, on a purchase.
Jeff Ball 26:45
Yeah, 65% LTV and then it’s typically going to be depending on on the credit tier 3 points and about 12%.
Jason Hartman 26:58
So don’t panic people on those rates. Hang on a second, we’ll talk more, okay. And that’s a buy and hold purchase? It’s going to be a 12%?
Jeff Ball 26:07
Jason Hartman 27:08
That’s not bridge financing. That’s not short-term hard money type stuff.
Jeff Ball 27:11
That’s correct. But again, this is, this is a no doc loan.
Jason Hartman 27:16
Okay. But you do check credit just no other docs.
Jeff Ball 27:18
We check credit, but no other docs. The property does not have to be leased.
Jason Hartman 27:23
Okay. So it can be vacant.
Jeff Ball 27:25
Yep, it can be vacant. So you could have purchased it with the goal of leasing it. And
Jason Hartman 27:32
Well, one, one distinction. We are talking purchase money right now not refinance, right?
Jeff Ball 27:37
Jason Hartman 27:38
Okay. So this is being purchased, you know, it, probably not least when it’s being purchased. And you know, initially, most of the time, at least. What, tell us about the term though, Jeff, you said it’s a three-year balloon. What, what does that whole term look like, the rest of it?
Jeff Ball 27:53
So the longest term, and we’ve got is a 30-year amortization, but it’s due in three years. So your payments are being calculated on a 30 year AM. But then obviously, at the, you know, on the at the end of the 36 months the loan is due.
Jason Hartman 28:10
It’s just due, it’s not adjustable, or
Jeff Ball 28:13
Jason Hartman 28:14
Now, what about, what about Dodd-Frank compliance? That’s a fairly short fuse. Only three years there.
Jeff Ball 28:19
When you say Dodd-Frank compliance. With more specifically, what are you asking?
Jason Hartman 28:24
Well, you know, they don’t Dodd-Frank doesn’t like balloon payments, you know, so I don’t I don’t know. You know, I mean, I’m no expert on the 2700 pages of Dodd Frank. Okay. I mean, nobody is. It’s absurd. But you know, they don’t seem to like those balloons. But when it’s a, you only loan to investors, so if it’s not a homeowner, you probably are okay, there, I assume. Okay, so what else should we know about this loan, the purchase money buy and hold loan.
Jeff Ball 28:54
From a purchase money buying a whole bone, I think that gives you a good sense of the basic terms of that. So our objective over time is to reduce our terms, particularly our rates to investors, and to extend out that balloon either eliminate that balloon, or at least extend it out to five or seven years, because that’s financing, as you said, it’s a that three years is a relatively short fuse. In many cases, our borrowers have credit scores, maybe in the mid six hundreds, which they’re seeking to improve their credit score over time, and then refinance that loan with, you know, a less expensive loan. So for us, it’s, it’s really our capital, our terms that we offer to the market are largely tied to the the terms available to us. It’s through our Capital Partners. And so as we
Jason Hartman 29:54
And by the way, that’s a good, a good side note. Where are you getting the money?
Jeff Ball 29:58
Yes. So for us, our capital has come from a combination of high net worths, then we moved to hedge funds, then we added in bank financing. And so today most of our financing comes from bank financing. And then also some credit funds in the marketplace who are seeking to provide capital into the market but don’t want to build their own origination platforms.
Jason Hartman 30:27
What about the refinance version of the buy and hold refinance or not buy hold but property or holding and you want to read, you know, this is good for someone who maybe bought the property with cash. And they got these properties at cheap prices a couple years ago, and now the prices have gone up. And refinancing makes a lot of sense. How’s the refi look on this? And then let’s talk about the bridge financing.
Jeff Ball 30:48
Yes, the refinancing, that the primary difference is the maximum today. For us, the maximum loan to value is 50%. So we’re conservative on cash-out refinance.
Jason Hartman 31:03
But, but it can Yeah, it’s cash out. Of course.
Jeff Ball 31:05
That’s right. So that’s, that’s the primary difference in the product is just a lower, lower LTV.
Jason Hartman 31:13
And to get that phenomenal. I’m being sarcastic with you. That phenomenal 12% interest rate, what, what kind of credit score’s required.
Jeff Ball 31:21
So we break it into three tiers. For us, a top-tier borrower is 700, or better. And then the next tier is from 700 to 620. And then, the the lower tier is from, from 580 to 619.
Jason Hartman 31:44
And how do those rates differ, say just go down a tier and tell us about the next interest rate and points with another?
Jeff Ball 31:50
So we go something like 12, 14, and then 16.
Jason Hartman 31:54
What about bridge financing? How does that work?
Jeff Ball 31:57
So the bridge financing is an interest-only product. And as I said, it’s, you know, we offer it up to 12 months. Again, the primary differentiator for us in the marketplace is that it’s a no doc loan, where we use credit score for tiered pricing. And so that’s, again, for some investors, the fact that it’s no doc and it’s offered both in a purchase form, as well as in a cash out refi form, that that loan product is very simple and easy for them to use. And so we do not provide traditional after repair or ARV lending, we do not provide financing. And what I mean by that is we do not provide financing of repairs, we either fund the purchase of the property and again, we require a 35% cash down payment, or we offer that product in a cash out structure with a 50% advance rate. And so one of the innovative way that’s that our customers use our products are is they’ve bought a property, they’ve renovated the property, they’ve actually got the property on the market, they’re trying to sell the property, and they have their next deal that they want to do. And they need cash out of that that completed property to buy their next deal. In many cases, you know, finance ears will not finance a property that is currently on the market, we can do that loan very quickly. Because it’s a no doc loan, we need credit, we need an appraisal on the property, they can get their cash very quickly. And that allows them to actually start their next deal while they’re waiting for the price that they would like on the property they have on the market.
Jason Hartman 33:50
Rates, terms? Other features of that product?
Jeff Ball 33:53
Rates and terms are very similar. To the longer term, again, because it’s being driven by the capital that we have available to us. So we’ve, the lowest rate that we offer, for a top tier borrower on that short-term loan is 10.99.
Jason Hartman 34:11
You’re pretty conservative and concerned about inflation risk, obviously, because when you first said when we first talked about that buy and hold program, it sounded like hard money. I mean, I make loans like that all the time, you know where I’m loaning it, you know, 12 and a quarter percent couple three points, maybe six-month term? You know, I do I do all the payments at the end. I don’t want to calculate any payments or receive any payments. I just, you know, take it all at the end. But yeah, interesting. Okay, so I just got to ask you, do you feel that we’ve talked enough about your loan programs and so forth? Is there anything else you want to say there because I would just like to close by talking to you about real estate investing in the market in general for a moment.
Jeff Ball 34:51
Yeah, no, I think that gives folks a pretty good overview. The, the, what I would encourage folks to do, to the extent that they’re interested in understanding more about what we offer to them. On our website, we actually have a very innovative, you know, we call it our product picker, but you can actually go in there and you can describe, you know, what are you interested in doing, and tell us as much information as you want. And our system will actually tell you, here’s the loan product that is available to you, here’s what the payment would be in. So it gives you the ability to do to run your own scenarios with, you know, a real-life financier that, you know, has capital available to lend out.
Jason Hartman 35:33
You know, you’ve got a lot of experience around finance, I mean, you know, semiconductor investment banking experience, JP Morgan. You will, what’s your outlook for the economy and the real estate market in general?
Jeff Ball 35:44
Yeah. It’s a timely question. We’ve actually been going through a planning cycle here at VFS and asking ourselves a lot of those same questions. So I think I would break it into a few, you know, a few components, I would say, overall, my view on the economy is, you know, when I look out over maybe the next two years, I think it’s, I think it’s going to probably be a relatively steady as she goes, environment. I think employment. If I think about employment, inflation and interest rates, you know, I think the employment picture is going to remain relatively stable. We’ve seen some softness, but I don’t see major bumps on the horizon there. From an inflation perspective. You know, I think, I think inflation is going to remain relatively muted. And I think so from an interest rate perspective, I’m certainly expecting, it’s more likely than not that we will see some some rate increases over the next two years. Whether that will translate into, you know, a direct correlation to what happens to mortgage rates, I think it remains to be seen, you know, mortgage rates have bumped here, I think, in anticipation of that. And I think when you go back and you look at, you know, as the Fed brought rates down, you know, the feds actions and mortgage rates decoupled at one point, so I’m not sure they’re, it’s directly correlated, as they might be within, you know, certain higher bands of rate of interest rates and mortgage rates. So from, from our perspective, I think we believe supply of real estate is going to remain relatively tight. And I think that’s a function of as rates do move up, at least some, it becomes more expensive to buy homes, which I think puts some pressure on on housing prices. And I think it it just basically means the velocity of homes, I think will remain relatively muted. So for investors, I think that means you got to pick your deals wisely. There’s, there’s less margin for error.
Jason Hartman 38:01
You always have to do that. Now, let me, let me make a distinction, though. When you say for investors, you’re talking I mean, picking your deals wisely is a lot more important if you’re a flipper than it is if you’re a buy and holder, you know, you really have like no margin for error if you’re flipping something, because you know, the chickens are gonna come home to roost really quickly. You know, those deals? I just wanted you to maybe define investor when you say that.
Jeff Ball 38:28
Yeah, I would agree with that. I think, you know, maybe three years ago, you could, there was more margin for air and flipping than there is today. There’s not much
Jason Hartman 38:37
Definitely. That margin is compressed.
Jeff Ball 38:39
That’s right. So I think that favors, that favors folks who are, you know, potentially doing this as a much larger part of what they do, in terms of our survey data suggests, you know, at least you know, more than half of the investors out there are part time. So I would say this is an environment increasingly where for flipping, it’s favoring professional flippers. On the buy and hold side, I think there’s there’s every reason to believe that rental demand is going to continue to increase. Some of that is a function of personal choice. I think there are a lot of folks who have come to understand that renting is actually potentially a good solution for them. Some of it is some of its necessity. When you look at what’s happening overall to demographics and real wages and those sorts of things. Some folks just it’s going to be very, very difficult for them to ever buy a home. To gather the downpayment and to meet the underwriting requirements. So I think it’s a it’s a phenomenal environment to continue to buy properties to build a rental portfolio. I think it’s hard to find those properties.
Jason Hartman 39:49
I want to ask you if you are as bullish as I am just on this part of the, the concept of investing. I think that we may be living at the best decade ahead of us in history, for rental housing. I mean, with the student loan debt problem with Generation Y, seeing their, a lot of their parents get burned in the housing market with that mobility being the best thing you can have on a resume with the fact that Generation Y, you know, the millennial generation is the largest demographic cohort by, you know, by about 4 million in American history. I mean, there, there are just so many factors that make this such a good time to be a landlord. You know.
Jeff Ball 40:37
I agree. I think I completely agree with that. And I also think one of the interesting dynamics. So I think the demand side is very attractive, as I’ve already said, I think it’s, you know, it’s not going to be easy to acquire properties, to turn into rentals. Because there’s, I think the velocity of homes is a little bit stifled for some of the reasons I outlined.
Jason Hartman 41:03
You know, we talk a lot on the show about the velocity of money. When you say velocity of homes, you just mean, inventory? Or what do you what exactly do you mean by that? Maybe?
Jeff Ball 41:11
Yeah, I think it’s. So in my neighborhood, I live in Austin, Texas. What I see is, folks don’t sell their home, because if they sell their home, they’re not sure where they’re going to buy their next home.
Jason Hartman 41:25
But to be fair, though, you probably live in a pretty high-end neighborhood. I mean, that’s not an investor neighborhood. I don’t think. But I don’t know you so.
Jeff Ball 41:34
No, that’s, that’s correct. But I do think there is the dynamic of folks are reluctant that that phenomenon I just described, I would agree is isolated to certain markets, where folks are concerned, if I sell my house, am I going to be able to find another house to buy. But I do think that there is also the phenomenon of people are in their house, they’ve got a phenomenal mortgage rate, they’re uncertain about their job prospects, even though they’re working, they’re not certain about the stability of that, and therefore, they’re not going to upgrade to the next house. And so we don’t have people kind of moving between the strata of housing.
Jason Hartman 42:12
So that’s, that’s an interesting thing. I think you said something that’s very important there. And I I’ve definitely given it a lot of thought. And that is that people with these really comfortable, great mortgages. They’re like the same people, Jeff, that are living in rent-controlled apartments in New York City, in San Francisco. They may want to move, but their deal is so good, that they just can’t make it make sense, you know, to lose that great mortgage they have.
Jeff Ball 42:42
I would agree. And I think that issue only becomes more pronounced as, if rates move up. I guess I won’t presume that rates move up. But the more rates move up, the the the stickier the existing home becomes.
Jason Hartman 42:59
Sticky is a good way to describe it, by the way.
Jeff Ball 43:02
Yeah, I grew up in Northern California. And, you know, in California, they have this odd, you know, state law that, that at one time kind of essentially fixed property taxes. As a result, no one moved.
Jason Hartman 43:13
Yes. Well, you mean prop 13 in 1978. Good old Howard Jarvis.
Jeff Ball 43:17
Jason Hartman 43:18
Yeah, it you know, I, I would submit to you, by the way that and I don’t think I’ve ever said this on the show, but I’ve definitely thought about it, you know, for decades now. But if we did not have proper, I’m in La Jolla, California, by the way, okay, spent most of my life in Southern California. If we did not have prop 13, in California, this real estate market would have never appreciated as much as it has. Because if you compare it to high tax jurisdictions, you know, Texas is fairly high property tax for sure. You know, New Jersey is disgusting. Illinois is pretty darn high, too. You know, you compare it to these jurisdictions. I think that’s one of the things that kept those prices from appreciating like crazy in the fluffy markets where, you know, everything’s going nuts. You know, the, I think the property taxes put a bit of a damper on appreciation in those markets.
Jeff Ball 44:05
That’s an interesting point, because you’re right, property taxes here in Texas are pretty extraordinary. And I think they do put some, some, some cap on it.
Jason Hartman 44:14
But you know, it’s such a business-friendly state, and the tenants feel like they’re getting away with murder, because they don’t pay state income tax, and they don’t pay property taxes, but really, you know, it passes through the rents are higher than other markets, we do business in. You know, we we know, everything’s a pass-through entity ultimately. So, you know, forget about taxing the rich and taxing the corporations, all they do is pass it through. Okay. So, you know, good stuff will very interesting conversation. Is there anything I didn’t ask you that you just like to say, you know, any outlook on the economy or real estate market or anything in general?
Jeff Ball 44:49
Yeah, not the only other thing I would share with folks is, you know, having bought and sold so many properties at a con of homes, we built a very, very large database of small investors around the world. So we do an annual survey to try and get understand an understanding of what are investors doing out there. And it has some good demographic data in it. It has some good information about what our investors outlooks for the coming year. So that is available also on our website. So folks, just you know, search for Vizio financial services, they’ll find that it’s a very high quality document. And so I just like to make that content available to folks.
Jason Hartman 45:27
Excellent. Well, Jeff Ball, thank you so much for joining us.
Jeff Ball 45:30
Thank you for having me.
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