Maximizing Returns with Real Estate Investment: An Interview with Ryan Jones – Real Estate Real Fast EP15

Summary

Aaron Jistel and Ryan Jones discuss the current real estate market, loan products for investors, cash out rule changes from Fannie Mae, debt service coverage ratio loans, interest rates, and home equity lines of credit. They also talk about how to buy and sell real estate during the current housing market for investors and Ryan’s unique dome property in Texas.

About Ryan Jones

Ryan Jones is an experienced real estate investor and mortgage specialist. He has been in the mortgage industry for nearly a decade, starting at Quicken Loans in 2015 before relocating to Texas and working side jobs while managing his business. He’s currently a branch manager for Security National Mortgage Company and has built a successful portfolio of investment projects. 

Ryan has a unique property – a dome on an acre in Lago Vista – which he purchased in 2021 for $345,000 and rehabbed for $80,000. He used the ‘BRRRR’ method (buy, rehab, refinance, rent, repeat) and has recently focused on creative financing options such as subject to or owner financing. Ryan is also part of the Investor Underground networking group in Austin.

Highlights

1. Ryan Jones’ real estate projects and how he finds, analyzes, and manages them.
2. Tips for finding real estate deals, such as joining Investor Underground and looking into subject to deals
3. Mortgage rate discussion and how they have been volatile recently.
4. Loan products for investors with the cash out rule change from Fannie Mae, how debt service coverage ratio loans (DSCR loans) can help.
5. Current state of interest rates and home equity lines of credit
6. Ryan Jones’ interesting dome property in Lago Vista.

Takeaways

[00:03:45] Aaron Jistel talks to Ryan Jones about his unique AirBnB in Lago Vista, Texas 

Ryan Jones talks about how he was able to find a unique property in Lago Vista, Texas that he was able to purchase for a great deal and then turn into a successful AirBnB. He talks about how he did his due diligence and what he did to increase the value of the property.

Ryan also discusses what the appraisal process was like on this unique property.

“I wanted to buy something that is run down or needs work, increase the value on it by doing rehab and then refinance out of that project. I did all my numbers prior to looking at it. You always want to do your due diligence to make sure that you can execute that BRRR method. 

To get into a unique property like that and then turning it into an AirBnB, that’s cash flowing almost $100k a year. You know, I’ve made my money back the first year.”

[00:11:17] Where to find good real estate investment deals and how you can be creative to get deals done

Ryan Jones talks about how he found the real estate deal in Lago Vista he recently closed and offers advice for others looking for deals. He recommends joining Investor Underground, a network of thousands of real estate professionals which allows members to connect and learn from one another. Additionally, Aaron suggests looking into ‘Subject To’ deals and other creative financing options.

“I think we’re going to be seeing a lot of creative financing happening. We’re already seeing it on [ListingSpark] listings right now. We’ve got just over 500 listings right now in every different stage of the process, whether that’s active, pending, or whatever. And we get probably get at least 20-30 offers a day that are offering creative financing to a seller that may be on the market for a long time, that are saying, ‘I’ll buy your place, but it’s subject to you leaving the underlying mortgage in place’, or ‘I want you to owner finance me a portion of it or something like that.’”

[00:13:42] Market update: What to expect in 2023

Mortgage rates have been volatile recently and it’s hard to predict where they will go. However, there is hope that the market will stabilize in the coming months. Buyers are learning to adjust to the new conditions and sellers are seeing patience pay off. Investors must be strategic about their purchase price in order to maximize their returns.

“It’s tough to say where we’re going to be. I think we’re going to probably see a pretty tough year with interest rates overall, but I think that it has to come back to normal eventually.”

[00:21:07] The impact of higher interest rates on the housing market

Ryan and Aaron discussed the impact of higher interest rates on the housing market. They discussed how lenders are creating programs to help with interest rate reductions, such as the two one buy down program, in order to help buyers alleviate the higher interest rate. They also discussed the appraisal process and how it is changing values in the market in real time.

“Houses are sitting, so it’s been tough for flippers from what I’ve been hearing. We’re getting a lot of refinance calls, so I know rates are higher, refinances slowed down. But for me, working with tons of investors, I’m doing a ton of refinances. People are trying to get out of their hard money loans, their high interest notes. The consensus is they’re looking for plan B and they’re going to wait until the market cools off and turn it into a rental.”

[00:27:58] Popular loan products for investors following the cash out rule change from Fannie Mae

Aaron Jistel and Ryan discuss loan products for investors. Ryan talks about the cash out rule change from Fannie Mae, debt service coverage ratio loans (DSCR loans), and how DSCR loans are becoming increasingly popular for investors.

“Come April 1, Fannie Mae is now changing their guideline to a twelve month seasoning, it’s going to put some hurt on BRRR investors. The good news is DSCR lending still has a six month seasoning.

So debt service coverage, ratio loans, it’s a commercial loan. If you don’t know what that is, we qualify off of rental income. So as long as the rents cover the mortgage payment, then you would qualify for that loan product and you can close it in your entity name.

So conventional loans are out of investments for a while and people are going to have to start resorting to the DSCR loan if they want to do the BRRRR method.”

[00:32:06] Interest Rates and Home Equity Lines of Credit

Ryan Jones and Aaron Jistel discussed the current state of interest rates and home equity lines of credit. Ryan shared his insight on where he hopes to see interest rates go this summer while Aaron discussed the various factors, such as market sentiment and tensions in the world, that could influence interest rates.

“I think what we’ve been really battling with is we’ve got so much craziness happening in the world. Then you compare that with being in the off season of real estate, getting through the winter, coming into the first quarter of the year. So I think a lot of people feel like they’re just kind of waiting around for summer, which tends to be a little bit of a hotter time in the market and hope that’s going to juice some of the numbers.”