Creative Financing Strategies for Your Assisted Living Business with John Neufer

Transcript

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Hey friend, it's Brandon Gustafson. Today we're going to be talking a lot about financing, how to how to get financing. I know this is a big question that a lot of you have. So, if you're interested in learning about financing and how you can actually finance your assisted living investment, stick around for today's video. Hey friend, I'm Brandon Gustafson. I help first-time assisted living entrepreneurs launch profitable, purpose-driven businesses, creating prosperity, purpose, and peace in their lives to

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help them reach their goals and create time and financial freedom. So, super excited to hop into our podcast today. Today, I've got with me John Newfer with New Finance. He is a he does private money l. It's a lending broker, does some things around just kind of like being a bank to help you as you're trying to secure funds to launch your assisted living business. And this is one of those things that I know that so many of you express just like concern over. You know, you don't know how to

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get started. You don't understand licensing. And the other big one is you don't understand financing. And so I wanted to get John in here and chat about it. So John, go ahead and introduce yourself, tell us a little bit about new finance, what you guys do, and yeah, how how we can kind of contact you as well. And we'll get to that a little bit more at the end, but put it here at the beginning as well, so people will know how to get to you if they can't stay to the end. >> Absolutely. Thanks for having me on,

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Brandon. Um, again, my name's John Newfer and I'm really excited to be on this podcast today with Brandon because, you know, I've been looking at assisted living a lot myself investing. So, I have a lot of questions for you today, Brandon. But, yeah, in my dayto-day line of work, we see a lot of residential assisted living requests in what we do. Um, and just a little context to what we do, we are a private money lender and broker. So, we do a little bit of both. If the deal is right for us, we lend on

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it. And if it's not right, we still want to help our clients. So, we'll broker the loan out. And yeah, we have some fantastic residential assisted living products available to those type of investors. I'm just happy to be on the podcast with you, Brandon, today. And I'm sure we'll dive a little bit deeper into our product and you know what [snorts] the guidelines are and things like that, but assisted living has really started to blow up in demand in our financing requests. You know, just over the last

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couple years. In the past, it was all about short-term rentals as the new investment. Um, you know, went from regular rental properties to Airbnb. Those were really popular. So all the lenders were trying to figure out how can we underwrite Airbnb and then everybody figured all the lenders pretty much figured it out. But then as soon as we figured it out, people stopped investing in Airbnbs as much, right? And now they're trying to find new ways to invest and residential assisted living seems to be the hot ticket right now.

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>> That's awesome. Yeah, I I've seen that a lot as well over the past few years. This kind of shift. This actually one of the ways that I was introduced to assisted living when I was starting out in in 2019 and getting into this was listening to Joe Ferless's podcast which is multif family and things like that and he would have ads for people doing assisted living and you know I was like what what is this thing and it's just evolved over the past few years. So it's really interesting to see how that

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shifts and that you're seeing that as well on your side of things from the >> financial. Absolutely. Absolutely. Yeah. Investors have to be agile, you know, and adaptable to the markets and as we've seen, you know, we've seen the the economy do some weird stuff over the last few years and yeah, so Airbnb just isn't working out as well, especially with those interest rates popping up as well. So, people aren't doing short-term rentals as much. Their rates went up. So, what are traditional real estate

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investors going to do, right? It's like, well, let's figure out some sort of home service business, it seems like. And uh you know, assisted living seems to be actually just a small piece of the pie of home service businesses or whatever you might call them cuz there's other aspects I've been noticing like sober living houses or you know I think there's a mental health aspect. Um there we have one of these houses right next to us. I don't know what they're called but it's people who are recently

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released from prison and part of the deal is that they live in a house. I think there's like 10 guys. is two doors down from my house. My whole neighborhood had a fit when they moved in. But, uh, [laughter] we're starting to see they're pretty good citizens when they're in those houses. You know, they don't want to go back to jail. So, but there's a lot going on with these home services businesses. So, I'm curious what your take is on. >> Yeah, for sure. Like, it's really

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interesting to see how it's it's shifting as people are seeing these different models. So, uh, some of the people that I coach are looking at doing like disabled adults or I've talked to people that want to do this with autistic individuals as well. And that's what I think is really cool about it is you you don't have to get pigeonholed into, you know, it's assisted living. I have to take on elderly care and that that's all I can do. My home in Colorado before we sold it was focused on mental

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health. And the the way that we can spread this out and you're still kind of doing a lot of the same stuff. You're providing you're providing a space, you know, you're a home for them to live. You're providing them with an environment that works really well for them. It's there's varying levels of of care and and things that you do provide, but the service that you're providing is is so needed in in in the world. And and the other cool thing is you get to identify the thing that you're

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passionate about. and and the process is going to be slightly different regardless of what you do, what you do, what type of license you want to get, or the population you want to serve, but you can create a home that is specific to that population. And it's it's it's so rewarding. So, if you have a loved one that has Alzheimer's, you can do a memory care home. If you have a child or or a loved one that had autism, you could do that. somebody that had a developmental disability, mental health

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issues like schizophrenia or bipolar, you can or or sober living, people that are are trying to just reset. Halfway houses I was what I would call the one that you were talking about with those that are coming out of the prison system. >> I think halfway has a negative connotation though. So, >> you're probably right. Yeah, but that's the thing that comes in my mind, right? It's probably somewhat equivalent transitional housing. There you go. But yeah, the idea there is you get to serve

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this population and help them make progress. And I think that's super cool. >> Yeah. No, it is cool. There's a term again another term slipping my head to just it's investing in, you know, kind of like philanthropic things, right? Things that are helping society, a positive investment versus, you know, what I do is I do loans. You know, I it's private money loans, kind of a little bit of a higher rate, short-term. It's helping the market. People need my money because banks don't provide the

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type of financing that we do. But you know just on another level of investing instead of just collecting interest we are helping people who actually need a place to go and you know provide a better service than other people in the area. So you know it's a fantastic investment strategy. I love it. >> Yeah. Yeah. And you're having just incredible impact on the communities as well. there are services that are needed otherwise >> these people oftentimes will end up homeless and that you know there's such

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a I don't know what you would call it like a homelessness epidemic in in in our nation um and I think throughout the world that providing people with this type of housing is it's needed it's a huge thing so I I only see it growing >> it's pretty crystal clear that the demand is only going to go up over the next you know 15 years I'm pretty sure it's going to be pretty high and I have a question for you Like I I I know the boomer generation is the wealthiest generation kind of like all time. Like

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throughout all the history of the world, the boomers actually are pretty much the wealthiest generation ever. But yeah, I mean, as some of these people move into these memory care facilities, I'm just kind of curious. There's going to be a flood and there's going to be a flood of people who can't necessarily afford it. So I'm curious, who's going to be paying for those? Is is it you think social security is going to be able to swing the bill on those or is it insurance paying? They're not going to be doing

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private pay because they might not afford it. There are a lot of wealthy ones, but there are a lot of unwealthy ones, too, that aren't going to be able to afford it. So, what's your take on all that? >> Yeah, I think it's really interesting. So, there's a few things there. One is I I think you're right. I think there's going to be tears to it, honestly. Um, you've got the people that have done very well for themselves. They've invested. They've built up equity in

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their home. You know, those types of things. they're going to be able to have the funds that they can use to pay privately for whatever services they need. The next one is long-term care insurance. So, because of the way that long-term care insurance has worked historically, there are not a lot of people that are in the an older I can't remember the the generations, but the generations that's that's older than the baby boomer generation, they didn't have long-term care insurance, or if they

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did, they didn't have enough time to pay into it. But what I'm seeing is a lot of the baby boomer generation now have their parents in these long-term care facilities and they're seeing the value of it and so they're investing in long-term care insurance and so when they get to that point where they are going to need this care, they'll have that insurance in place and that's going to help them out. So that's another big one. >> Just seeing it allows for that preparation and you know the boomers

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love to prepare. So that's good. >> Yeah. Yeah. And so I I see that one as as a big one. And then the third one is I think you're right. I'm not sure what it's going to look like. I don't know if it's going to be social security. I don't know if it's going to be something else. I honestly believe though that there will be some kind of government paid program that will take care of an underserved population in the future. Right now you get a lot of Medicaid and

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social security income and those things combined to provide you with income. That's know 90% of my residents are on Medicaid. I'm very familiar with that world. But I also I I don't know how long it will stay, but from a political standpoint, there there is a huge voting block that is going to age into this. And if politicians don't play this right, it could swing one way or the other. And so I think there will be bipartisan, you know, stuff at some point that people come together just so

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they can keep voting blocks intact. Uh, [laughter] as weird as that sounds, politics is going to play play a role in this. And I don't know what it'll look like yet, but it'll be it'll something will happen there. >> We're on the right side of history if you're an assisted living investor. It seems like that that it's a funny term that's been thrown around, but it's true. You know, in that way, it's going to be a bipartisan thing or excuse me, a partisan issue. So, that's good. That's

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fantastic. Yeah. So, >> yeah, I really think it will invest. >> Yeah, it'll be interesting to see how it plays out. So, I'm curious like your your exposure to assisted living, you know, you mentioned a little bit you've done some financing with this. Tell me a little bit more about that. Why is assisted living something that you the the people that you're working with in the financial world, why are they so interested in this? And you touched on it a little bit briefly, but tell me

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more about that uh specifically. >> I'd say it's not that they're so interested in it. I'm interested in it because I can finance those deals. the most of the banks, most of the private money lenders and debt service lenders, they have not they haven't decided to pursue it yet, but I know it's going to grow pretty fast here pretty soon. So, right now there's just a real high demand for this kind of financing and there are just very few lenders that are able or willing to underwrite these

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kinds of deals. And thankfully, I am one of those lenders that are willing to lend on it. So, that's one of the reasons, hey, I reached, you know, I saw Brandon's channel because I was doing the research myself. office and said, "Hey, Brandon, we got to talk about this because I can help some of your guys get financing for these deals." So, yeah, right now there's just a high demand, very minimal supply. So, brokers, you know, and I run a broker training program. I teach brokers how to start

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their own private money lending business. And yeah, they're asking me, "Hey, where do I get residential assisted living money for these inquiries?" Because I have a lot of them coming in because of the investor shift that we talked about earlier. You know, there's an investor shift. people are moving to home service businesses using their real estate, right? So, yeah, there's going to be a lot of shifts in the banking world to facilitate these types of loans. But from my understanding right now, most

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residential lenders, like mortgage lenders, they're not interested in underwriting the income that someone could make on a business in a residential asset. Right now, it seems like the only real option for assisted living investors is either SBA. I believe SBA rolls with you guys, right? >> And then maybe some you could do some personal loans. It seems like I don't know, maybe some credit card stacking. I used to do startup financing early on when I launched my company in 2016. So,

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they're all kind of startup capital, creative financing things you can do, but there just aren't any ones that kind of tie into the real estate outside of SBA from my understanding. So, I'm sure you can enlighten me on that, but yeah, we are one of the lenders that started taking on those deals and we underwrite them >> just like a regular residential deal would be underwritten. >> So, you know, >> do do you have any questions before I kind of dig into my This is going to be

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a whole another a whole another layer of me talking here. >> No, I think go into it. I I can hit back on on stuff that a lot of people that listen to me know I talk about SBA and you got to spread a broad net when you're talking to lenders because it can be hard. So, I think people are going to be really interested in what you got to say about this. So, yeah, keep going. >> Cool. So, let me give you a little bit of context to the type of lending that I do. So, I lend strictly on real estate

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property, right? So, real property, that's what I lend on. So, you call me a private money lender. I lend on one to fours, so investment properties. We do multif family, mixeduse assets, and commercial buildings. So, I kind of run the gambit on categories of real estate. Now, with that, you know, real estate is typically underwritten either using the borrower's personal debt to income ratio when they're buying a primary or the debt service coverage ratio, right? So, using the rental rate, is that going to

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pay for the interest rate or the the payments on the on the loan? Right? So, and it's called a debt service coverage ratio. Now there are a ton of debt service coverage ratios that showed up in the last 5 years. So many of them entered the space because they realized that this market is huge. The investor market is a lot bigger and a lot more capable than the primary resident market. Right? So I've always worked on the investor side and so I've noticed a flood of lenders coming in and like I

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said financing Airbnbs and financing rental properties because they see a real opportunity for investors. Now, the problem is they have not figured out how to underwrite the assisted living facilities. Now, the funds that I use, however, we I partner with a lot of SBA companies for one main reason. I will lend on commercial assets, but I'm not going to underwrite the borrower's personal income, assets, or tax returns. And as you know, the SBA is all about your personal income, assets, and taxes.

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It's all about what do you have? What can they lean against you, right? So, I've always been a really good compliment to SBA lenders because I pick up all their fallout. So, I'll I'll call an SBA lender, say, "Hey, any kind of, you know, deals that are falling out, give me a call." Because I can often lend on the same asset class without such a strict underwrite. And so, we do the same kind of thing with single family properties, but where we complement the market is where most

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lenders do a debt service coverage ratio requirement. We do not. So, I will underwrite a residential deal. I won't look at the borrower's personal income, assets, or taxes, but I also won't look at the debt service coverage ratio. So, because we aren't underwriting debt service, we don't care if someone's running a homebased business because I don't care what the rental rate is. Our focus is location, FICO score, and experience. So, we have a real tight, I don't know, I would say

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proprietary investment method where we underwrite these deals and we have a very low default rate. It's around 3 4%. Super low. And people ask me, well, what do you underwrite? You know, if you're not looking at the income, it's like, listen, we have a real nice focus on location experience and FICO that's allowed us to issue these and these are 30-year loans. So, I do some 12-month bridge loans, short-term money, which you guys, some of your people might know about, but this is a PERM loan. So,

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we're going to give them a 30-year fixed, fully amortized loan, and we're not going to look at any of those things that the SBA or or normal banks would look at to allow them to access these properties and start running their businesses. >> That's so cool. Yeah, I think [laughter] a lot of people that I teach would be really interested in that. So, when you say experience, what type of experience are you looking for? Is that real estate investment? Is it working in the home care? Is it a blend? Does it matter?

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Like what kind of experience are you looking for? >> Right? It has nothing to do with home care because we are underwriting as an investment property. And that's why like location is really important to us. Population of the location. So we'll, you know, let's just say the homeare business doesn't work out. Can they at least rent the property out, you know, or are they going to be able to liquidate the property if they have to, right? So it's investment experience that we're looking for. Now the cool

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thing is there's really only one guideline. Do you own an investment property or do you not? If you do own an investment property, I can go up to 75% on a purchase. Sometimes 80% if it's in the right place or the right kind of borrower. If they have no experience investing in real estate, then let's just say they own their primary residence. Okay? They have to own their primary. If they own their primary, I will give them a loan to buy their first investment property at 70% LTV. So, it's

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a reduced risk profile for people who don't have any experience with real estate. Now, if you don't own your primary residence, I can't lend to you on a single family house because there's just too much risk of you moving into the subject property and we are not lending on primary residences, right? So, with us, we can't have our our investors living in the subject. We we're a private lender. So, there are a lot of rules called Tilla and RESPA rules that came out in 2008. and we we

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lend to investors strictly. So, you either have to own your primary or an investment property if you want to work with us on getting these assisted living facilities, but we're going to give you the leverage and we're not going to underwrite all that stuff that the bank or an SBA lender would. So, we're filling that gap in the market where, you know, a lot of guys can't fit. >> Very cool. That's awesome. So, I'm going to regurgitate it just so that I make sure I understand and and people that

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are listening can also get it. So, uh, if I don't own a property, I I I'm just renting somewhere and I've never owned a property, then I'm I'm so I got to figure something else out. But if I own my personal property, I'm a nurse cuz, you know, a lot of you that are listening here, your nurses, your healthcare professionals, maybe you don't invest in real estate, and that that's totally fine, but you own a home. This is a loan product you could do. 70% loan to value would be a 30% down

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payment. So, let's just use really easy math. Let's say you're buying a million-doll property. 30% down is $300,000 down, right? So, very simple. You can vary that based off of where you're at. And that $300,000 down could be you, a partner, could be something else. And then if you are an investor, have some kind of secondary investment property, you're looking at 20 to 25% down. So, in that million-doll property, 200 to 250,000. Is that accurate? Did I Did I explain that correctly?

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>> That's perfectly accurate. And I do have some optimism for your your so person. Um if you don't own your primary and you don't own an investment property, I'll actually allow for a purchase on a duplex, triplex or forplex. So you can actually invest. It just has to be a multi-unit property. That's the only caveat. So actually those guys aren't so. They just got to, you know, go find those duplexes, you know. >> Yeah. Go find a duplex, get in there. So like you're if you're looking at

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investing in assisted living, you might have to go with kind of a stepped strategy. Maybe you find a duplex. You do that here with John, get into that and then stabilize that for a year. You know, be in it for a year or whatever and then shift over and start doing another one or depending on the layout of this duplex, maybe you rent out the other side to be an assisted living facility right there. So there's some options there. >> Yep. >> Yeah. And we we do some creative stuff as well. And this is where I'd say we

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excel over everybody else out in the market as a DSCR or private lender you want to call us. We do a creative aspect to our loan which is called our seller carry. So let's just say we issue someone 70% loan to value. Um not only are we giving you 70, we will also say hey if that seller wants to do a secondary note or a seller carry it's called we will allow that. Most lenders don't allow for it at all. We will allow for a seller carry all the way up to 90%. So, this is where I see maybe some of

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your guys want to want to purchase an existing facility, right? They want to buy an existing facility and you know they can only purchase on the real estate because the SBA or whatever isn't going to isn't going to finance the rest, right? So, we'll allow them to purchase that at 70%. And then they might talk to that the owner of the operating business, say, "Hey, will you allow will you carry another note all the way up to 90 for me?" So, a 20% note. And the reason why I'm bringing

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this up for those kinds of purchases is because that owner of that assisted living facility already knows it's a functioning business. It's a business that's functioning, that's cash flowing. So, they're going to be more comfortable just putting a lean against the property and collecting that extra money, right? And and making that work for the buyer. So, a 90% carry basically means, guys, you only have to put 10% down. So, if I go 70 and the seller goes 20, that means you only have to go 10% down and minimal

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risk out of your pocket. And the seller's normally happy to do that, especially if they're comfortable with the existing business. And they get to earn interest off of you, right? because it's a note, it's a loan. They're giving you a second loan. So, they could earn some extra interest on it as well. And you know, who knows? What if what if you you don't pay? Maybe they say, "Well, we're going to we're going to foreclose on you and you know, we'll take the

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business back." I don't know, right? So, so there's a lot of incentive for the seller to be willing to do. You're just trying to get them to be willing to do it so you can put less money down, right? >> I love that. I actually had >> Yeah. Yeah. I had a student in one of my programs probably about 18 months ago and he was looking at this exact scenario where he was going he had actually gotten the agreement in place with the seller to do the seller carrying and everything was good. Uh it

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was something similar up to like 90% or whatever but we couldn't find a lender that would help out with it. We were looking at SBA lenders probably talked to like 20 of them couldn't find one that would do it. So that you do this I think is is great. I wish I'd known you 18 months ago. >> Yeah. Nobody does it. And the cool thing is too, we don't even underwrite that other 20% that's coming from the seller. So a lot of lenders, they might be willing to do a seller carry up to 80

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85, but then they're going to calculate that into the, you know, into the DSCR whether or not they're going to be able to debt service. And so yeah, no, it's it's a fantastic program, Brandon. And, you know, I think for these assisted living facilities where the seller is comfortable with the business, it's just a slam dunk. >> Yeah. Yeah. I think that's awesome. Uh cuz I I that'll help out a ton of people because there's so many the the other thing that I do want to mention for

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those of you that you're like, "Oh, I I got to figure out the strategy." There is a level of education you've got to provide. So, I would encourage you to understand what the seller carry is because you're going to have to work with this person. You're going to find a lot of mom and pop shops. They're they started this out 30 years ago and they did it cuz they were a nurse and they started it out. They're not investors. They don't necessarily know what a seller carrier is. So, you may have to

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explain to them what it is so that it feels familiar to them, but uh I think this is a great option for you if you're trying to figure this out and you're strapped for cash and and you just can't get anybody to tell you yes, like this is a great option for you for sure to look into. >> Yeah. I don't know if if any of you guys have ever watched Pace Morby. He's super popular real estate investor guy. >> He talks about the the Gator method or he has all these terms that he uses to

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kind of explain his creative financing. So, at the end of the day, you got to think creatively and sometimes you have to educate the seller. I mean, the sellers aren't going to know that they could even do a seller carry and earn some interest off of the the operating business and the real estate, right? So, yeah, being able to educate the seller is huge and being willing to talk about creative financing as well. You know, a benefit to the seller is, you know, instead of getting all that cash at once

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where they have to pay capital gains on a seller carry note, they're only paying interest on the interest earned, right? So they don't have to pay interest on all that money that they get all at once, right? So there's a tax incentive as well to doing a mortgage loan, a seller carried mortgage loan for you, right? So all kinds of incentives and the more you learn, you know, what is it? information's power, the more you're going to be able to kind of seek out those creative options for the seller

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and yourself. >> Absolutely. And I'll put a link down below. Pace has a book called Wealth Without Cash. So, we'll have a link for that if you want to go check it out. Pace is great. He teaches a subject two method. Has like John was saying a bunch of different terms and things. He's a fun guy to listen to. So, go check him out. [laughter] >> All all self-created ter logos. He's good at branding. Let's just say that. >> He is. He's very good at the Gator

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method kind of thing, right? So, it's true. >> Yeah, that's awesome. So, the homes that we're talking about here, you mentioned a little bit, hey, if if you're buying an existing facility, this is an option for you. What if it's just like I want to get in and I'm I'm okay doing a little bit of renovations on the home and buying and converting a home. Is that something that's that this type of loan can also help people get into? >> That's a good question. the method of

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underwriting what we call a fix and flip loan or a you know buy rehab refinance kind of loan like a burr strategy that's all based on the after repair value or let's say the marketability of the asset after you improve it. Okay. Now the problem with residential assisted living facilities and we haven't figured out how to underwrite this and I'm actually working on this right now and we'll talk about that here in a second Brandon but the fix and flip market or or lending market has not kind of established a

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standard for these assisted living facilities on the after repair valued. And the reason why is because normally you're coming in and buying the asset and normally it doesn't really need repair, right? You're not buying a a beat up house. Your guys' strategy is not to go find a a beatd down house and and do a fix and flip loan on it to sell it, right? your strategy is find something probably it's a bit turnkey and just tweak it a little bit to you know host your seniors or or whoever

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right make sure it's licensable and all that. Now yeah the problem with that is there's no after repair value and that's how a fix and flip lender adjusts for risk and giving you more money to rehab the property. Right? We normally do loans at like 90% on purchase and 100% on rehab, assuming the the borrower is going to be able to get an after repair value of, you know, 75%. Right? That's how much we're going to give you. So, we're not underwriting for that yet. We haven't figured that out. And I'm

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working I'm actually working on a thesis right now to allow for strictly assisted living investors to buy maybe a turnkey asset and give them another, you know, 30, 40, 50 grand to put in the sprinkler system that they have to do to do an RCFE or whatever it is, right? I'm working on a thesis right now. I'm working with people just like Brandon to establish that kind of lending for you guys to do this. And it's going to be kind of like a mezzanine second lean position setup, you know, to get you

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into it. But but yeah, right now, Brandon, there's no rehab money that I can give you to improve this asset unless it's a beatdown property and you have a fix and flip experience and all that. And even if we did that, we're not going to approve a sprinkler system, right? We're not going to approve, we call those over improvements, >> right? We're not going to be able to do that because um yeah, over improvements. Let me just talk about over improvements real fast. So, let's just say you do

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like I've had these come to me, right? Uh people want to refinance their loan and they think they're they've put so much money into the property and they think it's worth a lot more now. Just because they spent money on the property, but just because you spend money on property does not make it worth more. So, we had someone come to us who had an assisted living. He put in the sprinkler system. It was like 60 grand. did all the other improvements, you know, rounded corners, right? The

00:28:58
showers, dropping them down, so making it outfitted for the seniors. And yeah, it's like, hey, man, you dropped, you know, 80, 90 grand on this, but listen, I can't get he want I think he want to cash out because of the improved value, but it's like we do an appraisal report and guess what? How many other properties in your 2 mile, three mile radius have a commercial grade sprinkler system in it? None. >> So, it's all about sales comparables. there are no sales comparables. So,

00:29:25
you've overimproved your asset to a point where there's nothing comparable to it. So, we can't give you extra money to improve the asset. Long story short, because if we were to sell the asset, that loan isn't really backed by the value of the asset anymore, right? So, it's the business value. >> And yeah, so long story short, Brandon, no, I don't have financing options for that unless we want to talk about more creative stuff. So anyways, what we were talking about was the overapprovement of

00:29:55
the asset and lenders haven't figured out how to cater to assisted living yet. Even though the the assisted living business has been around for decades, right? You guys have been doing this for a long time, but it's now really starting to catch on as a real investment strategy from the real estate perspective. And so where's all the money coming from? And and where is it comfortable? Well, it's coming from, you know, big banks, private money investors and debt funds. And everybody is

00:30:27
comfortable with real estate being the underlying asset at the end of the day. And so we like to underwrite it from a real estate perspective. So yeah, that's why SBA is probably the only option really out there right now is because they're trying to supplement that gap in the market. And I've been in this business for a long time doing creative financing and real estate. And I tell people it's like if SBA is lending on it, odds are the private industry, private lenders are not lending on it

00:30:58
because that's the role of the SBA is to fill in the gap in the marketplace where private simply cannot supplement those businesses. And those businesses, you guys, are high environmental risk businesses such as gas stations, car washes, right? And then other business classes like restaurants, standalone restaurants. Believe it or not, real estate lenders don't like standalone restaurants. I don't know if you guys have ever seen a a Denny's go out of business, but they'll sit out of

00:31:26
business for years, and that's because it's a customized business, and it requires a lot of capital to get started. So yeah, if you ever see an SBA program for it, odds are it's because the private industry like they need to pick up the slack that the private industry is is leaving there. And so yeah, you guys are in that class. Unfortunately, uh unless it's a real estate like focused underwrite, yeah, the overimprovements to get it fit for that kind of business just isn't there.

00:31:55
>> Yeah, I think that makes a ton of sense. I mean, it's it's the same concept, right? If I'm doing if I'm renovating my house just like, you know, if I make some improvements to my home and I add, you know, I don't know, just like cool doors or or something like that, um, I spent a good chunk of money on it, but it doesn't add any value. But if I added a bathroom or a bedroom or I bump out a section of my home and add some square footage to it, that's where there's real

00:32:19
value. And it's kind of the same thing. the these over improvements can they're costly and they're necessary to run the business in most cases, but they don't add true value to a home, which is yeah, a bit frustrating. So, >> right. And what kind of financing options are you guys giving them right now? Like I said, I I mentioned a couple just kind of skimming over. I'm not sure if you're familiar with them or not, but what what kind of options are you normally kind of,

00:32:44
>> you know, pointing your guys towards right now to to cover those improvement costs? >> Big ones. So what I have found actually that you're able to do if you're buying an existing business and you've got enough leverage, there's enough equity in in the properties, you know, you had mentioned the SBA will leverage the crap out of you. They will make sure that they are covered as much as possible with the asset you're purchasing with personal assets. They will do everything

00:33:07
they can to secure their investment. Um, so you know, and I don't blame them. That's what they're there for. But if you play it right from the beginning, you can work with the SBA and ask for extra capital, working capital upfront for some of the improvements or things like that. Or you can get it in negotiation where you get those improvements and they go into escrow accounts so you can pull from them as you're making those improvements. Uh, so that's one of the best ways I've seen to

00:33:32
do it and I actually have had experience doing that myself and that works pretty well and it gives you a lot of extra breathing room which can be very helpful when you've got to make payroll every other week and >> SBA you're sending right >> yeah that's SBA not every SBA lender will do it and you have to ask for it very early on in the process. You can't get to the closing table and be like oh I need an extra 20 30 $50,000. They'll say, "Well, we could maybe do that, but

00:34:00
then we've got to start all the way over." But if you from the very beginning start your inquiry and say, "I need, you know, $500,000 for the purchase of the business and I need to add an extra 50,000 for working capital." And then you lay it out in your business plan. It's for XYZ. You know, we've got to make this improvement. I need to make sure I make payroll for the first, you know, 2 months or whatever. And you have that very well laid out. You can get lenders that will tell you yes through that

00:34:26
process. And then for you, adding an extra $50,000 to a 30year advertised loan is nothing. Like it doesn't impact your underwriting hardly at all. >> Uh so that's a really great strategy that I have worked through myself. >> But the problem with like no, >> right? The problem with SBA that at least the reason why you know people when people come to me and like oh I gave up on the SBA loan because it just takes it can take ages it seems like to get those loans closed. you know, they

00:34:56
just keep asking for one thing after the next after the next. And you have to be highly qualified, you know, and a lot of the investors that I work with, they're a lot of them are are exclusively real estate investors. And if you if if you know any real estate investors, they like their tax write offs. They do not claim income, right? They try to to write off as much as they can. So, if you're a small business owner, maybe you do this for a living, I'm assuming you're writing off most of your income.

00:35:22
And the SBA, they want to see income. You know, they want to see income. They want to see assets. They don't want to see that you're overleveraged. So, you know, the denial rate on SBA are quite high. It's a good strategy. If you can qualify, you should absolutely, I tell people, you should take it because you're going to get the best rates with SBA most likely and it's going to be the best loan for you. But if you can't, you know, which is very common, that's where and if speed is the factor, right? And

00:35:49
that's kind of the the piece of the market that we cater to is speed, you know, speed to close. We just need to get it closed. A lot of my guys will come to us just to get the loan closed. They might not like the rate, you know, they might not like the fees, but that's how it goes in this industry. It's either you go for speed and which is going to cost you, or you go for slow, but you're going to get a better rate. Now, yeah, you you got to choose which one's more important. And depends on who

00:36:15
you're talking to. Who's the seller? you know, do you have to close quickly to lock out everybody else from the deal, right? So, that's kind of that's where private money has really excelled over as long as it's been around, right? Is being a local, you know, quick to close lender is very important. >> Yeah. I think there's two things from that that I that I'm like, yeah, like 100%. One is SBA lenders will often tell you no. So I tell people all the time, you should plan on being told no by 90

00:36:45
to 95% of the lenders you reach out to. So you cannot ask one lender and be like that lender told me no. Like it's impossible for me to get funding now. You need to reach out to 20 lenders and then maybe you get conversations with two or three of them. Like that's that's just the reality. It is very much a numbers game. Um and it can help you out and getting funding. You get better rates. But the other thing is you can do a loan like what John's talking about. I can use private money and one of the

00:37:11
reasons why I see SBA get rejected is you don't have the experience in that industry and they really want you to have that. So you work with private money, you do this for a year or two, you stabilize the business, then you refinance into an SBA loan because now you have the experience and it's a great way to get into it. >> That's exactly right. Private money is they they actually have a term for it now because the institution started getting in on it like last year. They're

00:37:36
calling it RTL loans. So they always have to create their own little way of of spinning it to Wall Street, but it used to be called hard money or just private money loan. And so hard money negative connotation, right? They don't want to call themselves hard money because it's in institutional money that's coming in and doing these 12-month loans with that improvement money on top of it and it's short-term and it's the same fees and everything are the same, but they're calling them

00:38:02
RTL, residential transitional loans. So that's the new institutional term to private money or hard money loans. It just picked up like last year. No joke. It's pretty interesting to see the evolution there. That >> that's really good to know because that it is one of those things that I talk to people about hard and private money as a strategy. I have like an entire section in my book that talks about it. But I also acknowledge that even for people that are new to this, they hear those

00:38:30
terms like hard money sounds scary. Like when you hear somebody say hard money, they're like I don't I want to stay away from that cuz they don't understand it. So having this new phraseology I think will help out in opening people's minds to >> strategy. Yeah. Hard money really what what hard money actually means you guys is it just means it's backed by hard assets. And so that's actually that's the original term. It's it just means it's backed by a hard asset. So a hard

00:38:54
money loan could be backed by, you know, a paycheck is kind of a hard [laughter] a paycheck could be an hard hard asset, but a hard asset really is like a car or house or what have you, right? So hard money loans typically associated real estate hard a hard asset. But uh in my course really what hard money actually means, you know, in in more of, you know, high level overview of what a hard money loan might mean is is high fees, short-term, right? Short-term high fees, high rate, hard money. You know, it's

00:39:22
hard. you you're going to have to pay it off quickly, which is why, you know, the hard money lenders typically don't want to give you money unless you're able to refinance out of the loan, you know, and so that's one of the problems with this improvement idea, right, with your assisted living is, you know, are you going to be able to refinance out of my loan into more of a conforming loan? And the answer is no. if I give you too much money over the asset of the of the property, right, that means my loan to

00:39:48
value is too high for you to be able to refinance out of it, you know, a year from now. So that's, you know, and that's why, you know, I've seen so many of these requests. It's like there has to be a solution, something done. So we have a lot of investors that we work with on the private money side. And so, you know, my focus over the next 12 months is establishing some sort of guideline and establishing a a debt fund that really focuses on helping the assisted living investor community in

00:40:17
doing these kind of technically, you know, over improvements. But in our eyes, if you understand the business and you know, we're able to hedge the risk with vehicles like leans or whatever, we're going to be able to help this community quite a bit and get away from those SBA guidelines and get to more of that private money underwrite, the easy underwrite because we understand the business. So yeah, for this that's going to be my dedication this year is talking to a lot of guys like you, Brandon, and

00:40:44
you know, hopefully creating some partnerships where we can establish our own debt fund to help finance these residential assisted living investors like you guys. >> I'm really excited about it. >> Extremely. Yeah, you and I chatted about this a few few weeks ago and yeah, it's it's super exciting what you're working on there cuz I think it has potential to help out a lot of people like the people that are listening to this get into this and not only buy the properties but make

00:41:09
the improvements, turn these into profitable businesses while also just having a huge impact in the community, positive impact there, which is why I love assisted living. Just there's so many cool things about it. >> Absolutely. Absolutely. Yeah. And what I've been seeing is the the risk factor on these loans is like, are you going to be able to succeed at this business or not? Well, if we lend money on the real estate and the over improvements, then we can actually set in some guidelines or I

00:41:37
don't know when you when you when you go bowling the the railings, right? Set in some railings on the side to make sure that you don't fail. And so some of those things could be talking about, hey, we want you to use this software or we want you to use this company to help you with A, B, and C to ensure that your business doesn't fail. And we're going to be able to even possibly roll those expenses into the loan for the new residential assisted living investor. So instead of to having to, you know,

00:42:06
bootstrap it, you know, we don't want to see you bootstrap because we don't want to have to default on the loan at the end of the day. We want to see you succeed, pay our loan, and do well in the business, right? So, lenders tend to do that, right? For example, PMI insurance, right? So, PMI insurance, when someone only puts 3% down on this is this is for a regular residential house if you're buying a primary residence and you put less than 20% down, you have to pay PMI insurance. And

00:42:34
it's it's mortgage insurance, right? And so, it's the same concept. It's like, hey, you know, we'll give you more money, but we're going to want to ensure that you do well. And so putting some of those guide rails in to actually help I see this being as just a a fantastic opportunity for the assisted living investors. And if we understand the business and we can set you up with like a roadmap to success and I think Brandon's already doing that with this course. But if we even implement that

00:42:59
and provide the financing for it through the business model you guys are operating. Oh my word. I think yeah I think it's we're going to be able to help fulfill that demand that we're going to see over the next 15 years 20 years with more mental health and you know baby boomers kind of getting into that stage in life. So yeah really exciting stuff Brandon and you know I'm just thrilled to work on it with you and I see no reason why an investor isn't going to want to invest in this kind of

00:43:26
business with us in in providing financing for you guys. So >> yeah, I I think it it's super exciting to see all this kind of coming together and see where it goes cuz just like we were talking about at the start of the podcast, there's this huge just wave of people that are coming into this. There's a huge need. I I talk about this, there's 50 to 80 million projected people that are going to be over the age of 70 by 2050. So that's just 25 years away. And even if just 10% of those are

00:43:54
going to need this service, that's 5 to 8 million people. And there's not that much volume of services out there right now. No. >> Uh like that there's a huge amount of of people that need this. And you know, we we're in a good spot to to get started with this. >> Absolutely. Yep. One of the problems with the real estate shortage is their houses aren't being built. We have a supply and demand problem with just the houses being built. So how are we going, you know, in these houses now to get

00:44:21
need to get converted into assisted living. So it's like, yeah, there's a huge demand. Definitely a shortage. So there's a need for, you know, the money coming into the picture. So yeah, it's really exciting. But I have a couple of questions for you actually on some of the assisted living stuff. >> One of the questions that came up, I was talking to someone. >> He has 10 houses. They experimented with assisted living, but they ended up doing sober living, which is, you know, I

00:44:45
brought up sober living earlier as their focus. What happens when some of these guys come towards the end of their life and they die, you know, and like is insurance paying? This is a tough subject, but this is the business, you know, that you guys are in and and the clients you're helping. >> So, tell me a little bit about that risk profile if you don't mind. You know, I'm I'm curious. >> So, are you talking like the the sober living people or the the assisted living

00:45:11
people? >> Assisted living. So, you know, death of a client and insurance and then also insurance paying. Are they paying on a net 90 if someone does die? Like, how does that all work and affect your guys' cash flow and ability to rebed, turn them over, and and all that? >> Yeah. So, in assisted living, this could be different in a nursing home setting where insurance where they would have Medicare. Um, but in assisted living, you're either working with somebody that has Medicaid, so different program, or

00:45:43
you're looking at somebody that is private pay. And so, you set up your leases to be they're they're essentially month-to-month leases. And that includes stipulations around death. And so, you could have something in there around if this person, you don't have to do this. This is very much up to you as an individual, but if somebody were to pass away that they have to pay the last month of rent or or something, you could put some kind of stipulation in there. Typically what we do is you can

00:46:08
oftentimes see when somebody is declining and getting close to passing away and so you just start planning for that as they start declining whether that's hospice coming in or they're actively passing and you're working with them to make sure they're comfortable but on the back end you're also starting to advertise and get out into your community and tell people hey we're going to have another bed here soon. you build a waiting list and so you bring people in. The payment itself, you know,

00:46:34
once they pass away there there's only so much you can do to collect on anything cuz they're no longer with us. Uh so you you can leave that up to if you want to pursue that with a family who's grieving or or not. We typically don't. We'll have our our things in our contracts that we worked with our attorneys on, but also I'm not going to, you know, badger somebody that just lost their loved one just for a few thousand dollar. So that's >> What about What about What about

00:46:57
prepaying? You do monthto month, but what about a prepaid month just to avoid it? >> Yeah. So, when you bring them in, you can have a deposit and you could have that be a prepaid month and then you could have stipulations around when and if that is returned to them. Um, and I think it would be appropriate to have one of those be if they were to pass away. That deposit then goes into like that just pays for it so they don't have to worry about anything. So, you could you I think there's ways to be creative

00:47:22
around that. I'm not an attorney so I'm not going to this is not legal advice. I would suggest that you go and talk to one, but I think there's ways around that to kind of protect yourself, okay? >> Uh to make sure you're good. When it comes to like if you're working with a Medicaid resident, you would just you're able to only bill up for the days that you provide that service. Uh so there's no extra they passed away, there's a death benefit on that Medicaid now. It's

00:47:46
once they pass away, you can no longer bill for that. So there there's no extra thing there. If it were long-term care insurance, I don't know. we it's still new enough for residents that we haven't had residents that have long-term care insurance that have passed away. So, I don't know what that would look like, but those are Yeah, that that that's my thought on where it's at right now. >> Right. Okay. Thank you. >> What else you got? Other questions, other topics you want to hit on

00:48:12
>> for now? That that was the main one. I mean, I was talking to someone and and they they decided to go to the sober living just cuz they're probably didn't understand it as well, right, on how to kind of navigate those issues. So, they said, "Hey, we're just going to do sober living. This works out really well for us." Right. >> Yeah. >> Yeah. And I I think sober living is great. I looked at doing sober living. I talked to there's a guy named Andrew

00:48:32
Lamb who teaches sober living. He's great. So, if if any of you are interested in that, I would go follow Andrew and and see what he has to say about it. He can help you out quite a bit. So, he he's great. I don't like it. your reimbursement rates are lower. I feel like I have more risk just based off of the profile of the person that's going to be in the home. It does I would say most of them are fine, but I have dealt with in my home where we did mental health, I have dealt with an

00:48:57
individual who brought drugs into the home and shared those drugs and we had an exodus of about six residents who were kind of caught up in this thing whether they were using the drugs or they were just tired of it and didn't want to deal with it and so they left. And so that can be really hard to deal with. And for the reimbursement rates that I'm getting in so that I would get in sober living, it doesn't make sense for me to do it. I would rather be in assisted living where my rates are

00:49:23
triple quadruple what I would get in in sober living in the states where I'm at. I have a much higher expense ratio. Um, so I do have more expenses in in assisted living than sober living, but you know, I've done it for years now. I'm not scared of it at all. So that's that's kind of how I treat it. >> Right. Right. That makes sense. >> Yeah. Are you seeing is there a paro principle with sober living investors that you see? Do you see a lot of people who have one house or you know new

00:49:51
investors kind of taking up a lot of market share? Or is it mostly the guys who have five, six, seven, 10 houses are just continuing to buy up and start, you know, launch these businesses once they get rolling the momentum? >> Yeah. uh the people in my network that I've talked to, they have multiple and I I would suggest doing the same thing in assisted living. I I I think it's fine to start off with one, but we were just teaching the challenge this last week, the roadmap challenge. Uh go to

00:50:18
roadmapchallenge.com to learn more. But in there, somebody asked a question around this and we were talking about I actually used an analogy. We just got some new kittens in our home and as we were looking at them, we decided we've got to get two cuz if you're going to get cats, you might as well get two cats. uh because then they just entertain themselves, which I can tell you from experience is very true. It's so nice. But it's the same thing in assisted living and I would say sober

00:50:40
living. If you're going to buy one, you might as well buy two. In my book, I actually talk about this a little bit because it just helps spread your risk profile. If one of the homes is having a bad month, the other one can cover expenses, can cover your debt service or something along those lines, help make payroll it. If they're close enough, you can share resources. You can get discounts on food. uh you can have your administrator be over multiple facilities and sober living is going to

00:51:05
be very similar where you're I can't remember the position they call it's it's essentially an administrator but it's different title but they can be over multiple homes and having that most expensive resource be able to be distributed amongst other places lowers your overall expenses on a home byome basis and can help just kind of spread that risk. So I see most people if they get into this they're doing multiple and I would highly encourage somebody whether you can swing it off off you

00:51:36
know from day one like I did two facilities in 5 months. If you can do that great I think you're going to benefit from it but if you can't and it's going to take you two or three years I still think you should be adding an extra home or two uh because it helps you out a ton from a cash flow perspective. >> Right. That's a good idea. Do you see investors partnering up together a lot? Kind of like real estate syndicates, right? They're syndicating on real estate deals. You know, they don't have

00:52:00
all the money to put down, but they can put some in and they kind of partner up. Do you see people doing that or like family and friends investing in this kind of business or is it kind of one guy at a time handling the whole thing or you know woman obviously handling the whole thing at once? [laughter] >> It's really interesting. So, a lot of the people that I talked to and people that are watching this, it feels like uh you all are much more focus like scared to do the partnerships and and scared to

00:52:29
try to get some of these more creative strategies like a syndication or things like that because they feel advanced. And I think those of you that are watching that are are real estate people, nothing that you're all that scared of because you you've been exposed to it long enough. But my people that are listening that are healthcare professionals, this is a whole new world and those terms are foreign to them. Um, so if you're interested in learning more about syndication, type in syndication

00:52:49
down below. We can do a video on that so you can see how that works for you. But I would say the majority of the people that I work with are new enough into this world of investing that they don't touch on those things and they're scared to invest with other people. And my advice would be don't be I would partner like I partnered with my dad. I think partnering is the best way to do this because then you can spread things out. responsibilities, the down payment. There's so much that you can do when

00:53:14
you're partnering with people that you just don't have access to. And then as far as like syndications and things like that, I would say it it's something that I don't see a lot of I do see a little bit, but it's not like multif family syndications. It's very different in the world of assisted living. People are they don't seem as excited to do it in smaller residential large facilities. Yeah, smaller residential. No, sorry I talked over you there. >> No, it makes sense. Now, it's

00:53:38
operationally, you know, extensive. There there are real operations going on there. So, it makes sense that the syndicates, the large syndicates might might avoid it. Um, but yeah, partnering, I was going to say growth. That's what I mentioned earlier is because, you know, if you have $10,000 and you can invest five here and five there, then you can start two. So, just stretching your money out a little bit further. When you partner up with people, you're able to do that, right? That's and hedging your risk by being

00:54:06
able to invest in multiple ones like you were talking about earlier. So, no, absolutely. Partner up might help with your growth. That's all I say. >> Yes, I totally agree there. I think that was all I had for us to chat about today. Tell us a little bit more about about your business, how people can get a hold of you and and what it's like kind of working with you. So, tell us a little bit about that. >> Sure. If you want to reach out directly to me, I'm best on emails. Some people

00:54:31
will do the DM thing. I'm actually really bad at the DM thing, so try not to DM me through social media. You you you think it would be the right thing to do, but just email me [email protected]. It's spelled N as in Nathan Eufinance.com. Just like my last name, newer. So, partner newfinance neufinance.com. Shoot me an email. We'll talk about your deal and we'll see if we can get it rolling. Uh you can always go to my website just newfinance.com. nefinance.com. Or if you want to watch me on social

00:55:01
media, I have a YouTube channel just like Brendan here. And I do some Instagram stuff, too. So, just John Newfer and just look that name up and you'll find me on all the platforms. And yeah, I also run a a private money loan training program. So I work with a lot of entrepreneurs, a lot of real estate professionals, accountants, people who have a nice big network of real estate investors and they want to, you know, kind of expand on that network by offering additional services or maybe they want to launch a new business with

00:55:31
like a little bit of a low overhead. I teach people how to broker private money loans at the end of the day. So we give all kinds of training, foundational stuff, teach you guys all the definitions and how to get clients. We give all the app packages. Kind of a similar program that Brandon probably has for his for investing in assisted living. Same thing, but it's more of a business opportunity versus an investment, right? So, yeah, we're on the same thread, Brandon. I'm right there with you. I want to help as many

00:55:58
people do as well as they can in this economy. And, you know, it's really nice that we were able to connect today and talk about assisted living. And, you know, hopefully we'll have a lot more going on together in the future. >> Absolutely. Awesome. Thanks, John. Yeah, make sure you reach out to John. We'll have his contact info in the in the bio and everything down below so you can reach out to him. All of his links, social media, and everything. Um, so we'll get that out for you. Go make sure

00:56:20
you follow him, reach out to him if you're interested in working with him. And, uh, looking forward to continuing to to work with John. So, >> thank you. It's been awesome chatting today. >> All right. Thanks, guys. >> All right. Thanks everybody. This was this was super helpful talking to John, getting to know him a little bit and more about new finance. I hope you go reach out to him because I I think he's got some incredible loan products that can really help you out as you're trying

00:56:42
to get into this and try to figure out how to get into your own assisted living business. Uh before you go, I want to remind you go take the quiz if you need some help trying to figure out how to get into assisted living. Go to aliquiz.com 30 second quiz. I'll I'll tell you which of my programs is the best fit for you. So go do that. And if you want to learn more about the roadmap challenge, go to roadmapchallenge.com. It is an incredible live teaching experience for us to get together,

00:57:05
answer your questions. if you're in the VIP room and and help you make some progress as we are building your roadmap together. I love doing it. It's one of my favorite things to do. So, I would love to see you there. Again, roadmapchallenge.com. And, you know, are are you curious about assisted living, but you're not sure how to get started at assisted living investing. I help first-time assisted living entrepreneurs launch profitable, purpose-driven businesses, creating prosperity, purpose, and peace. I love

00:57:28
helping people like you, you know, reach their goals and create that time of financial freedom that they're looking for. And remember, it doesn't take a lot, just a little bit. Just keep going step by step by step and I promise you if you do and you are consistent and persistent, you're going to be successful. Thanks for watching and have a great day.