Scaling Your Real Estate Business with Smart Financing Strategies with Jake Rome

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Welcome to Raising the Flipping Bar, the go to podcast for aspiring and seasoned real estate investors.

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I'm your host, Derek Marlin, and I'm the CEO of Elevation.

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We're a real estate investment company based right here in Denver, Colorado.

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We'll dive into smart investment strategies, market insights, and essential tips for scaling your real estate ventures.

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Whether you're making your first investment or your hundredth investment, this podcast is your blueprint for success in the ever evolving world of real estate investing.

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Get ready to elevate your real estate game and begin your journey with me.

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Hey everybody.

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Welcome back to another episode of Raising the Flipping Bar.

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I'm your host, Derek Marlin, and we've still got Jake from BackFlip with us.

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And we've had such a great conversation.

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We actually decided to split this into two episodes.

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So if you haven't listened to the first episode with Jake, please do.

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It's going to set great context.

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We're going to get into some super cool things with what BackFlip is doing now across the country and in the Denver market.

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So let's get back to today's episode and dive right in.

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let's rewind just a little bit in that I want the audience to understand why we first started talking about institutional money and access to capital.

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And I'm going to kind of frame this question maybe in a little different way.

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One of the benefits that we personally saw, cause again, we just got done doing our sixth deal.

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We closed a week ago, so this comes out, it will be within a month or whatever.

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We've got hard money lenders and private lenders that are talking to us all the time saying, Hey, can we earn your business?

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And we say, okay, you know, tell me why and try to vet people.

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Well, one of the folks that was kind of positioning themselves as a larger competitor.

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Um, I said, well, what, what's your access to capital?

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They said, well, we're full right now, but when we have some redemptions and we have folks finished projects, call us in 30 days, that destroys my business.

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So what I love is that you guys are so far ahead of the curve, you're running kind of an institutional.

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Wall Street type of operation at a very, you know, grassroots Main Street type of level.

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And not to say that there's infinite funds, but you guys have thought of that because you have that experience.

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It's not just, and I'm not trying to knock it, but there's lots of high net worth individuals out there and they might have 30 million.

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That's more than I have sitting in the bank.

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But if they make a couple loans, Their capital is allocated.

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Maybe just talk about kind of how that works for you guys, because we saw firsthand is that's a huge benefit to us.

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And that's why we love working with you guys.

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People don't think of that, but that's important from a flippers perspective.

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Yeah.

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The one thing we can't do is run outta money and stop you from being able to scale your business.

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And so thinking about our capital markets, infrastructure and piping is 75 percent of every day for me.

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It's harder, but it's worth it to build a resilient capital stack.

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So we have Several different debt funds, which are LP investors that, you know, invested into a fund format.

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We manage that capital.

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We then also have, you know, institutional note buyers that purchase loans from us and we still maintain the relationship.

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We still Process the draws and, and all, all the asset management, borrower, communication, as much as we possibly can.

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But, you know, sell the loans because then we get the capital back and we can do more loans.

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And so, we haven't raised $30 million, but we've done, almost $300 million of loans.

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And that's because of this machine.

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The other thing that institutional capital allows you to do is for the loans that, that it likes and it has its own perspective and it studies.

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You know, data sets of hundreds of thousands of units and figures out what it thinks is risky or not.

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And it's not always perfectly aligned with what we think is risky or not.

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But it doesn't really matter because they have their perspective.

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If you can get alone that fits into their box, you can get very aggressive pricing.

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And so this year, part of the institutionalization that I mentioned was, Morningstar rating agencies started rating these securitizations.

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So these loans get originated, they get put into a big pool, they get sold off as bonds.

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The bond investors or institutional investors, they like the risk profile and then they compete and they drive the cost of capital down.

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So since the securitization started becoming rated, we've seen the cost of capital.

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compressed dramatically independent of what the Fed's doing.

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And so even before the recent rate hikes, we introduced a product that you could get a 9 percent loan, right?

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You know, most people are paying between 10 and a half and 12, 13, right?

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And so we said, you know what, if someone's going to structure a deal in a way that, is less risky and deserving of lower cost of We're going to pass that on to them.

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And I celebrate when I see 9 percent loans because I say that entrepreneur gets it right.

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Like he's maximizing a profit.

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It's not maximizing his leverage, but that's not always the most important thing.

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Um, and you can actually, you can do the math and say, all right, the way that you get 9 percent with us is it's 80 percent loan to cost of closing and then a hundred percent.

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So it can still be, you know, close to 90 percent LTC depending on the rehab amount, but it's 80 percent of Some people are like 82, 83.

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And I'm like, look, If you just put in an extra 4, 000 up front and get to 80, your cost of capital goes down by 75 basis points.

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The return that you're earning on that extra 4, 000 is actually higher than the return that you're earning on your whole flip.

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And it's risk free in the sense that If you're guaranteed to make that return because you're paying less interest, right?

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Minimizing an expense is the same thing as generating revenue from a, investment returns perspective Yeah, and I think the cool thing about that, and this is the way that we personally used it, is for those that have kind of followed us for a while, or they're one of our students, is we've got an internal line of credit, and it's a family line of credit that we have for a stock and bond portfolio that we borrow against.

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Yeah.

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And all things being equal, we're paying, slightly lower interest and we're paying no points.

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So kind of apples to apples, you think, well, why wouldn't, why would you, not borrow at 7 percent from yourself versus borrow it, let's say, 9 percent and one point or 1 percent of the loan that you're originating for an experienced investor like us, people would go, well, why the hell would you do that?

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Well, for us, we got into it for twofold.

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And I really want the audience to kind of pick up on this.

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Which is it gives you the ability, like you said, to scale and to do more projects.

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So instead of taking, let's say we have access to a million bucks in Denver, that's two, maybe three deals.

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And we're truly maxed out versus if we can allocate that and do one deal with company capital, but then I can, allocate 20 percent of each deal, we can get into seven or eight deals with the same thing.

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Yes, we're taking on more assets, but I would argue that maybe diversifying is semi less risky.

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That's the way we're using it.

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And what I love that you guys do that you just brought up is you're moving with the markets.

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I think, I think private and hard money lending, again, in the old line perspective is so static and it didn't run up an insane amount, but it's been the classic 10 or 12 and two forever.

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And most people just think that it's never going to change and that's fine.

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But why wouldn't you work with somebody who's got community, you guys have technology and, oh, by the way, you're now beating people on rates.

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The reason that those, old school, capital providers can't move is 'cause they raise funds.

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They tell their investors, we're gonna pay you a 10 pref, and then we're gonna, you know, keep our lights on with the origination fee.

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Mm-Hmm.

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. And so even if rates go down, they've promised a 10 to their investors, they can't do loans at nine.

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And it just doesn't work.

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And so the benefit, there are challenges of being plugged into Wall Street too, for sure.

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But the benefit is that you do get to move with the market for the loans that Wall Street likes, which is not every loan either.

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We try to be really intentional about capital product design.

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And what we're doing is it's a bit of sort of marketplace making, right?

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Like there's a standard product.

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It is what Wall Street likes.

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And then we have a couple other products, the double double, which is higher leverage.

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We've accomplished that by doing a 1st lean ourselves.

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And then, you know, sometimes those end up with different different places.

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And so we can scale that product and then we've got a, it's called the zero gravity.

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Our, creative director came up with the name.

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It's a loan that sets you free.

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You don't make interest payments during the life loan.

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Yeah.

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And so for these deals, if you think about it, like they're not cash flowing, it is a bit weird that you're required to pay interest in addition to construction costs when a hundred percent of the construction is supposed to be covered.

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Yeah.

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You're then also coming out of pocket for interest.

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That's like a legacy feature that's related to the traditional mortgage space.

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If you do a commercial real estate construction loan, the interest is capitalized into the loan.

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And so we're trying to like take what actually makes sense from first principles perspective and introduce that product.

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It's very popular.

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And then we've started to find institutional capital sources that say, you know what, backflip, this is working, it's performing well, it makes sense.

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We want some of that.

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And so, that's what we need to do is introduce new products and then figure out a way to scale them into the capital markets.

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Well, what I also like, and I really want our listeners to kind of key in on is from a functionality standpoint.

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What I like that Backflip does is from the mechanical side, let's say draws, you know, a lot of times people work with other hard money lenders and it is kind of a nightmare trying to get your draws scheduled to get it done.

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The fees themselves are exorbitant for other folks, but our project manager, Travis, literally he's able to, maybe it goes back to your folks being remote, is set up in a draw inspection.

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He walks the person through virtually and essentially does a FaceTime.

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They double check to make sure what's done is done.

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And then within 24 hours, the money's instantaneously in our bank.

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And so for us, that's huge.

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Cause we build those relationships as flippers with contractors saying, I'm going to pay you out of company funds.

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We really try to guide our clients to say, don't just wait for the draw and then pay.

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That's not a good business practice.

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Like have liquidity to make your draw payments, but then to get it back almost instantaneously, is huge.

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And we just don't see that from other people.

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love that you brought that up and I'm glad that you've had a, uh, a great experience.

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We do, I don't know, four or 500 draws a month at this point.

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Not everyone has that great experience.

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I give us a B on, draws.

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Some is fantastic.

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And you have liquidity and working capital and like, it's not too disruptive if it takes a Have prioritized as making and needing to make huge strides on.

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In a couple of weeks we're going to be launching a same day draw program.

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So, for certain borrowers and loans that are eligible, which we're going to try to make as wide as possible if you're eligible for a 9 percent loan, You're also eligible for same day draws.

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And so we'll be funding, you'll put in the request.

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And literally get the funds the same day.

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So that's an area that to your point, you know, a lot of our members are very sensitive to for good reason.

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That's an example of something that we're taking the feedback and then really trying to, take it to heart and improve the business And the other thing that we've also experienced is just that customer service mentality too.

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And again, I think it's nice.

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People need to build relationships with all the different aspects of folks they do business with, whether it's their traditional banker, their CPA, their contractors, whatever.

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But we had a loan that we did with you guys.

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That was a large project.

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It was in central Denver.

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It was a permitted project.

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And unfortunately we got stuck.

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I call it permit purgatory.

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Like just this arbitrary, however many months.

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And it's just like, what, kind of want to stand at city hall and be like, what the hell's going on?

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But you guys were great in that.

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The typical term that we had selected on that specific loan was 12 months.

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We burned four months just sitting there waiting for a permit.

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So we got the property on the market.

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Market wasn't super strong.

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So it took, I want to say 65 days to get under contract and sell.

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We literally were closing, seven days into the 13th month.

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So we're going seven days over our overall guideline.

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And yes, you have investors that you guys have to, answer to as well from the prior discussions we had.

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So we enacted a half a percent fee for, for essentially re upping, which is, you know, a bummer, but it is what it is.

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And it's the way business goes.

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But then another shout out to one of your staff, Joe, who's in New Orleans and our account executive.

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He's like, Hey, let me see what I can figure out.

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And then he got back to us and said, you know what, because of you guys being a good customer.

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We'll give you that credit on your next deal.

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And so we just cashed in that credit.

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And that's just, to me, truly a great partnership.

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And I just don't think you see that all the time.

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That's a great story for a couple of reasons.

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Astute on you for deciding to liquidate and move on to the next one on that project, and unfortunately they aren't all grand slams.

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And then I'm glad to hear and not surprised that Joe's amazing, you know, went to bat and got that done.

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It's that goes back to the.

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relationship with the customer and the relationship with the repeat customer, right?

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It's the most important thing to us.

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And so, we aspire to be partners.

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And I think when people say, how are you different than other, private money lenders or hard money lenders, I, we have the tech piece of it and that's, answer one answer two is that our DNA is just different.

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So like, we truly do want to be partners.

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We truly want to make our members successful.

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And a lot of times that means telling them, You shouldn't do this deal.

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And that's unfortunate, in those moments, but then nine times out of 10, two weeks later, they've got a better one.

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And so it's, you can see people get like emotional and stuck on a project, but this is a business you're trying to make good investment decisions.

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You're trying to make the best risk adjusted returns that you can.

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You can make.

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You know, extra turns over here, but the risk is really high.

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You can make the same return with a lower risk profile.

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You should wait and do that second deal.

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Dealing with hard money lenders is the biggest headache real estate investors have.

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I thought that's just how hard money had to be until I met backflip.

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Backflip is changing the lending game by actually making loans stress free.

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And I know this firsthand because I personally use them for my own deals.

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Let me tell you, their free app makes real estate investing effortless.

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With just a few taps, I can apply for loans tailored exactly to my needs, whether it's low interest rates, high leverage, or even deferred payments.

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The best part, I can secure financing less than two weeks, making it easier to scale my business in close.

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More profitable deals, but it doesn't stop there.

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Backlip instantly provides all the data I need to estimate profits, including a curated list of high quality comps, saving me hours of work.

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Unlike other lenders who disappear after funding, Backlip is a true partner for Elevation.

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Their team is always just a call away and ready to answer any questions and offer support.

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With Backlip, you get the data and the cash you need to jump on good investments quickly and with confidence.

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Click the link in the show notes to download the free app.

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Now let's get back to the show.

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Well, and before we get into some kind of Denver specifics, I'd want to, we've done a great job of kind of going 30, 000 foot level to start.

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Then we've just really gotten done with a bunch of granular questions.

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I'd love to zoom back out and say, maybe, is there something that was the biggest challenge that you didn't see coming?

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And then maybe the biggest when we were like, man, this has been so great.

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I didn't see that coming either from a 30, 000 foot perspective.

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good question.

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The win I'll do first, just because I think it's going to be a win is the institutionalization of, as I mentioned before, of this specific type of loan.

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We didn't underwrite that when we started the business and that the rating started coming out and capital is really getting excited about, you know, fix and flip loans.

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And so that's going to enable us to offer.

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Pricing that is more competitive than we ever imagined.

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And I think it's going to benefit all of the people in this ecosystem.

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So that's certainly a win.

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You got to kind of have your line in the water and be fishing to get a bite.

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And so, business wasn't dependent on it.

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The other, I guess on the flip side of that, didn't see the rates, you know, going from zero to five and a half percent in such a short period of time.

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That was hugely challenging.

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Capital markets froze up, cost of capital doubled.

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The housing market has had all sorts of wonky things happening to it.

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And so that was challenging.

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That was, not totally unexpected, but not expected to happen with the, you know, violence that it did.

00:15:38.451 --> 00:15:41.301
I think we're on the right side of that now.

00:15:41.321 --> 00:15:50.561
And frankly, I'm thankful for it because we got to build a company in a culture that is much stronger and more resilient doing it in an environment like that.

00:15:51.051 --> 00:15:52.551
You know, there was a bunch of companies that.

00:15:53.166 --> 00:15:55.975
got started in the, zero interest rate era.

00:15:56.015 --> 00:16:02.076
And a lot of those companies aren't around today, because they like structurally weren't set up to be able to deal with that.

00:16:02.556 --> 00:16:05.086
It also speaks to the resiliency of this business model.

00:16:05.456 --> 00:16:09.096
Our members, you don't need housing price appreciation to make money.

00:16:09.436 --> 00:16:09.666
Sure.

00:16:09.666 --> 00:16:12.735
It's helpful, but frankly, housing prices could be going down.

00:16:12.745 --> 00:16:19.936
And if you're creating 30, 40 percent gross profit, You're building sweat equity, right?

00:16:19.936 --> 00:16:21.706
Like we, I call it entrepreneurial profit.

00:16:22.015 --> 00:16:34.495
So given the tailwinds I mentioned at the beginning that are really pervasive, supply, obsolescence, affordability, you know, like those are more powerful than any of the headwinds that we've seen the investors just need to be careful Yeah.

00:16:34.816 --> 00:16:41.316
Well, what I love that you just said is I think a lot of people look at this and go, Oh, well, I'm not successful because of the market, or I'm going to hold off because of the market.

00:16:41.326 --> 00:16:51.145
You guys had every excuse to probably scrap the whole thing or, or a completely pivot or downsize because of the market, but you've whatever quintupled, you know, in three or four years.

00:16:51.155 --> 00:16:55.505
So that's just a cool testament to kind of what you guys are doing and the entrepreneur spirit that you guys have.

00:16:55.941 --> 00:16:56.433
Appreciate that.

00:16:56.433 --> 00:17:02.524
I went to a founder dinner at fruition, down the street last week and one of the investors was like, Hey, have you seen this?

00:17:02.624 --> 00:17:03.484
I'm like, I don't know.

00:17:03.484 --> 00:17:04.134
What are you talking about?

00:17:04.473 --> 00:17:07.463
And there's a list of fastest growing.

00:17:07.933 --> 00:17:14.153
Companies that have raised, blue chip BC capital that at the time had less than 50 employees And backflip was number two.

00:17:14.324 --> 00:17:14.763
Nice.

00:17:14.784 --> 00:17:20.084
Which was Maybe we're hiring a little bit too fast, but We've got to keep up with the Yeah, no, that's awesome.

00:17:20.304 --> 00:17:27.554
Well, now I'd kind of love to shift gears a little bit and talk about the Denver market, especially since it's nice, you know, Jake, like you mentioned, you're here, you've got people all over the country.

00:17:27.554 --> 00:17:33.693
So I think you get unique perspective of getting all these data points from other locations, but then you can kind of centralize it.

00:17:34.044 --> 00:17:35.314
I'm going to put you on the spot a little bit.

00:17:35.314 --> 00:17:37.034
I know this is a little crystal ball.

00:17:37.054 --> 00:17:37.598
Nobody has the answer.

00:17:37.598 --> 00:17:54.388
The perfect answer, or as I always joke, we'd all be far wealthier and less stressed than we already are, but kind of, yeah, I mean like, where do you see the market ending up, you know, we're going to drop this here kind of early fourth quarter and more importantly, just kind of going into next year for the fix and flip space in Metro Denver.

00:17:54.828 --> 00:17:55.419
Yeah, it's good.

00:17:55.469 --> 00:17:56.128
Good question.

00:17:56.189 --> 00:18:00.179
I'm definitely not the smartest person that you've had in this room on that topic.

00:18:00.269 --> 00:18:05.989
My perspective is relative to the rest of the country is that you know, Denver is a higher cost of living market.

00:18:06.398 --> 00:18:07.719
People want to be here.

00:18:08.009 --> 00:18:15.999
And it's unique in that there's not insane barriers to entry like there would be in San Francisco or Boulder, but it's still a high cost of living market.

00:18:15.999 --> 00:18:27.088
I think from a long term perspective, just Climate situations and weather like people are going to be coming here more than they're going Um, we've also got a great business climate.

00:18:27.469 --> 00:18:31.209
And so the long term trajectory of denver I think is really strong.

00:18:31.638 --> 00:18:41.269
One of the things that we've noticed with flippers This is applicable everywhere is you really need to be paying attention to Who you're going to sell the property to how many of those people are out there?

00:18:41.659 --> 00:18:45.749
And and then what are they willing to pay so property liquidity ratio?

00:18:45.749 --> 00:18:53.888
You Is a metric that we use and it's the ratio between the forecasted sale price of the ARV and the zip code median sale price.

00:18:54.538 --> 00:19:01.648
And so if your property liquidity ratio is 200, you're forecasting to sell for twice the area median price.

00:19:02.499 --> 00:19:03.878
Maybe that you can pull that off.

00:19:03.909 --> 00:19:04.838
A lot of people do.

00:19:05.223 --> 00:19:17.134
But if you can keep the property liquidity ratio closer to 100, you know, there's a lot of liquidity when you go to sell the property because the last thing you want to do is finish the project and then be sitting on it for an unexpected three months.

00:19:17.534 --> 00:19:19.594
And so I think flippers.

00:19:19.858 --> 00:19:23.838
Most of them shouldn't be focusing on setting records, right?

00:19:23.838 --> 00:19:34.318
Like leave that for the condo developer who has 36 months to sell his penthouse because there's a bunch of lower cost units that are selling all along the way and paying down the debt.

00:19:34.628 --> 00:19:39.858
When you're only working on one project at a time, you need, to be able to exit quickly and reliably.

00:19:40.249 --> 00:19:46.638
And so we've really started to notice trends around the success of projects relative to initial underwriting.

00:19:47.054 --> 00:20:01.003
As it relates to the property liquidity ratio for another example of the way that we like to provide the pricing that the business plan deserves Is if the property liquidity ratio is below 100 on automatic 25 basis points off your interest oh cool.

00:20:01.034 --> 00:20:10.624
So we're trying to encourage People to look for the things that we look for based on our data To do projects that are going to make them successful Well, what I like about that is that, you know, we try to train people.

00:20:10.624 --> 00:20:17.554
A lot of times people say, Oh, well, I want to flip something in my neighborhood because I know it really well, but that might not always be the best investment.

00:20:17.574 --> 00:20:18.884
People always ask us, where do you flip?

00:20:18.884 --> 00:20:20.294
I say, wherever there's the best deal.

00:20:20.574 --> 00:20:22.503
So to me, that's a huge, yeah.

00:20:22.503 --> 00:20:24.304
Like let super smart people.

00:20:30.413 --> 00:20:30.894
We're aligned.

00:20:30.894 --> 00:20:32.066
We couldn't be more aligned.

00:20:32.276 --> 00:20:35.115
You know, we both want there to be a successful project.

00:20:35.165 --> 00:20:56.631
Yeah, well said If you're looking at that liquidity ratio, have you guys started to see certain pockets of Denver that are performing better from an ROI perspective where the properties are moving, quicker, and maybe people think it's the deal they thought or the location, but yes, just a couple of areas that maybe have stuck out.

00:20:56.641 --> 00:21:02.830
And now you've got an actual metric to track it, not just a gut feeling or, Oh, we know wash park is a nice part of Denver.

00:21:03.171 --> 00:21:04.621
Any areas you would kind of point out?

00:21:04.631 --> 00:21:06.101
Yeah, I think West.

00:21:06.280 --> 00:21:13.701
I don't have this is more anecdotal than anything but like Jeff Co Green Mountain area, Lakewood kind of West side time.

00:21:13.701 --> 00:21:14.721
There's a lot of opportunity.

00:21:15.000 --> 00:21:20.171
You've got, you know, 2 million houses and then 200, 000 houses that aren't that far away.

00:21:20.171 --> 00:21:27.300
And as we were Before the show, like one thing they're not making is was more access to mountains and trails.

00:21:27.300 --> 00:21:34.951
And so for people that are attracted to, access to the outdoors, that's where you're going to end up as opposed to Aurora or, something on the other side of town.

00:21:35.441 --> 00:21:39.310
If I was flipping in Denver, like, that's where I would look first.

00:21:39.391 --> 00:21:39.590
Yeah.

00:21:39.780 --> 00:21:42.431
Uh, because I think there's some unique opportunities to homes.

00:21:42.431 --> 00:21:45.635
There are also just Totally prime for it Yeah.

00:21:45.635 --> 00:21:47.076
And usually they're not too old.

00:21:47.086 --> 00:21:52.415
That's the other nice thing is, is that if you're working in central Denver, you're working in stuff that's 1900s, late 1800s.

00:21:52.816 --> 00:21:54.205
It's not that old typically.

00:21:54.205 --> 00:21:59.175
So it could be in disrepair, but usually it's not a complete disaster or a hundred years old.

00:21:59.175 --> 00:21:59.465
okay.

00:21:59.516 --> 00:22:00.326
Yeah, which is cool.

00:22:00.536 --> 00:22:00.796
Okay.

00:22:00.846 --> 00:22:05.276
So, what do you see, I would say, just to kind of wrap up on the Denver community.

00:22:05.276 --> 00:22:07.746
Where do you see, you talked about interest rates.

00:22:07.986 --> 00:22:10.935
We've kind of had this crazy low interest rate environment.

00:22:10.945 --> 00:22:12.195
We have this huge spike.

00:22:12.195 --> 00:22:19.016
We're kind of trailing down, The way we look at it is in 2018 and 19, we actually had the best volume we've ever had.

00:22:19.266 --> 00:22:25.445
We didn't have the best profitability because the good old days of 21 and 22 were every deal became a home run.

00:22:25.756 --> 00:22:27.395
That's truly an outlier to me.

00:22:27.786 --> 00:22:37.576
Do you see the trend, over the next year to getting back to kind of, let's call it the norm, which theoretically should give us the best chance to succeed and do the most volume and then refine our business model.

00:22:37.576 --> 00:22:38.026
Or do you see it?

00:22:38.115 --> 00:22:39.496
being out of whack or what do you see?

00:22:39.496 --> 00:22:43.276
Just some big picture trends rather than being like, Oh, this is the time to buy and sell.

00:22:43.316 --> 00:22:44.885
That'd be great to see where you think it's going.

00:22:45.026 --> 00:22:47.336
Yeah, we're not going back to 21.

00:22:47.496 --> 00:22:49.326
So we shouldn't be underwriting that.

00:22:49.326 --> 00:22:54.365
I think, the market will revert to the profit margin that makes sense for the risk on these deals.

00:22:54.605 --> 00:22:54.665
Okay.

00:22:54.726 --> 00:22:55.536
And so there may be.

00:22:55.786 --> 00:23:05.326
You know, times when it's higher or lower, but it's hard to underwrite and predict that, back to your crystal ball comment, like I'd have a different job and it would be less stressful.

00:23:05.576 --> 00:23:11.455
What we've seen is that 25 to 35 percent gross profit, is where most of these land.

00:23:11.455 --> 00:23:15.905
And if you look back at, Adam data, like historically, that's pretty much in line.

00:23:16.276 --> 00:23:23.615
I think if risk is taken out of the equation, then The profit margin will come down because it'll become a little bit easier.

00:23:23.895 --> 00:23:29.266
If the space gets more competitive, the profit margin will come down, but like ultimately there's a lower bound.

00:23:29.306 --> 00:23:30.715
I don't know what it is.

00:23:30.726 --> 00:23:36.096
Some of our loan products, we don't like if the deal is less, than 25 percent gross margin, cause there's not enough room for error there.

00:23:36.096 --> 00:23:41.346
And so I think the bound may be there, but it's all back to the institutional capital, how this fits in.

00:23:41.346 --> 00:23:43.425
Like it's all relative, right?

00:23:43.425 --> 00:23:44.496
Like if you can do.

00:23:44.746 --> 00:23:48.375
single family value add deal and make a two X equity multiple.

00:23:48.605 --> 00:23:50.586
You can do a multifamily development and make a 1.

00:23:50.586 --> 00:23:52.236
6 X equity multiple.

00:23:52.236 --> 00:23:56.096
Like everything is about a risk premium relative to the alternatives.

00:23:56.536 --> 00:24:01.516
And so, ticks and flip residential on the equity and the credit side.

00:24:01.526 --> 00:24:03.976
Like it has a place in the investment universe.

00:24:04.316 --> 00:24:06.385
It's figuring out what that is.

00:24:06.486 --> 00:24:11.445
but I don't think it's going to deviate, you know, too far from what we've seen historically.

00:24:11.705 --> 00:24:14.726
If it does, You should either be buying or selling, right?

00:24:14.726 --> 00:24:17.032
Like, depending on what side it's on Well said.

00:24:17.032 --> 00:24:20.000
Well, Jake, man, this has been such a great episode.

00:24:20.000 --> 00:24:23.559
We've really enjoyed kind of the entry points of our partnership.

00:24:23.569 --> 00:24:27.970
We're excited to share with our community, the great stuff we're going to be doing with you guys at Backflip.

00:24:27.980 --> 00:24:30.589
So just in general, thank you for the partnership.

00:24:30.589 --> 00:24:31.900
It's just been fantastic.

00:24:32.900 --> 00:24:34.078
Awesome II echo that.

00:24:34.108 --> 00:24:35.108
You guys are awesome.

00:24:35.108 --> 00:24:41.038
What you're doing with Elevation Academy and I'd say, you know, training investors the right way.

00:24:41.413 --> 00:24:42.554
Is really, really special.

00:24:42.703 --> 00:24:48.903
Too many folks wander on to YouTube and, get into these, get rich, no effort, other people's money.

00:24:48.903 --> 00:24:50.003
And here's your Ferrari.

00:24:50.003 --> 00:24:51.993
And like, that is incredibly dangerous.

00:24:52.233 --> 00:24:57.743
So I think what you're doing is extremely admirable and we're just happy to be able to support you and your customers.

00:24:58.338 --> 00:24:59.759
No, I really appreciate it.

00:24:59.999 --> 00:25:03.328
Well, how can people get ahold of you and or backflip as a company?

00:25:03.328 --> 00:25:04.898
You know, you've got marketing, you've got PR.

00:25:04.898 --> 00:25:07.628
So how do you want people to connect with you guys directly at backflip?

00:25:07.628 --> 00:25:08.749
so backflip.

00:25:08.778 --> 00:25:12.449
com I think is the easiest way that'll get you to anywhere that you want to go.

00:25:12.709 --> 00:25:15.989
We're on the ios and android app store as well.

00:25:15.989 --> 00:25:17.979
So like downloading the app again, it's free.

00:25:18.019 --> 00:25:22.175
That's the best way to meet us and it adds value to your business to start using it.

00:25:22.486 --> 00:25:24.621
We have Social handles as well.

00:25:24.631 --> 00:25:27.500
I don't memorize those, but we can put them into the show notes well, awesome.

00:25:27.780 --> 00:25:29.000
This has been so great, Jake.

00:25:29.020 --> 00:25:32.191
Thank you so much for being on and everybody we'll catch you guys on the flip side.

00:25:33.016 --> 00:25:36.006
Thanks for tuning into this week's episode of raising the flipping bar.

00:25:36.375 --> 00:25:49.695
If you found value in our insights and stories, let's keep the conversation going, connect with me on social media, and be sure to share this episode with friends or colleagues who might benefit your feedback and reviews, help us grow and reach more listeners like you.

00:25:50.036 --> 00:25:53.266
So please, if you enjoyed this episode, leave us a review.

00:25:54.036 --> 00:25:56.986
Thanks again to the elevation Academy for sponsoring today's show.

00:25:57.605 --> 00:26:03.635
If you're interested in learning more, click the link in the show notes below and remember every property tells a story.

00:26:03.976 --> 00:26:05.296
Every deal brings a lesson.

00:26:05.836 --> 00:26:08.645
Keep reaching for those goals and we'll catch you on the flip side.

00:26:11.385 --> 00:26:11.976
Hey everybody.

00:26:11.996 --> 00:26:15.195
Thank you so much for listening and watching, raising a flipping bar.

00:26:15.496 --> 00:26:20.855
Just a basic overall disclaimer is that a, This is not legal advice.

00:26:21.036 --> 00:26:22.566
B, this is not tax advice.

00:26:22.576 --> 00:26:24.226
C, this is not financial advice.

00:26:24.556 --> 00:26:28.546
I hope you get the gist, but I'm obviously not a lawyer, not a CPA hell.

00:26:28.546 --> 00:26:32.925
I'm not even a real estate agent actually, but in general, we hope you get a ton of value out of this, but there is a bit of a disclaimer.

00:26:32.925 --> 00:26:36.486
Please consult a professional if you have any questions whatsoever.