Episode 36: A Crash Course On Hard Money Lending – Featuring Wendy Sweet

Michelle: Welcome to the “InFlow Podcast.” I am your host, Michelle Bosch. Today, I have an amazing lady on the financing and lending side of real estate with me today. She is part of a mastermind my husband and I both belong to with the crème of the crème of real estate investors.

My guest today is Wendy Sweet. She is principal at Carolina Capital Management. Wendy has been lending money to investors since 2001 as both a conventional lender and hard money lender. In 2008, she along with countless others tossed conventional lending to the trash pile, and she dug in by growing her hard money company offering funds to investors who were able to navigate the changing real estate world.

She and her partner who is also her brother, Bill Fairman, have been successfully lending money primarily in North and South Carolina to investors, rehabbers, and builders. Currently, she also lends to commercial investors for multifamily, multi-tenant projects in key areas of the U.S.

They manage a real estate fund in addition to brokering loans for those with money that want to invest. Wendy is also a 35-year licensed real estate broker in both Carolinas. She combines her selling knowledge with her longtime lending expertise in order to provide top-notch service for her borrowers and investors.

And her goal is always to guide and assist like-minded people to build their wealth through a proven lending strategy while providing strong returns for real estate investors. Welcome, Wendy. It is a pleasure to have you on “InFlow” today.

Wendy: Well, thank you so much for asking. It’s just an honor to be here.

Michelle: Thank you so much for making time. Let’s jump right in, and let me go ahead and ask you, so how did you get started in real estate? Were you first a broker, and then you decided to get into the financing aspect, or how did it all come about?

Wendy: Well, the only reason I have my real estate license is because my mother pounded in my head my entire life, “You have to have something to fall back on no matter what you do.” And a real estate license just seemed to be the smartest way to do it. So, that’s really why I’ve had that. I don’t really like selling real estate.

I don’t like the hauling and hoping and, you know, driving people around and then the fear of, “Oh, my gosh, there’s a truck parked in the driveway and the closing hasn’t taken place yet,” you know, the owner-occupied rollercoaster. I much prefer the investor world because it’s pretty much a numbers game, and it is what it is. That’s what I like about it. There’s really no emotion involved.

But I got started in the finance. And in 2001, I was 40-year-old first-time mother, gave birth at…you know, I was one of those older mothers. I had my own company as actually a marketing company for golf courses, and I traveled all over the country putting together membership programs. I knew I couldn’t travel anymore once I had my child. So, I started working with my brother.

My brother had what’s called a net branch. So, they are a world lender, and their niche product was for investor properties, the investor loans.
Now, what I did for him is I called on different mortgage companies to try and get them to send their investor loans to my company. So, I knew the investor product. And as I’m calling on these companies, one in particular that I called on was owned by Larry Goins. Larry is a national speaker. You may have heard of him. Yeah. You know him, and he knows Jack.

So, I walked into Larry’s office and said, “You know, Larry, there is some sort of a real estate investor club here in town. And I know that if I can just get my foot in the door, I can get some business out of it. Do you know anything about it?” He said, “Well, as a matter of fact, I happen to be the president.” [crosstalk 00:03:55]

Michelle: Yeah. That’s a coincidence.

Wendy: So, within, I don’t know, just really a couple of weeks, I actually left working for my brother and went to work for Larry and his mortgage company. And within a month, we had 20 loans within a month just on the investor side. So, within two months, he fired his other mortgage brokers and made me his partner, which I’m very grateful for.

So he and I grew his mortgage company to doing huge, huge number of investor loans. And that’s what we really, really focused on. We could get the investor loans closed really quickly. They were the hardest ones to get done, and none of the other mortgage brokers wanted to do that. They were just pulling the low-hanging fruit. You know, for me, it was like shooting fish in a barrel because, you know, it’s the product that I really knew, and I had just a ton of people that were looking to get loans done.

So, what really happened with the hard money side, though, is I would have investors who would come to me for a loan, and they would have plenty of money in the bank, but they couldn’t find houses. They couldn’t find the houses. And then I had other people that could find the houses, but they couldn’t qualify for a loan.

So I started taking the people who had money in their self-directed IRAs or cash in the bank, and I started loaning that for them to the people who didn’t have money. And that’s really how I got into hard money, into hard money lending. And it grew.

It did very well until about 2008, which many people might remember that year as being a very special year for all of us in real estate and finance where everything tended to crash. So, we actually shut down our investor loan company at that time because, you know, we couldn’t get a loan closed to save our lives for investors, let alone a conventional loan.

So, I was still doing a few hard money loans on the side during that time, but I went back to the seminary. I went to college and finished up seminary for the next three years. And when I got out again, out of seminary, I had no intention of getting back into real estate, but God and Larry convinced me…

Michelle: A different plan.

Wendy: Different plan. I had doors open that I had to go through and windows open that I had to go through. So, I started back running some of Larry’s company, but for the most part, I was doing that hard money company on my own. And it just exploded. Then I contacted my brother, who at that time was even driving a truck because he couldn’t get any loans closed with his company either. So, I got him to come and work with me. And since that time, we’ve got $23 million of other people’s self-directed IRAs and that $50 million fund for accredited investors that we’re letting out of.

Michelle: That is fantastic. Now, for someone that has no clue and no idea, can you describe, or can you tell…explain the difference between what a hard money loan and a conventional loan would be in terms of requirement loan to value ratios, actual cost of the capital?

Wendy: Sure. So, when you are an investor, and you wanna buy a house to rehab it, going conventional is nearly impossible because a bank is going to lend you money based on the purchase price of the house. That’s what a conventional bank is gonna do. If you are an investor, you need to not only have the money to buy the house, but you need the money to fix it up as well. And that’s where hard money or private money comes into play.

So, a private money or a hard money lender…and the only difference between private and hard money is private is somebody who’s doing it out of their own bank account. They’re not really a company, and hard money is a company. So, we lend money based on the after repaired value of the house.

So, what we do is we take the list of repairs, the things that are gonna get done to the house. We give it to an appraiser, and they do an appraisal based off of those items being completed. So, we, in particular, lend up to 70% of what that after repaired value is. So, we’ll lend you all the money to buy it and all the money to fix it up as long as you’re under that 70%.

And there are plenty of companies that do that. Some will only go up to 65%. Some will say, “Okay. We’ll lend you 90% of the purchase price and 90% of the rehab amount as long as you’re under 70%.” So they’ll make you bring money to the closing table. So, there’s different variances of that.

It’s a short-term high-interest loan. Short term meaning ours is 12 months. Sometimes people will do six months. It’s a high-interest, meaning, it can be anywhere from 10% to 15% from what I’ve seen. And that’s an interest-only payment, and it’s monthly.

There’s some companies out there that will, you know, charge a 10-15% interest rate, but they won’t make you make the payment until you pay the house off. So, there’s a different variances of this loan type. There’s a lot of different options for you out there. So, if you’re ever looking for a hard money loan, you should always call around and find out what works for the deal that you’re trying to do.

Michelle: Yeah, absolutely, because some people might also charge points in addition. Yeah. There’s…

Wendy: That’s a loan origination fee. So we charge 3 points and 10.99%.

Michelle: Yeah. Okay. Great. Good to know. Now, you just mentioned a little bit ago that you’ve started a fund. It’s a $50 million fund. Is this accredited or non-accredited?

Wendy: It is for accredited investors.

Michelle: Okay. Can you explain the difference between those two?

Wendy: Sure. So an accredited investor is someone who is worth a million dollars without your primary being involved, worth a million dollars. And that can be any money you have in the bank, any self-directed money you might have, any rental property you might have. So, you gotta be worth a million, or you have to have made $250,000 over the past two years. That would make you an accredited investor.

Michelle: Correct. Now, what is the current focus of that fund in terms of like what kind of projects, what asset class, the size, and what markets?

Wendy: So, we lend primarily in the Southeast, mainly in North and South Carolina because that’s our backyard.

Michelle: Yeah. And you know that area very well, absolutely.

Wendy: We like lending on what we know. You know, markets are different. Even in one state, you’re gonna have several different markets. Like in North Carolina, we have the mountains, we have the beaches, and we have the Piedmont, the middle area. And there are certain areas that just aren’t doing as well as another area. So, you can’t just say, “Hey, I’ll lend in North Carolina.” You have to make sure you’re lending in areas that you know those houses are gonna get sold pretty quickly, because as a lender, every deal you look at is, “If I have to take this hand house back tomorrow, how quickly can I sell it?” Because that’s the risk that you’re taking on. So, we do lend regionally and locally just to make sure that we understand our market completely. Now, we have loan outside, like in Washington State, Oregon. We’ve done some stuff in Texas and Florida. But our direction is really, really on the Carolinas and the states that touch us.

Michelle: Yeah. It makes sense.

Wendy: That’s really important.

Michelle: Now, do you do multifamily?

Wendy: We do. We do multifamily. We do multi-tenanted. One of the things about multi-tenanted is, again, if we have to take it back tomorrow, how quickly can we sell it? Well, in a multi-tenanted building like an office building that would have different renters within that office facility, we would wanna make sure that there were other people that are able to pay rent until we can get it sold.

So, if you’ve got like a doctor’s office where there’s one doctor that owns that whole building, and he’s the only one in the building, if he tanks, then you don’t have anybody else to pay the rent. So you wanna have a multi-tenanted. Multi-storage facilities are another thing that we do. We do ground-up construction, which we really like because that’s pretty easy.

Michelle: Tell us, what makes it easier for you? It’s easy from the underwriting point of view, because when I hear ground-up development, I’m thinking, “Oh, my God, horizontal and vertical, and it takes time.” But for you, what makes it easy from your perspective?

Wendy: It does take time. People who are usually doing ground-up with us, they’re scraping off the old house and putting up a new one.

Michelle: Got it.

Wendy: So usually, they already have water, sewer tapped on too. So that’s not really a big deal. The thing is, is they’re not having to take over somebody else’s mess. They’re not having to square up walls from 1930. It actually moves faster than rehabs. And usually, the people who are doing new construction are a little bit more savvy about what they’re doing. So, it just makes our risk a little bit safer. And, you know, what’s really interesting too is our most common borrower is a black female.

Michelle: Interesting.

Wendy: How cool is that? Isn’t that amazing?

Michelle: Yeah. Yeah. Absolutely. Now, when an investor comes to you with a project, how do you vet the investor in the project to decide whether this is one that you wanna help fund and be involved in?

Wendy: That’s a great question.

Michelle: Not just the numbers part but also the person that you’re gonna be working with in general.

Wendy: Right. So each side has to stand on its own. The house has to be something that is absolutely going to sell quickly, or they’re gonna be able to get refinanced if it’s a buying home or it’s an apartment complex that they’re doing a value-add, where they’re rehabbing some of the apartments and getting the rent up. We want to make sure that there’s not just one exit strategy but two and possibly three. That would be even better.

So we wanna make sure that whoever is in this deal is going to…that the property itself is going to qualify and sell quickly and that a borrower will too. So, when we underwrite a deal, we can only lend to an entity. So, of course, you know, we’re gonna see all of their LOC docs or their trust documents or corporation, whatever their entity is, we’re gonna have to see all of that documentation. But we are also gonna look at them personally. We’re gonna pull a background check. We’re gonna pull a credit check. And I really, really care about their experience. That makes a difference.

There’s a lot of people that we do loans for that are new in the business, but they’re not, let’s see, uneducated. And with that, I mean that they’re involved in their local real estate investor group that’s so important. I always tell people to get hooked up, not only with their local real estate investor club, but also to go to the subgroup meetings that they offer because [crosstalk 00:15:49].

Michelle: Yeah, incredibly educational.

Wendy: Like, you’re breaking bread together. You’re sitting across from people that are trying to do what you’re doing, or they’re already very successful at doing what you’re doing. They’ll take you under their wing. They’ll see what it is that you do. They’ll come across the deal that’s not in their wheelhouse of what they like to do, and they’ll just give it to you to do and vice versa. So, they do business together. It’s a great way to get an education.

Michelle: Now, on the value-add multi-family, what size projects, below 100 units or below 16 units or above?

Wendy: It doesn’t really depend as much on the units as it does the cost of what we’re in. We don’t like to lend any more than about five million. So, our multifamily will be from about 500,000 to about 3 million. That’s more of an average on something like that.

Michelle: Got it. Okay. Now, do you personally hold a portfolio?

Wendy: I do. I do.

Michelle: Tell me, what kind of stuff do you hold?

Wendy: So, my favorite thing is I am a short-term rental queen. I love doing…I’ve got Airbnb base. I love doing short-term rental. You know, I’ve got them in the middle of nowhere. One house, in particular, I have in Rock Hill, South Carolina. I’m sure everybody knows exactly where that is.

So, I have a four-bedroom, two-bath house that is on a busy road, not even in a neighborhood. And I can sleep 11 people in that house. I could rent it on a monthly basis and get $1,000 a month for it. And that’s what I have been doing in the past. I furnished it, put it on Airbnb, and I’m making anywhere from 3,000 to $3,500 a month.

Michelle: Wow.

Wendy: Yeah. And that’s just one. I’ve got several. Now, the other thing I’m really getting into with the short-term vacation rental is I’m not just buying these houses. You can go out and rent them. Like I have a master lease on a few of them, where I have a lease with an option to purchase, and I’m leasing them out, and then I’m turning around and turning those into short-term rentals. So, it gives me an opportunity to kind of test the area to make sure it’s one that I wanna do. And then I get to buy it if I like it. So it works out really well.

Michelle: That is super smart. And you are the second lady that I have brought on that talks about short-term rentals, and I know a prior lady that I had, a guest. She was doing it in…I can’t remember actually the state. But she was doing it close to like big hospitals that are very well-known for specific specialty that they treat, and so she knows that people are gonna come from all over the U.S., even outside the country, to get treatment, and their families need to live there somewhere, so very, very interesting. Now, how are you managing those? I’m curious. Now, do you self-managed or…? Because I’m always thinking, “Oh, my gosh, yeah, it does sound like an amazing reward, you know, for the amount of work in terms of you could in a few months of the year get your money’s worth for the entire year.” But on the stuff managing and turning and cleaning. And so do you do that yourself, or do you bring someone else?

Wendy: Lord, no, I do it myself. I’ve got a great team. I pay them 20% of the profit, and also the cleaning fee is charged over and above the rent on the house. So, the people staying there pay the cleaning fees. So we have an outside cleaning company that comes in and takes care of that.

And, you know, the other thing too, you mentioned about the hospital. There’s traveling nurses, people who fix office equipment for the ER, that kind of thing, operating equipment. Traveling nurses, the 30, 60, 90-day rent is really, really strong. In fact, 36% of all of the rooms that are rented that are up on a nightly rent, the 36% of it is 30, 60, 90-day rentals.

Marriott is getting into the business. They’re getting houses where they’re renting out. We’ve got lobbyists now that are working for us instead of getting shut down in all these towns that you see them trying to shut back the Airbnb. So, it’s really, really gaining strength. It will only continue to get stronger, and I am sitting here with a glove on ready to catch every bit of it that’s coming my way. I love it.

Michelle: Exactly Yeah. Positioning yourself for it, yeah, absolutely.

Wendy: Exactly right.

Michelle: Now, before we started our recording, you mentioned something that really touched my heart just because this podcast is not just about the outer work and the material success but also about inner work and bringing ease and grace into our lives. And you mentioned that you are tithing, donating your time on Wednesdays mentoring others that would like to start working in the real estate space for free. And so for me, that’s a way that you’re incorporating faith and spirituality into your life. Can you tell us a little bit about how did that get started? Have you been doing that like since forever? And just tell me about the experience.

Wendy: Sure. Well, first of all, first and foremost, God is the one that actually owns my company. I’m just the steward, and I’m honored to even have the opportunity to do that. You know, I talked about getting involved in your subgroup. I’ve been facilitating a faith-based subgroup for Metrolina Real Estate Investors Association, which is one of the ones here in Charlotte for the…

Well, since 2002, every Friday at 7 a.m., we meet for breakfast, and there will be anywhere from 50 to 60 people that show up there. It’s really just amazing how the depth of knowledge of the people that are in that room and the new people that are coming in and how they just take them under their wing and just help them make as few costly mistakes as possible because, you know, we’re all gonna jump in the piles of poop. You just try to avoid as much as possible.

Michelle: The piles of poop. I like that.

Wendy: That’s what I call them, the piles of poop. I’ve been in every one of them. I’ve ruined a lot of shoes. So, that group has been going for quite some time, and it’s really, really good. So, in that group, I have some other friends, but we’ve kind of started a little…what I call a mini mastermind. It’s strictly a faith-based mastermind, and it’s all about us making sure that we’ve turned our business over to God, and we’re allowing Him to truly guide it and, you know, not making decisions on our own. We’re really just praying about everything we do and holding each other accountable for that.

So, one of the guys that’s in that group told me that he was going to start sitting at a coffee shop because, you know, people are always coming up, “Hey, can I take you to coffee…can I get you a cup of coffee? Can I take you to lunch and pick your brain?” And you wanna help people, but gosh, who has time to do it? He started doing it on Tuesdays. He set aside a couple of hours to meet with people. And I was just so inspired by him doing that. I thought, “Wow, that is so cool.” So I started doing Wednesday’s. It’s called Wednesday With Wendy.

Michelle: Oh, and I like that. It goes with your name perfectly.

Wendy: At the bottom of my email signature. I have my calendar set up, and I’ve set aside every Wednesday from 10 a.m. to 3 p.m. You can book an hour, and you can either come visit me at the coffee shop across the street from my office, or we can do it under Zoom call if, you know, you can’t make it to Rock Hill South Carolina because I do have people from all over the country that are meeting with me. And it’s not just new people. It’s people who’ve been in the business for a while, and they’re just looking for direction on what they’re doing, or they just wanna talk about their goals.

Sometimes we just talk about family. It’s just about growing, you know, whether…because, you know, it’s not just about business, especially as women, we’ve got so much that we have to balance. And I know for me, I’ve got three kids. They’re now 16, 17, and 18, and I look at them, I think, “Man, I feel like I missed their whole life because I’ve spent so much time building my business and trying to be a good wife and making sure I’ve had, you know, my household set up, and all the different things that you need to do.” There’s just so much for us to juggle.

And when you get together with other people that you know they’re kind of experiencing the same thing, it’s so much easier to do it together and to hold each other up and to be a team and just help others navigate what I’ve already navigated. I certainly wouldn’t want someone to step in all the same piles of poop that I have. I just wanna help them avoid it.

And, you know, at some point in this real estate world that we’re involved in, you know, you are gonna lose money. It’s just gonna happen. In fact, if it doesn’t happen, then you’re not doing enough deals. So, the goal is to make that loss as minimal as possible. When we do it together as a group and navigate together as a group, we’re so much better as a team, so much better as a team.

Michelle: Absolutely. I just released…I think this week, you know, they got released where I talked about basically these two different tendencies, people that are incredible quickstarts, accelerators that innovate, that bring about a lot of change and a lot of breakthroughs, you know, when it comes to financial freedom.

And then there’s another group that are more of the stabilizer ones that are a little bit more into, not just entertainment, but sustainment and want predictability, wants simplicity and just want something that can be replicable and more of a stable tendency in the business. And you need both of those people on your team.

And going to groups like the one that you host definitely gives you the opportunity to meet other people that may be complimenting you where you could throw an idea around, and they’ll give you your perspective and give you an opportunity to be exposed to those two tendencies for strategic growth, not just stumbling into growth and into poop.

Wendy: That’s right. I meant to step in that.

Michelle: Yeah. Absolutely. Now, what do you think, Wendy, is your superpower?

Wendy: Oh, gosh, I wish I had one.

Michelle: We all do. I’m sure you know it. Sometimes it’s second nature to us, so we don’t realize it, but we do.

Wendy: I would have to say that I have the ability to see a bigger picture, especially with other people’s lives, not so great at my own, but I have the ability to see the bigger picture. I can see stuff from 30,000 feet and kind of see things in puzzles. So I have the ability to put those puzzles together before I attack something. It may not appear that that’s what I’m doing, but that is what I’m doing. I’m able to see the bigger picture.

I’m much more of a visionary. I’m not a great integrator. I have wonderful ideas. I really stink at following all of them up. So, my team is so important to me because they are great at following things up and making sure that these things that pop into my head get taken care of. And the ones that pop into my head that shouldn’t be followed up on are quickly gotten out of the way. I would really have to say that, you know, without my faith and, you know, God’s direction, I’d be lost.

Michelle: Do you attribute that to your success?

Wendy: Oh, absolutely, 100%.

Michelle: Yeah. Beautiful. Now, what three pieces of advice do you have for women or anyone starting out in real estate for that matter?

Wendy: Okay. So number one is get rid of your gender. So many women are allowing themselves to be held back because they have the mindset that, “I’m a girl, and I can’t do this,” or, “I’m a girl, and people are gonna hold back,” or, “I’m a girl, and the men always get first choice.” Get that out of your head.

Michelle: And get in the game and jump in the arena.

Wendy: Absolutely, absolutely because gender does not matter in this business at all. The other thing I would suggest is that get plugged into a local real estate investor group, and not just the big one. Get plugged into the smaller ones where you’re breaking bread with people getting to know them because that group will eventually be your brain trust. And make sure you’re hooking up with people who are equally yoked, who have the same core value that you have.

And then my third piece of advice would be to make sure you are focused on the bigger picture, which is what are you doing to make the world a better place. Making money is absolutely secondary to everything else. If you stay focused on what you’re really doing to really build the kingdom and just give back. When you start giving back what you get back is just a ton more than you could ever, ever measure.

Michelle: Absolutely. I took notes right now because that third one…I mean, every single one is amazing pieces of advice, but the last one in terms of being purpose-driven and not just working for the sake of work but working in your higher work. And what I mean by a higher work is, like you said, building the kingdom. What are you here to do once you leave? How did you leave this a better place? Absolutely. What is the best way for people listening to us right now to reach you, find out more about what you do, whether they’re an investor that wants to have their money work for them, or if they’re an investor from the point of view that they’re bringing in a property, and they need resources? What would be a great way to get a hold of you?

Wendy: So the best way to reach me is really by my email, which is wendy@carolinahardmoney.com.

Michelle: Perfect, so wendy@carolina…

Wendy: hardmoney.com.

Michelle: money.com. Perfect. So we will have that as part of our show notes as well, and whoever’s listening to this can look it up but wendy@carolinahardmoney.com.

Wendy: Right. And at the bottom of my signature, it says knowledge is power, and that’s where you can click on my calendar if you’d like to take up an hour on Wednesday. And let’s see what we can do to get you rolling and on the right path and just answer any questions that you might have about real estate.

Michelle: Oh, my gosh, Wendy, I love this one hour with Wendy on Wednesdays. I might need to take advantage of that, and I am thinking that I need to also incorporate that into my life. On the land side, we teach, and we have an educational business, and we have coaches. But Jack and I very seldom do we personally coach anymore, and there is tremendous joy in that. And for some reason, we just stopped doing it because we’re busy with other stuff or bigger projects, bigger deals, you know, but I love that. I’m sure it’s feeding your soul tremendously, right?

Wendy: Absolutely. Absolutely.

Michelle: Yeah. So, I have to take that on, and I’m gonna…maybe it’s Mondays with Michelle just to go with [crosstalk 00:32:09].

Wendy: That sounds great. That sounds great.

Michelle: You know, something like that. Perfect. Well, thank you so, so much, Wendy, for spending this time with us. I love what you’re doing. I love your values. I love what you specialize. And you’re looking at real estate from the lending perspective, and that’s something that I don’t often come across when I have guest on board. So, I absolutely learned a ton.

And for anyone listening, if you enjoyed this episode, please leave me a 5-star review. I would greatly appreciate. That really helps me get out there and get more women to listen to “InFlow.” So, with anything else, I will let you go. Thank you again, Wendy, and thank you for listening.

Wendy: Thank you.

Michelle: Bye.