Blake Selby – How To Buy HUGE Rental Portfolios and Private Lending Ep. 243

Synopsis

Blake is a private lender with experience as a landlord and real estate investor. In this episode, Blake shares with us his experiences in buying huge rental portfolios and what got him into private lending.

Key points

How He Started

At 22 years old, Blake established his own gym in Davenport, Iowa, after graduating from Michigan State University. After making some profit, he decided to sell his gym because he wanted to purchase a strip mall to renovate and resell. It was just a matter of time until he was buying apartment buildings left and right.

A Single-family property vs. A Multi-family property

Blake observed that smaller apartments were doing better than bigger apartment buildings, which surprised him. As a result, he gradually moved into single-family rentals. However, a drawback of single-family rentals is that if renters fail to maintain their houses, such as not mowing their lawns or leaving their garbage outside, the authorities will charge you for it.

Finding Deals

He started with word-of-mouth marketing, bandit signs, and direct mail marketing. His goal was to locate out-of-state landlords who were interested in selling their properties. Blake shared that if you search hard enough, you will discover a number of people who would want to sell 47 to 70 properties all at once. The primary reason for this is because the area where he lives, on the border of Iowa and Illinois, has low rent, which means that landlords’ costs are likely to be high as a result of the low rent, so they end up selling their properties for a profit.

Financing His Portfolio

Blake prefers seller financing in financing his portfolio since the interest rates are cheaper than those offered by banks. As an example, for his 74-unit portfolio deal, he needed to spend 30,000 bucks to clear the properties and get the deeds cleaned up. The rest of the purchase price was seller-financed, with a 4.5% interest rate and a 5-year balloon amortized over 20 years.

Lending vs. Buying Rental Properties

He began private lending in 2017 and saw that he was receiving excellent returns of at least 12% on his loans. At the present, he is more focused on lending and no longer makes acquisitions because he doesn’t want his clients to believe that he is competing with them for deals.

His Loans vs. Institutional Lenders

According to Blake, he has no upfront fees, no discount points, no appraisal fees, no documentation fees, no origination fees, and no monthly payments which makes him different from other lenders in the market. Although he is a bit pricey compared to local banks, his clients make more money on their transactions because he does not collect the normal upfront fees and he does not charge monthly fees.

For example, if a property is valued at a million dollars, he would lend about $500,000 for it, which is a relatively small amount when compared to a traditional bank. His reason for this is because he thinks that the property values right now are so high relative to their earnings.

Hard Money Lending Scams

Blake advises people interested in hard money lending to thoroughly investigate the lender’s background before agreeing to do business with them, as there are many hard money lending scams out there.

First, the most common is the upfront fee lender scam where the scammer asks customers to pay a fee to apply for a loan. Second is the bait and switch scam where they’ll agree on terms to get through the whole appraisal process, but would later switch to a higher rate towards the end of the deal. Lastly, third, the too-good-to-be-true scam where they will present hard to resist deals like a 90% LTV ratio for a 30-year balloon at 4% interest, but would not carry out with the deal.

Location

At the moment, Blake caters to 11 US states, Mexico, and Canada. Within the US, he is willing to lend as long as there is a local five-star law firm and title company with whom they can confer to verify that they are in compliance with local lending regulations.

References

More from our guest

• For more details, you can find Blake on Facebook, Twitter, and LinkedIn. You can also visit his YouTube channel to get free real estate investment courses.
• To connect with him, you can visit his website at https://selbyrentals.com/.