As the Canadian markets continue to make real estate investing more challenging many investors are looking south of the border for opportunities. Although Canadian banks do operate there, investors find it doesn’t always work the same, systems and applications can be confusing and time-consuming. Often a stumbling block to getting traction can be obtaining sufficient financing to start building a US portfolio.
But it doesn’t have to be that way. On this REITE Lunch ‘n’ Learn, Lendai, a fintech direct lender financing US real estate properties for foreign investors, will share how they have approached the outdated trillion-dollar market by utilizing technology to level the playfield for global investors in the US residential real estate market.
In this informative presentation, Lendai show you how their digital solutions create a simple, fast, and efficient online financing process. Yes, no more having to drive to meet the bank manager or being stuck on the phone in a game of pass the investor for hours, all of this can be done from home. That means less hassle and more profits for your investments.
Francois: I'm really excited today. We have some awesome guest speakers. We have Michal from Lendai and Miles as well, joining us from Lendai. Miles in a beautiful field in the wineries where I want to be right now, but anyway, and how you're in a beautiful boardroom. Guys, please introduce yourselves. I know you have different roles at Lendai and we have an awesome action packed lunch and learn today.
Michal: First of all, thank you Francois for having us. It's a pleasure being here. My name is Michal Liviatan and I'm the head of the Canadian Rent of Lendai in Toronto. Lendai is a tech based private lender. A US private lender, focusing on financing, foreigners only investing in the US. We're gonna talk a lot about how Canadians can invest in the US. What would be the right way or the best way? There are a lot of opinions and a lot of discussions lately according to what's happening in the Canadian market. I'm going to let Miles introduce himself as well.
Miles: Thank you Michal for that great introduction. Miles Kulik is my name. I am an American customer success manager. The role really is dealing directly with the Canadians when they're interested in looking for financing for US investment. I've been with a lender for a couple months now. It's been fantastic. There's so much attraction, but I've been in the mortgage world for many years in the Canadian specific world. I'm looking forward to working with people, looking to invest in the US. It's a fantastic opportunity. Thank you.
Francois: Thank you very much. Everybody, if you have questions, please put them in the chat. We will address them at the end as well. If we see something as we go along. Let's get to it and learn how you can invest. I know currently I am in the process of working with Lendai on acquiring two rental properties in Florida. And so far customer service is awesome. Miles and Michal are an awesome team.
Michal: Before we dive into the bits and bites of how Canadians can invest in the US. In our portal and our platform, what we've created, we'll talk a little bit about how Lendai came to life. Currently, we're servicing clients from four offices around the world. We have our headquarters in Miami, Florida. We have our development center. Most of our team is sitting in Israel. We have our Canadian office where me and miles are at the front of it in Toronto. We have our newest location in London, England where they are focused on European citizens and the United Kingdom.
We are specifically a year for Canadians, but it's important to understand that Lendai is a global company that has tailor made mortgages products, terms and rates for foreigners around the world. Knowing that, we are covering a gap that has been created between foreign investors. It doesn't matter if you're Canadian and you're right across the border. We're sharing a border, we're doing so much business with the US on a daily basis. I think the Niagara border is the busiest in the world. That doesn't matter in terms of banking, in terms of mortgages when a Canadian will go into an American bank and I'm not talking about the Canadian branch or the TD. I'm not talking about the Canadian banks.
That would be the answer that they're going to get, or we're gonna get. We know the property very well. We can put a foreclosure on the property. We know how to put the line. In terms of risk management, we know what to look for, but we don't know how to look at you in your country of origin. You don't have a credit score. We don't know, you can be a felon or under a bankruptcy in your country of origin. We just don't want not interested to deal with such a loan, with such a borrower.
We know this because A. we're investors ourselves and B. we're foreigners. We've learned ourselves. We said, how can we make it better? There's gotta be a way. And this way our technology enables us to cover that gap. I'm not saying maybe it's a little bit different to come here and say what I'm about to say, but I will say because I believe in transparency technology cannot substitute everything where we're still at the end of the day.
We're still sending an appraiser with two legs and two hands and a piece of paper and a pen, and he's gonna write and evaluate not only the price of the property, but also the stage of it. And that we still follow, we still have to follow the regulations of non QM, private lending in the US. There is still an appraiser. There is still a human being going into the property, but our technology enables us to spread globally, worldwide. That's A.
And B. to minimize the timeframe of such loan processes. If this process could take, if you need to fax the documents tomorrow, or even worse or mail them to whoever is sitting in Texas, Alabama, or whatever state you may do business in the states. Those things will take such a long time, extra little costs, a hassle, and mortgages. Miles will tell us a little bit about the mortgage side later. Mortgage is not the most amazing process. You're experiencing in your business when you're doing business investing and going back and forth in and out deals anyways, it's not the most convenient and it could get very nerve wracking, you're anxious to get it done.
We're trying to make it as simple as possible. We have our portal, everything is online. You can take a vacation and, and get it online over wifi and get it done wherever you are in the world. Submitting your forms, online closing, this is something that I see people, I see colleagues sitting in an office and opening a bottle of wine and I'm like, oh, I missed the party. I missed the face-to-face party, but here we are closing a deal. When I'm in Toronto the client can be on the top of Mount Tron blond. That's a real story. Closing a deal on a property in Michigan or Ohio, or Florida, wherever it may be.
Francois: Because a lot of Canadians are not aware of them. A lot of US lenders. They might have web signatures and complicated processes.
Michal: Exactly and technology enables us. As I said, spread more globally around the world, no matter where you are and to shrink that timeframe, our goal is to get to 14 days of finance. Currently we're at 21 to 30 days. We're trying to lower it down and all kinds of little ways that are possible to do out there. The vision would be to enable financing for foreign investors as if you purchased all cash. We know that 60% of the Canadian investments are going in as cash, the most common.
We all know the most common method would be to take a HELOC on your primary residence, in your country of origin. And to put it in all the cash into your investment in the states, it's cheaper, no headache. You stake your competitiveness and you get the deal done. We want to do exactly the same thing, but we're coming in saying instead of one, leverage your capital, leverage your investment and get to with financing. That's who we are. That's what we're trying to do.
Francois: I love it. That's excellent because leveraging is what it's all about. That's why real estate is so great in part anyway, is the leveraging with 20% or 30% down, depending on the situation or more, you're able to buy more, like you said, to extend your buying power and also in Canada, it does impact your credit. If you're filling up your HELOC or your line of credit. If there is an impact, if you're only using a percentage and leveraging lenders, then that also helps you to keep buying in Canada and in the US, lots of advantages.
Michal: There is a lot of discussions of what would be the best way to invest as a Canadian. I'm going to speak for Lendai. Lendai believes that the best practice is to go under a US entity as far as your investment of course, if you want a second home, if you want to use it Perhaps you would like to purchase an occupied owner mortgage under your personal name. But this is not our model. This is not what we're here for.
It's very important to specify our model, which is that we look at it as a strict business. We want to see an income from this business. If it's a refinance, the place has to be tenanted and this business has to generate an income. We would like to use that US entity. We know that Canadians, this is a very important thing. They must consult and take the advice of a CPA or a cross-border lawyer, a professional that will give them the full picture of tax implications, someone who really understands CRA and IRS.
You purchased the property, you purchased the investment under a US entity, you placed a tenant in there. Your investment is generating an income. You hire a property manager. You have your homeowner insurance. For us, it's a strict business and this is what we find the best practice in terms of minimal liability, minimal exposure as if I'm coming from the customer service world.
I owned a few fast-food takeout places. At the end of the day, it's just numbers. We wanted the numbers to work. We want positive cash flow. We're going to look at the deal. We're going to do our due diligence in terms of DSCR. This is a DSCR, Debt Service Coverage Ratio based loan. First, we want to look at the business. We want to look at the property. We want to know how much this property can produce. And we're going to go into it.
There is so much to talk about. There is a difference between long-term rentals and short-term rentals and the income of this specific property. One property can produce this much, but it can also produce this much and we take the expenses, principal interest tax insurance, HOA, if applicable, most of Florida, gated communities will have a higher age away. If you go into the lower markets Alabama or Ohio, Michigan, then most likely you're not going to have the age away.
We take the DSCR ratio. We want to make sure that there's a positive cash flow. We have the same interests with our borrowers and us, our partners. We're going on a mutual goal for a positive cashflow. And if it's not, if we're coming in, there is some sort of a myth, I would say that the lender is like this and my lender said this, I don't like them and they 're trying to change that. It doesn't have to be that way. We have the same goal if I'm coming to a client and I'm telling him, listen, it's one-to-one you break even you're breaking even.
The way to negative cash flow is so short then maybe, and maybe it's not the most amazing deal. Maybe you can find something that's going to create more cashflow for you. At the end of the day, it's all about the goal. I think the mutual goal of what I see for the REITE club is to not live the nine to five. And not be attached to one place at one time, you want to be able to travel.
You want to be able to live a better life or the life that you wish for yourself and your loved ones. It's not going to happen with a negative cash flow. You'll have to chase. You're going to be like, not right now, you're chasing problem solving and turn, to put down all the fires and it doesn't have to be that way.
Francois: It's a really long-term relationship. For those that don't know about American mortgages, it's a 30 year mortgage in Canada, every five years. You start the process over.
Michal: 5, 7, 10 years, let's open the term. Let's send you an appraisal. Let's see the value. Let's see the most common or let's say the biggest difference between how a Canadian or American mortgage works compared to the Canadian would be, are actually three. I would do three differences. The first one, a 30 year term amortization..
The term or the rate will be locked for 30 years. It's looking on the long run and division of your business or the stability of it. We find that the best practice is to lock the rate at a 30 years done deal. We're not going to talk about it anymore. We're not going to change it. Then you can foresee and plan your investments for the future knowing exactly how much you're going to pay until the end of it. This is one difference. The second one would be the mortgage by down to points.
This doesn't even exist on the Canadian side. I guess, it would be a very American way to get more which I wouldn't say to its good or bad, but it's just giving you more off it different and giving you the option. You don't have to use it. Exactly. It will affect what I can see today is that it will affect your closing costs, obviously.
We always say from the get-go again I already mentioned, I like transparency and I don't like to waste anyone's time. I'm going to say from the get-go listen, you can buy your rates down. One point when I say one point, I always mean 1% of loan amount, a 1% of loan amount will decrease the rate in a quarter, at least for Lendai. Each lender has their own different ways of mortgage points.
I always say, you purchase four points, you get the lowest freight, but it will increase your closing costs. If you take zero points, closing costs could be 4% to 5% from the loan amount. If you do want to purchase the points, it will increase your closing costs to around 8% or 9% from the loan amount. It really walked through with the borrower and explain where is he going to break even on that cost
Francois: Because you do recuperate it at some point.
Michal: Easy numbers, a hundred thousand dollar loan, $4,000 of mortgage points. It will take five years for the borrower to break even on that $4,000 cost.
Francois: And then you're making money for the next 25 years.
Michal: Exactly, we all depend on your strategy. If you're a borrower, if you're going to come to me and say, listen, I want to go and I want to go in the long-term. I want to buy and hold it for my retirement, I would say put it right now and lock the lowest one. It just makes sense to you, the numbers work for you, for us. It's not so much of a selling point. It's more reflecting the numbers.
Francois: Help your cash flow.
Michal: Exactly, and then the third difference would be the origination fee or lender fee. We say upfront our lender fee or origination 2% and that is our only payment that goes to Lendai's pocket. That's opposed to all junk fees. You go through a whole process, getting into the settlement statement at the end just to find that you all of a sudden have all kinds of fees. Where did they come from? I don't know. Nobody told me, nobody showed me, nobody reflected or explained to me what I am paying for.
With Lendai, with us, you're going to go into your system. You're going to get a term sheet that is the initial term sheet, before any money is spent, the only money that will be spent on pocket would be the appraiser. Currently, in the US, all the rest of the expenses will be calculated. Third-party fees, the points, your net loan amount, you will know everything and I will always bug you and to tell you, hey, you have a little, you have another 70 bucks for UPS or I will always make sure the borrower knows exactly what he's gonna find.
I don't like those surprises, not when I'm a client and not when I'm on the other side, on the lender side. Nobody likes to surprise us. And again, it goes back to what I said in the beginning of this anxious feeling of a view being left in the dark, or you are sitting at home with the unknown.
We don't like it and that's what we're doing here. That's what we're doing. That's why we're here. One of the biggest advantages is to come into those origin countries. We support and say, hey, I'm Canadian, I'm right over here, but I'm providing you a US mortgage. Otherwise you can go to the states and find your lender.
Francois: You understand T4s and pay stubs and you were telling me in private conversations in the US, there's different terminology, income tax returns are very different. It's not a T4, it's something else. It's not paystubs, it's some other word payslip or something else. There's a few other tweaks. And then closing is very different. It's not often done with a lawyer in the US, it's a title company. Big difference again for Canadians.
Michal: We're using a provider, notary cam doing fantastic job. They have a pool of online notaries. It's called RON, Remote Online Notary and we're using it now mostly in Virginia or Florida. There are only two states out of all the states that are not accepting remote online notaries that would be Georgia and Alabama. Hopefully in 2022 they will join.
When we're coming to deal with loans in Alabama and Georgia, we have also found a detour. We need to go into legalization and a few days extra, we have our connection in Ottawa that has his appointments with the embassy every Friday. To cut down the times, what I'm going to say is to a borrower that is investing in Alabama or Georgia, I will always say, listen, the closing part will be different a little bit from the lending model. What we're going to do is we're going to go into a detour. This detour will cost us $300 and five business days.
That's what it is, but as long as all those things are up front, you're fully aware of where you are going into what the process will be and how my settlement statement will look like. Then to me, it's okay. That's what I want. It's almost like I'm always comparing myself to the food business.
I would say that hungry people are the hardest to deal with when you're hungry, for turning into something else. My biggest lessons were learned in the food industry. I always told my teams back then as long as you say it, they will, as long as you say it up front, listen, I'm making your food. It's being delayed. It's going to be delicious and amazing. In 10 more minutes, this hungry person will forgive you because you gave the right notice. You were transparent. You were accommodating and apologizing in advance.
It's those little things that I hate to say, but when you go down there to the states, some people won't be like that. They wouldn't give you the time. That wouldn't give you the effort and they wouldn't walk you through your loan process. Hand-in-hand they, like I said you could be left in the dark and it's a very anxious feeling.
Francois: Totally. Thank you very much Michal for your awesome presentation about Lendai. We have quite a few interesting questions in the chat. I know when Miles has been answering them, but if it's okay with you, I'd like to answer some live ones because some were quite good. If not everyone's paying attention to the chat. Let me scroll back up unless you have something else to add before we start answering questions.
Michal: No, I just want to brag about my Lendaiversary cup.
Francois: Nice, fully branded experience. We have a lot of questions. Let me find the top of this list. We appreciate it. Then we're here to accommodate all your questions. That's it. Bobby was saying, can self-employed Canadians qualify for the mortgage down South with a higher DP?
Michal: Down payment is in terms of LTV, LTC, loan to value and loan to cost, everybody's getting the same conditions. Everybody's getting the same terms and conditions. We're gonna finance up to 70% LTV or LTC if it's a new purchase to lower between the two. And we're admiring the big guys Apple, Tesla. There is no real negotiation of, this is our product, this is the price, same terms, same rates to everybody.
We're going to look at one year and 12 months bank statements. We wanna make sure that this business is stable in generating an income. We're going to look at a one-year back. We're here for investors. Francois, you said the relationship we would like to see. We're welcoming borrowers to start one deal with us and to extract equity, to use it as a down payment for your next one. And then to come back, we do have a maximum current of 1 million per borrower.
I foresee that by the end or the fourth quarter of 2022, we are going to be at around 2 or 3 million per borrower. We put on a cap. Risk management and putting all the baskets, all the eggs in one basket. We do have the max, but the model is to come back for more. The first one will always be the first field and will always be the heaviest one. We would like the information, we would like to look at your US entities. We're going to look at your passport and driving license with two pieces of ID.
When you are going to go into your second one, we already have all your information. We know your file, we know your entities, the little things, your insurance broker. I already contacted him to adjust to the policy and we already contacted your property management company. We are, all of it. The first one will always be the heaviest back and forth. We're going to show you exactly what we need, which is not much compared to others. And then the second one, the third one, we're just going to look at it like this. We're going to originate the loan, sign a deal and move on to the next.
Francois: Perfect. And the next question was from David. He's asking about dual citizenship and what's the impact because I know Katherine as well from the REITE club as American and Canadian residents. How does that work?
Michal: With citizenship, we are okay with the US aspect as well. If there is a US citizen that is living in Canada for years, 20 years he's in Canada, his earnings are in Canada and he doesn't have his credit or his history in the American side. That's also okay. Lendai, we don't do any discrimination. We'd like everybody, the model was to finance foreigners only with dual citizenship, permanent residents, all welcome. As long as you have the history and the credit report in your origin country. In your income? Yes, you're right. If you're in Canada, I want to see your history in Canada.
If you're in England, Scotland, Germany, Switzerland, Sweden, and many other places and countries we support. We want to see your history in that country, more complex. This is one last sentence. More complex situations can be where I get inquiries. I have a UAE citizenship. I was born and raised in Dubai, but I'm earning in Thailand.
That's a little bit complicated and complex to underwrite. We're going to move the file. Customer success manager will help the borrower together, everything that the borrower needs in terms of documents. We're gonna move the file to the underwriter. The underwriter is not going to deal with complex situations and multiple partners. Let's say more than four, over $120 investment in Ohio.
Francois: The 20,000, that's way too little, $3 million maybe at some point when you increase, maybe there's going to be changes, but again your goal is efficiency as well and speed. If you're starting to add all these layers that bugs down the system.
Michal: There are a lot of layers we are trying to accommodate. We're not here to talk about the rest of the world, but just for example, Australians really like trust and in those trusts or as the whole family. That makes it a little bit more complicated, but we are now welcoming that we are now working with Australians and accommodating that underwriting trust.
Whoever's joining our journey right now is evolving with us. We've been operating for three years now in the market. We just finished our seed front of $35 million. That was a big milestone for Lendai. We look forward to starting a round of funding. Whoever is joining us, growing with us and things are evolving. This is the second time we met and today I have so much more to talk about.
Francois: We have some more questions. I don't know if we'll be able to address them all cause now I see 24 more and I haven't even gone through the list. We have Nicole saying, I have mortgage clients and fans trying to buy in the US and in Mexico and Costa Rica, you only do US.
Michal: You can help with Costa Rica Francois.
Francois: Nicole sent me a message cause I have some lender options there. Lendai, not yet but maybe we'll have to talk and see if you guys want to expand because there is a big market. I have a question from Jane. Any kind of property, I'll let you answer what kind of properties do you finance?
Michal: Very important question. We're in the residential market and we're excluding condos and apartments. If you want to know the answer, why I would love to answer that I'm on a different time. It's a big answer. But basically where at single family residence, townhouses and two to four units, duplex, triplex, and quad.
Francois: Perfect. There you go. That's why the million dollars and all that.
Michal: That's why the million dollars, correct. It's a niche. It's a very specific model, but it's there for a reason. This market of private lending, non QM private lending in the US is a very established, not market. It's very well known for investors, for people that are self-employed or people that back the bank with the square box said no. We're going in on a niche of foreigners and in that niche, we're aiming for one target, one model.
This one model that we're targeting is a half a trillion dollars, big enough, a lot of big market share.
Francois: We have a question as well. How about development? Do you finance new construction? If I buy land and then I build a house, or I think you'd have to set it up by cash and then you guys would do a cash out refinance, correct?
Michal: That would be the right way to go. We do need to send the appraisal into ready to be occupied property.
Francois: Somebody would need to go in with their lines of credit from Canada build, and then what's the seasoning period before you can do a cash out refi?
Michal: We do 180 days. This is pretty much the industry standard. If you want to do a little improvement or if it's a brand new building from the builder you place a tenant in there. You get a couple of rent rolls for us to see that there is indeed an income. That's one way to go, another way to go, and this is not everybody, so most lenders will be very strict with 180 day seasoning.
We've also got some sort of a solution to that. It's called the delayed purchase. If anyone wants to right away move forward to the next deal, one to extract the equity in those 180 days, we now call it a delayed purchase, which means that during that seasoning period, we are gonna extract equity from the purchase price plus improvements.
If you did purchase all cash and you improved it a little bit, and of course everything is you have the invoice or your quotes are, and everything is you can prove it to us. That's where we're going to add the two. We're going to extract 70% from that cost in that seasoning period. You'll be able to extract it and move on to the next one fast.
Francois: Amazing. We love speed. Another question from Rob, do you count income from short-term rentals for a mortgage? Because we mentioned you do long-term mental, short term. What's the difference?
Michal: A big difference, short term rentals. Let's start with the easiest, less with the long term. Long-term rentals, we're going to refinance. We just want to see the income, so we said 180 days place attendant did there get a couple of rentals. We can extract 70% of the equity. Now, if we want to go into short-term rentals, now we want to see 12 months of operating. We want to see how this, again, we're treated as a business. We want to see one year of this operation and this going to be a breakdown from Airbnb VRBO or another 12 different channels that are doing short-term rentals or whatever use or property management company that will give us the full picture and the full report.
Many lenders are still basing their market rent analysis, 1007. We call it based on comparables in the neighborhood or which will lead to long-term rentals to a long-term market rent analysis. But if we do have the 12 months ledger, we are going to base our loans off of that. If your property makes 50, 60, 70, which is the average, and then even the higher level 120K, 150K, then that's where we are going to look at that and we're not going to have a DSCR limitation problem.
Francois: Amazing. That was a quick answer. A question about, when offering the mortgage rates, especially in Canada, oftentimes you get a rate according to your profile and stuff. Do you guys vary depending on the risk level or it's all the same rate?
Michal: Miles, if you will be able to take this question, I would love it.
Miles: Thank you. Great stuff. Two parts to that question. Yes, lendai's all about a go or no-go. Once we approve the loan, here's the rates and the rate matrix is the same for everybody. Perfect, that's a fantastic opportunity, but most definitely in Canada, there's some different rates.
Francois: It goes like I've had 0.99, and then this property is in a city or a tertiary market. Now it's 4% interest because the lender doesn't like the area. I think that's what this question is. If I'm correct. Let's see, what else do we have? Can you prepay the mortgage throughout the term to reduce the number of years down from 30? You have prepayment privileges.
Miles: I can jump in short. Our loan is a 30, 30 as Michal mentioned earlier. Third year term, third year am. First five years. The loan is after the fifth year it's fully open. In years one to five, there are penalties. If you break it early, it's a great graduated penalty clause, year one's obviously 5% of the balance. Year two is 4% of the balance. Year 3 is 3%. As you can see, the products are designed for buy and hold is purely designed for people that want to buy property. And just keep moving the rental income through.
Francois: Amazing. Thank you so much. And to change things up as well. I just wanted to say hi to Tim Tsai who's in the audience and we're going to be seeing Tim live in Calgary and in Edmonton next week in person. Tim has an awesome event happening this weekend. Everybody check it out and then make sure to ask Lendai to buy it. Use Tim's teachings to buy and then finance with Lendai. I'm putting it all together.
Michal: Francois, I would like to add one quick note that right now I'm putting in the chatter a link. This is your link to contact lendai via our partners the REITE club and the link is right over there. For whoever feels ready or feels like they need to start pre-approval or look into actively looking for a new purchase or refinance. You guys can use that link and that will take you to Lendai.
Francois: Amazing. It's super easy and then you get a friendly smile from Miles or Michal, or maybe more of your team. I see we have 49 other questions. I don't think we'll get to everything. I invite everybody to reach out to Lendai directly to get your questions answered and I'll scroll through quickly and just see if there's another question that really stands out and as well, just as a reminder, everybody tuning in, we have awesome events coming up.
Thursday tomorrow, we're talking about Kitchener and Waterloo, Cambridge, June 13th, we're living in Calgary. On the 15th, we're talking about building resorts with Sarah Larbi and Harry James. And then on June 16th, we're living in Edmonton in-person so I'm heading there. You're going to get to see me in person.
June 20th, we're live in Halifax as well. Daniel St-Jean we'll be there. Back home for me on June 23rd, pop-up in Ottawa. June 28th, we have lunch and learn about Costa Rica. July 20th, we're live for the Niagara wine tour. I'd love to see you there, Michal and Miles as well. It would be amazing.
Let's see if we have some other exciting questions, just a minute. Everything is available. This recording will be on our website as well for a repeat. Do you have realtor referrals in the US? Good question.
Michal: We currently have around 180 affiliate partners. I'm not sure if I mentioned lendai works in a B2B to C model business to business, to client. We partner up with every professional. If it's an influencer, a loan broker, realtors, property managers, you name it even hard money lenders that are product compliments there. We have so many partners in the US and outside the US depending where you're from.
We have any referral pretty much that you need, if you need even when you asked me about a construction loan. We don't do that. We have other affiliates with complimentary products that are related to what we do and coming from the same world. We love to make connections and we believe in networking.
Francois: That's why you're in the REITE club. All about customizing your lives. A question that's interesting. You have a cap on how many doors we currently own in Canada to qualify for a US mortgage? Cause in Canada, there's a bit of a limit at some point, you're like, nope, you need to go commercial or whatever.
Michal: That's right. That's why you will come to us. I would say, we are looking if you are a very seasoned investor, you have a wide portfolio. We will probably look at your DTI. But this is the model. This is what we want. This is the investor we want to work with.
I would say it's 50-50 at the moment. I have maybe 50% of my clients that are maxed out at the conventional big banks. That's where I'm coming in the picture. I'm looking at their portfolio. I see what they have in equity versus debt. And we take it from there.
Francois: Amazing. I love that. That's everybody in attendance when Canada starts saying no, then look down South and make it fun and there's an awesome solution.
Michal: Canada is making it very hard for us lately. I just think that real estate is maybe not something that will turn into a commodity, but we are here to make a living and it's okay.
Francois: That's it. Look for options outside of your country. The other question is about pre-approvals because in the US for the most part, you need to go in with your letter. Tell us a bit more.
Michal: Very short and minimal process, we're not going to look at your US entity at that stage. There is no need. There is no actual property. All we need from you, first of all, prequalification, if you want to see that you were a good fit for Lendai. You open your pre-approval application, you answer a questionnaire in two minutes, and then you get your pre qualification letter.
If you want to move forward to the actual pre-approval letter, we will have to see two pieces of ID and some sort of income, and that's it. You're going to upload those documents into our system, drag and drop. Anyway, I'm sure it's in your computer somewhere. And after 24 to 48 hours, you're going to get to your answer. It's a standard letter that determines the amount that you can borrow the rate, the term, you can take it to your realtor down South or anyone who's dealing with your transaction as a proof of funds.
Francois: It's amazing. It's quick, I've experienced it, myself. A question from Erica, what's the minimum beacon score for the product? It's a credit rating.
Michal: We're going to pull your Equifax, the Canadian Equifax report. I wouldn't say many of the maximum, I could say maybe the minimum is on this, mid 600s. But most of all, if you want to, if you want to hear what lenders or what we like the most, then I can straightforwardly say that we like stability. We like to see your income. That you're generating, if it's a self-employed freelancer or an employee we just want to know that you're making an income that is consecutive and you get to go.
Francois: And the building itself, like you said, the building helps qualify. It's almost like commercial lending in Canada.
Michal: I can even go into a deeper perspective and say that when we're dealing with foreign nationals and I'm not talking about cash, I'm talking in general right now, when we're talking about foreign nationals investing outside of your country, we're already speaking about people that are okay in their country of origin. The first roof you want to put above your head is primary residency.
You're not going to go most likely, right? 90% of the time. You're not going to go into other adventures before you at least are settled in your country of origin. And then you're going to say, oh, I'm going to invest in another country. The model of the people we are talking about already has that stability that we're talking about.
Francois: And some can be tenants but they have a really good job. They've had placements for many years for some people living in Toronto don't want to
Michal: Yes, and that's right. More than that, I can also say that in terms of our side, as far as risk goes where there is one investor investing in his country of origin we are depending on that market. Let's take a foreign investor investing in the US and then God forbid something is happening in the US and we're going into some sort of recession, the foreign investor, the same one that conventional banks didn't look at and didn't accommodate with, in terms of loan and information.
This foreign investor would be in a great position because he was not dependent only on one market. They have their own assets and work in Germany, Canada, England, Scotland, in another country, that's not even related to where the recession goes. We find the model of foreign investors is even safer.
Francois: I love it. I keep telling my students that everybody I meet needs diversity of currency, countries laws, and changing things. Flex recessions are happening in some places. Some places are not experiencing recessions. Are there areas in Metro Detroit that you do not blend in and what's the minimum amount? That's a good question as well.
Michal: The answer is no, we don't have limitations. If we're going into a state, you can invest anywhere in that state except for rural areas. We don't go into rural areas and that's obviously because of the well-known reason. If the property is vacant, then we want to replace it pretty quick. We want to see again, this positive cash flow going in. No restrictions within the area that we're lending to. A minimum investment for one property. It will be a hundred thousand dollars US. If it's two or more, we can now go down to 80,000.
Francois: That's interesting.
Michal: The minimum that people would, non QM, private lending the loans keep rolling into different hands. No buyer will go under a hundred thousand and we managed to go as low as 80, but for that you need two.
Francois: Another interesting question is after five years, if your rates drop, let's say somehow you're at 4% in five years. Can we refinance with Lendai or we have to switch or something? That's a good question.
Michal: I would say that we are always going to be a first mortgage, so of course you can close that and go for another one, but again, I don't want to promise. The uncertainty of interest rates is in the air.
Francois: Yes, you never know what to expect. Just a few more. I just want to see, I know Miles is busy typing. One more question, the rest will be on our website. If you guys join our website, I'm sure you're there. People can ask questions in our forums and reach out directly to our guests. One more interesting question. Would you use the client's equity from properties owned in Canada as collateral?
Michal: We got to take the US entity as a collateral. The US entity will be, we're going to have cross collateral and subject to but we also take a personal, this is a fully recourse loan. We're going to take a personal guarantee on that loan. That being said, this is not our retention, right? We're not coming in and saying, ooh, what do you have in Canada? No, we're not interested in your property in Canada.
We're not interested in going into any foreclosure or any defaults on the loan. We are here to work together with you to have a good deal and a good relationship going forward. First and foremost, we're going to look at the US that the property is being vested in. That leads me to many people asking me, will that be okay if I'm going to have many properties in the same entity again, pros and cons, you'll have to consult.
You have to talk about it and we have to take it case by case and look at your situation in your market and how many properties you have on that entity. The bottom line that we do, it's a fully recourse loan with a personal guarantee and across collateral on your US entity.
Excellent. I think Miles had something to add.
Miles: Just a real quick, just to add some of all there. People who have lines of credit secured by either property in Canada. People have lines of credits. We will consider those for down payment on a property in the United States. That's something rather than we don't collateralize properties across borders. We just look only at the US property, but we will look at the line of credit secured by Canadian property for the down payment.
Francois: Amazing. Thank you so much. This was a pleasure. I know there's many more questions. Everybody reaches out directly. We shared our guest speakers, their contact information.
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