Iran War Impact on Your Mortgage Rate Right Now

0:00This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed Sponsored Jobs to find the right people with the right skills, fast. It's a simple way to make sure your listing is the first candidate to see. According to Indeed Data, Sponsored Jobs have four times more applicants than non-sponsored jobs. So go build your dream team today. With Indeed, get a $75 Sponsored Job Credit at Indeed.com slash podcast, Terms and Conditions. Apply. Alrighty, folks. Obviously, the war with Iran has caused the 10-year-note spike. Conventional rates have also spiked, but what the heck is going on with non-QM? We will get that answer from Jonathan from Convoy. We will also talk about, once again, if you like it, lock it. But before we get into details, I want to know some personal stuff about Jonathan. He just sold a property that he first talked about on this channel three years ago. So we'll figure out why he sold it beat, what's he doing with the equity, and then we'll get into non-QM rates and so forth.

1:02So Jonathan, catch us up. What's going on with your personal portfolio? Yeah, it's crazy. It's almost been like a journey with Orat, you know, in the community. And we're not joking when we're literally saying that we're doing the work as well that everyone else is doing. Just to recap, I bought this property as a single family residence. I bought it as a six-bedroom, four-bath, super old. This was in Korea town, right? In Korea town? Yup, yup. For 1.64, and then we put like 300 into it and turned it from a six-four to a legally permitted 10-bedroom, nine-bathroom with a junior ADU and an ADU. Wow! That's good. Yeah, that was a scope of work in 23. And then we started renting it out room by room to students and people that were going in and out. And then we just closed on it this past week for 2.7. So and on top of that, when we re-fight, we re-fight in 2024, or 2025-ish, early on.

2:08And we pulled out everything we put in. So we literally did the Burm method, like as a whole. The reason why I'm selling them, I'll start there, is because at LHD and like the housing department of Los Angeles and just the legislation is terrible. Great. And it's insane. It is insane. And you know, it sucks because I told you and I told the channel, like I had a dream of really like locking into Korea town making it like a place for, you know, kind of Korean still, like Asians in general, right? Because it was being lost, like culture is being lost. And I was really trying to do that and unfortunately, it just became so hard to be a landlord in Korea town. And when you got people like Graham Steph and selling all of his stuff, that tells you. And again, he's very clear, right? The only reason he's selling is because of LA, because LA is freaking Russia.

3:09Or North, it's like North Korea. It's not. It's not. And like they, you know, because I own like apartments and other units in Korea town too, that I'm actually trying to sell now, you know, it's really sad. It's really, really sad, but yeah, we did the work on this property, right? It really just opened our eyes to the power of doing the work and actually find the right asset. And you know, we're taking that equity and we're going to invest it in the kind of middle of America we're taking it to, you know, Ohio, Idaho, like we're looking in those states, I'm going to move over a lot of the equity there because I think anywhere that is landlord not friendly, it's just, it's too tough right now. It's too tough. Yeah. Yeah. I said to people publicly and privately, if you gave me an asset in LA County, I would sell it immediately.

4:09It's just, it's just not practical. Most total states are going out of state, more and more, one until at a time fans are going out of state, which is interesting to see. So congratulations, you know, even though, you know, you had a plan, a vision, you're pivoting, you can't run the LA government, right, you're not in charge of that. So the rules change, your goals change. And I look forward to you discovering a new market. So we'll stay tuned for that. Sure. Absolutely. I mean, it's just, I'm jealous because you could buy so much out there, you know, for so, so much less. So it'll be fun. Yeah. There you go. Well, let's get to non-QM rates. You've been sharing with the channel for quite some time now that conventional moves and moves quickly, sometimes repricing two or even three times in a single day. Non-QM typically moves much, much slower. I'm wondering with the situation with Iran, if something has changed, did non-QM change and change violently, or are they just kind of sitting tight and we'll see what happens

5:10later? The non-QM market, actually, this is probably the quickest I've seen, I've moved in a while. Right. And I think, I think what happened is, obviously, Treasury will start jumping up, right? And on Monday, it was kind of a little bit, I think the non-QM market as a whole was thinking, okay, let's wait and see, right, let's see what happens on Tuesday. And then the Treasury's just kept kicking up and then they just started shifting everything so everything's off by about a quarter percent, I would say, to a quarter percent, because now they're pricing even more further for rates going up again, mortgage rates, potentially. So I think everything's kind of shifted that way and it was interesting to see because obviously we know that usually there's a delay and everything in the non-QM market from a rate move perspective is usually like two weeks, three weeks, a month, right? Later than the actual conventional moves, this time around, we saw it move almost immediately

6:14within 24 hours and it was a little bit of kind of a notion to the market where it's saying, we had it good for like, this was probably the longest period of lower rates we've had in a while, right? And then everything was finding Andy and then all of a sudden, as people were still on the fence, is it going to go lower? I'm going to wait, right? This happened and now rates are high. But it's interesting though because it is higher, but I had a lot of investors actually lower their flow rate just a little bit like an eighth. So they increased the actual, like, you know, par, like par, right? But then they lowered their flow rate by about an eighth. So I'm seeing more price in the 5.6, 5.7, 5.8, like, you know, floors instead of where they were before at like 6%, 6% and an eighth, whatever it was. So it's, it's, you're kind of seeing, I think it's a jump this way. I think the pricing, you're getting ready and opening up the sheet, if it goes lower,

7:16here we have it. But if it, you know, where we are going higher, like, which is where it looks like right now, we have that baked in as well. It's interesting because what I saw happen in the treasuries was frankly opposite of what I, what historically has happened, historically what has happened is, you know, bombs start dropping. There's a flight to safety, which for most people is the 10 year note. Now, obviously we've seen a, a sell America trade where people are dumping treasuries, buying gold, buying silver, buying other things. And I think that's probably why DSCR change so rapidly this time is because the move was so violent and then reaffirmed on Tuesday that this time is different, right? I thought the 10 year note would be lower and it wasn't and it wasn't by a mile, which obviously has other implications. So it probably makes sense that DSCR was forced to change because I think a lot of people in the market who'd studied history were like, oh, it's, it's going to go lower. It has to. Right.

8:17People run to safety and it just didn't happen this time. So there you go. I think it'll continue to, I think we've seen even more jump up today, right? So last night, last night, I was like, you know what, I told clients like, hey, I don't think this end of the week and next week is going to be really like, we're not going to see a lot of positive before we see, you know, it's going to get worse before it gets better. Yeah. So I think the, like, we thought it was a quick knee-drip reaction of the market, but it's turning out to be not that, right? Exactly. Now, you know, everyone's eyes, all of a sudden, because the news articles are talking about now. It's all on inflation, right? They didn't really. Yep. Oil, oil, yeah, exactly. Oil inflation. Like, that's what everyone's talking about it now. And I'm like, you know, this is probably not the market where you want to kind of wait and see, right? Especially if you, if you have a shorter time frame and you have to close in the next, you know, two weeks, three weeks, like, this is not the market to wait and see.

9:18Just, you know, lock it up and move on for now until we see some sort of improvement in the future. Yeah. No, I mean, until further notice, folks, if you like it, lock it, I mean, just come on. I mean, how many times do you got to be suckered and just smashed by something, you know, a black swan event? And, you know, the numbers change, the numbers change, right? On the numbers, lock the rates so you don't have, you don't have risk to your deal, right? Rates have gone up enough that could turn a good deal bad, a great deal to good. I mean, the cost of capital is, if you leave that variable unchecked shame on you, in my opinion. Yeah. And I mean, remember just even a year ago, in a year and a half, well, we were, we were underwriting deals like people are doing the work, right? At like seven, like six, eight, seven, five, seven, seven and a half even, like two years. So, if you're, if you're kind of like want to be conservative and you want to make sure

10:18a deal works, right? Because people are like, how, where are the rates right now and where can I underwrite it right now? And I tell them, look, you know, I'll, I'll tell you where it is right now, but if you're underwriting for the future, you might as well just underwrite it based on a more conservative number. And if that's seven right now, then just underwrite it at seven because if it works at seven, it'll be even greater at six. So that's great advice. But yeah, and people unfortunately sometimes don't like it because they're like, no, I want the rate right now and what it is right now. And I said, I'm telling you, but at the same time, like, I want you to underwrite it better so that you have groom and margin for when the market corrects and does this, right? And this is the same thing I'm assuming everyone wants the lowest down payment right now, which is what I'm seeing. And I've been telling people, like, it's probably not wise in this kind of market to put a little down payment as possible because we don't know whether there's going to be a correction down further or if it'll stay the same because if there's a little bit of a correction down

11:18further, you're 5% down, you're 10% down, you're equity could get slashed in half or you can, in some cases, be under water. So this is not, I don't think like the market to be like, let me put as little down as possible, I think this is more so like, you have to be buying with a margin. Hopefully, if you're putting 10, 15, 20% down, like last, right? You already bought it with a margin of, you know, 20% on the market value where it is, actually, and then 20% below that. So if you put 5% in or, you know, 10% in a buy it, you have that room to up and down. So it's not your cash getting slashed. But that's, I think, the danger of the market right now is everyone's trying to push low down payments in a market where, like, we're seeing an unprecedented amount of volatility. Yeah, I think you gave wise advice. I would tell everybody in my channel watching this still is, is underwrite your deals at seven. And if they work at seven, they're going to work at six and a half or six and three, eight. So whatever you end up getting, I think it's always wise to underwrite to a higher number of

12:20costs to capital and then be surprised. Versus the other way, you know, just barely getting a great deal at six. And then suddenly it's at six and, you know, three, eight. And you're like, oh, there goes that deal. So be more conservative and take Jonathan's advice. Yeah. And don't be offended, right? I think that's the biggest thing to people get offended about, you know, where the advice that I give sometimes, and it'll just don't be offended. Don't be a, please don't be offended by it. I'm just, please don't be offended. That's crazy. Yeah. I'm just trying to give a sound advice that's not like something that you'll kick yourself over later, right? That's the main goal. Yeah. There you go. Well, if somebody wanted to get a file started, you've obviously helped Olivia and I close two cash out refives recently. Thank you, thank you. Thank you. How do they get something started? Go to convoy at homelands.com and let us know you came for more app. There you go. Thank you, buddy. Have a good week. Thank you. You too.