Ryan Luthi - Funding unBankable Real Estate Buyers
LISTEN TO THE FULL EPISODE ON:
Ryan Luthi has worn a lot of hats in the real estate space. From agent, to investor, and now working with buyers who many banks would deem "unBankable." Not every buyer fits the cookie cutter box that lenders have in place. Ryan has rolled up his sleeves to meet a need to help buyers purchase property that traditional banks and lenders may have turned away from. As Co-Owner of unBankable, Ryan has found a niche in the market. In addition, he owns a current portfolio of 87 doors consisting of multi-family, syndications, sober homes, single-family, along with a short-term rental in the Wisconsin Dells area.
In this episode, you will be able to:
- Explore different real estate investing strategies and hear how Ryan has shifted his focus for maximum returns.
- Learn some of the secrets of house hacking for passive income generation.
- Discover alternative financing options for unconventional borrowers.
- Hear how Ryan is learning to master the art of building deep relationships in the real estate industry.
- Find out how you can make an impact on other by providing housing for individuals in recovery like Ryan has.
The key moments in this episode are:
00:00:00 - Building Deep Relationships
00:01:54 - Getting Started in Real Estate
00:05:47 - Helping Investors in Real Estate
00:09:26 - Unbankable Homeownership
00:13:01 - Flexibility in Financing
00:13:11 - Challenges in Traditional Mortgage Qualification
00:14:39 - Creative Real Estate Solutions
00:15:48 - Strategic Property Investment
00:18:24 - Importance of Exploring Different Lending Options
00:23:18 - Diversifying Investment Portfolio
00:26:24 - Working with Realtors
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Ryan Luthi
I've always put a huge focus on deep relationships, and I think I saw more of a long term relationship where someone may be investing every year, maybe multiple times a year, maybe take a little break, you know? But the idea that I could dig deeper, get to know people better, not have to necessarily work with as many people if I'm working with some people more than once.
Mike Swenson
Right.
Ryan Luthi
And so to me, that's what it's all about. It's all about relationships. And, you know, at the end, yeah, we happen to sell some real estate, we happen to do some transactions, but it's always about the people for me.
Mike Swenson
Welcome to the REL Freedom show, where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. Let's get some REL Freedom together. Hello, everybody. Welcome to REL Freedom real estate leveraged freedom. And we're talking about building time and financial freedom through real estate. And like most people on this show, we have guests that dabble in a few different things, and their journey changes and adjusts a little bit along the way as you build skills or as the market changes or as you look to add or enhance to your story. And so today we've got Ryan Luthi, and Ryan's background is the founder of Blue Door real estate and also now unbankable. And we'll talk more about that and how that's helping in the financing space. Also a real estate investor with some syndications, some multifamily, single family, short term rentals as well. And so you're somebody that just kind of has adapted and added along the way. And so that's certainly a theme for a lot of guests, and so we'll dig into that, too. So, Ryan, we're so excited to have you on the show.
Ryan Luthi
Yeah, thanks for having me. Appreciate it, Mike. Excited to kind of share some of the journey I've been on, and maybe it's helpful for other people out there.
Mike Swenson
Take us back. Start at the beginning here about why did you get into real estate? What were you hoping to accomplish? And we'll just follow your journey from there.
Ryan Luthi
Well, I grew up around real estate. My dad built houses and invested and did some flips and stuff, and so I kind of had, like, a seed or a spark of interest in seeing what that could potentially provide. And so I always wanted to invest in real estate, and in 2013, became aware of the FHA owner occupier loan situation with just a small down payment. And so I was graduated eight, so didn't have a ton of money, so I was like. But I was tired of paying rent. So it's pretty simple. The cost of my mortgage, minus the rent of the other unit was less than my rent. So I was going to save money after buying a house, which to me made sense, or a duplex in this case. So it was kind of a no brainer. Got my wife on board, which was probably harder than everything else. No, I'm kidding. But, yeah, it's one of the best investments I've made in terms of return and things over the years. But, yeah, since then, I've definitely continued to pursue that and then became a real estate agent a few years later. It just kind of became my whole life instead of just the side passion.
Mike Swenson
So as you were thinking about. Because I know a lot of people, that is their start. They can start with an FHA. They start with a duplex owner, occupy one. How did that unlock the next door for you? Because we obviously know you can get in. You can get in at a low price. Hopefully there's some appreciation happening along the way. So how did that lead to future doors?
Ryan Luthi
No, it's a great question. Absolutely. So I think one big thing that I think I see, or I saw myself and I noticed in other clients that I've helped over the years and agents that have followed in my footsteps and other investors, is you get a little bit of experience with, like, training wheels.
Mike Swenson
Right.
Ryan Luthi
You live in the building. Collecting rent is potentially as simple as walking downstairs and knocking on a door. You know, what's going on with the property. You can kind of be. So it's, I think, a really gentle way from both a cash out of pocket invested and the risks kind of involved with potential challenges. You're right there. Low money out of pocket and all that. I think it's a great way to get started because to go bigger, I think for most people, they need to have some confidence, and the only way to do that is to experience it and try yourself. Right. To do it. So it's kind of a low barrier of entry. I still think it's a great thing. Partly because you can keep leapfrogging. Right. So it's a great way to kind of plant more seeds. I love the analogy of a tree farm.
Mike Swenson
Right.
Ryan Luthi
And real estate takes time to make cool things happen most of the time. And so it just kind of, I think, is a great way to plant more seeds or be able to invest in something sooner before you have 25% down.
Mike Swenson
Right.
Ryan Luthi
That can take a while to save.
Mike Swenson
Up yeah, and kind of similarly for me in my journey. Now, we bought a little bit before you, so we were underwater on our property and watched a lot of our neighbors short sale and foreclose. But we decided either. So for us, it was a townhouse. We were kind of limited. We had the duplex conversation about doing that, but because we were so far underwater in our townhouse, we decided to just rent it out. But kind of, like you said, starting small. It was a couple that were some friends of ours. It was a coworker of my wife's. We had some conversations with them. They were looking to move out east in a couple of years, so they didn't want anything permanent, so we could rent to somebody we knew, somebody we trusted, somebody we'd hung out with. And it was kind of that little short step that was like, okay, we can do this rental thing, and then bought our first property. And so, yeah, finding that way to just get started with a level of risk that you're willing to take on can lead to those future things. So talk maybe a little bit about the agent side getting in. As a real estate agent, what were you hoping to accomplish with that, and how did that blossom and change over time to where you're at?
Ryan Luthi
So a friend of mine reached out and was starting a brokerage and kind of asked if I'd thought about becoming a realtor. And I'd never really considered it as kind of a career business.
Mike Swenson
What were you doing before that?
Ryan Luthi
I was in sales in the world of fitness, so totally unrelated. And so really, my experience as an investor was interesting, and first couple of years went well, and I just was, like, super intrigued by it, right. And just kind of like, this is working. This is neat. I'm saving money now. I own a place. And then eventually, a couple of years later, we bought a single family home because we were pregnant with the first kiddo. So anyways, I think the idea that more people needed to know about it, I was really excited to specifically do real estate, like as a realtor, broker, whatever, to teach multifamily investing, passive income, that kind of thing.
Mike Swenson
Right.
Ryan Luthi
Because at the time, at least, it felt like a market that was pretty underserved. The phrase house hacking in 2013 didn't exist. So even though that doesn't feel like that's that long ago, we weren't cool kids when we got started. Right, Mike? It's super popular now, but at the time, I think that was really fun. And so over the years, it's been super fun to help people achieve passive income, little pieces at a time in many cases.
Mike Swenson
Right.
Ryan Luthi
And so pretty cool.
Mike Swenson
Was most of your business working with investors? Did you do much on the residential side or not?
Ryan Luthi
I think the correct term that I've heard for myself is I'm a resumershall realtor Reshl I don't know. So about 50% or more, the highest was like 92% of my business was multifamily investors each year. So pretty big focus on that. And I just had a huge passion for it. And so it kind of became what I was known for. And I think that how people came to me and that kind of thing.
Mike Swenson
And I don't know if it's the same for you, but for me, focusing on working with investors, I kind of viewed it as double dipping my time. If I can work with investors, help them find properties, build relationships and contacts in the investment space, that's going to help myself too, personally, because I see a lot of agents out there, they're doing straight residential, and for them, it's almost like they have to pause and switch gears to even think about doing an investment property. And so I was like, if I'm just working on my agent sales, businesses, working with investors, I can hopefully grow and learn faster and build those relationships that I need. And so I kind of tell people that maybe our residential agents and their night job is investing. I kind of say, hey, my day job is my night job because I'm working on investment properties. And as I see as something that might be a fit for me or an investor that might want to partner with me, well, then great. I'm just double dipping my time.
Ryan Luthi
Yeah, I've always put a huge focus on deep relationships, and I think I saw more of a long term relationship where someone may be investing every year, maybe multiple times a year, maybe take a little break. But the idea that I could dig deeper, get to know people better, not have to necessarily work with as many people. If I'm working with some people more than once.
Mike Swenson
Right.
Ryan Luthi
And so to me, that's what it's all about. It's all about relationships. And at the end, yeah, we happen to sell some real estate, we happen to do some transactions, but it's always about the people for me.
Mike Swenson
And if we were to talk about me double dipping my time, you might be triple dipping your time as you're now working on the financing side. So talk about unbankable and how that kind of has come up and how you're helping folks in that space.
Ryan Luthi
So a big part of my entire life and career is always kind of just finding ways to help people. And that's one of the reasons I jumped into real estate. I felt like I had gone through an experience that I could help other people and be kind of a tour guide and help them go through it with a game plan potentially smoother, maybe less stressful than they might. They try to go it alone or something and share all the tips and tricks and the things. Not everything I've done has been perfect, right? Try to save them from mistakes I've made. And it's been super fun to help and watch people on that journey. But one of the challenges, as everyone knows, is in the last year and a half, interest rates have gone up. And at the beginning of that, I was kind of wondering, how is this going to affect our market, right. And I knew investors were going to be in a different place, right, because returns inherently go down unless prices drop. And with the lack of inventory, I was pretty much hearing from all the best economists and people that the prices are unlikely to drop due to low inventory, which has proved true. I think we're up 6% on average, depending on what you're looking at in Minnesota this year in appreciation. So it's pretty crazy that rates have gone up 2% in the year, which is the fastest increase ever recorded. And yet we've still seen 6% appreciation, which is higher than the 4% average over the last 100 years. So interesting things happening. And so I saw the writing on the wall. So I started to look for opportunities. And a little over a year ago, partnered with Jesse Mills, who had started a company after being a loan officer and watching all these people who couldn't get financing but they could afford a home, they had a down payment, they had a job, they had income, but they didn't have two years of business taxes, right? So fellow realtor, you know the story, right?
Mike Swenson
Yeah. And that happened to me in Covid shutdown. My first day launching my team was the first day of. Yeah.
Ryan Luthi
And so there's know people in those margins, right, who, they're good people. Some of them have owned homes for decades, right. And fallen hard times, have a medical event or whatever. And so it was interesting, I'm hearing about his business where he helps these people get home ownership. But what was the interesting part was, whereas most of the kind of programs or things out there that are anything even remotely similar, they're like hedge fund money and big fat cats, right? So one of the cool parts about the way he structured it was he allowed small medium investors to participate in these and basically help someone get a home, but have someone who is much more responsible than a tenant typically would be. Right. With more skin in the game. So the returns were solid. The person living in the property thinks of it as their own right. They have pride of ownership. And, and all along the way, saving opportunities, creating opportunities for realtors. We do use commercial financing to create the creative financing. So ironically, we use a bank, even though we call it unbankable homeownership. Without the bank, it's been just a wild ride. And we've helped a ton of people this year, and the stories are endless. And it's just been super rewarding to watch all the pieces come together and learn about this whole new, whole new.
Mike Swenson
World for me and talk a little bit about how that works. This is the thing for people that haven't maybe gotten a mortgage. You've got your smaller lenders who might have some more flexibility. You've got your larger lenders where it's kind of a rubber stamp. And like you said, there's a population of people that don't necessarily fit the box that lenders try to put them in and check their little boxes to verify everything that they need to, but talk a little bit more about some people that might work and then how that program works for them.
Ryan Luthi
As you know, Mike, the lending laws and sort of the guidelines, I guess, let's call them, have gotten more restrictive. So while interest rates have gone up, banks have also made it more difficult to get qualified for a traditional mortgage. So 30 year fixed Fanny Freddie, whatever, right. Normal home mortgage. So we're consistently working with self employed people, people with maybe some credit issues caused by any number of things, but usually sort of an event or something where challenges happened, but now they're trying to make things work, but they want to buy this home. They're paying x amount in rent and they can't buy because of XYZ. So the square peg and the square hole analogy, I think, is very true, and it's especially true this year. So we work with people in divorce situations. Sometimes they need a place to be safe. They need a place to feel less stress and have a new home. But chain of title issues are real, right? So if you purchase before the divorce is final, then the soon to be ex spouse might still have an ownership, and that's a complication that nobody needs in their life. Right? So sometimes what we do is strategic. As a matter of fact, one of the ways that we've helped people over the years, we not only do single family homes but we do multifamily. So duplexes, fourplexes, we've even helped people purchase apartment buildings. And so one of the ways that we've helped investors basically move the ball forward. So, I guess picture a common scenario of someone that is in between a house hack, three and a half percent FHA duplex or something, and their first apartment building. They don't have 25%, they don't have a few hundred grand or whatever it might take, but they've got half that, right? So someone with twelve or 15%, maybe we can basically use our program. And so we purchase the property with ourselves or with one of our small group of private investors. So we purchase the property, and then we do either a lease option or contract for deed back to the end buyer. And so instead of saving up an extra 10% to 15% down payment, they can get into the property. As you mentioned to me in previous conversations, you're okay with swinging a hammer, right? So maybe someone that wants to get in there, do a little value, add that value, add that sweat equity, and earn it through improvements to the property and rent increases, reductions in whatever efficiencies, put some new windows in, whatever it might be, right. And create that value as you can in commercial real estate, and then refi out. And now they've kind of sweat equity their way, forced appreciation to that money they never had. Right? So we set up a predetermined price, predetermined payment. So everything is kind of boxed up and agreed to before we even make an offer. So it's all very much laid out, and then we build it on a timeline so that it makes sense for their situation. So if the person needs two years of business taxes, they've got one partial year. This year, we're probably going to give them three years so that they have the full two years plus a cushion.
Mike Swenson
Right.
