Tech Approach to Old School Business
On this episode of Next Level American Dream, Abigail and Sean are joined by Tim Milazzo. Tim is the co-founder and CEO of StackSource, one of the nation's fastest growing commercial financing platforms. During the episode, Tim walks the listeners through more information about StackSource and Multifamily lending.
Key Topics
How has the industry changed?
Upsides in the market in terms of the Fed Interest rate?
StackSource, Tim"s company
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SUMMARY KEYWORDS
loan, multifamily, property, deal, lenders, financing, rates, non-recourse, real estate, non-recourse debt, interest rate, cap rates, capital advisors, debt, commercial, investors, people, starting, capital, prepay
SPEAKERS
Sean Thomson, Abigail Thomson, Tim Milazzo
Abigail Thomson 00:01
Welcome to the Next Level American Dream Podcast brought to you by Thomson Multifamily Group. Your hosts, Abigail and Sean, will discuss how you can take your American Dream to the next level through real estate investing, business practices, and personal development. Join us as we share our experiences as a father daughter duo who are trying to accomplish our goal of financial freedom. We hope you learn more about how to define and achieve your American Dream. Here's another episode of Next Level American Dream. Welcome to the Next Level American Dream Podcast. We have a wonderful guest for you today, but first, please make sure you've subscribed if you haven't already. We also love getting your feedback through likes, comments, ratings, and reviews. Today, Sean has a conversation with Tim Milazzo. Tim is a Co-Founder and CEO of Stack Source, one of the nation's fastest growing commercial financing platforms. During the episode, Tim walks the listeners through more information about Stack Source and multifamily lending. If you found any value from today's episode, please share it with a friend and help us grow. For more information on our sponsor, visit thomsonmultifamilygroup.com to start taking your American Dream to the next level through passive investing.
Sean Thomson 01:14
Hi, Tim, thanks for being on Next Level American Dream. How you doing?
Tim Milazzo 01:17
Hey Sean! Great to see you. Thanks so much for having me!
Sean Thomson 01:20
Well, let's get started. We do a little bio in the beginning. If you don't mind, just kind of give us a brief about where you come from and where you've landed today.
Tim Milazzo 01:26
Absolutely. So, I'm Tim. I'm the Co-Founder and CEO of Stack Source. We're an online commercial financing platform, and we're growing across the country. I happen to be in New Jersey, currently just outside of New York City, and I grew up around real estate, my dad was a successful broker. So, I grew up around stories about real estate deals around the dinner table at night. I never thought I would follow into the business. I worked in tech companies for several years at Google and Facebook and advertising technology, but I got drawn back into real estate through the opportunity to build a real estate tech platform, which became Stack Source, which is this online platform bringing transparency to different financing options.
Sean Thomson 02:10
So, you're taking sort of a tech approach to a very old school business of financing real estate, right? So, let's talk a little bit about Stack Source and what you're doing to kind of next level I guess or to take that into some more future business. Explain to me what Stack Source is and how you what your approaches to doing that.
Tim Milazzo 02:29
Yeah, so stack source, at the most base level is a real estate financing portal, you get this information on our website about a property that either you have under contract or you're looking to refinance, but our portal allows you to put in a property address and information about that deal and the financials. What you get back is an instantly matched list of commercial mortgage lenders. So that includes banks, credit unions, Fannie Mae, Freddie Mac, life insurance companies, and private debt funds. So, we have hundreds of lending partners across the country at this point. And based on the location, the size, the leverage, at different criteria that we track about these, this database of hundreds of lenders, you're going to get matched instantly to Hey, here are the lenders that are truly in market for that asset. So, you don't waste your time calling 40 different lenders and three quarters of them are not doing that leverage not doing that county, they can't help with that type of asset, you're instantly getting connected to here are the lenders that actually want to finance assets like yours and loan scenarios like yours. And that's, that's really the power of stack source is we connect you with hot sources of capital much more efficiently than a traditional broker.
Sean Thomson 03:40
Yeah, I know for us, so we do underwriting constantly, you know, we're underwriting pretty much all day long every day. You're always looking at what can I get on the debt side for this property? You know, because there's different locations, different property types, there's different, you know, all these different criteria. We don't know the answers that we get only the lender knows the answer to those questions. So, I used your tool the other day, and that's a game changer for us, because we can, we can probably get a very accurate sort of expense for the debt side that we can then underwrite into our deal. You know, being in the hunting for apartments right now is extremely competitive. It's a truly seller's market, there's buyers everywhere. For us, we're moving really rapidly, and we're having to be very specific and very detailed on our underwriting so that we can drill down as far as we can and get it get a competitive bid out there. So, a tool like that, it seems like it's extremely helpful. We haven't really started to use it, but it looks like from what I saw already, that it's going to allow us to move faster and be more efficient in what we're trying to do in acquiring properties for sure.
Tim Milazzo 04:41
Yeah, you know, good, good or bad financing can make or break a deal because you don't want to be waiting on a financing approval in later stages of the process when you're down to the wire with your financing and your due diligence contingency where you're down to the wire with a closing date and inefficient financing process can kill you. Same time, not getting the right loan terms not getting the right rate you can be, even if it doesn't kill your deal, I mean, if you're not squeezing as much juice out of one multifamily investment as possible, you're, you're missing the money that you could be making, you're missing the money, you could be returning to your investors. And it's a big deal to save 20 basis points on the rate, it's a big deal to have a longer amortization or an interest only period where your local lender hasn't given you one, or, frankly, more leverage. If you can get 80%, LTV versus you know, 70 or 75, that your local bank is offering you, you can do more deals, you can be more efficient with your capital, you can have a higher cash on cash return. So, good financing, and financing coming through can absolutely make her big break deals, we're all financing all day, that tool that we just launched, is we're just trying to bring transparency to people, hey, here are the interest range interest rate ranges that are available from this type of lender today. Or if it's in particular, if it's a Freddie Mac sbl, here's your exact interest rate quote based on the zip code and the you know, the fundamentals of the property and alone. If you can do that more quickly, and you don't have to wait for your loan officer to finish this round of golf, get back to the analyst seat, find out from the analyst with the spreadsheet says about what the rate should be, then you can analyze more deals and you can win.
Sean Thomson 06:23
Yeah, well, and that speed is critical. Like I said, we're looking at, I'm probably going to submit three offers this week, next week on properties, we just walked last two days, you know, I'm we're moving so rapidly on things. It's crazy, you know, when you're doing an underwriting, you're having to look at so many factors, it's really nice to take that debt component and just have it nailed down right away. You know, and I've worked with lenders before, and everybody's wonderful, you know, I send my requirements into them, and then they'll do an analysis for me to get back with me. But that's can sometimes easily take a day or two to get that information back. You know, and sometimes I'm facing a call for offers deadline, and I've got to get things right away, you know, and so it's nice to have that pretty quickly. So kind of tell me, what was your you came from a tech background? But what was your inspiration for creating this? What made you kind of motivated due to this business?
Tim Milazzo 07:17
You know, real estate was part of my roots, my dad works in real estate in New York in a very competitive market in Manhattan. And one of the reasons I didn't think I would follow him into the real estate business is I wasn't that natural salesman that that he was that can kind of go wine and dine the big landlords in the city and, you know, put together office leasing transactions. And when I interned, and I studied finance in college, and when I was studying finance, I got an internship at one of the big real estate services firms. And out of all the interns, I was the smart spreadsheet kid in the corner that, you know, could do things on a spreadsheet and within analysis that, you know, the brokers, you know, couldn't dream of, but I wasn't going to be the one trying to, you know, out hustle and make the cold calls. It just was it wasn't appealing to me, because I always loved the technology aspect. I love tech companies I love like reading about it and you know, finding out what was happening next with Internet technology. And so I jumped at a job offer from the big tech company out of school, and I was very happy working in the tech industry. But I increasingly got a startup itch, really not just wanting to work for a tech company, but really to build something. And over the course of a few years, I joined a later stage startup that got acquired by another technology company. But as I had this growing startup itch, really wanting to be an entrepreneur to build something. I got reacquainted with, with real estate through a real estate tech meetup event in New York City. And I saw what was happening in real estate tech. And the and what to me was eye opening for the opportunities, thinking about what will the real estate process and what will what will commercial real estate services look like 510 years from now, is it all relationships are very important. But so is information in this business. And I think relationships and information, you know, if you can if you can nail both of those, and those things multiply if you can be great at both. And a lot of traditional brokers are great at working relationships. But information is like a secondary concern and the speed and the efficiency of that information. I thought what if we could fuse the two together? What if we could have the information flowing? What if we could bring transparency to this and really leverage those relationships further? And that's that was kind of the inspiration for Stack Source. Why can't we bring transparency to financing where right now you have to call the guy in the suit in the big city that has the right relationship? What if we could break that down? What if we could put up a portal that gives you access to all the commercial financing options on the market? That was the beginning The idea for Stack Source.
Sean Thomson 10:02
Yeah, commercial real estate definitely is, or I guess real estate in general is definitely, it's kind of this bizarre thing where you have to have the latest cutting edge data to analyze the deals, but then it's very much handshakes and phone calls all the time, you know, and it's a lot of relationship, a lot of it is a relationship business, you know, the best deals that I look at are the brokers that I have the best relationships with, you know, but we still have to run the numbers and get all the data and stuff. So it's kind of funny how this business works. It's, you're kind of leading the data and tech side of it, but there's still that old school component, it's kind of weird, I'm, I'm struggle with the tech side of it a little bit more. I'm more comfortable taking, you know, pick up the phone and going looking at properties and things like that. So having tools like yours is a for a guy like me is, you know, that easy. It's kind of that easy button for the data, right? And that helps me a ton.
Tim Milazzo 10:52
We're trying to design it in a way that's easy to use. Because if you can, if you only have so many hours in the day, and those relationships are going to be key. You shouldn't spend any more minutes than you have to on spreadsheets, research data collection, what if we can just power that for you so that you spend your money, your time on the things that really make you money? And is it really what the moneymaker to put that next piece of data in a spreadsheet? Not really, it's what it enables you to do, which is make the better offer? You know, so if we can get people back some time, you know, I think I think that's what's going to make this all worth it.
Sean Thomson 11:33
Yeah, that's good. So where's the company headed now? Are you guys so you're you you've got the platforms kind of built, that you're just you're helping people find the funding sources? Where do you see yourself headed?
Tim Milazzo 11:46
Yeah. So when we launched in 2017, the team was me. And two software engineers, building this prototype, putting it out to market seeing how much of this can be really automate what pieces of this are going to be like, uniquely human pieces. And when we started to figure out the edges of get, okay, what pieces to the just the platform automate and what pieces are still like, hey, this capital advisory business like actually, on the phone talking about structuring negotiating loan offers, that's when we started to layer in Capital Advisors, full time real estate finance professionals working with us at stack source to provide the service. So we're now up to 12 Capital Advisors across the country we talked to right before the recording started about Texas, and we're starting to do deal flow in Texas. But we're actually hiring, we're looking for our first Capital Advisors in Texas, we're in Los Angeles, Phoenix, Chicago, Atlanta, Philadelphia, and New York right now as far as our Capital Advisors. But we've closed loans in 30 different states, we have done upwards of 130 financings at this point on our platform, and we have a billion dollars of loans in our pipeline, right now, a billion dollars. It's like this cool sounding number. For a startup. It actually represents like 0.05% market share for what's going on in real estate financing. So we're still very small compared to the size of the market here. We're a new kid on the block compared to some of the big real estate finance financing companies of decades past that have really built up great businesses. But we're, we're growing, we're going to more than double originations this year, based on what we've closed so far, in the first three months to 2021. We're going to continue hiring Capital Advisors across the country, we're doing a lot of deal flow compared to you know, the early days, that's we're growing, we're growing across the country, hiring people, we're even raising some money for our, you know, our effort to get into the second inning here as a business here. So let's that's where we're at.
Sean Thomson 13:39
Okay, well, let's talk about so we've talked about stocks, what is kind of what you guys are doing? Let's talk about where you see, I guess, just the markets going right. So interest rates just went up a tick, I think just recently, this last week, that kind of thing. Everybody's kind of trying to hedge against cap rate, you know, compression and inflationary pressures, all those sorts of things are going on, since you're kind of tuned into that sort of thing. What do you what are you seeing as the upsides to the market as it's coming in the next year, so maybe some things to watch out for?
Tim Milazzo 14:09
Okay, so we're at an interesting time in the capital markets. The 10 year Treasury Yields has risen by 80 basis points since the beginning of the year, it was at less than 1%. Now it's closer to 2%. The five and seven year have risen, but not quite as sharply rates are ticking up. They're still at relative lows. Now, what we're seeing in our data is that while the 10 year Treasury yield has risen sharply, the average commercial mortgage rate has only moved by a few basis points five to 10 basis points over the last quarter since the beginning of 2021, which is interesting, which means two things one banks and credit unions and Fannie Mae and Freddie Mac there are there are multifamily and commercial mortgage lenders that very much still want to make loans. They are Seeing that it is they've got a lot of dry powder, there's a there's the money supplies up, there's a lot of money out there for deals that work. Now on the equity side, that's where the cap rates and the you know, cap rates are low properties, many, many investors field properties are expensive that they're getting bid out by other investors. So it's an interesting time, if you have a deal that works if you can add value on a deal if you find a deal that that will underwrite, and it's not priced out of market. Um, there's very good, they're very good debt opportunities, you can lock up a 10 year fixed loan right now, in the low three percent’s, you can get non-recourse debt for Fannie Mae and Freddie Mac, in the mid to high three percent’s, you know, depending on, you know, a few factors of how you're underwriting and where you are in the country, there's a lot of capital available on the debt side, there's also a lot of capital available on the equity side from preferred equity investors for mezzanine debt funds. So there's a lot of capital. And the deals that are being underwritten are pretty tight. We've actually seen the variance between different commercial mortgage lenders so that the difference between interest rates, so if you go to one bank versus another, the variance is starting to shrink. After COVID. Last year, there was a big spread between the lowest and highest commercial mortgage offer you can get if you source multiple offers, that's starting to shrink, it's starting to come. So deals are tight on both the debt and equity side, there's certainly going to be winners and losers here, you know, capital is flowing south and towards the middle of the country more than it has, you know, based on different states doing well as we as we recover out of the COVID economy. There's so much interesting things happen here. multifamily has been on a hot streak. It absolutely has hotels have had some of the worst months of their of their careers. I'd say here they're in a hotel during a slump retails in a slump multifamily has been on a hot streak. There are a lot of people that are smarter on the macroeconomic side than I thinking that multifamily is going to stay on a hot streak for years to come.
Sean Thomson 17:00
So let me ask you about that you were saying that during COVID, the spread between the top interest rate and the bottom interest rate was very wide, but it's coming together is that that's sort of an indication of institutions seeing stability coming in the future, right? So, that's really kind of an indicator that hey, we're everybody starting to feel better about where we're headed, at least right?
Tim Milazzo 17:19
They're getting closer, the closest variants we saw between different commercial mortgage rates happened in the end of 2019, to the beginning of 2020. Right before the onset of COVID. banks and credit unions and lenders of various kinds were, we're all feeling pretty good. And there was there was a fair amount of consensus about the economy. And were now there with the lowest amount of consensus and what is risk? And where is the risk? And how hard is it going to hit us last year, it does not come down all the way. There are still opportunities right now to take advantage of lenders that are more bullish that have more aggressive sources of capital, or they just have so much capital on their balance sheet they need to deploy, they need to make something they need to make some yields, right. And then those opportunities are still out there. They're probably not as easy and it probably takes more calls today. You probably can't call five banks and credit unions and find that one that's really hot on the local multifamily assets, you might need to make 20 calls right now or obviously tap into somebody with those relationships that can you know, identify them quickly.
Sean Thomson 18:21
Yeah, yeah, I kind of see that as just everybody starting to feel a little bit better about where we're headed over the last year. It's just been no one knows anything really kind of so that it seems like everybody's kind of like, Okay, it looks like we're heading in a decent direction. There's a couple things that could get you but so are you are you seeing anything that should be of concern? So let's say if I'm underwriting deals, I should I be hedging a cap rate or hedging somewhere to counter interest rates, accelerating or inflationary pressures? or any of those kinds of things? Are you are you recommending to your people that they look at certain issues and account for that in the future? In the short term?
Tim Milazzo 18:58
Yeah. So, you know, there's still an opportunity here, despite like the 10 year Treasury rise, and it's risen fast, I mean, we're getting we're kind of getting back to a normal year yield curve where like 10 year, money is a little bit more expensive than five and seven year money, which is what you expect to happen. Historically, you're still in a situation where you can lock up a commercial mortgage and, and nobody knows what cap rates are going to be in 10 years in any case, but you can lock it in a good rate over the next 10 years. You can underwrite a multifamily that you're going to get cash flow all along the way. And as long as our economy isn't new, 10 years from now, you're going to be able to make some return on it. So in some senses, we're returning to a little bit of normalcy of where rates and the yield curve should be. The Federal Reserve has kept indicating quarter after quarter that they're aiming to keep rates low for the next two to three years. I mean, they're talking about keeping rates low through 2023. So let's say you have a big value, add play or lease up play and you know, there's some Economic vacancy, maybe you're finding a property that's struggling with collect collections right now with, you know, you're not allowed to kick people out, you're not allowed to foreclose, right now they're struggling with collections. And maybe it's a C+ class or B- class, I think there's still time to get in and 18 to 24 months, I owe bridge loan, add the value, get that thing up to stabilized, you know, rent collection and stabilized occupancy. And you can still take advantage of these low rates. So while cap rates are hard to predict for anyone, and anybody that can predict cap rates is going to become a billionaire, right? debt rates, we have a pretty good horizon of what they're going to look like debt should stay. If it's not as cheap as it is now, it should stay relatively cheap over the next two years.
Sean Thomson 20:49
Yeah, barring some additional global catastrophe, of course, that it's Yeah, I think that's, I think that's true. It looks like we're, it looks like we've come through a pandemic, and we're going to start to start to move in, in a more linear path here, but it's going to be good. I think so. Okay. So Tim, let's talk about we've cut, we've talked about Stack Source. We've talked about sort of some of the more global economic drivers, maybe, let's talk about some specific sort of funding strategies or finance strategies that you're seeing people that have success with.
Tim Milazzo 21:21
Absolutely. So depending where you are in your multifamily investment journey, you're going to be tapping into different sources of capital. If you've come from a background where you've done some fix and flips and you've got a little bit of capital available, and you're not syndicating you're buying for your own account. And that you know, that first multifamily deal is $900,000, you're going to be with local banks and credit unions, you can expect full recourse, so your own personal wealth is going to have to back up that loan. If there's any losses to lender, you're going to expect rates today to be in the mid threes to the mid fours, we see that either if you're starting a little bit higher, or getting a couple of deals in, and now you're in that one to $10 million space. That's where we see and we start to advise multifamily, you know, investor operators that you're finally in the zone where you can get non-recourse and non-recourse debt can come from a couple places, the most common in the multifamily space would be a Fannie Mae or Freddie Mac backed loan. So for Freddie Mac, you know, let's talk about their program. In particular, they're a government agency, their mandate is support the capital markets for housing, we just want to we want investors to be making returns on housing, so that they build more of it. And so there's, you know, more, there's more robust demand to build housing, because that should trickle down to housing being more affordable for our country. And so Fannie Mae and Freddie Mac are both looking to lend a lot this year, they're both looking to lend, like, on the, on the scale of about $100 billion each, which is you put them together, they're nearly a third of the entire commercial lending market that we're expecting this year, Bill ends nonrecourse that is the first and biggest difference between them and a local bank. Because now you're not putting your personal wallet behind the loan, if there's any losses to the lender, in the in the off case, that there would be they're definitely looking for stabilized deals, and they're looking for sponsors that have experience, good credit quality, you know, know what they're doing and have a clean, you know, business plan with the asset, but then your non-recourse in the other. The other benefit of that is, if you're trying to syndicate, and you want to take investors that are investing at it, and our IRA, for instance, has to be non-recourse, they cannot have recourse against their money. So that's, you know, in their situations where you have to have non-recourse debt. And it's to the point where, if you want to have a portfolio of a certain size, that is larger than you can guarantee that for non-recourse is that other way, it's like, you know, so if you if you want to scale your portfolio above a certain amount, it's always 30 year amortization and can come with interest only periods. So in that in that zone, and that like one, one to $10 million and beyond, and it's certainly a big player for large properties as well. The Fannie Mae backs loans to Freddie Mac, back loans are popular choices, you start to get up to $5 million more in property value cmbs commercial mortgage backed securities could be an option as well, that's probably the way to get the best rate and, and potentially full term interest only, you know, in a decision on that money, but you really can't get out of those loans early. They're getting cost an arm and a leg if you want to prepay out of those loans. So they're very restrictive loans, even though they have got great rates. So non-recourse is always a conversation that we have with growing multifamily investors, if they don't care about that non-recourse portion, if they're if they're comfortable with the risk of, hey, if there's downside, that's, that's fine, I'm comfortable with that risk. The very best rates in the market today are still coming from banks or credit unions, if you're talking to the right one.
Sean Thomson 24:56
Right. Let's talk about bit about some details of the other funding. You mentioned something so the prepays and the yield maintenance and things like that explained to me. Let's just take a scenario, let's say I do a $10 million property and I am securing it with non-recourse debt. What is the structure of that in terms of prepayments? Generally, for someone that's, that's financing it, and then what I'm running into a lot of times with our offers, is that people have these loans against the properties, it just make it impossible for them to sell it, because they're so big and prepay, and the you know, the, the loan itself just isn't that great. It doesn't allow for anybody to transact that loan. So, how do people avoid that catch when they're there, they're financing acquisitions, maybe talk about if you Okay, so if you don't mind just talking about the structure, and then how people are using that.
Tim Milazzo 25:46
So yield maintenance in general means that the lender, if you're paying down the loan balance early, they're going to collect a big cut of what is all the interest yields they would have made if you kept paying through the life of the loan. And so depending on the interest rate environment, that's going to be more or less of a concern, but it is the way to get the cheapest interest rate on your loan, I mean, it's going to be it's going to maximize your cash flow, because now the lender knows, okay, I'm protected, I'm going to make my yield, I'll sweeten the deal, I'll give you a better interest rate, but you're trading that for flexibility. So with Fannie Mae and Freddie Mac, they both allow different prepayment let options, so you can do a step down prepay. Meaning, you know, in year one, it's going to be the heaviest prepay penalty, they don't want you refinancing in the first couple of years. But if you're at year three, four, or five, maybe it's a seven year fixed loan, you're at year four, that prepayment penalty has decreased each year, and you might only be paying, you know, a flat 1% of the loan amount to prepay that early, the tradeoff is a little bit higher for rate. So you're going to have a little bit higher of a coupon rate that you're paying against the loan. So certainly with the Fannie Freddie and, you know, both the small balance and the conventional options, they're giving you some of that optionality. That is one of the important things to understand in the negotiation. If you're getting a term sheet, the prepayment penalty, you see, does not mean that that's the only option. You may need to trade back and forth with rate, loan amount max leverage, you know, for certain max leverage deal certain options with the with the loan may not be available, but prepayment penalty is one of those highly, highly negotiable items, and you know that you can you can trade that on and off with the rain. So that's one important thing to know.
Sean Thomson 27:30
Yeah, I see a lot of people, I'm trying to buy their property. And they're just stuck because they can't, they just can't get anybody to overcome that hurdle of the yield maintenance. Right, because it's so that when they when they structured their loan, I guess they just didn't consider the sale of the property during that time period or something. I don't know what how they made their decisions, but now they're in a property that they can't get rid of, because they can't make the loan work. And it's, I think that's a critical thing. If you're, if you're an operator, and you're securing debt against the property, you want to make sure that that debt sort of patterns your business up, or your business plan, and how you plan to operate that property. And when you plan to exit that property, I think, you know, you would be smart to hedge that a little bit to make sure that you're not stuck in that thing. And like you said, do a step down. And that that works for your timeline. Even if you're even if you're are going to have to pay a higher interest rate initially, or, or through the life of the loan, it would be worse to be into a property that you want to get rid of, and you can't you know, for whatever reason that might be.
Tim Milazzo 28:35
Now Fannie and Freddie loans are usually assumable. So they can they can move from the seller to the buyer, and the buyer can assume that loan and that can that can become a loan. Now, that's not happening a lot today, because if let's say they even took out max leverage, but the seller they bought it four years ago, they added some value went up, they've managed it, well, cap rates have compressed in that time, and the value is higher, if they took out a loan 75%, four years ago, that may only be 59%, of the property's value now. And now as the buyer do, you really want to come up with 41% of the equity. Now you probably want higher leverage on your debt as well. There is an assumption fee, that's usually 1% of the loan amount. So it's not happening very often it can happen for a conservative investor, maybe one that's not trying to really maximize the cash on cash return, they can assume the loan, if they would if they would qualify for the same loan and if the property is in good shape, so it's not it's not happening a lot. Now there are some lenders that have no prepayment penalty. And I'm not just talking about bridge lenders, but there are lenders with good rates, it's typically going to be full recourse. So you're usually not going to get that on a non-recourse basis. But again, if you're okay with the full recourse, if you're assuming there's very little chance at my leverage points and at this point in the economy that like this thing is going to shrink in value so much or I'm going to you know, I'm going to lose some cash flow and an income from this, that I'm going to be underwater on my loan payments. If you're if you're comfortable with that risk, you're comfortable to free, the full recourse. And if you're willing to pay a slightly higher interest rate we're talking about in the force today, like, you know, the high threes, the mid fours, there are lenders, there are regional lenders that have no prepayment penalty. And then, hey, you want to sell about a year and a half in because there's some crazy investor that you know, can if you want to maximize that optionality, that could be an option as well.
Sean Thomson 30:31
Yeah, I guess the moral of the story is, understand your business plan going into your debts, negotiations, and discussions. And then make sure your funding sort of lines up with that. Because if you go to exit this and you're doing you're not your funding is not set up properly. Whatever that exit looks like, you're going to be you're going to have difficulties that you don't want, probably.
Tim Milazzo 30:51
Absolutely.
Sean Thomson 30:53
Well, Tim, I really appreciate you coming on the show me on it. I love talking about this stuff. That's one of my favorite things, because it's such a big part of what we do. And it's so important. We had to do it so quickly. It's so complicated, but I you know, it's fun to talk about, and I really appreciate you coming on! I think your platform is unique and it's kind of special in this world a little bit. I was excited when I saw it and met you. So, thanks for coming and sharing all this with us.
Tim Milazzo 31:18
Sean, thanks so much! I appreciate your podcast, not just for me, but for the education you're doing for your audience, which is I think is awesome!
Sean Thomson 31:26
I'll ask you one last question, I asked everybody this on the show how you know, the name of the podcast is Next Level American Dream and you're sort of doing a couple things. You're helping other people achieve their dreams like me, but you're also building your own dream at the same time with your startup. So kind of what is the next what is the American Dream mean to you? And what is it what are a couple things that you've thinking you've done in your life that have kind of helped you level it up?
Tim Milazzo 31:50
Well, my dream that I'm not giving up on is that I get to work in tech and in real estate. And that's what we're getting to do. And my partner, my co-founder and partner and I, he was a software engineer at Google and I recruited him over to build this business with me to not give up on you know, being able to innovate, to do things differently, which I think is a uniquely American thing where you can you can dream up Hey, what if it works this way instead? And nobody stopping you go make it happen. Go meet clients go build it. And so that's that for us is very special, you know, we we'd love to have that opportunity and being able to fuse together tech and real estate and you know, make making this process better is absolutely part of our dream.
Sean Thomson 32:34
Excellent. Yeah, thank you very much. Well, I appreciate you coming on the show. Tell the listeners how they can find you guys so maybe stacksource.com is that probably the best place to reach you?
Tim Milazzo 32:45
For sure. stacksource.com -- You can contact our team through hello.stacksource.com if you'd like to send us an email. I'm active on LinkedIn. I'm active on Facebook and Twitter. So, my name is Tim Milazzo. If you search me on any of those platforms, I'm usually the first to come up and but yeah, I'm also if you'd like to send me a direct note. I'm tim@stacksource.com. So, any of those places should help you get in touch if you'd like to reach out about commercial financing real estate tech or anything else under the sun.
Sean Thomson 33:14
Yeah, sounds good. Thanks for coming on show, it has been awesome!
Tim Milazzo 33:17
Thanks Sean!
Sean Thomson 33:18
Talk to you soon.
Abigail Thomson 33:19
Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today, want to contact the team directly, or are interested in passively investing and being a part of our deal room, head over to our website at www.thomsonmultifamilygroup.com -- Before you go, please leave a review! Your comments help us create more episodes for you to enjoy.