Podcast Interview—The Icons of Real Estate Podcast
Episode 245: "Where Does Money Come From?" How Alejandro Szita Became a Mortgage Broker
After gaining extensive experience as a real estate agent for over a decade, and working as a prominent commercial and luxury real estate broker, Alejandro Szita launched his own venture, which centers around real estate loans for business owners and creative entrepreneurs. Now he is a Boutique Mortgage Broker for Artists & Entrepreneurs and President of Prosperity Lending. He is a California-licensed real estate broker and mortgage professional, and he has been doing loans and real estate transactions in Southern California since 2005. Throughout his career, he has encountered various financial scenarios, which has equipped him with comprehensive knowledge of the industry.
Podcast Transcription:
Tim Calaway: Welcome to the Icons of Real Estate. I'm Tim Calaway. We have a very special guest for you today. From Irvine, California, Alejandro Szita, and he works in the mortgage industry, and works with entrepreneurs and artists, self-employed basically, who need his help in getting a mortgage. Alejandro, how are you today?
Alejandro Szita: Timothy, thank you so much for having me on your show and for giving me a voice to your audience.
Tim Calaway: Yeah, fantastic. We're excited about, you know, talking with you today and seeing how we can help those people that, well, let's be honest, need some help sometimes with documentation and things like that. So I'm excited to hear the story. Let's start with that. Let's start with you. How did you get started in the mortgage industry, and how did you get to where you are today?
Alejandro Szita: I got started in the mortgage industry in a very unlikely way. You know, I was really interested in money. I have always been interested since I was five or six. Where did money come from? You know, because I saw that money was something that worried people a lot. I saw my dad sometimes worrying about money, even though he was a business owner and he was very successful. But I saw that even he being a successful person was worried about money. And every time that I asked my dad or my mom for money, I could see that it's not something that was forthcoming, you know? So that piqued my interest from a very early age, and I became obsessed with finding out about money.
Tim Calaway: Yeah.
Alejandro Szita: The only problem is the more people that I asked, the less answers I got. And I remember this location very clearly in my mind. One day I went with my dad to his banker, and the banker just turned to me. I was probably 12 or so, and he said, hey, if you want to come and see me and ask me any questions, you're welcome to do so. So he said, call my secretary and make an appointment. And I decided to take him up on his word, made an appointment, and went to see him. I didn't know anything. I was just a young guy, you know, I was across his desk. To me, he was the all-knowing and all-powerful person on this subject. You know, a branch manager and so on.
So, my first question, and my only question was, where does money come from? So he started on a lecture for 30 minutes. By minute 25, I realized to my horror that he didn't know. But I needed to be polite. So I listened to the very end, and I thanked him and I left. But that was a shock to me. I thought, wow, branch manager. Has all these people working for him. He's in his sixties, you know, he's been doing this for like decades. And he doesn't know where money comes from. I was shocked. And I thought that I was the exception, probably I didn't get it. Probably I was too young, probably it's because I didn't go to the university like he did, you know? You know, at the beginning, you tend to think that it is you. It's not the subject. And it's not other people, it's you. And then through life, through my horror, I saw that it was not just me. Of course I didn't know stuff, you know. But it wasn't just that, even though we all handle money, even though we all pay bills, have an income, you know, and so on and so on, this thing, we really don't know where it comes from or what it does. So that was my obsession. That is why I am in this business.
Tim Calaway: Right.
Alejandro Szita: To make a long story short.
Tim Calaway: Yeah. Basically sounds like to me it became a calling. Right?
Alejandro Szita: It became a calling. And then when it started to happen to me, you know. I remember when I came to the US in the nineties, I just wanted to buy a vehicle. I had the money in my account, and what an ordeal. I could not believe that it was, all because, you know, the salesperson says, hey, don't pay cash, get a loan. And I said, why? Why should I get a loan? You know, I didn't know anything. And he said, well, it's because you're gonna build credit. It's gonna be better for you. And so on. And that was the starting point for me to see how this loan business worked here in the US. And it was horrible. It was horrible if you were a self-employed person. Then I remember my mom, you know, my mom lives in Chile. I'm from Chile, you know. She came to see us one day.
We went to the bank. She has an account at one of the major banks. And I remember sitting in front of this account executive. We didn't ask him any questions. You know, we were processing some very trivial—ATM, a new card or something. And he started to say, he started to tell us how much money he owed. He owed like $40,000, how high his credit was, and that he made $50,000 a year. So I thought to myself, how come someone who makes $50,000 a year or $40,000 and has a high credit score, you know? That was another, like, what's going on here? This doesn't make any sense. Right. So, I would say that I'm in this business because I'm just telling you two stories, but I have hundreds of stories like that. Things that don't make any sense, you know? Things that don't seem to add up. And in an effort to answer them for myself, that's why I decided to—and this is an industry that I love also, you know?
Tim Calaway: Well I have a question for you. I hope it's not a trick question, but Alejandro, I have to know, where does money come from?
Alejandro Szita: It comes from us. It comes from us.
Tim Calaway: Okay.
Alejandro Szita: This is the most incredible thing. When you go to the store, you purchase an item, you tender your credit card. In the past it was a check and so on. And that, and you sign on the credit card. Well, now you don't sign. Now you just tap. When you just tap, that money comes into existence. When you get a mortgage and you have to sign about a hundred pieces of paper before an actual notary public. And the process of you signing these pieces of paper, as you sign them, you are creating the money that comes to you. That's where it really comes from. And the reason it is messed up is because when you look into the past, this is another thing, I don't want to get into it unless you want to, but the answers to this problem were already there. You know humans, or I would say civilizations, have been dated back to the Sumerian times.
Which is about 3000 to 6000 before Christ. So when you add it up, we have 10,000 years of history. In those 10,000 years of history, people have already solved this problem. And they solved it thousands and thousands of years ago. But what happened is, and this may sound controversial, but unfortunately it's the truth. I mean, you may say that you know, I'm going to say, because there's no, there's no way around this. A group of people for the last few hundred years have basically usurped this power that we all have to create money, and they have created an actual monopoly for themselves. So we still create the money the way we created it thousands of years ago. But now we need to pay a toll to this self-appointed elite, which has hijacked the power to create money from us. So that's the long and the short of it.
Tim Calaway: I bet we could talk for hours about that.
Alejandro Szita: Yes. So that's why I said it’s a little bit of a...
Tim Calaway: Well, we'll try not to get too deep into that right now, but I'll tell you what, I'd love to hear the whole, your whole philosophy on it coming from that vantage point. You know, at least from someone who studied it more than I have, you know. But not on this call probably. But maybe another time.
Alejandro Szita: This is the interesting thing, if I may say so.
Tim Calaway: Yeah, go ahead.
Alejandro Szita: Even though that is really bad, you know? There is still enough room for you to actually maneuver. Because these are things that you and I cannot change, you know? We can't change that fact. I mean, maybe if we all got together and did something, but that's a little bit beyond our power to actually control. What we can control is what we do. And even though we have this system that has been hijacked, there is still a lot of room for you to prosper. And there is still room if you know how it works, if you know how to adjust all the mechanisms and all the variables, you can still win. Even though you have to pay this toll to this unappointed elite.
Tim Calaway: Right. Okay. Well, let's talk about winning then. That sounds good to me. So, you know, tell me about, you do have a niche that you work for or that you work with, I apologize. A niche that you do work with, and it's the self-employed, artists, people like that. And we'll call them W-2 people, right? I mean, non-W2, 1099, or independent, whatever you wanna call them, entrepreneurs, self-employed. A lot of us are like that, me being one of 'em. Tell me about it. I mean, tell me, what's the process? I come to you and I say, Alejandro, I make X, Y, Z a year. I wanna buy an A, B, C house. And then I make this money and I'm 1099, or I'm paid in, you know, whatever, cash. And I, you know, I don't even know how to get a formal mortgage because I don't really have a lot of documentation. What's the process?
Alejandro Szita: You know, we do the reverse. Most mortgage brokers will start to ask you for documents, and the first thing we do is we don't ask you for any document. I just listen to you. We just listen to you. Sometimes it takes half an hour, sometimes it takes an hour. Let me tell you why. The mortgage industry is not set up for entrepreneurs. It's not set up for the business owner or the artist. It is set up for the W-2 employee. When you get a loan, what you are getting is a bunch of rules. You would think that if you're getting a loan, the lender wants to know that you can pay, that you have a good credit score. But that's just a small part of the story. The bigger part of the story is that behind the loan you have all of these rules. You could make decent money, you could have a decent credit score, you could have a decent down payment, but if you don't comply with the rules, you're not gonna get the mortgage. So it's more of a question of what set of rules matches your life story. And once we find the set of rules that matches your life story, we'll ask you for the documents that satisfy those rules.
Tim Calaway: Oh.
Alejandro Szita: So this is the approach that we take.
Tim Calaway: Okay.
Alejandro Szita: So that's why we listen to you. We want to know exactly the business that you're in. We want to know how you make your income. How does it come to you? Is it cash? Is it check? Is it electronic transfers, you know. How do you report this income? If you are self-employed, you probably try to minimize your taxes. So that means that we won't be able to use them. That means that we have to document your income in some other ways. But there are like seven, or there are like seven to ten other ways in addition to tax returns. So that's why we need to know a lot more about you in order to craft an actual proposal and match your lifestyle, match your business and match the way you live and make your money with a set rules that would allow you to get the mortgage.
And that process, by the way, is not a process that is too complicated. It's not a process that is too long. But it's a process that not many people are trained to do. It's a process that if you go to a major lender, the loan officer that is gonna talk to you is probably not trained on how to do it. Not, because he doesn't have the IQ to do it. It's because there are so many W-2 employees, and the industry is geared so much for the W-2 employee that nobody wants to take the time, because it costs money. You know, sometimes it takes us three months, two months, the longest has been a year, to actually prepare a self-employed person to qualify for a loan. And it's not because we don't make enough money. I'll tell you, a couple of months ago, we closed a loan for a lawyer, an extremely successful lawyer. Money was not an issue. However, we had to work with him for like eight months. Before he could buy his multimillion dollar home. Nothing wrong with him, it's just that we needed to match him with the correct set of rules that would allow him to buy the house.
So, to answer your question, the industry is not geared to it. It takes more effort, it takes more training, and it takes more time. And then most of the industry just wants to talk to you when you're ready. Ready means that you fit with one of the several rules that everybody knows, like W-2 employee, and then you can do the loan quickly. Because most people in the loan business get paid only when a loan closes. So most people cannot afford to spend a long time with you, and then if your loan doesn't close, basically they don't get paid for their work. And that's a problem that in other countries doesn't exist. You know, like in Australia for instance, realtors get paid by the hour, and they get paid a minimum fee. So they don't have this pressure to either not devote any time and then simply ignore you or give you a service that will result either on a closed transaction or on a closed loan. But here in the US we have that service, that we only get paid, you know, on success. And that makes it a little bit more expensive for everyone.
Tim Calaway: Right. Yeah. That's interesting. I didn't know that about other countries or like Australia, about being paid by the hour as a realtor. That's the first time I've heard that. That's kind of fascinating in itself.
Alejandro Szita: Yes, it is. It is.
Tim Calaway: Yeah. So I know, I remember, you know, I'm in my fifties, so I, you know, I remember, you know, the nineties and when I bought—I started buying using mortgages. And then the 2000s, of course, and on up, and then up till 2008 when everything kind of imploded. And I know a lot of people that I knew that were entrepreneurs, independent, were getting, I guess what you would call no doc, low doc loans, you know. And is this, is this similar to that? Or is it no, that's just something totally different. That's a package product by banks that they used to, that's what I always thought. You know, it was always kind of a package product to lure people in and say, hey, don't worry, those of you who are entrepreneurs, or are independent freelancing types. Come on in. We have something for you. But then when they went in, it was like, oh, they want me to put you know, 40% down on the home or something outrageous. Is this similar to that or, I mean, you know, or is it like, no. You tell me.
Alejandro Szita: You know, it's difficult to answer that question. I’m gonna answer, but lemme tell you why it's difficult. It's because the reasons why we had a collapse in 2008 or 2009 are not the ones that you told me. The ones that you told me are what the media says. But what the media says is simply not correct, you know? It's not because of the easy loans. It's not because the people couldn't afford the loans. It's not because they were misled. Actually, that's not at all, you know, what happened whatsoever. What happened is the real culprits of this, in my opinion, were the banks themselves. Not the mortgage brokers. Not the clients, you know, they just took paper. They overleveraged it. They basically gambled with it.
Tim Calaway: It's what they did with the mortgage money. Not so much who was making the mortgage payment. It's what they were doing with the money that was coming in. That's how I saw it.
Alejandro Szita: Correct. But to answer your question, those problems have always existed. Except that now, you know, some of them have a tainted name because of what you said.
Tim Calaway: Yeah.
Alejandro Szita: You know, but this is just because of the image that the media portrayed. But like I said, there are like seven ways. One way is bank statements, you know, which is the way that it was done at the time. Actually, at the time, it was not even bank statements. At the time, you just put on the 1003, on the loan application. How much money you made, and that was it. That doesn't exist anymore. If you put a number on the loan application, we have to find a way to document that. Bank statements are one way of documenting it. But there are like six or seven other ways.
Tim Calaway: Yeah, yeah. Just a verification process is all that's really needed.
Alejandro Szita: Yeah. And also another thing. Sorry. Go ahead.
Tim Calaway: No, I was gonna say, I just remember the days of being able to walk in you know, and they go, hey, I wanna buy a half million dollar house. Okay, well, hey, I'm, you know, I'm self-employed. That's all right. You know, they run my credit, you know, and they go, okay. And I go, wow, this is crazy. My dad always told me it was gonna be like lunacy, you know, my dad being, you know, much older and having gone through a whole, you know, being a W-2 employee and being in a field that was kind of difficult at the time. Not to get into my history or anything like that, but it was just so different then. And I'm not saying I'm not, by the way, I didn't mean to insinuate that the no-doc, low-doc loans were the reason for the financial collapse in 2008. I was just saying that was, for those who are listening that might be in their twenties, thirties, and forties, who weren't buying homes at the time, that's just the environment we were in at the, it was just totally different. Yeah. So it's nice to hear there are people like you out there that really understand the maneuvering of the system, you know. And that's the key. That's what I'm most fascinated in. So go ahead. You had something to say before I said that.
Alejandro Szita: Yeah. Well, I wanted to say that all those tools exist in the system, and they have always existed, except that, traditionally speaking, the number of W-2 employees and the business that W-2 employees bring is so big that institutions and loan officers and people working in this industry, because of convenience, in my opinion, or because of higher return on investment, they've decided to not use them. So it is not that we are doing anything that is not kosher. It's that we are using the tools that were always there, but that were ignored. People were not trained on them, they was not used simply because they were making so much money otherwise.
Tim Calaway: Right. Interesting, for sure. Well, so let, tell me, what do you, you know, I don't mean to put you on the spot, you know, but let's put our prognostication hats on. You know, we've had some leveling out in interest rates. I'm not gonna get into interest rate numbers or anything like that. There's no point, you and I can't change that future ourselves either. But, you know, how do you adapt and does it get more difficult as interest rates move one way or the other for, say, a niche or a group who aren't really considered a niche? Because so many people today are freelancers and entrepreneurs. To me it's more mainstream, more than it ever has been. But does it make it more difficult or any more difficult than say, a W-2 employer when interest rates are moving around on you like that?
Alejandro Szita: I would say no, because when I began in this industry, rates were at seven and a half percent. I remember one of my first loans, I was talking to this girl and I said, hey, I got the deal of a lifetime. It's only seven and a half. That was a really good rate. And before me, interests were, were in the 17, 15 and 18%, you know, sphere. And even then, homes sold, you know, sellers were happy, Buyers got their homes. It's not really the interest rate because you have an inverse relationship between prices and rates. As rates go down, prices go up. And as rates go up, prices go down. So it's a matter of finding what is the equilibrium, what is the balance that for you makes sense, This entrepreneur, this lawyer entrepreneur, very successful, that we, he bought his multi million dollar home a couple of months ago. He paid a really high rate, but to him, it didn't matter because of his strategy. You see what happens is, a loan, it's not like an actual commodity. You know, you hear all these ads on tv, you know, come here, we'll fight for your business. We'll only give you 5%. But that's not the reality. The reality is you have like a hundred loan programs. The reality is you have a hundred or more set of rules. Very seldom, two people will qualify for the same program. So they say all that in the media for you to call them, but once you call them, it reverses completely. Instead of them competing for your business, it's like, okay, let's see who you are to see what we can give you. And this is the reality. The reality is most of us qualify for one or two things. Very specifically to you, not to the lender, to you.
So it's a process of discovery. Once you discover what you qualify for and how you can do it, now, a mortgage is a financial instrument that allows you to change a few things inside. You know, it's like you can adjust a few variables. For instance, most people think that the mortgage broker is gonna tell them one rate, you qualify for this rate. In fact, most people qualify for like 15, sometimes 50 rates of which 5 make any sense. But there is a big difference between the lower and the higher. And then depending on your strategy, depending on your business, depending on your life habits, and depending on how you make your money, determines which of the five may work better for you. Wouldn't you like to know which one? I mean, wouldn't you like someone to tell you these are the five that make sense, and lemme tell you the advantages or disadvantages of each one? That would be great, right?
Tim Calaway: Yeah, for sure.
Alejandro Szita: Everyone can do it, but nobody does it.
Tim Calaway: We've been trained the wrong way, probably.
Alejandro Szita: Exactly. And once you choose the correct one that makes sense for you, it's not a matter of the rate anymore. It's a matter of how you can optimize the financial instrument to get to your goal. And I'll give you one more example if I may. I have this lady who is very successful. She has a house. She uses this in a very successful way. She can add an ADU, an Accessory Dwelling Unit on her land. It's legal. She already went to the city, they said she can do it. If she adds this accessory dwelling unit, her business is gonna grow by 30% in one year. 30% in one year. She has a CPA, a very dear CPA, that she has had a relationship with for a long time. The CPA says, you need to get a HELOC. And she's completely obsessed with that type of product.
And what I'm doing is the reverse and saying, let's not concentrate on the product, whether it's a HELOC, a second, or this or that. Let's concentrate on the goal. Let's see what you can do to get to the goal. And there is a product she can use to get to her goal. But because she's so concentrated on the type, you know, it's like us. The rate has to be this, the loan has to be this. We try to educate our clients. Forget about the rate for a moment. You know, the rate is important, and we'll come to that. Forget about the specific strategy, like specific products. We don't know if that is really going to work. Let's focus on the goal. You know, you wanna expand your business, you wanna grow 30% in one year? Let's see what we can do to get to that point. You know, that is the difference that we try to make. So to answer your question, yes, rates when they go down at the beginning it’s great because you can afford more home, but within a year the homes become more expensive. When the rates go up, yes. You feel a lot of pain because now homes become unaffordable. But guess what? Sellers cannot sell them either. Wait about a year and then things go into a balance.
Tim Calaway: Yeah. I guess you've probably heard this phrase a million times, but you, you know, you marry the house and you date the rate. You know, the rates can change all the time and you can get a ReFi and you're never locked in forever, but the house you need to, to marry, not the rate on the loan or the loan itself.
Alejandro Szita: Yes.
Tim Calaway: So Alejandro, we're kind of winding down here. A couple more questions or a couple more things. How, how does someone get a hold of you?
Alejandro Szita: The best way is send me an email at info@prosperity, like something prosperous, prosperitylending.us, U as in Uganda, S as in Sam. Info@prosperitylending.us. Or you can go to our website, which is www.prosperitylending.us. And then if you catch me between 10:30 AM and 11 at night, you can chat with me directly on the chat box.
Tim Calaway: Nice. Yeah. Nice easy access. So as we kind of wind down and close out the show, I always let my guests, Alejandro, kind of have the last word. Whatever might be on your mind, or, you know you feel like people need to know that maybe we didn't get to cover and take us out for the last few minutes.
Alejandro Szita: One thing that I would like to say, because I was at a seminar about a month ago, and one thing that I would like to stress is this.If you are renting, you can pretty much afford double your rent on a mortgage. Like I give you an example, if you're paying $3,000 today on rent, you can afford a $6,000 mortgage. How that can be done, it's the subject probably of another podcast.
Tim Calaway: I wanna know right now, Alejandro. I didn't mean to interrupt, but I'm like, no, don't talk about another podcast. Let's hear it. No, that's okay. Go ahead, man. I'm sorry.
Alejandro Szita: Not a problem. So that's what I would've finished ending with. Like renting, even though it's cheaper, you know, I, before this podcast, I wanted to see it. So I went into Google, I started to research, you know, about renting versus owning and all of the formulas, all of the calculators that I was able to see, in my opinion, are completely wrong. Because they assume that if you're paying $3,000 in rent, you are going to exchange that for a $3,000 mortgage. And as long as you can do that, then you're okay. If the mortgage is more than $3,000, then you're not okay. And that is totally wrong. It's totally wrong because when you pay a mortgage, about half of the money that you're paying comes back to you. So I'll give you a quick example. If you're paying $3,000 in rent today, that only buys you 30 days at a place. Yeah. If you don't pay the rent on day number one, by day number six, your landlord is gonna make your life miserable. Right? So you're not buying anything, but being able to be in a location for 30 days. When you pay a $6,000 mortgage, half of it is coming back to you. So now, what do I mean by half? Some of the money is coming back to you because of equity, because now you owe less. Some of the money is coming back to you because you get a direct credit on your taxes. So let's say that after all of the money that comes back to you, you end up with $3,000 and you're gonna quote-unquote waste $3,000. That's the same thing you're doing right now if you're paying $3,000 in rent.
Tim Calaway: Yeah.
Alejandro Szita: So you see that's a very simple, very fast explanation on why a $6,000 mortgage brings you more. You're wasting the same amount of money, except that now you have an asset, you have potential appreciation and you have savings. As a very famous philosopher said, in order to save, you have to make the savings a necessary expense. And I've been in battles and duels with financial advisors saying, yeah, but this is very inefficient. You could do this, you could do this, you could do that. But I'll tell you what. After being in this business for so many years and seeing it from my clients, yes, theoretically you could invest on this, you could invest on that, but nobody would do it because you have to make the savings a necessary expense. The people that are successful investors that I've seen are people that already made their money somewhere else. And now they can invest. But if you are a normal person and then you're living sort of paycheck to paycheck, and basically the rent is one of your biggest expenses, the mortgage actually, even though it could be double, it's gonna save you more money and it's gonna create an asset for you. Even though there are other more quote-unquote efficient ways to do it. This is the way that you're going to be successful at. I've seen it so many times, it's unbelievable.
Tim Calaway: Wow. That sounds fascinating, Alejandro. I definitely encourage anyone to get in touch with you and have that discussion, for sure. Alejandro, Prosperity Lending, thank you so much for being on the program today. You know, I look forward to talking to you again as a matter of fact, and we can have those deep dive discussions we were talking about.
Alejandro Szita: Thank you, Tim.
Tim Calaway: You have a great week. Have a great holiday week, and be safe.
Alejandro Szita: Thank you. A pleasure to be on your podcast.
Tim Calaway: Thank you.
