Take Note Podcast #4: The Flying Moose In the Room!
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Take Note Podcast #4: The Flying Moose In the Room!

February 27, 2020


Beethoven said that it’s better to hit
the wrong note confidently than hit the right note unconfidently never be afraid
to be wrong or to embarrass yourself. We’re all students in this life and
there’s always something more to learn. Unfortunately on this
episode I demonstrate that
I still have a lot to learn when it comes to interviewing
and being a good host. There are a few times where I interrupt
the guest and ended up talking for a longer period of time. It’s all very good
information. I hope you all enjoy it, but in the future I’ll do my
best to not do that as much. That way you can hear less of me and more
from the person that I’m interviewing and having on there so you can get the
information directly from the guest as opposed to just myself. But anyways, I hope you all enjoy and thanks
for your support. Hi everyone. This is Paul Cooper, the host
of the Take Note Podcast. We’re here with Joe Kennedy
of Flying Moose Investments. It is currently January 14th, and we’re going to do am
interview here about Joe, his history and investing and his life
and then what he’s currently involved in with his investments and why he
eventually graduated to Note Investing as opposed to some of the other more
traditional investments out there. So Joe, if you’d like to go ahead and begin, give people a little bit of idea of
who you are and kind of a little brief synopsis of your life here
and we’ll get started. Sure. Thanks Paul. It’s good
being with you today. Yeah. Um, my company is called Flying Moose and, uh, we’re Note Investors and many people they
tend to ask me who is Flying Moose and where in the world did you
come up with that name? There you go. I’m glad
you’re bringing that up. Cause that was gonna be my first question. Well first of all, when I set the
company up, I wanted a unique name. I wanted something that
would stand out, you know, I didn’t want to be ABC capital or for
X, Y, Z investments, that kind of thing. I want to, something that would be a
notable, and you could remember it, you know, once you’ve heard it and
you’d go, Oh yeah, I’ve heard of that. Of course. So you know, that, that’s kind of
why I wanted a unique name. And, and the origin. Well it’s, it’s, it’s
kinda simple really around this house. Uh, my wife, when I get in her way in the
kitchen, she calls me a moose. Um, and so, uh, I’ve kinda gotten
that connotation from her. And then one of my hobbies is flying.
I like to fly as a private pilot. And so it kind of seemed natural
that I’d be the Flying Moose. Nice and have you, what’s the
most exotic plane you’ve flown? Uh, I mean, from a pilot’s perspective, I haven’t flown all that exotic stuff. Um, mainly Cessnas 172s and, and some, uh, some Cherokees. Um, so I just, you know, I’m the, the guy that basically
busts holes in clouds and, and uh, I know on, on your side time
you do a little bit of traffic control. So, you know. Yep, about 40 hours a week. We talk to the air traffic
controllers. So yeah. So, uh, how far are you
in your pilot experience? Do you have your instrument or
commercial rating or anything? I just have private, I have
my private pilot license. I’m working on getting my
instrument. Okay. So that’s, that’s kind of the next
step. Mmm. You know. Doing the weekend warrior thing? Yeah. It’s a lot of fun, but
it, uh, it adds up quick. It does. It does. But I, I
enjoy it. And, uh, I, uh, I did that, did take a course to learn about what the call upset recovery
you’re in these little planes for people that don’t know if you’re in
these little planes and you happen to get behind the, uh, a big jet or
something like that. Well, the backwash from that plane from that
jet engine can actually just got it, flip you in a little bitty plane. So A you try to avoid that and B
is how do you recover from that? And that was quite an interesting
exercise. Oh, I bet. Yeah, I remember when I was doing instrument
training, we didn’t do it for that, but it was just an, they call it Unusual Attitudes where
your planes just in some stage of flight that you should normally never be in.
And it’s how do you recover and get your, get your plane safe and level.
And so you’re, you know, you’re not doing anything crazy. You’re not aimed up straight
in the air or the ground. Yeah. So far it’s all been great
takeoffs have equaled landing. So I have nothing to complain about. Well, you know, that’s, that’s the old
dumb joke is, you know, take off is a, is optional but landings always mandatory. And then the joke on our end is an
air traffic controller is, is, Hey, if a pilot makes a mistake, a
pilot dies. If I make a mistake, a pilot dies either way, at the end of the day I should get to go
home unless they crash into the tower. So, um, you know, it’s a
bit morbid, but it’s also, there as a reminder that what you do
is potentially dangerous. You know, we have the, you know, the safest system
in the world. We’ve got good people. Um, but when something goes
wrong, it can go horribly wrong. You generally don’t have fender benders
when it comes, airplane crashes. It’s usually pretty bad. That’s
very true. Very true. Well, I guess we should move on with
investments and a couple crashes with your investments cause that’s always something
that, uh, that people can learn from. Right. Well that’s good. I’ll tell you
a little bit about my background. Okay, cool. Kind of a, in the beginning, I, I spent over 20 years in a
corporate finance career, so spent the time in that corporate
world doing the, you know, you wish it was nine to five, but it
never really works out that way. Um, but, uh, I did that. And uh,
as a personal investor, um, I initially invested
always in stocks and bonds. Yeah. The traditional thing. Yeah. All the traditional stuff, you know, stocks and bonds and mutual funds
and all those kinds of things, and spent a lot of time, you know, studying and researching which ones you
wanted and those kinds of things. And, and for me, what I found, you know, if, if you happened to be fortunate
to hit the cycle right, you know, you could come out okay, if you didn’t
hit it right, you didn’t come out okay. You know? And so it was for me, it got to be kind of a guessing
game on, you know, we’ll, when do I invest in this
versus that? And, um, you know, I made a little money on some stocks
and lost a little money on other stocks. You know, it was never… it didn’t seem consistent.
Like it should be. No, not at all. And I’ve talked about that before. You
know, I opened my Roth IRA when I was 16, when I was 26 getting out of
college, I looked at night, I broken even for the decade,
you know, so that’s the thing. Can you afford to lose 10 years?
And, and um, yeah. So that’s, I think that’s why me personally and
probably yourself try to graduate to something that you have a
little bit more control over. Cause if I’m going to lose money, I’d rather it be my fault than
just something I can’t control. Exactly. And so I, I
moved out of that and I, moved into real estate. I did some
rentals, I got some, you know, and I still have a couple of rentals
to this day with a single family. Single-family. Yeah. I didn’t
do any multifamily. I just
did some single family. Um, and they’re okay. Mmm. But from a cashflow perspective,
you don’t make them. I, you know, I haven’t made much on mine. All it is, is basically whatever the
appreciation is over the years. And that’s, that seems to be pretty
common. If you’re not buying, you know, really low income housing. Right. And you know, lower income,
you’ll get more cashflow. The nicer areas that should put supposedly
have less headaches seem to be more of an appreciation/amortization play for the longer term
and not so much cash flow. Yeah. Right. Right. So I did
that. And then, then, um, then I thought, you know, maybe my entrepreneur spirit kicked in I
a little bit. And I said, you know, maybe I have no, uh, I think I’ll,
I think I’ll buy a franchise. Oh no, what’d you buy? Oh… That bad? Oh no, it was worse.
It was worse than that. Oh no. Well you gotta tell us. I uh, I’ll just say it was a, a boutique fitness franchise. Um, and I, you know, I thought it was
going to be great. And you know, I, I drank the magic water
and all that kind of stuff, opened up a couple of
locations and it was, it was probably the biggest financial
disaster I ever embarked on. Um, so did they set you up where you were
like leasing the equipment and everything? Um, well, pretty much, you know, it’s
a, you know, a fitness place, so you’ve, you’ve got the build out of the
location and some, you know, kind of minimal stuff. It wasn’t, it wasn’t hardcore fitness
like you see with all of… The CrossFit training and power
lifting and all that kind of stuff. It was, you know, it, it w it was more
of a, you know, a kickboxing type stuff, so, Mmm. There wasn’t a whole
lot, but it, you know, the, the business model just didn’t work
for me or I didn’t work it right. I don’t know which, but, um, you
know, the end of that story was, you know, a lot of money down the
drain and I just had to, you know, close it to stop the stop the bleeding. At some point you gotta cut the
losses and that, that hurts. And it can be hard because a lot of times, especially if you’re running a
business or doing some investments, like there’s a, there’s a learning
curve and it takes a while. So you don’t want to give up too early. You don’t want to just waste time and
money. Yeah, no, that’s, that’s rough. Yeah. Yeah. So after that, you know, I,
I kind of went back to real estate and, and that’s when I started kind of
researching different things. Um, and, you know, started looking into notes
and I attended some different stuff. Mmm. I took the course. Uh,
Brecht Palumbo has, you know, online with this distress pro site.
Um, it’s all, it’s an online course. Basically, you know, you read and
study yourself type thing and, and really got interested in,
in notes and possibilities. You did that before, you did
a lot of other note training? Yes, that was my very first
okay. Introduction if you will. That’s funny. I’ve never heard
of anyone starting with that. So for those of you that don’t know
Brecht Palumbo he does this thing called distress pro. He teaches a
little bit about note investing, the basic concepts. It’s
definitely not a full picture. Um, but then he also has this
monthly subscription that
allows you to get different information on different banks
and hedge funds and credit unions. So you could potentially
find, uh, different, uh, people who might be different
institutions that might be selling notes. So that’s, that’s what
Brecht Palumbo’s deal is. And that’s what distressed pro is. Right. And so, and so the special thing
here is that Joe started with that. Whereas, usually most people I know get that
after they decide they want to do note investing after they’ve done some other
type of education program or something else. So that’s why you
did it a little backwards. Yeah, yeah. Well I just came up, you know, I just found it on the internet and
came across it and thought, okay, well let’s learn some stuff about
it. So, um, that was good. And then, then I decided, well, I’d, you know, I
want to learn some more. So, you know, I got involved with, you
know, some of the, the gurus. Yep. That that exists and uh. Seems like all of us have. I attended their training.
Um, and you know, really felt like I got more of
a handle of what was going on. Um, and actually started to
go into notes myself. Um, one of the things, all this kind of interesting that some
of them teach that I didn’t particularly follow and it just because my
personal preference is that, you know, some of them teach, you know, well if
you really want to not to be successful, you know, you really need to get investors
in and you need to get them in, uh, involved early because you know, that’s where you’re going to
make money by having investors. Using other people’s money cause
you’ll eventually run out of your own. But my, my philosophy was a little
different, um, in that. Mmm. I guess being a little older and
knowing all the saving that you do for, for, you know, through your lifetime
and all this kind of stuff that, um, I guess I want it to be
comfortable that I was competent at doing the note investing before
I put anybody else’s money at risk. And so I took a little different path
in that I started off doing joint ventures. Yeah. With some people that had experience
so that I could kind of see and how, how the things progressed. And, and how that correlated with
my understanding. Mmm you know, uh, yeah, I guess. You
and I have ajoint venture. Yeah. No, we, Joe and I have got one
that we’re finishing up in Pittsburgh. It’s, it’s been a doozy. We’ll talk
about that once it’s completed, which hopefully should be soon. Um, yeah,
I mean, I mean I love note investing, but it’s not all sunshine and roses. You can definitely lose money
and there’s a lot to it. There’s a lot to it that you,
even if you’ve done deals, you won’t know everything for a while
because you just won’t encounter that problem. It could be a
different jurisdiction. It could just be a weird issue that
doesn’t happen that often. And so, um, I would definitely tell people
if you’re looking to get in, there are some good gurus out there, but find another investor in joint
venture with them. Um, you know, cause I’ve had people ask me to
teach them and I’m just like, I’m not going to sell a course. That’s
not what I want to do. Let’s just, let’s find a deal and work through
it together. I think that’s, it’s more beneficial for everyone. Um, and there’s a lot of
people that’ll do that. And that’s kind of how I got
started. I wasn’t necessarily, I was joint venturing without actually
creating a joint venture deal. I, you know, years ago and I found some experienced
people and they just kind of let me tag along with small positions in on,
on some different deals. And that’s, I think that’s a better way of getting
your feet wet and not having to necessarily cough up a bunch of money.
And if you are coughing up money, hopefully it’s for an actual investment
that you’ll make money on as opposed to just paying it towards education. Right. So my next step after doing
the joint venturing was okay, I wanted to go ahead and
buy some notes on my own. Yep. And so that’s what I did.
I went out, um, and um, I used a self directed IRA to buy notes. And so I bought notes and I’ve kind
of taken my personal philosophy, I’ve taken the position is that, you know, I don’t want to joint venture with
anybody on a note that I’m not comfortable with owning myself. Yeah. It’s not just something you
grab out of the air and yeah, give me your money and we’ll
put it, put it to it. So, um, that’s what I’ve done. So I’ve
invested in these, uh, you know, with myself directed IRA.
And then, you know, um, now leveraging that into, okay, working with joint venture partners on
those things that I’m comfortable with i t. I know that it’s gonna, you know,
should should give them, you know, not always a ballpark, knock it out
of the ballpark return, but you know, they’re there investment’s going to be
secure and they’re going to get at least, you know, a decent return know. And that’s, that’s huge. And that’s what
I’m starting to see is like, you know, there is no such thing as a
guarantee or, or secure investment, but these you can have a lot more
action and a lot more influence on, and they’re “secured” not to be confused
with “secure” meaning that they’re secured by the real
estate. Whereas, you know, you buy stocks technically, you know, you own part of the company but you can’t
foreclose on them if the company’s not taking care of things. And so it’s, some people would view that
as safer or less risky, especially if you know what you’re doing. Right, right. So that’s kind of
how I’ve evolved in, you know, I’ve now got to the
position where, you know, I don’t think I’ll ever know everything, but I feel confident that I know
enough to look at different things and, and then what to be aware
of as I’m investing in these
different notes and that, you know, I can bring that to the table. Exactly. Yeah. It’s not your
first rodeo. You’ve got, you’ve had a few black guys, bumps
and bruises and uh, but that, yeah, that’s the thing. Like, like you said,
you’re never going to know everything, especially if you invest in a wide
geographic area because each state and counties changing things. You know, we’ve seen some crazy shenanigans
in Ohio and Pennsylvania, so it’s a changing landscape and
that’s probably the hardest part, at least in my opinion, is keeping up with all the different
jurisdictions across the US but that being said, it’s probably the easiest way to invest
across the US besides maybe getting into some type of gigantic
commercial syndication. Right, right, right.
So that’s kinda how I, I have evolved into notes
and, and I agree with you. I think what I like about
the notes is a, you, you have you can exercise control over
it because when you get to a note, I mean, you can look at all kinds of different
options depending on what’s happening with the note. I think it’s usually
9 to 10 different exit strategies. You know, they don’t fit all notes, but you can usually get at least five
per note if you have to. Right, you know, and so you can work on it. And um, at the end of the day that the real
estate is, you know, what you’ve got, you know, if you end up having
to foreclose. So, you know, that’s what I like about it and
that coupled with, you know, I don’t have to worry about, you know,
a renter calling me saying, you know, Hey, the AC just quit working or you know, the hot water heater’s leaking or
the toilet won’t flush, you know, um, you know, you don’t, cause that’s not… That’s their problem. You
got to figure it out. I mean, you’re not always going to
have it. Like usually there’s, there’s less calls for that type
of stuff. It’s like a, you own it. You’re the one that’s responsible for
it. You got it. You’re the adult here. Yeah. That being said, you buy
nonperforming notes, you’ll, you’ll find there a lot of adults that
don’t behave like it because they’re not taking care of the roof over their
head by paying their mortgage. Yeah. That’s that. That can be a little
frustrating. But you know, I, I don’t, I don’t know what you do. Well, you’ve got to realize Christmas and going
to Disney World is more important than that. So that’s, that’s our
fault for thinking incorrectly. Yeah, it is interesting.
I’ve, I’ve, you know, I, yeah, I know another one of my premises is, you
know, I always like to start out with, particularly when you have a nonperforming
note to try to work with people to keep them and keep them in their house. Absolutely. I don’t, you know, I’m not one of
these guys that, I’ll wait a minute, you’re out in the street
tomorrow type thing now. And so I try to work with people and
put things in place and make some modifications if necessary,
whatever to keep them, keep them in their house and you know, have them try to have a normal life that
we would all like to have, you know. So, but there are, there are
the people, like you said that, you know, they don’t, they don’t make their payments
and the next thing you know, they’re posting on Facebook about
a new camera that they bought. They flip you the bird. And so it’s
just like, all right, game on then. Yeah. It’s like, okay, well, you know,
I don’t know what else to do, you know, other than, I mean, and that is our recourse when you buy
notes is to take the property back, either through forfeiture or foreclosure, depending on the state and if it’s
a mortgage or, or a land contract. And so that’s the final recourse. Um, there are a lot of different options
and it’s just like, you know, people might view it as like, Oh, you’re
kicking people out on the streets. Yeah. But they weren’t paying, they
weren’t fulfilling their obligation. We can’t just kick people out on the
streets because we get a better deal doing something else. It’s just like a landlord can’t kick
people out on the streets because they figured out they’ve got below market rent. They have to wait until the lease
is up and then they, you know, and then go from there. So it’s,
yeah, it’s, it’s, you know, I, I haven’t had to kick out any
little old ladies yet. I’m, uh, I’m waiting for my first one, but
I mean, come on. It’s, that’s, that’s not what it is. There are
people that do do that, but, uh, yeah, there’s too much money to be
made doing the right thing. And it’s a lot less hassle too if you
can get people to start paying again. Right, right. Exactly. It, you know,
it’s, it’s nice. And then, and you know, and sometimes, you know, I, I
have one, it was interesting, one note I bought it was, it was up in
Michigan and, and it turned out that, uh, there was two, um, people that were on
the note who was a mother and a son. And unfortunately the son had passed away
and he was the one that was living in the house. And the mother,
she lived, she was in a senior facilities senior
living facility. And so when we’ve kind of found out what the
deal was, reached out to them and, and she, she said, well thank goodness
she says, I don’t want the house. I don’t need the house.
You know, please take it, take it off my hands so I don’t
have to worry about it, you know, all those kinds of things. So, you know, well it was kind of a sad
situation that you lost her son. It was actually helpful for her,
cause we, you know, we did a, the Cash For Keys basically. Give her a little money. Just gave her a little money to just
clean it out and you sign it off and she said, Oh, absolutely. You know, and it made her day and made
everything easy for, for us. So that’s the big thing with it doesn’t
matter if it’s real estate or business in general is finding a profitable solution
for the people you’re trying to help. It doesn’t, you know, it
could be selling cars, it can be people that are going through
foreclosure or trying to sell their homes. They may not be looking for the most
amount of money they could get for their home. They want problems solved and it’s
important you take the time to figure out what their problem is. Right, right. So anyway, that, that’s,
that’s kind of what I like to do, you know, feel good in those
situations. I, you know, knock on wood, haven’t had to, you know, foreclose
and evict anybody yet. But you know, I have some that are kind
of right on the cusp. Probably going to take some
action if things don’t. To me that’s the most frustrating
part. It’s just like, wake up, we’re trying to help you.
Yeah. I mean it’s just, there are so many desperate people that
are with one of these big banks that would love this help, but we can’t buy from them and they
might get these other people where, you know, you’re bending over backwards
for them and they just like, eh, whatever. It’s, um, it can
be frustrating for sure. Yeah. So anyway, is that, is
that kind of moved into notes, I guess there were, there were, um, three areas that I came up with
that I kind of find challenging. Okay. Oh, before you get into
this, how many notes are yet? I’m at 24 notes right now. Nice. Good. Yeah. Good. So
you’ve got a few under your belt. Yeah, yeah, yeah. And I’m,
I’m, I’m looking at, you know, if some people are interested in
partial selling partials on those notes. For those of you that aren’t
familiar, a partial means you’re, you’re buying payments, you’re
buying part of the note. So generally it means that, you know, if there was 30 years worth of
payments left, you could buy, you know, a hundred payments or whatever, and
it would be set at a certain term. So you’re getting a certain return
and you’re collecting those payments. And then once you’ve collected all of
your payments, then the original, uh, um, the original owner, the person who sold you those payments
would collect the payments from then on. That’s, that’s a very bird’s
eye view of what partials are. Right. Right. And so, and it’s, and it’s good for people who don’t
really like want to get too involved in notes. Yup. Want to get a decent return,
you know, it’s, yeah. Mailbox. I call mailbox money man. Cause that’s
what it should be. And you know, every now and then performing notes,
will go non-performing. And so that’s, that’s, you know, I need to
know how to deal with that. But generally when you’re buying partials, it should be mailbox money
that you can rely on. Right. Pretty consistently. Exactly. Exactly. So anyway. Um, yeah, I mean, three of the biggest challenges I’ve
found is finding good assets to purchase. Uh, yup. There’s kind of that, there’s a lot of, there’s a lot of places you can
find stuff. I mean that, that, that are out there that are easy to find. Yeah. You know, different sites and, and the
exchanges that, that sell them. Mmm. The, the big challenge is two things. One of them to find
them at the right price. Yep. I tend to find that on a lot
of the exchanges and stuff,
they tend to be pricey. Yeah. Those, if you were a solo investor that doesn’t
have much time and just wanted to buy performing stuff and you
understood how to do that, you could go to the exchanges and fill
up your portfolio, you know, with it, with an okay return. But yeah, especially when we’re trying to do for
business and, or bring in partners, it’s um, they’re way, way too expensive. Yeah. And then the other thing too is
if you find some different places and, and uh, I mean to say that they are
a dump would be to give them credit. Yeah. It’s just like… They’re garbage folks. There’s a lot of recycled garbage out
there that people are selling as prime real estate. And it’s a
four letter word. It’s, it’s not any good. You
need to be very careful. It’s the same recycled garbage that
just goes around everywhere. So be, be very careful. And that’s where you get someone that’s
experienced like Joe or myself to just look over your shoulder real quick. And
it’s the usual suspects, folk like it. There’s, there’s several hedge funds
out there that are just selling junk. So be very careful. Absolutely. Absolutely. It’s, it’s interesting the stuff that
you come across and I don’t, I don’t know if I told you
about, I have one particular asset in, uh, Memphis,
Tennessee. and I, I had, uh, a realtor there that I was
working with and, and, uh, we had pretty much agreed on a
price. It all looked good, you know, and so I sent the realtor to do a drive
by and, and you know, okay, jump on it. And uh, so we were getting close to want to close
on this and all of a sudden my phone rings and it’s, the realtor
says, Joe, whatever you do, whatever you do, don’t close on
that deal. Don’t close on the deal. Oh no. Uh, and so I, and she left me a message cause I
didn’t catch it so I cut to the message. So I called her right back. She
says, Joe, I said, what, what, what, what’s the deal? She goes,
there’s no house there. Yep. It’s just a piece of land. But
if you look back at the Google, Trulia you go to, you know, the
different places Zilliow, Zillow and, and you know, you see all this house
that’s there and it doesn’t look too bad, but all do it is, it was an empty lot. Yeah. And just because
like you look at Google, the in the pictures only
like a year or two old, you still need to go buy cause it there, it may be a crater in the ground
in like Joe said, it may not exist. It could be concrete with grass
growing up everywhere. Um, yeah, so it’s not an uncommon thing for sure. That’s why you always
always have someone go by. Right, right. So, you know, spend a lot of time looking at stuff
and kick a lot of them to the curb cause this is garbage. And so you need to, you need to really try to try to find
a flower in the weeds if you will. You know, it’s all, it
takes a lot of looking. Mmm. Unfortunately the looking takes time
and it takes money. So I mean it’s, it’s one of those things, it’s like, um, this last year I spent a lot of
time looking at Saint Louis assets. All of them we ended up not closing on
because they had huge sewer liens through the city. They were hard to
find, luckily the O&E got it, because I paid extra for the
background check on it. And, but yeah, those would have been $10,000+
mistakes. And you gotta be very careful. You’ll slowly learn, um, what
cities have issues like that. And a lot of cities are now, and counties
are certain slap taxes on them. Um, even if it’s from other properties,
Pennsylvania is doing that. So like some of these hedge funds, the property you’re looking
at may be up to date, but the other properties they have aren’t, so they’ll take all of those delinquent
taxes and attach it to every single one. So be very careful. You’ll waste a lot of money on due
diligence on stuff that’s not good and you can’t close on. So be very careful that
you don’t close on stuff. And, and, um, especially if you’ve had a drought
where you haven’t closed on any deals, don’t go into a bad deal just because
it’s the first one that’s not terrible. Just because you’re tired of paying
money to find out it’s not a good deal, you know, whether they like it
or not, it’s money well spent. Yeah. I mean, I, I spent almost $10,000 the first quarter
last year on assets we didn’t close on due to due diligence. But that’s better than of
spending like $100,000 on assets. That would have been useless. Exactly. That’s, that’s
kinda my, you know, one of the first big challenges
cause you know, I’m not, I’m not a big fund or that
kind of stuff, you know. And of course the downside I think buying
a whole set of assets from a fund is, you know, you’re going to get some good stuff and
you’re going to get some not so good stuff too. You know, usually
it’s not a, not all roses. That’s a way that I’ve
kind of been able to, um, get out there is by buying smaller
pools and it’s like, look, you know, I bid on five of them, two of them
are garbage, one of them is just okay, and the other two should be decent.
I’ll take all five of them. It’s just, you’re going to have to reduce
the price on the garbage ones. So that way you’re helping the seller
out by at least giving them something for the, for the garbage. Because if they
can clean off their books a little bit, um, you’re going to be a much better a client
of theirs and they’re more likely to sell to you than if you only want to
cherry pick the absolute best ones. Right. Right. So, you know, once you find, find the good assets, then
you need to uh, and you learn, you learn more and more
over time is, you know, how much should you really pay for the
asset. And like most note investors, you know, I, I’ve got a model that I use
that I plug in all the numbers in it. You know, it runs, it gives you, you know, what your financial outcome would be
based on different scenarios. You know, whether you want to hold a property or
whether you want to flip the note and resell it, you know, if
it’s like a non-performing, get it performing and
sell it. What kind of, how can we get like that or
we know what the worst case, if you had to foreclose on, you know,
what’s it going to look like? So, you know, you’d do all
that. It seems like a, I dunno, maybe I’m, I don’t know if I’m wanting too big
of a return or what, but you know, or people or people are just
paying ridiculous amounts
for some of these things. It seems to me, I don’t know, turn
is an unrealistic, but you know, I’ve bid on a lot of these
different things and you know, people are paying even more. And so, yeah. So give everyone some examples here. There are a lot of hedge funds that
are floating lists around everyone, which is nice because it’s easy to find, but they’re charging anywhere
from 70 to 80% of the UPB, which is the unpaid balance, which
means that’s the balance that’s owed. And so they’re charging 70 to
80% of that. The problem is, is that’s not nearly enough
margin. Because you know, if you were to go in and not spend any
money and you’re able to get 100% of the value, then you made 20%.
So you think that’s good. But there are a lot of expenses and
holding costs and that’s a lot of risks to take on. But you get all these other people that
are fixing flippers and they used to buy REOs. And if you’re buying an
REOs for 80% on the dollar, and that was pretty good. And so all these newbies have been coming
in and bidding things up and a lot of them have left the market in this last
year because they’ve, they’ve lost money. So you may think a 20% discount is good
for non-performing, but it’s not an, it generally needs to be at least 50%.
Um, if that was a performing note, then that’d be a great discount
most times. So, um, that’s, that’s one of the things that I’ve
seen a lot of newbies coming in, bidding up stuff. And
then a month or two later, I see the exact same tape floated again
because they finally realized they couldn’t buy it at that price. Yeah. That’s interesting. Cause
that’s the other thing, you, you, you get new tapes and you look at it
and you find the same assets that you’ve already looked at and there’s new tape. The same garbage from last month. Yeah. Yeah. That’s frustrating. You know, you’re just wasting time on that stuff. Well, and part of that is, is some of these larger hedge
funds that we’re alluding to that, that sell this stuff, they basically have to sell and they’re
trying to get as much as they can and they really are kind of unscrupulous
and don’t really care if they’re selling you a bad collateral file or whatever.
It’s, it’s kinda sad and bad. Um, and you realize it’s like, I don’t,
I think you guys are making money, but because they’re also losing
stuff to tax sales all the time. Um, so you gotta be, be very careful and, um, especially some of these
older CFDs from hedge funds, if you’re buying mortgages directly
from banks and credit unions, there’s probably gonna be a lot
less, uh, BS associated with it. But those are much harder to
find. And if you can’t find them, take care of that asset manager. Yeah, I mean, I, you know, I had one in Louisiana that I was
looking at and it looked really good. Um, and I was about to make
an offer on it and I, uh, I asked for the servicer notes and the
servicer is the one that collects the money, you know, from,
from the, uh, the borrower. Think of the servicer like the
property management for a rental. Right. And as things
go along the servicers, they keep notes of conversations
that they have with the borrower and, and with the lender and you know, so there’s kind of a track record of
a history of what’s happened with this particular asset. So I
asked them, you know, can you give me the servicers
comments? And they send it to me. And I started looking down
and I, I see that, well, in a year ago, in January of 19, the servicer had received a letter from
the County condemning the property and requiring the house to be torn down. Yup. And so the servicers sent
that on to the lender, which was the hedge fund basically, said
to the hedge fund and said, you know, they basically say, and you’re going
to have to remove it from the property, take it down. And uh, you know,
is that what you want to do? And they came back and said the
service. Yeah, we agree. We will. Yeah. Go ahead and just demolish the house. Uh, it’s still on their list
of things they’re selling. And it’s messed up because technically
that would be fraud and you would win in court, but how much time and money is
it going to take you to get that back? And so that’s what we said
when they’re unscrupulous, we don’t know if they’re necessarily
doing that intentionally or just because they’re big and bureaucratic,
but you’ve gotta be very careful. And Joe, I had almost the exact
same situation happen with me. Uh, back in December when I bought
a bunch of performing notes, this one property was performing, the
borrower was subletting it out to a, as a rent, as a rental and it got condemned and it
was all in the servicing notes and I, and so I know I asked this,
the sellers like, okay, you guys need to figure out what’s going
on with this condemned status cause they’re trying to do repairs. And last I heard it was still condemned
and they didn’t have the money to do repairs. So it’s like, well, I
can’t buy this. Yeah. You know, and, and you’ve gotta be careful.
I another one of those, the water pipes broke and the lady, uh, tried to get her insurance to pay for
him, but it was too small that deduction. So I was like, okay, well if we can get
more information about that, that’s, that’s probably okay because if
it’s too small for the insurance, the property damage probably
wasn’t that big of a deal. But there’s a wealth of information
in those servicing notes, like you said there. Yeah, I mean, that’s of one of the learnings is you
become an investor of things to look at, you know? Mmm. Because it’s not, not an obvious thing for a lot of people
to think about looking at those notes. You won’t always get them too,
they won’t always volunteer. And that’s why you want to ask for them. Yeah, exactly. Exactly.
So, you know, there’s, there’s a lot of things, you know,
due diligence is, is uh, you know, it’s King as far as making hits. And it can be very expansive. Like
you think, Oh, you look up the O&E, you make sure the property is still
there, you see how much it’s worth. Those are the high points like
servicing notes. That’s a, that’s a smaller detail thing that that
can be really helpful looking at the pay histories. Um, there’s,
there can be a lot to it. Yeah. Yeah. So, you know, doing that part of their
diligence and, you know, trying to bid a competitive
price, um, is, you know, one of, one of the challenges. And then the
last one, and I think you had a, uh, a good discussion, you know, with
Dickie Baldwin earlier about, you know, the services he provides with regarding
to the service providers he has in his network, you know, throughout the
United States as far as, you know, all kinds of things that you need.
And you know, I know Dickie well, he just lives down the road from here. Oh, that’s funny. Yeah, he’s a good guy. But he’s, you know, he’s kind of my go to guy when I don’t
know somebody in a particular area, you know, he hooks you up
and he does a good job. Dickie and I talk about it in that, and I’m not joking when I say Dickie
probably saved my business because the worst, most frustrating part for me was getting
someone to drive by the property and give me a no BS estimate of, of the repairs and the
condition and what it’s worth. Because realtors generally don’t want
to do it for free and they want the listing. But a lot of these properties aren’t
worth that much if they were to list them. So, even though I was offering them like
50 bucks to do it, they would flake. You couldn’t get them on the phone. Um,
Dickie takes care of all of that. So, so yeah, like you’re saying, you’re, I, I, I truly use Dickie for a
lot of stuff and he’s great. And that’s the other part about being
investors is networking with other investors. See who’s good, who knows
who for what you need. Um, and, and trying to, you know, build networks in certain cities
if you like certain cities. Um, just because that, that
can be the hardest part, the management of some of this basic
due diligence stuff can kill you. Especially since when you get the bid, most of the time you have five to
seven business days if nothing’s wrong, to close. And telling them that it took you four
days to finally get someone on the phone to drive by the property
isn’t a valid excuse. Right, right. Oh that’s
a, that’s definitely, you know, an issue. It’s so it’s,
it’s good to good to have him as a, as a resource. Yeah. Referrals are awesome. You’ll
need them for everywhere. And cause you don’t want
to just be guessing when
you’re about to drop hundreds of dollars every month or
thousands of dollars in services. Right, right. And the other thing
you mentioned just now, you know, um, I, I’d like to highlight is
extremely important or it’s
been really beneficial to me is once you kind of get
into the, the Note Network and you know, and you get to know other
note investors and they get to know you, you know, um, I’ve,
I’ve found by and large, at least all the people I’ve dealt with
have been really good people to deal with. They’re very helpful and
forthright. You know, if you need some, some help in a certain area
with a servicer or you know, or if you have a question of something
that’s kind of really weird, you know, they may have come across it already
and they can help you out. And it’s, it’s a, it’s really a good
network. I’ve enjoyed being, you know being part of and knowing all the rest of the note investors
and talking to them and you know, we meet up at different events and
those kinds of things. And so you know, you, you can’t put a value
on that, but if it’s, it’s really valuable to have all those
contacts and be a part of that network. For sure. And what he, I would say
is as compared to most investing, especially real estate investing note,
investors generally aren’t sharks. We’re not eating our young
and they’re much more helpful. There are generally plenty
of deals out there. Um, you’re going to have a lot less people
trying to screw you over and take a deal out from underneath you in. If they do, it’s a small community and those
people generally don’t last long. So, um, you know, you’ll hear it referred
to as coopertition and things like that. So, you know, we’re trying
to compete a little bit. Everyone wants to do better
than the next guy. Um, but you can get people online
information that you’ve never met before. Give him a call, tell him who you are and they can probably
have at least 30 minutes for you and give you a referral. So it’s a great,
other Note Investors are a great resource. Don’t, don’t hesitate
to reach out to them. Absolutely. It’s nice to kind of have,
have that resource available to you. For sure. I mean, we’ve, we’ve
talked before where we’ve, we’ve bounced stuff off, like I’ve gone to conventions or
something that you didn’t and vice versa. And we’ll share notes and talk about
topics, see what’s new and upcoming. Um, because like I said, there’s, there’s
plenty of room for all of us to succeed. Um, you know, if one
of us was a, you know, trying to be a billionaire hedge
fund, then yeah, maybe I, I wouldn’t, they wouldn’t take the other person’s
phone call, but that’s not who we are. Uh, and there’s, there’s plenty for everyone. Yeah, absolutely. So at that, that’s one of the things I enjoy
about investing, you know, isn’t, did they have that resource? Oh yeah. *stumbles over words* Or if I can speak,
the camaraderie is great. You know, there’s a lot of people that
you can be friends with, bounce ideas off if you’re struggling
with someone. Um, you know, I’m sure you can find someone to either
be a shoulder to cry on or they can help you with that problem cause they’ve
probably gone through it. Um, people are very giving with their time
generally the Note community. Yeah. Yeah. And you know, if there are some, some
Rascals going through, you know, you, like you said, it doesn’t take long
for their, their name to come up. And you know, we get circulated
pretty quick about, you know, watch out for this person or
watch out for that, you know. If you’re going to invest with someone, don’t hesitate to ask someone else what
they’ve heard anything or put it on some forums. Um, you know, I don’t spend
a ton of time on bigger pockets, but you can generally see people on
there and ask them if they’ve worked with anyone, um, or, or ask the person that you’re
looking to partner with or whatever, if they have any referrals. Um, you’ve
talked to a few people for me. Uh, you know, I’d be happy to
do the same for you. Um, cause that that’s the biggest
thing is, you know, everyone’s, everyone gets a enamored with the, um,
how much money you know, you can make. Cause you look at non-performing,
you see that huge percentage. Find someone that you
like that’s trustworthy, that that’ll spend time with you. Um, because it’s going to be better if even
if you were to make a little bit less money, you know that you’re probably going to
be taken care of where someone else might promise you the moon and
you don’t get taken care of. So trust is still number one in
reputation. Yeah, yeah, sure. Exactly. Exactly. And that’s the thing. Don’t be afraid to necessarily invest
with someone that’s still pretty new. Just make sure that if they are
new, that they’re telling you that, that they’re not, Oh yeah, I’ve
done a million deals. Well, you’ve only been in
business for three months. I don’t think you’ve done a
million deals. It’s just, you know, that I do believe a little bit in the
fake it till you make it. But that’s, that’s one thing as opposed to just
straight out lying about how big you are. So just be careful, no matter what type of investing you’re
going to do before you partner with someone, maybe do a background check. Yeah, yeah. Find out a little bit about
them, that kind of stuff. It’s fun. It’s, you know, it’s, it’s work.
You know, you, you, you, you know, if you want to do it right, you’ve
got to spend the time to, you know, do your due diligence and you
know, do all the research. And that’s why I tell people if you want to
make money and notes and not work that much, then you either need to find someone else
to partner with or you need to only do performing notes. Yeah. You’ll, you’ll still have due
diligence on the front end, but hopefully you’re just
cashing checks afterwards. If you want to do nonperforming notes,
it’s going to be a business. Yeah. I mean if you want to do
more than just one or two. So you either need to figure out that
you want to do it as a business or you need to find someone else to handle
that part for you. Cause it’s, there’s a lot to know. It’s always
changing. And there’s a lot of work. Yeah, exactly. Exactly. I’m sorry folks. I wish it was a free money printing
machine with only like that and unfortunately so many people that are
trying to get ahead in life through whatever type of investing, that’s
what you’re, Oh, this is easy. Option trading is easy. You
know, real estate is easy. It’s, it’s generally not. I mean, granted
in a, in a big bull market, you know, generally it’s going to be harder for
you to mess up and lose money, but it’s, it’s still a lot of work and
especially when the market turns. Anyway. That’s, that’s kinda my, you know, evolution into notes and, you know, the
things that I find that are, you know, kinda challenging. Um, but I, it, I feel firstly I feel
a lot better, you know, with this investment then, you know, stocks because I don’t
have any control over it. Yep. And you know, the extra work
that you have to do with rentals. Um, yeah, I mean the work with rentals
and just the liability, it seems like with notes there’s
always some type of liability. But it seems like, you know, as long as you’re getting
the proper insurance and you
know, assuming the notes, legal and everything, you can really limit the liability
and the phone calls and headaches. It’s just a different thing
you’re going to spend, how many hours are you
going to spend in Excel? You’re going to spend
hundreds and, and you know, on the internet doing research and
going through a County websites. So it just depends on what you want
to do. If you’d rather swing a hammer, then you’d probably want
to go do fix and flips. If you’re willing to get into the small
details and the boring minutia then, then I’d say do notes. Part
of that is depending on, on who you are and what you like to
do as a person. Um, yeah, it, it’s, it’s fun. It keeps you
busy. Um, you know, granted, like with any business or investments, you’ll probably have a sleepless night
here or there or something’s going weird or, or you hear about some
crazy law being changed, like the laws up in
Ohio changing with CFDs. It doesn’t look like it’s going to happen.
But it could. And so it’s just like, well, geez, what am I being exposed
to by these politicians? You know, they think I’m a greedy, uh, investor and I’m just trying to make a
penny here for myself and my partners or whoever, you know, there’s,
there’s always something. But, um, again, that’s what you reach out to
the other investors and you know, or other professionals and they’ll give
you a good idea of what the market’s doing. And it’s like, look, it’s
okay. You know, and the big, and I, I try to remember this, it’s
easier said than done, but the, the best thing you can do after a bad
beat or a bad investment is go get a good investment. That’s, that’s the
quickest way to get over it. It’s much easier said than
done, but it’s like, man, man, this one’s going to be a black eye.
It’s probably going to lose money. It’s like, you know, this
is someone else’s, you know, retirement or whatever money.
It’s like, well, you know, can I come out of pocket to help? You
know, what do I do? It’s just like, well, the easiest thing to do is to figure
out how you cut your loss. It’s there. Go out and get a winner
and then, you know, do what you can to make things
right there. It’s, it’s, but yeah, it’s sometimes you gotta be cold blooded.
It just, it is what it is folks. It’s, it can be a little bit
of a roller coaster. Oh yeah, absolutely. You know,
there’s good days and bad days. Well that, and the other thing too is
just getting, getting stuff systemized, you know, have routines and that’ll
help as well. So then they’re like, it’s like, you know, even if you are
distracted thinking about something, um, you know, it’s like, Oh well I can
push myself into this grunt work. This is a routine, you know,
stuff’s still getting done. Right. Right. And that’s what you’ve
already gone through it and not, you know, I’m going through it as well as, you know, putting processes and systems in
place to, when you get multiple, now you’ve got, you know, you’ve
got a handful it’s not a big deal. But you know, once you, for
me, I want you get over 20. Yeah. It seems like the 20 to two dozen
where people start hitting that wall. Right, right. So, you know,
you gotta put them in, in place so you don’t lose track of them. Do you have an assistant yet? No, I’m actually in the
process of looking for one. Cool. I’ve got a lady that, uh, she actually lives up in Denver and
she’s been helping me on a few things. I’m just starting to get her trained on
some other stuff to really come over in a big way. Um, she, she’s
been absolutely great, probably see more of her soon. Um, especially for me since I’m trying to
eventually transition to full time, but I’ve still got a full time job
with the government, so there’s only, there’s only so many hours in the day, even though I have a great job to where
I can do some of the work at work while I’m on my breaks and things like that.
Um, you know, it’s, it’s, you know, it’s tough and you know, at some point
you’d have to step back and that’s hard. Like getting, uh, getting her trained
on due diligence was pretty easy, but me stepping back and just
trusting in her to do it, that’s hard. Yeah. Yeah. That’s, that’s, uh, you know, it takes a little bit
of time to get somebody, I think it’s going to take some
time to get somebody that you know, you’re comfortable with. If they can
go through the due diligence process, you know. Due diligence, you know, um, just whatever it could be, you know, you could just have them go on LinkedIn
or manage your emails and other things like that to start with. But
at some point, like I said, there’s only so many hours in the
day, so if you want to expand, you eventually got to step back and
delegate a little bit. And it’s, at least for me, it’s been much easier
said than done. Cause I, you know, I, you know, I, I guess I should make sense
since I’m an air traffic controller, “controller” is in my title.
Um, but, uh, you know, it’s, it’s tough. It’s, it’s like a trust in
someone with your kid for the first time, you know, is it, is it going to be
okay? Yeah, it’s going to be okay. Yeah. Well, you know, one of the areas I struggle with
besides these challenges is just, um, marketing. Yep. I’m a corporate
finance guy by background, so marketing is not, it doesn’t come
naturally talk to me, you know, and so. Well, and it’s not just that
we’ve talked about it before, is there’s a lot of people
that are doing it incorrectly, not unethically, not immorally, but technically not to the letter of
the law because there are SEC guidelines and you gotta be very careful how
you, how you market for stuff. So unless you’re only ever going to take
accredited investors or do some type of fund-raise with an SEC attorney,
you gotta be really, really careful, um, about how you do it,
you know, at that point, then basically what you’re going to do
is you’re only going to take friends, family, and acquaintances. And so you kind of have to
establish those relationships first. And the other thing is too, is just
like, “Hey, give me your money. I want to go invest it.” You’re not gonna
that’s not gonna happen too many times folks. You’re going to get people, you’re really going to piss people off
because it’s really annoying. And uh, you know, that’s, that’s why I’ve had decent luck just
trying to provide people with information on what I do. And, you know, if they
have questions they’ll come to me. And that seems to be what
works for me. At least for now. Yeah. Well on your podcast that you’re
doing I think is, is good as well. You know, the, you know,
the, the information I think
is what’s beneficial, um, and helpful. Yeah. Cause it’s, it’s a
completely foreign concept. There aren’t TV shows of this.
Everyone knows about house you know, flipping and rentals. You know, no
one knows what a real estate note is. So there’s a lot of education.
It’s a different mindset. Um, but it is fun and so it just takes a
while. But that’s the thing though, don’t, you know, doing the right thing
usually does take a while. It just, you know, you’ll, you’ll every now and
then you’ll hear about these, you know, flash in the pans where people
overnight make a bunch of money, but then they’re probably
not doing something right. Or maybe they had a bunch
to start with. And you know, everyone’s situation’s a little different. Yeah. Yeah. And I don’t know, just
my, my personal philosophy is I’m, I’m only going to do it the right way. Well, the other thing is I hate asking
people for money. I really do. Like, I just, Hey, here’s what I
do. If you’re interested, this is maybe what’s available. But
yeah, just like, Hey, I’ve got this deal. I want you to come get me. Like
that’s, I don’t like being solicited. And so I hate soliciting
other people like that. Yeah. I’m, I’m, I’m the same way,
but that’s okay. I’ve, you know, for me, you know, I think it’s going
to be over time is as you know, more people learn and hear about you and
you know what you do and that kind of stuff. You know, it’s not like something
that, you know, you should expect, you know, tons of people just banging
at your door, you know, first day out. Well, the other thing is, is, you know, if you’re desperate for money now
it’s got to come off on people. And if you do invest, like
you’re going to get in bad deals, like don’t be expecting your real estate
note business to be paying for your lifestyle quickly. I think unless you already had a bunch
of money or a new bunch of money to invest, and especially if you
want your business to grow, like what I’ve been doing is, you
know, what profits I have been seen, I just reinvested in the business.
You know, I live off of my, my W2 and then I tried to
reinvest this for the long term. That’s nice. Yeah. I mean it’s, it’s, it’s
building slowly. It snowballs. So you just gotta be a little
patient and uh, but that, that’s how it should be with just
about any business. Right. Yeah. No, that’s true. That’s true. So
what are, what are your, uh, plans for this year for 2020?
What have you got going on? Do you have any goals set up for
what you want to do or anything else? Yeah, I do. Um, you know, I, I wanna I want to increase
the portfolio of notes. Um, I have been doing more performing notes lately,
than non-performing. I think we just, just
about all of us have. And I think that is, and again, you know, you’ve got the magic crystal ball
and you can make lots, but you know, we hear a lot about, you know,
possible corrections in the market. Uh, I think that going down the performing
note route is one way to kind of insure yourself against any big corrections
that might happen in the market. Is it going to happen when it’s
going to happen? Personally, I think it’s going to happen. I just
don’t know when I think it’s going to be, I don’t know. Yeah. Are going to be six
months from now or 24. So, um, you know, I’ve been focusing
more on, I do have some non-performing, but I’ve been focusing on
performing. Um, and I’m, I’m looking at doing partials that we
talked about earlier with people who are interested. Um, and that
way, you know, I can, I can sleep good at night
knowing that, you know, they’re not going to lose a lot of
money on their investment. You know, and I’ll make a little bit of money. We’ve got to kind of a hedge if you
would against any market correction. So that’s less potential profits for you, but it’s generally also significantly
less headaches and time involved, so. Right. So that’s what I’m
doing. Um, uh, you know, I, I’d like to add about
another, I don’t know, 20-25 notes to portfolio and,
um, you know, I need to get, I need to get a virtual assistant to start
helping with some of this stuff cause you know, it’s starting to
get to that, that point. Um, and I also want to probably get,
you know, some, some assistant to, to help me with some of the marketing. Yup. That’s, that’s what I started.
Uh, my assistant with. She, she handles most of my social media stuff, then slowly transitioned her to where
she’s doing due diligence with me when we, when we get to that point. And, um, yeah. So it’s nice just having
her do a couple hours of, um, social media stuff each
week. Saves me a lot of time. So now I’m able to spend more time, do the podcast or my Note Nugget In A
Minute videos or go play with my daughter. I mean, you, you’ve got
family and it’s, yeah, it’s nice to have a moment to enjoy that
with them so you’re not having to work all the time, especially through the
holidays that we just went through. You know, that’s the busy time of the
year for us, and, um, yeah. So I was, I was stupid busy there for a
while, but I was still a, you know, I was able to close on stuff
before Christmas and uh, you know, still take a day or two
here to actually, you know, spend time with my family and
watch my daughter unwrap her gifts, which is important because if you
can’t do that then why are you working yourself to death? Exactly. Exactly. That’s what
it’s all about for sure. For sure. So what, what have you got planned for
this year? What’s kind of on your list? So probably more like
you just add more. I’m, I think we did roughly 50 deals last year. I mean it was a lot and it was
really surprising to me because, um, I closed on those 10 or 11 in Jackson, Mississippi first thing last year
and then it was super quiet for five, six months almost. I
mean, it seems like, you know, you would know the same thing.
Everything was overpriced, it was garbage and it was overpriced,
couldn’t find everything. Like I said, I dropped 5,000 to 10,000 bucks on
due diligence that never panned out. So I was getting pretty, um, I guess bitter would be the polite word
to use about it. Cause it was like, you know, if everything’s dried up, how
am I supposed to do stuff? You know, I, I finally found some people that
were interested and it’s like, well, there’s no inventory. So that’s, that’s
how it was for me. It’s like, Oh, I had people interested. There was no
inventory when I had inventory. No, people were interested. And now it’s,
it’s more balanced out. But yeah, it’s, um, that was not fun. And I think that’s kind of
why I transitioned to more
performing like yourself, because if, if people are going to
charge 70 to 80% of the unpaid balance, I’ll just buy a performing
note for that same price, and I’m not having to deal with the
headaches of a non-performing note. I know people live there,
they’ve probably got insurance, hopefully the you know, the taxes and
insurance are escrowed. And so yeah, I’m not gonna make as much money, but I’m going to get a little bit money
up front to pay for the due diligence and a little, you know, a
little coin in my pocket. And then depending on
how the partial set up, I could be getting a little bit money
each month or I could be getting in in a few years. Like on these ones
that I just closed on in December, I got a little bit of money on each one
up front after I pay for my expenses and due diligence, it’s not a
lot, but it’s a, you know, a couple hundred bucks a piece, maybe a thousand and then
five ish years from now, I think I’ll be getting about 3000 a
month in cash flow off those deals. Cha-Ching! So that’s a more longterm play. It does
not help me right now. And you know, I’d like to have money right now so I
could continue to grow the business and things, but I got a little bit, but five
years from now it’s like, Oh, you know, there’s, there’s 3000 bucks coming in
that is five years off. But you know, in the scheme of things I
shouldn’t be too, too far off. And once you understand the financial
calculator and how to set these things up, you can be very flexible on what your
investor needs and then what you want. Um, so moving forward when I’ll probably do
is as opposed to giving my investor the, you know, the next hundred payments,
they’ll get the next 110 payments, but they won’t get the
entire payment each month. I’ll get $20 of that
each month or something. So I’m getting a little bit of cash flow
now as opposed to all of the cashflow several years from now. Right. And again, that just tweaks it like I could have
got all my money on the front end by charging them a higher price. Then they
get all the payments and I can do that. And so I get money now, but then compared to the amount of money
that I would’ve got in payments on the back end, it’s less total dollars because I don’t
get that interest rate working for me. So if it’s a 10% interest rate
when you’re collecting payments, you’re getting part of that interest rate. Whereas if I just sell
virtually all the payments now, I’m just getting a chunk of
cash right now. So again, it depends on what you want, need,
and what the investor needs. But the, and so it’s, it’s can be
very flexible that way. But you know, if you look at it on
that Net Present Value, you know, you could be a higher return even
though you’re taking less now. Yeah. To waiting, you know, 10 years. Exactly. Part of that too
is the velocity of capital. So if you have something that you could
take that money now and immediately roll into another investment
or it could even be, um, education as opposed to an
investment, you know, something, a skill that’ll help you close
more deals or get more deals. Now that may be better than collecting
an actual higher dollar amount over, you know, five plus years from now.
So it just, it just depends. And it can be very hard to tell which one’s
the best for you. And so it really is, it’s kinda like what I tell people.
It’s like, should I people ask, should I do performing
or nonperforming notes? It’s like you should probably do a
little bit of both. Yeah. You know, get some cash now and get some cash later. Right. Um, you know, diversification. So I think that’s so in short more deals. Hopefully we’ll get more non-performing, probably going to do more performing
notes until we can find, um, some, uh, some better non-performing stuff.
Like the best deals I got last year. I got a small pool of 11
nonperforming notes and I, and I think you’ve
probably seen that as well. That buying small pools is probably the
way we’re going to have to go if not larger pools, just because when we cherry pick against
everyone else from these same people, you’re paying almost full retail for
it and it just doesn’t make sense. Especially if you have partners or someone
else you’re having to share it with. Exactly. Exactly. But um, yeah, I think, you know, especially if you focus on performing 24
deals should be fairly easy next year. Um, is that your total number or is that
just for performing or non-performing or what are you thinking? Oh, I’m, I’m thinking probably about three quarters
of them performing and a quarter of them not performing. Okay. Eh, I think you’re probably like me or
it just depends on what’s available. You know, we can only, we
can only get so much in. Um, I think I was talking to Dan Deppen,
uh, he was talking about, you know, it’s one of those things, once you start getting where you can buy
$200,000 to two a quarter million at a time, there are a lot more providers and
more doors will open for you as far as getting better deals because now you
know, you’re not big time by any means, but you’re not that small little mom
and pop guy that’s bothering someone’s like, Oh I want to buy some
notes. And it’s like, you know, they’ll put a bid on 20 of them and
they don’t even close on one. You know, you have more of a track record and I’m
starting to see that too since I closed on quite a few last year. People take my bids a little bit more
seriously because they know that I’m going to close if they’re worth closing on. Exactly. Yeah. It’s like with anything,
um, especially, you know, real estate or any businesses, you got to build your reputation to
really kind of get critical mass going and it sucks. It’s like, cause you can’t build your reputation
until you actually close on some deals. So it’s, it’s, it’s a little
hard there in the beginning. Chicken and egg. Yeah, it is. And that’s why you just do your best to
try to follow through with everything. Right, right. So that should be,
hopefully it’ll be an interesting year. Yeah, I’m hope so. I mean like I think we all see the writing
on the wall that the economy’s going to turn. It’s just like you
said, we know winter’s coming. When are the white walkers going to
get here? We don’t know. Um, you know, is it going to be six months from now
or a year from now, two years from now. You know, it, how much is this
election going to influence it? Um, you know, it’s, it’s, it’s
tough to tell, you know, if you look at it as a whole over the U
S though mortgages are down refinancings down, we’re starting to see quite a bit
of a softening in the hot markets. Um, people are fleeing Illinois, uh,
the West coast where it’s expensive. And so I think it’s, I think
it’s a matter of time, you know, it should be pretty soon. I mean, rents in New York city have
dropped dramatically this year. And so I think the writing’s on
the wall. It’s just again, when, when’s that gonna affect us? When are we gonna be able
to buy stuff at a discount? Because the mortgage
market, you know what, what we’re doing buying notes
lags behind the economy. Cause we’ve got to wait for stuff to get
in default for at least three to four months. Right. And then, you know, generally we need a lot of stuff to be
in default to really get the good deals because that’s when banks and hedge funds
are going to be more motivated. And, um, so it’ll be interesting to see. Um, are you doing any type of other strategies
and for real estate or to acquire property? Uh, besides just notes? Um, not really. I, you know,
I’ve, I’ve done one kind of, um, one deal, basically
just being a lender on, on the house. That was
about three quarters done. And the and the builder needed funds
to finish the house and he’d run dry. That’s kind of a hard
money loan a little bit? Yeah. Yeah, a little bit of that. But that’s just something that kind
of came out of the blue that you know, I heard about and they contacted me and
I went and looked at it and it looked like a good deal. And so, you
know, I went ahead and did it. But other than that, you know,
the focus really is on the notes. Okay, cool. Well, I mean, not that
I want to make this about me, but I, a strategy that I’m doing also besides
just note investing is if you look at the numbers and the calculations, if you
can acquire properties for you know, pretty cheap, um, you can turn around and do owner
financing and make a lot of money. Um, like the, uh, the CFDs I got
in Jackson early last year, the worst thing financially for me
personally is if they keep paying because they were sold with 0%
interest at under market value. So I had a huge discount on them just to
get a yield because it’s like you sold them a 0% interest. And the reason they did that is because
they acquired these properties through cheap for like a couple thousand bucks
for their taxes. The homes were vacant, they put in a couple of thousand dollars
to make them livable and turned around and sold them. And so it’s just like,
well if I had to take these back, I would charge a 9.9% interest. I would get a down payment if I could
and then I’m going to sell them for at least market value if
not slightly above it. And I could do all of those things and
put it on a 10 to 15 year note and it would be cheaper than the
market rent in most cases. So if you can do that, you’d know you’re not going to have a
shortage of borrowers lined up to do owner, you know, owner
financing and get them in. Those yields were like 30 to 40% I
mean really nice for a performing note. Nice. So I was looking at that
and I was like, well, so how do you get properties
for cheap? You know, if we can’t find a good source of notes
for us to buy, how do we make our own? And so tax liens I think are potentially
and deeds are a decent strategy depending on where you’re at. Um,
some States and counties are better. Um, maybe see if there’s stuff that we
could get over the counter for cheap. Cause even if, even if the home
has been vacant for a long time, if you can get it for 2000 bucks
and make it livable for, you know, 10 to 20. Yeah You can market that as a handyman
special. Just make it livable. You don’t have to make it super nice
because a lot of these people that would need owner financing would be willing
to come in and do some of the work themselves. So I think that’s
an interesting way to do it. Um, and I’ll probably talk about that in
the future. Hopefully it goes well. It’s just, it’s just an idea. I’ll be interested to hear how that,
how that progresses cause there’s a, I, I’ve been looking at things, uh,
as far as auctions as well. You know, I haven’t gotten anything
or pursued them yet, but I was thinking the same
thing. You know, you can, you could get them at a decent
price and turn them around. Well Texas, you know, super desirable and so you probably have
a lot of competition there so you may have to go to some more of the tertiary
markets where you’re not going to have as much competition. So in
the smaller towns, um, yeah, cause when I started doing tax liens
and deeds and things like that, back in college, it was good for a year or two and
then everyone started doing it. The big banks came in and started
bidding everything down. So, you know, there can be quite a bit of competition.
People hear about these stories. It’s like, Oh I, I bought a really nice home that I live
in now for $3,000 worth of you know, back taxes. And it’s like, that’s,
that’s not gonna happen that often. Yeah. Unfortunately it’d be great
if it did, but it doesn’t. So I think that’s where, even
though we focus on notes, you have to be creative to get
to get notes in the future, whether that’s from other asset
managers or just getting, um, assets and then creating your own
notes. I think a few people, um, have started doing, uh, selling land that way on owner financing
and that might be an interesting thing to try. I’ve heard some of that as well, you know, and I think because I haven’t foreclosed
on on a lot of them know I haven’t done seller financing. Um, but yeah, that’s definitely one of the exxit
strategies I would pursue because I think doing the owner financing
is a, is a great, way to go. And again, if you can
get the asset for cheap. A small down payment and like a
year or two’s worth of payments, you could be financed out of position
if not before then and then it’s all profit. So I mean, it’s, it
just, you know, it just depends. If you can find a way to get the assets
for cheap and owner financing can be great. Yeah. Yeah, that’d
be done. Yeah, of course. It’s like anything you get, anything
desirable for cheap, you can make money. So that’s the hard part.
Buy low sell high thing. Hardly anyone ever gets
to do it consistently. Exactly. Well I think that’s about it. Did you have anything else
you wanted to talk about? No that covers, you know, most of
the stuff I guess on my list and um, yeah know I just want to thank
you for having me on that. That was great to to visit with you and
catch up and share a few war stories. Yeah. Yeah. No, I really appreciate
you coming on and uh, and I think, I think we covered a lot of it. I think we’ve covered just about
everything besides all the fine details of actually closing on a note. So I mean,
I hope everyone was able to keep up. If you have any questions, don’t hesitate to reach out to me
and I’ll make sure to get the Joe’s information up here for you. So if anyone has any questions
I can reach out to him. Um, Joe is pretty much like maybe we’ve always
got 30 minutes for someone just to go over things and talk and um, Oh, what events are you planning
on going to this year? So if anyone wants to
meet you at any of those? Um, I haven’t got that all
lined out yet, but I um, I definitely go to the Note Expo. Okay. And if Quest has an event, um, I’ll,
you know, I’ll be attending that. As far as the other ones, um, I
kind of need to see where they are. Basically if it’s in Texas, you’re
going to probably try to be there. Oh yeah. If it’s in Texas I’ll be there. That’s, that’s the hard
part for me is there’s, there’s real estate stuff in Colorado, but none of the note expos
or anything like that. So I have to travel for everything and
get time off of work and so it can be a bit of a pain. I tried
to, I tried to go to them. I’m going to hopefully be able to go
to Note Expo this year. We’ll see. Yeah. Yeah. That’s usually pretty
good, I’ve enjoyed that one. Cool. So, right, well I think
that’s it for this time, Joe. I really appreciate you being on
and uh, as the year progresses, we’ll probably check in with
you, see if you’ve got any, uh, assets you want to talk about
and any more black eyes. I know I’ll have one or two that I’ll
probably talk about, but I mean, that’s, that’s the thing though. It’s it, that’s where I learned the most and I
think that’s where most people were in the most. You gotta know what’s, you know, the bad because everyone talks about the
good, everyone talks about, you know, the fish that was this big that they
got away. But um, you know, they, they don’t tell you about the, the really honest bad beats
and what you learned from it. Exactly, exactly. There’s, there are
some good ones, but they’re, you know, don’t, don’t ever think
there aren’t some bad ones. They’re, they’re not all home runs folks.
Lots of base hits, but that’s okay. You can make a good living and good
retirement just off the base hits. Absolutely. Well, all right. That’s
it for this time, folks. I really appreciate you tuning
in. If you have any questions, don’t hesitate to reach out to me
and Joe and we’ll see you next time.

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