Adding Tools to Your Real Estate Toolbox 2023 with Subject-to | Real Estate Notes Show

Episode: Adding Tools to Your Real Estate Toolbox 2023 with Subject-to - Full video Dave's Goals and Plans: - Pivoted away from 15 years in notes space buying to focus on Bank originated debt and seller finance/rap note sub2 world in 2023 - Mission to connect with note creators who didn't know JKP Holdings existed or that they could sell notes legitimately - Running Advanced course in January covering non-performing calculator, due diligence, and buy box filtering - Planning live calls (midday and evening) to teach note creators what makes a note valuable and sellable to buyers - Flying to Nashville May 31st-June 1st for second annual Diversified Mortgage Expo focused on deal-making between creators and buyers Nathan's Goals and Plans: - Shocked to discover many note creators don't know note buying/selling industry exists despite being same business - Put on first DME (Diversified Mortgage Expo) in 2023 with focus on education and business transactions - Making adjustments and improvements for 2024 conference with emphasis on actual deals closing during event - Tickets now available for May 31st-June 1st Nashville event for both note buyers and originators Key Recommendations: - Note creators must understand non-performing scenarios - performing notes can default anytime due to job loss, divorce, death, etc.

- Financial calculator becomes irrelevant for non-performing notes; must understand debt, licensing, state regulations instead - Learn what note buyers actually care about: seasoning, occupancy status, LTV ratios to create maximally valuable notes - Consider creating 80/20 deals to get capital out immediately while holding second position note - Both note buyers and creators must understand the legitimate assignment and lien selling process Topics Discussed: - Subject-to acquisitions and creative financing strategies - Note valuation and what makes notes saleable - Non-performing note due diligence and risk assessment - Legitimate note assignment and lien selling processes - Connection between note creators and note buyers - Private lending and seller financing internationally Guest Insights: - Ken Rosic: 23 years investing, retired at 45 with full pension through real estate; uses subject-to and creative financing on both acquisition and disposition sides - Ken Rosic: Has done international seller financing deals in Costa Rica and Mexico, proving creative financing works globally - Jeff Kaufman: Started after reading Carlton Sheets in 1996, took action in 2015 after working unsatisfying job; been in real estate almost 8 years - SE2 Empire: Operates as creative financing company offering coaching, doing deals, acting as private lenders targeting specific niches [Music] hey everyone good afternoon I'm Dave puts from jkp Holdings and as always alongside Mr Nathan Turner how you doing how you doing good man it's that wintertime season uh kids are getting sick it's all that fun stuff and business keeps pushing along yeah so you said ski I saw skiing open up recently that's exciting skiing opened up I actually just got back last night I was in Chicago for a little over 24 hours oh hopefully it wasn't buying notes over it in Cook County it was completing a very long process on an eviction on a lady that never had permission to move in in the first place oh anyway finally happened yesterday I did a post on it some people are asking some questions so I'll give more details there but yeah it took a long time and finally yesterday we got the we got it right there the eviction order wooo yeah oh good lord exciting fun times so we've spent the 2023 year um away from what we've done for 15 years in the notes space buying it we've really focused on Bank originated debt and we made a mission in 2023 our goal to get a better standing on this seller fance but more importantly the rap note sub2 world and it's blow my mind what we've learned last year yeah it's been nuts it's I we've been shocked I think at how people in the creation part of things don't know that we're around and and I got I I guess so I just assumed because that's kind of the path that I took was I was creating first and then I started buying notes so I kind of thought that everybody would know you know we're part of the same business just different sides of it so I figured everybody would know we're here but they don't so that's been a huge part of our our message here this year yeah it's been going well but I think we still have work to do yeah absolutely and will we get into what we're going to be in 2024 but you're absolutely right we've been on a mission to connect with all these people and what the common theme is wait you can sell a note and it's blown our mind and not negative about it but it's just amazing that the idea you can sell a note legitimately this isn't back door stuff this is a leg legitimate business of selling a note to another person yeah it's what assignments and Lunes were created bank's been doing this for decades centuries right yeah so it's amazing that we' we're teaching it but we're also excited about it because those people who are riging notes in this year last year last couple years have a goal mind of information and money right and what we're Tred to do is provide the opportunity to get some of your money out of that deal yeah yeah maybe some of it maybe all of it we're more than happy to cash people out of whatever deal are in so that they can turn around do it again and just turn it around and around around we can do a ton of business together yeah we have to know that each other exists absolutely and what we've done too is for no bues just FYI in January me and Nathan rerunning our Advanced course uh which will help you build the non-performing calculator which is a huge Fe you need to understand that uh Fina calculator has its place yeah but when it goes not performing that flanche calculator could be thrown out the window because you no longer have a cash flow coming in you really have to worry about that debt licenses each state all those kind of things come into play and our Advanced course talks about due diligence building note the do the non-performing calculator um and also how to filter and build your buy box so you can look legitimate in your business yes yeah you you have to know how to do it there's both sides to this and just because he bought a performing note does not mean it's goingon to perform forever and we came up through that world so we know how that goes yeah and you have to know what to do if and when it does start going on performing yeah un fortunately we ran to a lot of people who said well we bought performing notes that's I don't have to worry about the nonperforming side and we shake our head and we appreciate your excitement for it but every note can default at any moment and it has nothing to do with anyone's control someone di divorce death anything job loss anything can happen and unless there's some kind of perfect security that the seller will give you that thing may stop performing right yeah so what we focus on too is for these people we're bringing on is we just talked about in our quote unquote Green Room is you know what creates a good note um I'll post into the chat uh we actually uh I'll be putting on together I don't know if Nathan will be part of it or not but we'll be putting on a a live call to show you guys what it takes to um sell or create a note that is has the ability to be sold at the highest dollar what is this note buyers care about in creating notes and I think for a lot of people they don't understand that and that's okay that's what we're here to help you learn so you said I think during Christmas break yeah I'm looking at run it midday for some people and an evening call for those others if you are creating notes this is really for the note creators not note buyers right this would be focused on Note creators who want to learn how to create notes that they can sell or create notes that are valuable or what is it mean to have a valuable note outside the legal side of it what numbers really come to play occupied non occupied you know do we care about seasoning all those kind of factors what is seasoning right you know creating 100% Noe or maybe you create 8020 and get all your Capital out and hold a second all those kind of little cool ways of getting the most money for your dollar for your note and what not to do right we talk about all that often this will be recorded this will be on our YouTube channel as well as on our podcast so if you missed this at all feel free to go to those two places and we get that question all the time so yeah you know what do you buy a note for what makes it a good note we get those questions all the time so that's yes yes so please there's a form on the website uh sign up I'll be notifying everyone when those dates are and working our best before we bring our guests we have one other thing we want to make sure we keep pushing out there coming back in the early summer we're all flying down to Nashville we're having a big party so Nathan share a little bit about that for those who haven't heard us before what's happening at the end of May we were so pumped so last this 2023 was was the first time that uh my wife and I put on the DME Diversified mortgage Expo and we had a blast it was a great conference uh I think it was a good balance of fun and education uh and it was just a a really great time um we're gearing up you know as well as it went there's always room for improvement and so we've made a few adjustments a few tweaks and uh we're looking forward to next year already so it's May 31st June 1st um tickets are live now if people wanted to go get a ticket now and grab it lock it in right lock it in you could do that these are for note buyers and note Originators Creator people everyone in notes should get there and one of the biggest things that I was excited about last year when he put it on was there was deals taking place and purchases being made at the conference yeah and that's a never part of it that's a big deal I I going to conferences and getting excited and all that that's great that's really fun but if business isn't coming out of it then to me that's kind of been a bit of a waste of time so that's a big focus is we're there to get deals done so come and note creators note buyers we're both sides are there uh so the money can exchange hands so let's do it absolutely well we've done enough of uh the talk let's bring in our special guests uh we are good I believe I have the names I got the names backwards I will fix that as we talk along uh but I'll let you guys introduce yourself share we'll start with uh Ken over there share a little about who you are how' you get into real estate and just what are you doing now that's a that's a long uh that's a long winded question you have there too so I'll try to abbreviate that um my name is Ken rosic I am um partner in SE two Empire so SE empire.com is our main business right now is Jeff's the founder of that he'll speak about that in a second but um so as you can tell from the title we're we're about subject two is one of our favorite acquisition strategies but we're really about creative financing uh creative Finance strategies um on the acquisition side as well as the disposition side which is where you guys come in so we thought this would be a nice yeah a nice partnership to uh talk about what we're doing on both sides of that so yeah um but a little bit about me so I've been investing in real estate for I guess what we're going into 2024 so 23 years now 2001's really when I had kind of got into real estate just by happen stance and I just kind of started acquiring properties I worked a full-time job during that time um I was in charge when I retired I was in charge of human resources for school districts here we in the St Louis metro area gotta and so uh I've been retired now for five years and real estate let me do that I retired at the age of 45 full full pension full benefits all of that and real estate was the reason I could do that so I've just kind of ramped up the real estate investing I'm I'm kind of a serial entrepreneur I have various other interests health and wellness interest too but but the main focus is real estate uh over the years we've done all kinds of things with real estate just as many other Real Estate Investors have to buy and hold rentals kind of straight rentals we're down to two of those we've kind of sold all all those off we're just down to a couple um we do uh fix and flips over the years that's kind of what got me out of the job at you know the the nino5 at age 45 was was doing flips and so now we're kind of just focused on helping other people achieve those things right that's my goal as part of se2 Empire we try to focus on the the coaching we do deals you talked about note Originators we do that we're private lenders we're kind of uh trying to do a little specific Niche and all those sorts of things um but that's just a little bit about us and I I've been doing creative stuff for gez I don't know in notes in 15 20 years now probably I I actually owned property internationally with seller financing right Costa Rica we had was it's all seller financing deal uh we're we're also buying property in in Mexico right now my wife and I and and it's again creative financing is is doing that even in Mexico even in Costa Rica so I know this stuff works like Jeff and I know this stuff works and so we're just here to help everybody achieve their dreams this is awesome awesome thank you so much Ken so Jeff how did you get started with this whole world of real estate yeah it's a it's a funny thing um my name's Jeff Kaufman by the way in case you can't can't read in case you're challenged in the uh in the uh reading Department uh no I started actually I started like a lot of people did way way back I was in the I was in the military I was in the Marine Corps and uh which by the way my hair is super super long right now way longer than I think I've ever had it since I was left the military um but no I got I started reading the old Carlton sheets back in 1996 and um you know up late one night probably drank a little too much and and and ordered the uh order the old Carlton sheets package the no money down package H but I I eventually I I sheld that I just thought well this is impossible but it's one of those things that never really left my uh my conscience and uh you know fast forward almost a couple of decades I'm I'm working a job that I can't stand um and in 2015 so I've been in this for almost eight years now uh in 2015 I purchased my very first well I decided to jump back into it and I purchased my very my very first property um investment property anyway um in the latter parts of 2015 and so as The Story Goes a lot of folks have heard me tell this story but uh but it's the absolute truth when I was looking to purchase those properties I had gone through a divorce some years prior to that I had I mean when I'm telling you I had zero dollars in Saving I had no savings I just had a W2 living paycheck to paycheck even though I made good money I was still living pretty much paycheck to paycheck I think like you know a lot of W2 people do sure um but I I wanted to buy these properties and I was like how in the world am I going to you know I go to a bank I get I get a I get a loan I got to put 20% down where is this 20% gonna come so I'm freaking out you know um I I go out I put this property under contract and um I did have a coach at the time but I was just in the beginning stages of that of that mentorship and um he kept talking kept bringing up this this idea of subject two buy it subject to I didn't know I mean I didn't know the first thing about it but I knew I had to move forward so I so I ended up U kind of make a kind of wrap things up the introduction wrap this introduction up I bought my first property subject two I actually closed that property myself um because I couldn't find a title company that would close a subject two deal so uh so I actually closed that deal myself made a ton of mistakes um and in that first year I was still working at W2 but in that first year uh I was I was making six figures uh are very close to it I don't remember exactly what the salary was but I do remember I do recall in that very first year I nearly tripled my salary so from my base salary through to through these through these creative deals I I nearly tripled my my yearly salary so uh you know my wife thought I was my wife thought I was going to be in jail we went through this whole this whole ordeal where you know we thought uh quite possibly that we might do what we called a business divorce to kind of separate set she she literally thought I was going to jail so that's how I got started and then um then of course just like just like Ken mentioned you know um I I grew to love this business um and I and I love the creative financing aspect of it I love being able to look at a deal uh you know anyone can buy a cash deal but I think that really limits or it can if you don't if you really don't know what you're doing it can limit your purchasing power it can limit you uh to a very specific box and um for me I just really really love that whole uh that whole idea of getting something in my in my hands across my desk that a lot of people just maybe they couldn't do something with that and turning that into a very profitable deal and so that's that's what we do at sub to ire similar to Nathan's story right Nathan got started by doing similar stuff yeah uh creating notes selling selling proper properties on terms is what we called it at the beginning like didn't call it a no didn't even call it a mortgage we were doing it was land contracts in Ohio and we were selling houses on terms and it made a ton of mistakes but thankfully you know made out okay yeah and then it just kind of goes from there and then you kind of pick your Niche and you figure out okay well I like this and then you just kind of pursue it so that's that's what I did and then kind it found me is I like to say yeah yeah so creative financing is a very hot word right can you give an example what creative Finance really is I'll give it to Kev give it to Kev you how would you define creative financing because it seemed like everything in real estate is creative financing even if it's basic which isn't true yeah so it's one of the most misunderstood terms probably especially for new Real Estate Investors but I guess from our perspective creative financing is just figuring figuring out a deal without the need for traditional Banks or or institutional financing uh funding right so it could be a land contract on terms it could be creating a note uh we in the case of a sub two deal wrapping right you wrap the land contract or you wrap the note all those sorts of things so it's basically just figuring out it's cutting out we like to say I like to say it's cutting out the middleman right it's it's me as a buyer let's say I'm I'm the acquisition person it's me and the seller of that property figuring out the deal between us everything in between right there's no middleman there's no loan there's no none of that stuff so that's kind of how we view creative financing gotcha so when you guys talk about sub two we've learned a lot about sub two what are some of the myths or wrong things you can do with sub2 that you guys have found over the years that people are making mistakes on yeah I I I would say I'm just going to repeat one of my absolute favorite sayings and that is uh in regards to subject two you know you may sit down with a seller and you may come to an agreement that the seller will will sell you that property subject to the existing financing um but just because they will do it doesn't always mean that you should do it and so um so for us you know we realize that a lot of our deals um they're overlooked because the numbers just don't they just don't they don't look attractive to your to your standard uh your standard cash buyer um but one of the things I think that's misunderstood is everybody and this is part partially true people talk about you know you make money when you buy everybody's heard that at some point um but we we kind of don't believe that because with our strategies we do believe it don't get me wrong uh but with our but with our strategy our exit strategies um when we sell depending upon how we sell uh sell that property or for you know and in your guys's case you're going to sell a note we can get super super creative we can kind of create our own what we like to say our own little economy inside each deal yeah and so so we look at it on a deal by deal basis uh we don't have we don't put ourselves in a box and we look we we we like to look at both s both the acquisition side if maybe our terms aren't the greatest on the acquisition side we know if we have you know the right location I know all the all the uh specifics that all the boxes that you need to check on the disposition side we know that we can make a profit on on most of these deals um but again you know some deals just don't they just don't turn out they don't turn out that way some deals are just too far gone and and that's when you call your uh your short sale guy you know yeah so y can I add something there to you yeah please do Ken the sub two stuff um I guess I just like to say one one of the things in sub two that we'd like to be honest open and honest with the the seller right who's who's probably in some kind of financial distress I need to get rid of the property lost my job I have to move what divorce you mention all whatever it is right and so they're looking to to us as the buyer right the investor investor buyer coming in there to do the deal and they need to have trust with us and so we we want to be transparent we want to make sure that they understand what subject two means right because their name still staying on that underlying loan right right sure be responsible for the payments but that still a risk to them and they need to understand all that and as Jeff mentioned I think subject two is not for every property I think that's a that's a big thing that we see too you can't try to force a a square a square peg into into a round hole so to speak yeah how do you guys do your best to avoid the do on sale with Subic 2 that's one we've heard coming up it is a it is this is 100% how you how you set up the structure in the beginning this is do on sale has never been a problem for us um I've known three people in my entire life that has ever uh that have ever uh experienced something like that and it's because it's not because the banks are out scouring public records and and you know looking for uh looking for llc's which by the way uh you know Fanny actually has guidelines now as you guys may well know that that you can they accept people moving properties into llc's all day long um how we how we normally do it um in the way that we the method that we prefer is we prefer to use trust we use we use trust extensively um so it's a it's a matter of how you set that trust up initially and also there's a you know um one of the other one of the other things that we see is insurance insurance a lot of folks just don't know how to set that up correctly but what it boils down to is and you guys as node investors know this the most and that is if I'm making my payment to you 90 99% of the time you're not going to care where those that fun those funds come from nope right and so as long as that payment's made and so that's we we push that super super hard% right don't get yourself if it's if it's a deal where you even think remotely that this deal will not pay for itself or it can't afford to make those payments then we just don't do it so you mentioned like the banks are not out necessarily looking for these kind of deals however are they keeping an eye out because if they've got a loan at 3% and they could be lending it out at 8% are they kind of a little bit more aware than they were again yes this is this is this is um this has more to do with how it's how it's structured in in a trust you know and and you know they could go out and they could scour the uh scour the public records for for trust recordings and they could you know I'm sure they could go out and and take take a bunch of those to court and um you know and probably win but it's kind of um how do I want to say this it's a little it's it's kind of protecting it's building it a structure that's going to protect you from that in the future just by how you set it up on the front end on the acquisition side um and so the the with the extensive use of trust uh it becomes it becomes it doesn't put those red flags up like like a lot of these other uh strategies might yeah so all about doing it right in the beginning that's what it's all about one of the things we found uh in the beginning of the year I'm curious how you guys teach um your students who does your servicing for your notes do you self-service do you use a licensed servicer using software or you using something else so generally speaking um in order and Ken I'm I'm sorry I'm just kind of but generally speaking um we we we really like to use on the disposition side we really like to use land contracts okay and so um generally speaking if if our seller is really concerned about that payment being made we will hire a note Servicing Company um we just went through one byi is who we went through used Evergreen before we've used Madison management before so it just depends it depends on how comfortable our seller is with uh with making sure that that payment's made um but for the most part we we either it's kind of optional it's not it's not a standard and that's what we teach is if the deal if if the deal can uh support you self-servicing it if you're not soig that you can selfservice then then go ahead and do that otherwise let's hire a a service one of the cool things we've learned is that and another thing I would add into your contracts for those who follow you is putting that servicing fee as a borrower expense right because that makes us as no buyer a whole lot easier to buy for a little bit higher if that payment is $300 a month and I have to pay $20 out a month that's a little bit out of my paycheck which means my bid has to be a little higher or a little lower to deal with that $20 for 180 months right so yeah I would ideally put that in the buyer side of it um Nathan's more comfortable with land contracts than I am um and it's a preference right but I understand why you guys do it in a land contract versus a note mortgage because technically then the Deeds Changing Hands again which makes a little bit more convoluted um but it's good to see you guys are open to that servicing mentality yeah and actually we're we're going through this right now in fact Ken and I both went to court yesterday yeah and it's on it's on an eviction on a land contract and the fact is you know we have it's much easier to get someone out of a property on off of a land contract yeah yeah than it is to and cheaper yes than it is to foreclose so where was the property at it's in Illinois Illinois just like yes your your the the Chicago yeah we're talking Chicago story was near and dear to our hearts yeah yeah just yesterday the one thing I'd be careful of our debt licenses right um in technically in Illinois debt license is a requirement um you can look up all the penalties all stuff but there are certain states that require ownership if you have a debt and you're collecting on a debt you're supposed to be having a debt license in your name um I won't get into what happens if not or whatever but just for people listening and that's a certain thing I won't buy in Illinois because I don't want to get the license plus deal Cook County is too long of a time frame for anything right but there States like Georgia where it's a 90day foreclosure but it requires a debt license unless you're buying your personal name well then go get the dead license it makes sense right that kind of stuff makes a lot of sense for a lot of us to talk about um when we talk with you guys regarding you know these WAP notes how do you lay it out to that original borrower that may want to look for a house a year two years from now how do you structure that conversation Ken how do you deal with the borrower who's like hey you're P my payment for me but I want to go buy a house three years from now yeah and their debts wrapped up so uh so that has a lot of layers to it that particular conversation so so usually right the seller is distressed in some way and so the likelihood that they're going to be in a position to actually go and get a traditional institutional mortgage and qualify again in 12 to 24 to 36 months is probably pretty low uh so I I think it's some education again being transparent with the seller some education on what the actual situation is you know we're going to take this not we're going to take this property subject too but we're going to pay your $30,000 interviewers to do that right and so that's going to affect your ability to go out there in 24 to 36 months and do anything so I think that's the first piece of it right the seller education and then the the second piece of it is we uh you you know they're within 12 after 12 months after some seasoning right they can then discount some up to 50% or if not all of that um that loan if they can prove someone else is making the payments for them and so we provide that we provide that information to and we actually just did this in that that same property we're talking about in Illinois we provided a note because they wanted to go out and and buy a different property that we were responsible for the payments the payments have been made by us for x amount of time and then they were able to get approved under that lender now that doesn't work for everybody but we certainly do that uh say you know that we've taken the obligation for those payments and it shouldn't count against them or not fully count against them when they're trying to qualify again um that and we also try to uh you know we could so we take over a subject two no and it might be let's say it's 5 years in so got 25 years left on the term like the likelihood that we're going to make 25 more years of payments on that is pretty slim yes right like we're GNA get refinanced by our third party buyer that we bring in right we're g to get refinanced out in three or four or five years right whatever term we put into the land contracts right we we like to do that in a certain amount of time they're going to Bloon us out refi us out and then we're going to get you know the final payment that third piece of the payment on a sub two deal on the backside so I I think it's just education and letting them know like here's our plan like there's no guarantee yet you're correct we might make payments for another 25 years but the likelihood of that's probably pretty slim yeah absolutely especially where the rates are where that right we expect them to go down a little bit um in this world so when we're doing this kind of stuff you know one of the things that seems to be a misconception is idea that Dodd Frank comeing in play right and people seem to not understand what do Frank did the in the whole world how do you guys make sure that the people who are following you follow that guideline of making sure that if it is an owner occupant that they're following armls rules and um you know those kind of things what do you guys do Jeff to make sure that that happens well it's uh again this is it's a lot of h a lot of ifs here but um yeah but number one that's another reason why we we love land contracts because these are these are non-qualified loans and and you guys you guys' note guys have probably read this before uh but if you if you read through dodf Frank which admittedly it's 2,000 pages long like but I will say uh on the land contract side you know it is an offer to extend credit but they're non-qualified loans and if you look at dodf Frank they are so so vague on um I forget the exact wording but it's something along the lines of uh um uh you the the ability to repay has to be a reasonable ability to repay something I'm I'm paraphrasing here uh so that's yet another reason why we love land contracts so much because because dodf Frank doesn't it still comes into play but it's not it's nowhere near stringent however if we are going to uh if we're going to wrap on a note or if we're going to sell a note um that's fully underwritten by an rmo and um and you know and that's how that's how we're going to comply with God Frank yeah absolutely that's a huge thing yeah yeah and who are you guys currently using for underwriting if you when you need to do it do you use like call the underwriter using you know who you guys have you used in the past do you have anyone particular you guys used to do your underwriting and your your originations no it's really kind of a uh it's really kind of putting a Facebook post out there hey who's Who's the who who are you guys using for uh as an ralo at this point uh but I don't have anyone really particularly in my Pock maybe Ken does I I don't I don't have anyone in my pocket no we don't have any set one it's just on an as needed basis kind of depending on you know where the property is and who's the recommended people in the area absolutely so we're we have a list of of people who are nationwide we talk to them regularly so if you ever run into the problem guys reach out to us we can give you um understand that there's people who can do underwriting which is just the math part of it they can do Nationwide it's the origination that's more State specific and Licensing um and we're in our private weekly group we actually be going with an arm alow talk about who can or can't originate we're finding out some states don't even allow attorneys to originate documents so it's interesting to hear about right because we think attorneys do almost anything they want at least they do too right sorry Aaron whoever is listening but that's the idea is that we got make sure that the origination is correct because just putting a document together we've talked to people who literally put a document together at like a diner and sign off and do it and it's like you can get yourself in trouble and we don't want that we want to buy those notes and that's the second half this conversation me and Nathan are going to be going through some of the scenarios that make these notes valuable so hopefully those who are following you stay stuned in here for a few minutes because we're going to talk about what we use to make your note more valuable what do we care about what are the things we're looking at what are we don't care about things like that yep absolutely so Kim with the sub2 world have you had any borrowers or people who are going to borrow from you have any kind of common questions or issues or concerns that seem to be repetitive that the either the original borrower goes I don't understand this or the the past borrower has a problem that there's an underlying borrower anything commonly that comes up um really what we we've kind of already addressed the from the seller perspective especially if it's a sub two deal is c can I go you're gonna be making my payments can I go out 12 months from now and get another loan like what's the likelihood of all that so I think that's a common one uh another common one too yeah is is what as I mentioned before is I'm staying you know that seller is staying on the loan the underlying loan right the the deed is changing into the trust as Jeff mentioned we use a trust structure right and so then the beneficiaries of the trust then become us right or our LLC and so we just want to make sure that they understand what's happening there from a title perspective right they just need to understand that and then they need to understand that they are in a worst case scenario still obligated to that loan if we can't make the there there's never a time when we've not made our payments right if we say we're going to take over a loan we take that very seriously right that's our respons possibility to do that because they're trusting us with that and so we just need to make sure that they they understand though that that if everything goes sideways right sometimes goes sideways like we can just be honest about that right things go side of course and they just so we want to just make sure that they understand what that in a very worst case scenario looks like and I think sometimes they don't think about that worst case scenario not to scare them but just to say okay if a b and c happens we're going to do X Y and Z to try to help help mitigate that like for instance what if the do on sale Clause gets yep you know gu what are we G to do well we have a plan for that like yeah we could just refinance we pay it off we we have enough relationships with people like you and other F like if we had to close in seven days and cash something out just because we had to we could yep right and so we try to teach that like what's the worst case scenario but here's what's likely to happen based on our don't be afraid of the worst case scenario because there are options be aware but not afraid y yes and here's what we're gonna do and 100% disclosure at all times I mean I mean I I can only I can speak to that because I you know I I have had some uh I had one instance in the past I thought I'd be a wiseacre and uh you know I had I had a property I bought subject two and um I found I had a buyer for it immediately right away I was just going to wholesale this deal to him which I would never recommend men you wholesale a subject two deal these days never ever do it it's super super dangerous um but I thought I would you know the somehow I the dates the dates are kind of a little bit mixed up because this was a long time ago but you know I had a buyer and I was just expecting that buyer to come in and pay off all that that whole underlying loan I was like well cool I just won't I just won't even bother setting this up with a mortgage with the with the lender I I won't make the payment I'll just let the buyer pay it off and uh and my buyer backed out literally at the closing table so I was late on my very F the very first payment on that property was late and not that it was not that it damaged uh this the seller's credit or anything like that uh but that seller gave me hell I in fact probably up until about a year ago was the last time I heard from that seller I mean she was pissed would be too and yeah she had every right she had every right to be pissed and so uh so that is that is just one of many Lessons Learned in this crazy business you know and uh you know we learn mistakes we we've made mistakes with people it's just about making it right as best we can it's a relationship Communication business yep so one of the things we we were Tau before about is this idea of creating a sellable valuable Noe one thing we we stress upon this 2023 season is we don't understand why people are creating 5% notes yeah you have a house house that the borrower cannot go get a loan that's why they're buying it from you most likely and you're creating a note that's less than the bank the reason they not going to the bank is because I can't for whatever reason typically why are we seeing people create notes at five or six% I saw the day someone posted they had 5.5 and dis closed it I don't get that maybe just don't understand would you guys ever create a note today that and typically the reason is well the borrower can't afford a higher interest rate and my thought is then if that's the case the borrower is not for you yeah no have you guys Canen have you ever created a note at 5% in today's world so so my and Jeff will have a little bit different opinion about this probably um so one of one of the rules that that we do or one of the things to do we try to structure the end payment right the end payment so that it's the same the kind of the same level as rent would be right okay so then the question is is what does that mean in the terms and so a lot of times we back into what that interest rate might be which is which is a reason why it might come out to be five and a half six percent But to answer your question from my perspective now given that the interest rates are eight% half% now my answer would be no I would not go lower than a than a bank rate but sometimes we structure the deal on the land contract based on what that payment can be right what what can the payment be and it just happens to come out to be 6% or six and a half percent or 7% or whatever um I'll leave Jeff to do one of one of his rules about pigs and Hogs right we're not that far off man we're not but that's but but yes you are correct speaking we would recommend that we don't go lower than the bank rate yeah uh for for sure and that right if if the people can't can't make that payment then we just need to find a different buyer yeah and we'll talk about why for us note buyers that hurts our deal in a minute for those are watching we're gonna talk about why that if you ever want to sell a note why that hurts go ahead Jee what's your opinion on today creating 5% notes I think it's uh I think it's fairly widely accepted that the the credit challenged are going to get they're going to get a higher rate so I I have no problem at all um you know being in the I mean definitely within the Usery Usery laws within that um but I also do have this thing and I totally agree with Kim like where we like to be with with our rates and depending upon the term we like to I like to come in what what makes owning a home attractive to a lot of people um looking for a home are are you know I'm paying let's say let's say the rent is $1,500 I'm paying $1,500 in rent well a lot of times especially prior to this these recent rate hikes a lot of people would get into look for a home just because it's cheaper to own a home so yes my and and you know you've got this as long as you're staying in that that large pull of buyers and you can what I like to do is I like to come in just below where those rents are yeah and if I if I can nail that I don't really care what the interest rate is as long as it's you know as long as it's not something that's super super uh you guys are making this spread on the fact that you owe X dollar and you're paying that xll a month and you're collecting X doll over here so if you have a 3% note you can give a 5% note you're making a 2% spread so it doesn't really affect you at all just just to be fair we I've never ever written a I've never written terms at 5% ever like yes we not so but I but I am negotiable depending upon what the location will support what you know the geography of the deal you got to be mindful of that you got to be mindful if you're going to go out and sell a property and expect to have a good borrower they have to you know they're not stupid they're going to go out and look they're going to go out and look and see you know what rents are available and if it's more affordable for them to rent why wouldn't they just rent I mean and yeah some people are are a little less shortsighted than that but you know generally speaking that's that's why people buy homes yeah than the Equity Building part oftion to yeah they're definitely just just looking at the monthly payment and that I totally agree that's what I was doing way back when is we look at Market rent and then structure something very close to that whether just over just under right at but something very close to Market rent um going forward though like Dave says we're we're after yield get your pencils out yeah here we go the higher you know the higher you can put that interest rate and still making an affordable payment that's what we're looking for absolutely so rather you sit there and say listen let's make this a 10 and change the term yeah right right so I we have in the flanch of calculator for you guys we have five numbers in matter the balloom we throw out the window we don't need it right we have the term we have the payment per month we have the interest rate and your original balance if we can sit there and say we have a fix dat number on the the payment per month we got that and for those who listening who not notice we're talking about p&i principal interest Pi is a different animal because we don't care about tax insurance p& is what gets affected by the interest rate we don't get to collect the tax and insurance so that's that's not part return part of the equation yeah right so we have a situation where we are collecting we have a you have a monthly payment you have a uh original balance which you're selling the property after your down payment right so you have your original start dealt and then you have other numbers you can play with so interest rate is the last thing we're trying to figure out so what I would be doing is backing in and saying okay what term should I get it to equal 10% return right or 9.9 whatever it is solve for the n in our fler calculators and you'll get a better situation the reason is is that just like in a savings account your bank account gives you 5% or 6% right if I go get my five and I want to buy a note I don't want to make a 5% return I want to get higher and right now raising capital or capital is not going to be at four we need to be double digit returns because Capital today is really expensive eight nine 10 11% so we need to beat that number to make our money right and most people who may have their own Capital say well I don't want to go into a note getting a 6% even if it's my own Capital because I might as well just go buy a CD at five and a half yeah so the idea is that if you can change it and make the interest rate a higher number if we're trying to buy at a 12 interest rate a 12 yield right flat and we'll get into partials is that we need we have a yield chart that kind of shows you what the expected discount is on anything if it's written at eight or five or four what is the discount expected if we're looking for 12 or if we're look for a 13 and you'll see that if you're runting at a five and you want to say you want 12 you're looking at the fact that I'm going to make a probably 40% of balance thing we never buy a percent of upb but we're just using for a sample the fact that because the interest rate is so low we have to bid our number way down and give you such a discount to get it back up to toal 12 because that payment per month and our purchase price result in so we need to get that payment higher or to term lower we need our money back faster so that's why interest rate is such a huge deal the interestate in term drive all our numbers the lower the term or the higher the interest rate Factor one and two right you can have a a 9% interest rate but the problem is if I'm looking for a 10 I'm gonna have to give you a discount so I'm gonna on the side note I'm gonna bring up my chart and I'll give you some actual um examples if you wrote a loan at say at 8% and we're looking for a 12 360 months we're looking at 71% on a $100,000 we buy a $100,000 note for $71,000 if you were an 8% note $100,000 for 360 months $71,000 we would make an offer generally speaking but if you made that thing at 10 we're up to 85% because of that that number so in the class I'll be we'll be working on later December is that's one of the biggest features get that higher and then just the the term because you can play with that number to get a turn that works out and within reason of course if you're going out 40 50 years on the term yeah I was gonna say Dodd Frank might be a little might might actually come into play on something like that yeah yeah but that's that's the number one factor is what's your interest rate so that's why we're we're big promo prop proponents of like boosted up as much as you can within reason that payment has to be affordable otherwise none of it works but that's that's a big deal make sure that interest rate is nice and high I'm just running some numbers in the background to give you an example if we had a you know 1,500 a month payment right and you sold for $100,000 and we need and it loans a 10% interest rate that's 97 months right so it's easy to do if that thing is now 300,000 and you need a 1,00 month payment it doesn't work right I we get that unless you you go longer term whatever it just doesn't work so we get all that but we want to make sure that it makes sense because if you ever need to sell it you're gonna expect a huge discount if that doesn't happen right um down payment to us 10% good we don't really kind of picky on that um the one thing we be taught about in the class is seasoning which is will we table fund mean buy at the table we will but we're going to we're our rate our yield over turn is going to be really high because we have no proven track history does that make sense you guys r y absolutely more risk on that so what's your thoughts on this you know feeling about stuff how can we work together how can we yeah do a bunch of deals hey I you know I I know you guys are uh you know you're in the note World um it's actually how we can work together is uh is uh is that uh you know I'm not I'm not Ken's way more versed in in the note buying uh aspect that than I am um but man if you guys are if you guys are looking for good notes we'll have to start uh we'll have to start looking at interest rates I got I do have a question for you though yeah yeah so let's say we pick something up subject two let's say we pick it up and that note was uh the terms of that note are uh less advantageous let's say that was I don't know we bought it uh we bought it last year let's this is this is like a kind of a kind of a i this is a totally madeup scenario but that note was written last year and it was at uh you know it was at 7% okay right however that property is appreciated that property's the value of that property's gone up I don't know let's say it's been 30% which is not too far-fetched sure over the past couple years so now we've got that underlying we got that underlying um at 7% we go out we find a buyer we find that buyer at 11% as long as that note that underlying note is we can pay that off and you know I'm just these just imaginary numbers let's say that we're looking to sell uh the remainder of that or or we create two notes right so we create one for that underlying mortgage that covers that underlying mortgage and now we have this other this other one yep that that is going to um we're going to sell both of those we're going to sell both of those notes you're going to pay the underlying off now you've got this other note hanging out there um so that for you would be correct me if I'm wrong that would be a scenario that would be advantageous to you because now we've got a note that's sitting at 10% that and and it's not going to matter it's basically a wash you have a uh you have the security you have the property yep uh you have the return that you're looking for and so on 10% let's say that you you buy that at 85 and uh everybody gets paid everybody gets paid and and the underlying gets paid off everybody's happy right so then and then you're talking about having so when you sold it on WP you did it as a first and a second yeah yeah so I guess it doesn't really matter but but yeah and personally I would buy the first however I've got people that would buy the second um I was just talking well you guys can keep the second we keep it as our cash flow right yeah it's now you're out of the deal completely all your cash is out you're clean and you're collecting a second and tip that second's a little bit higher right um and even if you're even if it's two three hundred bucks a month I guess my question is what is what is what would be your uh desired spread U there well I guess you'd be paying that first off me yeah okay okay so yeah that that would make sense your hats hats here right and we spent an hour talking about the whole subject two stuff and now we're moving on to the ideaas how can we create help you guys create that note you know we you have you already found the borrower you found the seller you made all the connections now how can you make that something you can get out of if you need to or to cash flow and make some money right because you bought it a bu different discount and yeah you can create 8020 8515 but and we're going to buy 85% to make our yield and that's what comes into play here is that calculation um so Hans asked the question uh what are note buyers uh paying for cfds that are not underwritten by ralo but are seasoned and have yields of 79% so what I understand your question being yield meaning the interest rate you wrote the CD at 78 %.

um again you can use a calculator and say okay if we say we want on a cfd which is a little more risky right because it's it's not a mortgage a note what if we set it at say a 14 you can quickly figure out estimated wise that's a word what is the estimated purchase price that a note buyer would buy it at so set the calculator at 14 and say what discount is now Nathan may buy at 13 and half I may be have 14 someone else may say 17 and that's how you can kind of figure out estimated wise what we would expect to buy that note that so so the factors there are uh what's the current interest rate that's that's GNA be the number one factor number two is it's a cfd is considered a little bit more risky number three you said it didn't use an rmlo non rmlo is not going to sell for as much um y it can probably be fixed I can probably go with through and and qualify that borrow through rml however that's going to cost me time and money um and just you know Manpower having to get it done so those are the three factors that are gonna be considered when talking about what kind of discount you're going to get but there it is yeah so like you say like a 14 is probably more realistic than a 12 is what we be looking for at that point so yeah that's one of the features right it rmo cfd versus a mortgage versus a note those kind of things are coming to play and for you guys doing rap notes with an underlying I call third-party borrower I don't know what the word phrase is you're really sub toed to another loan we don't as note buyers want to buy that rap note unless we pay off the underlying lean because of the messiness and the trust and all that stuff I I haven't ran to any note buyers who are okay with doing that the other way but we want to pay it off and I know the math doesn't make sense why you paying off a 3% note it's just the legality side of thing we've had Jeff Watson on talk about it it just doesn't work for us ifone it defaults that would get really ugly and just not something we' want to De keep it clean yeah totally understand that yeah the idea is for you to be the bank and not right have to pay another bank exactly it's not even paying the bank is that we if you had a deal where you're actual the you had a hard money loan from Nathan right and you're the borrower you wrap that note and there's no I call third party borrower that I have no problem buying that note now because I know who the borrow with the original note is it's when that third party person gets pushed aside is when it gets murky right you have to do a trust and all the stuff to get around it I we don't prefer that method we'd rather you sit there and say hey I'm the borrow on this deal I owe you know 8% note to my hard money loan I created a note 11 I'd like to make sure that I can you know I have no problem buying that rap note because I know you're the unline borrower and that that they won't call the note and we have no trust issues trust being the The Entity issues those kind of things that makes sense you guys absolutely yep right and to answer could I just said to answer I think Nathan mentioned is like you know how can we help each other our communities and what we do and what you do and how to put that all together so one of the things Jeff and I like to do is we like to offer like TurnKey methods and TurnKey strategies for our people so you right are a turnkey disposition strategy right to a a large extent so I I think from a offering our community and your communities and what can what can we do I'd like to talk and we could talk more about this but uh talk more about what are you looking for you already mentioned like you're going to be doing yeah information on what what does that note need to look like or even backing it up like you're one of the few people that I've I've seen that are would are even entertain a contract for deed right a land contract actually buying that so what do those need to look like how can we TurnKey that to our community and offer structuring that so that then it's valuable to you on the disposition side whether you buy potentially right yep that's huge right fantastic Nathan comes along you guys have 10 cfds you need to buy it at and you and I would encourage you guys to create these notes to the higher industry to avoid the huge discount right if you create a cfd at nine he comes in and looks at 1415 the discounts just gets disgusting so we encourage you guys to do that you guys are doing such awesome work yeah getting a hold of a seller finding the property and then creating this borrower at the back end of it make sure the structure is legal and everything's great we're just trying to find between the the one little part of it that helps you guys dispose of it so we even get into the fact you can sell partial so if you had a situation you can sell instead of the whole note you can sell 60 months of payments right we're not going to in hypothecation but in the partial world you could sell a year payments six months of payments 10 years of payments if you have a low first balance you could do that and pay off you say Dave I owe 38 Grand on a $200,000 house at 3% could you give me 38 grand for a certain amount of payments I say great loans you pay off the first I'm cool with it yeah no problem and I get 16 months of payments at 14 slam dunk home run I'm ecstatic I'm getting my return you guys are great you guys are and after 60 months you're gonna get the cash flow for the next 30 years or whatever long it is so we want make be more in Dave's Department I'll I'll look at the cfds Dave gonna look at the partials yeah we got yeah well there's a there's a second benefit there I mean that uh you know you're looking at cfds Dave's looking at at notes and partials then uh then there's yet another opportunity uh for us to maybe maybe take the dive into into more fully underwritten uh I I won't say fully underwritten that's the wrong wrong term but uh to more qualified airtight on the qualified side versus non-qualified loans yeah yeah airtight notes and contracts for Deeds yeah yeah awesome very good guys so we have our our before we go into the afterhour party with you guys and we disconnect from the Live Crew we K yeah we need your brainiacs your knowledge your experience go ahead Nathan yeah so I mean you guys can you've been around now for a long or a little while now um you've seen some stuff I get the feeling that sub2 and and all the creative Finance is growing um and it's becoming more mainstream for lack of a better term uh but we're seeing more of it that more than we did a couple years ago for sure definitely what are you seeing coming up on the horizon are you are you looking at more of it coming up your way are you seeing a crash coming that's gonna contribute to your business or our business or what do you see coming down the pipe well I mean go first okay good go for six months a year no good Jeff six months a year from now maybe two years what are you seeing well I I'm I'm a kind of an outlier because I I started doing this you know a long time ago when uh when it wasn't popular and so one of the things I I continually tell people is that you know because you got all the gurus now all the gurus are saying you know now you know you hear them they're slamming it um you brought somebody up earlier that just recently jumped into this stuff and and I'm like in my mind I'm going okay I've been doing this this entire time yeah you can't you're not going to tell me that there isn't a best time to at least understand the stuff and get into it because yes as I like to say anytime is a good time to understand Crea a finance particularly subject to if you know when to go out and if you know if you're looking at a mortgage that that you're thinking about taking subject two and you you see the trends you know that you know you'll get to this point where you see maybe a loan was originated in 2015 you automatically know that's something you're gonna you're you're gonna go after because you know that that interest rate is going to be stupid low so I mean I guess the answer to that question is I don't there is no you know as long as for me as long as the spread is there as long as I know I can I can do something on it and make make a spread I I don't see this I don't see this coming to an end not in my business and I would recommend that anybody out there uh looking for on the creative side never exclude uh never exclude creative financing from their strategies because it has been a total total game changer for me well said Kev what do you see what do you see the housing market and the whole world of real estate are we looking at like a 20% crash coming up or are we looking for prices say flat well that's a that's a good crystal ball type of question isn't it but F first I'd like to uh agree with Jeff like we've been doing creative financing and and subject to just being one piece of a creative financing strategy for years now right but we weren't we didn't just jump on the bandwagon so like and I think Jeff's 100% correct it's just going to continue so knowing how to do that putting the tool in your tool box right which is our whole theme today is definitely the the thing to do um I I do watch Trends and things especially here in our our Market the St Louis area um Missouri and Illinois specifically and I mean who the hell knows but but I I mean I I can't quite figure out because just when I I think I have one thing figured out then something else changes I do know this though common sense says that the pressures in the market the the housing market the high interest rates all that it can't continue without a correction agreed right so you know I I think like we need to really start preparing ourselves for what that means and how is that going to impact our business not that we have to rewrite and go back to the drawing board with what our business is or our particular real estate Niche but how can we adapt right and and and be flexible moving forward and uh what do we need to do right so if we continue this High interest rate environment obviously the seller financing stuff that that we're talking about here today primarily is going to continue right the opportunities there are going to continue to abound um we also have this mindset issue I think though with with the whatever we call them the the generation coming up right th those people that are at College age I I say that right I just turned 50 but those people that are that are college age that are coming up right just kind of have this mindset well I'll stay at home and tell whatever right I'll live in the basement or like I don't know where that mindset came from but we have to be able to adapt because there's a large number of people that are that are are going to be talking about you know am I getting married am I gonna have kids am I gonna move out am I GNA rent am I going to buy all those sorts of things we need to be prepared to to adjust and be able to help those people right we're here to help people we solve problems Jeff and I solve problems like we're pretty good at solving problems right hence the whole creative Finance Str so so we just need to figure out what are those problems to solve for people and how can that potentially benefit them and benefit us awesome inside the comment box there is a bitly link uh if you want to get a hold of Ken or Jeff use it link and you'll get all the information emailed um and it we'll go from there guys it's been a pleasure hang on for after hours but I want to thank you guys for tuning in with us and spending the afternoon or the midday with us and sharing your experience your knowledge your years of just brain power to share with you guys the time energy is is greatly appreciated and the fact that you guys are willing to be open and honest and and not close-minded and not sharing details is very appreciative we're really thankful for you joining us today yeah yeah it's been good thank you feeling is very very mutual we appreciate you guys thanks so much for having us yes absolutely well guys um hang on for after hours everyone who's listening we will see you soon our next webinar is uh December 15th we're going to be having Dave polio if you don't know he is um you'd want to you should yeah yeah he'll be talking about the market uh the status of Market of the notes space so enjoy your weekend everyone have a great time take care everyone thank you [Music] hey everyone good afternoon I'm Dave puts from jkp Holdings and as always alongside Mr Nathan Turner how you doing how you doing good man it's that wintertime season uh kids are getting sick it's all that fun stuff and business keeps pushing along yeah so you said ski I saw skiing open up recently that's exciting skiing opened up I actually just got back last night I was in Chicago for a little over 24 hours oh hopefully it wasn't buying notes over it in Cook County it was completing a very long process on an eviction on a lady that never had permission to move in in the first place oh anyway finally happened yesterday I did a post on it some people are asking some questions so I'll give more details there but yeah it took a long time and finally yesterday we got the we got it right there the eviction order wooo yeah oh good lord exciting fun times so we've spent the 2023 year um away from what we've done for 15 years in the notes space buying it we've really focused on Bank originated debt and we made a mission in 2023 our goal to get a better standing on this seller fance but more importantly the rap note sub2 world and it's blow my mind what we've learned last year yeah it's been nuts it's I we've been shocked I think at how people in the creation part of things don't know that we're around and and I got I I guess so I just assumed because that's kind of the path that I took was I was creating first and then I started buying notes so I kind of thought that everybody would know you know we're part of the same business just different sides of it so I figured everybody would know we're here but they don't so that's been a huge part of our our message here this year yeah it's been going well but I think we still have work to do yeah absolutely and will we get into what we're going to be in 2024 but you're absolutely right we've been on a mission to connect with all these people and what the common theme is wait you can sell a note and it's blown our mind and not negative about it but it's just amazing that the idea you can sell a note legitimately this isn't back door stuff this is a leg legitimate business of selling a note to another person yeah it's what assignments and Lunes were created bank's been doing this for decades centuries right yeah so it's amazing that we' we're teaching it but we're also excited about it because those people who are riging notes in this year last year last couple years have a goal mind of information and money right and what we're Tred to do is provide the opportunity to get some of your money out of that deal yeah yeah maybe some of it maybe all of it we're more than happy to cash people out of whatever deal are in so that they can turn around do it again and just turn it around and around around we can do a ton of business together yeah we have to know that each other exists absolutely and what we've done too is for no bues just FYI in January me and Nathan rerunning our Advanced course uh which will help you build the non-performing calculator which is a huge Fe you need to understand that uh Fina calculator has its place yeah but when it goes not performing that flanche calculator could be thrown out the window because you no longer have a cash flow coming in you really have to worry about that debt licenses each state all those kind of things come into play and our Advanced course talks about due diligence building note the do the non-performing calculator um and also how to filter and build your buy box so you can look legitimate in your business yes yeah you you have to know how to do it there's both sides to this and just because he bought a performing note does not mean it's goingon to perform forever and we came up through that world so we know how that goes yeah and you have to know what to do if and when it does start going on performing yeah un fortunately we ran to a lot of people who said well we bought performing notes that's I don't have to worry about the nonperforming side and we shake our head and we appreciate your excitement for it but every note can default at any moment and it has nothing to do with anyone's control someone di divorce death anything job loss anything can happen and unless there's some kind of perfect security that the seller will give you that thing may stop performing right yeah so what we focus on too is for these people we're bringing on is we just talked about in our quote unquote Green Room is you know what creates a good note um I'll post into the chat uh we actually uh I'll be putting on together I don't know if Nathan will be part of it or not but we'll be putting on a a live call to show you guys what it takes to um sell or create a note that is has the ability to be sold at the highest dollar what is this note buyers care about in creating notes and I think for a lot of people they don't understand that and that's okay that's what we're here to help you learn so you said I think during Christmas break yeah I'm looking at run it midday for some people and an evening call for those others if you are creating notes this is really for the note creators not note buyers right this would be focused on Note creators who want to learn how to create notes that they can sell or create notes that are valuable or what is it mean to have a valuable note outside the legal side of it what numbers really come to play occupied non occupied you know do we care about seasoning all those kind of factors what is seasoning right you know creating 100% Noe or maybe you create 8020 and get all your Capital out and hold a second all those kind of little cool ways of getting the most money for your dollar for your note and what not to do right we talk about all that often this will be recorded this will be on our YouTube channel as well as on our podcast so if you missed this at all feel free to go to those two places and we get that question all the time so yeah you know what do you buy a note for what makes it a good note we get those questions all the time so that's yes yes so please there's a form on the website uh sign up I'll be notifying everyone when those dates are and working our best before we bring our guests we have one other thing we want to make sure we keep pushing out there coming back in the early summer we're all flying down to Nashville we're having a big party so Nathan share a little bit about that for those who haven't heard us before what's happening at the end of May we were so pumped so last this 2023 was was the first time that uh my wife and I put on the DME Diversified mortgage Expo and we had a blast it was a great conference uh I think it was a good balance of fun and education uh and it was just a a really great time um we're gearing up you know as well as it went there's always room for improvement and so we've made a few adjustments a few tweaks and uh we're looking forward to next year already so it's May 31st June 1st um tickets are live now if people wanted to go get a ticket now and grab it lock it in right lock it in you could do that these are for note buyers and note Originators Creator people everyone in notes should get there and one of the biggest things that I was excited about last year when he put it on was there was deals taking place and purchases being made at the conference yeah and that's a never part of it that's a big deal I I going to conferences and getting excited and all that that's great that's really fun but if business isn't coming out of it then to me that's kind of been a bit of a waste of time so that's a big focus is we're there to get deals done so come and note creators note buyers we're both sides are there uh so the money can exchange hands so let's do it absolutely well we've done enough of uh the talk let's bring in our special guests uh we are good I believe I have the names I got the names backwards I will fix that as we talk along uh but I'll let you guys introduce yourself share we'll start with uh Ken over there share a little about who you are how' you get into real estate and just what are you doing now that's a that's a long uh that's a long winded question you have there too so I'll try to abbreviate that um my name is Ken rosic I am um partner in SE two Empire so SE empire.com is our main business right now is Jeff's the founder of that he'll speak about that in a second but um so as you can tell from the title we're we're about subject two is one of our favorite acquisition strategies but we're really about creative financing uh creative Finance strategies um on the acquisition side as well as the disposition side which is where you guys come in so we thought this would be a nice yeah a nice partnership to uh talk about what we're doing on both sides of that so yeah um but a little bit about me so I've been investing in real estate for I guess what we're going into 2024 so 23 years now 2001's really when I had kind of got into real estate just by happen stance and I just kind of started acquiring properties I worked a full-time job during that time um I was in charge when I retired I was in charge of human resources for school districts here we in the St Louis metro area gotta and so uh I've been retired now for five years and real estate let me do that I retired at the age of 45 full full pension full benefits all of that and real estate was the reason I could do that so I've just kind of ramped up the real estate investing I'm I'm kind of a serial entrepreneur I have various other interests health and wellness interest too but but the main focus is real estate uh over the years we've done all kinds of things with real estate just as many other Real Estate Investors have to buy and hold rentals kind of straight rentals we're down to two of those we've kind of sold all all those off we're just down to a couple um we do uh fix and flips over the years that's kind of what got me out of the job at you know the the nino5 at age 45 was was doing flips and so now we're kind of just focused on helping other people achieve those things right that's my goal as part of se2 Empire we try to focus on the the coaching we do deals you talked about note Originators we do that we're private lenders we're kind of uh trying to do a little specific Niche and all those sorts of things um but that's just a little bit about us and I I've been doing creative stuff for gez I don't know in notes in 15 20 years now probably I I actually owned property internationally with seller financing right Costa Rica we had was it's all seller financing deal uh we're we're also buying property in in Mexico right now my wife and I and and it's again creative financing is is doing that even in Mexico even in Costa Rica so I know this stuff works like Jeff and I know this stuff works and so we're just here to help everybody achieve their dreams this is awesome awesome thank you so much Ken so Jeff how did you get started with this whole world of real estate yeah it's a it's a funny thing um my name's Jeff Kaufman by the way in case you can't can't read in case you're challenged in the uh in the uh reading Department uh no I started actually I started like a lot of people did way way back I was in the I was in the military I was in the Marine Corps and uh which by the way my hair is super super long right now way longer than I think I've ever had it since I was left the military um but no I got I started reading the old Carlton sheets back in 1996 and um you know up late one night probably drank a little too much and and and ordered the uh order the old Carlton sheets package the no money down package H but I I eventually I I sheld that I just thought well this is impossible but it's one of those things that never really left my uh my conscience and uh you know fast forward almost a couple of decades I'm I'm working a job that I can't stand um and in 2015 so I've been in this for almost eight years now uh in 2015 I purchased my very first well I decided to jump back into it and I purchased my very my very first property um investment property anyway um in the latter parts of 2015 and so as The Story Goes a lot of folks have heard me tell this story but uh but it's the absolute truth when I was looking to purchase those properties I had gone through a divorce some years prior to that I had I mean when I'm telling you I had zero dollars in Saving I had no savings I just had a W2 living paycheck to paycheck even though I made good money I was still living pretty much paycheck to paycheck I think like you know a lot of W2 people do sure um but I I wanted to buy these properties and I was like how in the world am I going to you know I go to a bank I get I get a I get a loan I got to put 20% down where is this 20% gonna come so I'm freaking out you know um I I go out I put this property under contract and um I did have a coach at the time but I was just in the beginning stages of that of that mentorship and um he kept talking kept bringing up this this idea of subject two buy it subject to I didn't know I mean I didn't know the first thing about it but I knew I had to move forward so I so I ended up U kind of make a kind of wrap things up the introduction wrap this introduction up I bought my first property subject two I actually closed that property myself um because I couldn't find a title company that would close a subject two deal so uh so I actually closed that deal myself made a ton of mistakes um and in that first year I was still working at W2 but in that first year uh I was I was making six figures uh are very close to it I don't remember exactly what the salary was but I do remember I do recall in that very first year I nearly tripled my salary so from my base salary through to through these through these creative deals I I nearly tripled my my yearly salary so uh you know my wife thought I was my wife thought I was going to be in jail we went through this whole this whole ordeal where you know we thought uh quite possibly that we might do what we called a business divorce to kind of separate set she she literally thought I was going to jail so that's how I got started and then um then of course just like just like Ken mentioned you know um I I grew to love this business um and I and I love the creative financing aspect of it I love being able to look at a deal uh you know anyone can buy a cash deal but I think that really limits or it can if you don't if you really don't know what you're doing it can limit your purchasing power it can limit you uh to a very specific box and um for me I just really really love that whole uh that whole idea of getting something in my in my hands across my desk that a lot of people just maybe they couldn't do something with that and turning that into a very profitable deal and so that's that's what we do at sub to ire similar to Nathan's story right Nathan got started by doing similar stuff yeah uh creating notes selling selling proper properties on terms is what we called it at the beginning like didn't call it a no didn't even call it a mortgage we were doing it was land contracts in Ohio and we were selling houses on terms and it made a ton of mistakes but thankfully you know made out okay yeah and then it just kind of goes from there and then you kind of pick your Niche and you figure out okay well I like this and then you just kind of pursue it so that's that's what I did and then kind it found me is I like to say yeah yeah so creative financing is a very hot word right can you give an example what creative Finance really is I'll give it to Kev give it to Kev you how would you define creative financing because it seemed like everything in real estate is creative financing even if it's basic which isn't true yeah so it's one of the most misunderstood terms probably especially for new Real Estate Investors but I guess from our perspective creative financing is just figuring figuring out a deal without the need for traditional Banks or or institutional financing uh funding right so it could be a land contract on terms it could be creating a note uh we in the case of a sub two deal wrapping right you wrap the land contract or you wrap the note all those sorts of things so it's basically just figuring out it's cutting out we like to say I like to say it's cutting out the middleman right it's it's me as a buyer let's say I'm I'm the acquisition person it's me and the seller of that property figuring out the deal between us everything in between right there's no middleman there's no loan there's no none of that stuff so that's kind of how we view creative financing gotcha so when you guys talk about sub two we've learned a lot about sub two what are some of the myths or wrong things you can do with sub2 that you guys have found over the years that people are making mistakes on yeah I I I would say I'm just going to repeat one of my absolute favorite sayings and that is uh in regards to subject two you know you may sit down with a seller and you may come to an agreement that the seller will will sell you that property subject to the existing financing um but just because they will do it doesn't always mean that you should do it and so um so for us you know we realize that a lot of our deals um they're overlooked because the numbers just don't they just don't they don't look attractive to your to your standard uh your standard cash buyer um but one of the things I think that's misunderstood is everybody and this is part partially true people talk about you know you make money when you buy everybody's heard that at some point um but we we kind of don't believe that because with our strategies we do believe it don't get me wrong uh but with our but with our strategy our exit strategies um when we sell depending upon how we sell uh sell that property or for you know and in your guys's case you're going to sell a note we can get super super creative we can kind of create our own what we like to say our own little economy inside each deal yeah and so so we look at it on a deal by deal basis uh we don't have we don't put ourselves in a box and we look we we we like to look at both s both the acquisition side if maybe our terms aren't the greatest on the acquisition side we know if we have you know the right location I know all the all the uh specifics that all the boxes that you need to check on the disposition side we know that we can make a profit on on most of these deals um but again you know some deals just don't they just don't turn out they don't turn out that way some deals are just too far gone and and that's when you call your uh your short sale guy you know yeah so y can I add something there to you yeah please do Ken the sub two stuff um I guess I just like to say one one of the things in sub two that we'd like to be honest open and honest with the the seller right who's who's probably in some kind of financial distress I need to get rid of the property lost my job I have to move what divorce you mention all whatever it is right and so they're looking to to us as the buyer right the investor investor buyer coming in there to do the deal and they need to have trust with us and so we we want to be transparent we want to make sure that they understand what subject two means right because their name still staying on that underlying loan right right sure be responsible for the payments but that still a risk to them and they need to understand all that and as Jeff mentioned I think subject two is not for every property I think that's a that's a big thing that we see too you can't try to force a a square a square peg into into a round hole so to speak yeah how do you guys do your best to avoid the do on sale with Subic 2 that's one we've heard coming up it is a it is this is 100% how you how you set up the structure in the beginning this is do on sale has never been a problem for us um I've known three people in my entire life that has ever uh that have ever uh experienced something like that and it's because it's not because the banks are out scouring public records and and you know looking for uh looking for llc's which by the way uh you know Fanny actually has guidelines now as you guys may well know that that you can they accept people moving properties into llc's all day long um how we how we normally do it um in the way that we the method that we prefer is we prefer to use trust we use we use trust extensively um so it's a it's a matter of how you set that trust up initially and also there's a you know um one of the other one of the other things that we see is insurance insurance a lot of folks just don't know how to set that up correctly but what it boils down to is and you guys as node investors know this the most and that is if I'm making my payment to you 90 99% of the time you're not going to care where those that fun those funds come from nope right and so as long as that payment's made and so that's we we push that super super hard% right don't get yourself if it's if it's a deal where you even think remotely that this deal will not pay for itself or it can't afford to make those payments then we just don't do it so you mentioned like the banks are not out necessarily looking for these kind of deals however are they keeping an eye out because if they've got a loan at 3% and they could be lending it out at 8% are they kind of a little bit more aware than they were again yes this is this is this is um this has more to do with how it's how it's structured in in a trust you know and and you know they could go out and they could scour the uh scour the public records for for trust recordings and they could you know I'm sure they could go out and and take take a bunch of those to court and um you know and probably win but it's kind of um how do I want to say this it's a little it's it's kind of protecting it's building it a structure that's going to protect you from that in the future just by how you set it up on the front end on the acquisition side um and so the the with the extensive use of trust uh it becomes it becomes it doesn't put those red flags up like like a lot of these other uh strategies might yeah so all about doing it right in the beginning that's what it's all about one of the things we found uh in the beginning of the year I'm curious how you guys teach um your students who does your servicing for your notes do you self-service do you use a licensed servicer using software or you using something else so generally speaking um in order and Ken I'm I'm sorry I'm just kind of but generally speaking um we we we really like to use on the disposition side we really like to use land contracts okay and so um generally speaking if if our seller is really concerned about that payment being made we will hire a note Servicing Company um we just went through one byi is who we went through used Evergreen before we've used Madison management before so it just depends it depends on how comfortable our seller is with uh with making sure that that payment's made um but for the most part we we either it's kind of optional it's not it's not a standard and that's what we teach is if the deal if if the deal can uh support you self-servicing it if you're not soig that you can selfservice then then go ahead and do that otherwise let's hire a a service one of the cool things we've learned is that and another thing I would add into your contracts for those who follow you is putting that servicing fee as a borrower expense right because that makes us as no buyer a whole lot easier to buy for a little bit higher if that payment is $300 a month and I have to pay $20 out a month that's a little bit out of my paycheck which means my bid has to be a little higher or a little lower to deal with that $20 for 180 months right so yeah I would ideally put that in the buyer side of it um Nathan's more comfortable with land contracts than I am um and it's a preference right but I understand why you guys do it in a land contract versus a note mortgage because technically then the Deeds Changing Hands again which makes a little bit more convoluted um but it's good to see you guys are open to that servicing mentality yeah and actually we're we're going through this right now in fact Ken and I both went to court yesterday yeah and it's on it's on an eviction on a land contract and the fact is you know we have it's much easier to get someone out of a property on off of a land contract yeah yeah than it is to and cheaper yes than it is to foreclose so where was the property at it's in Illinois Illinois just like yes your your the the Chicago yeah we're talking Chicago story was near and dear to our hearts yeah yeah just yesterday the one thing I'd be careful of our debt licenses right um in technically in Illinois debt license is a requirement um you can look up all the penalties all stuff but there are certain states that require ownership if you have a debt and you're collecting on a debt you're supposed to be having a debt license in your name um I won't get into what happens if not or whatever but just for people listening and that's a certain thing I won't buy in Illinois because I don't want to get the license plus deal Cook County is too long of a time frame for anything right but there States like Georgia where it's a 90day foreclosure but it requires a debt license unless you're buying your personal name well then go get the dead license it makes sense right that kind of stuff makes a lot of sense for a lot of us to talk about um when we talk with you guys regarding you know these WAP notes how do you lay it out to that original borrower that may want to look for a house a year two years from now how do you structure that conversation Ken how do you deal with the borrower who's like hey you're P my payment for me but I want to go buy a house three years from now yeah and their debts wrapped up so uh so that has a lot of layers to it that particular conversation so so usually right the seller is distressed in some way and so the likelihood that they're going to be in a position to actually go and get a traditional institutional mortgage and qualify again in 12 to 24 to 36 months is probably pretty low uh so I I think it's some education again being transparent with the seller some education on what the actual situation is you know we're going to take this not we're going to take this property subject too but we're going to pay your $30,000 interviewers to do that right and so that's going to affect your ability to go out there in 24 to 36 months and do anything so I think that's the first piece of it right the seller education and then the the second piece of it is we uh you you know they're within 12 after 12 months after some seasoning right they can then discount some up to 50% or if not all of that um that loan if they can prove someone else is making the payments for them and so we provide that we provide that information to and we actually just did this in that that same property we're talking about in Illinois we provided a note because they wanted to go out and and buy a different property that we were responsible for the payments the payments have been made by us for x amount of time and then they were able to get approved under that lender now that doesn't work for everybody but we certainly do that uh say you know that we've taken the obligation for those payments and it shouldn't count against them or not fully count against them when they're trying to qualify again um that and we also try to uh you know we could so we take over a subject two no and it might be let's say it's 5 years in so got 25 years left on the term like the likelihood that we're going to make 25 more years of payments on that is pretty slim yes right like we're GNA get refinanced by our third party buyer that we bring in right we're g to get refinanced out in three or four or five years ....