Advanced Note Partial Strategies | Real Estate Notes Show

Episode: Advanced Note Partial Strategies With Justin Bogard of @AmericanNoteBuyers Full Video Dave's Goals and Plans: - Planning to include content about partials, hypothecation, and advanced strategies in DME conference coming next June - Considering volunteering to teach financial calculator in high school career and life management class for at least one week - Emphasized that old school numbers are the key to the entire note investing space Nathan's Goals and Plans: - Been focusing on webinars for over two years emphasizing seller finance originators doing it correctly - Recently put emphasis on teaching exit strategy options for seller finance deals, not just creation - Pivoting strategies from non-performing loans to other approaches as market conditions have shifted since 2010 Key Recommendations: - Understand financial calculator fundamentals - it's essential for note investing decisions - When selling partials, run detailed quarter-by-quarter analysis on numbers to avoid manipulation and understand true returns - Sellers should consider partials to recover cost basis and capital without giving up the entire note and future backend payments - Learn proper structuring of RAP notes to avoid legal issues with courts - Analyze each individual financial number (PV, term, interest rate, UPB) separately to prevent being misled by manipulated figures Topics Discussed: - Partial note sales strategy for capital recovery - Hypothecation as recapitalization method - Financial calculator literacy in note investing - Market shift from non-performing loans to new opportunities - Fix and flip sellers using seller financing and note partials - Risk analysis through spreadsheet evaluation - Advanced note trading strategies - Comparison of note investing vs.

house flipping Guest Insights: - Justin Bogard transitioned from house flipping and wholesaling after losing money, finding more success with note investing - Notes allow analysis of deals quickly through spreadsheet evaluation without dependency on contractors - Partial sales enable fix and flippers to recover their cost basis (100% of invested capital) while keeping the backend note for future revenue - The note investing space is small and interconnected - repeat guests indicate strong community relationships so why why does somebody want to sell a partial what's the advantage to somebody selling a partial what's similar to a hypothecation where you're just recapitalizing so a lot of times fix and flippers that do have great margins in their deals and they sell stuff on seller financing let's say they have a 200 000 mortgage they sold a house for 250 000 they probably have a hundred fifty thousand dollars into it they got a fifty thousand dollar down payment so what's their cost basis now a hundred thousand dollars right yeah right so they have a 200 000 mortgage and they have a hundred thousand dollars into it if I just want to repeat and rinse I would just sell a a partial of that note that was just created and just make sure I get that hundred thousand back out of it and so then I have no cost basis in this deal and then I also have the back in the note that's going to revert back to me sometime let's say 10 to 12 years down the road [Music] hey everybody good afternoon I'm Dave put some jkp Holdings alongside me as always Mr Nathan Turner how are you good day good day very good yeah very good so uh things are progressing we're uh doing some more stuff it's been a crazy summer I think everyone I've talked to has been overwhelmed with stuff um it's just been August and September has been a killer for everyone I think just a lot of stuff but how you been every year you know get into summer and then it's juggling family vacations and work and just trying to keep up on everything uh travel all this that but no you know what it's all good it's all part of life yeah yeah and the kids are getting older and stuff like that and in nude space we're always transitioning right and that's one thing I think a lot of people and for us you know been around since 2010 and whatnot it's hard for us to adjust too um because what we so why why does somebody want to sell a partial what's the advantage to somebody selling a partial what's similar to a hypothecation where you're just recapitalizing so a lot of times fix and flippers that do have great margins in their deals and they sell stuff on seller financing let's say they have a 200 000 mortgage they sold a house for 250 000 they probably have a hundred fifty thousand dollars into it they got a fifty thousand dollar down payment so what's their cost basis now a hundred thousand dollars right yeah right so they have a 200 000 mortgage and they have a hundred thousand dollars into it if I just want to repeat and rinse I would just sell a a partial of that note that was just created and just make sure I get that hundred thousand back out of it and so then I have no cost basis in this deal and then I also have the back in the note that's going to revert back to me sometime let's say 10 to 12 years down the road [Music] hey everybody good afternoon I'm Dave put some jkp Holdings alongside me as always Mr Nathan Turner how are you good day good day very good yeah very good so uh things are progressing we're uh doing some more stuff it's been a crazy summer I think everyone I've talked to has been overwhelmed with stuff um it's just been August and September has been a killer for everyone I think just a lot of stuff but how you been every year you know get into summer and then it's juggling family vacations and work and just trying to keep up on everything uh travel all this that but no you know what it's all good it's all part of life yeah yeah and the kids are getting older and stuff like that and in nude space we're always transitioning right and that's one thing I think a lot of people and for us you know been around since 2010 and whatnot it's hard for us to adjust too um because what we did for years we have to adjust it doesn't work anymore yeah we have to be more creative and whatnot um yeah not in the same way not in the same way it's interesting so last week I was at the IMM conference uh in Dana Point that it's an MPL conference and it's it's really interesting you know you go to a non-performing loan conference and it's I it's in a way you kind of get the feeling like is this still relevant like is it worth doing a whole conference just about non-performing notes in some ways yes in some ways no you know like uh it's the same there's still a lot of opportunity there but it's not the same opportunity it was even five years ago and so yeah you just like you say we got to learn and adjust and figure out what else we can do and on the flip side we've put a focus on the last nine months now uh we've been doing these webinars for over two years and we put a real emphasis on the seller finance Originators doing it correctly but also thinking about different ways that they can do things better to increase their returns yeah um not only creating it correctly but also doing the exit strategy options because I think a lot of times they don't talk about that on the other side and the non-performing world is going to be really interesting because if we do have a bubble most the people who've originated notes in the last two three years haven't seen what we saw for 10 years no exactly exactly it's been a shift and change is good in my opinion you know I I like going and doing different things and figuring out what else you can do and how else you can do it keeps it fresh keeps it interesting uh and so it's it's been good it's been fun to try to figure out different ways that we can do notes because there are so many different ways that you can do this business so we're just pivoting to something else for now absolutely I think for most people we we get what they're trying to do and we just want to help them right if we can help them make going through the the agenda and the sponsorships and everything for for DME coming up next June we're still several months out but uh we've actually included in there uh something about partials we want to dive deeper into that hypothecation and some of these more advanced strategies that maybe we don't talk about as often so it expect to hear more about this because it is we'll cover it today we've covered it before this is not the end of this topic yeah this will go on forever um which is awesome so before we let our guests of honor on here um feel free to put all the chats we're live on uh LinkedIn Facebook Twitter or X whatever it is and this will be recording put to YouTube so make sure you take a look at that or and or our podcast um one of the other things I want to say is that this is the first time we've actually had a guest on twice which is fascinating to me I'm like holy goodness um this space is extremely small we all know each other um but it is absolute pleasure uh to bring Justin on here uh Justin I've known for a long time he's been a quiet guy in a space but he's a wealth of knowledge um be sure as we get Justin on here if you get on a phone call Justin he will speak exactly your level but if you need to go and learn he's absolutely great guy to speak to as well Justin welcome man how you been thank you very much I've been doing great it's been a great summer and I was listening to you guys uh talk back and forth and yeah Summers when you have family and you have kids right it's just a whole different dynamic in the summer you don't really get any time off yeah so yeah it's just tough yeah so we always start with our basic questions so Justin how did you get introduced to real estate note investing and how did it all begin yeah this is this is the most famous question when you get you get asked this paralysis that was me at first I was just like absolutely oh my God like there's so much I can do with the spreadsheet now and then and then I just had to simplify I said nope yeah I cannot go down that path I got a bispy sure about what I'm doing and understand you know a lot of people try to run numbers in their head and they can get you know within the ballpark of what they're doing but you can't really get accuracy until you run a calculator right and I always run a calculator even if I know the simple answer to it just because I like to deal with pennies you know up to the penny um I'm I'm becoming more of an accounting um Centric mine right now sure because I've been drilled by my accountant and by you know our fractional CFO that helps us out about running the numbers and understanding the reports and stuff so I've I've continued to strive to be more diligent so I'm always going to run it to like you know the the hundred thousands decimal on some of this stuff just so that I have some accuracy with it because I honestly I want to know what I'm making I want to know what I have into it so and then there's times two where I I think it's a simple answer and I'm pretty sure I know what the answer is and then I'll run it in the calculator and then I'm off and I go oh I'm glad I ran into calculator I forgot about that yeah yeah so it's an incredibly useful tool I've got it on my computer on my desktop my laptop my phone like it's everywhere so and I use it daily it's it's a huge part so Justin we've talked to you I'm sure you've seen us we've talked a lot of and you're involved as heavily too A lot of these seller finance Originators right um and what they don't realize that first they have to learn how to structure a note correctly make sure it's underwritten make sure that the paperwork is solid right make sure the terms and stuff like that is inside that note and that they create something with an attorney alongside them and ensure the fact that this legally is something that they can sell or foreclose on post in your experience what have you seen with these seller finance notes that people are watching who just recently create a note or doing that what mistakes have you seen with them with know you may only buy parts for five grand why would you do that and what's the keys to it those are all excellent questions and to answer the first part of your question you know kind of what is it partial and I'm a very literal person so my business partner and I we always you know go back and forth because he's really loose with the terms that he says and I'm very accurate and literal with them so I'm always like no that's not what you said he's like no this is that's what I said so we talk about a partial it's not a fraction of a note it's not fractionalization it's literally if you take an entire am schedule 30 years and like you said before we'll just cut it in half 180 payments and I want to buy those 180 payments well that's what you're looking at you're buying mostly interest and very little principal on the beginning part of that of that note so you're just buying a part of the entitlement I guess is a better way to put it so that's what I say a partial sometimes people think of a partial like oh it's a thousand dollar payment and I'll get 750 of it that's not a partial payment that's a fractionalization and that's not what we do that's that'll be a security a security so let's clarify that I mean if you do five a thousand dollar payment you do 500 500 that's fractional where partial is more a number of payments yeah period of time out of the full yeah yeah I think of the entire entitlement and I'm just buying a part of that entitlement and we'll call that the partial because you're getting the entire thousand dollar at the payments a thousand dollars a month I'm still getting it for 15 years just on 15 year one month it goes to the other it goes back to reverts back to the other person and they get that thousand dollars going going forward so why why does somebody want to sell a partial what's the advantage to somebody selling a partial what's similar to a hypothecation where you're just recapitalizing um so a lot of times fix and flippers that do have great margins in their deals and they sell stuff on seller financing let's say they have a 200 000 mortgage they sold a house for 250 000 they probably have a hundred fifty a win-win situation uh if it's through you know lending borrowing money on their notes through hypothecation which we've done webinars if it's also doing um these ideas of doing these rap notes and doing correctly so that if you don't get caught by the you know the courts and whatnot um learning how to do a servicing learning how to do a payment structure um we've done due diligence calls we've done a lot of different calls and one of the most fascinating things that is chat about is the fact that the old school numbers are the key to our entire space right it all goes back to math yeah and and you know I think as this week I think I've said to half a dozen people I wish they taught the the financial calculator in high school like this is the calculator we should be learning not the scientific in my opinion yeah so I was even saying to my family like I'm gonna volunteer it won't be this year I don't it's too late next year I'm going to volunteer to go and teach to have a clear career and life management class so I want to go and volunteer to teach at least one class I would do a whole week on the financial calculator show them how it's done and just yeah this is how you can make this work and this is this is something you're going to use for the rest of your life absolutely if you aren't you I do have a course on Advanced cochlear but we also have a bigger breakout in our advanced class that we'll be restarting up in a few months if you answered that let us know but what we've also learned the fact that in numbers right we have our PV our financial calculation our present value our term our interest all those numbers come into play when we buy and sell a note yeah is that you can manipulate those numbers and what most people don't realize is that on the buy side and sell side you can manipulate those numbers very easily for those who are not sophisticated enough to understand yeah and in the in the world we'll be talking today is anybody you meet off the street how in the heck why do you do what you do and yeah all that stuff so I was just like anybody else I was fascinated with HGTV and I really wanted to be hands on with taking a house you know fixing it up a little bit or reselling it making some money and and I thought that could work for me so I took some seminar classes and I started just doing this full-time I I fired my W-2 job and flipped some houses took them down to the studs had some rentals did some wholesaling deals and had some rentals because of it as well and I just I fell flat on my face a couple times lost a bunch of money it's like this what am I doing wrong this isn't working for me and then I just kind of fell into um investing in notes with um with my future Mentor I went through a program called note school and they kind of just turned the light bulb on for me really quickly and realized you know like you guys you love spreadsheets just like I do and I can look at a tape and I can analyze it pretty quickly and figure out what I want to make on a deal and I can learn a lot about the risk pretty quickly without going into too much due diligence and that's what I like to do I don't want to have to depend on contractors and having contractor turnover and opening up a wall finding out there's another code violation I have to fix I mean the list goes on and on I don't know why people flip houses I don't know yeah but I did it I tried it I failed at it God bless anyone that's figured it out and can make a lot of money with it I just don't I couldn't do it so this is where I landed and I am much better off where I am today I'm with you man that's awesome Land Learning became a nightmare for me as well um the whole idea of what we do is as me Nathan we say we're lazy investors if you had a chair um and we crunch numbers right we're back yeah and Banks work in not in properties it was a little real last night and they couldn't get the grasp that we're all about numbers it's all we are it's a numbers game making decisions does the borrow can they re-perform if thousand dollars into it they got a fifty thousand dollar down payment so what's their cost basis now hundred thousand dollars right yeah right so they have a 200 000 mortgage and they have a hundred thousand dollars into it if I just want to repeat and rinse I would just sell a a partial of that note that was just created and just make sure I get that hundred thousand back out of it and so then I have no cost basis in this deal and then I also have the back in the note that's going to revert back to me sometime let's say 10 to 12 years down the road but we all know it's probably going to pay off earlier than that so we'll get a big boom before that so these guys can just take that money and just go reload and do the next project and just keep on building up those little Tails as we call them yeah in the future you just get a big burst of income um so what's your experience so I've I this is something I ran into recently what's your experience with um people who say well I just want to sell like I'm the the idea of a partial uh is troublesome to them because they don't want to take it back after a couple of years they just want to be done with it how do you get around that what's your experience with that I'll buy another another partial there you go right so most people don't realize that if I buy five years of a partial rate and there's 10 years left I could buy the second five years after it's done you know yeah and oddly enough sometimes you make more money that way oh you're leap rocking yourself yeah down the schedule so it's the opposite of us as a consumer having a mortgage and leapfrogging it down the schedule by paying extra payments per month or per year and having a 30-year mortgage go down to you know nine years because we just LeapFrog down the am schedule so we're doing the reverse of that from the bank side and we're only buying a little bit of a time because future cash flow you know is much cheaper to buy it in the future than it is buying it today you know because you'd have to get a bigger discount so it works both ways for the buyer and the seller so the parcel does so if somebody doesn't need part of a note you want to why would someone buy a front-end versus back end where is the advantages on that so the reason why I would buy a front end of a partial is because typically it's going to be significantly less risk for me because I'm only invested in a fraction of well I won't use the word fraction a part of that entire value of that property so if that property we're just talking about for 250 000 and I had a hundred thousand dollars into it I'm I'm very well protected right so if that property needs to be turned over it's going to be worth well more than 100K as the front end investor I'm the first money and first money out too so it's it's a lot lower risk and potentially it's going to be a little bit higher yield as opposed to buying the entire note because the discount isn't as great on the partial to the person um selling it as it is when they sell the entire paper so you're just thinking about future payment streams and the more the payment streams you buy in the future obviously the larger the discount is and the fewer payments you buy the less that discount looks as well so let's break that down a little bit right so if I'm going to buy either 15 years left of payments but I want to buy year five through year 10.

I have obviously I'm paying more of a discount because future money right what happens if that note pays off in year three before it even gets to me well I probably wouldn't be buying the partial that way I would only want to buy it when the next payment due is the one I'm going to receive because I don't want my money tied up you know obviously until the future I guess you can do that I've never I never tried to do that but that would be my probably my my counter-attack to what you just said so you're saying is that I agree to pay five through ten but when it gets here when it gets to year five then I'll make payment is that more accurate if you wanted to do that I like I said I don't know unless I'm understanding what you're saying I wouldn't do that I would be buying here here one through ten up front and then in the future if I only this idea of you can sell a part of a string of payments and get a return in your IRA or any money or even get started is fascinating well it's gonna say the only thing more interesting than the fact that you can trade notes is that you can trade part of a node what yes it's mind-blowing that there are so many different ways you can do this business and I think people when they realize um what what we mean by that is like listen guys just understand that when you're doing this stuff you are literally able to do anything you want to know as long the numbers work out for you and the buyer but just be really careful when you do this because when you do this and you run the numbers you have to understand what the numbers mean there are some really cool tricks to trade that we've talked about in the past um that you can unless you look at each individual number you can manipulate numbers by excluding one right if we do the 50 50 where you're selling half the payments for half the upb and people say well that makes sense and you realize it equals to a 16 return on average whoa and if you do quarter by quarter you're looking at 32s and stuff like that it you have to understand it and with no investing there's an advanced strategy with notes right and partials which is fascinating because when the notes come out you want to buy 12 months 60 months whatever 10 months of payment or if you want to sell it so for sellers this idea of having a partial is really key because maybe you don't want to pull up all your money you don't want to get rid of the whole no you just want to get a part of it and get some Capital back in your pocket and start going again yeah yeah so and you know what this is such a fascinating topic and I'm glad we're getting into it into it today uh in fact this week uh my wife and I were they can't what can we do about it right it's numbers so it's It's oddly enough somewhat complicated to get and started with notes because the fact that the numbers aren't taught in school like Nathan said earlier right so tell us a little bit about your first understanding of these five big numbers right um the flanger calculator and what does it mean to you now how do you use them why I loved how Nathan talked about teaching this to his local schools and stuff because I actually thought about doing that too but if you get to that first I'm going to send my kids out to Canada to where you're teaching that so they can learn that stuff from you Nathan because that'd be great for them to sit down for a week because I've tried to do it and they don't want to listen to Dad I got a 10 and 12 year old girl and they're too busy with other things going on in their life than to learn about making money or being a financial Savvy yeah you're exactly right the financial calculator is not taught you can be involved in real estate very heavily and still not understand a financial calculator you can get to the note business and this is a foreign language it's a foreign language to you until you get taught the right way how to do it how to understand it how to leverage it how to manipulate it in your favor whether you're buying or selling and it's a beautiful thing but once you learn as long as you got you know the three variables you can solve for the fourth and that's just the key to what I learned so I always solve for term I never put the term in there just because the term is always inaccurate from the beginning to end you guys know the drill when borrow payments early later on time yeah screws up the am schedule yeah absolutely and it's a fascinating thing and it really yeah I think I learned it like my lesson my first lesson on it was like in a in a conference that I was at uh for an hour maybe two and then after that it's just practice practice practice and then you get all kinds of crazy and you start making a spreadsheet like Dave and you take it to like some kind of level of complications what's the old term you know analysis the paperwork and you say I can't buy it because of x y and z um there's there haven't been too many instances where I couldn't buy it because I've learned from my mentors how to fix things through title and before I buy it I can just wipe the Slate clean and just have them sign a new note so in that essence you know I I've been able to work around it but the most common things I see are just simple errors that maybe not heavy real estate attorneys you know draft these documents they're just kind of a little bit in real estate and they'll draft these documents and they'll forget to put what's the first due date don't forget to per what's the maturity date don't forget to put or they'll or they'll concatenate the principal and interest and taxes and insurance into the payment and so you know I I look at it I'd be like is is a judge that's not in our space going to look at this and read it and understand it quickly because that's what he's going to discover and I'm going to be on the opposing side of it I want to make sure that he's going to see quickly that he can read it and enforce it and understand it quickly so that's probably the most common things I see are you typically going back and rewriting that note with the borrower and getting it cleaned up if it's necessary yeah so I'll work with the seller and say hey look just so you know x y and z are wrong you know obviously I'm also doing that to try to lower the price as well but intellectuality we do need to have good paper yes and that's it's for the borrowers benefit as well because the last thing you need is is for the borrower to hold out payment on you uh because honestly it just costs more time and money I'd much rather them be happy and just cash flow it and pay it on time every month than I would for them to try to fight it absolutely yeah so we're talking about today is been something that people get confused on often um could you break down in simple terms what is a no partial for those who either want to sell it why would they sell it what's the advantage you know advantage of selling it and for a buyer what's the eventual buyer who wants you all that cash today and they can survive with just the cash flow and they could have you know tax ramifications could be greater if they took all the money up front as opposed to having it stretched out over a longer period of time like an installment sale so those are the advantages for the person selling the partial the the best way I feel to do partials is really in your retirement account because then again if you're using cash you just kind of you have that cash you know future cash out there that profit I just I like it better in the retirement account itself and I like hypothecations with cash doing it that way so let's break that down one of the biggest things that we've run into at partials is this conversation between the hypothecation slash partial of if that partial defaults in year three of five what are some of the ways that that gets resolved or maybe doesn't get resolved maybe the buyer of that partial has to foreclose on it what are some of the ways you've seen both in the cell on the buyer's side of when something in a parcel goes bad well it all comes down on how I document the partial sale so if I have a loan and I want to sell one of you guys a partial of it I'm going to make sure that I stay in control of the deal and I'm going to say if things start going wrong I'm either going to buy it back from you or I'm just going to handle the foreclosure and we're just going to ride this ship together if I am buying the partial again I want to be in control of the deal because I'm typically the note professional and the other person is usually you know a novice note investor and so I'll help guide us down the the best way to get the most return so it's all all the paperwork what are some of the options you've seen what you know have you seen the fact of the buyer typically doing the Foreclosure or you doing things like a buyback or or some kind of different strategy of getting involved and fixing it what are some of the options that note sellers who are out there or no buyers could possibly see all the above it's the beautiful thing about our business is that the documentation is making the rules and every as long as everyone understands the rules and they accept them we can we can have whatever language we want in there as long as it's you know illegal illegal link buying binding document so it's really up to you the most common thing that I've been taught um by Eddie speed is you know he had he has documentation that he's been figuring out for years so he's he's helped me and and his students with figuring out the best ways to be you know as a buyer of a partial versus being a seller of the partial and they're two completely different agreements to where like I said it's about control like if you're the note professional and you're the one that has the most knowledge you just want to make sure you're in control of that deal uh whether you're on the back end of it or the front end of it as the buyer yeah so you said front end and Bot at back end what is Define front and back is it a time period is it is it just defined by the contract what's a front end and what's a back end so loosely we're just we're going by the amateurization schedule and if you just have two people involved in a partial what I just said the front and the back end I was talking about whoever is getting the next set of payments is the front-end investor and whoever gets the future payments is the back end investor or the tail as we also call it some of the servicers that service these partials they they call it something different for example FCI is one of them that we use for partials and they'll say the primary investor is the investor at the back end but the partial investor is the one at the front end so they have different or secondary investors the one on the front end which is kind of unlogicals for how you would think but that's just how they do it so gotcha it makes sense I guess the the original note holder versus the partial note yeah yeah that's true yeah technically the secondary person came in and bought it after the fact so so is there an advantage and also I'm sure you mean to say is also you could buy balloons too so just you can buy any the back what do you typically prefer well I'm going to sell the front of it and keep the back the the my retirement account is is built for it and I would think most people that do this would agree that retirement account is really the best play for the partial uh because you can't touch that money anyways and if you're not gonna retire for 10 to 15 years what better time now than to start when you know you're 50 55 years old and just start selling off notes that are in your retirement account for you know selling off 10-year partials yeah amazing so for a new investor or a new originator it sounds like this is an easy way to buy and sell notes right um get some of the money you can hold the note for long term and you're not really Letting Go the note as a note seller you're still kind of managing it that if it goes bad you jump back in there and kind of fix things up if you need to um and a note buyer you're kind of hands off it's a performing note with a basically a seasoned investor kind of backing you up and walking through if something happens they jump back in there and kind of solve the debts you know you save the day kind of thought process it's um when I was doing a lot of flipping notes and brokering notes a few years back that's typically how I would educate somebody new to the business to get into it is to buy a partial because I'm like your risk is going to significantly lower yes you're not going to make as much yield as you would as you would want to buy the full loan but your risk is really low and you're stepping someone guess what I'm Tethered to you now or Dave or Nathan is Tethered to you now to where you have someone experience that has skin in the game with you and that's the best way to learn is is to be with somebody that has skin in the game that knows what they're doing you can learn a lot I wish we all could have had somebody like that you know when we first started well I'll speak to myself I did I didn't have anybody that was buying the selling me the partial at the beginning but I also had specialized note training but you know if I didn't I would definitely want to have somebody there with me that was go ahead skin the game so then what are some of the pitfalls get uh you know rejection hands come up real quick like well I I don't I'm not ready for this even though it may seem too good to be true on the risk and the rate of return but yeah so it typically will be just a little bit slower it's because of the explanation Factor and then what happens have you had a problem with when that note finalizes the term giving the note back to the buyer or taking it back from taking it back from buyer or giving it back to the seller what typically is that process to make sure that that transfers back to the original note holder servicer servicer servicer and he comes down to the servicer that servicer just needs to know exactly what's going on and then you as the the the you know the CEO of your own business you need to make sure that your vendors are doing what they're supposed to do so just have some sort of uh you know notification on that timed event when it's supposed to happen or about when it's supposed to happen so you can make sure everybody understands what to do surfaces do a great job at the end of the day you're just you that's one loan of the you know ten thousand they have in their facility so you just gotta help you know make sure stuff happens the right way um the best the best news you ever get is when your bank account just gets a lot bigger and you don't know why and you're like okay I like that hit but what just happened yeah so it's happened those are not clear it's the same process to buy a partial there's a purchase sale agreement all those things parts are same right and you want to make sure you run value on the property because you made me a spot where it defaults and your agreement says you take care of that foreclosure so it's not always Cut and Clear right so you make sure you do your own e do all your due diligence however you have some on the back end and say listen I'm kind of stuck on the one part can you look it over and typically a seller who wants to cash out some of their proceeds will have no problem walking through the stuff with you guys because they're going to get fond of money in their hands so we can move forward so a good question Joe I appreciate you jumping in what you need that's the beauty of this business you can do whatever you want and we'll talk some more offline because so what are some of the cool tricks or techniques you've learned buying or selling a partial that um you know that could help either a seller or a buyer kind of be more interested in this idea I understand what do they want what is their need what is their problem that you can solve and if a partial is that solution how can I how can I get the numbers in the to where they're going to want to do the deal so I can make it a good return for me but I want to make sure it's a good deal for them because I do want to buy the partial but if I know they need twenty five thousand dollars I better figure out a way to get them twenty five thousand dollars in hand and me to buy a part of that loan to where I still make a good return and that's that's how I would approach it so just for those who are we haven't posted yet but our our next webinar is heavy strictly in the fact that these seller finance people need to see the actual numbers we're going to break down the numbers um with uh rmlo uh Mark Ross next week but I understand that Justin's been doing this for so long and he's done a lot of partials um because of where he came from in his education but the advanced idea of knowing the fact you can buy and sell or if you need money up front you're gonna get a cash flow and if you sell every you know you have a partial that in five six years all of a sudden you're gonna get an influx of money coming in which is awesome and you may not need you may need the money right now to do another deal and all of a sudden now you didn't sell the whole note you only sold part term and you're gonna get a bunch of money in the future so just be knowledgeable that it may be a better deal as a seller because you're gonna get more money because you're gonna get the balance of the payments moving forward in five or ten years so just start running numbers where I'll show you next week about that detail sales um just when we talk about the partial bought like year one through five and I'd be like okay on year four hey look like you mentioned before Nathan you know this is how we would just keep buying more of a partial so they could get and we've offered that deal up front like here here's optional payments right I can buy the third of it today a third of it and seven years from now and then a third of it you know 12 years from now I'll just keep buying it down for you so I'll give you more than you want for it yeah right because I'm buying it in thirds but I'm also separating you know every seven years I'm buying another chunk so when you run the financial calculator you realize wow I can pay more for it and I'm actually making more money because my money I'm only buying seven years of payments at a time as opposed to buying 21 years of payments so for those who are not familiar with can you explain the different schedules those three schedules are partial what's the three schedules that are most common the a b and c yes so you always have the borrower's amortization as what they go by right that's how they bought the note that excuse me that's how they got the note created and they signed on it so that's that's the one amateurization we'll just call that a uh the second amortization would be us as discounted note buyers buying the entire note at a discount so we would obviously let's say that 200 000 mortgage we bought for 150 000 so we have a new amateurization based on 150 000 to zero all right the same amount of years same amount of terms same amount of months it's just we're stretched longer so then there's more um uh principle being paying down quicker as opposed to the borrow exam station where the the principles pay down a lot slower so now we have the third or the C amortization which will be selling a partial of it so again you're just taking whatever the balance that you're paying at and you're just gonna have you're just gonna amortize it down to zero on however many months you are in the deal because we're assuming most loans are just going by a month as opposed to quarter annual payments so as a seller of a partial what do you prefer do you prefer to sell the front like what are some of the risks involved with partials well as a as a note professional selling it to somebody I've got to stay on top of managing it if things go wrong and be there to help the the person on the other side of the transaction if something goes bad it'll be a teaching moment for them and be on top of it so it's it's great to run partials on the calculator and the numbers look great and conceptually you know once you get past the foreign language of this it looks pretty easy to do the Second Battle is finding somebody to buy that partial or finding finding uh somebody to sell that partial to you and you know so there's a whole other game to that so it isn't something that you can just flourish and do 100 of the time it's just something that when when it fits you should do it yeah and that's what we learned this note business is like there's no one tool we use every time we know 28 tools and we just figure out which tool we need to use for that job yeah with that investor what can you expect as a new buyer they're probably pretty new what kind of expectation is partial selling at it depends on the on the the time of the decade right so when I first got into this business pretty heavily it was about 2016 and the the no partial for a first-time investor the going uh partial rate was typically around like the six to seven percent yield um as interest rates got lower we noticed that people were able to buy uh partials and stuff at around five percent if you can believe that and then now typically I'm seeing that probably like the seven to eight percent range is kind of common right now so for the first time investor that doesn't have a lot of experience um that doesn't know what they're doing that's typically what they're going to pay for a partial because they're just looking for that steady Eddie passive income uh more seasoned person more advanced person is going to be looking for a bigger appetite there because they're more active in the business and there um with no partials too there are a lot of questions regarding um what is the uh typical process for them to sign up for the servicer does it typically change servicers but from my experience I would keep the same service as that because one of the most common issues when borrowers to fall is when their loan changes hands to a servicer so keep them with that servicer no notifying if you're a seller out there that servicer will inform you as well as your note buyer of what's going on if something happens so they'll notify both parties and both parties usually have access to that portal that right the back end stuff so they get notified of that we've bought and sold partials before it's a great way I think Justin's point on in your eye right because technically you're just sitting there collecting money and you just if something goes wrong you can work things out that way um it's it's better than a performing no because you have someone you can rely on and sometimes you can get cashed out right we've done it where we've taken the accent we had to foreclose on it we've also done the other way the seller may actually be willing to buy you out based on your upb another point just to re reimposite the schedule C tells you how much is payoff so if that loan pays off during that partial guess what happens you literally are gonna get paid the buyer of the partial again their upb and you get the remainder as a seller which works out for everyone um it's amazing this isn't talked about more but what we found me and Nathan talked about these before we don't see a lot of parcels for sale do you think it's people not understanding it or people not I got an answer for this one I got an answer for this one yeah the reason why people don't buy partials that often I think in our business is because um well I'll always to the selling one the reason why people don't sell partials too much in our business is reverse hypothecation we've got a webinar what would you say the biggest difference between a partial and hypothecation or borrowing against a note is if you want cash today and cash flow today do a high qualification if you want cash today and you want cash flow in the future then do the partial the best way I that I do it is the retirement accounts my partial and cash I do hypothecations gotcha so guys out there think about this right if you own if you originated a note and you need we stress a lot because I find these seller finance people out there could take our money and go make 30 40 50 on our money so take advantage of that don't be stuck in a spot where you don't have any Capital it's help just part of it get some Capital back up and go do another stomach do or another older fans with the money you're going to get from this note that you already have and get the payment in the future it's super awesome it's just about unashaying the math and there's a lot of courses out there we've had webinars on it um I do have an advanced class on if you're interested Justin teaches it too you can reach out to all of us and say Hey listen curious about this but if you want to change this calculator you can take advantage of a lot of position you're already in and get cash out quickly the biggest two things is understand the math and make sure your documentation is clean right you gotta make sure that documentation is good and solid and that you're servicing with a license servicer if you're not we can run into problems we have to get that sorted up um when you work with these partials um what is the most common issues you've seen when you've tried either buying or selling that the they struggle with they struggle to understand besides the math is there anything that the you've seen I mean I've seen the people wondering about the servicer part is it the math the biggest one is there any other concerns or questions people may have when I'm buying the partial it's typically because the person believes or this is their full-time job like myself and you guys so we'd be looking for a different return obviously yeah yeah that's awesome so when we talk about notes and no partials um one of the most common questions we have is what happened with servicing right what what is that what happens there people get kind of flustered right because they're brand new they don't understand it or even sellers like Hey listen I don't want to move do no partials typically stay at the same servicer so they're not every servicer that I know of in our space that we all comment low commonly know I don't know if they all service partials I've only heard of a few of them doing it and doing it well so I just kind of stick to the ones that I know that that do it well and so just for example because I know FCI does a couple of our partials um they they they know how to do it I mean they get in there and they understand the amortization schedule they know how many uh payments that I'm owed and they know how many payments the other person is going to get on the back end and they run they run multiple schedules like you mentioned the three schedules they go ahead and run a schedule for everybody yes that's good so we have a question from Joe okay um relative to the standard full note how much faster or slower is it to sell or buy a parcel so I guess if you're gonna sell a note or buy a note that process what is is it faster or slower to do the same thing with a partial I think it's a little bit slower to buy and sell a partial because it's even more foreign to somebody as opposed to buying or selling a full note is another layer of complexity on it so that's what slows it down it's the explanation and them trusting the fact that this when when somebody explains something to you for the first time and they want you to buy something you're just like you know whoa I need more research right the same thing happens when you're trying to explain a partial to somebody they're gonna they're gonna because they need the cash they don't want to wait to get that boom in the future absolutely um they it we're in a very transactional time in real estate nobody wants cash flow it seems like nobody understands cash flow and nobody wants to build on cash flow it seems like I know I'm making a blanket statement there but it's what I see and it's true everybody wants cash they want to turn over a deal quickly and just get a cash transaction they don't want long-term income so that's the reason why you don't see people selling a lot of parcels especially seller financiers the you know the fix and flippers and the wholesalers and the landlord guys and and the new people to the space because they they want that money in hand that's what they want they don't want long-term income so we don't see a leader pop a lot of people buying partials either because they just don't understand the financial calculator benefits of it I would love to buy all partials yeah everything I buy I would love to buy it my risk is a lot lower I'm in it for a shorter period of time as a fund manager it's the best thing for me and my returns are better so how do you do that as a fund manager because I I haven't been able to get in my head around that at the end of the term of my fund I have to pay back my investors their capital so how do I how do I work partials into the fund you you treat it as if you're just buying that part of the loan you're selling that part of the loan so if you bought a 10-year partial and you're six years into the fund and you have to Sunset it and you got four years left on it well guess what I'm just going to sell those four years so you just resell that whatever is remaining in the partial I'm doing I'm doing it right now with somebody um yeah that's it's no different you don't want to complicate it it's just it's a simple I have an entitlement and that's what I own I'm just selling the rest of what's left of my entitlement so in my case it's a five-year term so I would have to buy something longer than five years so that I can resell whatever's left if you want or you can buy exactly they really do need all the cash up front they want all they cash the entire note that they can get up front because of what they need to do with the next transaction so most people aren't able to um you know they're not able to do a partial on every deal to sell a partial on every deal because they need enough Capital to start doing three or four deals so like when I first start getting into brokering notes I you know what I would try to broker as many as I can and then when I build up enough cash I would go buy a note so then I could start building you know my long-term income for myself so I had to do a balance of both but okay when you're buying it that's usually the biggest pushback is like why I want all the money what why do I just want fifty thousand so not it doesn't fit for everybody but it is it is a tool like we talked about that you need to have in your tool belt ready to use for that situation to solve that problem yeah um so we're going to talk about fair about some kind of bad stuff but I want you guys to make sure that if you have any questions before we go crazy here um to get to our final parts of this before we let Justin go feel free to put in the chat um one of the things we've run into is what are some of the cool options you've seen or tried to put into agreements that maybe different than other people have you done anything that's a little bit strange or unique either if you're selling one or buying one have you tried anything unique at all I mean nothing nothing super fancy I have ideas on my head that I can use the last thing I want to do is just completely make the deal lopsided in my favor that the other person is is holding the other end of the stick and I just I don't want to do a deal like that um you can do a deal like that because you can make design the paper that way but I just want to make it a good deal for everybody so like I said before for me it's about control so if I'm on the buying side of the partial or the selling side of the partial I'm going to make sure the documentation says I'm going to handle the heavy lifting for this and you're just going to receive the cash flow from it or a big boost of income up front typically it's you know I if I'm buying the partial and it does sell off early I want to make sure that I just get the payments that I was buying into so it's almost like a guarantee that I get those payments and I'll say if I bought 10 years of it and it sells off in year six I want to make sure that I get 10 years of payments you know what I'm saying with that interest because I want that ready to return that I that I that I want because that's what I've banked on and that's why I ran my numbers and managing a fund obviously you want to know what that predictability is and on the other side of the fence you know I want to make sure if it sells off early and I'm on the back end of it that you know the person wherever it sells off at that's where you stop the entitlement schedule and they get you know the upb that they're owed for that absolutely awesome so we'll give you a shout out here in a plug uh you're gonna be a node Expo in six weeks oh yeah I'll be there yeah you're speaking at that one I am not speaking unless somebody asked me at the last minute but no I was I'll be observing that weekend so okay well still if people want to come see you in person you'll get me there and I will be the conference so yeah I'll be there as well so we'll we'll and we'll be in a few weeks having uh Bobby pass on they'll be talking more about node Expo for those who are curious in a few weeks we'll be actually having Bob on just to talk more about that if you're curious if that'll be uh we'll be having them on the beginning of October uh and then uh expos in November so yeah first weekend in November so plug Shadow for that uh yeah make sure you check that out as well absolutely so we're always curious we like to kind of finish off these uh these interviews these discussions with with your background and experience and what you've been doing and what you've been seeing where where do you see the note business going where are we headed well I don't have a crystal ball but if my gut tells me don't count on a lot of non-performing loans to come through right now out to Justin the email you'll see the the link inside the chat and uh we'll go from there again we'll disconnect from the live we appreciate everyone tuning in and asking questions thanks everyone see you next time guys um I think if you are have a lot of capital and you really experience I think the non-performing commercial space is going to be a game changer for you next next spring next summer we'll see what happens but that's my anticipation uh we're trying to ramp up our fund to be in that game as well um so there's I can see a lot of turnover happening in the commercial space pretty pretty soon so I think seller financing is is going to continue to be strong ever you know ever since after the the Great Recession uh it's every year it's continue to build to get stronger now people like us are out here educating and being in ambassadors for you know good documentation and good underwriting and how to do things the right way so people like us can buy the paper in the secondary market and then all of us benefit from it yeah that's that's a big push right now and I think it's going to get better all right I think so I think you know collectively we're kind of reaching a lot of people and I think that's a big deal um yeah and I think that's going to continue but no I appreciate your your thoughts on that I agree I think commercial non-performing commercial is uh not far away yeah we did have one other question before we disconnect uh from Andrew asking what if an investor says they want 25k up front and they will pay back in 60 days give payments forward for a period I'm not sure exactly what you mean um we're not doing the eBay dollar today give you a cheeseburger Tuesday kind of thought process it's it's I'm exchanging money for a period of payments um I'm not sure if that clarifies Andrew for you um they don't uh let's say they put 25 Grand up front and it'll be back in 60 days I'm not sure if you want to clarify that we can definitely jump on and it almost sounds like a hard money loan yeah yeah um yeah you could do anything in the note business he said his name was Andrew yeah you can do really anything it's all about documentation and how you run the math and does the deal work for Nathan and me or Dave and Nathan or you know whatever just you know both parties involved gotta greet you just like buying and selling a house the value is what they agree on it's not what uh you know appraiser says it's whatever they agree on yeah as long as everybody understands it and we agree on it you can pretty much do it yeah I I will say one thing I was going to mention uh about what I see happening and what I've been seeing happening is the the evolution of the wholesaler is becoming more of a hybrid wholesaler now to where they're not just a transactional wholesale where they're they're understanding cash flow so we have several wholesalers across the country that are working with us and they're and they're getting mentorship kind of from us on how to set things up and they're able to figure out ways to do deals that other wholesalers can't sell because there's not enough margin in there and so with them creating seller finance notes they're able to do transactional deals with the complexity of a seller finance no and having us buy them kind of at the funding table or the month after not sure that's something new that we've been seeing that probably past two two years a lot more yeah that's cool I like that yeah wholesalers are are different animal now than they were five ten years ago look at the margins everywhere in like you know the Midwest where I live in Indiana the margins are just they're just so thin because fixing flippers they they there's so much cost for them now and they're not making any money I don't know how they're making money right now unless they're doing large projects yeah interesting cool well uh Justin I appreciate you joining us on Friday afternoon oh you're welcome um we'll definitely be in touch I'm sure uh Justin has a great Facebook group he does live feeds make sure you jump in there um and just reach out to him right Justin's been around for a long time he's very knowledgeable um go check him out say hello Expo um and uh if you have any additional questions um go ahead and post it in the feed reach did for years we have to adjust it doesn't work anymore yeah we have to be more creative and whatnot um yeah not in the same way not in the same way it's interesting so last week I was at the IMM conference uh in Dana Point that it's an MPL conference and it's it's really interesting you know you go to a non-performing loan conference and it's I it's in a way you kind of get the feeling like is this still relevant like is it worth doing a whole conference just about non-performing notes in some ways yes in some ways no you know like uh it's the same there's still a lot of opportunity there but it's not the same opportunity it was even five years ago and so yeah you just like you say we got to learn and adjust and figure out what else we can do and on the flip side we've put a focus on the last nine months now uh we've been doing these webinars for over two years and we put a real emphasis on the seller finance Originators doing it correctly but also thinking about different ways that they can do things better to increase their returns yeah um not only creating it correctly but also doing the exit strategy options because I think a lot of times they don't talk about that on the other side and the non-performing world is going to be really interesting because if we do have a bubble most the people who've originated notes in the last two three years haven't seen what we saw for 10 years no exactly exactly it's been a shift and change is good in my opinion you know I I like going and doing different things and figuring out what else you can do and how else you can do it keeps it fresh keeps it interesting uh and so it's it's been good it's been fun to try to figure out different ways that we can do notes because there are so many different ways that you can do this business so we're just pivoting to something else for now absolutely I think for most people we we get what they're trying to do and we just want to help them right if we can help them make a win-win situation uh if it's through you know lending borrowing money on their notes through hypothecation which we've done webinars if it's also doing um these ideas of doing these rap notes and doing correctly so that if you don't get caught by the you know the courts and whatnot um learning how to do a servicing learning how to do a payment structure um we've done due diligence calls we've done a lot of different calls and one of the most fascinating things that is chat about is the fact that the old school numbers are the key to our entire space right it all goes back to math yeah and and you know I think as this week I think I've said to half a dozen people I wish they taught the the financial calculator in high school like this is the calculator we should be learning not the scientific in my opinion yeah so I was even saying to my family like I'm gonna volunteer it won't be this year I don't it's too late next year I'm going to volunteer to go and teach to have a clear career and life management class so I want to go and volunteer to teach at least one class I would do a whole week on the financial calculator show them how it's done and just yeah this is how you can make this work and this is this is something you're going to use for the rest of your life absolutely if you aren't you I do have a course on Advanced cochlear but we also have a bigger breakout in our advanced class that we'll be restarting up in a few months if you answered that let us know but what we've also learned the fact that in numbers right we have our PV our financial calculation our present value our term our interest all those numbers come into play when we buy and sell a note yeah is that you can manipulate those numbers and what most people don't realize is that on the buy side and sell side you can manipulate those numbers very easily for those who are not sophisticated enough to understand yeah and in the in the world we'll be talking today is this idea of you can sell a part of a string of payments and get a return in your IRA or any money or even get started is fascinating well it's gonna say the only thing more interesting than the fact that you can trade notes is that you can trade part of a node what yes it's mind-blowing that there are so many different ways you can do this business and I think people when they realize um what what we mean by that is like listen guys just understand that when you're doing this stuff you are literally able to do anything you want to know as long the numbers work out for you and the buyer but just be really careful when you do this because when you do this and you run the numbers you have to understand what the numbers mean there are some really cool tricks to trade that we've talked about in the past um that you can unless you look at each individual number you can manipulate numbers by excluding one right if we do the 50 50 where you're selling half the payments for half the upb and people say well that makes sense and you realize it equals to a 16 return on average whoa and if you do quarter by quarter you're looking at 32s and stuff like that it you have to understand it and with no investing there's an advanced strategy with notes right and partials which is fascinating because when the notes come out you want to buy 12 months 60 months whatever 10 months of payment or if you want to sell it so for sellers this idea of having a partial is really key because maybe you don't want to pull up all your money you don't want to get rid of the whole no you just want to get a part of it and get some Capital back in your pocket and start going again yeah yeah so and you know what this is such a fascinating topic and I'm glad we're getting into it into it today uh in fact this week uh my wife and I were going through the the agenda and the sponsorships and everything for for DME coming up next June we're still several months out but uh we've actually included in there uh something about partials we want to dive deeper into that hypothecation and some of these more advanced strategies that maybe we don't talk about as often so it expect to hear more about this because it is we'll cover it today we've covered it before this is not the end of this topic yeah this will go on forever um which is awesome so before we let our guests of honor on here um feel free to put all the chats we're live on uh LinkedIn Facebook Twitter or X whatever it is and this will be recording put to YouTube so make sure you take a look at that or and or our podcast um one of the other things I want to say is that this is the first time we've actually had a guest on twice which is fascinating to me I'm like holy goodness um this space is extremely small we all know each other um but it is absolute pleasure uh to bring Justin on here uh Justin I've known for a long time he's been a quiet guy in a space but he's a wealth of knowledge um be sure as we get Justin on here if you get on a phone call Justin he will speak exactly your level but if you need to go and learn he's absolutely great guy to speak to as well Justin welcome man how you been thank you very much I've been doing great it's been a great summer and I was listening to you guys uh talk back and forth and yeah Summers when you have family and you have kids right it's just a whole different dynamic in the summer you don't really get any time off yeah so yeah it's just tough yeah so we always start with our basic questions so Justin how did you get introduced to real estate note investing and how did it all begin yeah this is this is the most famous question when you get you get asked this anybody you meet off the street how in the heck why do you do what you do and yeah all that stuff so I was just like anybody else I was fascinated with HGTV and I really wanted to be hands on with taking a house you know fixing it up a little bit or reselling it making some money and and I thought that could work for me so I took some seminar classes and I started just doing this full-time I I fired my W-2 job and flipped some houses took them down to the studs had some rentals did some wholesaling deals and had some rentals because of it as well and I just I fell flat on my face a couple times lost a bunch of money it's like this what am I doing wrong this isn't working for me and then I just kind of fell into um investing in notes with um with my future Mentor I went through a program called note school and they kind of just turned the light bulb on for me really quickly and realized you know like you guys you love spreadsheets just like I do and I can look at a tape and I can analyze it pretty quickly and figure out what I want to make on a deal and I can learn a lot about the risk pretty quickly without going into too much due diligence and that's what I like to do I don't want to have to depend on contractors and having contractor turnover and opening up a wall finding out there's another code violation I have to fix I mean the list goes on and on I don't know why people flip houses I don't know yeah but I did it I tried it I failed at it God bless anyone that's figured it out and can make a lot of money with it I just don't I couldn't do it so this is where I landed and I am much better off where I am today I'm with you man that's awesome Land Learning became a nightmare for me as well um the whole idea of what we do is as me Nathan we say we're lazy investors if you had a chair um and we crunch numbers right we're back yeah and Banks work in not in properties it was a little real last night and they couldn't get the grasp that we're all about numbers it's all we are it's a numbers game making decisions does the borrow can they re-perform if they can't what can we do about it right it's numbers so it's It's oddly enough somewhat complicated to get and started with notes because the fact that the numbers aren't taught in school like Nathan said earlier right so tell us a little bit about your first understanding of these five big numbers right um the flanger calculator and what does it mean to you now how do you use them why I loved how Nathan talked about teaching this to his local schools and stuff because I actually thought about doing that too but if you get to that first I'm going to send my kids out to Canada to where you're teaching that so they can learn that stuff from you Nathan because that'd be great for them to sit down for a week because I've tried to do it and they don't want to listen to Dad I got a 10 and 12 year old girl and they're too busy with other things going on in their life than to learn about making money or being a financial Savvy yeah you're exactly right the financial calculator is not taught you can be involved in real estate very heavily and still not understand a financial calculator you can get to the note business and this is a foreign language it's a foreign language to you until you get taught the right way how to do it how to understand it how to leverage it how to manipulate it in your favor whether you're buying or selling and it's a beautiful thing but once you learn as long as you got you know the three variables you can solve for the fourth and that's just the key to what I learned so I always solve for term I never put the term in there just because the term is always inaccurate from the beginning to end you guys know the drill when borrow payments early later on time yeah screws up the am schedule yeah absolutely and it's a fascinating thing and it really yeah I think I learned it like my lesson my first lesson on it was like in a in a conference that I was at uh for an hour maybe two and then after that it's just practice practice practice and then you get all kinds of crazy and you start making a spreadsheet like Dave and you take it to like some kind of level of complications what's the old term you know analysis paralysis that was me at first I was just like absolutely oh my God like there's so much I can do with the spreadsheet now and then and then I just had to simplify I said nope yeah I cannot go down that path I got a bispy sure about what I'm doing and understand you know a lot of people try to run numbers in their head and they can get you know within the ballpark of what they're doing but you can't really get accuracy until you run a calculator right and I always run a calculator even if I know the simple answer to it just because I like to deal with pennies you know up to the penny um I'm I'm becoming more of an accounting um Centric mine right now sure because I've been drilled by my accountant and by you know our fractional CFO that helps us out about running the numbers and understanding the reports and stuff so I've I've continued to strive to be more diligent so I'm always going to run it to like you know the the hundred thousands decimal on some of this stuff just so that I have some accuracy with it because I honestly I want to know what I'm making I want to know what I have into it so and then there's times two where I I think it's a simple answer and I'm pretty sure I know what the answer is and then I'll run it in the calculator and then I'm off and I go oh I'm glad I ran into calculator I forgot about that yeah yeah so it's an incredibly useful tool I've got it on my computer on my desktop my laptop my phone like it's everywhere so and I use it daily it's it's a huge part so Justin we've talked to you I'm sure you've seen us we've talked a lot of and you're involved as heavily too A lot of these seller finance Originators right um and what they don't realize that first they have to learn how to structure a note correctly make sure it's underwritten make sure that the paperwork is solid right make sure the terms and stuff like that is inside that note and that they create something with an attorney alongside them and ensure the fact that this legally is something that they can sell or foreclose on post in your experience what have you seen with these seller finance notes that people are watching who just recently create a note or doing that what mistakes have you seen with them with the paperwork and you say I can't buy it because of x y and z um there's there haven't been too many instances where I couldn't buy it because I've learned from my mentors how to fix things through title and before I buy it I can just wipe the Slate clean and just have them sign a new note so in that essence you know I I've been able to work around it but the most common things I see are just simple errors that maybe not heavy real estate attorneys you know draft these documents they're just kind of a little bit in real estate and they'll draft these documents and they'll forget to put what's the first due date don't forget to per what's the maturity date don't forget to put or they'll or they'll concatenate the principal and interest and taxes and insurance into the payment and so you know I I look at it I'd be like is is a judge that's not in our space going to look at this and read it and understand it quickly because that's what he's going to discover and I'm going to be on the opposing side of it I want to make sure that he's going to see quickly that he can read it and enforce it and understand it quickly so that's probably the most common things I see are you typically going back and rewriting that note with the borrower and getting it cleaned up if it's necessary yeah so I'll work with the seller and say hey look just so you know x y and z are wrong you know obviously I'm also doing that to try to lower the price as well but intellectuality we do need to have good paper yes and that's it's for the borrowers benefit as well because the last thing you need is is for the borrower to hold out payment on you uh because honestly it just costs more time and money I'd much rather them be happy and just cash flow it and pay it on time every month than I would for them to try to fight it absolutely yeah so we're talking about today is been something that people get confused on often um could you break down in simple terms what is a no partial for those who either want to sell it why would they sell it what's the advantage you know advantage of selling it and for a buyer what's the eventual buyer who wants you know you may only buy parts for five grand why would you do that and what's the keys to it those are all excellent questions and to answer the first part of your question you know kind of what is it partial and I'm a very literal person so my business partner and I we always you know go back and forth because he's really loose with the terms that he says and I'm very accurate and literal with them so I'm always like no that's not what you said he's like no this is that's what I said so we talk about a partial it's not a fraction of a note it's not fractionalization it's literally if you take an entire am schedule 30 years and like you said before we'll just cut it in half 180 payments and I want to buy those 180 payments well that's what you're looking at you're buying mostly interest and very little principal on the beginning part of that of that note so you're just buying a part of the entitlement I guess is a better way to put it so that's what I say a partial sometimes people think of a partial like oh it's a thousand dollar payment and I'll get 750 of it that's not a partial payment that's a fractionalization and that's not what we do that's that'll be a security a security so let's clarify that I mean if you do five a thousand dollar payment you do 500 500 that's fractional where partial is more a number of payments yeah period of time out of the full yeah yeah I think of the entire entitlement and I'm just buying a part of that entitlement and we'll call that the partial because you're getting the entire thousand dollar at the payments a thousand dollars a month I'm still getting it for 15 years just on 15 year one month it goes to the other it goes back to reverts back to the other person and they get that thousand dollars going going forward so why why does somebody want to sell a partial what's the advantage to somebody selling a partial what's similar to a hypothecation where you're just recapitalizing um so a lot of times fix and flippers that do have great margins in their deals and they sell stuff on seller financing let's say they have a 200 000 mortgage they sold a house for 250 000 they probably have a hundred fifty thousand dollars into it they got a fifty thousand dollar down payment so what's their cost basis now hundred thousand dollars right yeah right so they have a 200 000 mortgage and they have a hundred thousand dollars into it if I just want to repeat and rinse I would just sell a a partial of that note that was just created and just make sure I get that hundred thousand back out of it and so then I have no cost basis in this deal and then I also have the back in the note that's going to revert back to me sometime let's say 10 to 12 years down the road but we all know it's probably going to pay off earlier than that so we'll get a big boom before that so these guys can just take that money and just go reload and do the next project and just keep on building up those little Tails as we call them yeah in the future you just get a big burst of income um so what's your experience so I've I this is something I ran into recently what's your experience with um people who say well I just want to sell like I'm the the idea of a partial uh is troublesome to them because they don't want to take it back after a couple of years they just want to be done with it how do you get around that what's your experience with that I'll buy another another partial there you go right so most people don't realize that if I buy five years of a partial rate and there's 10 years left I could buy the second five years after it's done you know yeah and oddly enough sometimes you make more money that way oh you're leap rocking yourself yeah down the schedule so it's the opposite of us as a consumer having a mortgage and leapfrogging it down the schedule by paying extra payments per month or per year and having a 30-year mortgage go down to you know nine years because we just LeapFrog down the am schedule so we're doing the reverse of that from the bank side and we're only buying a little bit of a time because future cash flow you know is much cheaper to buy it in the future than it is buying it today you know because you'd have to get a bigger discount so it works both ways for the buyer and the seller so the parcel does so if somebody doesn't need all that cash today and they can survive with just the cash flow and they could have you know tax ramifications could be greater if they took all the money up front as opposed to having it stretched out over a longer period of time like an installment sale so those are the advantages for the person selling the partial the the best way I feel to do partials is really in your retirement account because then again if you're using cash you just kind of you have that cash you know future cash out there that profit I just I like it better in the retirement account itself and I like hypothecations with cash doing it that way so let's break that down one of the biggest things that we've run into at partials is this conversation between the hypothecation slash partial of if that partial defaults in year three of five what are some of the ways that that gets resolved or maybe doesn't get resolved maybe the buyer of that partial has to foreclose on it what are some of the ways you've seen both in the cell on the buyer's side of when something in a parcel goes bad well it all comes down on how I document the partial sale so if I have a loan and I want to sell one of you guys a partial of it I'm going to make sure that I stay in control of the deal and I'm going to say if things start going wrong I'm either going to buy it back from you or I'm just going to handle the foreclosure and we're just going to ride this ship together if I am buying the partial again I want to be in control of the deal because I'm typically the note professional and the other person is usually you know a novice note investor and so I'll help guide us down the the best way to get the most return so it's all all the paperwork what are some of the options you've seen what you know have you seen the fact of the buyer typically doing the Foreclosure or you doing things like a buyback or or some kind of different strategy of getting involved and fixing it what are some of the options that note sellers who are out there or no buyers could possibly see all the above it's the beautiful thing about our business is that the documentation is making the rules and every as long as everyone understands the rules and they accept them we can we can have whatever language we want in there as long as it's you know illegal illegal link buying binding document so it's really up to you the most common thing that I've been taught um by Eddie speed is you know he had he has documentation that he's been figuring out for years so he's he's helped me and and his students with figuring out the best ways to be you know as a buyer of a partial versus being a seller of the partial and they're two completely different agreements to where like I said it's about control like if you're the note professional and you're the one that has the most knowledge you just want to make sure you're in control of that deal uh whether you're on the back end of it or the front end of it as the buyer yeah so you said front end and Bot at back end what is Define front and back is it a time period is it is it just defined by the contract what's a front end and what's a back end so loosely we're just we're going by the amateurization schedule and if you just have two people involved in a partial what I just said the front and the back end I was talking about whoever is getting the next set of payments is the front-end investor and whoever gets the future payments is the back end investor or the tail as we also call it some of the servicers that service these partials they they call it something different for example FCI is one of them that we use for partials and they'll say the primary investor is the investor at the back end but the partial investor is the one at the front end so they have different or secondary investors the one on the front end which is kind of unlogicals for how you would think but that's just how they do it so gotcha it makes sense I guess the the original note holder versus the partial note yeah yeah that's true yeah technically the secondary person came in and bought it after the fact so so is there an advantage and also I'm sure you mean to say is also you could buy balloons too so just you can buy any part of a note you want to why would someone buy a front-end versus back end where is the advantages on that so the reason why I would buy a front end of a partial is because typically it's going to be significantly less risk for me because I'm only invested in a fraction of well I won't use the word fraction a part of that entire value of that property so if that property we're just talking about for 250 000 and I had a hundred thousand dollars into it I'm I'm very well protected right so if that property needs to be turned over it's going to be worth well more than 100K as the front end investor I'm the first money and first money out too so it's it's a lot lower risk and potentially it's going to be a little bit higher yield as opposed to buying the entire note because the discount isn't as great on the partial to the person um selling it as it is when they sell the entire paper so you're just thinking about future payment streams and the more the payment streams you buy in the future obviously the larger the discount is and the fewer payments you buy the less that discount looks as well so let's break that down a little bit right so if I'm going to buy either 15 years left of payments but I want to buy year five through year 10.

I have obviously I'm paying more of a discount because future money right what happens if that note pays off in year three before it even gets to me well I probably wouldn't be buying the partial that way I would only want to buy it when the next payment due is the one I'm going to receive because I don't want my money tied up you know obviously until the future I guess you can do that I've never I never tried to do that but that would be my probably my my counter-attack to what you just said so you're saying is that I agree to pay five through ten but when it gets here when it gets to year five then I'll make payment is that more accurate if you wanted to do that I like I said I don't know unless I'm understanding what you're saying I wouldn't do that I would be buying here here one through ten up front and then in the future if I only bought like year one through five and I'd be like okay on year four hey look like you mentioned before Nathan you know this is how we would just keep buying more of a partial so they could get and we've offered that deal up front like here here's optional payments right I can buy the third of it today a third of it and seven years from now and then a third of it you know 12 years from now I'll just keep buying it down for you so I'll give you more than you want for it yeah right because I'm buying it in thirds but I'm also separating you know every seven years I'm buying another chunk so when you run the financial calculator you realize wow I can pay more for it and I'm actually making more money because my money I'm only buying seven years of payments at a time as opposed to buying 21 years of payments so for those who are not familiar with can you explain the different schedules those three schedules are partial what's the three schedules that are most common the a b and c yes so you always have the borrower's amortization as what they go by right that's how they bought the note that excuse me that's how they got the note created and they signed on it so that's that's the one amateurization we'll just call that a uh the second amortization would be us as discounted note buyers buying the entire note at a discount so we would obviously let's say that 200 000 mortgage we bought for 150 000 so we have a new amateurization based on 150 000 to zero all right the same amount of years same amount of terms same amount of months it's just we're stretched longer so then there's more um uh principle being paying down quicker as opposed to the borrow exam station where the the principles pay down a lot slower so now we have the third or the C amortization which will be selling a partial of it so again you're just taking whatever the balance that you're paying at and you're just gonna have you're just gonna amortize it down to zero on however many months you are in the deal because we're assuming most loans are just going by a month as opposed to quarter annual payments so as a seller of a partial what do you prefer do you prefer to sell the front the back what do you typically prefer well I'm going to sell the front of it and keep the back the the my retirement account is is built for it and I would think most people that do this would agree that retirement account is really the best play for the partial uh because you can't touch that money anyways and if you're not gonna retire for 10 to 15 years what better time now than to start when you know you're 50 55 years old and just start selling off notes that are in your retirement account for you know selling off 10-year partials yeah amazing so for a new investor or a new originator it sounds like this is an easy way to buy and sell notes right um get some of the money you can hold the note for long term and you're not really Letting Go the note as a note seller you're still kind of managing it that if it goes bad you jump back in there and kind of fix things up if you need to um and a note buyer you're kind of hands off it's a performing note with a basically a seasoned investor kind of backing you up and walking through if something happens they jump back in there and kind of solve the debts you know you save the day kind of thought process it's um when I was doing a lot of flipping notes and brokering notes a few years back that's typically how I would educate somebody new to the business to get into it is to buy a partial because I'm like your risk is going to significantly lower yes you're not going to make as much yield as you would as you would want to buy the full loan but your risk is really low and you're stepping someone guess what I'm Tethered to you now or Dave or Nathan is Tethered to you now to where you have someone experience that has skin in the game with you and that's the best way to learn is is to be with somebody that has skin in the game that knows what they're doing you can learn a lot I wish we all could have had somebody like that you know when we first started well I'll speak to myself I did I didn't have anybody that was buying the selling me the partial at the beginning but I also had specialized note training but you know if I didn't I would definitely want to have somebody there with me that was go ahead skin the game so then what are some of the pitfalls like what are some of the risks involved with partials well as a as a note professional selling it to somebody I've got to stay on top of managing it if things go wrong and be there to help the the person on the other side of the transaction if something goes bad it'll be a teaching moment for them and be on top of it so it's it's great to run partials on the calculator and the numbers look great and conceptually you know once you get past the foreign language of this it looks pretty easy to do the Second Battle is finding somebody to buy that partial or finding finding uh somebody to sell that partial to you and you know so there's a whole other game to that so it isn't something that you can just flourish and do 100 of the time it's just something that when when it fits you should do it yeah and that's what we learned this note business is like there's no one tool we use every time we know 28 tools and we just figure out which tool we need to use for that job yeah with that investor what can you expect as a new buyer they're probably pretty new what kind of expectation is partial selling at it depends on the on the the time of the decade right so when I first got into this business pretty heavily it was about 2016 and the the no partial for a first-time investor the going uh partial rate was typically around like the six to seven percent yield um as interest rates got lower we noticed that people were able to buy uh partials and stuff at around five percent if you can believe that and then now typically I'm seeing that probably like the seven to eight percent range is kind of common right now so for the first time investor that doesn't have a lot of experience um that doesn't know what they're doing that's typically what they're going to pay for a partial because they're just looking for that steady Eddie passive income uh more seasoned person more advanced person is going to be looking for a bigger appetite there because they're more active in the business and this is their full-time job like myself and you guys so we'd be looking for a different return obviously yeah yeah that's awesome so when we talk about notes and no partials um one of the most common questions we have is what happened with servicing right what what is that what happens there people get kind of flustered right because they're brand new they don't understand it or even sellers like Hey listen I don't want to move do no partials typically stay at the same servicer so they're not every servicer that I know of in our space that we all comment low commonly know I don't know if they all service partials I've only heard of a few of them doing it and doing it well so I just kind of stick to the ones that I know that that do it well and so just for example because I know FCI does a couple of our partials um they they they know how to do it I mean they get in there and they understand the amortization schedule they know how many uh payments that I'm owed and they know how many payments the other person is going to get on the back end and they run they run multiple schedules like you mentioned the three schedules they go ahead and run a schedule for everybody yes that's good so we have a question from Joe okay um relative to the standard full note how much faster or slower is it to sell or buy a parcel so I guess if you're gonna sell a note or buy a note that process what is is it faster or slower to do the same thing with a partial I think it's a little bit slower to buy and sell a partial because it's even more foreign to somebody as opposed to buying or selling a full note is another layer of complexity on it so that's what slows it down it's the explanation and them trusting the fact that this when when somebody explains something to you for the first time and they want you to buy something you're just like you know whoa I need more research right the same thing happens when you're trying to explain a partial to somebody they're gonna they're gonna get uh you know rejection hands come up real quick like well I I don't I'm not ready for this even though it may seem too good to be true on the risk and the rate of return but yeah so it typically will be just a little bit slower it's because of the explanation Factor and then what happens have you had a problem with when that note finalizes the term giving the note back to the buyer or taking it back from taking it back from buyer or giving it back to the seller what typically is that process to make sure that that transfers back to the original note holder servicer servicer servicer and he comes down to the servicer that servicer just needs to know exactly what's going on and then you as the the the you know the CEO of your own business you need to make sure that your vendors are doing what they're supposed to do so just have some sort of uh you know notification on that timed event when it's supposed to happen or about when it's supposed to happen so you can make sure everybody understands what to do surfaces do a great job at the end of the day you're just you that's one loan of the you know ten thousand they have in their facility so you just gotta help you know make sure stuff happens the right way um the best the best news you ever get is when your bank account just gets a lot bigger and you don't know why and you're like okay I like that hit but what just happened yeah so it's happened those are not clear it's the same process to buy a partial there's a purchase sale agreement all those things parts are same right and you want to make sure you run value on the property because you made me a spot where it defaults and your agreement says you take care of that foreclosure so it's not always Cut and Clear right so you make sure you do your own e do all your due diligence however you have some on the back end and say listen I'm kind of stuck on the one part can you look it over and typically a seller who wants to cash out some of their proceeds will have no problem walking through the stuff with you guys because they're going to get fond of money in their hands so we can move forward so a good question Joe I appreciate you jumping in there um with no partials too there are a lot of questions regarding um what is the uh typical process for them to sign up for the servicer does it typically change servicers but from my experience I would keep the same service as that because one of the most common issues when borrowers to fall is when their loan changes hands to a servicer so keep them with that servicer no notifying if you're a seller out there that servicer will inform you as well as your note buyer of what's going on if something happens so they'll notify both parties and both parties usually have access to that portal that right the back end stuff so they get notified of that we've bought and sold partials before it's a great way I think Justin's point on in your eye right because technically you're just sitting there collecting money and you just if something goes wrong you can work things out that way um it's it's better than a performing no because you have someone you can rely on and sometimes you can get cashed out right we've done it where we've taken the accent we had to foreclose on it we've also done the other way the seller may actually be willing to buy you out based on your upb another point just to re reimposite the schedule C tells you how much is payoff so if that loan pays off during that partial guess what happens you literally are gonna get paid the buyer of the partial again their upb and you get the remainder as a seller which works out for everyone um it's amazing this isn't talked about more but what we found me and Nathan talked about these before we don't see a lot of parcels for sale do you think it's people not understanding it or people not I got an answer for this one I got an answer for this one yeah the reason why people don't buy partials that often I think in our business is because um well I'll always to the selling one the reason why people don't sell partials too much in our business is because they need the cash they don't want to wait to get that boom in the future absolutely um they it we're in a very transactional time in real estate nobody wants cash flow it seems like nobody understands cash flow and nobody wants to build on cash flow it seems like I know I'm making a blanket statement there but it's what I see and it's true everybody wants cash they want to turn over a deal quickly and just get a cash transaction they don't want long-term income so that's the reason why you don't see people selling a lot of parcels especially seller financiers the you know the fix and flippers and the wholesalers and the landlord guys and and the new people to the space because they they want that money in hand that's what they want they don't want long-term income so we don't see a leader pop a lot of people buying partials either because they just don't understand the financial calculator benefits of it I would love to buy all partials yeah everything I buy I would love to buy it my risk is a lot lower I'm in it for a shorter period of time as a fund manager it's the best thing for me and my returns are better so how do you do that as a fund manager because I I haven't been able to get in my head around that at the end of the term of my fund I have to pay back my investors their capital so how do I how do I work partials into the fund you you treat it as if you're just buying that part of the loan you're selling that part of the loan so if you bought a 10-year partial and you're six years into the fund and you have to Sunset it and you got four years left on it well guess what I'm just going to sell those four years so you just resell that whatever is remaining in the partial I'm doing I'm doing it right now with somebody um yeah that's it's no different you don't want to complicate it it's just it's a simple I have an entitlement and that's what I own I'm just selling the rest of what's left of my entitlement so in my case it's a five-year term so I would have to buy something longer than five years so that I can resell whatever's left if you want or you can buy exactly what you need that's the beauty of this business you can do whatever you want and we'll talk some more offline because so what are some of the cool tricks or techniques you've learned buying or selling a partial that um you know that could help either a seller or a buyer kind of be more interested in this idea I understand what do they want what is their need what is their problem that you can solve and if a partial is that solution how can I how can I get the numbers in the to where they're going to want to do the deal so I can make it a good return for me but I want to make sure it's a good deal for them because I do want to buy the partial but if I know they need twenty five thousand dollars I better figure out a way to get them twenty five thousand dollars in hand and me to buy a part of that loan to where I still make a good return and that's that's how I would approach it so just for those who are we haven't posted yet but our our next webinar is heavy strictly in the fact that these seller finance people need to see the actual numbers we're going to break down the numbers um with uh rmlo uh Mark Ross next week but I understand that Justin's been doing this for so long and he's done a lot of partials um because of where he came from in his education but the advanced idea of knowing the fact you can buy and sell or if you need money up front you're gonna get a cash flow and if you sell every you know you have a partial that in five six years all of a sudden you're gonna get an influx of money coming in which is awesome and you may not need you may need the money right now to do another deal and all of a sudden now you didn't sell the whole note you only sold part term and you're gonna get a bunch of money in the future so just be knowledgeable that it may be a better deal as a seller because you're gonna get more money because you're gonna get the balance of the payments moving forward in five or ten years so just start running numbers where I'll show you next week about that detail sales um just when we talk about the partial reverse hypothecation we've got a webinar what would you say the biggest difference between a partial and hypothecation or borrowing against a note is if you want cash today and cash flow today do a high qualification if you want cash today and you want cash flow in the future then do the partial the best way I that I do it is the retirement accounts my partial and cash I do hypothecations gotcha so guys out there think about this right if you own if you originated a note and you need we stress a lot because I find these seller finance people out there could take our money and go make 30 40 50 on our money so take advantage of that don't be stuck in a spot where you don't have any Capital it's help just part of it get some Capital back up and go do another stomach do or another older fans with the money you're going to get from this note that you already have and get the payment in the future it's super awesome it's just about unashaying the math and there's a lot of courses out there we've had webinars on it um I do have an advanced class on if you're interested Justin teaches it too you can reach out to all of us and say Hey listen curious about this but if you want to change this calculator you can take advantage of a lot of position you're already in and get cash out quickly the biggest two things is understand the math and make sure your documentation is clean right you gotta make sure that documentation is good and solid and that you're servicing with a license servicer if you're not we can run into problems we have to get that sorted up um when you work with these partials um what is the most common issues you've seen when you've tried either buying or selling that the they struggle with they struggle to understand besides the math is there anything that the you've seen I mean I've seen the people wondering about the servicer part is it the math the biggest one is there any other concerns or questions people may have when I'm buying the partial it's typically because the person believes or they really do need all the cash up front they want all they cash the entire note that they can get up front because of what they need to do with the next transaction so most people aren't able to um you know they're not able to do a partial on every deal to sell a partial on every deal because they need enough Capital to start doing three or four deals so like when I first start getting into brokering notes I you know what I would try to broker as many as I can and then when I build up enough cash I would go buy a note so then I could start building you know my long-term income for myself so I had to do a balance of both but okay when you're buying it that's usually the biggest pushback is like why I want all the money what why do I just want fifty thousand so not it doesn't fit for everybody but it is it is a tool like we talked about that you need to have in your tool belt ready to use for that situation to solve that problem yeah um so we're going to talk about fair about some kind of bad stuff but I want you guys to make sure that if you have any questions before we go crazy here um to get to our final parts of this before we let Justin go feel free to put in the chat um one of the things we've run into is what are some of the cool options you've seen or tried to put into agreements that maybe different than other people have you done anything that's a little bit strange or unique either if you're selling one or buying one have you tried anything unique at all I mean nothing nothing super fancy I have ideas on my head that I can use the last thing I want to do is just completely make the deal lopsided in my favor that the other person is is holding the other end of the stick and I just I don't want to do a deal like that um you can do a deal like that because you can make design the paper that way but I just want to make it a good deal for everybody so like I said before for me it's about control so if I'm on the buying side of the partial or the selling side of the partial I'm going to make sure the documentation says I'm going to handle the heavy lifting for this and you're just going to receive the cash flow from it or a big boost of income up front typically it's you know I if I'm buying the partial and it does sell off early I want to make sure that I just get the payments that I was buying into so it's almost like a guarantee that I get those payments and I'll say if I bought 10 years of it and it sells off in year six I want to make sure that I get 10 years of payments you know what I'm saying with that interest because I want that ready to return that I that I that I want because that's what I've banked on and that's why I ran my numbers and managing a fund obviously you want to know what that predictability is and on the other side of the fence you know I want to make sure if it sells off early and I'm on the back end of it that you know the person wherever it sells off at that's where you stop the entitlement schedule and they get you know the upb that they're owed for that absolutely awesome so we'll give you a shout out here in a plug uh you're gonna be a node Expo in six weeks oh yeah I'll be there yeah you're speaking at that one I am not speaking unless somebody asked me at the last minute but no I was I'll be observing that weekend so okay well still if people want to come see you in person you'll get me there and I will be the conference so yeah I'll be there as well so we'll we'll and we'll be in a few weeks having uh Bobby pass on they'll be talking more about node Expo for those who are curious in a few weeks we'll be actually having Bob on just to talk more about that if you're curious if that'll be uh we'll be having them on the beginning of October uh and then uh expos in November so yeah first weekend in November so plug Shadow for that uh yeah make sure you check that out as well absolutely so we're always curious we like to kind of finish off these uh these interviews these discussions with with your background and experience and what you've been doing and what you've been seeing where where do you see the note business going where are we headed well I don't have a crystal ball but if my gut tells me don't count on a lot of non-performing loans to come through right now um I think if you are have a lot of capital and you really experience I think the non-performing commercial space is going to be a game changer for you next next spring next summer we'll see what happens but that's my anticipation uh we're trying to ramp up our fund to be in that game as well um so there's I can see a lot of turnover happening in the commercial space pretty pretty soon so I think seller financing is is going to continue to be strong ever you know ever since after the the Great Recession uh it's every year it's continue to build to get stronger now people like us are out here educating and being in ambassadors for you know good documentation and good underwriting and how to do things the right way so people like us can buy the paper in the secondary market and then all of us benefit from it yeah that's that's a big push right now and I think it's going to get better all right I think so I think you know collectively we're kind of reaching a lot of people and I think that's a big deal um yeah and I think that's going to continue but no I appreciate your your thoughts on that I agree I think commercial non-performing commercial is uh not far away yeah we did have one other question before we disconnect uh from Andrew asking what if an investor says they want 25k up front and they will pay back in 60 days give payments forward for a period I'm not sure exactly what you mean um we're not doing the eBay dollar today give you a cheeseburger Tuesday kind of thought process it's it's I'm exchanging money for a period of payments um I'm not sure if that clarifies Andrew for you um they don't uh let's say they put 25 Grand up front and it'll be back in 60 days I'm not sure if you want to clarify that we can definitely jump on and it almost sounds like a hard money loan yeah yeah um yeah you could do anything in the note business he said his name was Andrew yeah you can do really anything it's all about documentation and how you run the math and does the deal work for Nathan and me or Dave and Nathan or you know whatever just you know both parties involved gotta greet you just like buying and selling a house the value is what they agree on it's not what uh you know appraiser says it's whatever they agree on yeah as long as everybody understands it and we agree on it you can pretty much do it yeah I I will say one thing I was going to mention uh about what I see happening and what I've been seeing happening is the the evolution of the wholesaler is becoming more of a hybrid wholesaler now to where they're not just a transactional wholesale where they're they're understanding cash flow so we have several wholesalers across the country that are working with us and they're and they're getting mentorship kind of from us on how to set things up and they're able to figure out ways to do deals that other wholesalers can't sell because there's not enough margin in there and so with them creating seller finance notes they're able to do transactional deals with the complexity of a seller finance no and having us buy them kind of at the funding table or the month after not sure that's something new that we've been seeing that probably past two two years a lot more yeah that's cool I like that yeah wholesalers are are different animal now than they were five ten years ago look at the margins everywhere in like you know the Midwest where I live in Indiana the margins are just they're just so thin because fixing flippers they they there's so much cost for them now and they're not making any money I don't know how they're making money right now unless they're doing large projects yeah interesting cool well uh Justin I appreciate you joining us on Friday afternoon oh you're welcome um we'll definitely be in touch I'm sure uh Justin has a great Facebook group he does live feeds make sure you jump in there um and just reach out to him right Justin's been around for a long time he's very knowledgeable um go check him out say hello Expo um and uh if you have any additional questions um go ahead and post it in the feed reach out to Justin the email you'll see the the link inside the chat and uh we'll go from there again we'll disconnect from the live we appreciate everyone tuning in and asking questions thanks everyone see you next time guys so why why does somebody want to sell a partial what's the advantage to somebody selling a partial what's similar to a hypothecation where you're just recapitalizing so a lot of times fix and flippers that do have great margins in their deals and they sell stuff on seller financing let's say they have a 200 000 mortgage they sold a house for 250 000 they probably have a hundred fifty thousand dollars into it they got a fifty thousand dollar down payment so what's their cost basis now a hundred thousand dollars right yeah right so they have a 200 000 mortgage and they have a hundred thousand dollars into it if I just want to repeat and rinse I would just sell a a partial of that note that was just created and just make sure I get that hundred thousand back out of it and so then I have no cost basis in this deal and then I also have the back in the note that's going to revert back to me sometime let's say 10 to 12 years down the road [Music] hey everybody good afternoon I'm Dave put some jkp Holdings alongside me as always Mr Nathan Turner how are you good day good day very good yeah very good so uh things are progressing we're uh doing some more stuff it's been a crazy summer I think everyone I've talked to has been overwhelmed with stuff um it's just been August and September has been a killer for everyone I think just a lot of stuff but how you been every year you know get into summer and then it's juggling family vacations and work and just trying to keep up on everything uh travel all this that but no you know what it's all good it's all part of life yeah yeah and the kids are getting older and stuff like that and in nude space we're always transitioning right and that's one thing I think a lot of people and for us you know been around since 2010 and whatnot it's hard for us to adjust too um because what we did for years we have to adjust it doesn't work anymore yeah we have to be more creative and whatnot um yeah not in the same way not in the same way it's interesting so last week I was at the IMM conference uh in Dana Point that it's an MPL conference and it's it's really interesting you know you go to a non-performing loan conference and it's I it's in a way you kind of get the feeling like is this still relevant like is it worth doing a whole conference just about non-performing notes in some ways yes in some ways no you know like uh it's the same there's still a lot of opportunity there but it's not the same opportunity it was even five years ago and so yeah you just like you say we got to learn and adjust and figure out what else we can do and on the flip side we've put a focus on the last nine months now uh we've been doing these webinars for over two years and we put a real emphasis on the seller finance Originators doing it correctly but also thinking about different ways that they can do things better to increase their returns yeah um not only creating it correctly but also doing the exit strategy options because I think a lot of times they don't talk about that on the other side and the non-performing world is going to be really interesting because if we do have a bubble most the people who've originated notes in the last two three years haven't seen what we saw for 10 years no exactly exactly it's been a shift and change is good in my opinion you know I I like going and doing different things and figuring out what else you can do and how else you can do it keeps it fresh keeps it interesting uh and so it's it's been good it's been fun to try to figure out different ways that we can do notes because there are so many different ways that you can do this business so we're just pivoting to something else for now absolutely I think for most people we we get what they're trying to do and we just want to help them right if we can help them make a win-win situation uh if it's through you know lending borrowing money on their notes through hypothecation which we've done webinars if it's also doing um these ideas of doing these rap notes and doing correctly so that if you don't get caught by the you know the courts and whatnot um learning how to do a servicing learning how to do a payment structure um we've done due diligence calls we've done a lot of different calls and one of the most fascinating things that is chat about is the fact that the old school numbers are the key to our entire space right it all goes back to math yeah and and you know I think as this week I think I've said to half a dozen people I wish they taught the the financial calculator in high school like this is the calculator we should be learning not the scientific in my opinion yeah so I was even saying to my family like I'm gonna volunteer it won't be this year I don't it's too late next year I'm going to volunteer to go and teach to have a clear career and life management class so I want to go and volunteer to teach at least one class I would do a whole week on the financial calculator show them how it's done and just yeah this is how you can make this work and this is this is something you're going to use for the rest of your life absolutely if you aren't you I do have a course on Advanced cochlear but we also have a bigger breakout in our advanced class that we'll be restarting up in a few months if you answered that let us know but what we've also learned the fact that in numbers right we have our PV our financial calculation our present value our term our interest all those numbers come into play when we buy and sell a note yeah is that you can manipulate those numbers and what most people don't realize is that on the buy side and sell side you can manipulate those numbers very easily for those who are not sophisticated enough to understand yeah and in the in the world we'll be talking today is this idea of you can sell a part of a string of payments and get a return in your IRA or any money or even get started is fascinating well it's gonna say the only thing more interesting than the fact that you can trade notes is that you can trade part of a node what yes it's mind-blowing that there are so many different ways you can do this business and I think people when they realize um what what we mean by that is like listen guys just understand that when you're doing this stuff you are literally able to do anything you want to know as long the numbers work out for you and the buyer but just be really careful when you do this because when you do this and you run the numbers you have to understand what the numbers mean there are some really cool tricks to trade that we've talked about in the past um that you can unless you look at each individual number you can manipulate numbers by excluding one right if we do the 50 50 where you're selling half the payments for half the upb and people say well that makes sense and you realize it equals to a 16 return on average whoa and if you do quarter by quarter you're looking at 32s and stuff like that it you have to understand it and with no investing there's an advanced strategy with notes right and partials which is fascinating because when the notes come out you want to buy 12 months 60 months whatever 10 months of payment or if you want to sell it so for sellers this idea of having a partial is really key because maybe you don't want to pull up all your money you don't want to get rid of the whole no you just want to get a part of it and get some Capital back in your pocket and start going again yeah yeah so and you know what this is such a fascinating topic and I'm glad we're getting into it into it today uh in fact this week uh my wife and I were going through the the agenda and the sponsorships and everything for for DME coming up next June we're still several months out but uh we've actually included in there uh something about partials we want to dive deeper into that hypothecation and some of these more advanced strategies that maybe we don't talk about as often so it expect to hear more about this because it is we'll cover it today we've covered it before this is not the end of this topic yeah this will go on forever um which is awesome so before we let our guests of honor on here um feel free to put all the chats we're live on uh LinkedIn Facebook Twitter or X whatever it is and this will be recording put to YouTube so make sure you take a look at that or and or our podcast um one of the other things I want to say is that this is the first time we've actually had a guest on twice which is fascinating to me I'm like holy goodness um this space is extremely small we all know each other um but it is absolute pleasure uh to bring Justin on here uh Justin I've known for a long time he's been a quiet guy in a space but he's a wealth of knowledge um be sure as we get Justin on here if you get on a phone call Justin he will speak exactly your level but if you need to go and learn he's absolutely great guy to speak to as well Justin welcome man how you been thank you very much I've been doing great it's been a great summer and I was listening to you guys uh talk back and forth and yeah Summers when you have family and you have kids right it's just a whole different dynamic in the summer you don't really get any time off yeah so yeah it's just tough yeah so we always start with our basic questions so Justin how did you get introduced to real estate note investing and how did it all begin yeah this is this is the most famous question when you get you get asked this anybody you meet off the street how in the heck why do you do what you do and yeah all that stuff so I was just like anybody else I was fascinated with HGTV and I really wanted to be hands on with taking a house you know fixing it up a little bit or reselling it making some money and and I thought that could work for me so I took some seminar classes and I started just doing this full-time I I fired my W-2 job and flipped some houses took them down to the studs had some rentals did some wholesaling deals and had some rentals because of it as well and I just I fell flat on my face a couple times lost a bunch of money it's like this what am I doing wrong this isn't working for me and then I just kind of fell into um investing in notes with um with my future Mentor I went through a program called note school and they kind of just turned the light bulb on for me really quickly and realized you know like you guys you love spreadsheets just like I do and I can look at a tape and I can analyze it pretty quickly and figure out what I want to make on a deal and I can learn a lot about the risk pretty quickly without going into too much due diligence and that's what I like to do I don't want to have to depend on contractors and having contractor turnover and opening up a wall finding out there's another code violation I have to fix I mean the list goes on and on I don't know why people flip houses I don't know yeah but I did it I tried it I failed at it God bless anyone that's figured it out and can make a lot of money with it I just don't I couldn't do it so this is where I landed and I am much better off where I am today I'm with you man that's awesome Land Learning became a nightmare for me as well um the whole idea of what we do is as me Nathan we say we're lazy investors if you had a chair um and we crunch numbers right we're back yeah and Banks work in not in properties it was a little real last night and they couldn't get the grasp that we're all about numbers it's all we are it's a numbers game making decisions does the borrow can they re-perform if they can't what can we do about it right it's numbers so it's It's oddly enough somewhat complicated to get and started with notes because the fact that the numbers aren't taught in school like Nathan said earlier right so tell us a little bit about your first understanding of these five big numbers right um the flanger calculator and what does it mean to you now how do you use them why I loved how Nathan talked about teaching this to his local schools and stuff because I actually thought about doing that too but if you get to that first I'm going to send my kids out to Canada to where you're teaching that so they can learn that stuff from you Nathan because that'd be great for them to sit down for a week because I've tried to do it and they don't want to listen to Dad I got a 10 and 12 year old girl and they're too busy with other things going on in their life than to learn about making money or being a financial Savvy yeah you're exactly right the financial calculator is not taught you can be involved in real estate very heavily and still not understand a financial calculator you can get to the note business and this is a foreign language it's a foreign language to you until you get taught the right way how to do it how to understand it how to leverage it how to manipulate it in your favor whether you're buying or selling and it's a beautiful thing but once you learn as long as you got you know the three variables you can solve for the fourth and that's just the key to what I learned so I always solve for term I never put the term in there just because the term is always inaccurate from the beginning to end you guys know the drill when borrow payments early later on time yeah screws up the am schedule yeah absolutely and it's a fascinating thing and it really yeah I think I learned it like my lesson my first lesson on it was like in a in a conference that I was at uh for an hour maybe two and then after that it's just practice practice practice and then you get all kinds of crazy and you start making a spreadsheet like Dave and you take it to like some kind of level of complications what's the old term you know analysis paralysis that was me at first I was just like absolutely oh my God like there's so much I can do with the spreadsheet now and then and then I just had to simplify I said nope yeah I cannot go down that path I got a bispy sure about what I'm doing and understand you know a lot of people try to run numbers in their head and they can get you know within the ballpark of what they're doing but you can't really get accuracy until you run a calculator right and I always run a calculator even if I know the simple answer to it just because I like to deal with pennies you know up to the penny um I'm I'm becoming more of an accounting um Centric mine right now sure because I've been drilled by my accountant and by you know our fractional CFO that helps us out about running the numbers and understanding the reports and stuff so I've I've continued to strive to be more diligent so I'm always going to run it to like you know the the hundred thousands decimal on some of this stuff just so that I have some accuracy with it because I honestly I want to know what I'm making I want to know what I have into it so and then there's times two where I I think it's a simple answer and I'm pretty sure I know what the answer is and then I'll run it in the calculator and then I'm off and I go oh I'm glad I ran into calculator I forgot about that yeah yeah so it's an incredibly useful tool I've got it on my computer on my desktop my laptop my phone like it's everywhere so and I use it daily it's it's a huge part so Justin we've talked to you I'm sure you've seen us we've talked a lot of and you're involved as heavily too A lot of these seller finance Originators right um and what they don't realize that first they have to learn how to structure a note correctly make sure it's underwritten make sure that the paperwork is solid right make sure the terms and stuff like that is inside that note and that they create something with an attorney alongside them and ensure the fact that this legally is something that they can sell or foreclose on post in your experience what have you seen with these seller finance notes that people are watching who just recently create a note or doing that what mistakes have you seen with them with the paperwork and you say I can't buy it because of x y and z um there's there haven't been too many instances where I couldn't buy it because I've learned from my mentors how to fix things through title and before I buy it I can just wipe the Slate clean and just have them sign a new note so in that essence you know I I've been able to work around it but the most common things I see are just simple errors that maybe not heavy real estate attorneys you know draft these documents they're just kind of a little bit in real estate and they'll draft these documents and they'll forget to put what's the first due date don't forget to per what's the maturity date don't forget to put or they'll or they'll concatenate the principal and interest and taxes and insurance into the payment and so you know I I look at it I'd be like is is a judge that's not in our space going to look at this and read it and understand it quickly because that's what he's going to discover and I'm going to be on the opposing side of it I want to make sure that he's going to see quickly that he can read it and enforce it and understand it quickly so that's probably the most common things I see are you typically going back and rewriting that note with the borrower and getting it cleaned up if it's necessary yeah so I'll work with the seller and say hey look just so you know x y and z are wrong you know obviously I'm also doing that to try to lower the price as well but intellectuality we do need to have good paper yes and that's it's for the borrowers benefit as well because the last thing you need is is for the borrower to hold out payment on you uh because honestly it just costs more time and money I'd much rather them be happy and just cash flow it and pay it on time every month than I would for them to try to fight it absolutely yeah so we're talking about today is been something that people get confused on often um could you break down in simple terms what is a no partial for those who either want to sell it why would they sell it what's the advantage you know advantage of selling it and for a buyer what's the eventual buyer who wants you know you may only buy parts for five grand why would you do that and what's the keys to it those are all excellent questions and to answer the first part of your question you know kind of what is it partial and I'm a very literal person so my business partner and I we always you know go back and forth because he's really loose with the terms that he says and I'm very accurate and literal with them so I'm always like no that's not what you said he's like no this is that's what I said so we talk about a partial it's not a fraction of a note it's not fractionalization it's literally if you take an entire am schedule 30 years and like you said before we'll just cut it in half 180 payments and I want to buy those 180 payments well that's what you're looking at you're buying mostly interest and very little principal on the beginning part of that of that note so you're just buying a part of the entitlement I guess is a better way to put it so that's what I say a partial sometimes people think of a partial like oh it's a thousand dollar payment and I'll get 750 of it that's not a partial payment that's a fractionalization and that's not what we do that's that'll be a security a security so let's clarify that I mean if you do five a thousand dollar payment you do 500 500 that's fractional where partial is more a number of payments yeah period of time out of the full yeah yeah I think of the entire entitlement and I'm just buying a part of that entitlement and we'll call that the partial because you're getting the entire thousand dollar at the payments a thousand dollars a month I'm still getting it for 15 years just on 15 year one month it goes to the other it goes back to reverts back to the other person and they get that thousand dollars going going forward so why why does somebody want to sell a partial what's the advantage to somebody selling a partial what's similar to a hypothecation where you're just recapitalizing um so a lot of times fix and flippers that do have great margins in their deals and they sell stuff on seller financing let's say they have a 200 000 mortgage they sold a house for 250 000 they probably have a hundred fifty thousand dollars into it they got a fifty thousand dollar down payment so what's their cost basis now hundred thousand dollars right yeah right so they have a 200 000 mortgage and they have a hundred thousand dollars into it if I just want to repeat and rinse I would just sell a a partial of that note that was just created and just make sure I get that hundred thousand back out of it and so then I have no cost basis in this deal and then I also have the back in the note that's going to revert back to me sometime let's say 10 to 12 years down the road but we all know it's probably going to pay off earlier than that so we'll get a big boom before that so these guys can just take that money and just go reload and do the next project and just keep on building up those little Tails as we call them yeah in the future you just get a big burst of income um so what's your experience so I've I this is something I ran into recently what's your experience with um people who say well I just want to sell like I'm the the idea of a partial uh is troublesome to them because they don't want to take it back after a couple of years they just want to be done with it how do you get around that what's your experience with that I'll buy another another partial there you go right so most people don't realize that if I buy five years of a partial rate and there's 10 years left I could buy the second five years after it's done you know yeah and oddly enough sometimes you make more money that way oh you're leap rocking yourself yeah down the schedule so it's the opposite of us as a consumer having a mortgage and leapfrogging it down the schedule by paying extra payments per month or per year and having a 30-year mortgage go down to you know nine years because we just LeapFrog down the am schedule so we're doing the reverse of that from the bank side and we're only buying a little bit of a time because future cash flow you know is much cheaper to buy it in the future than it is buying it today you know because you'd have to get a bigger discount so it works both ways for the buyer and the seller so the parcel does so if somebody doesn't need all that cash today and they can survive with just the cash flow and they could have you know tax ramifications could be greater if they took all the money up front as opposed to having it stretched out over a longer period of time like an installment sale so those are the advantages for the person selling the partial the the best way I feel to do partials is really in your retirement account because then again if you're using cash you just kind of you have that cash you know future cash out there that profit I just I like it better in the retirement account itself and I like hypothecations with cash doing it that way so let's break that down one of the biggest things that we've run into at partials is this conversation between the hypothecation slash partial of if that partial defaults in year three of five what are some of the ways that that gets resolved or maybe doesn't get resolved maybe the buyer of that partial has to foreclose on it what are some of the ways you've seen both in the cell on the buyer's side of when something in a parcel goes bad well it all comes down on how I document the partial sale so if I have a loan and I want to sell one of you guys a partial of it I'm going to make sure that I stay in control of the deal and I'm going to say if things start going wrong I'm either going to buy it back from you or I'm just going to handle the foreclosure and we're just going to ride this ship together if I am buying the partial again I want to be in control of the deal because I'm typically the note professional and the other person is usually you know a novice note investor and so I'll help guide us down the the best way to get the most return so it's all all the paperwork what are some of the options you've seen what you know have you seen the fact of the buyer typically doing the Foreclosure or you doing things like a buyback or or some kind of different strategy of getting involved and fixing it what are some of the options that note sellers who are out there or no buyers could possibly see all the above it's the beautiful thing about our business is that the documentation is making the rules and every as long as everyone understands the rules and they accept them we can we can have whatever language we want in there as long as it's you know illegal illegal link buying binding document so it's really up to you the most common thing that I've been taught um by Eddie speed is you know he had he has documentation that he's been figuring out for years so he's he's helped me and and his students with figuring out the best ways to be you know as a buyer of a partial versus being a seller of the partial and they're two completely different agreements to where like I said it's about control like if you're the note professional and you're the one that has the most knowledge you just want to make sure you're in control of that deal uh whether you're on the back end of it or the front end of it as the buyer yeah so you said front end and Bot at back end what is Define front and back is it a time period is it is it just defined by the contract what's a front end and what's a back end so loosely we're just we're going by the amateurization schedule and if you just have two people involved in a partial what I just said the front and the back end I was talking about whoever is getting the next set of payments is the front-end investor and whoever gets the future payments is the back end investor or the tail as we also call it some of the servicers that service these partials they they call it something different for example FCI is one of them that we use for partials and they'll say the primary investor is the investor at the back end but the partial investor is the one at the front end so they have different or secondary investors the one on the front end which is kind of unlogicals for how you would think but that's just how they do it so gotcha it makes sense I guess the the original note holder versus the partial note yeah yeah that's true yeah technically the secondary person came in and bought it after the fact so so is there an advantage and also I'm sure you mean to say is also you could buy balloons too so just you can buy any part of a note you want to why would someone buy a front-end versus back end where is the advantages on that so the reason why I would buy a front end of a partial is because typically it's going to be significantly less risk for me because I'm only invested in a fraction of well I won't use the word fraction a part of that entire value of that property so if that property we're just talking about for 250 000 and I had a hundred thousand dollars into it I'm I'm very well protected right so if that property needs to be turned over it's going to be worth well more than 100K as the front end investor I'm the first money and first money out too so it's it's a lot lower risk and potentially it's going to be a little bit higher yield as opposed to buying the entire note because the discount isn't as great on the partial to the person um selling it as it is when they sell the entire paper so you're just thinking about future payment streams and the more the payment streams you buy in the future obviously the larger the discount is and the fewer payments you buy the less that discount looks as well so let's break that down a little bit right so if I'm going to buy either 15 years left of payments but I want to buy year five through year 10.

I have obviously I'm paying more of a discount because future money right what happens if that note pays off in year three before it even gets to me well I probably wouldn't be buying the partial that way I would only want to buy it when the next payment due is the one I'm going to receive because I don't want my money tied up you know obviously until the future I guess you can do that I've never I never tried to do that but that would be my probably my my counter-attack to what you just said so you're saying is that I agree to pay five through ten but when it gets here when it gets to year five then I'll make payment is that more accurate if you wanted to do that I like I said I don't know unless I'm understanding what you're saying I wouldn't do that I would be buying here here one through ten up front and then in t....