How to Create Notes Properly and Balance Real Estate Success with Life | Real Estate Notes Show

Episode: Balancing Act: Mastering Note Creation and Personal Life in Real Estate Investing Dave's Goals and Plans: - Bought plane tickets for DME Diversified Mortgage Exchange event a week and a half ago - Promoting early bird ticket pricing that runs out next Tuesday - Launched an ebook on due diligence available on their website - Planning to attend DME event Thursday and stay through the week Nathan's Goals and Plans: - Heard perspective on work-life balance from someone years ago that helped him - Continues to see notes coming in that are not done properly - Finds notes in the market that cannot be purchased because foreclosure is not possible due to improper documentation Key Recommendations: - Create notes properly upfront to ensure legal enforceability and foreclose ability if needed - Abandon the concept of perfect work-life balance - instead use spinning plates analogy to prioritize attention where needed - Securitize notes to industry standard (Fannie Mae/Freddy Mac standards) to maximize exit strategies and sale value - Get tickets to DME event early to save money before pricing increases next Wednesday - Properly document notes to plan for future contingencies 2-5-10 years down the road Topics Discussed: - Work-life balance juggling during summer with kids, family, and business responsibilities - ARM/RMO work and creative financing in real estate note investing - Importance of proper note creation and documentation for legal enforceability - Reasons for selling notes: lump sum cash needs, medical expenses, school costs, home renovations - Foreclosure challenges when notes are improperly documented - DME Diversified Mortgage Exchange event coming up in one month - Note securitization standards and exit strategies Guest Insights: - Nick is a licensed lender operating in 23 states plus DC with 5 years in ARML/DSCR loan business - Personally owns 10 different businesses, has 40-agent real estate company in Miami, and has been real estate investing for 10+ years - Invested over $1 million to obtain state licenses to become direct lender rather than just broker - Goal is to move up the value chain to provide better rates, terms, and creative options for clients rather than increase own profits - Notes should be standardized (Fannie/Freddy format) to be securitizable and provide proper exit strategies welcome back everyone to another uh real estate notes show um your host Dave puts and actually we'll be talking today about originating notes in creative financing and talking about rmo work from a broad scale but before I get along get too far ahead of myself my co-host Mr Turner how are you man good really good oh it's been time year it's that time of year it's a it we yeah it's been a busy week but it's been good it's been good yeah so I think for us is just kind of really getting into the thick of things in the summertime right and for those out there I'm sure you're juggling kids and family and birthdays and holidays as well as a not spot you know that kind of area is sometimes a little bit difficult to juggle all of it um it can be tough we definitely kind of help you through it in the process for sure one of the areas we've been hearing a lot from people out there is this whole idea about armal low and unsure about what it all means yeah yeah and it's a tough one um going back you know for those trying to figure out that work life balance I I heard something a couple years ago that helped put it in perspective for me there's no such thing there's no such thing as perfect balance so don't don't try to get there because there is no such thing uh the guy that I was listening to he talked about it being spinning plates you you those circus guys that have the spinning plates you spin one plate that's your work life you spin another plate that's your home life you do another plate that's your hobbies you know another plate that's whatever different things you're doing at different times each one of those things is going to need more attention so you spend the time on the thing that needs attention at that time and then you move on to the next that's B sense yeah so it's not like one thing just rocks and roll right you're juggling you're constantly juggling all of it and how you juggle is the biggest question constantly but yeah rmos so we've talked a lot about um just in those last probably year and a half a lot about people that are originating notes and creating notes and just the importance of doing it properly uh because we've seen we continue to see notes where they're they're coming in and they're just they're just not done properly they're not done in a way that will get you the best uh the best purchase price yeah so if you're doing it properly if you do it the right way we'll actually pay you more so back up there right why do someone want to sell a note right why is this matter and for me you don't have to ever sell a note you can create these and do really good job creating all these assets yeah and this show is not this episode is not only about selling it not but creating it in a way that's legal for the fact that if you ever have this note default you're backed Behind law and security the fact that you can literally turn around and foreclose on the borrower we're finding a lot of paper out there we can't even buy because we know we can't foreclose on it right right that's the issue and why does somebody want to sell a note so here's an example so I went to Tom Henderson's uh class here a couple months ago and he told us about how I mean Tom's a legend he's been around forever I mean he's a guy that I aspire to be like and he was talking about how uh he had a bunch of notes and he's got you know monthly income coming in fantastic and then he had pneumonia three times in one year that added a whole bunch of medical expenses that he wasn't planning on so in order to get a more lumps of cash that he needed right then he sold some notes that could be a reason that you might want to sell some notes just because you need a lump sum of cash for who knows what kids going off to school you want to renovate the kitchen I mean who knows what there's all kinds of different reasons you'll need a lump sum today uh where it makes it worth it for you to go out and sell a note yeah and I think that most people if they want to recapitalize that there's all kind of reasons to sell a note but I think you don't want to remove that exit strategy yeah that ex possibility of need to get Capital needs to be there right right and and besides the selling part like we were saying before like what about a foreclosure what if they they stop paying and then you have to go through the legal process if your Note is not done properly you're gonna have a very difficult time for closing uh and that's going to be all kinds of yeah trouble that you just don't want so if you can do it properly upfront you can plan for all these things that are going to happen two five 10 years down the road that you could never foresee and a lot of misinformation out there about what is it like to create a notes correctly right you anyone can create a note wrong I think that correctly part is really really um big on stuff right make sure uh that's available right yeah so so one more thing before we bring our guest on here DME Diversified mortgage X it's coming up uh you you want to get your tickets sooner than later early bird pricing runs out on Tuesday next week that is the last day to get early bird pricing so get your tickets uh use Dave's link but make sure you get your tickets because that's it's coming up soon if you want to spend an extra hundred bucks next Wednesday okay I'm okay with that but but save yourself money uh get your tickets sooner than later and your hotel also those out there uh we just want launched our um ebook for due diligence yeah if you are curious about that please feel free to jump in there um and uh take a look at that on our website well um with that said we have our ebook out there exciting that's good so the DME is coming up in a month just over a month hopefully find in there take a look at that um I actually just bought my plane tickets yesterday so I bought mine yeah week and a half ago everything's good I'm locked in go Thursday and whatnot so yeah exciting it's gon be good yeah absolutely let's bring him in Nick sorry about the little confusion here I'm not sure my internet whatever going on but we'll figure it out so Nick I think we what most people are looking to find out more about you is who are you right who are you most people like ourselves never heard of you right and it's amazing to hear that there's this space is small as I'm sure you know to hear about there's someone out there that is licensed in this many states doing armal work is awesome and I know this isn't always um a field you're in but I'm sure that our group our tribe will kind of find you and then go from there yeah well thank you guys for having me but yeah I'm uh definitely uh seasoned real estate investor and that's what brought me into this industry uh but right now I'm a licensed lender and uh we're actually in 23 States and then DC so 24 total uh that we can cover and we love to work with investors so definitely love to speak with your crowd here yeah not our typical investors right we're typically looking at the takeout end of things and uh financing out of uh short-term or seller finance notes or other creative financing but I'm always is interested in helping our clients get into creative financing as well and I actually have a uh uh I'm on the other end as well I actually have a commercial space with seller financing so as a investor I take advantage of your clients here uh when it's when it's out there right so I have a a commercial space that's actually a restaurant nightclub where I got a seller finance note at 6% so obviously not the rates that you guys want to hear about uh that was quite a while ago but definitely in the space personally uh so I've been investing for over 10 years uh and as I mentioned have some seller finance done all kinds of creative Finance second Finance all kinds of different ways that I do it myself to get creative uh don't own any notes myself so I appreciate all you guys doing that end of things yeah um but yeah that's what brought me into real estate I have a real estate company here in Miami called Miami real estate agency with about 40 agents and then uh also the mortgage companies kind of the the fruition of being an investor for over 10 years getting into doing my own uh real estate purchases sales all that stuff for any flips I'm doing and then obviously the natural progression was to get into the finance in but you know more of the traditional Finance uh is is kind of where I come from so not afraid to get licenses and all that stuff been doing that for many years and uh not afraid to start businesses a lot of different businesses I have I own about 10 different uh businesses and all kind different Industries but real estate's kind of my mojo so come from uh being an investor for over 10 years myself and uh definitely love to do it for everybody else and and spread the word out there for people to get creative and use people like you guys so I'm definitely into it I just uh haven't been on this side of thing so I appreciate you guys having me on so how long ago did you get into actually the the armal work in that business of creating these DSS dscr loans how long youve been doing that kind of work uh so it's been about five years now so I started uh I do I have a lead generation company so I do a lot of lead generation uh and I was hired by a bank and the bank FDIC Bank was all 50 states and it was uh very easy to advertise you know nationally uh but as my interest was investor based and uh that's kind of where I was leaning towards we didn't have outlets for investors right so uh the bank space was not creative for me it was not conducive for my clients and my typical investors out there uh so we built a big team at a broker shop um because we were generating millions of dollars in business but it wasn't the types of business that we really wanted to do so we took that to a broker model where we could find all kinds of different creative outlets and had hundreds of different lenders and Banks and everybody we would work with and uh then that came into doing it uh again kind of working my way up to Totem Pole right I love to work uh and get the chain so we went from broker to brokering to now being our own lender and paying for all those licenses you know I had to put up over a million dollars just to get the licenses right so you guys can all take advantage of that million dollars that I had to put up just to pass the compliance to get the state licenses and uh yeah just keep growing so we're we're into growing me and my partners are into Investments ourselves so we're into I guess kind of getting to the core of it right moving our way up the food chain and we can continue to move our way up the food chain uh as we as we grow so we're excited to take our people with us and our clients with us and we're all about giving our benefit to our clients right we're not going up the food chain to make more money for ourselves we're going up the food chain so that our clients can make more money on their deals get better rates and terms and uh more creative options for our clients that then allow them to get more uh you know basically liquidity is really what we're all about here right so absolutely the biggest m M AK people who are creating these notes or gathering information what is some of the biggest mistakes you've seen in the space of these creation of notes uh well I mean I would say first off there's definitely a whole uh you know Continuum of these notes right I mean I've seen onepage notes to you know full on uh you know standard notes that we have so my goal is always to try to uh securitize a loan right so this is probably something you guys aren't really used to you guys AR really thinking about and Nathan brought it up earlier about having an exit strategy so the way that we uh basically uh position our notes is it so there's they're securitized right so it needs to be standard usually Fanny or Freddy is kind of the standard uh industry note so we need to make sure ours is standard but then every investor wants a little nuance and stuff so uh you guys should all be thinking kind of the same right so we're protecting ourselves we're paying law firms to make sure the right note that the right language is there so that we can then sell that to a larger correspondent usually that then securitizes it so if the note's not securitized then it's really you're not going to have those exit strategies that you really want so uh for me looking at these creative notes when we're taking people out of them right I don't really see them getting created like you guys do but when we're taking people out um uh it is interesting when you know they're they're not really standard and I have a feeling that uh that you guys deal with this all the time where people are put themselves at risk as you mentioned not being able to foreclose properly or not being able to then get out of it if they need to resell it uh so um I'm sure those are some of your challenges but again I haven't been there myself but coming from the other end uh that's what I could see uh being the biggest mistakes because I wouldn't want that note right I'm taking them out of a note and putting them in a note that can be securitized and can be fully enforcable fully foreclosed in all different states and that's what our license is for that you mentioned before so I mean I would uh recommend to your listeners to put the themselves in my shoes right you would want to securitize it the same way I do right I I would say and make sure your Note is ready to go if that day comes as Nathan mentioned when you get sick and needs to go get top dollar for it and uh you did mention some due diligence I don't know what due diligence your guys are doing on average because I don't even really see that right I see the note I see the payoff that's really all I see on the takeout end right uh but I don't know what due diligence your your people are doing UPF front I would recommend uh they also do more of that and you guys mentioned you had a book on that um yeah so there's two different due diligence right now right there's the lender side of due diligence where they're valuing the borrower right they get the house to secure the property they get the information about the house they fix it up whatever they do with it and then they go ahead and you know find a borrower to fit the house they come the terms make sure the borrower is underwritten make sure that the borrower is you know the dod Frank rules are in place to make sure the DTI is good down payment's good everything is there in place for them to really kind of move forward um but from the no buying side we're doing it Mak sure the paperwork collat right making sure that these you know what's going on with the Bor in the past what's going on now are they paying and they not paying um are we foreclosing what's the status of foreclosure is the collateral file solid um you know what's what other leans on the property yeah yeah what state it is in do we need any licensing for that State uh yeah what's current interest rate when the last time they made a payment what's been their pay history over time can we see if they've made on time payments all the time or have there been some late payments in there like that that's the kind of things that we're looking at when we're looking at buying a note yeah so I don't know how much uh you guys really standardize that right and that's kind of where I'm coming in is trying to standardize that and uh sure hopefully your your your uh your groups can can take a page out of our book and standardizing that as much as they can and I think that would be the problem with standardization in our space is you you know you have a borrower who's maybe an i 10 borrower one with you know bad history um maybe not W2 so the bank typical process of of underwriting these borrowers are extremely difficult um I think where you fit in the puzzle is that there are Underwriters who will underwrite these kind of notes what they don't have is that person turn around and say I need that license origination person to go in there and originate that note where the underwritten process maybe a little bit it it's a little oldfashioned right you may need like okay you have to pay off this cell phone to do this or hey the W2 is older they don't qualify for the typical Fanny and Freddy products and that's where our space comes in where we'll buy that note if it's secured right but the underwritten underwriting is not a rer stamp process yeah yeah exactly we we do that uh with our non-qm program so we deal with a lot of I 10 foreign National everything that you know your standard stuff doesn't do so there are a lot of uh uh you know Outlets you know we call them my investors right that are buying the notes from me uh right that uh that have these written programs so the closer you guys and your clients can get to those written programs uh the closer they'll get to being securitized right because I'm selling them to the guys that are securitizing uh these dscr notes and bulk so uh the more they can do uh the better and the dscr there's a big appetite right now as well in secondary uh so I know you guys kind of have your own pool right and your own thing but for those people that are looking maybe have a large uh you know portfolio of notes uh you know if they have done the proper due diligence and they are truly securitized notes uh you can make some big bucks uh Upstream because the appetite for DSR is just crazy right now and there's not a lot of people uh doing activity right so activity is still down uh but dscr is just hungry right the dscr rates are coming I did a I do a show every morning I know you you d your people don't uh listen but we do our daily rates and conventional investment is more expensive Fanny May is more expensive today right now for me to do a 30-year Fanny May investment than a uh 30-year dscr with a three-year prepit right so threee pre is pretty standard and we're beating it by just a hair but it's been like that for the last three weeks right so the dscr secondary is really hungry so if you can standardize at least to that it's it's pretty easy right so dscr is pretty easy to standardized the I 10 stuff that is that is difficult as you mentioned that's uh very hard to get a one written program that works for all the banks and Outlets it's just not going to happen uh so you do have to have some flexibility within there but the dscr that is becoming a very large secondary market and it's having I guess I would say the most positive activity when the rest of the market is kind of coming uh you know gotcha the sky is falling right every every head you see in the in the major news is the sky is falling with rates but thecr just keeps coming closer and cl closer to to the conventional stuff everybody's used to so that's where that's where my head's at is dscr all the way if I was you guys I would be trying to securitize everything as close to the industry standard of DCR as close to one dscr as you can and uh you know that also means you probably got to really work with uh actually seeing who's leasing up the the space and making sure they're leased out and and and ready to go but once you have those assets and they're actually leased then you could really really securitize them uh for some big money especially at the rates you guys get is crazy right that you guys write the notes that so couple things there so let's go back and and for those of our listeners who don't know what dscr is can you explain what that is what that stands for and how's that different so DCR is our favorite loan so that's debt service coverage ratio and basically no income no employment so it allows us to do it uh business purpose loans which I'm sure a lot of you guys are you know uh the people that are not licensed as you mentioned are trying to fall in that category where you can kind of get away with it right uh so we do a lot of those but dscr is typically business purpose uh which allows a lot of flexibility uh with secondary and the laws and all that stuff a lot of flexibility with licensing uh but it's no income no employment just the estimated rents from the appraisal versus the expenses right the P Tia of the mortgage and the expenses for the property so as long as the property cash flows that's a super liquid investment anything over a one DSR that cash flows monthly uh is basically going to be a a solid note if you have a prepayment penalty uh anything without a prepayment penalty is not going to be as attractive and it's going for uh less than conventional but anything with a prepayment penalty three to five years is going to be sold on secondary for a higher price than Fanny which is just it's never really happened before right and as far as I've been only doing this uh maybe five years uh but you know there's been a lot of liquidity and it's never been like this right and dscr is uh kind of the uh the name of the game I guess I would say where all of the investors saying this is where our money needs to go this is where the growth is this is where the opportunity is uh you know especially when conventionals dying up I'm sure they'll change their tune once uh once we get some some more action but uh for right now just a little more clarity on the dscr right most people here are doing Residential Properties right if a comes to you and wants to create a loan with a borrower who lives in the home would you consider a dscr n we can't do that so that's where that's where the licensing comes in right so uh your clients you know don't have that same bar that I do but yes we can't do any of that business purpose type stuff uh with the primary borrowers of course uh your investors could right if if they're planning on the borrower uh you know eventually it not being a primary home primary occupancy of course as long as the rents versus the you know relative costs it's positive uh you know then you should be good but uh yeah for us we have to have income if it's a primary home second home anything like that it's only those true business purpose that we can use those dscr loans for so it's kind of a gray area it's kind of the cross between commercial and residential and it's become that that gray area has become the big uh you know the big pool out there of of where everybody's headed because it it it's a lot of flexibility lot of flexibility for people on my end with licensing where we may not have to have it a lot of flexibility in secondary where uh they don't have to be as tight on the DTI as you guys mentioned and all the stuff that uh you know isn't as uh as black and white as rents versus expens yeah you know and I think what people don't realize that the dscr loan is a business loan right it's it's a business to business mindset where what does business to business mean this doesn't mean that you're lending money to a you know big mashal business it just means it's not a personal loan it's not going to a residential borrower it's really going to another business right a landlord could be a business right um it could be big it could be small so that's a big thing for it now would you guys ever consider doing loans or underwriting a owner occupant borrower who they seller or Finance doing a rap note where they go in there and they would give a loan to a borrower who's underwritten has all the credentials and give them a loan and write that underwriting well I could definitely help out yeah I mean if you guys are providing the the liquidity and stuff then yeah it's just uh to meet our secondary you know our typical written guidelines or sell it to Fanny or Freddy obviously has to meet all their stuff uh but of course uh I'm definitely open to helping your guys uh create those notes correctly uh I I see the most opportunity in the dscr uh but obviously you guys are have been doing this for many years and so the traditional stuff is is no problem as well um you know we have all the tools available that all your traditional lenders would have so we can use those when we're underwriting the file so it's really easy for us to do that um the the part that is more of the gray area where the opportunity is where I think your guys could grow more grow the portfolio more is the dscr where it becomes easier more flexible and uh more securitized which is you know what's kind of counterintuitive right you would think that those are the worst loans out there like okay no I don't have any DTI I don't have any personal income I have nothing to do with this borrower how is that a better loan than a loan with personal income with W2 with uh you know the whole underwriting and it's just that's the industry we're in right now and uh it's interesting that's that's probably what I would uh have your borrow have your people take away from here is that you don't have to stick to the fully underwritten borrowers as long as it's an investment property right so primary got to stick to your guns but where you can let loose a little bit and uh find some more opportunity is is any investment stuff uh where you traditionally might have thought you had to be a little more strict on the DTI not at all right it's strictly we're only need a credit report is going to set the pricing uh so you're going to need to pull credit you're going to need to prove that there's no lates so a fraud guard is what we use as our typical vendor for uh as Nathan mentioned just checking for Fore closers bankruptcies stuff like that and uh mortgage payment history no mortgage Miss payments right that's basically it along with the rents so there's no you know an ID right we have to prove ID right same same Patriot Act stuff so not a lot of moving Parts lot easier for you guys a lot easier for us so absolutely I preach about DCR all day you hear me on the show so that's obviously what I love uh but the primary stuff sure use my license all you want uh I don't what does a borrower what does a lender have to bring to you for you to create a loan for them what items would you give a taskis you know kind of thing I mean if it it depends on what guidelines they're going for right so if they're wanting it to be to Fanny or Freddy guidelines we all we all you know use that and we can use all the same tools as Fanny and Freddy and there's pretty standardized list you know for any conventional loan so your typical stuff typical package uh but for the dscr like I mentioned it's pretty easy you just you just need a ID right because we're going to need to pull their their fraud guard or whatever so we'll do that as a lender uh we're going to need an appraisal obviously but we'll order that that to get the rents and stuff we're going to need to their history right so just a couple things so for dscr like nothing it's pretty crazy uh just an ID and a pulse and they have to pull credit for a full package you know just your typical stuff and we would be happy to underwrite it to you know non-qm guidelines or standard Fanny and Freddy guidelines it really matters where you guys want to securitize this but most of them probably aren't right it seems like they're kind of more holding the or or selling them to other private investors you know in this case yeah but yeah if you could if if they want to go for the Gusto uh and use use me because I'd probably be more expensive than your typical due diligence right uh then we could write to those specific guidelines to make it securitized so I think that would be the advantage i' probably charge more than your typical I don't know who you guys are using typically probably some underwriting or lawyer services to draft docs I can kind of put that all together but I would probably charge more than your average uh but the benefit would be at the end of the day I'm going to write it to where I'm securitizing it and you got you know you guys are going to be selling three points higher than I am and the same guidelines is g to be crazy right so uh you guys will have a much more Superior note at your rates than I would but I would so if someone is looking to create a node seller fiance whatever they obviously get an appraisal they that you guys can pull credit for them you would underwrite them make sure that they're you know what the credentials are these are typically all non-qm loans and then you would do uh the paper the collateral you underwrite it the whole thing you would do and you put the collateral paperwork together the you know the note or mortgage right the note mortgage D trust whatever it is for that state you would create the whole paperwork and then they would go through that process of closing that deal out and then do everything else um and then you would direct them to a serer or recommend that they do a serer correct yeah the serer was also a piece I don't know how often your guys take advantage of a subservice or once they create that but uh that would be my recommendation a lot of the sub servers you can get to take on that foreclosure uh risk depending on the size of your note and you guys have some meat on those notes right you guys are way higher than I am so uh you guys have a little bit to give so uh I I don't have a subservice or because I I sell the loans immediately to an investor that then service I don't service at all so I'm I'm not the service uh lender the servicer uh but but yeah I would definitely recommend them to get the serer But and we would fund it as table funded so we often fund loans where uh we're doing the whole loan but the funds are coming from another source right the actual liquidity the actual wire so we would do everything your investors your people that would be providing buying the note would get everything send their wire into title as the table funding but all the notes and everything would be in our name right so all the licensing everything would be in our name and you guys would just take it out at the closing table right so table funding is kind of the channel that we would put this under as a category makes sense with you mentioned before about bundling up notes right that's something I know a lot of our note buyers are you know interested in right Nathan has a pool of say 50 to 100 notes could he take those notes and sell them on the on the market yeah well I mean you kind of gotta have a license in some ways so I mean someone like me could probably help you with that um it depends right so yeah you got to be careful right you got to be fully licensed most of the time but if you have a a takeout in mind you know you can usually execute that through an intermediary or whatever so uh it all depends on how they're securitized though so it takes a whole lot of time to go through those packages and and do all the due diligence because you're going to need a third party right so you'll need to take all those 50 notes uh use a third party due diligence to you know make sure it's securitize a right and they all meet a standard and then you can do typical securitization Sal so yes they can but I think the challenge would be again as you mentioned to standardized this industry doesn't or you know your typical private note creator doesn't have a standardized process where everything's going to be the same and when you're securitizing loans too you're going to need packages that are in the same um General likeness right gen General credit score range General rate range right usually so you can sell any not at a seven that are between you know six and a half and seven and a half as long as the credit's the same and stuff so you have to build these profiles so that would just be the challenge is uh you know we have uh my company does it but the companies I work with that do this and sell the large securitizations have whole staffs right that they go through get them ready send them to the third party due diligence when they come back a couple months later uh you know they have all their stuff to package it and they get it ready to sell and then they start marketing uh and and taking offers on that package so it is a lot of work but if they could get a standardized process then they could use some uh third parties to really push them through there right so yes I think they could take advantage I do think they'll need a little bit of help uh most likely for your average and how many notes like if you're going to securitize a portfolio how many notes would you need before you can start looking at that like I I imagine five is too little but you know like is the number or the the amount of the upb it's it's it's either right so there's there's a lot of liquidity right now so if you're talking Fanny or Freddy there's all these rules right so Fanny or Freddy we're not that's not what we're talking about we're talking about PRI we're talking about uh basically reats right real estate investment TR we're talking about stock stock money out there that's going to be coming through us through some sort of Investment Bank Outlet that's going to provide the liquidity in some way they'll usually take a little or a lot right especially when we're talking about this non-qm stuff so there's really not a limit technically Ally yeah I would say five would be kind of the low end um and you know anything under a million wouldn't be worth it you know so you know you want uh you know maybe a five 10 million you could be talking 100 million you'd be like standard right a securitization of 100 to 250 million is pretty standard for them to trade 100 to 250 million at a time but smalltime investors I I'm sure they would love your guys' notes because the the premium they're going to pay you on the rates that you guys you guys do is just it's going to be enormous so what do you think the typical sales uh price yield is what do you think they're selling at so I mean like right now I'm securitizing look here I have them in the other screen here so I'm doing notes right now at uh so dscr notes are sevens to eights so seven to eights is selling I'm I'm selling them at you know par price right so I'll securitize it I'll charge a couple points uh I mean I'll do the loan I'll charge a couple points and then when they securitize it they're paying me 100 you know they're just paying me the full the full loan amount right so I'll a couple points I get the full loan amount we're we're selling them at par usually so seven and a half at par you guys are at 10 12 15% so you're talking 110 right if you're trying to sell to that same investor if you securitize it to the same standard so yeah right now I'm selling between seven and eight uh at yeah you know 100 basically so you know we can take a you know we bought one just recently it's 11.99 yeah I can literally turn around and sell thing in 110 150% of upb and which makes no sense in our brains I don't understand why people do that but that's beside the point that's what that's where at uh you know your guys industry is way over here and we're way over here like super strict side because it's it's a lot of work for me it takes me you know when they say it takes 30 days to close a loan it's not me not working right and it's it's not me personally but it's not my team not working there's a lot of stuff that you don't when you're the customer and and you guys probably don't do as the typical you know uh lender private lender I guess you would say whatever uh role you want to put yourself in so it's hard so for you to get to where we are is going to be a challenge you know there's a gap but if you can get there and I mean notes are notes right so the Market's the market price is the price if your Note is at 12% my not is at 8% it's the same exact borrower same exact profile same exact property they're going to pay more for yours right it's it's a no-brainer so there's liquidity out there there's hundreds of millions billions of dollars out there in money once these loans and once your guys' yields uh so yeah I mean there's a big opportunity there to connect dots it's just a challenge this is why I love doing these our show because the topic goes one way and then we go a completely different direction because the we don't know what's going to come out of these shows I promise talk about this before did we no right we didn't we don't prep for we PR for a topic and then these kind of things come up and you know our brains start going which is which is awesome right you said like it's a you know a 30 60 day process to get it to that securitized product um so obviously there's time in there what's the cost to get that done give or take I mean we're paying usually probably $2,000 a loan in costs so you know that would be my cost so obviously if I'm going to do this for someone else there' be you know cost in addition to that so that's what I was telling you guys before it usually costs about 1,500 in underwriting processing type fees to uh if I use a third party or if I use it inhouse and then we use typically a law firm to draft all of our documents and uh do all the closing stuff and that's usually about 500 bucks so about 2,000 bucks what I pay but you know I'm doing hundreds of loans so you know if your average investor does one a year they might you know expect a little bit different pricing than that but uh that's kind of the fixed cost Services you know you charge the borrower for typically as much Services as you can so I try to you know pass those those cost the appraisal and obviously all that stuff so any of the services we can legally charge for we will any of the services that we can't uh like uh what's an example like fraud guard you you you mentioned the fraud stuff the uh we use fraud guard as the industry standard and that you know cost 50 bucks a file but we can't charge a borrow for that because that's for our due diligence right it's not a it's not a borrower cost so yeah I mean it's not that expensive to do it's more of the work and the guidelines so we're partnering with an investor who says here's the guidelines right here's what you have to underwrite too then we go and get our underwriter get our process or get our file together right and it costs us as you mentioned you know two grand plus uh to to get all those people in place but then those people still got to do all the work and then you know I have 10 different staff members to help that process as well so there's a lot of overhead but that ual per file cost is not that expensive it's more of having a system and a structure in place and those written guidelines where everything is exactly by the guys right we have to have a clear fraud guard on every single file every single alert of any kind has to be cleared and sometimes clearing one fraud God alert could take a hundred documents right we might have to go to a a a bankruptcy case from from years ago get the whole case to confirm that the borrower actually did you know clear the full bankruptcy and and stuff right so it might have not know the state didn't file whatever they needed to file to clear it we get the paperwork from the attorney the attorney says we sent it to the state the state didn't do it you know you could get stuck for a month in one little tiny tiny condition and even a dscr loan has to have a clear fraud right so yeah it it can get quick but it can also get wide right so that's where the challenge is if you have that structure and and you build that securitization that standard where everything is 100% fraud guard cleared uh then you know that you can securitize that note which sometimes it's easy sometimes it's super hard takes the far time takes less time takes a lot of you know work from my admin staff not the underwriter is not going to do that that you know I paid the fee to the law firm's not going to do that it's the the administrative uh task and you know your guys probably you know couldn't do this on their own so they would probably need someone like us that knows what they're doing um but it's a huge cost I mean I guess that's that's what I want to say is it's it's more work and knowledge and structure than it is cost per se the cost per loan is not too crazy it's more structure you know it's not bad a package of 100 loans you're talking 200 Grand like that that adds up pretty quick yeah I mean if you guys were you know if if we were just an underwriting company yeah or something like that right so I'm not interested in two grand alone though I'm interested and we you know we make a commission on the loans right for S right so the those companies that I use like the third party processing third party Underwriters uh and of course the law firms are always third party right so uh we're putting those those people in place which you guys could as well there's companies out there it's just the the you know the the scale and I'm not interested in that I could you know hire my under underwriter and pay them you know hourly and then make a margin on that but that's not what really we're about we're about creating the note and using those uh best practices so I use the best law firm right the that's that all the big dogs use to to actually do the documents and I use the industry standard processors and Underwriters uh that are that are industry standard there's no point in trying to make a a couple bucks off that right so that's not my business my business is putting my clients in the best position to win which is using those best vendors so I don't care about that 2,000 bucks at all it's more about uh getting the deal done and then yeah we're going to make our you know 2% commission or whatever we're going to make as the originator on the loan but for you guys that are you know obviously in a different seat you know the cost isn't that much and I would probably have to charge you way more than you know 2,000 bucks that going to cost me uh but there's a Delta there you know that you guys can make some money there and uh you don't have to you know charge but for every loan you're saying is $2,000 right so if you had say 10 loans they up to $2 million you're saying the cost be about $20,000 give or take right yeah just for like I said the third party underwriting type like cost yeah for sure yep yeah it's not the cost isn't that intensive it's more of you don't realize that you're going to have to have you know five people on your staff which all make 100 Grand no that's 500 Grand a year that just kind of floats around that makes the math a little different but the actual you know per loan cost isn't crazy but you know it's it's a lot more to get to where I am you sit there and you spend 20 grand right you sold 2 million over of assets at 7% you're you're you're sitting there and you bought it at 13 right it's you're you're hitting home runs yeah yeah interesting crazy stuff yeah so Nick when you're doing all these kind of dscr loans and whatnot um are you ever pre-approving the borrower at all working with a borrower and finding the lender uh well I mean that's kind of our job we're the lender so I youan know our role is you know they apply with us and they need a yes or a no right so legally that's our responsibility uh you know that's kind of the the rmlo hat is you know someone applies whether it's business purpose or not right you come to me I don't know whether you're going to close in an LLC or not for sure I have to treat you as you know the same same as anybody uh and I'll have to get you an answer within three days right you apply you give me your I pull your credit you give me all your info I have to give you an answer in in in the in those three days so um so you're pre- prooving the borrower yeah I mean we're pre-approving the borrower for whatever they submitted for right so if they're just going for I need to know what I qualify for then yeah for sure but if they already have a thing in mind then yeah I mean we're going straight to do you qualify for this house if they submitted a house uh you know in in the uh in the application and uh that's where I didn't like at the bank right it was either you fit in this box or not and that was it right it was Fanny's box that was it Fanny and Freddy the you know government or FHA you fit in this box or I have to just tell you sorry bye you know so that's why we had to go and find where my goal is that everybody that comes in I have an outlet for them and that's typically uh you know what I preach to my my people uh whether that's a dscr loan and then sometimes even it has to go like full commercial where we're just doing asset based lending right hard money type lending which I'm sure a lot of your guys do as well is just you know they're just looking at collateral and that's it just just appraisal uh and you know that's that's the I I I call it the hierarchy that we have to go through right VA is always the best loan if they qualify VA I have to buy Lo give them VA they tell me they're VA borrower you know I have to give them that I can't even can't even go down the list right so we have a little bit of a different uh you know type of qualification uh but most of the people that come from us would be person who's owns a property and they're seller financing it to a borrower and they want to have their borrower pre-approved so they can create the note yeah for sure yeah we reove borrowers all the time yeah so if they don't have a contract in place already with the seller financing it place that yeah we can pre-approve borrowers I mean that's our job by law so you don't you don't need to know me to do that just tell your hey go go click next button and and uh you know look at approval within three days because that's our job right so yeah and how much that typically cost a borrower to do appr oh it's free yeah nothing okay yeah yeah we pull the credit for free we don't we don't charge them up front or anything and uh yeah if they qualify we'll send them the letter if they don't qualify we'll send them some tips on how to improve their credit I'm big on uh the credit improving as well I'm not a credit a credit improvement company uh but I always pull the simulator so whenever we pull credit and their credit's low we'll run the simulator and say hey you need to work on XYZ come back in three months once you work on XYZ they click the button again if their credits improve great we'll send them the letter so you guys can use that to your advantage for sure uh because yeah you know me being licensed I have to by law get that answer to them quickly so you guys know that I'll you know I'll quickly get them the answer as long as they get us their you know their W2s and all that if that's what we're going for and then yeah we'll we'll qualify them for a conventional loan but if they're going to end up doing some uh creative stuff you know you'll know that they at least qualify for the most restrictive typically which is you know Fanny or Freddy conventional yeah what typically is the biggest problem borrowers are having when they come to you just what kind of crazy stuff have you seen where you're like dude you can't qualify for anything well right now it's just a lot of people are priced out so that's our biggest challenge we preapproved people 6 months ago that are nowhere near approving now right or I guess now it's about a year or whatever right since the the rat started climbing so for us the challenge is usually everybody has bigger eyeballs than they can afford right so everybody comes you I want to get a $500,000 house and then you do the math and if they can make it you know it's either barely there and then guess what the rates go up by half a point and now it's not even in the ballpark right now now we got to be more realistic so that's what's had a lot of people sitting on the fences right now I don't know if your guys your your types of clients are are in that area um but as far as like problem problems uh the biggest thing we had recently was just all the covid stuff so covid had extra guidelines uh okay which you know as private investors you guys probably didn't know that Fanny and Freddy put all these extra guidelines especially for like self-employed borrowers we had to get a bunch more due diligence on the self-employed borrower for the last you know four years since covid because a lot of people were getting the uh the government loans the the PPP loans right the SBA Loans that through a lot of deals for a loop hasn't seen a lot since because that kind of you know went through its course uh but there were all these extra Flags we had to check for those government those SBA type of loans uh we had to have the bank statements to prove their income um when before we just go off their tax returns what they claimed and then uh during Co they just released it about I think it was about four months ago they don't make now get extra bank statements on top of the tax returns to prove the business income so if a bar was in default right and we're going to foreclosure and that just behind is that something we can send to you and say Hey listen can you qualify as guy to for different loan and get us out yeah but uh that's difficult right so you guys aren't reporting on credit so I don't want to put my foot in my mouth here so let me let me think about my let me think about my I don't want you guys to uh take advantage of me um yeah but but yes if they've missed a payment you need to report it right I'm going to send you no they are our services reported for us right we use but if you're private you know you can fill out the form however you want right I send you a vom you fill it out please be honest right if they missed a payment I got to know because we're all yeah no it would be more like listen they're two months behind they're constantly doing stuff like that and they're willing to refy out or maybe their interest rate's at 12 133% right and they want to get down to a lower rate it's something that maybe they've been behind we have a bar right now that I've literally send like notice default like four times I would love for them to get out of the situation but it sounds to me that most likely they probably wouldn't qualify because of all the bad history they have well I have Solutions I have solutions for everybody so again that's that's kind of my forte and why I went away from the bank and and the more traditional route I wanted to be the in control of my destiny so what I preached to my team I got over 300 loan officers is we want to have a home every loan right so whether that means we got to get as creative as we can get I mean if you give me some people that'll that'll do seller finance my guys will will work with them to make it happen if that's the last ditch opportunity right my guys are are willing and able to do whatever it takes uh but within the written programs there's a lot of stuff in non qm that allows for uh you know bad situations right so we have like our our alt do a b c and then even some you know lower than that where you can have 130 some of them you can have 230 some of them you can have 160 but mortgage history is very important right so if if you got like 260s I don't think there's anything I can do for you and hopefully you guys are honest when you fill that out because you know I would would take out once they go we can we can present to a serer and say listen guys see if you can get the borrow to to send their application to you know Nick and his crew over here and see if we can get the refinance out of us you know I have loone right now it's a 14% interest rate yeah right could that person who's struggling could get into a seven eight% again if their credit scor is decent enough right and they're behind our payments they may be up on everything else I'm not saying to be you know kind of cheating system but if this person can qualify and we just getting tired of them we can refer them over and say listen go get refi out hell yeah that's what that's what we're here for yeah and it will help the borrower too right I mean I'm I'm all for taking someone from a 14 to a seven if they're uh you know better and it will make them better so yeah if they're if they're just short every month by you know a couple hundred bucks and that's just killing them you know that could make the difference for someone you know someone's life so that's that's totally cool for me to solve people's problems and that's as far as filling out your docs and being honest on it most note buyers will use a third- party servicer so it's not it's not us reporting it it's going to get from the serer they have no incentive to budge the numbers there yeah yeah when we get when we get the third party servicers is very easy but I do get weary when I get the handwritten out and Pen you know V from the seller finance you know they skip a couple boxes and it's like o I don't know I need to I need to follow up right and I'll usually have my people call and and follow up because that is where we get a little discrepancy uh and we're doing a lot of takeouts on the flips right so we'll have some weird uh you know money people and they're at the end of their their term and we can't get it closed I like uh here's a good example too of of you guys that do the short note I don't know how many of you guys doing the 12-month uh you know notes and the the super short-term notes so but if I mean that's the typically the the notes we're taking out is a lot of the the hard money stuff and uh the problem I find a lot of the times is at the end of the 12 months they're not extending and they're not giving terms right so they'll fill out the vom I can't refinance them until month 12 right they have to make they have to have 12 months seasoning right to get the full thing but then we'll get stuck in this Middle where either it's a subservice or and they just say no it's done our contract's over right we're not going to fill out we're not going to say that they get another month because they don't because we're we're Bound by XYZ right so we could get stuck in this gray area where it's like the private note Holder will Ex will give them a one- month extension but we have to like get it in writing and the subs servers are kind of sticks us there so that is a challenge a lot of the times where we're trying to be as helpful as we can uh but we get stuck in between kind of those two parties where we just have to know yes you'll give them a month because I need a couple days you know there has to be a little leeway between the 12 month this not's over until we can actually take them out there's going to be a 30-day you know so the more flexible you guys can get with that the better you know when I'm talking to your guys like help me out right get get with uh you know extensions just put it in your contract charge a point to extend it six months you know I don't know uh how often you guys do that on your shortterm stuff uh but that's the more standard hard money stuff that I like where it just says you know we can read it right there it just says if it goes past 12 months we'll give one extension at one point cost and then I just know the payoff is gonna go up by one point you know it's just Auto it's yeah there's no complicated stuff and uh we can be more helpful that way so that would be uh where we get stuck a lot of the times but the more they can use the servicer as you mentioned Nathan the better because that makes it super easy if it's an automated one super easy super super easy that's what that's what we're looking for is those those ones with servicers uh and we get those two where it comes from the seller finance guy and yeah it's it's a spreadsheet at best uh but how do I know you know not that I doubt anybody but at the same time like I got to be able to prove accuracy and yeah like you're saying is they want to get rid of the note so they're incentivized to fill it out you know but then you also get some guys like I said that will say no I'm not sending it I'm like well I can't get you your money until you extend it because I can't get this approved until you say that you'll take one more payment from this guy or you'll just let him slide on the payment right so you'll get you'll get them to fill out that thing and if they're just they just don't understand that the goal is to get them their money they need to be honest one which you know obviously hopefully everybody is but two is is flexible right if it's 12 month term WR in what the next payment's going to be or if there is a next payment so that we can then take them out because we have the underwriter is not going to if they're foreclosing today then you know we can't you know if they're out of compliance if they're defaulted it's just doesn't work right and you don't want to do a whole new note and and stuff so Auto extending the notes would definitely be a big thing for those short term interesting I never thought like usually typically it's a 12-month balloon right and that's it right yeah yeah which is fine to write it in but then you just give yourself a 60-day for financing cuz uh all of our takeout stuff for dscr is going to be 12 month seasoning to give us the best terms six months I can do but a lot of times there's restrictions like uh improvements right so I'll need to like prove the rehabs or whatever they did to to get the value up and then the zero seasoning there's only like two options and it's really strict so from you guys structuring your stuff yes the better the more you can give me a a 60 days past 12 you'll have better luck getting people Tak out which helps everybody right interesting very cool before we disconnect Nathan always has a question you wants to ask all yeah so I'm I'm curious Nick with your background um and what you're doing I'm I'm more Curious where you see interest rates going where I just read something here this morning that said seven and a half percent that's the highest it's been in I don't know how long and they're expecting it to go up and so I don't know what do you think where where with what you've seen and where you think we're going where rates going I talk about this every day I love this stuff uh I mean it's it's G to be tough so it's it's all about the FED right so we're always going off the fed's movement so uh the only I guess bright light as I mentioned before is dscr Right which is a little counterintuitive so as the fed's been going up and the you know the standard 30-year Fanny Freddy's been going up we've seen the dscr come down so that's where we we see some opportunity in non-qm and the liquidity in the markets that are not your traditional investors right these are the reaps who need the higher yields so they're they're wanting these more risky products but they also want them securitized and standardized so that's kind of why I always preach about this is kind of a n industry right this DCR is kind of this hybrid between your your old school commercial loans which were you know asset based and and and there is underwriting but it's just in it's just appraisal versus just the property rent and then clear the borrower of all their other mortgages and all the other fraud and bankruptcies and all that stuff so lot of opportunity there rates in general I think we're GNA keep going up for the next couple months until I hope that the June is the one because we just had some stuff in our favor finally yesterday uh you know I think June would be my preference to where it starts to go down so we'll slowly creep up until June but it's more likely July you hear all the news saying uh it's more likely July now so once the FED moves in July we'll see it turn back to normal and we'll start the downward Trend so I would say we'll probably get close to eight before July um wow and you know dscr is right around eight right now so DSR won't go up so that's going to be crazy when your primary is the same as the dscr stuff uh just because there's so much liquidity in that area ah makes sense yeah yeah it's just it's just counterintuitive but but yeah I would say July is when we would see realistically people will see an actual you know the headlines change awesome well Nick we have to thank you very much for joining us lot of cool information that I never knew of never even thought about to be honest with you so having that information is always an awesome thing um but I wanted to make sure if you guys do want to connect with Nick the link is inside the chat you can definitely do that all information will be there hit that button and you'll get uh sent to a website our website you fill the information is the information will be sent right to Nick and his information will be sent to you uh feel free to follow up with Nick and ask any questions check out his website um a wealth information wealth of experience um and it's awesome to have someone like that uh join us for this afternoon yeah awesome thanks dick.