Current Note Investing Market & Note Expo 2023 | Real Estate Notes Show

Episode: Current Note Investing Market & Note Expo 2023 ‪@NoteSchool‬ Full Dave's Goals and Plans: - We've been shifting gears to understand the seller finance world and embed ourselves in those groups - We were doing non-performing notes for years but pricing has gotten out of whack, so we're pivoting to seller finance and performing notes - We're planning reverse mortgage talk and content about people transitioning from W2 to owner financing in coming weeks - Interest rate is the number one determining factor on discount pricing, not percent of UPB Nathan's Goals and Plans: - The variety within the note investing niche makes it really fun and interesting with multiple directions to pivot - People get confused about ROI calculations when really it's about yield and IRR equations - You must understand how financial calculators and spreadsheets work and how numbers interact with each other Key Recommendations: - Trust but verify - get advice from people who know what they're doing, not just opinions from social media - When originating notes, write them at high interest rates to minimize discount and enable more volume of deals - Don't chase desperate borrowers with low down payments who can barely afford payments - find quality borrowers - Learn to use financial calculators and spreadsheets to understand yield, IRR, and how interest rate drives returns - Don't compete with banks on rate - seller financed notes are a premium product, price accordingly Topics Discussed: - Current market shift from non-performing to performing and seller-financed notes - How interest rates are the primary driver of note valuations and discounts - The evolution of seller financing from mom-and-pop single notes to professional bulk sellers - Difference between percent of UPB pricing and yield-based pricing analysis - Various note types: mortgage notes, reverse mortgages, seller finance, performing, non-performing, seconds, wraps Guest Insights: - Bob (30+ years in note investing): Seller financing has evolved to include more professional bulk sellers and sub-twos/wraps, but core principles remain - Current market shows non-performing loans trading at upper 90% of UPB despite tight margins, likely due to cheap institutional money - For larger deals ($150k-$200k+), balance discount with yields - a significant discount can offset lower yield requirements - Avoid originating notes below bank rates (currently 8%) - seller financing should command a premium - Most notes exit within 5-10 years, not 30 years, which significantly increases actual yields on discounted purchases first question you always get is what are you gonna pay me what you what percent of upb yeah you know well if you you know depends on what you if you sold it to a lousy borrower at a low rate on the long term what do you think you're gonna get yeah right but if you want to know it's like well how do I write it if I want 95 cents on the dollar it's like so you there's a way to learn from all these people I do want to say there's a lot of good stuff on social media but there's a lot of stuff that's not accurate either so back to my um trust B verify you know make sure you're getting advice from somebody that knows what they're doing and not just some hot Sports opinion and some Facebook [Music] Chat good afternoon Dave puts here from jkp Holdings alongside me as always Mr Nathan Turner what's up good we're chatting so much we almost chatted right into our intro here yes oh good conversation now it's always fun um but yeah we like oh crap oh crap so I'm glad I Conn next here with you guys uh for those who are watching tuning in hopefully it's not your first time but this will be recorded it's probably our most asked question to get so we've been doing a lot of things lately and kind of Shifting Gears we're just talking to Bob uh if you call the Green Room what everyone call it about how the Market's shifting and how that we just saw the fact that some nonperforming loans in the fanny level we're trading at upper 90% of percent of upb that's crazy I mean but they must have really cheap money or some game plan that you and I uh aren't playing yet yeah we're sitting here trying to figure out so just trying to run some rough numbers based on what we know how does that work like even if your money's at 2% margins are slim but if you're talking hundreds of millions maybe that makes it worth it and the mortgages are three four 5% you know interest rates that to get a 10% return you're discount a lot these guys are buying almost a par um so it's crazy so I apologize for we're over speaking some people just finishing the conversation up and hopefully those who are tuning in can understand the stuff so what we've been doing a lot lately in the last 2023 has been a mission to understand the seller Finance World um and also understand where notes are at rap notes sub twos owner financing and just embed ourselves in those kind of those groups um and we just reconnected or connected with another group this past week had an awesome phone call um with another group that does similar stuff so stay tuned we'll be hitting about a bunch of that stuff up um and in the coming weeks we'll also have uh some reverse mortgage talk um and some more people who've done from W2 to owner financing so it's be exciting yeah it's really cool it and it's it speaks to kind of the variety within this Niche yes so we've got we've got mortgage notes as kind of the umbrella and then you're talking about reverse mortgages seller finance uh performing non-performing seconds you know institutional versus seller finance creative Finance WS you know there there's so many different directions that this business goes that it makes it really fun and really interesting all the time it also makes it really possible to be able to Pivot yes at any given time if if we were I mean we were doing non-performing for years and now the pricing has just gotten so out of whack that it's hard for us to justify that direction when now seller finance uh performing notes become a much more attractive asset class yeah and it's funny because we talked about this a lot I think people get a little confused because I still heard today someone mention you know buying an Roi everything's really based on buying on that interest rate right that's the driving force behind all this it's really difficult for us to buy um on a low interest rate situation uh if you're originating a loan and you're listening to us please don't write it 6% right if you can if the borrow is able to do it again if it's owner occupant only if it's an investor you can write whatever you want to write at um but to for us to buy it uh has to be large enough interest rate or we're going to Discount you based on the return we're looking for so and it's still a question we get all the time like just on this call this week these are guys that have been doing this for a number of years they're not brand new to this business but the question we get is what percentage of youv yes well it depends what is your interest rate and that both of us that was our first question back to them well what's the interest rate and that's the number one determining Factor on what that discount is going to be so write it at a high interest rate you've got a smaller discount and we can do a ton of business yeah yeah and I think people get lost in that because they think other ways and I don't know what the focuses on that is um because it goes back to oh percent of upb it doesn't matter Roi doesn't count it's yield IR kind of equations and that's what we talked about if the big pools are selling they sell at a percent of upb um because it's easy number to use but they're really looking at the interest rate and seeing what the return is because your interest rate's your return right and you have to Discount the principal enough on lower interest rates to get the interest back up the return back up if your interest rates real low you're gonna have to drop your discount on the balance alone to get that return so yeah we're always looking at yields so yes learn how to use the financial calculator use Dave's wacky spreadsheet but learn how it works yeah you gotta use something yeah yeah if you have question about that feel free to reach out to us uh Nathan used the manual calculator we have some spreadsheets stuff but either way you're doing it make sure you understand what those numbers mean how to use them um and and what they mean how do they how do they interact with each other that's a huge thing right um and it's funny you know we got in the space decade plus ago we were focused on bank loans um and we still you know we bought bank loans up to the most recent days and we've shifted over to the seller finance where the grandfathers of this you know this investment strategy bought seller finance notes flipped over the bank and then flipped back right that's what they did for years they focused on buying sell Finance paper yeah and we're lucky enough to have one of the Legends in the business Bob's been around forever and ever well I don't want to make him seem too old we'll get him on here he can tell us all yeah welcome man how are you I'm good guys appreciate you having me and Nathan you caught yourself just in time about been around forever and so long and you know the grandfather and you know yeah so Bob for the few people who are tuning in maybe there's 7 two people who have been tuning to us who are you how'd you get into real estate and notes um and keep it under four hours because yeah yeah well if I went through every it would take four hours but um actually my very first job out of college was Consumer Finance so everybody should have to be a a debt collector at some point in life I always say you should be a debt collector and work in a fast food restaurant as long as you've done those two things in your life you'll appreciate whatever other job you end up getting um so that started off into real estate and then I was in the banking World 1990 I entered the seller finance space as you mentioned I went to work for uh Metropolitan mortgage out of Spokan Washington at the time they were the the big dog in town and work with them and 1997 we moved to Dallas to work at the associates which was again another big firm and then in 2001 I went to work for bayie and a lot of folks probably have heard of bay and I worked with them for 12 years and then I came over with a colonial funding group and Eddie speed and we started our Capital fund um in 2013 and we like you said we've been in this Finance space for over 30 years we have bought Bank paper we bought deals from hedge funds and um but our true core is still seller financing has seller finance changed over the years or is it just evolving what have you seen uh that's a great question I don't know that it's really changed a whole lot other than um to your point a minute ago about a lot more subt and wraps um you know we'll we'll say quote unquote professional seller financers as opposed to just Mama pops you know back when I started in 1990 it was you know you would find somebody who had one property and sold it and have one note you know and that was it and um obviously it was much more important to find folks that were generating multiple notes so you had you know lower marketing call so you know you find somebody who would buy property fix it up do some rehab build a portfolio that type property and then buying bulk so um but it's crazy you know we were talking before we jumped on about interest rates and cost of funds and stuff and um you know interest rates now are pushing 8% we still see somebody do a seller finance note at six I'm like yeah why are you doing it less than the bank will do it just you know that's not the thing so um it's it's always been a a really good access to priv private capital for folks that either don't want to or can't get bank or traditional financing I remember back in my University days I took business and uh we were talking about pricing uh about you know pricing whatever Goods you've got or whatever and and the the line that stuck out and uh kind of became sort of a legendary quote was don't try to compete with Walmart you're never gonna undercut Walmart and and we're seeing people doing that now where they're trying to compete with Walmart with the Banks like no no no no no the banks are offering what they're offering you've got a premium product so charge more yeah so when you've gone through this process of buying what are kind of some of the stumbles that maybe people who are watching who are creating it who've been in a space maybe a year or two that you've seen that you say don't do this kind of stuff with origin notes don't go after the broken desperate person to be your borrower right I mean there are a lot of and we refer to them you know on the Note School side as like penalty box buyers in other words they there's nothing wrong with them but the credit availability right now is so tight in the underwriting and the rates are higher people can't qualify there's you know there's well-deserving borrowers out there that can be homeowners you don't have to chase somebody with a low down payment that can barely afford to make their monthly payment you don't have to Market to those people so if you're creating notes find good quality borrowers you know to your point earlier if you're if you're creating a note to sell it right you want to find a good borrower and you want to write it at the right terms so you can minimize your discount right and you know you guys were talking about percent of upv and you know it's all about the yield I do want to just you know differ a little bit on that because there is some opportunities especially in the rep performing space where you got a low rate and a long term and all right all of a sudden you're going to get a huge discount so you got a balance discount with yields we'll buy below our our yield requirements at times if we know we're buying a big enough deal and we got like an 80 90 $100,000 discount that loan pays off in five six seven years your yields going to jack up anyway so we always try to balance that discount in there which really comes into effect on you know deals over 150 200,000 all of a sudden then you you know you got a good size discount even if you're buying at a high digit yield yeah yeah because most time people don't go 30 years right you have a exit in 10 years your yield just goes through the roof you're absolutely right there well said um so not school right this is something we've all heard about um I think Nathan you went through it years ago tell us a little about for those who are familiar with it what is note school well let me let me set back just a little bit when I first started in 1990 I met Eddie speed when I was working at met metropolit mortgage and Eddie was you know a loan Trader he was a broker he would buy for his own portfolio and he would sell it to institutional investors like Metropolitan and then Associates when I moved here to Texas his office was pretty much right down the street um so I got to know Eddie real well and and um you know he developed all kinds of seller finance programs for companies like home investors how to create notes that institutional investors like Bay you would buy um and from that he created no school as educational piece initially to teach people how to find notes so they would send it to him so he would have a continuous marketing Source right and then they can make fee income and so forth and that's red to an educational platform where mainly um somebody who let's say has a corporate job maybe they're looking to exit that and they have money in their 401k or in their self-directed IRA and they're looking for a retirement they're looking to invest in passive income um and it's involved over the years to creative financing and mpls and that kind of stuff but it's basically how to you know build up a passive Investment Portfolio and um no school's probably been around 20 years now so um that was that was Eddie's baby when it started and he still promotes that and does three-day classes and um teaches a lot of people across the country how to buy um assets and partials and so forth let me tell you a real quick story on partials yeah um so when Eddie first started he worked for um his wife Martha's dad um and and his business partner in Mississippi and they were buying and selling notes well they were selling notes to a finance company down there and they would go to the company and it would be a 30-year note and the company say um we can't buy that note because our machine it was before computers or however they tracked it would only go 15 years so they were like okay we we'll just say you part of the note then and that's really how the whole partial thing they buy the whole note and only sell part of it because the the finance America couldn't figure out how to advertise something more than 180 months so you know and now all of a sudden you know you guys are mored into partials and yeah such a great way to you know to your point on some to lower rate stuff to hide the discount is you know you got a 6% 30-year note all right well I'll buy the next 10 years and it'll revert back to you after that and you know it's yeah it's win-win they get Capital back and you get a good cash flow for a period of time yeah that's amazing yeah was the very first class I took back in 2009 wow I was looking up we were creating notes I didn't even know that's what they were called and we're looking for an outlet looking for some way to resell the these some way to capitalize that my thinking was you can sell a turnkey rental surely you can do that with what we're doing whatever it is that's called so I found Eddie online somewhere and went down took his class and and blew my mind you know all of a sudden I started realizing this is a bigger thing went to uh later that year went to uh noteworthy down in New Orleans and uh again blew my mind as Eddie was there again and and just there's 200 people all talking about what I was doing and that was kind of that introduction oh wow this is really a thing so when you mentioned earlier about all the different niches in the in the note space you know yeah and um the ability to Pivot you know I think that's key and that's one of the um the themes that we're going to have at note Expo this year is just in the everchanging market you know are you ready to Pivot um the only you know my only word of caution on that is there's a difference between being prepared to Pivot and then just being chasing shiny objects so sometimes you got to stay focused on what's working in the market right now and and not dabble too much in 18 different things yeah um but on the other hand when the lead comes to your desk you need to know am I going to flip this loan and make a fee am I going to buy a partial on it am i g you know youve got to be able to do something because we're all spending money on marketing whether we're doing something like this and talking about business and hey send me deals or if you're looking to buy let me know or you know that kind of stuff um so I would say be ready to Pivot but also stay focused on you know what your core businesses and in our case it's always been sell Finance yeah are you guys buying wraps at all are you guys getting into that space buying wraps we've you know we've talked about a lot it's definitely a hot market for the creators but rap notes don't seem to be fitting in well with the note buyer if we can't pay off the underlying lean yeah well if you don't pay off the underlying lean you're technically in second position right so yeah that limits the investor pool people that are comfortable doing that we buy WS but most of the time we do require to pay off the underlying debt because we do want to be in first lean position unless there're just such crazy you know Equity or we love the property or you know sure it's an outlier but our basic stance is you know hey you bought a house for this you wrapped it you know we'll buy that note you'll make you know whatever we pay off you'll make that spread and you know get your Capital back and go do your next deal so we usually require the underline to be paid off so note Expo I believe was one of the first conferences I went to um and I believe weirdly enough I think you were one of the first people I met uh you probably didn't realize it I was sit with a buddy of mine he introduced us and one thing I want to make sure people realize is these not conferences who were very n nervous about going we me and Ethan talked a lot of people before his last year and we we heard from those people who listen to us and talk to us that their nervousness was a 10 for some of them once they got there it dropped from a 10 to a zero talk a little bit about how no conferences for those who may be new or just getting into it is not as a stuffy atmosphere as some may think it's not at all intimidating but go ahead Bob yeah no and we try to make that environment so that it's not right I mean if the only conference you ever went to was like an NBA Conference or something then you know that's you got your suit on and you're meeting with a bunch of bankers and I can tell how you know there's 2,000 people there you might feel a little intimidated but we started node Expo this will actually be our 10th Annual node Expo and we wanted to create an environment where not only do we have quality content you know whether it's General Sessions panel discussions whatever um but we have a community where you can connect with people whether it's new or reconnect you know like um I may only get to see you guys a couple times a year and it's usually at a conference right I mean you know I I used to see Nathan all the time at an imn conference and then when he took over DME I was at DME and he's been to node Expo and you but honestly I don't make my way to western Canada very often so I don't I don't get to see them and U so it's always a way to connect and reconnect and also to that point we have about 25 to 30 exhibitors so you get to see all the vendors that you deal with right and and if you're new to the business it gives you an opportunity to UM Vet them in person you can meet with different loan servicers see what's a fit different Ira companies different BP agents whatever so just that and um you know we've grown over the years I think it's a it's a solid product when people come there to your point Dave it's not like they feel like oh my god what have I got myself into yeah it's like if you want to sit there and listen to everybody on stage all the time you can do that if you want to work your way through the exhibit hall all day and have meetings out in the lobby and you know just connect with folks you can do that too so it's a it's a pretty good environment and um I would not say it's intimidating at all and I hope nobody feels that way could you give us a little snapshot of what some of the topics so the people who are looking or curious about going maybe in tune for some they can expect yeah I mean it's stuff we've been talking about we've got some creative Finance presentations we've got some topics on wraps we've actually got some panels on distressed debt raising Capital um self how to use self-directed IRA funds um in all those spaces you know do you buy an npl in your self-directed IRA you know there's people say absolutely not there's people that say yes you can if you do it correctly and you know what you're doing and things like that so we've got some topics on that um and we also talk a lot um really just about the mindset of you know we're all entrepreneurs in this no space right we got you get up you know whether you go to an office like we have or whether you work out of your house um sometimes you know you're dealing with people you've never met whether it's a seller whether it's your loan servicer and you got to have that right mindset because it can get frustrating and you know U so sometimes we use it as a uh a reset button you know get you know it's your pep rally once a year come to the note Expo and kind of get rejuvenated and um so we do a little bit of the you know get out of your head and start you know pull the trigger on some deals some people want to do deals and all they really do is window shop right they look at deals but they haven't bought one yet they just need to get over that fear of you know that first step absolutely so we have uh I'm not sure if Nathan saw it Steve Thomas made a comment that if if you're in the note business and you haven't been to a note Expo then you're not in the note business well well okay guys Steve yeah so it's great to hear this stuff and we collaborate all the time right most people say well aren you competing we all are right but at the same time we're all learning from each other the space is different from most real estate where the collaboration is really really important and very very helpful so you know let's back up here I put it in the chat here too note Expo is the third and fourth uh of of next month and it's it's in Dallas right um it's at a conference it's in a hotel setup and it the exhibits are outside the conference inside and they have speakers for two full days so I would encourage you if you're local to it you have no excuse not to be there um and if you are a little bit uh a distance I was bringing up this morning that it looks like I will be attending this year so I'm looking forward to making sure you guys all get there Nathan's flying in from Canada to go there and it's it's about the networking right this is what the space is all about is networking finding how we can help each other and collaborate as Bob said before if a deal doesn't fit you but you have a collaboration partner that does fit them you pass it on them they're going to pass you a deal back so you make sure you network for that availability you have all these tools in your toolbox available if there is a secret sauce to this business so number one you have to get educated and whether that's through no school or somewhere else but make sure you know what you're doing because this is not real estate it's only related that's all yes so make sure you get some some education next though the real Secret Sauce to this business is conf conferences I started going in 2009 that was my first and i' I go to several conferences a year I'll go to three or four or five whatever is out there uh mine or somebody else's because it's so important to network it is so important to talk to your vendors and just have that face to-face conversation let them take care for dinner and yeah you know and have real conversations about nothing to do with business and also to do with business and you do all kinds of stuff with people that you have met and have you know become friends with and then when you get to the stage like me that have been around forever as Nathan said at the top then you're you're fortunate enough to do business I'm at a point now honestly I only do business people like to do business with yeah Life's Too Short you know I have a Life's Too Short bucket it's either you know the person I'm dealing with or a deal when it comes across oh yeah you might be able to make some money on it but is it really worth all the hassle to do it I just pass on it but Dave to your point about competitors I always look at everybody as a counterparty as opposed to a competitor because like you said I'm gonna have something and it may not fit what I do but if I can pass it along to somebody or um you know a lot of people oh I'm only comfortable because they came from a real estate background investing in my NE in my neck of the wood so to speak well in this an environment like note Expo you're able to network can have boots on the ground in other areas right yeah oh I met this guy and he's he lives in Michigan he can help me out with that Detroit deal or that Kansas City deal or whatever and I mean if I ever get a note in western Canada I know who to call right I mean I I'm looking Nathan I'm looking but I haven't got one yet but uh you can find out what people's you know what their buy box is what they like you know you may have some loans and you need some Capital you may find somebody looking to buy a partial you know maybe they got a grandkid and they have a small Ira they need to build so you sell them a small partial in that so um one thing we really like is all our breaks lunches and happy hours are all right in the exhibit hall right you and you sit there you meet the vendors we set up I think tables of 10 so that you know you get to have lunch with people you know or some new folks so you know not to be a dead horse but it is all about networking yeah yeah and I encourage people don't NE neily sit with people you know yes you go ahead and sit somewhere where you don't know anybody and it's really easy I know it's really intimidated but it's really easy you just go down and you know you find this table and there's one spot and you say hey is the seat taken yes that's all it takes yes it's all it takes it's really easy yeah and and you'll find especially I've found in the note world people are extremely friendly and they're willing to share all kinds of information and and knowledge with you so and I challenge you though if you're going to these Expos too besides talk some you don't know is follow up with the connection you do make I can't tell you how many people go to conferences exchange business cards and never follow up you know I give them my cards to all the people and I don't get an email and I'm shocked I encourage you guys this is the keys to this business you got to network you got to talk to people if they're a BPO agent or they live in you know Michigan or wherever just having their business card on file and reaching out to and say hey it was good talking to you means a lot right yeah the world has changed to some degrees as far as people not having business cards a lot of times uh and it does make it difficult and that's one of the reasons why conferences like ours and and Nathan have come up with you know the on the phone where you can you can connect with people on the app you can you know connect with people after the event via the app still should do capture people information so so don't get all freaked out if you don't have a business card or whatever you still got very true use the app and um but connect with people to the app right don't just use to have it make sure you follow up with them talk to them afterwards that app is not only active at the conference it's also active afterwards yeah absolutely well said Bob so you can set up meetings or whatever that's true y yeah extremely helpful so we're gonna get some little nitty-gritty here what is your thought process the market of the note investing right now where do you see things have turn what are you guys are focusing on now are you guys doing anything different than you were four years ago five years ago give us like a temperature gauge of what you see the note Market being at your size well I think right now one of the key things if I had to put in one word it would be leverage there's a lot of people that are leveraged their cost of capital has changed and they got figure out a way how to get rid of some of their product it could be a small Regional Bank it could be a mom and pop guy who's got 10 loans but he's got you know he borrowed money at prime plus whatever and now does anybody know what prime is today hi round good question I do have it but yeah go ahead I'll look for it real quick yeah I mean it's like seven or eight I mean it's up right so all of a sudden you went from 4% cost of funds to 10% cost of funds or you know whatever it happens to be and um you have a lot of underlying lenders that are calling their loans due and you know are not going to extend them or the cost funds going to go up so they got to sell products so we're seeing a lot of people that are for lack of a better term being forced to liquidate some assets that they probably wouldn't necessarily want to you know in a world two years ago with you know basically 2% interest rates yeah but now we're seeing a lot of that so um um aming some of it's seller finance some of it's some of that institutional type hedge fund paper and and things like that yeah I've seeing 8.5 as a July and uh just a year ago we're at five and a half yeah so you're right and go back a year before that and it was probably two and a half yeah it just drops dramatically and you're absolutely right those people who plan on refining or whatever are are stuck right we we we have a lot of people that not only invest in notes but invest in deals like um Apartments multi right so every syndication that I heard a pitch on in the last three or four years was we're gonna buy this deal you know set a four cap and we're going to Value add and then we're going to refy out in four years and pay everybody off well that model for refi was not at nine 10 11% that was refined out of four yeah and what are the banks going to do they're either G to be a property owner or they're gonna have to figure out a way somebody's got to come to the table with some money to pay that loan down or so forth so um fortunately like uh Nathan said earlier we're not quote unquote real estate we're just related to it so the paper side of it it's a little bit a little bit better and maybe not as sensitive to that but there's a lot of funds that they use leverage too and we've never used leverage in our fund you know it's just in my mind it was Phantom returns it made it look like you were really blown and going but you know that was all you know how the numbers work when you use leverage kind of increases it looks pretty yeah rates are low and everything's good yep no that's us too we don't leverage anything nope I'm just not comfortable with it yeah borrowing money on borrowed money nah no I agree people it just so they can say they grew their fund you they grew their fund to 50 million or whatever well I think 20 is just fine if you can just raise the money and do whatever so um leverage I think is key and affordability just all across the board affordability helps create seller finance notes because you may not be able to qualify at the bank but on the other hand it also creates non-performing notes because yeah people are having a hard time buying gas buying groceries making you know it just makes it tough all the way around and you know affordab you know you see oh inflation's this unemployment's that and it's all a shell game what's the real number is you know yeah I go to the grocery store I know what things cost Bob's getting to our final question before we get there so we're gonna hold that off for our final question right and I think you hit some really cool things there and I think people are are focused on trying to become Wall Street right that was a big FOC let me grow grow grow and become Wall Street and you don't have to be um we both know someone who did that and they got burn out it is extremely overwhelming dealing with all these borrowers and all the troubles and tribulations and what most people don't realize who may be in the space for three years that everyone's paper right now is doing well they didn't live through the non-performing world of your foreclosing on most of your portfolio um and when that comes fold that's a lot to undertake for closing on multiple multiple assets and juggling all the stuff I don't know how some of the people do it's shocking we did have a question Gan I think um you touched on this before Bob but Gan asked the question is that he's heard of people buying non-performers over upb what is are the cases to justify buying above the unpaid balance well number one like we talked earlier have a low cost to Capital um but look there's three factors when you're buying an npl right you got B value you got upb and then you got total legal balance so if you are able to verify the total legal balance because what is total legal balance just for those who may not know what's give me a quick definition of total legal balance that is the total amount that you're in you're um entitled to collect when that loan pays offer goes to foreclosure so could be ACR interest it could be advances foreclosure fees anything that whether it's the court or whoever happens to approve the Foreclosure um the servicer usually says in order to pay off that loan like for example let's say this loan was modified okay five or six years ago and they did a deferment they deferred principle well the upb may be 100 Grand there could be a $60,000 deferred principle that's do at the end well that's part of your collectible balance yeah plus your crude interest plus your foreclosure fees and tax advances and so forth um so all of a sudden you may owe 100 Grand but you're entitled to $180,000 right so if I bid 102 on 180 I'm over upv but I'm still you know quick math say 75% of what the total legal balance is and to your point about back in the day back in the day most properties were underwater meaning they more than they were worth now there's a lot of equity there too so the VP may be up there so we focus more on Bo and total legal balance than upv and that's why when you read that the fanny trade that just happened was in the high 90s of upv it didn't disclose what the total legal balence was so I'm willing to bet that was probably high 70s of upv um and I think the B was in the 50s I think it had so much equity in there if I remember looking at it so that would be why um you do have to verify that if somebody puts on the spreadsheet hey they owe me $188,000 trust but verify friend Ronald Reagan once said yeah good good good example there you know a lot of people forget about that total legal balance uh is collectible and most sellers will expect you to be bidding based on that number because you can collect on it now the hard part like you said is verifying it because some people throw all kinds of stuff in there um and that's not collectible based on the agreement in the documents um so it there's been many times where we've looked at that kind of stuff and I've seen huge spreads in this stuff and that comes back to the point you need to verify we saw loans where the upb was 50 and the legal balance is 150,000 and I said that just doesn't make sense I just that's ridiculous so absolutely I'd be verifying talk to your servicer talk to your seller and just say I want a list of the things that you're saying you are owed um Serv should be able to also provide that payoff information yeah and how they're doing and to be honest with there could be some jurisdictions across the country where the judge is like no you can't have 10 years of recruited interest and your foreclosure judgment is for x and you know yeah so you just got of you know take everything and run it through your buying Financial modeling and figure makes the most sense sure I've got one that's actually paying off next week just to go along with this so the unpaid balance is around 87,000 total legal balance that we're getting paid off on is around 92 so there's about $5,000 you know uh and that's late fees that's legal fees uh that kind of thing that goes into that and so that I mean $5,000 that makes a difference you know that extra juice for sure yeah yeah and then you guys also buy bankruptcy notes and like that do you guys like bankery notes or do you guys stay away from them um I think Nathan summed it up earlier with us it depends answer on some questions um cash flow in BK loans we're we're okay with um chapter I mean yes we buy them we don't chase them if it's in a portfolio we're gonna buy you know we're going to bid them we'll bid them differently obviously than an RPL or an npl just depending on what it is right but we don't filter and say kick out all the BK loans or whatever but you know we know folks that who have models that all they want to buy as BK loans we're not that guy either but if you give me 20 loans and two of them are BK then okay as long as I get all 20 loans I'll take the two bks yeah and the BK loans will definitely juice your returns with the aers uh for period of time depending on how long that period is um so let's get in more temperature gauge what do you guys are more focused on right now are you guys buying more performing notes or not performing what are you guys seeing H that's a good question for a long time we were buying a lot of rep performing loans right now I would say seller finance performing loans is is good we um we do have a good pipeline of mpls um but it's not as large as obviously we would like everybody thinks npls are sexy and I want them and then when you start digging into them um the the factor of how much hair they have on them um maybe it's like well I'm not that excited about it so I would say we like cash flow um especially for those of you who think it's sexy to have a capital fund and so forth when we first start our fund I think 2013 uh you know we were probably 70% npls yeah and it didn't take long for for us to figure out that we needed a much better blend of Performing loans because you got to have cash flow you can't pay out Returns on a negative cash flow npl deal that's going to be resolved in a good way but down the road yeah um so we blended it and by the time you know our fund at its at its height was probably 70% performing 30% mpls and we typically don't play a lot in the Aro I mean obviously you have a nonperforming loan you foreclose you end up with Aro and we'll usually sell or Finance it uh if you could just can't sell at retail um but we don't chase Aro per se and which um you guys were talking earlier about reverse mortgages and and we're seeing a lot of heckum yep um really you're it's it's an Aro play if you're not good at working your way out of Aro for those of you that don't know reverse mortgage that we're seeing on the secondary market now is where the borrower is deceased and the property is vacant and supposedly secured um okay but there's not gonna be any low mod unless you might have an air that thinks they are entitled to it and probate and all that kind of stuff so you're gonna end up with the property okay well Dave you got somebody who lived in that house had a reverse mortgagees they died when they were 85 years old right if you like shy carpet and avocado colored appliances then we got a deal for you uh I mean they're gonna you know what these houses look like right my dad's 90 years old he when he passes away I don't want anything to do with his house it's just it's got so much stuff in it from however many years he's been in there that I can only imagine what would happen so yeah it's you know but if you're good at Aro and you have boots on the ground you know how to do it it's a great place it's just not our cup of tea yeah it's great for those looking for fix and flips or you know typically want to buy at the foral auction if you're that kind of investor listen to this reverse mortgages when we have it on is a great topic to learn about y I agree yeah we'll be talking about that in the next couple weeks and I've done a bunch and our guest has done a whole bunch so that'll be a good good discussion yeah so we've also touched upon hypothecs do you guys get involved in hypothecation much at all um we've made some we've made loans to folks against their note portfolios okay right so for example we'll lend up to um 65% of the portfolio upv Okay um 55% of the cash flow right so in other words let's say you have a million dollar portfolio you can borrow $650,000 and $10,000 a month cash flow your payment is going to be $5,500 you know rough numbers like that so that way there's enough cushion to where if there's some slippage in your portfolio you can still Debt Service um and if you you know if a loan pays off you pay your loan down and all that's built in so we don't do a lot of oneoff hypothecation just more on a portfolio level yeah yeah absolutely so for those who do have that kind of portfolio and you don't know Bob which I'd be shocked feel free to reach out to them uh the link is inside the chat is pinned to the comment um yeah absolutely so it's weird we ran into and I'm curious for you guys this perspective that we've learned we asked a lot of people at the node expo at DME last year this question we're amazed how many seller finance people don't have a conference to go to have you guys learned the same thing we're amazed that these people don't have a conference like we do it doesn't seem to be seller finance conferences yeah you you ever seen one or is you know of any not strictly for seller finance like that no I mean I would say you can learn seller financing at note expo at source at DME at noteworthy but it's all evolved in in the whole note space in general so that's why I'm trying to convince them like if you are in the seller finance in RS and sub twos come to the no conferences we're in the same game as you are right so if you I'm amazed that you guys don't have sub2 conferences or rap conferences or owner finance or seller finance there's social media but there's nowh to meet with other people doing what you're doing I encourage you to reach out go to node Expo DME Paper Source and all the other ones because we're in the same space you are we're just we're the husband wife kind of situation right you guys are creating we're buying I encourage you guys to to definitely take a look come out meet us in Dallas uh in a month from now and just learn from both people who are doing what you're doing already but also the flip side of those who are looking to buy from you um and give you cash now so you can go buy more deals yeah I mean you can find your Capital Source there also like we said earlier the vendors and service providers you're going to create notes you got to do it right whether that's you know whether that's do it in compliance or whether it's do it at the proper you know note rate and term so you can exit at the number you're looking to exit at um so yeah how to create a note it was funny when you guys were talking about the first question you always get is what are you gonna pay me what you know what percent of upv yeah you know well if you you know it depends on what you if you sold it to a lousy borrower at a low rate on the long term what do you think you're gonna get yeah right but if you want to know he's like well how do I write it if I want 95 cents on the dollar it's like so there's a way to learn from all these people I do want to say there's a lot of good stuff on social media but there's a lot of stuff that's not accurate either so back to my um trust but verify you know make sure you're getting advice from somebody that knows what they're doing and not just some hot Sports opinion and some Facebook Chat yeah it's amazing you know me and Nathan should just do an episode on the craziest stuff we've seen we've seen people I hate to Comon that people but people who are new to the space and not using servicers um who are not putting in you know using the Piti as a fixed amount on their note um and things like that where there's no start date with paperwork when people are doing those kind of things that's your first problem right if you need you need to learn how to create that paper right um if you're not using a note servicer you got to make sure you are um we had a couple people using apartments.com that we're just trying to educate them that that doesn't equate into the node space like it does rental properties um um and doing it right is the first step of of doing this as a business versus a hobby I think that's a great point if you're going to do it as a business yeah right you got to do it right you can't cut Corners I'm Gonna Save $18 a month on this or you know I don't want to do that because the uh the rmlo is going to charge me $900 to create the documents correctly well if you create a bad note you're going to get a bad price or when you go to foreclose on it you're going to have an issue yeah and you don't want to be on anybody's radar of creating notes that are not enforcable or are not in compliance because yeah you know Dave may look good in orange but not a lot of us want to be in an orange so I'm just well said B well said a one-page note probably is not going to be sufficient when it com yeah make sure your dockins have thorough information have a start date your interest rate your p& should be separate from your tax insurance that number should adjust you should have in there that the borrower that the borrower be notified that the es amount will adjust as years go on um that you actually have an interest rate in there and that you'll be licensed servicing it I encourage you those who are creating these make sure you use the borrow to pay the servicing fee you can do that I encourage you to look at that because this helps us as not buyers give you a higher rate we don't got to subtract that from our our monthly fee um so the idea is who those are creating it so I I love it um Nathan I let I'll let you finalize this interview with our uh we don't have a big catchy Famous Final last question curious we've got people that come on that have have different experiences that we do and certainly not it's not often that we have somebody with such a wealth of knowledge and experience so having been through everything you've seen and and been through all the experiences you have what's your crystal ball what do you see happening down the road here where's where's the note game heading well I could take the easy way out and say if I had a crystal ball I wouldn't be on here with you guys right um wow that's that's great um I think we're in for a good run I mean whether it's the npl space or the Performing loan space and the ability to Pivot because I I don't see the market changing for the better as far as lower interest rates and and so forth and there's going to be levers pulled on people that are going to have to liquidate and are going to have to recapitalize to some extent and if you're sitting look the key to the no business is always being able to match deal flow and capital right there's going to be people watching today they got all the money can't find a deal and get people that got all the deals and they ain't got no money well come to know exp find somebody and make the match but um I still think there's going to be some MPL product people are going to realize you can't always sell them for 90 cents on the dollar people are you know a year ago real estate was on fire everywhere and they're just you know gonna ride it to the end well that's not the case anymore and I think there's going to be some pressure I'm always skeptical in presidential election years because there's all kinds of voodoo math going on out there as far as what's really happening and this is great this isn't great and so forth but it does present opportunities because people get nervous right um so um be ready to Pivot and have money ready and and look if you're sitting on Capital either give it back to your investor but don't pay stup prices because you don't you don't want dry Capital sitting there costing you you know I'd i' rather give money back to investors make a stupid trade outside of my financial model because it's like if I don't do a deal you know I'm not gonna I'm not gonna have any loans in my portfolio I've seen people make stupid trades um overpay for loans because they just felt like they needed to do that not really a answer but crystal ball and naan I think see some good product 2020 well said Bob I think a lot of people don't remember what 05 looked like everyone was like oh we got to get deals you know the real estate's never going to Bubble Up and those who did a deal just to be in a deal realize how bad of a decision is just to get no deal if you're 0405 and you went back to that self what would you told yourself to do with that capital or anyone to do with the capital you would told just put it back in the bank hold off a little while because things are going to be on sale and I think we're agreement that money will be well used when this Market whatever when it happens happens and your investor is going to be you know they may be disappointed their money didn't get you know deployed but if they know you're looking out for them and you're look this is our model and this is what we're doing they don't want you making a bad trade with their Capital either right so you know in our Capital fund it's it's our money to spend but it's their money they invested and they trust us to make good Investments for them and if there's not a good deal right now and I have to return Capital we do that and that's just always you know that's just always been my philosophy absolutely so uh for those who don't know we'll put put on the page and Link and all stuff uh Wayne Garrett which you guys know very well will be actually our next guest in a few weeks so T stay tuned with that but Bob I appreciate man I'll be seeing you in about a month I'm ecstatic to be seeing you guys and uh spending my weekend uh with networking and uh meeting new and old friends it's great looking forward to it well I know there's people on here that were on the fence whether or not to come to not Expo but now that they know you're going to be there um I'm gonna pull up my registrations and just watch them tick up all afternoons they know you're gon to be there absolutely forward to seeing you guys yeah absolutely so guys make sure you just I'll put the link back in the chat make sure you get on there if you want Bob's information go to link there as well um we look forward to seeing everyone there Bob hold on for after hours and uh take care everyone have a great weekend everyone thanks everybody first question you always get is what are you gonna pay me what you what percent of upb yeah you know well if you you know depends on what you if you sold it to a lousy borrower at a low rate on the long term what do you think you're gonna get yeah right but if you want to know it's like well how do I write it if I want 95 cents on the dollar it's like so you there's a way to learn from all these people I do want to say there's a lot of good stuff on social media but there's a lot of stuff that's not accurate either so back to my um trust B verify you know make sure you're getting advice from somebody that knows what they're doing and not just some hot Sports opinion and some Facebook [Music] Chat good afternoon Dave puts here from jkp Holdings alongside me as always Mr Nathan Turner what's up good we're chatting so much we almost chatted right into our intro here yes oh good conversation now it's always fun um but yeah we like oh crap oh crap so I'm glad I Conn next here with you guys uh for those who are watching tuning in hopefully it's not your first time but this will be recorded it's probably our most asked question to get so we've been doing a lot of things lately and kind of Shifting Gears we're just talking to Bob uh if you call the Green Room what everyone call it about how the Market's shifting and how that we just saw the fact that some nonperforming loans in the fanny level we're trading at upper 90% of percent of upb that's crazy I mean but they must have really cheap money or some game plan that you and I uh aren't playing yet yeah we're sitting here trying to figure out so just trying to run some rough numbers based on what we know how does that work like even if your money's at 2% margins are slim but if you're talking hundreds of millions maybe that makes it worth it and the mortgages are three four 5% you know interest rates that to get a 10% return you're discount a lot these guys are buying almost a par um so it's crazy so I apologize for we're over speaking some people just finishing the conversation up and hopefully those who are tuning in can understand the stuff so what we've been doing a lot lately in the last 2023 has been a mission to understand the seller Finance World um and also understand where notes are at rap notes sub twos owner financing and just embed ourselves in those kind of those groups um and we just reconnected or connected with another group this past week had an awesome phone call um with another group that does similar stuff so stay tuned we'll be hitting about a bunch of that stuff up um and in the coming weeks we'll also have uh some reverse mortgage talk um and some more people who've done from W2 to owner financing so it's be exciting yeah it's really cool it and it's it speaks to kind of the variety within this Niche yes so we've got we've got mortgage notes as kind of the umbrella and then you're talking about reverse mortgages seller finance uh performing non-performing seconds you know institutional versus seller finance creative Finance WS you know there there's so many different directions that this business goes that it makes it really fun and really interesting all the time it also makes it really possible to be able to Pivot yes at any given time if if we were I mean we were doing non-performing for years and now the pricing has just gotten so out of whack that it's hard for us to justify that direction when now seller finance uh performing notes become a much more attractive asset class yeah and it's funny because we talked about this a lot I think people get a little confused because I still heard today someone mention you know buying an Roi everything's really based on buying on that interest rate right that's the driving force behind all this it's really difficult for us to buy um on a low interest rate situation uh if you're originating a loan and you're listening to us please don't write it 6% right if you can if the borrow is able to do it again if it's owner occupant only if it's an investor you can write whatever you want to write at um but to for us to buy it uh has to be large enough interest rate or we're going to Discount you based on the return we're looking for so and it's still a question we get all the time like just on this call this week these are guys that have been doing this for a number of years they're not brand new to this business but the question we get is what percentage of youv yes well it depends what is your interest rate and that both of us that was our first question back to them well what's the interest rate and that's the number one determining Factor on what that discount is going to be so write it at a high interest rate you've got a smaller discount and we can do a ton of business yeah yeah and I think people get lost in that because they think other ways and I don't know what the focuses on that is um because it goes back to oh percent of upb it doesn't matter Roi doesn't count it's yield IR kind of equations and that's what we talked about if the big pools are selling they sell at a percent of upb um because it's easy number to use but they're really looking at the interest rate and seeing what the return is because your interest rate's your return right and you have to Discount the principal enough on lower interest rates to get the interest back up the return back up if your interest rates real low you're gonna have to drop your discount on the balance alone to get that return so yeah we're always looking at yields so yes learn how to use the financial calculator use Dave's wacky spreadsheet but learn how it works yeah you gotta use something yeah yeah if you have question about that feel free to reach out to us uh Nathan used the manual calculator we have some spreadsheets stuff but either way you're doing it make sure you understand what those numbers mean how to use them um and and what they mean how do they how do they interact with each other that's a huge thing right um and it's funny you know we got in the space decade plus ago we were focused on bank loans um and we still you know we bought bank loans up to the most recent days and we've shifted over to the seller finance where the grandfathers of this you know this investment strategy bought seller finance notes flipped over the bank and then flipped back right that's what they did for years they focused on buying sell Finance paper yeah and we're lucky enough to have one of the Legends in the business Bob's been around forever and ever well I don't want to make him seem too old we'll get him on here he can tell us all yeah welcome man how are you I'm good guys appreciate you having me and Nathan you caught yourself just in time about been around forever and so long and you know the grandfather and you know yeah so Bob for the few people who are tuning in maybe there's 7 two people who have been tuning to us who are you how'd you get into real estate and notes um and keep it under four hours because yeah yeah well if I went through every it would take four hours but um actually my very first job out of college was Consumer Finance so everybody should have to be a a debt collector at some point in life I always say you should be a debt collector and work in a fast food restaurant as long as you've done those two things in your life you'll appreciate whatever other job you end up getting um so that started off into real estate and then I was in the banking World 1990 I entered the seller finance space as you mentioned I went to work for uh Metropolitan mortgage out of Spokan Washington at the time they were the the big dog in town and work with them and 1997 we moved to Dallas to work at the associates which was again another big firm and then in 2001 I went to work for bayie and a lot of folks probably have heard of bay and I worked with them for 12 years and then I came over with a colonial funding group and Eddie speed and we started our Capital fund um in 2013 and we like you said we've been in this Finance space for over 30 years we have bought Bank paper we bought deals from hedge funds and um but our true core is still seller financing has seller finance changed over the years or is it just evolving what have you seen uh that's a great question I don't know that it's really changed a whole lot other than um to your point a minute ago about a lot more subt and wraps um you know we'll we'll say quote unquote professional seller financers as opposed to just Mama pops you know back when I started in 1990 it was you know you would find somebody who had one property and sold it and have one note you know and that was it and um obviously it was much more important to find folks that were generating multiple notes so you had you know lower marketing call so you know you find somebody who would buy property fix it up do some rehab build a portfolio that type property and then buying bulk so um but it's crazy you know we were talking before we jumped on about interest rates and cost of funds and stuff and um you know interest rates now are pushing 8% we still see somebody do a seller finance note at six I'm like yeah why are you doing it less than the bank will do it just you know that's not the thing so um it's it's always been a a really good access to priv private capital for folks that either don't want to or can't get bank or traditional financing I remember back in my University days I took business and uh we were talking about pricing uh about you know pricing whatever Goods you've got or whatever and and the the line that stuck out and uh kind of became sort of a legendary quote was don't try to compete with Walmart you're never gonna undercut Walmart and and we're seeing people doing that now where they're trying to compete with Walmart with the Banks like no no no no no the banks are offering what they're offering you've got a premium product so charge more yeah so when you've gone through this process of buying what are kind of some of the stumbles that maybe people who are watching who are creating it who've been in a space maybe a year or two that you've seen that you say don't do this kind of stuff with origin notes don't go after the broken desperate person to be your borrower right I mean there are a lot of and we refer to them you know on the Note School side as like penalty box buyers in other words they there's nothing wrong with them but the credit availability right now is so tight in the underwriting and the rates are higher people can't qualify there's you know there's well-deserving borrowers out there that can be homeowners you don't have to chase somebody with a low down payment that can barely afford to make their monthly payment you don't have to Market to those people so if you're creating notes find good quality borrowers you know to your point earlier if you're if you're creating a note to sell it right you want to find a good borrower and you want to write it at the right terms so you can minimize your discount right and you know you guys were talking about percent of upv and you know it's all about the yield I do want to just you know differ a little bit on that because there is some opportunities especially in the rep performing space where you got a low rate and a long term and all right all of a sudden you're going to get a huge discount so you got a balance discount with yields we'll buy below our our yield requirements at times if we know we're buying a big enough deal and we got like an 80 90 $100,000 discount that loan pays off in five six seven years your yields going to jack up anyway so we always try to balance that discount in there which really comes into effect on you know deals over 150 200,000 all of a sudden then you you know you got a good size discount even if you're buying at a high digit yield yeah yeah because most time people don't go 30 years right you have a exit in 10 years your yield just goes through the roof you're absolutely right there well said um so not school right this is something we've all heard about um I think Nathan you went through it years ago tell us a little about for those who are familiar with it what is note school well let me let me set back just a little bit when I first started in 1990 I met Eddie speed when I was working at met metropolit mortgage and Eddie was you know a loan Trader he was a broker he would buy for his own portfolio and he would sell it to institutional investors like Metropolitan and then Associates when I moved here to Texas his office was pretty much right down the street um so I got to know Eddie real well and and um you know he developed all kinds of seller finance programs for companies like home investors how to create notes that institutional investors like Bay you would buy um and from that he created no school as educational piece initially to teach people how to find notes so they would send it to him so he would have a continuous marketing Source right and then they can make fee income and so forth and that's red to an educational platform where mainly um somebody who let's say has a corporate job maybe they're looking to exit that and they have money in their 401k or in their self-directed IRA and they're looking for a retirement they're looking to invest in passive income um and it's involved over the years to creative financing and mpls and that kind of stuff but it's basically how to you know build up a passive Investment Portfolio and um no school's probably been around 20 years now so um that was that was Eddie's baby when it started and he still promotes that and does three-day classes and um teaches a lot of people across the country how to buy um assets and partials and so forth let me tell you a real quick story on partials yeah um so when Eddie first started he worked for um his wife Martha's dad um and and his business partner in Mississippi and they were buying and selling notes well they were selling notes to a finance company down there and they would go to the company and it would be a 30-year note and the company say um we can't buy that note because our machine it was before computers or however they tracked it would only go 15 years so they were like okay we we'll just say you part of the note then and that's really how the whole partial thing they buy the whole note and only sell part of it because the the finance America couldn't figure out how to advertise something more than 180 months so you know and now all of a sudden you know you guys are mored into partials and yeah such a great way to you know to your point on some to lower rate stuff to hide the discount is you know you got a 6% 30-year note all right well I'll buy the next 10 years and it'll revert back to you after that and you know it's yeah it's win-win they get Capital back and you get a good cash flow for a period of time yeah that's amazing yeah was the very first class I took back in 2009 wow I was looking up we were creating notes I didn't even know that's what they were called and we're looking for an outlet looking for some way to resell the these some way to capitalize that my thinking was you can sell a turnkey rental surely you can do that with what we're doing whatever it is that's called so I found Eddie online somewhere and went down took his class and and blew my mind you know all of a sudden I started realizing this is a bigger thing went to uh later that year went to uh noteworthy down in New Orleans and uh again blew my mind as Eddie was there again and and just there's 200 people all talking about what I was doing and that was kind of that introduction oh wow this is really a thing so when you mentioned earlier about all the different niches in the in the note space you know yeah and um the ability to Pivot you know I think that's key and that's one of the um the themes that we're going to have at note Expo this year is just in the everchanging market you know are you ready to Pivot um the only you know my only word of caution on that is there's a difference between being prepared to Pivot and then just being chasing shiny objects so sometimes you got to stay focused on what's working in the market right now and and not dabble too much in 18 different things yeah um but on the other hand when the lead comes to your desk you need to know am I going to flip this loan and make a fee am I going to buy a partial on it am i g you know youve got to be able to do something because we're all spending money on marketing whether we're doing something like this and talking about business and hey send me deals or if you're looking to buy let me know or you know that kind of stuff um so I would say be ready to Pivot but also stay focused on you know what your core businesses and in our case it's always been sell Finance yeah are you guys buying wraps at all are you guys getting into that space buying wraps we've you know we've talked about a lot it's definitely a hot market for the creators but rap notes don't seem to be fitting in well with the note buyer if we can't pay off the underlying lean yeah well if you don't pay off the underlying lean you're technically in second position right so yeah that limits the investor pool people that are comfortable doing that we buy WS but most of the time we do require to pay off the underlying debt because we do want to be in first lean position unless there're just such crazy you know Equity or we love the property or you know sure it's an outlier but our basic stance is you know hey you bought a house for this you wrapped it you know we'll buy that note you'll make you know whatever we pay off you'll make that spread and you know get your Capital back and go do your next deal so we usually require the underline to be paid off so note Expo I believe was one of the first conferences I went to um and I believe weirdly enough I think you were one of the first people I met uh you probably didn't realize it I was sit with a buddy of mine he introduced us and one thing I want to make sure people realize is these not conferences who were very n nervous about going we me and Ethan talked a lot of people before his last year and we we heard from those people who listen to us and talk to us that their nervousness was a 10 for some of them once they got there it dropped from a 10 to a zero talk a little bit about how no conferences for those who may be new or just getting into it is not as a stuffy atmosphere as some may think it's not at all intimidating but go ahead Bob yeah no and we try to make that environment so that it's not right I mean if the only conference you ever went to was like an NBA Conference or something then you know that's you got your suit on and you're meeting with a bunch of bankers and I can tell how you know there's 2,000 people there you might feel a little intimidated but we started node Expo this will actually be our 10th Annual node Expo and we wanted to create an environment where not only do we have quality content you know whether it's General Sessions panel discussions whatever um but we have a community where you can connect with people whether it's new or reconnect you know like um I may only get to see you guys a couple times a year and it's usually at a conference right I mean you know I I used to see Nathan all the time at an imn conference and then when he took over DME I was at DME and he's been to node Expo and you but honestly I don't make my way to western Canada very often so I don't I don't get to see them and U so it's always a way to connect and reconnect and also to that point we have about 25 to 30 exhibitors so you get to see all the vendors that you deal with right and and if you're new to the business it gives you an opportunity to UM Vet them in person you can meet with different loan servicers see what's a fit different Ira companies different BP agents whatever so just that and um you know we've grown over the years I think it's a it's a solid product when people come there to your point Dave it's not like they feel like oh my god what have I got myself into yeah it's like if you want to sit there and listen to everybody on stage all the time you can do that if you want to work your way through the exhibit hall all day and have meetings out in the lobby and you know just connect with folks you can do that too so it's a it's a pretty good environment and um I would not say it's intimidating at all and I hope nobody feels that way could you give us a little snapshot of what some of the topics so the people who are looking or curious about going maybe in tune for some they can expect yeah I mean it's stuff we've been talking about we've got some creative Finance presentations we've got some topics on wraps we've actually got some panels on distressed debt raising Capital um self how to use self-directed IRA funds um in all those spaces you know do you buy an npl in your self-directed IRA you know there's people say absolutely not there's people that say yes you can if you do it correctly and you know what you're doing and things like that so we've got some topics on that um and we also talk a lot um really just about the mindset of you know we're all entrepreneurs in this no space right we got you get up you know whether you go to an office like we have or whether you work out of your house um sometimes you know you're dealing with people you've never met whether it's a seller whether it's your loan servicer and you got to have that right mindset because it can get frustrating and you know U so sometimes we use it as a uh a reset button you know get you know it's your pep rally once a year come to the note Expo and kind of get rejuvenated and um so we do a little bit of the you know get out of your head and start you know pull the trigger on some deals some people want to do deals and all they really do is window shop right they look at deals but they haven't bought one yet they just need to get over that fear of you know that first step absolutely so we have uh I'm not sure if Nathan saw it Steve Thomas made a comment that if if you're in the note business and you haven't been to a note Expo then you're not in the note business well well okay guys Steve yeah so it's great to hear this stuff and we collaborate all the time right most people say well aren you competing we all are right but at the same time we're all learning from each other the space is different from most real estate where the collaboration is really really important and very very helpful so you know let's back up here I put it in the chat here too note Expo is the third and fourth uh of of next month and it's it's in Dallas right um it's at a conference it's in a hotel setup and it the exhibits are outside the conference inside and they have speakers for two full days so I would encourage you if you're local to it you have no excuse not to be there um and if you are a little bit uh a distance I was bringing up this morning that it looks like I will be attending this year so I'm looking forward to making sure you guys all get there Nathan's flying in from Canada to go there and it's it's about the networking right this is what the space is all about is networking finding how we can help each other and collaborate as Bob said before if a deal doesn't fit you but you have a collaboration partner that does fit them you pass it on them they're going to pass you a deal back so you make sure you network for that availability you have all these tools in your toolbox available if there is a secret sauce to this business so number one you have to get educated and whether that's through no school or somewhere else but make sure you know what you're doing because this is not real estate it's only related that's all yes so make sure you get some some education next though the real Secret Sauce to this business is conf conferences I started going in 2009 that was my first and i' I go to several conferences a year I'll go to three or four or five whatever is out there uh mine or somebody else's because it's so important to network it is so important to talk to your vendors and just have that face to-face conversation let them take care for dinner and yeah you know and have real conversations about nothing to do with business and also to do with business and you do all kinds of stuff with people that you have met and have you know become friends with and then when you get to the stage like me that have been around forever as Nathan said at the top then you're you're fortunate enough to do business I'm at a point now honestly I only do business people like to do business with yeah Life's Too Short you know I have a Life's Too Short bucket it's either you know the person I'm dealing with or a deal when it comes across oh yeah you might be able to make some money on it but is it really worth all the hassle to do it I just pass on it but Dave to your point about competitors I always look at everybody as a counterparty as opposed to a competitor because like you said I'm gonna have something and it may not fit what I do but if I can pass it along to somebody or um you know a lot of people oh I'm only comfortable because they came from ....