Buying Your First Few Notes: Struggles and Worries | Real Estate Notes Show

Episode: Dave Putz and Nathan Turner discuss the struggles and worries of buying your first few notes. Dave's Goals and Plans: - Has explored notes for 6-8 months, starting around late summer/early fall of last year - Rolled over old employer account and used CARES Act to withdraw from TSP (government retirement plan) into self-directed IRA for real estate investing - Has exchanged emails and negotiated with note sellers but hasn't actually bid on any notes yet - hits the brakes before making offers - Initially interested in notes to avoid dealing with houses and tenants, just 'dealing with the paper' - Still learning about the legal side of notes and admits he has knowledge in his head but no practical experience yet Nathan's Goals and Plans: - Attempting to help Dave and others see the other side of the note space by bringing in beginner perspectives - Uses indicative offers in note deals (different from real estate where you don't typically do that) - Had a Waco, Texas property note listed for sale to Dave - originally listed at $35k with $39k unpaid balance, 9.97% interest - Bought the Waco note in April 2019; borrower went non-performer after wife passed away and he fell off on payments Key Recommendations: - Don't skip the collateral review step - get the collateral file to understand what you're actually looking at before finalizing price - Work through indicative offer questions (Nathan has 13 on his website) as part of due diligence before bidding - Understand the mindset shift: you're becoming the banker, not the property owner - stop thinking about the property itself - Finalize pricing before moving to collateral analysis stage Topics Discussed: - Transition from wholesaling/creative finance to note investing - Challenges of creative finance in New York (legal/lawyer barriers) - Self-directed IRAs and using retirement funds for note investing - Mindset shift from property owner to banker - Due diligence process for purchasing notes - Collateral analysis and underwriting steps - Fear and hesitation points when bidding on first notes - Local real estate community awareness of notes Guest Insights: - Dave struggled to explain to local contacts what notes are - biggest difficulty is helping people understand they can BE the bank collecting payments instead of making payments - People in New York have zero interest in notes because they're all focused on wholesaling or landlording - Moving to note investing appealed to Dave because he's burned out from landlord duties and property management issues - Dave admits he still gets boggled by the concept that someone will pay him as the bank instead of him paying Wells Fargo dave puts here from jkp holdings alongside me nathan turner hey it's good it's good it was actually we had that big snowstorm a couple of days ago and then today was a beautiful sunny day up just just below freezing so my wife and i went for a walk at lunch time it was fantastic we got about eight inches of snow so we're like oh yeah um but it is what it is so we're inside this tonight we have dave so dave i'm going to prep it up was caution is optimistic to get into this video with us i'm ecstatic to have him on here um i'm lifting him up because we're putting him in an awkward spot i'm sure but we wanted to bring him on here to kind of let others see and let us see the other side of this whole space right so dave can you just introduce yourself jump and share a little bit where you came from what your real estate background is and how long you've been doing notes i know you have about 1000 2000 notes on your about right oh yeah at least uh dave mcavoy i uh from new york about 75 miles north of manhattan uh been doing real estate on and off for three or four years i haven't done a whole lot at all to be honest with you my experience is really in wholesaling so i've done a couple of wholesale deals here and there and then that working in new york is is if anyone's from new york it's it's pretty difficult and what i came across a couple years ago was more the creative side of real estate like seller financing subject to lease options those types of things and getting those kinds of things done in new york is in my experience is almost impossible i still can't believe people in other states are so successful as they are i guess they don't have lawyers that they have to deal with but new york everyone lawyers up and that's that's when my deals are that's when my deals died okay so um as far as notes go uh you know i i've heard about self-directed iras a few years ago and um decided to look more into it uh early last year um and then i came across uh notes as a as an option to invest with my uh with my rra so that's kind of where i landed i want to say july or august when i really started to look more into it where did you hear about notes was it a real meeting was it online you know what probably bigger pockets or something okay i mean i heard about it when i first started getting into real estate by and i just never looked more into other than just seeing the word note i just never even bothered yeah so when they came across it seemed it seemed it seemed a lot more interesting than you know i don't have to deal with the house i just deal with the paper for the most part so that's what kind of intrigued me to look more into it all right all right wow it you know it's always interesting to hear because everyone's story how they got into notes is unique um how long you've been exploring notes as an option for investment has it been a while no probably late summer early fall last year six or eight months or so okay that's awesome did you take any kind of training courses or are you just no learning from the fire hose of information out there pretty much podcasts youtube a couple of books yeah facebook yeah okay very interesting so what about notes besides you know we're always trying to convince people who do wholesaling fix and flips and landlord to move over the node space because it's very similar to a point but the mindset's still the same you're just doing the other side of the real estate part was it difficult to change your way your mindset was from focusing on the brick and mortar and everything else to working on the note side the legal side of it are you still learning about that i'm still learning i think i got a pretty good amount of knowledge um in my head anyway but you know in practice obviously i don't have anything yet yeah but uh yeah it's a whole different way of as far as i'm concerned it's a whole different way of thinking okay yeah and then so are you looking for like the passive income is that what uh your kind of your your goal is with notes initially it was it was to build up my my ira right um i took a good chunk out well i rolled over an old an old account for an old employer and then i actually took advantage of the cares act last year it took a bunch of my money out of my uh my tsp which is which is a government a retirement plan okay they rolled it into the ira so i took you know most of my money out of wall street now i'm looking to do some real estate with it right cool okay so you get this space there's a lot of people that we feel are helpful from the new beginner point of view do you find that people compared to brick and mortar are are more helpful um i would say i would say so yeah i mean in the virtual world world yeah i mean if you're trying to talk to somebody locally like i would you know nobody knows about notes around here i've talked to a few different people like what are you talking about um same thing with creative finance you know i bring up sub 2 or seller finance and they're like what are you talking about wow we got to move their dates and it sounds good up there they're either flippers or they're or they're landlords and i have zero interest in being any of those yep and and yeah that's where a lot of us come from is and and frankly it's burnout where you're a landlord or a flipper and you're like ah it's way too much work their jobs yeah a lot harder yeah very interesting and not to say there's no work involved with notes but but it's different so how do you talk about running to and from a site to check on you know the contract to make sure they're doing their job right right yeah why do you find the biggest difficulty is explaining to people what notes is i guess the biggest thing is getting people to understand that i could be the banker they can be the bank yeah where they're collecting the payment instead of making the payment you know and i still have kind of boggled myself to actually think that's actually going to work you know i'm so used to you know making payments to wells fargo or however for yeah years and years now i have a chance to you know have someone who owns the house and make the payment to me i can totally relate i remember that took me a little while just to get my head around be like wait and and to every once in a while i'd kind of sense that i my brain switched back to real estate and i kept thinking about it as a property and no no no no no i'm the bank just trying to remind myself of that and yeah yeah and just it's a different kind of a mindset it's not the same as as a property owner that's interesting for me it was that conversion over from being a landlord to dealing with not dealing with tenants getting the phone call dealing with that toilet problem the roof problem gfi going off stupidest thing in the world um and that was before burr came out everything else but it was just a headache and a headache and a headache and competitiveness and dealing with all that stuff and then dealing with the bank or dealing with a hard money lender here or there yeah it was but i could relate when i when it came to was like i want to share a lot of people yeah so at your local rhea are they talking about anything about notes at all or i don't know if you've been to rio with be going on but i haven't been to an in-person rio meeting in a couple of years because like i said they're all wholesalers flippers or landlords and i didn't have any interest in that at the time there was maybe when i really started looking into it again like august september they had uh someone from um note school ah we'll do a presentation on it yep yeah re-pass it no no brian something yeah yeah brian oh yeah brian okay i forget his last name yeah yeah it's good to see those people get out to the local areas because it draws people in right notes is everywhere and you could do you can do notes from anywhere yeah which is crazy talk so let's dive into this stuff a little bit right how many notes would you say you you've explored to bid on like you put an offering on that you were thinking about buying i haven't actually bid on any yet okay i've exchanged emails with some people and and does some negotiations but that that's when i kind of hit the breaks okay and what's standing in the way what what is it that you're trying to kind of overcome i don't know i mean i see i see the numbers and you know the yield and all that looks good but sure what am i missing so let me ask something let me ask a question let me ask a little differently what was happening just before you kind of pushed away what was the last thing that happened email exchange that happened and the next email didn't happen what would you say you where did you get where was that point you have all the numbers set was it like okay i'm about to place the bid and you just don't pretty much okay yeah okay and then you told us just before we started that you actually had bid on one of mine on paper stack i guess uh well i didn't bid we didn't get that far didn't get that we were you know negotiating yeah okay okay so a little different thing with notes with notes compared to real estate right we make indicative offers and my one of my funding partners said to me when we first got he got into space with me what do you mean you make an offer with all his indicatives like real estate you don't do that that's not like you know you have your contingencies but not that much i have a ton of indicative offer questions i have and you know i have 13 on my website but like that that's crazy talk for real estate investors yeah so with that said those questions are kind of just to help with due diligence when you're a bit on the asset with nathan you had your numbers i presume you didn't look at collateral yet right no okay that that's probably a big part of it i get a collateral file now what am i looking at and what is it yeah what are you even looking at yeah for sure so you didn't did you get the point where that would would have been your next step or were we still talking well we didn't we didn't finalize the price okay but i'm guessing after we we got that down that would have been the next step yeah okay that one that'll be a good case today let's go over that one because go forward so that was the one in waco texas yeah so i had from from my research and right or wrong but my research said the property is worth about 55 000 um unpaid balance on this one do you happen to remember what the unpaid balance was i want to say around 39 let me see if i ah no it's not there no i i i i'm able to see the original list price but exactly in the other numbers and i think my original list was maybe 35 is that right yeah okay okay it had 10 interest rate just under 9.97 um what else about this one anything else he had i bought it as a non-performer i actually had this one quite a long time uh much longer than i wanted to but it is what it is i actually bought this april 2019 and got into negotiations with the borrower uh he agreed to start making some payments i think he even made maybe one maybe two payments and then he kind of fell off again uh and then there was i think there was a document missing or something like that there was some reason where i had to kind of go around in circles before i could do anything more with this so we got that all settled and then i started we sent out a demand letter to start a foreclosure and he called and said no no i really do want to make payments i said okay we already tried this so what's going to be different this time and and then i got the story so the story is he'd been he's been living in that house for a long time rich nation date 2008.

so he and his wife were there and what happened the reason that he went delinquent on this is because his wife passed away and i think she was the one that handled all the bills uh and then on top of that his wife passed away so that was a bit of a blow he had the same job he's actually been working the same job 30 years some kind of a factory uh with you know he's an old older but you know still a ways away from retirement and the difference here was he had kind of recovered from that and also his daughter was on the case and saying dad you got to do something or else you know this is not going to go well so he had her as kind of the backup the one to kind of help push him into getting on track so we got him on ach i started making regular payments this was probably october last year so he's made he made a few regular payments over the holidays and then i put it up for sale in january so with the 10 interest rate here's where i was coming from at the the interest rate on this was 10 uh so i didn't feel like i had to discount it huge because uh whoever bought it after me would be getting somewhere i don't remember exactly what it was at 35 i'd have to run the numbers again but it was it was somewhere around 13 14 yield and i i thought that was pretty good something somebody could deal with so that's where this one came from and then we're we're talking about i remembered your name when when uh dave told me you'd be on and i couldn't remember where from but anyway so that's that's where this guy was um and that's kind of the background story and for me i find actually that background story helps a lot and to me that that gives me more confidence that he's gonna be on track and he's gonna be you know performing from here on out because there's a reason the reason is resolved and we're back on track everything's back to normal and we're okay to move forward do you remember the details of how you got them performing again i was just a conversation and i i was fairly frank with him and just said you know we've already done this and so i need you to to help me understand how this is going to be different and he told me what happened in the beginning with his wife and said that his daughter was was pushing him to make sure he got you know this figured out once and for all i don't know i don't even think we did a reinstatement on this um just in conversation with him he seemed pretty sincere and he seemed like a real guy and sometimes you just got to take a leap of faith and hopefully he comes through and that's how it is and then the other big thing for me was he got on ach right away he had no problem selling the form to get on ach regular payments uh so i wasn't gonna go have to you know chase him every month and say so are you ready to pay now make sure the question on facebook did the borrower qualify for any kind of hardship like harvested funds or no no this is in texas uh but no there was no extra benefits that way yeah dave no one that's one of the things i'm sorry that's one of the things on paper stack when you go in this and it says hardest hit and i'm like what what exactly does that mean it's not as common now as it was a couple years ago right it was much bigger back cody would be a great one cody if you're listening and just feel free to chime in so certain states got a pile of money to kind of help out that people who got delinquent money could be given to the lender to kind of help out the lender and get make them whole this is part of the bailout from 2008 yeah and each state was given a certain amount i never actually used it did you ever try oh it was hard because the borrowers had to sign off you hadn't worked with the borrowers directly there were some programs out there that could help out it was hard enough to get the borrowers on the same page it was the heartache we had um didn't it wasn't part of the qualification they had to take a class or a course or something like that i think so yes and the lender had to give up 10 it was like real kind of structured things it's not as common now i mean it may be in the future now but it was just more common back then after like 10 13 14.

um i thought about adding it to our list the problem is a lot of those expire quickly um the money runs out nice having to keep track of it to balance with you knowing the story now from nathan does that change your mindset of what you would have done um hard to say that yeah it's hard to say i think again for me um i do my own loss mitigation so if meaning if somebody doesn't pay i'm the one that picks up the phone i i don't hire that out i don't have the servicer do that i just purely because i want to be more efficient and that's really it to me that you're going broken telephone at best you know really and then just the time where i'm gonna i'm having to relay messages and the servicer is the relay person and that that's just time that i don't want to spend and so i i prefer talking to him myself and that's not for everybody and and there are some people that really shouldn't because they're going to lose their temper and whatever and i'm not that guy so that's okay but uh you can get yourself into a lot of trouble if you start sure so dave do you remember what you would have fitted out what yield you're aiming for how much experience do you have with the financial calculator have you have you worked in with that at all or is that yeah uh that that stuff is pretty basic i'm okay with that like figuring out roi and cash my cash return i don't know how to do that yet okay but yields is okay okay i i don't remember what i was looking to get but if it was ten percent i was probably bombarded being greedy right sometimes you have to you have to give it out just don't be too great i've had people go shoot for 25 years it's like whoa like you can get that if you buy not performer great um i'm gonna ask this question nathan you can say no if you don't want to do you remember what you bought the loan for yeah you know what i don't mind sharing that um so i and i just did the calculations quick here i think i think the unpaid balance was around 39 it was 39 and change so i just put 39 into my calculator so i was offering it at 35 which is about a 12.2 yield so not as high as what i said before but still a pretty decent yield on that i ended up selling for a little bit less but only because it's an investor that i'm trying to close off um so there's some you know other circumstances or so you bought this as the not performing first uh for 21 000 is what i paid for it right my fingers here here we go yeah i paid 21 for it uh i collected a little over 3 600 in payments from the borrower and then my profit on that was an additional oh i don't have that separated out on my thing here my my total profit including the the monthly payments was just under 8 000.

and i held this much longer than i wanted to so my my annualized return is not fantastic but overall it was just under well a little under 35 total uh roi on it so it was pretty decent but that's that's a little bit different if you're looking for cash flow that's a little bit different uh it wouldn't obviously be that high it would be whatever the yield is right and then but you're i bet your x irr is probably much higher because the fact that you got rid of it in about a year and a half yeah your xlr is probably really really nice yeah and i don't usually calculate that but yeah whatever i don't even know what that is so i'll quickly explain it basically saying in the time period you hold it what's your return because yield calculations is from from the start to maturity so the grave kind of thing yeah so the idea is that if you bought the loan you're projecting out that the yield that saying i'm going to hold from now to maturity which may be 10 years but if you buy and sell into two years you it's not yield because yield goes to maturity so alexa are saying i want to buy it now hold over two years and sell it what is my return for those two years which is typically higher than yield because you're you're not holding it for that time period for a long time period you're getting out sooner right on value of money kind of capital so cool so now you're you're looking at all these websites you're looking at paper sack you're looking all this website to buy deals you haven't made a bid yet is it mostly you said numbers aren't the problem is it mostly the uncertainty of when they say yes all crap yeah okay and is it the collateral follow crap is it oh my god that were my numbers wrong is it uh is it i don't know how to close what's the next step yeah yeah next step i mean the numbers i'm okay with just you know next step the collateral file make sure i'm not missing something you know what if you know you know i closed something today then tomorrow i'm like oh sure i forgot about that you know yeah yeah interesting truth is you're going to make mistakes yeah yeah it's inevitable but you buy your performer which is like that helps you get by yeah we had we had a conversation i'm gonna go back four or five years ago where we're talking about uh a company that we don't like um and they were sending out deals and sending out old bpos and like one of our good friends found like pictures of the property like destroyed yeah right when you're buying non-performers all stuff can be fake bigger pump companies will buy two or three bpos to get the highest and send it out right when you're buying that performer it's a lot different so when it's a short time period that nathan had where that bar was performing for not as long as a year it makes it more conserved right but there's less unknowns yeah right and then and the you're safer as well because um in this case at least and i think this is mostly the case it'll be serviced with uh you know a reputable servicer so they've got that pay history it's not me just saying oh yeah he totally made his payments and doctoring something up but it's coming from a third party uh and that's all they do is collect those payments and report it so jonathan on facebook uh asked something and maybe dave you thought it or not was like you know what happens if his fear was collateral file not knowing about it we'll get that into it in a second but what happens if the tax sale was missed right the tax sale happened now taxes are being collected and i didn't know it got sold or taxes are paid up great everything's good you didn't know there's a tax in the property um what the property's worth and he mentioned the bpo thing right so we do a little differently i reach out to my people and say i have property in your backyard right and i have can you help me out with that that's how i'm working because i don't trust ppos um tax sale right do you unders do you understand what that basically means if that if it goes a tax sale property you know so the sale of the taxes don't right it's if that person who bought the taxes now can file foreclosure and now that if they foreclose on you can wipe out but any proceeds will go into the additional stuff right okay yeah so they can file for closure but you're still in position to collect money if the proceeds there and as the first lien holder you're going to get notified of that foreclosure so there's a time to fix it yeah and it may cost you some but yeah it's not you know it's not all lost and it's all a complete disaster and that can be caught typically in o e or it can be caught on you know when you call the county records hey i have a question about taxes right owners usually catch it calling the county's always the best hey what's the situation on this loan is it current and is there any sale taxes on it because it could be current because the person who bought them is keeping him current and now you're collecting interest on it and i i still call counties for taxes um yep i was gonna say you know i'd do that at the beginning but then i'm like no actually i still do that now i call it county all the time and just say so can you tell me anything that's outstanding on this is there any other taxes uh any other liens anything else that that the city has on this property that i need to know about so dave are you i don't understand what the o and e kind of does it's like a title report but it's not yep okay cool cool so you're at this point where you're looking at assets and you're trying to figure it out you have a bid number and then you have to call attorneys up right you get the collateral file oh crap i'm gonna be honest with you my first buying of collateral file i let the servicer look at it right and i didn't really look at it too much i didn't know different between the simon and longest didn't get all that stuff i bought it ship it to the server so they said you're missing something and it says what am i missing you know and they said an assignment i said assignment of what like i had no clue but they caught it because when they they bring in a house they can give you kind of a review what we found later is that you can get that review before you buy it and what happens i said to nathan and say nathan here's a review of all the cloud files i'm missing x y and z and we can negotiate if he doesn't want to fix it or if i'm going to fix it i can discount the price or if he's going to fix it it may take a little while and it may take some time but the soft collateral is there for them to review the hard file then will be shipped afterwards and even that you know it depends on who your seller is to some degree but i it's fine to call them up and say hey i'm new walk me through this and just you know can you tell me is there anything missing and if they are worth their salt they'll tell you and you know this is very very much relationship business and if people start just throwing on crap files word gets around very quickly there's a couple companies now that i don't even look at i don't bother that they are in so many lawsuits with clever files not coming to them luckily they're in the second space but i don't bother right and that's that is more common in the second space you'll get uh some really messed up collateral but so most on the cladophile yeah it's a figure for us i trust my attorneys the attorneys know if that file most of the time they review it and they can say xyz is missing because they're gonna be the ones for closing on it yeah right yeah so do you have your attorneys ahead of time like i do are you only looking in specific areas like if you get something in a state never bought before are you going to bother or are you going to find a lawyer there first you know what i mean i don't necessarily have them set up i'll cold call we're all call somebody else in notes i'll call dave and say hey yeah you know and he'll say go look at the spreadsheet yeah the resources and in our bid calculator it actually has if you haven't seen it on the bottom part it actually tells you what attorneys are licensed in that state right and you can say okay like nathan does hey i've never bought an estate i'm in a cold call hey i'm looking at buying and filing your state could you do me what would you guys charge fee wise to review a collateral file 100 bucks 150 whatever it is but you get it back and say this is missing this is this thing right there are attorneys out there that will do a nationwide kind of review um they'll review a whole cloud file and say hey listen you're missing the air and you can get a normal attorney typically who can review collateral on a large scale because it's normally the same certain states like pa won't allow you know a loss no affidavit and those kind of intricacies but you can go on the facebook groups and stuff like that and say hey i'm looking for attorney in this state to do a cloud overview yeah here's five and call them up big put it out on facebook and you'll get yeah five to ten people say oh yeah i use this guy who's that guy so you guys only trust attorneys to do it you know i know i've heard of like services that actually would do this richmond monroe is the one that's most common um for miller richmond moreau okay they're clear collateral management company um there's a couple of them out there right um you can yeah casey wilson is awesome we've been on forever and they're just as good yeah take a note right casey wilson right i don't know if they're taking clients anymore but i know they froze for a while but those people can review collateral files for you and that process i i've looked at clerical files i can i'm not going to i'd rather yell somebody else right yes i do like you filed you've reviewed the collateral file you missed something what the hell i reviewed myself actually i go through it and just see and it's possible i miss something and if i miss something then i beat myself up i yell at myself and then and then i call casey wilson i'm missing this can you help me out yeah yeah yeah so most of the time you compare your your cloud file to your assignment your o e and you can see that the chain of ownership of the new right is it match is there any kind of skippage going on right there's a note there's a mortgage errors is there a title policy there and then i'm gonna compare it to my own e you know you order from pro title right and i'm gonna compare is these simons and longest all in here because you're gonna need them yeah potentially yeah potentially hopefully you don't yeah hopefully you don't i wouldn't recommend cold calling borrowers like nathan does uh because there's laws about that but until you understand what you can and can't say just don't call a borrower in the beginning right yeah all right it's pretty cool stuff i mean i know body performer is probably the best way to go about it right for sure get started or buy or partial either way is awesome because i think we showed before you're connecting with that seller if that goes bad you're going back to the seller and they'll be buying it from you or they'll help you fix it i've i've got actually a fella here in montreal who's i sold this note like two years ago and uh there's still he's he's got the property now he's trying to sell it and the title company is saying well we're missing this and this and so we're going back and fixing it for him now but okay you know it's nothing for me to go back it's whatever was two chains before me but i i have a relationship with him so i call him up and say hey todd i need this sign yeah sure and no problem and it you know it didn't cost anybody anything i think i think it cost i paid for a shipping label and then my buddy jordan just paid me back no big deal so that's basically when you want to fill the chain up right if the chain's broken somehow you need to make sure it's clear because you need to show that from the originator to you is fully clear it's like a title search if you can't show clear title you can't foreclose on a damn thing right right what else part of the process was difficult for you i obviously know calling attorneys is not comfortable right not sure what to say it's intimidating i'm sure if aaron quinn's listening she'd be like you're crazy for being scared of me right um what else part of that process of buying that asset was holding you back from doing i it don't know i guess it's just fear of the unknown yeah you know one thing these numbers it's like i said it's you know if something goes wrong yeah i mean obviously i could foreclose but then you know the whole copic thing how was that how's that working you know some states are different than others yeah mostly it's working but yeah what's that now mostly it's working for the foreclosure yeah if it's i don't know actually i haven't had any that's covid related so that hasn't been an issue in and of itself it's just been the moratorium getting to the next step that's been the only thing that's been a problem but but the thing with attorneys i was going to say is going to conferences and stuff and meeting a lot of these attorneys i i found out they're actually for the most part they're pretty cool yeah they're not they're not as like stuffy and unapproachable as i thought uh before i started yeah i was always had this image of an attorney in my head and they're i don't know intimidating somehow but now that i know a bunch of them no they're pretty cool and they're fine you know and we'll call them up and and i just all the time just last week called them up and say hey i've got this situation what do i do and he gave me some advice and great thanks you know no charge great appreciate it's funny too because like i was intimidated by getting that you know 15 minute phone call bill yeah i don't that doesn't happen for the most part i've had a few of those attorneys and that's more of the difficult cases where things are crazy in the case but for the most part you reach out to him call on whatever becomes comfortable right yeah and they're willing to help you because they're they understand where you're coming from they like dealing with us which is crazy because we're like a small person in their big pot but they can relate to us big much more than bank of america which you can't get anything done dave do you still have your nine to five like are you still working full time yep how about dave mcvoy are you still working yeah okay steve i can't imagine how you have a 95 in in automation can you take the excel spreadsheets that you put together if i could spreadsheet myself taking the garbage out i would be able to do it okay that's my favorite slime i love optimization and that's that it drove me to do it because of the united my wife won't let me quit and because of benefits and all stuff with the state government but i i found myself going towards automation to solve the problem of it and i found it nobody else was doing it so i'm like wow this is crazy and i i put the spreadsheet together sometime like four in the morning when i wake up and i'm like oh brain fart you know and i've done it and it's like wow but i also like that stuff so you have to find what you like you know what i like when i first got a notes is not what i like now which is crazy i used to love diving into spreadsheets for hours looking at numbers looking at properties looking at numbers looking at properties i have we use the time like how many can i get an hour done and i'd go for five hours straight i can't do that anymore i couldn't right but we did you get a tape i mean when we first got started you had like 48 to 72 hours to get an acid bid price in there or someone else was buying it yeah it was like that right it's not like that anymore but that was the problem and my brain hurt i was on zillow and just killing myself right and figuring out the value and all stuff but fine and i got that's why i started getting to hey can i script this oh so it's an api you know 2013 or so right and i got into doing that and i pulled away from that because some of the stuff i was getting wasn't what i wanted but i started finding out ways of automating it just to lessen it and reduce errors and do some of that and i built the calculator by just playing with it and being wrong and making a mistake and going oh crap and adjusting it and adjusting it um if you buy something small enough and you make a mistake you're okay especially buying a performer even if you make buy one like a seven yield that's crappy it's it's like education right education you pay for and get nothing in return here you're at least getting a seven percent return on a performer loan and you get a loan in your name you can hold on to it and maybe you sell for a small loss but you now had education you go through the process to give yourself some comfort on my first loans yeah i take a hit every once in a while just as a learning experience and that's your education and some guys pay the 20 forty fifty thousand dollar you know mentoring thing um or you buy a note and it might cost you five grand and yeah you know in your mistakes and and and doing it wrong but i think it's more worthwhile to do it that way and then you've got the experience behind you besides the money you're getting the phone call people right they're calling your servicer all of a sudden now you have a connection you caught the attorney you talk to this person you talk to that person you have a story to tell i bought this loan guys i'm getting returned yeah yeah getting that one under your belt oh crap where did my claddo file go oh my servants are gonna hold it great how much that cost a year whatever twenty dollars right typically i let if it's a non-performer i'll ship it to my attorney and go hey listen we're gonna start this anyway i can't do it as fast as gabe can do it but i you know i gave i think it's 45 minutes one time which is shocking shout out the game on that one but i'll send to the attorney on those all the time i'll bring it into my own house and put it into a lock safe right it's going that process of learning what's available yeah and then you know what questions to ask that's my filing camera right there um the only thing i would say not to do would i think i did in my first one is i burnt the file after we foreclosed on it i didn't yeah we've had a bonfire in the backyard shout out to tim on that one and i'm like crap maybe we shouldn't have burnt this thing because i don't know what could ever happen but yeah that that cloud files burnt uh 2012 so i still don't know what do you do with them i was like taxing home for seven years yeah i still don't know i i haven't actually looked for an answer for a long time but i've got a basement with you know a couple of bankers boxes full of old files and the ones where i took the property back and sold the property so then that file really isn't good for anything but can i get rid of it i'm not sure so keep them so we've been on for a while now dave and i'm not saying you're convinced to buy and you're ready to go for it is there anything else we didn't touch upon that kind of held you back from making a headway to making an offer your first offer no i feel like i'm i'm more confident in doing it than i was an hour ago that's for sure good well that's good let me ask you this you mentioned this earlier you don't buy cfds is there is there a specific reason why nathan loves them i'm not a fan of them so no on the opposite side yeah i don't yeah nathan's on the opposite hill buyer on the opposite side of real estate everyone tell says that you can if you can get solar financing all day long you know that that's what and they only do seller financing or subject to or things like that so seller financing is not all not all cfd what not all seller financing is cfds oh i understand that okay yeah but you can have a note right you can have a no mortgage sell finance cfds for me or maybe my image is bad and the ones i bought i actually bought one with nathan a couple years ago trust it out is really crappy properties missing a bunch of stuff sell to a buyer who gets pissed off with the lender and doesn't completely finish what they gotta do that's my knowledge and what i've heard and the concerns i have but how'd you do on that cfd dave very well yes right i was in an ira and i'm like i got testing out i'm going to call nathan up when we do the deal but that's the mindset we have the cfds are usually lower asset values right yes yeah and they're usually depending on who writes a paper that property may need work or may not yeah they are a little bit riskier for sure um it's a bit of a different animal uh just in terms of how it's dealt with upon default so it's it's not necessarily the same as a mortgage but it could be and and that's part of that's part of the fun of it for me is is figuring out where it works and why it works and why it doesn't work in some places all that kind of thing so i kind of like that i like the challenge of it i like the fun of it um but it's not for everybody and i this is my full time so i don't have you know a nine to fiver that i have to work around this is what i do so if i have one that's a challenge okay and bring it on and we'll see if we can figure it out but i like them um probably the main reason and again i'm a little bit of a different type of investor where i'm running a no business so i'm i'm always looking at the back end where i'm going to resell it so for me if i take back a property it's not such a big deal probably if i go back actually over history the last i don't know five six years i would bet just thinking back on we review annually and we just did this almost half the time i think i take back property which i don't actually want to and it's not my my primary goal but it happens pretty often you know half the time roughly so because of that that's partially why i like the contracts for deed is because it's faster and easier cheaper to take back a property if i'm going to be taken aback anyway then make it as painless as possible and uh i know that that cfd is depending on the state and depending on the situation some cfps can do it in some states actually depending on how long the borrower's been there they have to go through the entire process of foreclosure so erin clint says if you have a problem call her she's made a comment the post that your stress will be over by the way so she'll release it attorney she does florida and georgia yep anything else just i think she still does tennessee uh or she was doing in her partner left um i'm sure she'll comment but she was handling tennessee as well okay so great yes yeah and she likes chocolates if you can give me your contact there's nothing in my chat window here oh okay it should be uh it's on the facebook i'm sorry my man oh okay okay yeah um but yeah she'll post it in the chat in the facebook live uh chat box i have it going on my other side here so you know uh tennessee's on a hold she says okay so again aaron quinn's an awesome person to hang out with um she really knows her stuff and she can break things down to you she loves working with new investors right she loves being able to figure things out for you she likes hard problems too um but she'll make it kind of an ease for you right she does owe me a phone call i just remember oh yeah so um i think dave i think what cfds is it's a good price start to get into right yeah it's just you have to be know the house is it you know how many do you think our houses that you bought where they're just not in good shape oh 75 of them yeah they're typically not they're like you say they're lower asset value uh they're typically not in great shape and if that matters you know it can be in not great shape but still worth x amount and if that's and if you buy properly then who cares right then it doesn't matter you know and if it's in better shape then all the better great but as long as you price it right in the beginning then that's fine erin said she's avoiding you by the way i knew it so you know cfds can work for you dave because you're very comfortable with real estate and and be able to work with it right um certain states don't allow cfds jersey we can't do it right we can't do raps can't do that stuff they're more common down in texas yeah texas doesn't really like them they treat them the same as a mortgage but that's okay because the mortgage is fast and taxes yeah remember texas is like foreclosure by lethal injection you could do it in like 49 days i forget whatever it is but that's what states yeah it'll be like michigan and indiana ohio um those are not legal there's no foreclosure there's no legal process there's no court involvement let me rephrase that right that's not just non-judicial statements right actually iowa is a good state for cfds yes so nathan you're saying michigan is not a good state they are actually it's a very quick process to get the proper property back missouri i think is a good one just going off in memory but he's always good for notes as well it's like uh six weeks or something like that yeah yeah just don't fight most of the stuff he finds they can you can you know missouri's and kansas city i mean um uh yeah kansas city there's a couple other cities that are popular you know uh we're also trying to buy a colorado note i've never bought one i trying to buy a condo a note we just don't see them that often um but their focus process is pretty easy i had one it was actually a cfd in colorado and then i saw oh i had one and i sold it so i don't have it anymore gotcha so dave i've we've got it over a lot of stuff in this call this is what i wanted to do i wanted to bring someone like yourself on to really kind of challenge you but also help us understand more about where you guys have struggled at and i think walking you through and give you that confidence gives you the ability to buy something um yeah but we want to make sure you engage and ask those questions you're going to hit those points where you're just not sure bounce the idea off somebody else hey guys i got those numbers yeah what do you think of these numbers you don't need your property address i got these numbers i'm buying it at this percentage i'm buying this yield and does anyone live in this area and you may have someone goes yeah i could drive down the street from you you know you could find that person but yeah kyle's in michigan jean's in indiana yeah we got guys all over the place right and we just reach out to them hey i have a question for you yeah yeah you know jeans i don't know gene's still driving truck but hey gene you're in your truck again and you hit them up yeah and these people are people we didn't know 12 years ago 15 years ago but we've connected because of notes yeah right i think me and nathan connected we were in vegas and flew home in the same airport coming back from vegas a couple years ago right we really connected there yeah so you're gonna connect with people actually i remember we had a common common uh friend i guess with jack yeah and i was like yeah i've known jack for like 10 years and you're like yeah he was a big guy in the space uh just he he just left his fund and uh they had like 30 000 loans so he did a lot yeah but if you taught him you wouldn't know that he did anything like that he doesn't come across as a hot shot but he knows his stuff right um but i can turn to him for questions right and you can turn to people for questions and turn to multiple people for questions dave how do you do it how do you do it we all have different perspectives and i find in the note space especially there's really nobody that's too cool for school like everyone will talk to anybody it's it's not a big thing and if your question about somebody has a few other investors we'll go yeah we don't like him or yeah no he's fine you know okay oh yeah that's good to know yeah so is there any other questions or concerns you have that maybe we've done up we can do a better job of explaining and sharing that like hey you guys missed this point that i now understand that before was unclear um i don't think so i think you you you like i said i had a decent knowledge on paper and you you guys kind of solidified what i was thinking okay um you know the cfd thing was was helpful because i'm actually i'm actually looking at a collateral file of a house in michigan that's a cfd okay cool cool um the only caution with michigan is just be sure on the value especially if it's detroit it's block by block so that's that's the only caution there for anybody yeah right you can buy a detroit cup of coffee yeah yeah yeah you know and and you can definitely we have our portal we have agents like that but just hey who lives in that city yeah you'd be surprised we have our facebook group which is like a bunch of investors who fill it out um i should update that to include counties or whatever but you know hey you lived there i just need a question and you're going to get better information than from a bpo yeah bpos just are just not worth it to me right and then next you know you're calling you know whoever you want to call michigan we have a list of attorneys right and say hey listen i'll you know you can reach out and say i have a question about this some attorneys are doing cloud file reviews some aren't but even actually just on the bpos i actually still do bpos but i get a bpo and then i call the agent and say hey can you give me the download tell me what's going on here the same property i call the agent they did the bpo yeah okay yeah the little trick too with that is if you get a cloud file there's a bpo in there call the agent who did the bpl on it before yeah they drove by the property know the property they know the area hopefully they're a decent agent some bpo agents are just just going to do bpos yeah i just start asking questions hey what's up what's the area like what did it look like someone lived there what kind of conditioning was it right and you could hook up with aaron i'm not sure if your husband is doing his launch yet but there's there's software out there now that you can do drone checkout stuff where you can actually hire a drone to go drive by and look at the roof and all kind of stuff it's pretty cool stuff so um i know bobby's putting that together um and getting that started and i'll be talking to him soon about how we can link up and do more ad stuff so yeah cool well this is an awesome conversation dave i think it was awesome i hope that most people here tune in get to listen to it i think we talked about a lot of different areas of just getting in just getting started and it'd be cool i i really enjoyed having you on i'm glad you did it good um joking dave i appreciate your help nathan great talking to you yeah i'll talk to you again yeah cool no it's it's worth it just to jump in and get going and you you won't learn as much from anything as than you will from doing so just right yeah yeah well guys i'm gonna wrap it up here hopefully you guys have dinner dave i'm sure you're digging out of snow forever uh 30 inches well my my 8 to 10 was nothing compared to that i wish that would be nice a few more tomorrow a few more over the weekend oh yeah we're done i don't know if dave you're gonna hit this weekend but i know that soup bowl they're calling for rain now no more snow but yeah the rumor two days ago was that supposed to be another giant storm again you dave puts here from jkp holdings alongside me nathan turner hey it's good it's good it was actually we had that big snowstorm a couple of days ago and then today was a beautiful sunny day up just just below freezing so my wife and i went for a walk at lunch time it was fantastic we got about eight inches of snow so we're like oh yeah um but it is what it is so we're inside this tonight we have dave so dave i'm going to prep it up was caution is optimistic to get into this video with us i'm ecstatic to have him on here um i'm lifting him up because we're putting him in an awkward spot i'm sure but we wanted to bring him on here to kind of let others see and let us see the other side of this whole space right so dave can you just introduce yourself jump and share a little bit where you came from what your real estate background is and how long you've been doing notes i know you have about 1000 2000 notes on your about right oh yeah at least uh dave mcavoy i uh from new york about 75 miles north of manhattan uh been doing real estate on and off for three or four years i haven't done a whole lot at all to be honest with you my experience is really in wholesaling so i've done a couple of wholesale deals here and there and then that working in new york is is if anyone's from new york it's it's pretty difficult and what i came across a couple years ago was more the creative side of real estate like seller financing subject to lease options those types of things and getting those kinds of things done in new york is in my experience is almost impossible i still can't believe people in other states are so successful as they are i guess they don't have lawyers that they have to deal with but new york everyone lawyers up and that's that's when my deals are that's when my deals died okay so um as far as notes go uh you know i i've heard about self-directed iras a few years ago and um decided to look more into it uh early last year um and then i came across uh notes as a as an option to invest with my uh with my rra so that's kind of where i landed i want to say july or august when i really started to look more into it where did you hear about notes was it a real meeting was it online you know what probably bigger pockets or something okay i mean i heard about it when i first started getting into real estate by and i just never looked more into other than just seeing the word note i just never even bothered yeah so when they came across it seemed it seemed it seemed a lot more interesting than you know i don't have to deal with the house i just deal with the paper for the most part so that's what kind of intrigued me to look more into it all right all right wow it you know it's always interesting to hear because everyone's story how they got into notes is unique um how long you've been exploring notes as an option for investment has it been a while no probably late summer early fall last year six or eight months or so okay that's awesome did you take any kind of training courses or are you just no learning from the fire hose of information out there pretty much podcasts youtube a couple of books yeah facebook yeah okay very interesting so what about notes besides you know we're always trying to convince people who do wholesaling fix and flips and landlord to move over the node space because it's very similar to a point but the mindset's still the same you're just doing the other side of the real estate part was it difficult to change your way your mindset was from focusing on the brick and mortar and everything else to working on the note side the legal side of it are you still learning about that i'm still learning i think i got a pretty good amount of knowledge um in my head anyway but you know in practice obviously i don't have anything yet yeah but uh yeah it's a whole different way of as far as i'm concerned it's a whole different way of thinking okay yeah and then so are you looking for like the passive income is that what uh your kind of your your goal is with notes initially it was it was to build up my my ira right um i took a good chunk out well i rolled over an old an old account for an old employer and then i actually took advantage of the cares act last year it took a bunch of my money out of my uh my tsp which is which is a government a retirement plan okay they rolled it into the ira so i took you know most of my money out of wall street now i'm looking to do some real estate with it right cool okay so you get this space there's a lot of people that we feel are helpful from the new beginner point of view do you find that people compared to brick and mortar are are more helpful um i would say i would say so yeah i mean in the virtual world world yeah i mean if you're trying to talk to somebody locally like i would you know nobody knows about notes around here i've talked to a few different people like what are you talking about um same thing with creative finance you know i bring up sub 2 or seller finance and they're like what are you talking about wow we got to move their dates and it sounds good up there they're either flippers or they're or they're landlords and i have zero interest in being any of those yep and and yeah that's where a lot of us come from is and and frankly it's burnout where you're a landlord or a flipper and you're like ah it's way too much work their jobs yeah a lot harder yeah very interesting and not to say there's no work involved with notes but but it's different so how do you talk about running to and from a site to check on you know the contract to make sure they're doing their job right right yeah why do you find the biggest difficulty is explaining to people what notes is i guess the biggest thing is getting people to understand that i could be the banker they can be the bank yeah where they're collecting the payment instead of making the payment you know and i still have kind of boggled myself to actually think that's actually going to work you know i'm so used to you know making payments to wells fargo or however for yeah years and years now i have a chance to you know have someone who owns the house and make the payment to me i can totally relate i remember that took me a little while just to get my head around be like wait and and to every once in a while i'd kind of sense that i my brain switched back to real estate and i kept thinking about it as a property and no no no no no i'm the bank just trying to remind myself of that and yeah yeah and just it's a different kind of a mindset it's not the same as as a property owner that's interesting for me it was that conversion over from being a landlord to dealing with not dealing with tenants getting the phone call dealing with that toilet problem the roof problem gfi going off stupidest thing in the world um and that was before burr came out everything else but it was just a headache and a headache and a headache and competitiveness and dealing with all that stuff and then dealing with the bank or dealing with a hard money lender here or there yeah it was but i could relate when i when it came to was like i want to share a lot of people yeah so at your local rhea are they talking about anything about notes at all or i don't know if you've been to rio with be going on but i haven't been to an in-person rio meeting in a couple of years because like i said they're all wholesalers flippers or landlords and i didn't have any interest in that at the time there was maybe when i really started looking into it again like august september they had uh someone from um note school ah we'll do a presentation on it yep yeah re-pass it no no brian something yeah yeah brian oh yeah brian okay i forget his last name yeah yeah it's good to see those people get out to the local areas because it draws people in right notes is everywhere and you could do you can do notes from anywhere yeah which is crazy talk so let's dive into this stuff a little bit right how many notes would you say you you've explored to bid on like you put an offering on that you were thinking about buying i haven't actually bid on any yet okay i've exchanged emails with some people and and does some negotiations but that that's when i kind of hit the breaks okay and what's standing in the way what what is it that you're trying to kind of overcome i don't know i mean i see i see the numbers and you know the yield and all that looks good but sure what am i missing so let me ask something let me ask a question let me ask a little differently what was happening just before you kind of pushed away what was the last thing that happened email exchange that happened and the next email didn't happen what would you say you where did you get where was that point you have all the numbers set was it like okay i'm about to place the bid and you just don't pretty much okay yeah okay and then you told us just before we started that you actually had bid on one of mine on paper stack i guess uh well i didn't bid we didn't get that far didn't get that we were you know negotiating yeah okay okay so a little different thing with notes with notes compared to real estate right we make indicative offers and my one of my funding partners said to me when we first got he got into space with me what do you mean you make an offer with all his indicatives like real estate you don't do that that's not like you know you have your contingencies but not that much i have a ton of indicative offer questions i have and you know i have 13 on my website but like that that's crazy talk for real estate investors yeah so with that said those questions are kind of just to help with due diligence when you're a bit on the asset with nathan you had your numbers i presume you didn't look at collateral yet right no okay that that's probably a big part of it i get a collateral file now what am i looking at and what is it yeah what are you even looking at yeah for sure so you didn't did you get the point where that would would have been your next step or were we still talking well we didn't we didn't finalize the price okay but i'm guessing after we we got that down that would have been the next step yeah okay that one that'll be a good case today let's go over that one because go forward so that was the one in waco texas yeah so i had from from my research and right or wrong but my research said the property is worth about 55 000 um unpaid balance on this one do you happen to remember what the unpaid balance was i want to say around 39 let me see if i ah no it's not there no i i i i'm able to see the original list price but exactly in the other numbers and i think my original list was maybe 35 is that right yeah okay okay it had 10 interest rate just under 9.97 um what else about this one anything else he had i bought it as a non-performer i actually had this one quite a long time uh much longer than i wanted to but it is what it is i actually bought this april 2019 and got into negotiations with the borrower uh he agreed to start making some payments i think he even made maybe one maybe two payments and then he kind of fell off again uh and then there was i think there was a document missing or something like that there was some reason where i had to kind of go around in circles before i could do anything more with this so we got that all settled and then i started we sent out a demand letter to start a foreclosure and he called and said no no i really do want to make payments i said okay we already tried this so what's going to be different this time and and then i got the story so the story is he'd been he's been living in that house for a long time rich nation date 2008.

so he and his wife were there and what happened the reason that he went delinquent on this is because his wife passed away and i think she was the one that handled all the bills uh and then on top of that his wife passed away so that was a bit of a blow he had the same job he's actually been working the same job 30 years some kind of a factory uh with you know he's an old older but you know still a ways away from retirement and the difference here was he had kind of recovered from that and also his daughter was on the case and saying dad you got to do something or else you know this is not going to go well so he had her as kind of the backup the one to kind of help push him into getting on track so we got him on ach i started making regular payments this was probably october last year so he's made he made a few regular payments over the holidays and then i put it up for sale in january so with the 10 interest rate here's where i was coming from at the the interest rate on this was 10 uh so i didn't feel like i had to discount it huge because uh whoever bought it after me would be getting somewhere i don't remember exactly what it was at 35 i'd have to run the numbers again but it was it was somewhere around 13 14 yield and i i thought that was pretty good something somebody could deal with so that's where this one came from and then we're we're talking about i remembered your name when when uh dave told me you'd be on and i couldn't remember where from but anyway so that's that's where this guy was um and that's kind of the background story and for me i find actually that background story helps a lot and to me that that gives me more confidence that he's gonna be on track and he's gonna be you know performing from here on out because there's a reason the reason is resolved and we're back on track everything's back to normal and we're okay to move forward do you remember the details of how you got them performing again i was just a conversation and i i was fairly frank with him and just said you know we've already done this and so i need you to to help me understand how this is going to be different and he told me what happened in the beginning with his wife and said that his daughter was was pushing him to make sure he got you know this figured out once and for all i don't know i don't even think we did a reinstatement on this um just in conversation with him he seemed pretty sincere and he seemed like a real guy and sometimes you just got to take a leap of faith and hopefully he comes through and that's how it is and then the other big thing for me was he got on ach right away he had no problem selling the form to get on ach regular payments uh so i wasn't gonna go have to you know chase him every month and say so are you ready to pay now make sure the question on facebook did the borrower qualify for any kind of hardship like harvested funds or no no this is in texas uh but no there was no extra benefits that way yeah dave no one that's one of the things i'm sorry that's one of the things on paper stack when you go in this and it says hardest hit and i'm like what what exactly does that mean it's not as common now as it was a couple years ago right it was much bigger back cody would be a great one cody if you're listening and just feel free to chime in so certain states got a pile of money to kind of help out that people who got delinquent money could be given to the lender to kind of help out the lender and get make them whole this is part of the bailout from 2008 yeah and each state was given a certain amount i never actually used it did you ever try oh it was hard because the borrowers had to sign off you hadn't worked with the borrowers directly there were some programs out there that could help out it was hard enough to get the borrowers on the same page it was the heartache we had um didn't it wasn't part of the qualification they had to take a class or a course or something like that i think so yes and the lender had to give up 10 it was like real kind of structured things it's not as common now i mean it may be in the future now but it was just more common back then after like 10 13 14.

um i thought about adding it to our list the problem is a lot of those expire quickly um the money runs out nice having to keep track of it to balance with you knowing the story now from nathan does that change your mindset of what you would have done um hard to say that yeah it's hard to say i think again for me um i do my own loss mitigation so if meaning if somebody doesn't pay i'm the one that picks up the phone i i don't hire that out i don't have the servicer do that i just purely because i want to be more efficient and that's really it to me that you're going broken telephone at best you know really and then just the time where i'm gonna i'm having to relay messages and the servicer is the relay person and that that's just time that i don't want to spend and so i i prefer talking to him myself and that's not for everybody and and there are some people that really shouldn't because they're going to lose their temper and whatever and i'm not that guy so that's okay but uh you can get yourself into a lot of trouble if you start sure so dave do you remember what you would have fitted out what yield you're aiming for how much experience do you have with the financial calculator have you have you worked in with that at all or is that yeah uh that that stuff is pretty basic i'm okay with that like figuring out roi and cash my cash return i don't know how to do that yet okay but yields is okay okay i i don't remember what i was looking to get but if it was ten percent i was probably bombarded being greedy right sometimes you have to you have to give it out just don't be too great i've had people go shoot for 25 years it's like whoa like you can get that if you buy not performer great um i'm gonna ask this question nathan you can say no if you don't want to do you remember what you bought the loan for yeah you know what i don't mind sharing that um so i and i just did the calculations quick here i think i think the unpaid balance was around 39 it was 39 and change so i just put 39 into my calculator so i was offering it at 35 which is about a 12.2 yield so not as high as what i said before but still a pretty decent yield on that i ended up selling for a little bit less but only because it's an investor that i'm trying to close off um so there's some you know other circumstances or so you bought this as the not performing first uh for 21 000 is what i paid for it right my fingers here here we go yeah i paid 21 for it uh i collected a little over 3 600 in payments from the borrower and then my profit on that was an additional oh i don't have that separated out on my thing here my my total profit including the the monthly payments was just under 8 000.

and i held this much longer than i wanted to so my my annualized return is not fantastic but overall it was just under well a little under 35 total uh roi on it so it was pretty decent but that's that's a little bit different if you're looking for cash flow that's a little bit different uh it wouldn't obviously be that high it would be whatever the yield is right and then but you're i bet your x irr is probably much higher because the fact that you got rid of it in about a year and a half yeah your xlr is probably really really nice yeah and i don't usually calculate that but yeah whatever i don't even know what that is so i'll quickly explain it basically saying in the time period you hold it what's your return because yield calculations is from from the start to maturity so the grave kind of thing yeah so the idea is that if you bought the loan you're projecting out that the yield that saying i'm going to hold from now to maturity which may be 10 years but if you buy and sell into two years you it's not yield because yield goes to maturity so alexa are saying i want to buy it now hold over two years and sell it what is my return for those two years which is typically higher than yield because you're you're not holding it for that time period for a long time period you're getting out sooner right on value of money kind of capital so cool so now you're you're looking at all these websites you're looking at paper sack you're looking all this website to buy deals you haven't made a bid yet is it mostly you said numbers aren't the problem is it mostly the uncertainty of when they say yes all crap yeah okay and is it the collateral follow crap is it oh my god that were my numbers wrong is it uh is it i don't know how to close what's the next step yeah yeah next step i mean the numbers i'm okay with just you know next step the collateral file make sure i'm not missing something you know what if you know you know i closed something today then tomorrow i'm like oh sure i forgot about that you know yeah yeah interesting truth is you're going to make mistakes yeah yeah it's inevitable but you buy your performer which is like that helps you get by yeah we had we had a conversation i'm gonna go back four or five years ago where we're talking about uh a company that we don't like um and they were sending out deals and sending out old bpos and like one of our good friends found like pictures of the property like destroyed yeah right when you're buying non-performers all stuff can be fake bigger pump companies will buy two or three bpos to get the highest and send it out right when you're buying that performer it's a lot different so when it's a short time period that nathan had where that bar was performing for not as long as a year it makes it more conserved right but there's less unknowns yeah right and then and the you're safer as well because um in this case at least and i think this is mostly the case it'll be serviced with uh you know a reputable servicer so they've got that pay history it's not me just saying oh yeah he totally made his payments and doctoring something up but it's coming from a third party uh and that's all they do is collect those payments and report it so jonathan on facebook uh asked something and maybe dave you thought it or not was like you know what happens if his fear was collateral file not knowing about it we'll get that into it in a second but what happens if the tax sale was missed right the tax sale happened now taxes are being collected and i didn't know it got sold or taxes are paid up great everything's good you didn't know there's a tax in the property um what the property's worth and he mentioned the bpo thing right so we do a little differently i reach out to my people and say i have property in your backyard right and i have can you help me out with that that's how i'm working because i don't trust ppos um tax sale right do you unders do you understand what that basically means if that if it goes a tax sale property you know so the sale of the taxes don't right it's if that person who bought the taxes now can file foreclosure and now that if they foreclose on you can wipe out but any proceeds will go into the additional stuff right okay yeah so they can file for closure but you're still in position to collect money if the proceeds there and as the first lien holder you're going to get notified of that foreclosure so there's a time to fix it yeah and it may cost you some but yeah it's not you know it's not all lost and it's all a complete disaster and that can be caught typically in o e or it can be caught on you know when you call the county records hey i have a question about taxes right owners usually catch it calling the county's always the best hey what's the situation on this loan is it current and is there any sale taxes on it because it could be current because the person who bought them is keeping him current and now you're collecting interest on it and i i still call counties for taxes um yep i was gonna say you know i'd do that at the beginning but then i'm like no actually i still do that now i call it county all the time and just say so can you tell me anything that's outstanding on this is there any other taxes uh any other liens anything else that that the city has on this property that i need to know about so dave are you i don't understand what the o and e kind of does it's like a title report but it's not yep okay cool cool so you're at this point where you're looking at assets and you're trying to figure it out you have a bid number and then you have to call attorneys up right you get the collateral file oh crap i'm gonna be honest with you my first buying of collateral file i let the servicer look at it right and i didn't really look at it too much i didn't know different between the simon and longest didn't get all that stuff i bought it ship it to the server so they said you're missing something and it says what am i missing you know and they said an assignment i said assignment of what like i had no clue but they caught it because when they they bring in a house they can give you kind of a review what we found later is that you can get that review before you buy it and what happens i said to nathan and say nathan here's a review of all the cloud files i'm missing x y and z and we can negotiate if he doesn't want to fix it or if i'm going to fix it i can discount the price or if he's going to fix it it may take a little while and it may take some time but the soft collateral is there for them to review the hard file then will be shipped afterwards and even that you know it depends on who your seller is to some degree but i it's fine to call them up and say hey i'm new walk me through this and just you know can you tell me is there anything missing and if they are worth their salt they'll tell you and you know this is very very much relationship business and if people start just throwing on crap files word gets around very quickly there's a couple companies now that i don't even look at i don't bother that they are in so many lawsuits with clever files not coming to them luckily they're in the second space but i don't bother right and that's that is more common in the second space you'll get uh some really messed up collateral but so most on the cladophile yeah it's a figure for us i trust my attorneys the attorneys know if that file most of the time they review it and they can say xyz is missing because they're gonna be the ones for closing on it yeah right yeah so do you have your attorneys ahead of time like i do are you only looking in specific areas like if you get something in a state never....