JKP's Best 5 Mortgage Note Investing Discussions with Experts | Real Estate Notes Show

Episode: JKP's Best 5 Mortgage Note Investing Discussions with Experts Dave's Goals and Plans: - Attended Paper Source conference a few weeks prior and interviewed multiple people - Planning to bring out new content/offerings in the fall based on Paper Source learnings - Not strong in second lien investing and calls friends for guidance on second deals - Focuses more on the property/house than the person when buying first liens Nathan's Goals and Plans: - Gained energy from networking with people at same level at Paper Source conference - Had investor pitch meeting at Paper Source that brought in new investors - Got extra couple days out of the conference experience - Emphasizes importance of networking with diverse people to gain different perspectives Key Recommendations: - Network with multiple people, not just one or two, to learn different perspectives and experiences - Diversify note portfolio like a mutual fund - aim for 18% overall portfolio return by winning some deals and losing some - Expect singles and doubles, not home runs - shooting for home runs consistently leads to striking out - When buying seconds, focus due diligence on the person/borrower rather than the property - Buy in good neighborhoods (B/C grade) rather than bad areas, especially when starting out - Approach note investing as a basket strategy rather than betting on individual deals Topics Discussed: - Differences between first lien and second lien note investing - Importance of networking and conference attendance for deal sourcing - Portfolio diversification strategy in note investing - Risk management through realistic expectations (singles/doubles vs home runs) - Due diligence differences: property-focused for firsts vs person-focused for seconds Guest Insights: - Gerald transitioned from 30-year construction career to note investing after attending Ward Hanigan training in early 2000s - Early mentorship through Dean Engel's mastermind group ($300/month) with investors like Mike Rika provided exponential learning curve - Example: Mike Rika bought $50,000 second note for $5,000 on property with negative equity and made $155,000 - Shifted focus from first liens to second liens after learning from Mike Rika and has had much better results on seconds - Philosophy: Treat note portfolio as mutual fund with multiple holdings to smooth returns rather than home-run hunting [Music] hey everyone Dave puts here from jkp Holdings alongside me as always Mr Nathan Turner good day hello there we have a great guest with us today but before we get jumping on the guests Nathan it's been a few weeks since we made the Paper Source we had a great time there we're actually able to interview a bunch of people it was awesome um what did you take back from that whole experience ah Paper Source is one that that I it just kind of energizes me where it's good to get with the just everybody it was great meeting with everyone and and seeing everybody had some really good conversations um actually I got to talk to you a little bit later uh some ideas and some things we may want to look into but um just it great it great to get together and just to be with everybody I spent an extra couple of days there uh because I had a um a different kind of a meeting basically an investor pitch meeting so we got a couple of new investors there and and yeah it's great good times so you know I came back with the energ energy as well right talking to either new people or people that were um in the same level as we are but just the energy of be around people that we can really kind of talk shop with right and feel good about um I'm not big on travel but it worked out really well well it was great we had a good you know hopefully everyone got to watch replay and again this will be on YouTube and Facebook and all that stuff um and whatnot but we have some really cool stuff that came out of it um come the fall we'll be bringing out some new stuff um but I agree with you the energy was really good and we got some really good compliments on our I wish we had a recording of our our presentation but it was good but it was great so one thing we've learned is talking with other people either educates us on something we didn't know or experiences we didn't have that's why it's huge network with not just one or two people but a lot of people and here to different perspectives um for me learning from people who've done it before is key yeah and it's it's so fun when I talked to other people and I've I've thought this for a long time but with Noe investing so much of it comes down to preference and and do you like this part of the business do you not like that part of the business do you like this kind of exit strategy or that kind of strategy and there's just there so many options that you can kind of tailor it to whatever your preferences are and that's what makes it interesting to a lot of us because we can all be in the same space talk about the same deals but because of our angles being different yeah we're not being on the same assets right right that's not a huge competition which makes it a lot of fun to get together we can just hang out and be together instead of being enemies so with that said one of the things that me and you are are not great at right our second leans we had some people on before talking about seconds and they're different animal they're not the same um kind of asset that we typically buy um and it's not right or wrong it's just different angle and a lot of times if we get in a second I'm gonna be calling my friends up and saying Hey listen I got some questions here because it's a different mindset a different thought process um in your experience seconds what's the big difference between first and buying seconds for you so I ended up buying I think I've had two seconds in my lifetime um one of them was by accident and then because I thought it was a first and it turned out to be a second and then the other one uh was on purpose but I actually had purchased the first and the second together so the first really um a lot of it you know there's a few differences uh many times I like lower balance stuff uh typically on a second lean it's not on a lower priced asset like lower priced home it's on a nicer home in a nicer area and that's great I I find that seconds tend to be a longer term strategy typically and you're doing a lot more due diligence on the person instead of the house and and I with the first it's reverse I don't care so much about the person I care much about the house true for me it's you're right it's all about the person try and getting that person to reperform um you know they really don't want to foreclose once they really have to yeah um and I'm sure they deal with the big bangs like we do and we're in first face whatnot um so it's quite interesting um so you know it was Weir we were down there in paper stores and you forgot the people you T to regularly to bring them on and talk about their stuff um you know Gerald you've been someone in the space for a long time right you've seen the Ed and flows and stuff and your experience is awesome um we envious of some of your experiences so wanted you to come on um and talk a little about second tell us a bit about how you got into notes what introduced you notes what did you do beforehand and now where are you at sure um you know I worked in construction for about 30 years uh heavy industrial like oil refineries power plants Municipal type projects and it required a lot of traveling around so I was looking for something to do that was closer to home and I could kind of switch careers and I ran into a guy named uh Ward Hanigan heard him speak down in San Diego and he was talking about buying a trustee sale so I went and took his training and I spent an astronomical sum with him I think I spent $4,000 which is I'm joking about that it uh it was money well spent I probably made a couple of million dollars off of the training I got from him and um it kind of gave me an introduction into real estate and Noe investing I mean to me Noe investing it's not just notes you have to know real estate as well you have to know title you got to know you know property valuations uh bankruptcy there's a lot of things involved in it but that's where I got my first exposure and then I went to one of WS um he does a reunion every year he'll put bring together all of his students and there was probably 200 people in the room and uh Dean Engel spoke and this was probably around 2003 or four Dean thinks it was 2005 or six but I thought it was a little bit earlier than that but um you know it's so funny that he he got up Dean got up and spoke for a couple hours and he had this uh Book and Tape set you like a CD or DVDs at that time and I it was like $1,000 it was called note buying profits and um um my wife punched me in the ribs you're not going to buy that are you and I said well I don't know you know it might be worth it and um so I did buy it and you know I've bought so many Book and Tape sets over the years A lot of them sit on the Shelf this one I bought I used it I I dug into it and I was kind of fortunate it was one of those serendipitous times because a friend of mine worked over at Condor Capital and Condor was a big hedge fund that was buying up a lot of distressed paper uh they call it you know scratch and dent stuff and so he was trying to explain what he did and I had gotten this introduction to note investing this education and um so I was able to kind of put the two together and for the first couple of years I only bought notes from Condor they were like my main source that that I don't think I bought any notes from anybody else for the first two or three years and part of what I did too I was kind of like a um what do they call it um I was Finding notes that I thought other people would like and then I'd flip it to them and make a commission off of it I might make 3,000 bucks or 5,000 bucks or you know some dollar amount and it was good because you know I had no money invested it was quick money and it it gave me a lot of Education into the uh you know what people are willing to buy what they're willing to pay for it and uh so that's that's how I got started interesting so back in the early 2000s was Dean's training I'm just curious was Dean training more about seller finance deals or was that not at all no it was institutional paper really it was um yeah and and I joined a mastermind with Dean and them after I did his his Book and Tape set um he had started a mastermind and I think we were paying like 300 bucks a month or something you know it was pretty cheap really yeah and you know Kevin Cardell was in it and I don't know if you know Mike Rika yeah um KY was involved in it Jack KY was involved in it and some other guys um but it was such a head start I mean it just gave me such a like a rocket ship into the note investing world because we get on a call every week and talk about deals and I remember Mike Rika talking about buying some note with negative equity and I'm thinking why in the world would you buy a second with you know the house is worth 200 and First Mortgage is $250 and you're buying a $50,000 note for $5,000 and you know I couldn't comprehend that I couldn't put my my head around that but then it started to make sense to me because we we kind of followed that deal through and he said you know this is what I bought and a month or two later he's saying this is what happened and I made $155,000 on it wow you know know $5,000 purchase yeah impressive yeah so it it made me it helped me to understand and that's why I get into the concept of diversification you know I like to look at notes as a a basket of notes um like a like a mutual fund you know if you got a thousand notes in a a thousand stocks in a mutual fund you're really looking at the portfolio return you know if I can get 18% of my portfolio over all you know I'm going to win some I'm going to lose some but I'm I'm happy with the overall outcome and that's really my target that's what I shoot for definitely and that was part of me and Dave's uh presentation and and Paper Source was they're not all winter winners and you're G to get some that are stinkers and you're going to get other ones that are home runs and awesome you know and it it all balances out hopefully on the positive side uh but you're looking singles and doubles are mostly what you're going to be getting that's okay you know in the beginning you're looking for that really hype deal and you may get them while you're shooting for a double that may become a home run um but you know if you're shooting for the home run all the time you're also going to strike out a lot right you're better off hitting those singles and doubles and just kind of go through the promotion right you don't buy in really bad neighborhoods on rentals and wonder what's going on you want to buy those BC neighborhoods right so you want to hit those good situations when you first got involved seconds were probably a huge thing because I know Mike was into them and um you know a bunch of people were into it was first really not as evolved was it not as common to buy first I know you know the big funds back then were Condor and you had um uh what's called up in New York as well um so my head um I know the one you're talking about yeah yeah yeah yeah you know I bought firsts for a long time the first two or three years that I was in this business and then I discovered seconds and I remember Mike R and I I had a buddy of mine guy named Ellis San Jose down here in in LA county and Ellis and I were doing some deals together and I said you know let's have a phone call with Mike and he can explain seconds to us yeah and so we got on a little 20 minute 30 minute phone call with Mike and he explained what he does with seconds and I I toward the end of that call I said you know is that it is that is that all it is and um it there's a lot of uh nuances you know there's a lot of things you have to learn to make seconds work for you uh things to watch out for if you don't have the education yep I'd be careful putting too much money into it but um you know first they've been around they still around I just have had much better results on seconds um you know I've got seconds that I bought and have received 20 times what I paid for it you know I bought a a second in my IRA recently I paid like $4,000 for it and I just collected $96,000 on it it was a a Hidden Gem it was a you know diamond in the rough you know people didn't know what they were selling and I I took a chance on it I didn't know for sure what I was getting but I figured hey I'll throw 4,000 bucks at it and we'll see what happens and uh it happened to pay off so I'm I'm looking at some of these uh you'd sent over some of the slides and we can get on to it if you guys want but one of the things I saw in here like here's one of the things that I can't wrap my head around with seconds is you say like uh it could be three or four years before you start to see return on that and to me I'm like three or four years I need money now and so it's hard for me to yeah to justify buying something that you know there's 's a good chance that I won't see anything from it for a couple of years and granted that happens with first from time to time but that's more the exception than the rule is is it how like how common is that on a second that you're not going to see anything for a while it's probably maybe a third of the notes I buy or long-term Investments and I know that when I buy it but if I buy a a $100,000 note for $5,000 or $110,000 I can afford to stick it in the file cabinet let it sit there and I pull it out and look at it once every three or four months or six months I got a friend out here in California named rck CIS and and he bought a lot of seconds over the years and he'll stick him in his trash pile you know he call it his trash pile and they'll sit in the file cabinet and you you pay cheap enough prices for and you you look at it and um but you know but I've had a lot of seconds where I reconciled it within six months you know I bought a second on a house in Burbank it's one of the slides in your in that thing I said over um and I paid $70,000 for it which is you know big chunk of money but the house was worth 800 and the first mortgage was 400 and so I bought a a second mortgage where the payoff is like 170 or something like that for $70,000 and I ended up approaching the homeowner saying you know do you really want this house and he said was 75 years old he's like no not really I want my grandkids are up in Sacramento I want to go I want to move to Sacramento so I said well how about if I just give you cash for keys you move out and I'll give you I think I gave $20,000 to move out which is a pretty good chunk of money yeah but there was so much equity in the house that I could afford to do that so I gave him $10,000 down and I had him sign a a deed over to me that day so I gave half the money up front he signed the deed I went down the next week and recorded it so I owned the house subject to the first mortgage and his first mortgage is fixed at 2% he got a modification on it so this is a house that we're going to hold as a rental and um so I gave him he had like two or three months to move out I'm not in any big hurry I said you know take your time get everything packed up move it to Sacramento let me know when you're ready and I'll give you though the $10,000 cash you know you hand me the keys that day I'll I'll hand you a check for $10,000 yeah so that's what happened and the guy's very Cooperative we're still friends today I helped him he helped me and I got a great rental house I'm getting $5,000 a month rent on that house and the first mortgage payment is600 a month Jesus interesting so there's so many exits on second I'm try to see if I can get that that up it is in a PDF format let me see if I can get it up um without any craziness but let me see if I I can do it sorry everyone who's watching live yeah scroll down and it'll a little further down and this is a good one you know Arnold Palmer it's a funny thing the more practice more I practice the Lu I get yeah you know that's that's the thing within seconds is that the more deals I do the more home runs I'm going to hit you know if I'm not if I'm real reluctant I'm not doing that many deals I'm not getting the hands-on experience I'm not getting the you know I'm not down in the trenches doing the doing the the deal um so keep going oh stuff to watch out for and this is another thing that I get um where is it getting stripped out stuff like that that that kind of thing just makes me panic when I think about I don't I don't want I don't want to get stripped like for heaven's sakes I just put why don't you describe a little bit what that means because lot people are very confused but what strip needs yeah well if there if the if we if the homeowner files BK and there's no equity over the first mortgage suppose the first mortgage is $200,000 and the house is worth 185 mhm then they can strip the lean but you have to be aware of that when you buy the note you know if and a lot of times I buy notes with no equity I'll buy notes at 140% loan to value but I pay a lower amount for it and I and those are the ones I stick in the file cabinet and I don't look at them I look at them once a year or once every six months and I don't take any action until the first adverti is down you know the balance when the first goes down significant ly or the home value Rises right and that has really paid off for us in the last two three years you know but low interest rates so many people are refinancing their houses and equity's going up uh that we've gotten payoffs on on loans that we bought for small amounts of money get you know getting really large payoffs but the lean strip um it just means that if the homeowner wants to go out and file chapter 13 they can't do it in the chapter seven they can only do it in 13 and if there's no equity they can um have the lean stripped it's called motion to avoid lean it's the legal term you'll see on the docket report so I had to become real familiar with Pacer you know I'm on Pacer almost every day looking at stuff checking notes you know we still have close to 300 notes right now and uh we're still dealing with with some bankruptcies but I've had some of my best loans were bankruptcy loans you know it's just and once you know it you're familiar with it it's not a scary thing and there's a lot of opportunity there you know I gotta but let me just jump in real quick the you know a lot of people get confused when you strip a lean does that mean you can't for cloth on them does that mean that the lean is gone what does that mean for the investor it means your lean is unsecured and you can't foreclose on it uh but you probably will get paid something you know I had a lean stre up happened down in in South Orange County casan capestrano and we bought the loan for about $155,000 and we ended up collecting about $20,000 over the four years so they they pay you like credit card debt you know there's different levels of of debt in a bankruptcy there's secured debt and there's unsecured debt so we still got some money you know we got our cost back plus a little bit um it was still a break even deal for us but at least we didn't get completely wiped out so yeah when you when they're lean strip you can't foreclose on it it's basically unsecured at that point interesting obvious one the other ones yeah you me go back up one of the other ones is Statue limitations so and this is again where I I'm trying to reconcile the two things because on the one hand you're saying you just stick it in drawer for a couple years on the other hand you're saying beware of Statute limitations so if you sticking in drawer aren't you just tempting fate there no we have a we have a spreadsheet or like a Google doc sheet with all the statue of limitations for each note okay and we we kind of Target that but in California it's 10 years after the maturity date oh wow so if you got a 30y year alone that matures in 2056 and you got 10 more years after that statue limitations way way out in the future but we have gotten burned by this in Florida I think it's 10 years after the maturity date or five years five years after the maturity date so we just got burned on one recently and what we ended up doing is we routinely send out discount letters on loans that we can't necessarily start foreclosure on so we'll send out a letter with four options you know a full payoff you know the loan might the balance might be $100,000 we might have bought it for five or eight and so we'll give them a full payoff at say $25,000 and then we'll say or we can Finance it interest only for a year at 7% to where the payments you know three or 4 hundred bucks whatever or we give them an option to pay it uh fully advertising over 20 years or 30 years or down payment so we'll list out multiple options and let them know that even though you owe me $150,000 you know we willing to take $25,000 because we bought it so cheap and so a lot of times we get phone calls or emails or letters from the homeowner say yeah I want to talk more about this um and it all has to do with us you know buying these seconds for 10 15 20 cents on a dollar yeah I mean we have a full chart of you know stations because every state I have one two three four five six seven eight nine pillars for stations right from maturity date to last payment received to due date and all that stuff so you're right there's different pillars all you have to do is flag it right when it comes up when it's getting closed it's not that it's end of the world usually there a way to kind of negotiate maybe you do a mod agreement maybe you do something to avoid that problem um or you make an action right um some states let you forgive stuff you know like Florida so let me um you know lack of PTI vation that's a huge one too I think people miss out on um and the reason is that if you're in a bankruptcy you need approved every payment from the origination to now a lot of times you get a loan with you know last two or three years of payments and that's it yeah you mean forclosure right yeah yeah yeah foreclosure not bankruptcy but foreclosure sometimes bankruptcy too sometimes bankruptcy will ask for that they contested um with legal balances but yes you're right but you know my strategy on this is like we have one right now same situation um my asset manager said Gerald do you want to start foreclosure on this we don't have any pay history and I'm like well yeah let's go ahead and start foreclosure because a lot of times once we file the the first document on the Foreclosure this is Florida loan the homeowner starts to freak out and say oh shoot I'm gonna lose my house you know we might have mailed them 10 letters already they throw those letters in the trash but when they get that letter from our lawyer this like demand letter saying that you know if you don't pay us we're going to start foreclosure on your property and you have 30 days to think about it and then if they don't pay us then we file the first documents related to the Foreclosure um and we're just trying to get their attention you know we only complete probably 10% of the prop of the foreclosures that we start you know we might start a 100 foreclosures and we only take 10 of those to completion where we actually have to own the property or take it to a sale where somebody pays us off you know see and then on just to contrast that on the first side um if a person is living there same kind of thing maybe 10% of those maybe uh that we actually bring to to completion if the property's vacant then that's a different story on on a second that's that's going to be a different thing as well but if it's vacant then I'm G to foreclose because it's vacant and what do there's no emotional Equity there right right yeah they've left I heard about the term emotional Equity starting back in 2008 you know and I think some a couple people you were maybe it was Gordon mentioned it at the Paper Source this year you know and and I forgot to continue thinking about that it's it's a powerful thing yeah obviously you're talking about mortgages de of trust depending on the state um seller carryback we did a webinar with Tracy a few weeks ago and the number of seller finance last year which we can't figure out why was dramatically high with all the house selling and all the money out there it was crazy um scratch and dent um for those who don't know what scratch and dent is it could be numerous things it could be the fact the person didn't give all the information on their forms uh when they submitted it for the application for the mortgage um they could have bought a car any kind of numerous things they didn't have all the tax returns all stuff could be all over the place um here's a this is a nice place I'll live there right so here's some examples that let's stop on this slide for a second yes this is a a we foreclosed on this from second position and we took over payments on the first mortgage and we held it as a rental for seven years so that didn't quite fit your model right do you think we made money or lost money on this deal so you situation where you your income was 120 your expenses 144 and your gain loss are 24,000 just based on the numbers he lost 286 a month right we lost 24,000 over seven years on this house numers tell you you have to lost money well go to the next slide not a bad return you're kidding I mean the price when we bought the the note the house was probably worth maybe maybe $300,000 okay here's your key right here yeah we we paid 177,000 for the note and we held it and we ended up with a 23% annualized Roi do you remember what the upb was on that not really I think it was in the hundred something thousand range you know we bought this note like two for us 2011 12 13 especially 20133 you know in 2013 we spent $3 million on second mortgages wow good bu to buy and hold you know to hang on to and the at the average Pool price at that time was like 12 cents on the dollar yeah you know so we we lucked out we just happened to hit it right where we had the capital available um I did some joint ventures with people and we still have those investors today most of them we're still you know finishing we're still doing going through our loans but um we made $330,000 profit on this deal nice really nice that's amazing oh so cool so this is a very confusing one for a lot of people right when a first may not be a first or when a second is actually a first uh just for before you dive into this one I want to explain people why is a first or first and second or second it's literally the order of the county records if it's recorded first it's the first it's recorded second second you could be in a spot where the second was recorded first and the first recorded second in your eyes right most time when they build a house they have to record that trust and they move it over or do a piggy back so yes it could be flop flop can you share a little bit about when a first may not be a first well in this case it's very unusual I mean I've done you like I've been through hundreds of hundreds of these deals and the County recording shows this loan to be my Loan in first position because the document ends in 627 then there's another second mortgage right behind us ending in 628 so if you go go down to the County Rec record's office you know Ricardo's office you'll see these two loans in in the sequence you know mine was 627 theirs was 628 so I just assumed hey I'm in first position no doubt about it you know and it turns out that they the original intention was for my loan to be in second position but they recorded the documents incorrectly oh so it's a big mess I've been in I've been in litigation on this for three years yeah there's ways you can reverse it you know to but I'm presuming you don't want to reverse it your second's actually your first I mean I would stay there right if you can yeah uh you know this it's an ongoing legal so I don't want to get too deep into it they finally came to me last week with an offer to buy a out that is about a third of what I was looking for you know so we have to counter offer but we are making a little bit of progress because you know Fidelity first First American Title is the company that's suing us actually they're they because the other party had title insurance so they filed a claim a title insurance claim and it's a it's a long convoluted story I've I've had already had four different lawyers consult with me on this I've got one primary lawyer then I've had some other guys that were what do they call them expert Witnesses you know to help resolve this case and and we've already gone through one uh mediation and we're probably going to go through another mediation so anyhow it's it's a messy deal most people are not going to run into this especially we paid quite a bit for this loan and so it's kind of you know on the expensive side we have a property it looks like it's in no man's land yeah right and that's part of my due diligence when I look at notes you know I like to buy notes in cookie cutter neighborhoods yeah you know but if the price is right I'll buy in The Boondocks this is like you know out in the you know I've gotten stuff in Minnesota out you know thousand lakes 10,000 Lakes Minnesota you know but I I typically look at um the city or the town even but population over 20,000 because I figure if I take it back selling a house in a 5,000 person neighborhood is tough right but you know everything is worth something at the right price absolutely you know someone gives you a note for a dollar would you take it oh yeah of course you know there I would I would I would do a little bit of due diligence on that but in general yeah for sure yeah so if the taxes are let's look at the next slide yeah maybe not so it was a junior payoff yeah um again this is one that we had to start foreclosure to get their attention I bought the note for under $3,000 July of 2018 we didn't start for we we we sent numerous collection letters we made phone calls we had the property door knocked and um they never responded so we start foreclosure a month after we start forclosure we get a phone call from them what do we got to do to clear this up so we sent them a payoff statement and they didn't even negotiate with us they paid the full amount normally they would come back and say well I can't pay 96,000 but I can give you ,000 would you take it and in this case they didn't really negotiate they just paid us off you know we get a check in the mail that's a little bit of a return there I mean anyone's watching who wouldn't exchange $22,900 for just over 96,000 right that's a that's a decent return and and you said this happening about two years right oh you bought three years you bought it and turned it around not a bad Roi on that one yeah yeah what's the next slide look like did I do any numbers on it yeah so here's the numbers 108% Roi yeah 32 months yeah okay and if you if you're going to be an own investor you really have to learn how to use a financial calculator and you have to learn how to do irr internal rate of return you know uneven uneven cash flows yeah i' I've real quick just for people who don't know IR is even cash flows xir is uneven cash flows right that's the way you figure out so sorry go ahead yeah yeah my my mentor that's taught me so much about calculators is guy named Gary Johnson and Clyde Wilson and they have a class called Financial Freedom and if ever you get a chance go take it it's a three-day class on using a financial calculator to figure out you know what you're doing with your money you know and it's well worth it I've taken it three times already over the last yeah we we use I use Net Present Value and xir all the time that's how I make offers that's awesome yeah I'm I'm pretty good with the calculator I'm I'm certainly not a beginner but uh but I could use some brushing up that's for sure yeah get into that advanced category we're flying over to Vegas now looks like yeah oh and this is not really a note deal but it was such a good deal I had to throw it in there yeah and you know it's it's notes in real estate like Gard M talks about you know it's it's notes and real estate uh and this was a letter that I mailed you know in 2015 I I created a private note holder list for notes in California and I mailed out 7,000 letters to people offering to buy the note and I got four or 500 responses and I think I bought close to 200 notes out of that mailing and this is great return yeah it was a it was an awesome return what year was this this was 2015 but um but the Burbank property that you saw the one we did earlier yeah um I mailed that guy a letter in 2015 five years later he called me up and asked me if my offer was still good whoa you only one letter you sent to him I only sent one letter to him wow but he must have he called me up and I made him an offer $70,000 for that that Noe and he said n you know I think I'll hang on to it a little bit longer and he must have had a change of heart or you know his financial conditions changed but he called me up five years later and I ended up buying that note from him for the same offer I made five years earlier and it was actually worth more because um the equity had gone way up yeah so anyhow this Vegas deal was a result of of a direct mailing um and he the seller was a a court appointed um like a conservator or a custodian okay it was it was his job to um liquidate the property so he says I don't have a note I got your letter and I don't have a note that note's already gone but I have a a property that I need to to bring the auction and it's but it's subject to a life estate so you guys you know what a life estate is no I don't basically the lady has the right she's 94 years old she has the right to live in that property until she passes away or moves moves out okay so it's like it's like a subject two deal one of the conditions of the deed that I get you know so the property actually transferred to me in September 2016 for $4,700 the the property was worth about 175 at that time W but I don't have possession I only have title so I don't I can't walk in the house and do whatever I want with it Weir I had to live there I had let her live there for a certain for per the conditions of the of the deal and you know you don't know I figured she might live six years or eight years you know that was kind of when I did my calculations using my financial calculator I figured A reduced value I plugged in the value at like $150,000 and I thought I might have to hang on to it for eight years something like that so that's how I I reached my my top bid number she didn't pay you all you just got discount because she's not going to make payment she's live in the house you have title to but she occupies she doesn't make any payments she has to pay the taxes and the upkeep any maintenance you know um property taxes utilities are all per responsibility and I have the right to go uh inspect the property whenever I want to so once or twice a year if I'm in Vegas like for Paper Source I would schedule an appointment with and I'd go by and take a look at the house wow and make sure that you know the roof wasn't falling in or the plumbing wasn't backed up and there you know sewage all over the kitchen floor but she kept it Immaculate you know it was the house is really wellmaintained how this house did it go to foreclosure auction or no it was a it was wasn't a forclosure it was in the sale was held on the courthouse steps in Utah and there was only me and two other biders but what was the legal action that caused the auction it was a a cord appointed like a receivership okay she she lost a lawsuit you know her family her husband or her son or whoever it was got sued and they lost the lawsuit gotcha part they had to liquidate the assets but the judge was nice enough to say okay I'm not going to put you out on the street you can live in this house for this length of time but you're not going to own it anymore I never heard of that that's interesting yeah that's a new one for me yeah yeah so it's it's a life it's called a life estate and Pete fortunado talks about that he's had a couple deals where there's a life estate involved yeah and um so anyhow so they they notified me in November of 2020 that they that she's moving out and so I went over there and helped her move out and um got her relocated to Denver I didn't I mean I just packed up the U-Haul and they took off down the street um and then we fixed it up and sold it for $310,000 so if you look at the next slide it'll show the numbers I think so that's the the numbers on it I can I can live with that yeah no kidding so I only had you know for the first four years I only had 40,000 invested in it uhuh and then later I had to do rehab and and closing cost and commission so at the end of the four years I ended up having to spend another you know $50,000 uh to get the house ready to sell and sold Sun colem mentioned it she actually WR across one how did this come across your desk I mean I don't think I've ever seen email huh you talking me how this come across your desk like how do this come through an email like life estate sale like this come from no no no I like I said I mailed a letter to the court appointed uh custodian a cour appointed receiver okay yeah this guy was a he was given the job he does this he's a professional like Liquidator basically he gets assets and sells them so he had a note and I mail to him and he calls me up and says hey this note is gone but I have a property would you be interested in bidding on it and I said yeah I'll bid on anything real estate related you know whether it's a property you know mobile home whatever you know so you and two other guys at the auction was were the other two guys interested at all or did they not know where it was well they yeah we bid it up and we started off I did the opening bid at $1,000 wow and then somebody else says okay, 1500 bucks and the other guy says 1,800 bucks and then it kept going up and up and up until we got to 40,700 was my last bid and everybody else dropped out they didn't go any higher how many other properties where there for sale or the auction just this one okay really wow that's interesting yeah hey guys drop your comments below if if you've ever deal with this I've never seen it it's pretty interesting um I'm sure it's rare but that's cool very interesting I we have a bunch of more slides uh do you want me to skip through anything all this you can brief this is the the one that where I mailed the guy the letter and he five years later we bought the deal this is this is the one where I um you can scroll down a little bit this is in the middle of rehab uh go back to that picture see that that back unit was an addition to the property the front part is the three-bedroom two bath and the back part is a two-bedroom one bath oh and so we ended up splitting it we we put a we closed off the doorway in between and put a new door in the back and we now rent this out as like a duplex so we get 3,000 on the front unit and 2,000 on the back unit oh nice so you can go down next slide um just we touch the numbers real quick I've already pretty much discussed this part go to next slide yeah so this is the numbers on that um you we spent a lot on rehab the house is old and dilapidated built in the 50s but it's something that we're going to hang on to for the for the rest of our life I think you know it's it's a great rental property makes great cash flow and um today it's worth probably 900,000 yeah for 70 that's awesome you put 9 to this and then reab for this much money and then you I guess you paid off the first no no I I'm making payments on the first oh okay it's subject two we just take over the payments on and this this is the one that's fixed at 2% that loan is will never go up it's always going to be 1,600 a month for the next 30 Years fantastic boy oh boy that's a nice purchase right there yeah well done this just shows the amortization I always create an amortization schedule so as of 51 of 20 the the balance was 396 if you today if I looked at it it would probably be 375 or something like that right but a good opportunity to show people what this looks like you know what does this look like for those who maybe kner you know what do these comms mean and why they change right so do you want to quickly share a little bit about that what do the comms mean what do they why do these two change when everything else stays the same yeah this is an amortization schedule and this is an Excel spreadsheet that we built uh and it you can crunch the numbers it'll the spreadsheet will do it for you it'll break down the payments if you advertize whatever the starting balance was 493 over um I think the term was 40 years on this one it was 35 according to here oh 35 yeah yeah 35 years so 420 months and it it'll break down the payments by principal and interest and it'll show the New Balance yep so that's the the date of the of the payment due so this state payment was due 5120 it's the 109th payment in that amortization schedule and the payment the payment amount is not going to change that's always going to be 16 34.443856 loan and the interest is the interest and and principle are going to continue to change every month will be slightly different um to where the balance goes down but you know one thing you have to really look at is look at the amount of principal we're paying down every month yeah almost ,000 dollar I think right now it's it's out it's over $ thousand dollar of principal reduction so the interest the portion going to interest is getting smaller and smaller as a loan matures and that's why a lot of times the beginning alone is very valuable because of all the interest and the and U sorry the interest the beginning the end por is the principal's gone so um I know we have a bunch more slides do you want me to skip to a particular property or a particular slide before it doesn't matter we can wherever the conversation goes you know I know you guys are running out of time um let let's let's back up for a second right youve bought a lot of seconds what are some of the things you screwed up on what are some mistakes you've made that you say crap well um first thing that comes to mind is is like on that Oceanside property that we held it for seven years um the lady was trying to get a loan modification on the first which would have dropped her rate from like 6% to 4% probably and if I think I pull the trigger a little bit too quick on the Foreclosure if I had to let her um go ahead and get her loan modification done um and then foreclose on it I would have had a lower monthly payment but then she might have paid me off too anyhow so um you know I think as far as uh have a do diligence have you ever made you know a mistake that you've learned from that you say listen I can't do that again absolutely you know sometimes we get a pool of 100 loans that they want us to give them a price on and will you can't when you when you're looking at 100 loans you can't dig deep into every single loan nope so we we throw we plug in a number to each loan we might we might have taken a look at bankruptcy or at the credit report um different things that we look at and then we we wing it you know we have to provide a number within 7 days or whatever it is and can't take two months to go through the tape so you know we could have done better due diligence I think um if you go back to things to watch out for um in my slides let me just scroll up I got that up right now um unscrupulous note sellers be real careful you know I've got I I've got one guy that I bought notes from five years ago that still owes me like $30,000 and it's just not worth getting an attorney and trying to go after him you know I think spent a million bucks on a deal and so he owes me like 3% you know he's still you know it's it's a small amount of money um but ask around make sure you you know reputations from people um because I I got a friend that wired off a million dollars to buy some loans and he's still fighting them in court he's never gotten his loans so you know when you're buying notes there's no escrow you know it's not like buying a house where you open escrow or you know over at this local title office you're trusting people to deliver what you're buying and you know doesn't always happen um I think I had something uh on my list about low yield monthly payments so we bought a note in close to here belflower California and the the note the monthly payment was fixed at like $325 a month and we paid $90,000 for a note where the balance was like $150,000 and my partner said he you know he thought we were gonna get the house and I said hey we might not get the house you that's okay I'll take the chance and technically those guys could have paid us 300 bucks a month which is $3,600 a year on a a $90,000 investment so if you just do a cash on cash 3600 divided by9 $9,000 is 4% interest you know the yield would be 4% yeah fortunately they ended up defaulting I mean they paid us for a while at 300 bucks a month yeah but then they ended up defaulting we took it to foreclosure and somebody else it went to third party somebody bought it trustee sale and we ended up get just getting cashed out but you know be careful don't don't always assume that you're going to get the house back you know that's my whole point of of saying that is don't always assume you're going to get the house back a lot of times they'll just make payments even though you think it's unlikely they'll get the payments made you know or or they'll reinstate when you thought there's no way they're going to reinstate that and they do and you're G oh shoot exactly it's the assumption that you know what's going to happen before it happens I think a lot of people make that mistake and assume things are going to happen based on the fact that um what they know of yeah and you know one of the things that we've done is we have good systems um we use a CRM called act and all of our notes are in act all of our histories every phone call we make every letter we send out it's all plugged in act and we we have a small office we have five people in the office myself my wife and three others so we have an asset manager an admin assistant and a bookkeeper full-time bookkeeper that does a few other things I mean she only works about 25 hours a week but she's still considered you know pretty much full-time um and you know it just helps so much to have good records we plug everything into QuickBooks uh every loan we buy has its own uh it's class accounting so every loan has its own profit Center basically so all the charges all the the income and expenses go against that in individual loan we can run a report on that one particular loan um and then we use uh Mortgage office we use a light version called um loan office to do all the amortization schedules and statements and coupons and that's one of the best things we did we were trying to use something like notesmith prior to that okay and it just wasn't up for the task you know if you got a handful of notes if you got 10 notes it might work fine but if you got 300 notes it's too cumbersome um so you know if you're wanting to start out in this business in the beginning you can get by with spreadsheets and stuff but if you if you ramp up and end up with a decent volume um you know get the right software to to be able to track your notes and we self-service a lot of our notes probably 75% of them wow um is that just money or control I think it's a combination of both you know it's a little bit cheaper and then I think we have more control over it okay yeah um um you know we have a lot of notes in in our our account I've got about a hundred notes between my account and my wife's account in in our hours so all of those notes we put with the serer because we don't want to take the chance of getting like prohibited transaction that's a key yeah I do the same thing so all those notes almost all of them I mean there's some notes that we bought real cheap and they're pretty much inactive so we self-service those notes they just kind of sit there in the file not doing anything but if we decide to to start collection on it then we'll move it to a serer before we start collection interesting yeah that works so we have some questions if Nathan was fixing some stuff I yeah yeah you bet so Cindy Coleman she's asking about uh a course or a person that you can learn the seconds business from are you don't teach do you I don't teach um and Dean's not teaching anymore either um and that that course that he did is not available as far as I know you know so you know Rob hea does a really good job he has some good information on his websites you know if you don't mind me mentioning that a good guy fix notes Fix N O Tes dick notes he has a great program I'm part of his mentoring group you know I pay X dollars a month to to sit down on a phone call once a month and we had our call yesterday and Rob's a young guy probably less than 30 years old and I've known him for 10 years does a really good job had a lot of experience um so I don't you know Mike Rika does a mentoring program notec conference.com so I like Mike he's awesome guy um those are the first two that come to mind as far as you know the one thing I would say is stay away from the guys that want to get you into a mentoring program and starts at $25,000 and the Platinum level goes up to $50,000 yeah don't do it you know it's just not worth it I don't think you know I AG go out and buy a note get some experience get some better yeah yeah it's really going through the motion right every when you know when you go to college right you go here you spend all money for college and you get out with no money you just came out with skills right and now you can make the money with the skill you learn same thing with buying the note you buy that first note you learn everything you need to do so they may you lost your money May made some maybe broke even but then you now have the skills to go buy notes um we run our own Mastermind too on weekly basis we have some and some really cool people just talking about high level stuff of different angles different you know positions because everyone's different everyone's different mentality is awesome um I know that it it for seconds you know you for Quan's out there but there's I don't know of any training programs out there per se uh that's particular on seconds yeah specifically I think Rob's program is is covers seconds really well and Mike is primarily a second guy yes Mike yeah Mike y absolutely um some of the first notes I bought were from Rob really oh really yeah way back when was it through usmr I think so back then yeah yeah yeah he worked usmr for a long time he still does but more as a consultant oh does he okay good yeah I first through gold Mark gold so that was my first purchase was through Mark gold she was not in the business anymore so yeah I know Mark yeah so my first seconds were through Coast Capital yep the Mad yeah da y da Madden Trinity yeah yeah which I don't think they're around anymore I haven't seen them yeah no comment so we do have another question for you um you know what resources services do you use to operate the business and one of the most important service you use that's a general question yeah and I think I cover that I'm not sure if I cover that in these slides or is the other slides I do um but we use like I said we use CRM that's something that every we have five people in the office and everybody can input data you know if a check comes in we log it into the history you know we got a check for $318 42 and um it shows that CRM shows the the first mortgage what the balance is the date of last payment when we last checked it things like that and then we have another box that shows our loan our second mortgage and the what the monthly is what the date last paid is so we keep track of everything and we can we can run reports on that as to you know if we want to see the delinquent borrowers we can run a report that'll show everyone who's more than say 30 days delinquent so act is a really strong tool loan office is is another one um CRM is that do you care Share which one you're using act act Sage act and you can some people use um I forget the name of the of the Salesforce Salesforce but that's huge I mean that's a big one thing acts the same way you know I I just spent $1,500 to upgrade act from you know version 21 to version 23 you know it's but it's worth it I mean you know um I couldn't live without it and and you know in hindsight um marage office might have done a lot of what we do in in act but I don't think it it doesn't keep track of the opportunities and phone calls and people that want to sell notes things like that all that gets plugged in to act so that's one software the second software is is loan office you know act CRM you can use Salesforce whatever yep uh Act is a CRM that is very valuable I mean uh and then loan office does all of our amortization schedules statements coupons everything we want to do with with mailing out statements to people that that all goes through loan office and then QuickBooks would probably be the next one you got to have good accounting um you know we have to file our taxes every year we have um we have about we used to have 12 joint Partners wow now we're down to about four yep and so I I I send out quarterly reports to them yeah we we split money you know once a quarter we take whatever's knit after expenses and and I'll distribute it between us and them um so Excel we use a lot of excel we use we do a lot in QuickBooks U but that's the primary yeah you know becoming familiar with Pacer you know the bks uh you know there's a lot to learn on on on BK so we had another question from Cindy what's where's pricing at seconds at she's heard that they're pretty high I've heard they're up at 55 but I've even heard higher yeah I've heard 5560 where are you seeing price of seconds right now you know I'm um I'm starting to slow down I'm I'm wanting I'm I'm making our company smaller there than larger so I've been buying nothing but rpls for the last year and a half two years L are Y and um we're shooting for a yield in the in the mid teens okay 13 14 15% something like that and a couple of the big pools I bought recently were in the 50% range of upb so 53% maybe or 55% 51 something like that we have bought a couple of pools of of higher quality loans where we paid like 75% of upb but really the determining factor for me is the yield I'm not gonna I'm not gonna buy the yield is really what drives it I'm not gonna buy a loan where I'm less and say 85% of upb I don't want to I I mean above 85% I don't want to be at 105% of upb yeah you know yeah because if I have to foreclose on that I can't get my money back yeah so it's weird you say that a lot of people are still bidding on the percentage of upb we've heard at the at the Paper Source that and they're being taught to bid on percentage of upb and ignore the interest rate right that yield is your driving force that it's the the percentage of upb is a byproduct of your bid well I'm going to bid at 12 14 15 yield okay I'm gonna this is my bid oh what percentage of upb is that number versus the other way around um that's a key thing for a lot of people is that you should be driving back in the return return you want versus bid percentage and then say Oh this is the return I get yeah yeah my my spreadsh sheeet when I'm bidding Stuff shows you what my yield is going to be and my target is somewhere around say 15% yeah sure you know if it's a great Loan in a great area if it's down the street from my house in Orange County California then I might drop it down to 12% or something but if it's in you know Cleveland Ohio you know Memphis Tennessee or whatever I'm going to shoot for something in the mid teens or maybe even 177% you know yeah so where do you see the market going Gerald do what's your crystal ball prediction I have no idea uh it doesn't affect me that much you know I'm not aggressively buying right now I you know I I um I just don't want to work that hard I've worked hard for you know I started working in in construction ruction in 1973 I guess yeah so I'm 68 years old now and I'm I'm really wanting to go I took up golf recently cool six months ago I started playing golf and I I enjoy it I just went out bought some new clubs yesterday we're trying to get Focus we're trying to get one of the you know the note conferences to do a golf day beforehand or something something like that maybe commodity so I'm glad to see you relaxing a little bit it is how difficult is it to relax when you've done this for so many years I don't have a problem okay you know I I mean some people I know they only they work because that's their only interest that's the only thing they have going on in their Liv point I have a lot of other interests you know I like fishing I like shooting I just went did some sporting plays with my brother down in Houston um fishing bicycling there's a lot of things that that I I got plenty of things to occupy my time that's good uh friends and family I'm the oldest that of seven kids I just went down to Louisiana and saw my almost 90-year-old mom spent a week down there and then went spent a few days in Houston with my brother and my focus is more like friends and family yeah and Recreation I think um we've we've done well with the note business and I don't have to be that aggressive right now I'm uh you know if I if I can get eight or nine or 10% of my money as opposed to eight % I'm okay with that you know I'll live with that you guys are younger than me and you know you're still on the upward Trend you know you're still trying to grow your business yeah it's interesting to say that because we feel like we're getting older as we go on you know but then you say you started construction before I was born which is kind of uh you know Earth shattering but it's great you know um I think where you came from is a good acttion to realize what goes on um I did construction for 13 years um I wouldn't do it again it wears on you um but I think that the transition to notes is so attractive so many people like it because it is real estate without the headache of real estate right and you and you know a lot of our notes have turned into real estate like the Burbank house yeah you know it's just so we have you know a dozen of sold rentals right now all in Southern California um and that's a nice compliment to the note business you know the rentals are fairly easy to manage for the most part we have higher Quality Rentals we don't have a lot of turnover so we have to do some maintenance on them you know change a roof or whatever but U it's not a huge amount yeah absolutely well Gerald uh I'm gonna ask you to hang on for a few minutes we're a disconnect from the public I appreciate you reaching out to us and joining us today um do you want to give out your email address I'm sure your website available um I'm going to ask you guys don't ask them for assets he's not selling right he is where he's at this is retirement um but if you want to pick his brain U feel free to reach out to him just just chat for a few minutes um I can definitely share your email address but do you want to give your website so everyone can see what it is yeah it's the L Mo group.com so it's t h then my last name L Mo and then Group G u.com uh my my email is Gerald thee Mo group.com and uh phone number is 71 4462 8050 um just don't put me on a robocall list but feel free to share you know if you guys want to email the slides out to people I'm fine with that if you guys want feel free email me or shoot me message or whatever you guys do yeah reach out to us let us know my um contact information is the last slide sure in that um presentation there's no way doing it okay well Jal I'm going disconnect from the live feed um guys have a great weekend if we don't talk to you um hopefully we have some good stuff coming up our next uh event is actually on Facebook um we'll have a a really good conversation you'll see all the details coming up soon but uh stay tuned all right guys have a good time enjoy your weekend you bet thanks for the invite hey everyone Dave puts here from jkp Holdings good afternoon always aside me Mr Nathan Turner how are you sir hey very good thanks how are you doing good hopefully the weather is kind of being a little bit better for you guys we're getting like 60 degree weather here I'm me kind of impressed right now it's been above freezing just the last couple of days uh where we discovered we've got a little bit of a leak in our basement so we're trying to figure once once it warms up and we can dig it's an easy fix but uh anyway we're having to deal with that right now lots of fun yeah um so hopefully things are working out things are kind of turning in um for those who don't know DM around the corner um there's a couple more conferences our DU dilig portal actually has a list of all the conferences coming up so definitely take a look at that um this is being recorded be on YouTube and I'm telling you the pregaming talking I guess the Green Room is they talk on TV we had some cool topics um this gon be a phone with Joe um he gave nailed down one more for us at the end of uh March so we'll talk about that later I don't want to give it away but it's we have a bunch of stuff coming up I'm sure you see the feed in the Facebook events um we have a bunch of new topics coming up on Fridays and be cool so Nathan I knew you we were talking offline as well you're me submitting some offers we're doing some offers too things are kind of opening up a little bit um winning some bids buying some partials selling some deals I got really yeah I went into contract on two last week I just uh I got my due diligence back uh actually just this morning I'm supposed to be closing today bpos are not fantastic and so I'm I'm actually debating or negotiating I'll say with the with the seller right now or see and uh if we can do something a little bit better on their pricing because that's with with you know I know you're not a huge fan of bpos but but with the values that I'm getting versus what they think it's worth we we're not on the same page so we're trying to figure that out but but some other bids in aside from that as well so so is it the fact the values of the area are bad or the house itself is not good the house itself yeah one there's there's some damage to the house we already knew that um last July they got a valuation of 80,000 today I'm getting a value of 50 so that's that's big difference so that's uh we're in negotiation we'll see if that closes or not but this and what I tell people all the time is you don't try to make the numbers work don't don't try to force something that isn't gonna go because you'll just you'll be sorry don't don't get emotional about it right no and there's always another deal and if you need pass on this you know as much as I want to keep the relationship and and it won't damage the relationship in this case but uh but don't try to force something if it's not there that's that's kind of what I'm getting at Joe can you give us a background where you came from Real Estate wise how did you get into notes how did you come across this crazy thing and what was your learning curve what was your background sure sure well I came from my mother um a long time ago no uh after that I had a corporate career uh I spent uh I spent about three years uh doing oil and gas Finance International operations um and so I actually lived all over the world uh doing Finance for oil and gas operations so doing project economics is a very familiar thing with me you know we would we would do that for all these different projects you know all over the world um so that part of it was you know when I when I left the corporate world it was It was kind of just intuitive for me um and so I uh I had invested in real estate in the in the early 2000s mostly rentals that kind of stuff um and then I I heard about notes and I thought it's kind of interesting you know what are they how do they work you know the first impression is well you know the banks are the the ones that hold the notes type thing um and so I started doing some research and uh got involved with some different groups and started to learn kind of what they were and um how you could access them um kind of the difference you know like there's performing non-performing and and then you get into the nuances between those two because they're completely different type animals um as you guys know uh and so I uh about I guess it was four almost five years ago I took my plunge and and and got my first note um and started I actually started off um I wanted to to learn with somebody that I thought knew what they were doing so I jumped in a joint venture um and I jumped in with the wrong person and so that didn't turn out well at all um I well it ended up with me having to basically take the notes back to avoid lawsuits and all that kind of stuff so which I did but then you know I started working through them myself and with um you know listening to a lot of different people like this U and and other people other professionals you know you learn a lot and once you start doing it you know I can't emphasize enough that you know you learn by doing a lot you know when you start doing it just you gotta you got to pull a trigger and so anyway um I started moving forward I I really enjoyed it you know doing the economics on these things were easy for me uh that kind of stuff and so it's a matter of you know finding them evaluating them and seeing if they're a good fit and then understanding kind of what you're buying and where you should and shouldn't be buying and you know all those kinds of things that uh you basically learn as you go along you know you just don't wake up in the morning and know all this stuff at least not me I takes me a while to absorb it so that's kind of how how I got to notes and uh you know the other thing I find is that kind of once you get into the space you know it's uh it's it's kind of a it's a nce group of people um and you once you get to know them and they get to know you uh you know I really enjoy working with the people in in the notes space they're really I mean there's obviously some exceptions but they're really a good group of people that you know I enjoy interacting with and and working with and you know U even though you may not be able to agree on a particular note that you're selling or buying or whatever you know that that's just today you know tomorrow you'll be working together again because that's that's what you do it's not it's not like it's something person personal uh because if you start making it personal then you're going to be making the wrong decisions for all the wrong reasons yeah is my experience so that's kind of where where I got to today um and so um so it it was kind of forced upon you but but you took it on and and just took the bll by the horns well yeah I mean I I I learned because I was I was sitting watching nothing happen you know on yeah you know some they were non-performers and nothing nothing there was no action being taken and so 18 months later I said you know hey I'm done just sitting here watching nothing happen you know we need to take some action and so that's that's good how you how you move along anyway yeah no that's good and then coming from a finance background we talked to everybody uh I think Dave and I included we all came from from a real estate background right so coming from a finance background in a lot of ways is a huge Plus because that's really what this business is about is is finances and numbers numbers and people get in a space like I don't want to mess with numbers I just want to buy real estate and like right you're doing both yeah real yeah if you want to donate money it's a good place to do it sure yeah yeah it's it's a shame because it's a lot of people get into this stuff because of landlording right and they get banned they get tired of it the struggles the eches yeah and know it's a little bit it's still real estate but it's just not dealing with the tenants right but there's more than just a house right you're not doing Aro rehabs it's there's numbers this is a bank versus being a real estate owner right yeah yeah right a different look at the numbers and then you said so You' got a preparation you prepared a presentation for us on numbers yeah if you want to you know this is this is a cure for everybody who has insomnia problems you know uh because we're going to talk about numbers uh and I I have to say that um this isn't the introductory course you know it's just kind of a little more advanced that we're going to be talking about so you know hopefully if you have some exposure to to doing some notes or whatever um this might be a good fit for you um we will get into some some things that are normal when you get into buying notes and stuff so you know it's some things you should know uh so if you want we can jump into that let's jump in so Joe is gonna bring us on to learning about the differences right this the idea here today is there's multiple ways to calculate your returns now there's some simple ways and more complex ways and you may say well I just want the easy way sometimes the easy way way is the wrong way and gives you a fake return sometimes the easy way can give you a roundabout idea right and there's some ways that are just lot more complex that can be overwhelming so hopefully that kind of helps right so so gonna start out about you know talk about understanding the Returns on notes and kind of a good good way to calculate that because that's what it's all about um so a lot of common questions you know some people say well isn't the return just the interest rate on the note I mean you know if it's 5% note isn't that my is that my return well if you paid the full unpaid balance yeah it would be but I know I don't think a lot of people want to pay the full unpaid balance plus you know you have all these other things that jump in like you know what the legal balance because you know know that's another part that you need to consider um depending if they're behind and all kinds of stuff and so you know then then the other question is you know well you know they have all these acronyms what what do they mean what's Roi and IR R and x iir r and yield and npv and xnpv you know golly your head just swims with all this stuff and you know so okay how do I know which one is the one I should be using when when I'm looking at this particular note well kind of I'm going to just quickly go down I'm not going to go I thought about actually showing the mathematical equations for these but then we would all be asleep myself included okay so we're just going to talk about what what these particular formulas do and um how they apply most of these not all of them most of these uh because I like to use Excel and a lot of these are Excel functions that you can use in an Excel spreadsheet so um you know you can use them there but the the ROI return on investment is just a a total net profit compared to your cost um tends to be backward looking um and it includes asset appreciation well asset appreciation doesn't really apply to a note because your note doesn't really appreciate now if you're talking about real estate doing you know looking at arv values and all that kind of stuff you know that's another Dynamic but if you're just looking at the Noe it you know it doesn't appreciate so um that doesn't really apply here um and there really isn't an Excel formula for Roi um let me make sure people understand it you can use your calculator the fancy calculator everyone uses but you can also use spreadsheets to calculate the same returns so that's what saying is that there's people there push the calculator right yeah there's the calculator you can use that baby you can the calculator but what Joe's talking about is you can also use which I use spreadsheet formulas to equate the same numbers so that you could put this alongside of any asset any tape and get the returns right on the spreadsheet in a quick formula sorry Joe go ahead yeah so Dave who has a calculator that can do that many people many people yes so many of the people who are been in the space for a while or Old-Timers used the calculator right and we have one and it's great the fly so yes we have them yeah yeah no you have a good one I know I'm not talking about the handheld calculator I'm talking about the Exel spreadsheet that you not many people use a spreadsheet but you and I both do and it's easy for us to calculate deals yeah oh yeah yeah that's that's you know I only use the calculator if I don't have my computer handy otherwise it's always EX so you know for me anyway irr is a turn internal rate of return and that it's for a series of cash flows which relates a lot to our notes because that's what we're looking at we're looking at a series of cash flows um to do IR they have to be equal in other words you're getting the same app payment each time and it has to be at the same interval so you have to at least receive one every month or every quarter or every year to to be able to use this particular function now the xir r that's the internal rate of return it's for schedule of cash flows that aren't necessarily periodic now we tend to have more periodic ones I mean if you just strictly look at the note but if you think that you're going to get um multiple payments at a certain period of time or you think you're going to get an early payoff or whatever that's when this comes in handy my only problem with it is that's hard to forecast when you're forward looking I mean you don't you don't really know you're my expectation on most of my notes is that you know they're a monthly note but you can use that and you can also use it um in a backward looking because of these are the kinds of payments that I ended up getting um rate function rate function is just a the interest rate per period Alan that you've received on periodic equal basis um probably one of the most used ones that I use is a rate function um all of these four they're going to they're going to give you a percentage so you're going to end up with a percent that says okay this is the percent return based on these particular criteria that you put into that equation you can all use also use the npv or it's the Net Present Value um and that will tell you what all those cash flows are worth today and a whole lot of this is based on um basically the the present value of money you know it kind of goes back to the principle of a dollar today is worth more than a dollar tomorrow and I think we know if we've looked at the news the dollar today is 7% less than a dollar was last year yeah because of inflation and so that's what this is trying to tell you is what the value of it is today based on whatever you know you it have we we're seeing on the news at 7% but you can put any figure in if you want your discount rate and determine what the current present value is and the Net Present Value function that's for just to schedule of cash flows it's not necessarily periodic you know maybe you get one today and one in two months and you know however um we in my corporate function we would use this a lot because we were looking at projects and projects have you know a lot of varying cash flows over time depending on your expenses and your revenue and all that kind of stuff whereas notes tend to be you know more consistent now you can have some notes that you know have some nuances and and that's where you can play with those also uh but those in at least my experience tend to be more of the exception than the rule so when do I use them like like I said Roi I kind of use I I always after I sell a note I like to see how did I end up doing you know did did I get this one right or did I miss something and so I do kind of a post appraisal if you will and an Roi is is one way to do it um after I sold after I sell a note I can see well how did it perform you know and I take into consideration you know my purchase expense my due diligence expenses my servicing fees if I had Force placed Insurance my legal expenses the payments I received sales expenses and all that to see you know what kind of return did I end up and what what I like to do is because when I buy a note and I think most of you guys do you you calculate what you think your return's going to be on it when you buy it and then when I sell it I go back and I calculate to see what did I really get you know and did I get more or less you know what was it was it about On Target uh or were there some surprises and you know there's always surprises and you know there are some ones that are kind of standard but there's always some surprises that pops up so I do that kind of for you know a backward looking purpose the irr and rate they're the ones I most often use when I'm preparing to u a bid and so um notes like I said they're based on periodic consistent payments and you know if they're all the same you can use the rate function um but that doesn't mean that I don't take into consideration servicing fees I don't you know I do take that into consideration I do take into consideration things like my due diligence expenses and I also take into consideration the purchasing costs the boarding costs all those kinds of things um when I go through that calculation yeah and uh so Joe just just I don't typically interrupt but one of the questions was what do you mean by rate what is rate ah rate rate basically is going to give you a percentage it's it's your rate of return if you will angle rate return it's your return you figure out or a simple one right over five years your annual return an annual return it's based on an annual basis right some people you know it's interesting some people call it yield some people but if you if you go and you look at the EXL formula there's an Excel formula for yield the yield formula on Excel basically is structured to determine the yield on a bond and a bond is a little different than what you get because a bond you end up it's it's got a pay off at the end and the variable in the price what you paid for it so the the uh components for it are a little different than for a note so what I find is that the rate formula in Excel is a better application for calculating this so when I say rate it a lot of times people use that term interchangeably with yield and what that means is it's your rate of it's your annual rate of return yeah you can also use the the I on the calculator right for those using the calculator the I where these correspond in the time value calculations it respond to the there's actually letters on the calculation that there's I there's n there's NPR constant like that so you know what you're using rate is a term we use because it's an equation in our spreadsheets right where on the calculator it's an i function so it's a return annually so yes so you can use the word yield but what we're looking at the fact that the angle return could be a yield could be an IR which are completely different calculations we're going to get into that in a few minutes right and then like I said xir that's just you know like the IR it's just with if you have inconsistent payments so um what I did is put together a little little sheet to say okay what's what's the difference between these things uh and what are the parameters that you have to have in order to be able to calculate that so yield or rate if you want to calculate that you have to have equal payments at an equal interval and then that will it give you a percentage return if you want to do IR R you look it doesn't have to be equal payments so the payments can be whatever it when he means regular meaning the same time same month same amount right it it could be different amounts that means it's regular or different Clockwork yield is the same the first of every month right right that's with with yield on the yield one yeah you've got the first of every month and you got the same dollar amount ching ch- ching ch- ching now if you have if you have a situation where um I'm trying to think where you where you don't have equal payments um I don't know there probably are some um some loans that might have variable interest rates and if you know what they're if you could predict them and you know okay the rate the the the rate or the payment is going to go up at a certain period of time you know but it it it's going to be every month the payments are going to be made then you can use that to calculate what your return is um or if payments are every other month and the borrower is not consistent you can use the IR yeah exactly yeah the problem I have is I can I can never forast that yeah correct so internally we use IR for another way is that payoffs right yield goes to a maturity date where we're using IR to say I'm going to sell a loan in three years or if there's a payoff in five years it's not going to go to maturity date so we use IR to say I'm not going to hold this for 20 years where you calculates to maturity Bond right to that to 20 years down line says what's your return ever single year till the maturity date yeah right right yeah because I I use something similar like that because I you know one of my exit strategies is if you you take a a non-performer you get it reperform and you sell it um that's a potential exit strategy for my non-performers and uh I also then calculate well what price can I sell that at based on what I think the buyer is going to want as a yield and based on that I can calculate the sales price yeah and then you can put that in to determine what your rate of return is going to be so you're right you would have consistent payments until the time you sold the note well it's non-performing you won't necessarily consistent payments but you hope you would after a period of time consistent payments and then you'd have the lump on payment when you sold the note and then you could calculate your return right um and so it was just kind of a I just kind of put it together I hadn't really looked at it from this perspective is I mean but it kind of makes sense where what you can use in a particular situation to give you your return um either in dollars or the the percentage amount right you know when I first started out I was so I was exposed to some people that were suggesting that you ought to just bid as a percent of upb just you know make that your basis for your bid and um always thought why why that doesn't sound it sounds strange but I was a I was a newbie and you know thought well maybe they had some other things some experience or you know there's always shortcuts that you know people have and figured this was kind of a nice shortcut so um I thought it might might be interesting to kind of look at some examples of of a comparison of if I bid based on upb percentage or if I bid based on what I want my yield to be or my return okay so um I thought I'd put you two guys to a test all right so here's here's what we're gonna do here's the the basic assumptions for the for a bid okay all the notes that are going to be presented they're performing okay so you can put that category there all the up B upb bids are going to be bid 90% so I think does that I think that sounds kind of like what a lot of people who are bidding upb bid for performers yeah and as as a yield bidder somebody who wants a return GNA be somebody who wants a 12% return might be a little high you know I think some people have lowered it a little bit but not high for for this exercise we're we're going to use 12% so all right here's what's going to do what we're going to do we're going to have three notes that are come up bid upb bid is going to be 90% And the return is 12 now here's the first one the upb is 50,000 the interest ratees 99.5% it's got 163 payments left and the payment is 54656 all right there's okay you're cheating I'm I'm a calculator guy so we already know the upb bid on this one 90% of 45 five 50,000 is gonna be 45,000 right so boom you didn't need the calculator for that one nope that's an easy so the question is the yield bid the 12% yield is that bid going to be higher or lower than 45,000 what's see in the audience I know that probably a little bit delayed but so the question is will the yield go up or will the yield the return will they go up or will go down right because the the return you're you're gonna bid on a 12% return yeah so is your 12% return going to be a higher or a lower bid than 45,000 if you want 12% what I get is if you want 12% you're gonna have to bid lower than 45 okay you say lower you you agree Dave you're going to have to bid lower okay let's find out yes you are you're going to have to bid lower if you want a 12% return so the good news well okay so now let's look at what what is the yield on the upb bid when you do the calculation If you bid 45,000 I'm I'm not you can tell do you know the answer Nathan you want to guess of course I I also included cost for the servicing and all that so that might but yeah if I just put in just a straight 12% yield without any additional right additional expenses in there uh bid's going to be 43860 right 22 cents but that's without any additional expenses there yeah because this bid that I did it includes about n yeah it's a net bid after $30 servicing after close to $500 and expenses when you consider you know the the cost to acquire it you consider your due diligence you consider reg you know recording fees all that kind of stuff but anyway so the yield that that upb guy is gonna get is going to be 10% make sure you guys all know this this is based on zero servicing fees right this is a gross yield this FYI no no no no this is a net this is this is net this is a net yield this is this is after servicing after your acquisition costs all that kind of stuff so um so they're apples and apples with the 12% return and the upb return of 10 right so this bad news in this situation is I lost the bid because I wanted a 12% return I only bid 4,568 the upb bidder bid 45,000 they got the bid but they're going to get a 10% yield they're not going to get the 12 which I was hoping to get okay so I lost that one let's go to the next one sorry we knew the return yield was 12 because that's what we based it on yeah right all right loan two it's got the same upb as the first one okay 50 Grand interest rates 3% it's got 104 payments and the payment is still the same 54656 now we know that the upb bid is going to be the same still 90% of 50,000 is 45,000 so is my bid to get my 12% going to be higher or lower than 45,000 it's a lot lower we'll give it a little pause for uh Facebook catch up so again Joe just so people were kind of lost explain it again what are we trying to figure out what are we solving for for those people right we're so we're we're comparing for those people that just bid on a upb you know as a percentage of upb because some people do that I mean I was originally taught to do that yeah we all were as opposed to how you would bid if you base it on a a given return your what Your required return is okay and then this example I said okay well we'll look at a bid based on a 90% upb bid as opposed to a return that I want 12 I want to get a 12% return so I'm looking to see how this upb bid is going to compare to my bid that I want to get a 12% return on and will I win or lose the bid and if I win or lose how does my yield which is I'm mine's based on 12% how is that going to compare with the yield that the person got when they won the bid like in the first case when they won the bid for their 90% upb right and in that first loan like I said you can see that to get my return I had to bid less they bid 45 based on the 90% upb I only bid 40 568 because that's a 12% yield but at the end of the day when you compare well what yield did they get compared to what I wanted to get they would get a 10 and of course because more than likely they bid strictly on percentage upb they probably didn't calculate the return no they didn't they didn't no they just did it and so yeah my objective was to see well what return would they get what do you really get you know and they're gonna be that was loan number one was um so loan number two is the same scenario only what you're seeing is you're seeing a lot lower interest rate you're going from a 9 five interest rate on the note to a 3% now I still want to get a 12 return on my Note and they're still gonna bid 90% so what do you they 45,000 what do we have to bid so they're biding 45,000 and we have to bid here based on our 12% return right I'll do a little you know circle thing right on that 12% what do we have to bid to to win to get our return right yeah what do you have to what's bid to get your return so you think it's higher or lower huh you say it's lower right yeah much lower much lower much that's what you have to be that's what to get that return that's what you bid yeah you bid 32461 and the reason why that's so much lower is because the differential between the interest rate and your return yeah you know this this note only has a 3% interest rate that's nothing you know Rel it's something but it's not much so to in order to make up that differential and get my 12% return I have to bid a lot lower y to get that return so understand that you can look at two loans identical numbers and with that industry changing we talked about this in our weekly Mastermind group that changes your bid dramatically no matter what the upb stay the same right right understand that the interest rate you can't ignore it you have to look at it that's why in all these examples I kept the upb the same and I kept the payment the same right it's going to be the interest and the number of payments are the ones that are going to going to wobble so you know what what does what kind of return does that upb bidder get so we're going to say what did the return the person who bid 45 we're solving for the I or the anger return right what are they getting they're gonna get a 3.7% return and what what would we get if we won the bid well we get 12% because that was what the whole thing was based upon so so far I'm not doing very good bidding I'm not getting any of the bids but by the same token you know I'm not ending up with a 3.7% return either right yeah so so I think you're right go to the third case this one yeah let's do it so that the guy that's getting that 3.7 unfortunately they're going to find out that they're they're very frustrated with notes as a as a investment they going well this thing is stupid and it doesn't even make any sense I'm not making any money you're right exactly exactly exactly I think I could help your problem I'll be an ID just like you and I'll buy it from you right there you go so here's the third one this one's a little trickier the upb is just a little bit larger it's 51,000 uhhuh 211 the interest rate's 12.5% there's only 12 payments left because this is a fiveyear balloon it was advertised for 360 30-year amortization with a balloon at the end of five years of 50,100 so basically you are going to get 12 payments at of the 546 and then after that you're going to get the balloon payment so now we know the upb bid is again 90% of the 512 so that's the 45 341 now what are you gonna bid higher or lower what there for delay you're bidding higher or lower than the upb bidder we'll give it I yeah more than the 45,000 341 or less than the 45 341 right we're solving we're we're putting our interest rate in we're putting in the payment we're putting in the balloon right we're solving for what is the PV right or rate equation or the PV the the formula for Pb so we're gonna pay higher than the upb than the upb bid all right I hear one Higher you Nathan higher y tada yeah you definitely are going to bid higher time value of money you're going to be getting that balloon payment early you've got a 12 and a half percent so the interest on the Note already is higher than what the yield you're looking for yeah you know so you could bid 49781 and you're going to win the bid compared to the upb person and you're still going to get your 12% the upb bid if they got it they'd have like a 20% return which is nice I mean you you'd like to get that one but all day if you're been against me you're not going to you [Laughter] know and of course our our return is 12% so that's just kind of a examples of different types of notes how the interest rate definitely has an impact on what your return is going to be and how the present value of money because you're getting a balloon much earlier than waiting next 20 years to collect these payments are going to help your return uh that all affects what you want to look at and and how you calculate it using these different uh parameters so yeah congratulations guys you pass with I have to give you each one of you guys a star for the day I like it little sticker I like it so um what do we learn from this situation right we're learning the fact that if you're bidding based on b or upb and ignoring all the other numbers your return is dramatically different that's if you use math and why is essential to use math because if you don't you can end up with a 3.7% return right because you didn't calculate it so you may not understand it but you must understand it if you want to be successful yeah so let's keep that on the screen for a few minutes um let's let's talk about a little bit more about real quick about the balloon right can you explain Joe what is a balloon for why is it there and how does it change the number like what does it do right not mathematically but why is it changing if that was a zero it would be totally different situation because a different loan right right right well you know a lot of times the the practical application is a lot of times what I've seen is you can see some balloon notes or situations where people who maybe they don't have good credit when they're getting the loan so they end up getting a loan that has a higher interest rate that you know lender will lend them a higher interest rate and they'll agree to a balloon because um what they want to do is they want to improve their credit rating which will then allow them to get you know more of a commercial type loan uh at a lower rate so they're going to refinance it so they'll pay off pay it off pay off the balloon and refinance at a lower interest rate and um I've seen that you know happen with lot lots of different situations um there's also the situation where they get to the balloon and say no we can't do it can you extend it and so then you have you know recalculate okay we'll extend it and see what the what the payoff is and that's another exit strategy you need to really consider I think in one of these because uh you need to see what your return would be if you did extend it but the benefit of the balloon that's theoretically that means in 12 payments they're supposed to pay me $50,100 um so that means in 12 months I'm going to get that ,12 plus I'm going to get that 54656 every month for that 12 months mons well the fact that I'm getting that so early is very beneficial and so that's the reason why I can bid more because of the present value of it is greater than if I had to wait for you know 280 more payments um and again it's it's a time value of money the the further out you go the less that money is is worth this basically what it is and the fact that you're getting it earlier means means it's more valuable great money today is worth more than money tomorrow abolutely absolutely that's a really good lesson for everyone to learn you cannot just look at a percentage of upb it's that's I think you know if you go back 10 years ago when everything was underwater right even then it didn't make sense but but I think that that what we heard a lot back when up back then was bid on a percentage of upb or or value whichever is lower y so it made a little bit more sense back then but only kind of and I think it made sense because we couldn't screw up I think that's what it comes down that's really what it is you couldn't when you're buying it so cheap that yeah you're wrong but you know who cares they're all getting returns right that's true yeah that's that's true that's a great that's a great point you know today I mean I I I jumped in after the 2008 and all that kind of stuff so you know I don't have quite that experience that that you guys do but um yeah now you need to you need to figure it out the good thing now though is and and I heard this I think we're losing this audio audio coming back come on we can do it in there when you're when you're buying notes we lost you for a second or two man yep so so I wanted to just show people right we did I did something similar but I wanted maybe you can kind of see let me see if I can find real quick where we're on the uh fly here um let's see if I can so Cody asked a question there about um are we finding that sellers are more looking at a percentage of upb or are they actually looking at yield calculation I'm not sure about you guys my my experience is um they're more looking at yield calculation I don't know about you guys yeah yield calculation well I'm kind of seeing a mix I'm you know I'm seeing I'm seeing some sellers wanting to have um particularly on performing you know it's like oh we want 100% of upb yeah yeah Dave and I looked at a couple couple weeks ago where they wanted a premium they wanted 101% or 102% and it we ran the numbers and they just really didn't make sense yeah so let me share I'm GNA share with you guys so so for those who may be a little confused a little bit I'm going to show you a side by side comparison of what and I'm sure I've shared this before with you guys but me [Music] um hopefully everyone can see that okay so we have a situation where we have a coupon rate of three right ubb if we bid 60% right look at the difference in returns right because of the interest rate on the coupon the original coupon we bought it at 30 the change is dramatic we changeed payments it changes dramatic right so the ubb say the same you change this number or this number the change is dramatically what it is so we gotta be careful being simple with things so yeah so let's let's open for some questions here um me uh bring this and I like simple I'm a big Advocate is simple however you do need to know what you're doing um I agree with simple too yeah but you know even I've had people ask me before well do you need a f financial calculator but if you're not using a spreadsheet then yes you know you do need to know how it works and and how to plug the numbers in and solve for x uh and if you don't you better learn it because you'll you'll get yourself into a real world of trouble if you're just using a regular calculator to try to figure stuff out so one of the things Cody I think we talked before about this is that sometimes sellers are not selling based on yield or Roi big funds do right but some people Hey Joe I have a I'm gonna buy an asset from you or whatever I'm gonna bid this and you're not sisc investor you may look at your B your bases and say hey I'm in I'm here I'm doing greatest loan I only have $4,000 to break even and you want to buy for 20 done deal I get out and I'm moving on to a different deal right I may be in that position where that was what we did at one point is we went based off our basis and if we could sell it if we're completely in the black here and we're in Infinity return and you want to buy it for 10 grand it just adds our thing right so some sellers do that I don't agree with it but it definitely can be do it right so be cons sure when you bid on things and you can put this formula inside your spreadsheets when you get them and run it down the ENT ire list and then that could be a filter right I tell my Mastermind guys every time you got to tape some of the best filters is just to take away the low interest coupon rate loans take them out because you're probably not going to turn a 2% into a 10 right you're not going to yeah um so another thing that that I noticed too besides the low interest rate is a lot of times um loans that have a small monthly payment when you start deducting servicing fees from a small monthly payment you know that becomes a significant percentage reduction of what you're going to receive you know 20 bucks as a percent of a $100 monthly payment as opposed to a $500 you know that that's a significant impact on your return absolutely that's another way to filter right we all talk about States on stuff you may filter by interest rates above six and any payment that's above 200 and eliminate anything else because if you're paying 20 bucks a month or if it's not performing you're paying 95 whatever you're paying it's crazy so yes you may be able to filter during this process which and sometimes I do if I see two if I get a tape in and it's all 2% I'm not gonna bother no me nether no no it's not the math won't work right and that's one way of doing it you end unless you have a seller that you know really has to sell yeah yeah otherwise you just take him off because they're like what is this what is this garbage bid well yeah so I don't know if you know the answer Cindy asked a good question and this is hard because this F fluctuates too much can we accurately account for inflation I don't know of a way of doing it that's over my head no I mean I I I I would I would tell her that if you could let's talk because we can make a lot of money oh I like that so uh yeah someone asked on the group about how what the formula in Excel is for rate for those who be listening to the podcast later equal sign rate open parentheses and it actually tells you what to put in additional spots exactly yes it's it's nice and simple and I'm GNA tell you guys I used to use a form called Data diff I'm going to encourage you guys to use the MP formula to calculate how many payments are in the loan right right the number of periods inside that situation so it gives you an accurate because if the upb is wrong it's going to give you an error and you may go back to your seller and say listen the numbers aren't making sense oh it's a balloon oh okay right so all these formulas have it yes you can use a calculator or you can use a spreadsheet I'm a spreadsheet crazy person because I can process a 100 loans in a minute using a formula where a calculator takes a little bit longer yeah and I'm only looking at you know if I'm looking at 20 loans I don't mind doing that by by hand I could get all fancy and use your spreadsheet but per 20 loans it's not a big deal I don't mind going through plugging in the numbers and and just seeing what they all work out to individually so this is a good question um s was if you use a formula inside Exel right and I'll put it into the chat so you guys can see it too uh will the future value always equals zero so I want to make sure we're clear Future's value is a balloon value right but you may be talking about something a little bit different so a balloon value doesn't always equal zero it depends on if there's a balloon or not however there's another function it right after the FV the the future value zero or one meaning is it the beginning or the end of the loan so is the balloon the beginning or end so most likely I don't know if any loan I've ever bought were the balloons at the beginning right use that balloons at the end so hope that that helps bons are not super common um especially if you get anything established after Dodd Frank there's they're not common at all so don't get too hung up on it it's important to know how they work and and when to use those calculations but yeah you don't see them a ton if you do a balloon make sure you record any mods you do with them because that right it can change your maturity date and stuff so yeah but yes good question so yes you can do a rate form in Excel Google Sheets is sure you know I use all the time same idea and I run this calculation I have a spreadsheet um for those who bought the beginner series I actually have a yield calculator that I can share with you guys um he can run through assets through that way so awesome if you have any more questions feel free to let us know Joe when you came into space and Roi was what you did in percentage of upb did you have an aho moment where like holy crap I'm not getting the return I thought was there a story that came along with like oh um no I mean like I said based on my career experience not I didn't really have that um I guess the thing that when when I first got into JV the thing that bothered me more than anything was because of the the lack of action on a dealing with it you know the clock is ticking and the longer and longer the things go on the more and more your return is reducing yeah so um what you know what I I knew but kind of reinforced is that you need to take action you just can't sit there and hope something's going to fix it because the longer it goes on with it not being paid no action being taken you know the the worse your return is going to be yeah yeah yeah the shame so guys awesome information from Joe well laid out too I I do a terrible job laying myself out but it was a very well organized situation to show you the comparison and the effects of it right in a different ex different ways of bid Roi versus IR now those who are curious about the xir versus IR it's a very similar function again still in Excel but it really kind of tells you you know xir is it Compares payment to date where IR is a simple payment string right and it just takes a payment string where xir takes the dates and uses the formula to figure out if it's been skipping months and all that good stuff so awesome stuff Joe yeah thank you I think a lot of sellers understand this and a lot of new investors don't and unfortunately for the most part by and large I don't think sellers are trying to take advantage but at the same time if they're getting that bid that's at 10% of upb and it's you know five or10 thousand more than your bid they're probably going to go with that higher bid and you know they the seller honestly they have to assume that the buyer coming in at that bid is doing it for a reason so you know not that they're out to try to screw anybody over but if they get offered a higher bid they're probably going to take it yeah absolutely and I think you know some courses don't teach it some courses do they don't emphasize it enough um it's not hard to do and you don't need to understand the exact math behind it just understand it it's your return and if you look at bank statements bank account if you look at your mortgage State you can calculate your mortgage as well your personal mortgage with this stuff oh yeah absolutely yeah yeah yeah so then Joe what do you see coming down the pipe here you you've been around long enough that you've you can see things as they are what's your crystal ball prediction here you know I'll be honest my crystal ball to be politically correct is lacking uh um I actually thought that we were going to see a turn in the market last year um and I think that you know the um continuance of you know the moratorium that we had on foreclosures I think that you know the the payments that went out um all those kinds of things uh protracted it but yeah I was expecting us to be honest to see a lot of of non-performers started to hit the market basically in the last quarter of last year it didn't happen um and now when I listen to people which is most anybody that's smarter than me uh talk about the forecasting and stuff the they're seeing and I tend to agree unless we have some more economic easing or whatever going on that there there is this pool that's sitting out there that's just kind of waiting to kind of filter its way down uh and it you know it's before it gets to little guys like me it's got to go through the hedge funds and you know kind of filter down Etc U but I I think there's some coming it's got to be you know yeah um I think the stock market is going to correct too but you know yeah don't don't don't bet your money on that you know and and and I mean we had the question about inflation earlier is inflation the trigger I mean who knows right but maybe maybe hopefully it doesn't get too crazy um but there have been talks about this thing started going up like the early 80s right and that's I much younger right um that scared to here and for those maybe even younger than I am we're not talking like eight nine 10 we're talking double digit inflation yeah right so yeah so we shall see yeah yeah it's well thank you very much Joe disconnect from the Facebook live and hopefully uh we've given some tools resources to those people who who are newer or just didn't know about this so Joe again thank you for presenting coming on and chat us chatting with us on this Friday afternoon thanks thanks guys it was a pleasure spending time with you you bet thank you all right y'all take care you too welcome note investors I'm Dave putz from jkp Holdings and this week Nathan Turner and I we're joined by Candace horn she's a newer note investor who's attended a few note conferences but shares her journey from beginning a note investor to only a few assets we discussed some of the issues and struggles she's had some advice she would give how to get over some of the hurdles that she's gone through and some great pointers of what to do when you first begin we also share upcoming five-week education class Nathan Turner and I will host starting October 25th this class will be five weeks of intense learning with homework tons of resources so be sure to check out our website to learn [Music] more hey everyone Dave puts here from jkp Holdings alongside me as always Mr Nathan Turner what's happening my man it's morning I keep I I I'm still getting used to that that but yes it's morning where I am it's been good it's been good we've had conferences starting up right we had a lot of fun stuff happening I'm really excited about where where things are going um things are kind of starting to open up too like notes and so that we're seeing more portfolio tapes coming out assets are coming more consistent um I just read on one of the articles I get in my feeds about like August was increased that was pre pandemic so I'm kind of curious about that whole thing yeah um I am very interested to see what will trickle down um in the future so yeah really interesting I actually just got home last night from the imn conference it's kind of the Fall conference season yeah uh and it was fascinating it was really interesting to hear all the different panels and I was surprised that not everybody thinks we're going to see a huge increase in notes there were some up there that were that were saying I [Music] probably oh we losing Nathan for a minute so we'll see what happens here cool we like for half a second we lost you but yeah we I was at noteworthy and the conversation for us was was there's just shift going on somewhere with anything right now something going on we don't know what to look like um but something's happening right we're seeing interest rates going up obviously we're seeing you know money market CDs increasing which is a curiosity of what's Happening so I think that we're expecting something to happen the problem is we don't know what that something is right well and what the Fallout will be very true and then we'll just kind of have to wait and see yeah but I mean we're we're overdue for Market correction that should have happened a couple years ago so huge and we don't know what it look like it may be residential maybe commercial it may be whatever right right so it's interesting to say that we're we're we're sharing with everyone else you know I was noteworthy last week and um for those who are affected by the hurricane are we're hope that you guys all safe if you're not hopefully if we can help out in any way let us know um it's it's pretty devastating what we're seeing uh from afar um so if you if you need help if we can do anything let us know um please reach out um being no worthy was really exciting to be around the group we had about 80 people in attendance which was really actually good we're G from a lot of attend um about how awesome was for the intimacy um being a talk to people so that was really cool um and whatnot good one thing I want to bring up too before we get to our special guest today is that Nathan and I are running a a really awesome five week CL that's going to start the October 25th um we're gonna be talking about really deep diving stuff so if you are a newer note investor who's got some basic knowledge who's looking for the in between I would ideally say reach out look to us you can bring a partner on for half off whatnot but this is ideally for those people who are regularly started notes fing one or two notes three notes or took a bigger in class and looking for the next step yeah yeah if you you've got some kind of basic knowledge you've read some books did some videos whatever it might be and then just looking to to just dive in and get the confidence you need to actually get into this it's a fantastic business there's lots of room for a lot more players uh so we're we're excited to be able to share what we've learned over the last several years yeah and just see what we can do to help so in the class will be five weeks they're GNA be intense right there's GNA be homework assignments we're going to go through collateral files you find a problem with it that's gonna be a homework assignment so you're really GNA have live action doing stuff like this we're also going to provide resources that you've never seen before that we don't share publicly ever um and we'll explain why in the course but there things like statute limitations debt license stuff big calculator stuff so it's really good course um and whatnot so that's gonna be Tuesday October 25th you can sign up on the website um if you have questions about that reach out to one of us and ask about it yeah right yeah this class came out of a conversation we had in Las Vegas right so we were sitting Las Vegas talking and we approached by a few colleagues who are in the space and whatnot and the question was we've gone through Basics we have the knowledge of that stuff we just didn't know where to step to right Nathan and we just kind of collaborate and says what could we provide yeah so what we found was that the basic knowledge is easy understandable but then it was the how do I do do diligence correctly systematically how do I filter tapes down easier faster because I can know what I'm looking for is don't know how to do it faster or systemized um and we were going to that's where this came from right Nathan yeah yeah and we're just again it's there's a lot of really great courses out there like I've got one Dave's got one um mostly it's geared towards kind of basic knowledge and that's great but and you've got to have that basic knowledge I was talking with a friend at the imn conference where we're saying notes is not like real estate investing where real estate investing you be like okay let's go out and buy a house and rent it out and and pretty much anybody can do that for notes you've got to have more information you've got to have more training and so that's that's what we're offering here is to give you that training because it's it's not like real estate you can't just go off willy-nilly you've got to know what you're doing to get and the resarch were providing it be immense so you're going to benefit from that um the homework assignment is geared for those people who want to learn on the job kind of thing and say we're going to a deal you're going to have to break it down and figure out the problem and give us a homework assignment back before class yeah so it's really really really intense so it's really cool um but we wanted to bring on our special guest who introduced us to this whole world of bringing on this idea of bring new investors who got basic knowledge into the space but then bring them on and say let's bring them to the next level so cace is joining us today she's not a new investor right she's done a few deals kis welcome thank you for joining us today hi guys thanks so much for inviting me I love your podcast and I've listened to a ton of episodes since I met you and have learned so much good good so how did you get started with notes how did you get involved how did you hear about this world of notes were you landlording were you what were you doing yeah so um you guys know me we're friends but for everybody who doesn't know me I'm a solo parent and um I a few years ago I was looking ahead to this time in my life my youngest son just went to college and so I knew I would be ending up with a lot of free time and if you have kids you know there is no such thing as free time so like what am I gonna do with my life one second I'm sorry they're saying they can't hear us so let me figure out what's going on I apiz guys let me see what's happening one second let's I apologize everyone hopefully uh there's more sound Cindy and all that stuff I was not looking at the chat comments I apolog guys hopefully you guys can hear us now and it's better if you can let us know hopefully as always we record it though so yes always go back and check it out and figure out what's going on still no sound let's see give me one second [Music] guys check one two let's see that should be one two there we go that looks better all right I'm not g to start from the top we have this recorded right so I apologize everyone so hopefully you hear that Stacy Cindy Theodor Marco um I I appreciate you guys uh chiming in there and letting us know that we're having a problem so um hopefully that fixed the problem hopefully that uh corrected the issue I'll just wait for quick responses on that yay thank you Marco for informing us so good um go back real quick we're summ real quick we started some beginner courses we know people start beginner courses but a lot of people people want it in between um and what we create me and Nathan created was a five-week course on how to go from the beginner stuff to more advanced stuff collateral file homework you're going to be you're going to be homework rolling down tapes bid calculations stuff like that we're going to give you homework assignments so this five-week course will start on the 25th of October Tuesday night 8 o'clock you can learn more at our website um you can take a look at it uh we'll Post in the comments below and that's five we intense course where uh you could bring a partner for half off so come and join us back back to Candace Candace is one of the people who came up this idea for us to start off with for those people who has done a deal or two or has done beginner course but wants that next level right so um with that being said Candace welcome back to the program right I apolog I haven't restarted uh it just it was a button unclick so K how did you get involved with the not and all that good stuff yeah um everyone's GNA eventually hear what I first said but you know I'm really big on um living your life by Design and so a few a few years ago I was finishing up graduate school I went back to school after my kids started school I'm a solo parent and as I said like if you have if you have kids there's no such thing as free time and I knew that in a few years um I would be having a lot of free time my youngest son just went to college a few weeks ago and uh I I like to look a few years down the road so like what am I going to do with myself um I had I had a lot of ideas you know am I going to go back to school and get my PhD am I going to get an MBA like what am I going to do one of the things I was interested in was commercial real estate investing and I wanted to learn more about that um I you know I'm in my mid 40s and as much as I love school I knew I would not want to be doing homework and research and writing a thesis I I want to take the Summers off I want to work in my garden I want to travel and working for someone else oring in school doesn't allow for that so like well let's learn about commercial real estate investing um I have some I I know some people in um office and hospitality and I was in a room about maybe five years ago where I heard about a development deal like well that sounds interesting and I said you know is there a way can get in on this and they're like oh you know funding's closed and um and the next year when I was in the room like I had done some a little more research because uh in that conversation I heard a term that was totally unfamiliar to me and that was accredited investor and I went home and was like I knew that I'm like next time I see these people I'm going to be prepared with some better questions well I learned that I was an accredited investor w right I'm like okay well this is a new like I don't know what that means but um apparently there will be some options for me and so I went back the next year and had some better questions and said hey you know is there anything else like this happening that I can get in on like surpris like I'm an accredited investor and you know can you point me in a direction that I can learn learn um I'd been in school so I didn't have two years of full-time um employment I wasn't going to qualify for a mortgage to buy a rental property for example and I didn't know the term leverage as it applied to real estate but I knew that's what I wanted to do with my money and so like I'm not trying to put a couple hundred, into a condo and you know get $600 a month like how can I make it grow well I you know I learned two things that day um I didn't really get the guidance I was looking for from that person which is okay uh they've become one of my biggest supporters like they didn't really know what my vision was I didn't really know what my vision was um but it it led me to look for places where I could learn and grow in this space so I looked for a women's real estate investing group and I found one that was having a three-day seminar like a week later which was awesome timing and um I went to that seminar and learned about all the different asset classes and ways to invest I learned about syndications you know buying land and this really weird and confusing thing called notes that was about four um three or four years ago um if you've never heard of notes like nobody's heard of notes it's very it's very everybody has a mortgage nobody has heard of notes so it's very strange um I dug into a couple of areas of Real Estate St and that was one that really aligned with what I want we have freedom and flexibility and options and how to Pivot and that's what I loved about notes so that's where my um that's when I started investing in my own education started um and then you know two or three years later here we are and I have a few assets under management and I'm not brand new thank goodness but I am newer and learning learning learning every day and and there's a lot to learn there's and and it's we've talked about this before Dave where it's hard to if you're teaching notes it's hard to say here are all the possible things that could happen because they're they're Limitless everybody's got a story everybody's got their own situation and it in a lot of cases it's really a case-by casee situation and then like okay so what do you do here and it's a different situation because it's a different person it's a different asset class it's a different state it's a different County and you just you kind of a lot of it is just kind of on the job training and you just kind of figured out as go but that's one of the things I love about it is that it's it's different and it's exciting and you never know exactly what way it's going to go which can be fun it can be frustrating but it can be fun so cace what about note investing was so attractive to you that you would switch away from your goal which was commercial real estate what was it about notes was it one thing two things or was it a person like someone came around like really kind of hel hel held you and said this is the way to go uh a combination um I my education has come through our front page yeah and she does an amazing job educating and I gained a really solid foundation and kind of went through all of her levels of program um so that was the start but um and you know it's like this is a relationship business at least to me and so it's like who do you want to align yourself with and who do you feel good about learning from um but from the notes aspect I really like that there are all the ways to Pivot that makes me feel safe if plan a doesn't work out we can have a plan B CD and that really works for me I like that flexibility and and those options so that's what I love about notes and the ability to scale it's it's very much a thinking game yeah you're like okay this didn't go the way I thought it was going to go and then okay so what else could we do and you just and you get creative and and and it's very collaborative you can talk to me or Dave or or anybody you can talk to just about anyone and it's a very open community and we like to share ideas and War Stories and all that kind of stuff yeah that has for sure been one of the greatest things um if anyone newer is listening um gosh like go to conferences I this year was my first year going to conferences I met n DME and met Dave a couple months later in Las Vegas yeah um get in the room and and learn from people because everyone is so nice and helpful and will totally like bring you along and I'm glad to be you know joining that group of people who can be helpful to whoever's a few steps behind so there's a lot of people who have said to me I'm very intimidated by conferences right I don't want to go there I don't know much I'm you know I'm going to be around a bunch of people who talk probably way above level that have millions of billions of dollars that I just don't what do you say to those people who say conference is a big deal is it a big deal oh my gosh um I've only told a couple of people this but now I guess everybody can know I was terrified terrified to go to my first conference I mean I knew Paige and I knew the people that I'd gone through her education with and have some friends nobody I knew was going to be there and and I almost didn't go and I had to I just said to myself literally like this if you're going to do this you have to do this and are you doing this or you're not doing this in your life and I went and my strategy was find someone who looks nice and sit next to them um it you know a lot of what I heard at the first conference and even you know every time there are always going to be smarter people in the room than you there always going to be people who are talking about things you don't know that's the point yeah yeah that's how you learn so most people are really friendly stand around in a group say hi introduce yourself and um take notes because the list of what you want to learn about is just going to grow that's okay that's to me that's kind of the whole purpose and it's interesting too when you get into a conversation um you know we kind of talked about this at the beginning you can get in conversation and and you're going to get different points of view and different opinions and that's good and you want to have as many different opinions and and points of view as you can so that you can say okay so and so that you can start to kind of put those pieces together and say so in this situation I could do that or this that seemed to work for this person and that didn't work for that person and and that's all part of the education all part of forming where you're gonna go yeah and like with that said like a lot of people ask the question well should I go first or seconds you're going to talk to a bunch of people who do all kind of stuff right is it overwhelming at first yeah uh yes because I know I have a solid foundation in the notes business but you can't you can't learn about all the parts no matter where you get your education from and so I did go to the conference and hear I learned about partials I learned about you know paig doesn't do first and there are reasons for that and then there are these people who are seconds you know then there are people who only do seconds like well that's A New Perspective um yeah it's a little overwhelming but when you're new you know like the shiny objects and like everything's amazing exciting and it is like that's the great part of this yeah you don't have to do everything and hearing about these things that everyone else is doing um at least for me is really helping shape what I want to do and how I want to grow my own business it's a wonderful thing you can't pick everything that's okay figure out what lines for you and what you want are you doing this as an investor are you doing this as a business um you know there's no wrong answer right yeah a lot of it is just personal preference what what fits you best and go for it absolutely that's really cool so what's what's your do you have a favorite conference yours obviously that was a leading question if you if you if you all don't know Nathan is hosting the DME in a few months and I just told him like I haven't scheduled a trip to Portugal with my brother until I knew when his dates are every couple weeks he's like do you know when it's happening yet I'm like I don't know and I'm going to the TM next year yeah so everybody should should go and support Nathan and and yes come to mine but go to anyone go to all of them I just was with Dave in Orlando and um and that was my third Conference of the year and I have um two or three more coming up this year and yeah every single time like life life changing life changing yeah and you meet different people I mean I've been doing this for years and I just met some new people at IM that are going to be great partners and we're GNA have you know we're g to do some really cool things together and that's you know so many years later and I'm still meeting new people and and getting new ideas and things so it's it's great go to conferences go you know if anyone is feeling overwhelmed about the idea of going to conferences the way I look at it is I don't need a thousand friends I just need 10 really good ones yeah you don't have I mean my first conference like I said I was so nervous literally my only intention was like I just if I exchange business cards with five people it will be a success well I walked away with some people who are going to be friends for life and and and business partners and um set your intentions small you know have the goal to meet one or two people that will be worth it to you and you grow from there build your confidence from there I actually did the exact same thing I I forgotten about that but my first conference I was like 20 business cards I'm gonna give out 20 business cards that is my goal and I got it and it's just and it just balloons it goes from there yeah so people get in the space and they get completely overwhelmed in different directions if you restart it right now how would you get to where you are today I guess faster do you think that you need to learn all these little parts to get to where you are or was there a fast track that you could have used to get to I'm going to buy this note based on some kind of hey my personality said this this and this I'm gonna go this direction I think I'm moving pretty fast um I mean I finished I did kind of my big Advanced education the beginning of 2020 like the first half of 2020 and then last year people ask you like when you get in the space everyone will say this when you're looking for assets they're out there and you find them for relationships but people are going to want to know what are you looking for and you need to know and you need to know why and um people ask like how did you learn about notes how did you get into it and I've heard a lot of people say like not to me necessarily but why if you learned about this three years ago or 10 years ago why haven't why don't you have a note yet what's the delay I didn't I didn't get active in notes last year because it was a big licensing year for me and my other profession and so I was balancing building that business um but I was totally ready to go so I knew that as soon as this year started that would be it um and then as soon as I started I mean I have I have closed on one and I've acquired I've um originated two notes one was commercial and that exited pretty fast that was um securing collaterals for bridg loan then I purchased five I just closed on two more assets yesterday so I think I'm going pretty fast but um definitely definitely get your education you know there are so many places ask questions um I think what holds a lot of people back is fear yes and you know I was think you know you said like we're going to talk about your journey and then what hurdles you've overcome and I was thinking you know what hurdles have I overcome fear was a big one fear of what though um losing money losing my kids future um not worthy into it I like it not trusting you know not getting aligned with people who are trustworthy I don't worry about that too much because um there are a lot of great people and you know just got to follow your intuition there and ask questions and ask around but um M you know how do I not mess this up and i' I've had some great mentors um but when it before I took action um I was asking I was asking a couple of friends and my financial advis or my accountant like how do I not mess this up how do I not lose what I have and I received the best advice that allowed me the kind of the piece to move forward and they said diversification and due diligence okay well those are two things that are in my control true right we can learn how to do thorough due diligence and we can choose not to put all of our eggs in one basket and that's what helps me sleep at night and so that's what helped me move forward so one get some education make some friends and move through your fear small steps if you need to but just do your first deal like I just need to get my first deal over with so I can start learning the lessons and um you know move forward smarter yes Stacy Michelle said in one of the comments here is that you're not alone uh she was terrified in attending the first event too I soon realized it was not it wasn't a big it wasn't what was in the head of oh my God I'm going nuts I this is gonna be overwhelming so Stacy thank you for sharing that um we were talking at the conference to about this and this is something Nathan I said repeatedly is how do you find out who who's trustworthy who's not and what notes is really different from a lot of sectors is we're real small so if you ask any three or four people that you see repeatedly around about a certain person you're going to get a response that are usually pretty common either yay or nay right um but so you get that confidence in who you're talking with before you get into it um and the other parts are confidence Builder right if you're confident your due diligence if you're confident your analyzing you're confident in your math it actually comes about to reduce your risk not eliminate but reduce it so I'm curious Candace now so you you did a bunch of training and you learned a bunch of things and then you bought a couple of notes have there been any surprises any things that you were like oh I didn't learn about that you know when you when we do a followup on this in like six n or 12 months I bet I'm going to have a lot of lessons to talk about on these like six or seven assets I just know it it's like waiting for the lessons um the things so far you know I learned a little bit about how foreclosure for example or bankruptcy can play a role in the note space those are huge areas on their own insurance huge area on its own um I'm sure I heard about statue of limitations but that's not something that I had retained I'm like okay well this is something I need to brush up on um in you know over the last couple of months I've been dealing with these assets like you send someone out to do an inspection and it's they don't do it as fast as you're expecting like got to be on top of things and follow up and um allow some margin for things not progressing at your own timeline so those are some challenges right now learning one of the biggest questions we get from newbies is where do I find assets at how difficult was it for you to find assets because that's something we don't crack right it's hard to crack into that world how did you find assets the first couple you're buying was it through a mentor through someone you knew or through a tape you saw and B when you got that note tape how did you work through it and know what you wanted right so I'll start with your the second part first I already knew what I wanted because through my Education and Training like what's your buy box why know your why I already knew what I was looking for and um I have a um I don't know if it's a calculator or whatever like a big spreadsheet analyzer that breaks it down you know I put in the assets and that helps me narrow it down but if it's a smaller group of um assets on a tape like I can look because I'm organizing by state I'm organizing by you know securing collateral value that's going to be how I narrow it down first and that that eliminates a bunch um so those are my criteria yeah how do you find assets man it's like the one secret nobody's GNA tell you um but they're they're you know they're out there um is someone who didn't grow up in this space like oh my God the amount of money available in the room is like my brain doesn't even go that big but um obviously like for friends who do paper stack right there online market like trading I don't know exactly what that's called but like trading platform that's a great place for new people to look yeah um I agree and and see and see who's on there like reach out hey can I ask you some questions get to know people I hate saying the same things that I hear from everyone else but it really is the way um one of the one of the ways that I found um that I I was got my first couple of notes was was through relationships you know a couple of people that I had known for a few months independently said you know what are you looking for and I said look I'm really trying to get a couple of um notes purchased so I can get learning about this in real life and I have this capital and um like that's what I'm ready for and one of them said maybe you know let's partner and you know you have some capital I have some Capital like let's I'll bring you in like let's look at a tape together and see what we can buy together partnering is an awesome idea I've offer that to people who um I know that are you know at my level or below like let's do this together and then um the other one was they said look I have a tape um I can't buy anything off of it right now so like let me brow for these to which was amazing like the biggest favor because I really was hoping for that timing to come through and um that help me get going and since then I've had other people reach out to me and say I know you're I know you're doing this like I have this I have this asset so I I get calls and emails about that um kind of from random sources just literally just from meeting people and making friends you know what that's a big that's a big deal if people know that you're for real you've got money and you're actually ready to form yeah that's a huge plus abely because the tire kickers are not worth the time honestly and and I know that kind of sounds a little bit harsh but people want to deal with people that are ready to go and are actually going to do what they say they're going to do and so when when you've got that and you're ready then you get calls people reach out to you and say hey i' I heard you got some money that you want to spend um do you want to buy what I've got to sell yeah and you know everybody everybody doesn't have like oh my gosh so like we know the deals are out there but then when they really do start coming across your desk it's like I just want I just want more money to like it's it's hard to let deals go by so um one of the things like how do I build my network how do I pass these along how do I make this happen um but but that does happen for sure and if you don't have your own Capital like figure out who you're going to park with get a JV agreement set up and have that ready to go so you can say I'm looking to buy if you have anything let me know I think it's as I hope it's as simple as that were there any gotchas that you didn't realize when you got into your notes and you actually live do it you're like oh crap like I I'm a little underc confident in this area where I don't know was there any of that stuff and what did you do to get over that hurdle oh man I'm like I'm terrified I think I fought well we'll see how they exit this last weekend I was sharing D and someone who's been uh doing this for decade said look the problem like your experience is going to stay the same even as your level grows you know yeah if you're if you if your stomach doesn't turn a little like you're not an investor yeah so um I'm I definitely those areas I mentioned like foreclosure Insurance bankruptcy really want to learn a lot more about that um you know the the legal side you know when you have to deal with the attorneys about the stuff that comes up with browers like I want to learn more about that even if that's not my role in the business I want to be educated so I can you know manage that part with um whoever I partnering with what assets have you bought so far first seconds I know you bought first yeah yeah only first um so I'm looking at my whiteboard here got everything so I can see easily nice that must yeah that's awesome so um what was your question what assets have I bought yeah what kind of assets first seconds performing nonperforming yeah um I look at first non-performing and all of these happen to be um vacant vacant with the um deceased borrowers and they're in foreclosure so I I like Aro really happy with Oreo I know everybody doesn't like that model but it totally works for me so even though that's not what I was expecting to start with um I am loving it uh a couple of the assets I will hopefully price at foreclosure so that they'll go because I I mean I want to turn my money faster but a few of them I'm going to keep so and then um originate notes from there I think that's what I really like which is also really fun I like originating yeah it's good we got a we got a a flattering and potentially embarrassing comment you who's it from I Love You Marco let's have it Marco says I had the opportunity to work with Candace on a potential deal she has integrity that's number one for me when choosing a partner thank you so much there a lot of great people in this space and no one's better than others it's just different experiences yeah and talking everyone's a key thing you know people say well I listen to this person listen to everybody there's so much knowledge out there and it's all based on experience based on what they've done right you could take someone that I've never dealt with that I've never done with something with and they're brand new and they could teach me things that's the cool part about this um your first deal you probably didn't have this fancy D calculator like we all have and all stuff how did you pull that trigger and actually make that purchase into confident or 50% un confident you're doing the right thing so I mean I have it's probably a calculator I didn't build it right I got it from my training program that's something that I paid for what I have learned is that I don't understand how it works and I know that oh my God Dave you like my brain is not you're just a freaking numbers genius like you talk fast you think fast you know how numbers work that's um that's something that I want to learn to figure out because I have this tool which will break it down but I want to learn what's behind it so that I can um make adjustments myself and things like that so that helped me because I already knew what I was looking for and I had guidance so um you know the person who's like let me arbitrages with you I asked hey this is what I'm thinking for a bid range how does that sound to you I don't know what people are bidding I like I don't know if people talk about that or not but I don't know what things are going for right now and so I said here's what I'm thinking they said that sounds good to me and it ended up working so that's that's how I felt confident at first but honestly not 100% confident it's scary how is this gonna go it is scary it's money that you're putting out and with the potential return somewhere down the road you know three months six months 18 months you know we don't know and that's kind of the the exciting part but kind of the scary part especially at the beginning where you don't have the hands-on experience to know that yeah this is this really works it really does yeah definitely so you approach Us in Vegas about beginners and in newbies and stuff like that and the Insight that me and Ethan game from that is is tremendous because we don't know what other people don't know and it's it's in to talk at different level sometimes is difficult for us right um Debbie Anderson said the bid range for nonperforming seems incredibly high right now and we're going to talk about that in a minute um because someone actually had a conversation with me yesterday and we talked about where to what what's hot right now what's the good pricing so de good good question there but we found out was that that confidence was the core guide to success if you're confident the fact that I'm gonna make a good bid based on good numbers and then I have a resources and tools moving down the line I know who my servicer is I know who my attorney is my collateral is solid I can move forward with the fact that the risk level there right so for me when we had that conversation with you me and line was how can we help right but the problem is the same time that these things get complicated overwhelming like you said your your calculator does is there a way for new investors to kind of get into this without being overwhelmed with the calculator or are you g toci like you need to learn this stuff even though it is complicated um I think having someone that you can check in with is crucial you know is it a paid mentorship is it a buddy that you you know met on you know at youra who also wants you know who's been doing this um you know is it your new group I I love that one of the things you're building is um you know let's let's go through this next step together in our five or 10e course and then have that cohort of people at that level um so I I think that's critical you know can I pick up the phone or send an email and like you know Jean like what do you think about this like am I thinking through this correctly you know or who do you know that does this if I have a question um so important to have somebody to bounce that idea off of and um I I think that's critical or you know um there's always the option of if you're ready to go or you're almost ready to go ask someone who's doing it hey can I you know can I bring you a deal will you walk me through it you know you keep the here's I'll bring the deal you keep the profit walk me through it so I feel safe and then I'm going to feel confident but I think you guys are providing that and a lot of people provide that in their groups and training and mentorship yeah I think you said a good point the network of people that's why the five week we're going to do is that getting together with just not one person not just me and you having that brain of power together on a weekly intense basis that wants to succeed just like you do is crucial why do you think being a talk off air right we need each other to bounce things off of and just ideas and thoughts and Brainiac stuff so well said yeah all the time and and we constantly do that um like we've got our own private Facebook group for our class we'll do a private Facebook group so that we can just chat together and say okay so you know what are the challenges what are the things you're coming across and what are the things that you're wondering about what does This Acronym mean you know anything anything like that where you're just not sure yeah there's ways to find out and if it's and if it's part of a group that you joined where you can have a private group so you're not putting that out on the worldwide web and feel like an idiot you know that's that's fine and then you've got that kind of that safe space to do that yeah yeah and you know if you have a if if you have a question some one else has the same question nobody's just saying it yeah yeah for sure nowadays itvs out there ltvs out there you know btvs out there these new acronyms are coming out because the way the market is and if you don't know what it is and you ignore it you're GNA have problems yeah right yeah um I think that with collaberative talking allows you to actually partner with someone without actually partnering with them right allowed you to connect with someone and say hey I'm looking back to deal what does everyone think about the situation and having that confidence and Trust in that group to really dive into it and solve those issues we're talking noteworthy I think one of the people spoke that got the most attention was Ken who literally had the room write down their fear like true ultimate fear of if I fail or what your fear is your spouse whatever and it was really cool to see that opening up and that having that true feelings was really crucial and like Nathan said we have a private Facebook group of about I don't know eight nine investors we've been doing it for seven years and we share our private conversation to each other and bounce real true ideas off of you need that team not that person but that team to really bounce the ideas off of that we may not have the experience or may not be in area and you may have someone who has that experience in there well then we share successes and and and challenges and failures in there as well and yes and we always say ah Gabe a amazing G right like right but he he's killing it right and he's killing it his own way yeah right so it's all different stuff uh Stacy made a comment uh the best way to partner with someone who's done the kind of deal you want to do um you know we've talked in mentoring and the my Facebook group that I'm offering um the person with the most comments whatever the two weeks we'll do a mentoring but we have to realize that to to partner with me you know stuff like that that's a lot of time of our our time right and we can't always teach one person for weeks and weeks weeks because it just doesn't work out well for both sides it's frustrating so I agree the fact that partnering is good but having that Collective group is even better um so yeah definitely look at stuff um cace I want to know when now that you're getting experienced and you have this recognition of people you've been to the conferences and someone says I'm stuck what question would you ask them to figure out where they're stuck how to get over that that feeling of being stuck I don't know what to do I'm I'm lost how can they do your professionalism right how do you get to that level of I don't know we're gonna like settle like settle in settle in boys have a therapy session time for some group couns [Laughter] uh you know it's I've been there I've for sure been there and I think we've all been there if you if you don't ever if you're if you haven't felt stuck I don't think you've I don't think you're committed enough to the grow um honestly or you're just really really freaking lucky um I I don't know anyone like that but don't tell me it do you um you know it's really what are I think it's what are you afraid of of yeah what what don't you know if things were going the way you want them to what would be different you know like oh I don't have anyone to call oh I don't know about this thing that I heard and um I think when you can bring yourself back from the emotion like name it sorry sorry here's the therapist me like figure out figure out like what is your emotion it's like I'm scared I'm nervous I'm frustrated I I'm confused okay great acknowledging that then it's the facts it's like we should not be making decisions from emotional place we should be like figuring out what's real okay what's real I know some people I'm in a Facebook group there's a podcast um if do I know where to go and I just I'm scared to do it okay it's just like I don't know I think it all comes back to people who can I who can I ask about this if you tell me you're stuck I'm G say how can I help you um I think almost anybody would say that yeah does that answer the question yeah I think sometimes is walking them through that issue or problem or concern is the key thing to figuring this out yeah and I you know I have a I think I have more time than you guys do for this right now and so it's someone I met at the last conference is a little bit behind me and was talking to me and I said look you know you're not at the point of of buying assets but you're curious like let's jump on a zoom I'll show you a tape I reviewed and like I'll show you how I'm thinking about it and we'll go through together I'm not the expert in the room but I'm happy to share what I know and show you how I'm starting with this and um see where I can direct you you know beyond what I know yeah yeah I think I think what you say makes a lot of sense right I think for a lot of new people um for us when you hear I'm stuck I don't know what to do I can't help that we need you really to kind of figure that out and help us help you right for real you need to you need to know where you're stuck yes thank you well said you need to you need to know love yes yes but you do like like Ken was saying like you have to sometimes dig down a few layers to figure it out so if you don't know that when you know what you need find someone and say I realized what I need can you help me or do you know someone who can then it's easier if you were to do it all over again you would the trainings and stuff like that you would do that formal education um the resources all stuff do you think if you started over again just didn't do anything watch YouTube videos you would be anywhere close to where you are today oh no no but it you know what it would have given me um if I had started there I think I would have had more understanding about the space before I got started so it might have accelerated that but no absolutely not um I I'm I mean like I said I learn a ton from your podcast I listen to a few others uh and I learn something every single time um but that's the really slow route to you know getting change in your life and making progress in the space that's the slow route that's when you're that's when you're driving home from work saying um I don't like the you know I want something different in my life but when you decide that you're serious you know that's just not going to cut it for me so what is your goal what's your goal five years down the line right where where do you see yourself going with this Candace the planner Candice Candace the planner hold let me my my notbook how long do we no I know I know exactly what I want it's just um honestly I'm I'm still developing my idea of of how I want my business to grow but I'm narrowing it in a lot um like I said always learning every conference I go to I learn something new every person I talk to I learn something new um I'm starting to really narrow in you know I'm not going to end up buying it across the country I'm going to be narrowing it on about five markets and building teams there and and that's what I think is going to work for me so I mean five years from now I'm G to be the girl who's friends with everyone and is making a boatload of money I don't know that's awesome so if anyone has additional questions before we tune off please feel free to ask Anice she you know she's doing this for about a year or so she's had some education she has some training but she's actually jumped in uh a lot of people can't say the same they've had maybe education or attended to these conferences or one or the other or neither and they haven't done anything and they get started they they have to do something um how when you're getting into this space it's overwhelming and whatever and there's a lot of different people in the sector all over the country like we're Nathan in Canada I'm in Jersey right it's all over the place when you go about this whole course right it how was it for you to connect with others right it was it something you were out shooting out to do or was it something that came natural with the group that you connected with um I you know I feel really fortunate that I found that educational group that was just about real estate in general because it connected me with a lot of people and it was designed like there was a small group component that a lot you know that you guys have that a lot of trainings have so that helped me um for sure uh and then I kind of narrowed in my Niche from there but um will you repeat your question a lot of people either stay in office right how was it for you um you know I'm always I'm always a little nervous about that but as soon as as soon as you put yourself out there I think you just have to show up and and be who you are right everyone says it just say if you're new if you just say hey I'm new here nobody cares everyone's going to be extra nice to you and bring you in just say that um and I think that opens a lot of doors but you know it's again it's okay you don't have to connect on this huge level just find one or two just find one or two people to connect with to start building your community I don't know that's what brought me some confidence awesome and and see if it's the same experience for you the people that I learned with years and years ago I'm still you know we're still in contact all the time we're still you know exchanging ideas and things and and some have moved on to other things and others are still in the business but we still keep in touch and we still talk about like oh you remember 2009 when we had that class years and years and years ago and it's they're lifelong friendships yeah it's funny you go on social media and like you know you talk your person friends like who that person oh they're in Alabama what do you even do like it it becomes a different world for you right you get sucked into it and that world becomes part of you I think it's really cool um and it's exciting to have someone new kind of walk through their journey and see where they're at today and we'll check in I'm sure in the future and and we'll be bringing some of the things on here that cand has brought up um one of the questions regarding nonperforming assets and whatnot um you have to be mindful what you like but you also have to be mindful what is well priced what does well priced mean I we say go based on your desired return and back into it so if you're looking for an X return with all your expenses of income what's your best purchase price and what is selling right now um non-performing notes are expensive right now right because of the fact demand is high and Supply is somewhat low right now but it's going to start peaking right now right things are starting to change um we're watching arms real closely to see how many arms are created now because arms were one of the big factors of 06 0708 so we need to look at that kind of stuff but yeah not before we know it's are high price but granted go buy an REO what are you paying for that if you're in real estate you're looking for an REO you're paying retail right you're paying 95 so yes they're expensive compared to before but when me Athan bought in 2010 2011 they're never going to get that price again right so it doesn't mean we're not going to buy we're just going to be very strategic of what we're buying and how to make things happen yeah it's so good question on that so um Nathan I don't think people heard you before so I'm sure it'll be on the recording on YouTube remember you can watch us on the YouTube channel which will have all the audio we record this on Zoom uh Nathan announced uh he had a big announcement to that he'll be launching publicly next week Nathan yeah so finally last week after extensive search we finally nailed down a location and time for the Diversified mortgage Expo which is coming up June 2nd and third in Nashville Tennessee will be at the Hilton by the airport and that's very exciting it's a beautiful location 20 minutes from downtown if you want to get downtown Nashville and go see the sites and everything everything else uh but if you want to stay near the airport that's fine too uh come the day before we're going to do a big ax throwing tournament so we'll have an ax throwing DME Champion trophy in the whole nine yards so if you're participating in it awesome if you're not it's a fantastic networking activity can come and and meet some people and have some fun and yes Debbie June June 2023 yeah June 2023 second and third so mark your go to the website yet this isn't public he's letting us all know before he got actually officially launched so it's coming I just I just got home guys give me a break yeah got take me a minute before we wrap up what Nathan just said reminds me of something that I think will help anyone who's new the first conference I went to you know I said who I was I said I'm new I asked some questions but honestly almost every conversation I had was on the personal level um so when you say you know a great NE you know networking and social activity that's you know if you're nervous about the business side or you're like I don't know how to have these conversations just get to know people where do you live what do you do um that's where everything started to build for me and then I know that um unless you're listening later you know if you were listening at the beginning you know Dave just mentioned how um we're all it's a small space and we we have friends and colleagues from all over and I know that you brought up you know the hurricane and um how it's really impacted please yeah you know I think you posted today the the video of flooding in front of the resort that you and I were at days last week yeah yeah and um you know definitely on my mind we've if you don't have friends in Florida you definitely have business you know business associates and colleagues there and um I think I'm going to do a post in the next week or two on some resources of how it's going to be easy to to um help some people get back on their feet when needs to become a parent so um if you don't like to do that sort of leg work like let me know and I'll be happy to send you an email or like tag you on my post um I I hope we all give generously to to the things that we care about and you know we we've all got a lot of friends down there in Florida on the Southeast um so and I said earlier I know I was muted but if you guys if anyone is affected by that or know someone affected and there something we can do to help um please reach out to us um we'll do our best to help you connect you with something or whatever um and uh we'll do our best to help you out down there but yeah it's devastating to see what we see from afar right we're not affected directly um but we all can feel for what's going on down there it's it's not comforting um so please make sure you you know if you have connections or issues down there and we can help please reach out to us um and what not which is great in the meantime please be safe yes Ser things going okay but uh we're going to wrap it up there again if anyone is interested in the five-e course we'll be bringing it up again I'm sure uh June uh October 25th Tuesday night 8 o'clock will be starting um you can go to our website and check that out that's a really really cool thing that cace and Marine brought up to us in Vegas and we're really excited about bringing it up again a lot of the resources we'll be sharing with that will be unseen before statue limitations debt license stuff um things that we've never shared before um we'll be part of that group uh bring a partner half off um but the homework to us in the networking will be the biggest part that you're really going to really have homework every single week and you're have to bring it before class and that will challenge you to actually pretend it's a note you're looking at as well as connecting with others who were part of that group and continue to network with them so that you know and they know that you're in together so collaborate together so we can all learn at the same time excited to do that well Candace I appreciate you join us on this Friday afternoon or a little earlier for you but um it was great great seeing you last week it's great seeing you again here um we hope that we're able to answer any kind of questions that people had if they feel they you reach out to feel free to reach out to candidates online um send her a message hit her up on Facebook and uh everything else awesome I think she's Frozen but oh no at least we got an end smile from her you go all right thank you everyone we will talk to everyone soon yeah that's [Music] great hey everyone Dave puts from jkp Holdings good afternoon Mr Nathan Turner was inside next to me how are you hello hello very good very good awesome it's good to connect um we had a great session last two weeks ago um we talked about a lot of awesome stuff I would definitely recommend anyone who missed it take a look at the podcast YouTube channel whatever you can get a hold of that um recently you know things have kind of started to change for me um we're seeing some new product there coming from different areas um I know that recently we got a pool of assets we talked to Paper Source with a gentleman about some seller finance stuff that's coming about which kind of lends to what we talk with Tracy about the seller finance World being something that's growing it is it's an interesting an interesting time and we'll uh you know one of the cool things about notes is um it's very easy to Pivot yeah uh so if if seller financing notes are more available and and that looks better do that um I'm also buying some reverse mortgages right now oo they're available so I'm doing that you know and it just you can pretty easily just kind of go back and forth and whatever is available whatever works at the time that's that's good yeah um one thing about C financing and and notes in general is unchanging numbers I want to let everyone know that I'm gonna run a a spreadsheet training course for everyone just understand how to create a partial yield calculator um I could post it to whoever wants it but it's going to be a two three hour you're create your own spreadsheet to understand time value understand the formulas and get away from this brick and mortar financial calculator that some people find confusing where you can plug and play numbers on a spreadsheet right um for me I like the spreadsheet it's not as Grand as the calculator but I think spreadsheets make a lot of things easier for newer investors to kind of grasp um deal flow and Deals what's going going on with you we we bought few partials recently uh we've actually looked at a few formul notes we purchased and then there's two nonperforming notes that we kind of back and forth on that I may not go with yeah um what's been with you what's been going on with you I've got these uh it's a few different reverse mortgages uh another uh just kind of a regular first mortgage and then I sold a couple of of the loans that I've been holding on to uh just because it's time and I'm I'm selling off stuff and getting everything kind of going into the fund and so we're awesome winding down and building up at the same time so it's a lot of fun that's awesome um for those who are interested we a comment just go to jkp Holdings spreadsheet dcal training we'll go through it um and I'll be talking Nathan afterwards we have some really cool stuff that's gonna be coming about for September um so tune in for that kind of information it'll be a training course but with that said um financing notes we both came from the institutional world we did some lease options but seller finance notes is the wild west that we thought we walked into when we bought into notes you know notes was like this wild west theory for a long time and then we got to grasp at it and then you walk into seller finance notes I feel like I'm back to the wild west on just different things I like seller finance that's the same thing that's kind of where I got my start is um uh very at the very beginning I was creating notes and that was I was doing seller finance and so that was uh an interesting learning curve figuring out how to write paper and how to make it a a good piece of paper to be able to resell if I choose to in in the future yeah so I'm I'm a big fan I there's there's all kinds of fun ways that people put them together and and uh they're a little bit goofy sometimes but I mean people are paying yes sometimes that's all that matters yeah so without further Ado we have gentlemen here that be tuning in with us if you don't know Jeff um get to know him he's a wealth of information um his experience is no other um he's been doing notes for a long time since the 80s I know right and we ran into him a paper source his knowledge is amazing but he's a science s person right this is is bread and butter yeah I and I I I admire Jeff's analytical skills to look at it and and treat this like a real like a real business like a real project and something that can be um tweaked and and you can look at different things and what works and what doesn't work and I I like that approach I like you know kind of the systematic approach to it that's good so Jeff welcome a man how are you yes sir hello guys how are you I'm doing good good good well let's start from the beginning you know we all start where we're at today some people that's overwhelming some people it's exciting where did you get started with real estate and how' you get into notes if you can keep it under four hours would be great yeah that's the trick here um well let's see uh long story short uh when I was 19 I purchased my first property a Triplex I lived in one unit and out the other two cover the mortgage um I learned that and I purchased that property at 19 I decided when I was young about 15 and a half years old I read the book uh Think and Grow Rich uh someone gave it to me and that's like the Cornerstone of My Success for sure and um in reading that book I decided uh about 16 years old that I would never be a renter I'd own when I moved out I was going to own and buy something uh so I bought my first property when when I was 19 um a Triplex lived in one unit went out the other two and then from there I I purchased and lived in and fixed up and moved uh several times by the time I was 25 I had 25 uh 27 doors at 25 years old I had 27 doors nice and I was taking care of him all myself we're talking within you know a half hour hour driving distance of my house and um being a landlord I I know it all we can go over stories with that another time but um you know uh landlording is is not all it's cracked up to be and neither is a rental cash flow um you know a lot of people tell hey I got a rental property you know the the the expenses are 1,200 a month and I'm getting ,500 a month and that's $300 a month positive cash flow until something happens right until the water heater breaks and there goes four months five months of P cash flow uh or a bigger expense comes up so I was always you know people think oh my God 27 doors you must have been rolling in it no I was barely making ends meet keeping all the the maintenance on all the properties covering you know 18 different mortgages and and and doing what I had to do and I there had to be a better way went to a boot camp seminar you guys know these dog and pony shows right you go to them free come learn how to be a millionaire and so I went to dozens and dozens of those I tried everything you know I was an entrepreneur in a mindset and I still am and and I uh I went to this one and the guy said be the bank not the landlord and I was like I don't have to be a landlord what uh went back back of the room within 20 minutes signed up $7,500 five-day boot camp right yeah called in sick for a week I was working at Ralph's grocery store in Southern California um since I was 15 and a half and uh at 25 I went to this boot camp and it changed the direction of my life I was like oh my God this is for me now if there were 200 plus other people in that class after about six months nobody was around anymore they went off to the next shiny object but I I knew in my heart of hearts that that this seller finance note business was for me at first brokering notes and then eventually to buy them and be the bank yeah um that's the short story of how I got into it wow what year was this this was 1991 yeah started in May of 91 so I just had my 31y year anniversary last month and I do nothing else I don't invest than anything else uh no stocks no crypto um no nothing else just notes it's all about the cash flow sold off all the properties carried back notes on some got cash to buy notes with others built up the portfolio life happens got a divorce lost everything started over and uh building building it back up it's been 11 years since the divorce but you know still got to build it back up to where it was um and uh you know I know how to do it so it's uh it's been uh you know nothing happens overnight and and to to grow businesses and to start these and I'm glad you mentioned too Nathan that that it is a business uh we're not going after it like it's a business we're going after it as it's a business it is a business and if you're just laa gagging around thinking that you're gonna find a note by building a website it's not going to happen that way guys not these days yeah yeah it's you said all that you know we do have some members and people who follow us are probably born after you got started right it's absolutely I'm not as young as I look and we want to make sure people understand that where you are today and which we're going to get to is not anywhere close to where you began at right it's years and years of working hard work to get into where you're at today and the knowledge you have and experience you have so can you in the beginning what were some of the hurdles you came across the struggles that you had that they can probably relate to uh well the biggest hurdle is that you see the potential and everybody else making money with notes or supposed making money with notes and you want to be that guy tomorrow next month in six months you know and it doesn't happen like that it is going back already to it's a business and most businesses fail seven out of ten businesses fail any business in the first year of their business whether it's a restaurant a gym uh I don't know a beauty shop uh a storefront uh you're starting an online business I mean most businesses fail in the first year and this is this is just like any other business if you don't attack it and think of it as a business you're not going to last long as a business we're not talking about just buying a note here and there for as an investment in your IRA and stuff we're talking about running it out as business and I think a lot of people when they get into the business they think they're G to be successful in six months and in in a year and they don't give it enough time to really ramp it up and build your business and grow your business um and that's that's a a huge hurdle I think people need to get out over is that uh do I just want to dilly dally in this or am I am i g to have an actual business and one day hopefully quit my job right and nothing ever moves as fast as you'd like it to never and you just gotta understand that and be okay with it yes absolutely yeah it takes time and and uh you know since 1991 are there things I do differently now than I did then oh for sure yeah right I'm not as techsavvy as you guys but you know for instance I didn't really start using Excel spreadsheets till about the divorce 2011 so I have an email that I just saw recently that said exactly that which I was like whoa right yeah so that that was that that made me more efficient and and things like that but uh it's uh but I still use hey come on don't don't don't diss the calculator man right I can't pull a spreadsheet up when uh when I'm out on the boat and someone asked me about a mortgage I can pull up the app on my phone right this is true this is true and I think the difference between you know the the calculator itself and um the spreadsheet is that we get a tape of assets that comes in right of 50 assets to run 50 assets on a calculator would take some time use a form write down the sheet and say okay here's my number so yes and certain things that spreadsheets actually struggle with with the calculator I'll be going into that eventually uh they don't do points right it's not 34.38% it's the calculator to use I have a whole calculator Secrets book with 120 plus examples and practice things in it it is so simple it's five buttons that's it guys don't be afraid of the calculator I I do usually one at a time from individuals one note at a time and you're right when there's a lot more when I get a tape in or something like that you got to use uh the Excel spreadsheet you're not running it through or another program called T value I use a lot of and um uh so yeah with the numbers I mean we could talk about numbers all day long but uh yeah so you you hear all about this you know Bank origin loans that we all pretty much came off of right this is what we did in 2010 and most of the people in the space did a lot of origination loans where you were in a different track right you did the seller finance world where getting inventory you're not getting a 500 tape asset list right you're putting in work to get asset list yeah yeah when did you guys start what year 2010 2010 yeah 10 okay so um yeah before the crash yeah there not a lot of tapes around you guys right there they're worked you know and and and you're talking about you know we all deal with banks well we all don't I don't you know deal with they we do if they come across us and and you know if someone comes across us we we're happy to deal with things but there's a difference if I could share my screen a second let me show you the difference between uh different types of notes is that okay one second open I'll hit the little button here tell me when you should be good okay boom and then I'm GNA pick uh I made a few documents here yeah perfect so that you can we can see this so oh wrong one we're talking about notes we'll get to that one in a minute here it is okay there there's three types of notes here they are this is it a conventional note A Bank mortgage company gives someone a loan it's a dead instrument created when a bank or mortgage company finances a sale of real estate right most people understand that you want to buy a property you go get a loan from somewhere that is a conventional note okay then you have a private mortgage note maybe the person can't get a bank loan can't can't fit in that box which is getting Tighter and Tighter these days right um and then there's private mortgage notes so an individual investor maybe a real estate investor but an individual investor uh will fund the loan to purchase the house so the person's taking money out of their pocket 100% providing the loan for the person to buy the property that's a private mortgage note a debt instrument created when an individual not a bank finances the sale of real estate then we have what's called a purchase money mortgage this is a instrument right now we're we're not seeing that screen Jeff just looking at the we've got value based investing versus speculation that's the one we see right now what um what I'm showing this one this is my screen are you sharing a screen or a uh yeah it says it says I'm sharing my screen correct you may be sharing a um window how about I I stop and then I'll share again let's see if it works now I'm sorry guys no problem boom and boom now there it is Boom okay yeah okay so we did commcial note bank note private mortgage note in individual a person uh giving a loan right for someone uh and then a purchase money mortgage note a debt instrument note in mortgage note in D to trust uh sometimes a recordable la land contract carried back by the seller of their property to facilitate the sale of their own property a seller finance note that's that's the whole key a seller of their own property selling their own property carrying back the note on the property they own that is a seller finance note and the differences between them are as follows you can have when when a conventional or private note loan is given they have to follow all of these rules and more there's a loan application references are asked for they run your credit there's income requirements right debt to income ratios lending guidelines employment LTV regulations Z truth and lending and all these different things when when a seller sells their property and Carries back a note none of that is applicable none of that is applicable so if I buy a conventional or private note guess what what happens I have to follow all those same rules and and requirements if I buy a seller finance note there's no regulations right we'll go one more when you purchase a conventional or private note you have to follow all the regulations that they do when they gave the loan just as if you gave the loan yourself including the collection regulations um when you buy a seller finance note a purchase money mortgage the regulations lenders follow do not apply as defined and discussed uh uh in a class that I do um I I have a little home study course and and this is on day one we call it it's called a holder in due course there is a technical legal term for it it's called a holder in due course it's as if I sold the property myself and carried back the note myself I become that person so it's a same with a conventional or private note if you buy a note from a bank or a mortgage company or or a private individual that gave a loan it's as if you gave the loan and you have to follow those regulations when I buy a seller finance note it's as if I sold the home and carry back the note myself so I don't have to follow these regulations okay so that that's the differences between what you guys normally do which is go after bank loans and tapes and mortgage company loans and what uh what I do which is go after the individually held uh first position performing seller finance notes and then you're just looking for already created like you're not even creating your own necessarily yes existing absolutely yeah I don't I don't want to buy properties carry back notes you know let that like yeah that's a lot more work man I want to sit home and go bass fishing and go snow skiing and go hiking and you know uh that's awesome stuff right yeah yeah for sure uh yeah okay so I'll stop this now we can continue so does that kind of uh explain it and then you asked a question and that's why I brought that up yeah what was that did that answer the question or was there more to it no I think for most people they have to understand the differences right that was a good explanation of what that looked like um and good definitions um I did we did one question that came through for Steve from a Steve Johnson regarding you know mobile home parks and notes of that do you get involved with the mobile home parks and buying notes in them yeah well that those are seller finan usually um however most of the time we just go for mobile homes on land so it's not in a park they own the land and the mobile home it becomes real property it's the same as as a a note on a house um can you buy notes on mobile homes on least land on a lot or they pay lot rent yes you can but it's a whole different ball game of of requirements due diligence because that is not real property just because someone's living in it doesn't make it real estate yeah and when when they're in it you know in my world if a mobile home is older than 10 or 15 years old it's old it's like vintage right and it's not worth much it's a it's a wobbly box it's a it's a pregnant roller skate on Wheels it's it's just uh you know just like cars depreciate so do mobile homes right so there there's different things to look at can they be purchased yes uh there's just different due diligence and things that go for like that have I purchased them absolutely right yeah that's awesome we did have another question regarding your your due diligence when you're going your through your due diligence who do who helps you with your due diligence on an asset um people are looking for companies and teams and you know local Walmart to get their their their due diligence who's just special Godlike you know Seeker person that you use for your due diligence to review assets time on the water man time on the water if you don't know all about it yourself and you're G to trust someone else to do that that that's a scary situation for me I am not a risk person I do not like Risk so when I buy notes yes there's still risk right there's always risk but I I try to minimize it and keep myself in a position where you know even if it goes bad I it'll it'll still be good you know if you follow me there um and I now I forgot the question again no just due diligence right you know oh due diligence so so is there a place you can go I believe there's a few people out there that will process your notes for you and things like that uh however in the beginning you should absolutely try to do it all yourself make that phone call to the title company order a a a title insurance policy right make make that connection to the appraisal company and order that appraisal yourself see how the process works learn how to read an appraisal learn how to how to read a title insurance policy learn how to read the documents we just read a a security instrument yesterday that had some language in it that I couldn't believe that was put in and I caught it and so now there's a different price because there was like this person doesn't have to uh this person gets a a 15% discount if they pay off before 2025 and I'm like Wella that's a whole different ball game now different I have to lower my price and adjust for everything but you you've got to learn yourself if you start out and you just trust people to do things for you you are eventually going to get burned because it's not their job to keep you safe it's their job to do the due diligence and then give it to you so and it's a different perspective like yes sometimes I'll buy a note and I have this kind of exit strategy in mind right and then what if it changes and what if I I don't decide I I don't want to do that for this particular note I want to do something different and I mean if you're trusting somebody else to do it for you they may not know your endgame right or they won't be able to guess your endgame and so that and that makes a difference on your due diligence makes makes I also make sure we're clear what title policy really means right it's an insurance policy saying that the there the title's clean when the loan is originated and why is that important for origination as well as buying is that we can all then we order our o which says from the time it was purchased to now what has happened so if the tile policy is there and something comes up you actually have an insurance policy to deal with the issue and sometimes pay you off if the circumstances is right so it's a huge tool that if you don't see a tile policy you should be a little worried and you need to make sure that there's a clear title besides just your leens absolutely yeah the chain of title to the property and in 31 years you know knock on wood I've never had a claim with a title insurance policy but it's just like it's like car insurance or house insurance you pay it every year this pay one you pay one time and you know just like house insurance or or car insurance you might not ever use it yes right right so um you've got to think about that and I see so a lot of now someone might bring up the fact that well aren't seller finance notes Messier well well a little bit Yeah they are because they don't they don't have to get an application they don't have to get you know truth and lending and write out everything and sign this and fiduciary responsibilities and stuff the guy sits at the table and says so you want to buy my house for 120,000 great give me 20,000 down I'll hold the note for this long how does that sound great signed the documents done and some I've gotten a note written on a on a piece of a yellow legal pad right that had to be corrected you know so there's in seller finance notes uh we do a lot of work not a lot we do some work on cleaning up the file making it presentable to investors whether institutional or private and and for myself making sure I have everything I need in case after I buy it I need to take action and and get things corrected so so you'll you'll buy it and then do some fix up and then may or may not sell it I'll make sure it's fixed up before as I'm buying it during the process there's one right now we're doing a land contract in Georgia and um uh they recorded a warranty deed and they have a note but there's no security instrument there's no deed of trust oh okay and so we're like well that's got to be fixed right and if you want us to do it our price is going to go down a little bit if you do it before that we'll keep our price the same got it so the guy's like and he use an attorney guys attorneys you know no offense to anyone that's an attorney but they don't know everything and they especially don't know about about seller finance notes if they have if that's not like their Core Business they're not a real estate attorney they probably haven't done these transactions and and they just I don't know look it up on Google and do their best I have no idea so before we get into some deals right everyone wants numbers exciting can you share a little bit about how you come across these assets the secret ideas new cool technology that you use to find great New Deals H we're we would just just love it if there was some new cool technology to find us seller finance notes but I tell you what guys 31 years I mean both of you have seen my marketing presentations and and you know thinking of it as a business uh I think my last figures that I quoted at the Paper Source convention was you know over all 31 years over 79,000 people have responded to me yeah and I've closed you know 2,300 transactions you know very very small small percentage of them um but that's a lot that's a lot and when you when you uh talk about you know what cool technology is there to find notes Guys these notes aren't aren't online usually you know and if they are they've they've usually been through us us meaning the people that regularly buy seller finance notes the institutions some of us larger privates and uh I've seen notes that we've cancelled up on those up online and uh you know if if that's your mode of finding you know deals great trust but verify we talked about trust earlier with the due diligence stuff trust but verify look at that stuff read it yourself get what you need to get if they don't give you enough time bail right you need to know what you're doing you need to know your your investor mindset and you need to know um what you're doing when we're trying to find seller finance notes um yes there are some online marketing strategies that we use uh social at U social media uh every now and then uh Google AdWords things like that uh search engine optimization all these different kinds of things but um the core of of finding an individually held seller finance note is marketing right uh I talk about marketing all the time marketing is is something you have to do for every business and uh for me I I'll quickly go through it it it's it's you've got to have three to five things working for you at any one point in time and of those five things um half of my business comes from direct mail I purchase names of names and addresses of note holders uh and I I direct mail to them uh that's half of my business every year half my deals closed even and last year was like 62% but uh of my deals that I closed were from my direct mail campaign uh and it's not a onetime throw out a thousand letter and get a deal it's a consistent program over time a thousand a month 2,000 a month whatever you can afford it's expensive but it does get me deals uh second is classified ads in small outlying rural areas uh third is building a referral Network takes more time you got to be in business for a few years for people to start getting to know what you do and that you can do what you say you can do and then those referrals can start coming in um uh online marketing we already talked about uh and then direct contact talking to people all the time about what you do because it it is such a niche within a niche within a niche right oh you're a real estate investor well kind of oh you buy properties well no oh you give loans well not exactly and you know so we're in a niche within a niche within a niche and in the note industry itself there's a bunch of little niches I do this one little thing you guys do that thing and other people do this thing and and you've got to focus on one and build up your marketing I offered the marketing plan to people at the Paper Source convention dozens of people requested it I sent it to them I haven't seen one back yet I haven't se I'm like hey I'll I'll do it for you I I'll go through it I'll help you I'll make make sure everything's good and get your on your you know get your best foot accepted and you're just like people don't want to do the work they want the easy way out oh my gosh if it was that easy everyone would be doing it yeah right because that question always comes up why isn't everyone doing it if it's so great well because there's work involved right soive quick and never has been and never will be it's never has been never will be how many pieces of mail do you think that the 2300 year clothes on average those people received how many marketing you know letters there's competition yeah you know and it probably came directly from me telling people to do it right uh but it's okay because there's plenty of notes how many however I'm gonna say at least a dozen if not a couple dozen how many piece of letter did you send to that person that closed how many did you send three I send they get four things from me in 19 months so they'll get a they'll get a letter um you know right away six months later they get a a follow-up postcard 12 months later another follow-up postcard and 18 months later a follow-up postcard it's a program right I'll get I'll get that first Contact in they'll call me or or email me or fill out the worksheet online from the letter and then not everybody needs a sell right now a lot of them are just curious right I'm usually the first person to tell them no you're not going to get the balance of the not there's a discount involved and let's see let's see how bad yours is g to be right yeah or how good it's going to be sometimes they're good but smaller discounts but uh yeah it's it's uh action and and marketing in in a program uh a consistent program that's what that's why the direct mail works is it's a cons assistent program not a one-time thing yeah so I got a question on um on the notes that you're seeing uh where people are responding and you're you're reviewing all the documentation and stuff what's kind of an average interest rate that these loans are being written at I know it varies wildly but so so you know people carrying back notes on their properties most the ones that do it most of them it's one one in their lifetime they carry that right it's not a business for them it's I had to sell my prop I carried back and no so they don't know what they're doing and if they don't contact us beforehand we see stuff you know uh zero down zero perc for 50 years and you're just like oh my god do you have any more properties I right and so we see everything from those to you know 2% 3% and 4 perc and you're just like what are you a bank yeah now with interest rates going up in three to six months we'll see some higher interest rates I'm sure however going with that our yields are going up too because we got to keep the same the same profit going right um so prices are still going to be um the same if not lower in the coming future but uh yeah that's that's uh that's a big thing all over the place yeah all over the place yeah yeah you know would you buy a no a note with a0 perc interest rate for 50 years is going to get a huge discount performing or not right so it's it's one of the fun things about the business that really keeps me doing it year after year is that every person that contacts me it's a whole different puzzle how am I going to fit the pieces in right how's this going to work right with with uh with 29 different ways to buy a note which one's gonna work for this guy yeah yeah keeps it fun keeps it interesting keeps it so let's get into some fun stuff here you don't have to share your screen give us an example what note you've seen what numbers have come across in the last say year or two what give us a kind of a general situation you've run across and some numbers of a property okay so let me share my screen okay and you're and hopefully get the right one this time Jeff you're in California and you you buy all over the place right I I'm in Arizona now I was in California Lake havu City Arizona now for uh seven plus years oh go and yeah it's 97 degrees already it'll be 107 today and is already running so you guys up there don't know what that is I'm experience we're hitting 90 today we're hitting 90 in Jersey W oh my gosh 90 that's a cool day here yeah we pray for 90 degree days no but you're buying all over the place right like it yeah but we're bu Nationwide yes Nationwide uh we even did a deal once Puerto Rico and Guam um all all the states I think maybe there's one or two states I haven't done a transaction in in all these years you know like Maine is one I think M's tough anyway yeah yeah this is Nationwide oh that's cool yeah oh what did I finish the question or you're good we were looking for GNA share a screen I was gonna share a screen and show you some numbers yes yeah I do want to go over that investor mindset too so let's let's sure boom this is a recent transaction I want to share that one there you guys see Kingston Georgia yeah Okay cool so here's a a a recent one that that we took down meaning purchased uh for my self-directed Roth IRA you know we're all doing this the right way that's that's one of the best ways to do it is is build up a self-directed Roth IRA and put them in there so long story short the a person in Kingston Georgia little small rural town in Georgia so the regular house owner occupied o single family home owner occupied single family home can get that out of the way that's distracting there we go and uh 120,000 sales price you got 20,000 cash down payment $100,000 seller carryback note uh 30 years at 8 and a half% interest this guy knew something right this guy's a little more savvy than regular individual cell Finance note holder yeah um he knew to get the interest rate a little bit higher he knew to get a a a decent down payment um so that's great so we plug it in the calculator we run the numbers the payment amounts 768 91 there first step Second Step verify the balance when they call you they've received a few payments so we got to know what the balance that we're purchasing is so we' run it through the calculator here's the Little Steps the balance is 9,630 then the next thing I do is I'll calculate the loan to value right balance of the note divided by the sales price of the property in this case came out to be 83% loan to value yeah but but Jeff uh if the property was sold you know a year ago the the property is probably worth more so the loan to value is going to be lower yes but initially on the initial per price we don't know what it's going to come in at we don't know what it's going to upraise at even with going online and stuff because I don't really trust the values Zillow and all those other ones give I I trust the numbers right so the numbers I know that it sold for 120 it's going to be at least worth that so my loan to value is at least you know at at the most let's say right now 83% so if the appraisal comes in for higher later on when we're doing the transaction then great my loan of value is lower and I'm I'm actually safer okay or let's not use the word safer more secure right yeah um and then I go with my full purchase on this one we had a good down pavment on this one I wanted a 12% yield on this not the greatest I usually like higher um but it's it's a bit competitive out there right now I came in at a 12% uh for a purchase price of 74620 to the note holder this is direct I'm I'm doing this direct I didn't broke for this and everything so that was the price of noer and yeah okay it's a a $25,000 discount but I have to wait 30 years to get my money yeah right and I I want to make some money yeah so the issue with this one was of course this person had contacted some other uh companies right competition to see what they can buy there was some poor credit on this one so that that's the reason for the higher um uh for for the yield and for the for the discount okay um I don't know what that is sents on the dollar uh but it looks like about 75% you know or somewhere around there so pause right there I I stress this traumatically because that people don't realize is people bid percentage of upb or Boo this is a case example Jeff doesn't even know what the percentage of upb is or BPO is because he's based on a return not based on a percentage number right he's guessing because it doesn't matter if this is 80% or 20% his numbers based on return he's looking for based on the situation sorry okay correct based on the situation because we use all all four or five different ways right yield investment to Value um sents on the dollar uh etc etc right there's there's other ones that are are in blanking now but those are the the three major ones that we use yep oh Sense on the dollar didn't say that um to calculate our our prices in this case the final number did come from yield a yield based calculation right and of course when we this is an initial price so to verification of the information that they gave us and acceptance of the pay's credit appraisal and tile we already saw the credit right and and did a soft PLL and and we saw the credit so we already knew that so now this price is still subject to appraisal coming in for at least the sales price and like we talked about ear Clean and Clear chain of title um and with that said and then we do one last calculation to check our Safety and Security uh is investment to Value investment to value is the purchase price you're paying compared to the value of the collateral ITV this is a term you got to learn and and a number you have to calculate this is your security we're at 62% investment to Value meaning there's 38% uh uh security above me Equity above me that if something goes wrong worst case scenario happens and I have to foreclose take back the property fix it up resell it and carry back another note or sell it for cash I'm going to have enough room to do all those things and still at a minimum get my $74,000 back and with the market is today the this is a big deal because if the market drops at all you have to be in a spot to absorb that impact of property values correct increasing correct correct so so I like to keep myself for my own personal uh portfolio and my personal preferences under 70% investment to value and usually under 60% investment to Value uh I am I am not risk averse I I'm I manage my risk and again in 31 years I've had two foreclosures and and I actually made a ton of money on both of those those for before go on we had one question about how much if someone begins how much should they budget for marketing oh geez you know look guys when I started out um there was no internet right and I was working night crew at a grocery store at work nights and and take care of the properties in the daytime and try to start this business in the daytime and my budget was was really small couple hundred bucks a month you know as Deal started closing I could put more towards it I would prefer when when people work with me and and I I Mentor them or I coach them on their way to to starting their business um I I like them to have a minimum of $1,000 a month for 12 months commit to 12 months commit to at least ,000 a month and and you'll see some uh uh progress you'll see some deals starting to come does that help yeah I think it does absolutely it makes sense you can't be bootstrapping his business on because you're never getting traction again it's not a get-rich quick and it's not a you're gonna make a million dollars in a month not not it's just not so so there you go yes good question good um so I I do the the ITV and then we have on the bottom there we have the information that we verified on the calculator and the numbers we calculated and this guy went for it uh appraisel came in for like 122 so we were okay on that one uh title was easy they had a title insurance policy so we just had to do an update or a date down it's called from the time they got the policy till now and uh and that was one we recently uh purchased uh and those payments are just going in the Roth IRA every single month that's a good looking note I like that one yeah yep now are they all like that that simple to do and easy no I picked out a smooth one for you but you know there's always hurdles and surp surprises just like with you guys I'm sure you guys have a few more hurdles and Surprises with some of the non-performing and stuff um but uh people seem to think that I I don't purchase non-performing I I do just not at the prices you guys do it's definitely changed over the last couple years yeah yeah we had another question regarding again yeah yeah regarding from April regarding when someone says no to your price right what do you say then how do you overcome some those objections so okay so part of the business I is marketing and getting those calls to come in right yeah all right so I can get the calls to come in for people starting a new business or starting out and stuff but what happens when you pick up that phone and start negotiating and talking and communicating with these people that's where the deal is made right so on that very first phone call I have an idea by the time we're done with it I I'll have an idea of what they're looking for if they're looking for par you know 100% of the balance or a 5% discount or a 10% discount guys you know don't waste my time this is not how this works if you can get 90 cents on the dollar you should have this that and the other thing you don't so you're your discounts going to be a lot less so when I do call with the prices they are already thinking in their head oh my gosh this guy might not even buy this note right because as I'm going through getting their information and feeling out the worksheet most of the time verbally I would say maybe a third of them go through the website first and put their information on my form and send it to me guess what I I'll call them up right away when I get it and start verifying the information that that person to person contact that relationship building is is what this business is all about it's not all about numbers sometimes right I bought lots of notes at lesser prices than competitors because they I built a relationship and they like liked me better whatever that means you know so and that's worth something like that's not that's not nothing that that's definitely worse something and that didn't happen over in the first year that that took years to learn how to negotiate and talk to people so on that first phone call we're getting to when they say no on that first phone call oo I 3% interest rate ah what are you a bank dude why would you do that you should have get got like an eight or nine or 10 he's like well that's what the banks are giving well under writers aren't going to like that right and uh oh you got you got a thousand down on a $200,000 property Underwriters aren't going to like that oh it goes for 50 years Underwriters aren't going to like that so by the end of the phone call they're like oh my God my note's really crappy I hope I can get something for it yeah so when I call them back and give them a price the discount is not going to be a shock to them right they're gonna oh there there's a discount involved I get it and and they they'll be more open to hearing the options right it's not all about the full purchase then we got the options so when they say no I go back and I said well on the first phone call wait a minute didn't you say you know you'd like to pay off some debt or you know buy your your daughter a car or pay for your son's college or so let's see how we can work this out you know here's three options here's a full purchase price here's here's a way to get just what you need to pay that College tuition this year here's a way to get a couple years of that and I give them some different options um now I don't get everybody to say yes obviously right I don't what what what's the I think my stats are like 2.3% over 31 years have accepted and closed yeah I probably get 10% to say yes it's the other you know some of the a lot of them don't work out um and uh uh so when they say no I'm just I just go with those other ones I try to figure out what's going to work for them um and you know then sometimes they still say no you know a lot of times they still say no however then you just follow up with them call them next month call them three months six months and and I keep saying call yes people we got to talk to these these people it's not all about oh I could just send them a price in an email and if they say yes great if they don't great you're just throwing stuff against the a fan wallers to see if it'll stick right that's not the business right you can send out numbers all day long we're not quote machines right we want to get a deal if I'm sending you a price as a broker you you negotiate the heck out of it right that's your job and that's that skills to be learned also is is the negotiating side deals are made on the phone emails are for confirming details and things like that but are made on the phone lots of phone time and you get information about that you wouldn't get on a form right why they sell the loan yes what the numbers you know hey situation hear the tone of voice you can get a grasp of what's really going on and more than just the asset itself absolutely and you could hear their tone and I'll tell you this and and whether it's a bank that you're buying it from or or a mortgage company tape or an individual note holder there's stuff they're not telling you right and our job due diligence is to peel that onion and find out what they're not telling us because there's always always always something they're not telling us yeah right oh you showed this to other buyers why didn't they buy it yeah well I don't want to tell you well I'm gonna find the same stuff so you might as well tell me right now yeah right and not waste of our time so how many assets do you see are actually serviced by a licensed serer ah half maybe half yeah like some some states require it like Arizona requires that if you carry back a note it has to be serviced by a a licensed Servicing Company um and other states have have similar rules but you know note note holders again you know this is they carry back one note in their lifetime right it's not their business and they just get the payments every month and and these days they they get cash app or a venmo or a or a PayPal or something and and and that's where we get the payment histories from but I would say about half already have a a Servicing Company in place right that's pretty good actually yeah I'm I'm kind of surprised by that right you know most these are Backwoods kind of deals that just happen and whatever how do you deal with are you licensed in all states to buy debt right there's certain States out there that require a debt buyer to be licensed um do you do that this is seller finance notes the only state that I know of that has regular ations on uh brokering notes if you're buying them for yourself and you keep it full term you're not a broker you're a buyer and a holder and that's one thing but if you are uh G to broker them the only state that I know of that has regulations is California California requires that you have a real estate broker's license to broker notes and uh that's hard for some people to swallow because there's a lot of notes in California um I have my license there because I live there and that's where I started so I just got it you know don't need anybody slapping my wrist or checking up on me um but other than that you know as far as I know you know I'm not a licensing expert but as far as I know you can broker notes everywhere except California if you don't have a California real estate broker license yeah that's cool yeah and classic California yeah well let's not get into that this is a this is a business call so I'd like to know give was your worst Story You've ran into where it just was just bad or your worst mistake even no I try to forget about bad things that happened even like an argument with the wife you know last week I'll forget about it because yeah it just drains your energy and stuff but um the wor successful one yeah just the facted lessons for others who are watching and saying successful meaning I purchased it worst one there's a uh I I guys I I'm I'm really struggling I have other people's stories of their worst deals but you know like uh buying uh what you thought was an owner occupied single family home a note on a owner occupied single family home in Oklahoma and it turns out that it was built out of hay it was ay hay home a process I looked it up there's a way to do it but it had burn they didn't have insurance but again that's that's not my story that's an associate story but um yeah my worst I've had there there are transactions where you're like you're like nail biting wondering if it's going to get the closing or not because of tital issues or because the note payor is is not friendly with the seller of the property right they there's a little b battle going on they don't have a good relationship they hate each other and it gets it gets sticky you know it gets stressful on our part because we're like the mediators trying to make everyone happy and uh and things like that gosh uh I really wasn't prepared for that question I I don't have even like my two foreclosures I I had a windfall on them so yeah you know those aren't even bad stories youen I think IDE oh go ahead have you lost money on a deal no never why because I purchased it properly yeah right if you purchase it if if someone says hey this is this is how much I'm selling my note for and and you buy it for that price without doing your due diligence your own due diligence you know it's a crap suit you're you're taking a risk you're being you're being a speculative investor at that point right right oh is is this a good time to do that before we're almost done yeah we've got not a lot of time yet left let me let me I'm going to share this real quick because um I really want uh your listeners to know the difference I'm pretty sure it's this one value based investing versus speculation okay I I learned this from this big thick book this is Graham DOD uh Graham and DOD security analysis mcra Hill this book is huge at that half my face and it was written a long time ago and it's it's a lot about stocks and different things like that but it it really stresses the difference between a value-based investor and a and a Speculator a value based investor I'll just read this off because I think that'll go quicker a typical note investor seeks an investment that provides current income preservation of capital and growth potential with minimal risk the typical note investor seeks a relatively safe secure trouble-free cash flowing investment this is me what what do value based investors want Epi this is a a phrase I coin Epi stands for extreme passive income extreme passive income because the check comes into your your box every month or it gets your a payment deposited every month and there's no one calling you up about toilets termites taxes or tenants right extreme passive income um value based investors want to take advant of the power of compounding right uh what is that when when you got when you've gotten a loan in the past and you signed your truth and lending document and you it shows you you're getting $100,000 loan but you're going to pay the bank $272,000 that's the power of compounding that's what we're taking advantage of here uh we want preservation of capital we don't want to lose money we want minimal risk there's still risk we just mitigate it uh we want a relatively safe secure investment for the long term would a value-based investor buy non-performing notes absolutely but not for the prices that speculators would pay for them let's talk about speculation a speculative investor is as follows a speculative investor knowingly assumes the risk of incurring a large loss if he or she believes the possibility of a large gain exists the speculative investor understands the risks expenses and the time involved in the investment he thrives on the concept of the greater the risk the greater the returns speculative investors want a home run every time they'll take large risk for the possibility of large profit will use their last dime with a promise of huge gains will pay little or no attention to the downside risk will abandon strict standards of valuation and risk aversion these are the differences these are the two types of investors out there and I can go on and on about this for for an hour or two as well but I really want people to start thinking I think that's one thing I got out of the conference at Paper Source last month when we we met um and we talk is that uh people want that quick Buck they they want to make a decision they don't want to do the work and they they get away from uh um what a real investor should be doing which is knowing what they're investing in you know uh crypto for example oh my God the people that were raving about crypto last year woo I I I can't even count how many people where are they at now right cash me outside right how about that there it's down like 90% And that that's always been crypto's always been in in and into the foreseeable future here a very speculative investment so I I I think at the at the conference where I was going with that is that a lot of people do not know their investor ID they do not know what where they're at and it takes a while for you to figure it out so while you're figuring it out why don't you broker some notes flip some to investors that know what they're doing and see how the process works and see if you like how that investor does it or you like how that investor does it and then you'll narrow it down to what what you're I'm looking at your picture I should be looking up here what you guys are are looking at uh as far as what your investor ID is so I I wanted to get that out there for the for the public in general you got to know what kind of investor you are in before you start investing in anything absolutely so we you you we kind of hinted at it before but you you talked about uh looking out to the Horizon here uh with the non-performing and the and just market conditions and and all of those kinds of things what's your take what do you see coming well we've never seen nothing like this in history right all of these different things that are happening at once with the war in Ukraine and and in Ukraine and and the the gas prices and the oil stuff and and the inflation hit in 8.6 and then interest rates just bumped for a 30-year fix 6.1 now two months ago was like in the fours yeah this is unprecedented how fast interest rates are going up now I'll tell you this though been doing this for 31 years I know when interest rates hit 6% for me my opinion my statistics when interest rates hit 6% much much fewer people are going to be able to qualify for conventional Bank financing and there's going to be a lot more seller financing coming up here right so I'm jumping up and down I've been waiting since the early 2000 right go up I as note investors yes as performing individually held single I want interest rates to go up because then they'll get closer to my yield and I can give a little bit better prices sometimes yes item so uh I think that we're going to see more seller finance notes on the horizon um I don't know how all this is going to play out you know with the economy and everything like that uh we just dipped into a bare Market a recession is looming um and and we're just going to continue to move forward I'm GNA continue to do the marketing uh but I do expect that I'll be very busy in the next couple years yeah yeah so I know April said that gave your Twi comment on in the thread oh Twi yes Twitter is my little slogan I came up with I I I thought way back when I watched Austin Powers I was just like that's what I'm talking about right everyone says it now that's what I'm talking about not just a mouthful right five that's what I'm talking about I'd rather just say Twitter Twi T Twitter and uh and get get it out it I use it when anything exciting happening when something's positive when I catch a fish I'll shout it out when I you know when I hit a good golf shot boom Twitter you know yeah so uh that's that's my little thing kind of like I guess branding you or whatever that's my thing I'm Jeff Twitter Armstrong find me on Facebook at twit Jeff on Facebook so everyone appreciate you coming on for the hour giving us great really good it was awesome just that experience and knowledge is overwhelmingly awesome and guys feel free to reach out to Jeff he puts out a newsletter that you can Gras so much great information from um just stay in tune with them take a look up on LinkedIn Twitter everything else out there and just tune in with them and learn from them he's a great guy to learn from and he's open book so thank you Dave yeah um it's you know my website Armstrong capital.com I I send out every Wednesday I'm pretty sure you guys get it I hope you get it a little tips and training by Jeff just little tidbits an article every month things like that just to keep that motivation going yeah you know please feel free to sign up for that that newsletter on my website and yeah questions email me I'll get back to you yeah yeah email is always best I'm really busy on the phone so most of those go to voicemail and I I return phone calls but uh email me as best you'll find it on the website thank you guys for having me thanks Jeff everyone have a good weekend we will be catching up with everyone soon but uh if you have any questions feel free to take a look at the fa YouTube channel Facebook group and all that good stuff and uh take a look at the not training that will be coming out shortly thanks everyone for tuning in and uh we'll talk soon you thanks guys calculate that as a Ang return versus a one-time lumpsum Roi because that will dramatically increase returns no matter what you do and you could do this if you could do this four times a year season it for two months sell it to us season it sell it over and over again that 10 grand on 40 multiplies and and yes we're more than happy to buy notes from you all through the year any [Music] [Music] day hey everyone J puts here from jkp Holdings longsi as always Mr Nathan Turner how are you very good very good try to stay warm oh my God apologize for that I a button so I wanted to make sure that we connect for a few minutes let us people who don't know who we are kind of get to figure out what's going on here um I'm Dave puts I've run jkp Holdings for about 10 years plus I've been buying notes uh mortgage real estate back notes for that many years and um I've been primarily buying Bank originated but we are working into this idea of seller finance notes we bought a few of them we're learning a little bit more about them and that's where I'm at Nathan care Share about yourself so I'm Nathan Turner uh I started in notes in about 2008 and I was creating notes like a lot of you guys too and uh it was in Ohio so in Ohio it's a land contract we were making all these land contra cont TRS and and one of my biggest stumbling blocks is like okay how do we cash out of these how do we how do I make money on what I've now created uh and took some classes and started meeting some people and learned all about notes and this whole secondary Market that I had no idea existed before uh and now it's kind of come full circuit feels like where where now Dave and I are here we want to help those who are doing what I used to do about creating notes there is an outlet and there is a way where you can cash out of these you can go out and make some more money and we are more than happy to buy your notes uh so we're going to get into all that stuff today but that's just kind of a real brief introduction absolutely we have a lot of people here don't know who we are a lot of people are really interested in this topic and what we found is a huge bridge between the world of note buyers and those are originating notes the seller finance owner finance origination world and us it's almost like two different Bubbles and what you're going to find out today is that our connection between what you guys do what we do can be seamless where it just flies which is awesome so I want to make sure you guys tune in ask questions I got few things going on here to kind of track things we're on LinkedIn we're on Facebook uh hopefully everyone can see us and hear us and all that good stuff if you have problem make a comment in the box and all go from there but we wanted to start off with you guys um we do have some guests which we'll bring on a second but we wanted to just kind of introduce what we do and some of the first things what we want to talk about today yeah so we like it's it's it's a big world and it's big leap I like I say I started out with creating notes uh which is great and I love creating notes I still do it today a lot of seller finance notes mainly what I buy and Dave as well is is mortgage notes so people will go and get a mortgage with a bank with whoever Wells Fargo Chase Bank of America You Name It Whatever Bank um the bank will then sell that note and there's all kinds of reasons why they sell that but but short story is we will buy those notes uh we are not Banks we act as Banks do in some cases uh but we are we don't actually own the property we just own the mortgage attached to the proper property or the note attached to the property and so we collect payments in that way so that that's a very very brief introduction what we do what else you got Dave yeah so one of the things we wanted to First share with you guys is that we get the concept of morgage and Note and what you guys are doing we get right but what we want to share with you guys is why why would you sell a note you know and what do you need to provide to us and what you don't need to provide to us to make the numbers work yeah right so one of the things we wanted to share with you guys is that you guys make huge profit when you create that note huge profit you create a note that you're into a deal for 40 Grand you create a $100,000 note oh my gosh it is awesome at a thin air you created money and we have some great people who are going to be joining us today who are doing just that as well as those who are doing it on a larger scale they'll be in the chat I'm sure so when you create that note what you don't realize that you can cash out everything you're into it for plus more which is awesome that that that's what we do we we go around we buy the loans like I said I do some origination still uh and I enjoy doing that but my main business is buying already originated notes so somebody else created that note I'm just buying it as an income stream uh that's my core business so I hopefully you can see already how our two businesses really come together so we have some cheat here to kind of go down our checklist and make sure we include everything for you guys um so when you create that note and you create this money out a thin air do you know you can sell that note to us the collateral and just create another note amazingly enough I'm finding a lot of you guys don't know that we exist or where to turn to sell that note and today we're going to talk about what you can do to turn to sell the note to any of us and what details you need you can take this money and go buy another property with it you can do anything you want with it the one caveat is some of you guys have some assets that are non-performing oddly enough we buy them too oh I'm crazy but we buy them too right yeah both Dave and I started out really you know after the after the whole recession happened so we we both started out buying non-performing notes as our main business where people are not making payments living in the house that's what we started buying in 2010 uh and that's been a major part of our business for the last 10 12 years yeah so if you've got one of those problem notes or let's say they're just not paying regular and they're just kind of a thorn in your side we buy those too we call those scratch and dent so we'll buy the scratch and dents we buy the non-performers we buy the performers we buy pretty much anything so hit us up yeah so when you're looking at buying this kind of stuff there are two different worlds you play in we have the seasoned note and buying at the table at the closing table you can sell either one of them understand the fact that if it has some seasoning which just refers to a time period of proven payments we can buy it for actually a bit more money right than if it's brand new the risk levels higher you can also sell part of the loan payments the first five years or you can click the whole thing and buy sell a whole note off and do what you want with it one of the caveats we've seen recently and we actually have some two people who are Professionals in their space as well is creating what they call 8020 loan we have 80% on first 20% the second and you can sell the first off and keep the second for payments and sell the 80% of whatever loan you're creating for huge profits for you guys and then you still got that 20% second that you can collect some money off that as well uh so you still have some cash flow but then you've got that big chunk that you can go back out and do whatever you're GNA do or whatever personal thing you've got maybe you're sending somebody off to college or maybe you're you know renovating your own kitchen or you know whatever it is you've got money needs for uh we're here to help fill that Gap yeah absolutely so um I want to I'm just going to bring up uh some information here what we do have today um is a few special guests who are not going to be on video and then two guests who are actually be on video uh if you're familiar with Note creation subject to or any of that kind of world you probably use an underwriter well we have Max from call the underwriter on he'll be off video uh but he's going to be discussing things or answering questions we need to to go to him uh we also also have soow who runs home key servicing uh soow is a service provider who will act like a landlord for rental properties but for not space we're going to get into why a servicer is key for us as well as for you guys as we go along and and soill is that's one Service Company there's a bunch out there uh we happen to have soill here he can answer all kinds of questions he'd be a great resource for you uh if you move your services over to him fantastic that's that's good for him uh good for us and we'll talk about why that's good for us as well we'll get into that awesome so let me uh switch over here uh we should be good we have some special guests on right now um may just make sure we got going on we have uh two guests with us right now that we are really excited about right um we have Justin and Melissa hopefully you guys are there and we all have un muted so um what we want to talk about today with you guys is this idea of you guys create notes and create dollars out a thin air which I think is awesome oh J you're still muted can you Melissa can you share a little bit about how you got started in this idea of creating notes okay so please forgive me because some of the things that you are going to see you're probably going to make you cringe like the fact that I use apartments.com okay definitely open to doing more better as one of my real estate Associates say um I've only been in this market for about two and a half years so it's been a learning game right it's definitely been a learning curve um my first deal was kind of just dropped in my lap and I feel like God says okay you're done doing wholesaling you're smarter than this this is what I want you to do you know and it just really after learning this strategy I was able to get out of the Rat Race and create millions of dollars in like 18 months so it was life-changing for me very fast um I do specialize mostly on getting subject twos and then doing an owner finance with those subject twos um and I get 20% down and I create a great monthly spread for the most part um and yeah everybody pays through apartments.com and it's a good life however I do often find myself uh cash poor right so I'm I'm like you know now I've gotten a hotel that I'm looking at and I've created all of these millions in in notes and I wouldn't mind cashing some of them out so I could get some cash to reinvest into this hotel that I'm looking at so hopefully learning all of this by the end of this uh session I'll be able to to do that yeah awesome we may have to spread this out into a couple of webinars because there's there's a lot of information but you're in the right place this is this is great that we're and we want to remind you guys if you guys do catch this video You're middle of it this will be on YouTube will'll be on the Facebook page uh be on our website uh but yet YouTube channel all the good stuff is there just look up jkp Holdings on L's uh on YouTube you'll find this video so Justin can you share a little about your background how did you get involved with notes uh very very similar very similar way I uh I started off wholesaling and I just man I I just really didn't like it I was cold calling and you know it was like offering these 50% deals or 50% for cash and I just I just didn't like it and then I I kind of discovered the more creative routes that you could take and just making win-wins for owners and you know for buyers and sellers making win-wins for us you know I just try to make as many um it seemed like I could help more people that way um and and help them faster There Was You know I didn't have to raise as much Capital you know and a lot of times when I did raise the capital I was able to you know very very similar to um very similar to what Melissa was saying you know buying subject two and then if I had to come out of pocket any cash I just turn around and and get that cash back from an owner finance buyer um a lot of times but sometimes you know we've flipped a couple of houses that we just you know that we couldn't find buyers for and we just ended up owner financing them and then you know we were like well we can sell it we've heard that you can sell notes so you know eventually you know and I was you know earlier this week I actually sold my first note so I've been through the process um but as soon as I opened up that can of worms it was like holy cow there's so much more to this than than than I even knew yeah and you know what I went through the exact same thing I started creating these notes in 2008 in in kind of all over Midwest Ohio Indiana Michigan and and it was like okay there's got to be a what to cash out of these and I'd heard rumors you know I'd heard these stories about people that buy notes and I went to a um a training seminar in 2009 and it just blew my mind like it just all this huge secondary Market that I didn't know existed I went to a to a conference later that year uh down in Louisiana and and everybody's you know talking about this thing that I just barely learned about and yeah it's it's real and it's a it's it's a very vibrant Market we'll say yeah my my first one one of my first deals I actually traded equity in in two houses for an owner finance house on the back end and so I had all this Equity sitting there that I ended up selling and making all my money in the front end because I sold the other two houses but then I still had this other one sitting there and I was like well that's all my money that's tied up still sitting there yeah um and that ended up being the one that I finally sold and I was like oh well that wasn't as hard as I thought it was going to be yeah um but there was there was just some intricacies that I had to had to had to learn and kind of get punched in the mouth and keep on rolling with okay awesome so we want to get into a little bit more of the details of this stuff um to make sure that watching you guys well what we're talking about here so what people get interchange words a lot of times right so there's this called land contract contract for deed we also have a lease option we also have you know D trust all these different words that mean different things but generally mean the same thing right if I say listen is it a mortgage or land contract you may say why does it matter well in legal sides if a loan goes not performing that does play a role certain states don't allow land contracts you talk to people in Texas they say what are you talking about right um I have no idea what a contract yeah you talk in Ohio Indiana it's all over the place there Michigan right if you go to Louisiana it's called a bond for deed if you go uh one in the Carolinas I think it calls an agreement for deed they're all basically the same thing for our purposes we we kind of lump them together and call it contract for deed or cfd yep and we need know the difference we would ask you guys to let us know what it is if it's a mortgage or not I'm just make sure you tell us what it is because we have to price it differently and certain states are actually discouraging land contracts with the with the judges so and certain situations where the land contract can't be foreclosed on or can't be evicted you actually have to do a foreclosure depending on the numbers and that doesn't necessarily mean it's a dead deal it just means we just need to know what it is up front so we know what we're going to get into here if we need to convert that over to a mortgage at some point or or something else but we have options we have things we can do uh we just need to know what it is getting started we lost Melissa for a half a second Melissa whoops hopefully she can jump back on we'll switch over so when you guys are when you guys were talking about that I didn't even realize that we could sell a leaf option the same way we would sell a a regular mortgage note um because I do have lease options but you know we we like to take our we we like to see lease options as the dating as as dating our tenant before we move them into owner finance yeah um and and it actually works out really well for us it's you know we get to capture you know all the all the tax benefits of being a landlord originally and then we switch over into an owner finance deal um but I didn't you know my concern was always well dang you know if it's a lease option I can't cash out of it because I can't sell it because I don't have you know they have the option yeah yeah so short answer is yeah we'll buy we'll buy lease options with a lease option it's a little bit more particular uh depending on the terms of the contract a lot of they're all different you know different lease options are written differently so we just need to read through the agreement and understand what's in there but short answer yeah we'll buy lease options as well we're probably we're probably going to do the same thing and flip it over to uh to either a land contract contractor deed whatever you want to call it or to a deed of trust or mortgage a note will'll probably convert it to something else sometime in the future but yep short answer yeah we'll buy that interesting okay we had a question here to um Kevin yeah Kevin asked uh he does Private living for 12 months or less um is there any advantage of selling short-term notes and are marketable if a note is 12 months 5 months 30 years 20 years it's math equation right so um anything you want to ask feel free to put in the chat as well but yeah we can price it you may get a significant discount you may not we run everything through our model and we figure these kind of things out right um is it markable absolutely the world of notes is really buying it is the numbers right we base our deals on numbers where we're going to get into you guys base on dollars um and we're GNA we talk to Justin earlier before we went on and that idea of basing on dollars may make sense in some worlds but we're going to show you why it makes sense to do it based on returns better so um the other question we have from is King vered note of a land contract into a de trust absolutely it's done very regularly um and we have Max on the audio he can tell you about that in a short while but if you need to um you can definitely convert that over call it's called call the underwriter um go to their website and you can convert any land contract over to a note so and and like even Justin you're saying you need to go to a lease option and then convert them over um you don't need to I mean that's fine and if you want to date them for a little while before you make it permanent I get that uh but you don't have to you could just you could just start off with a give trust a mortgage whatever whatever it is in that state is it is it is it as valuable that way um for for is the is the note as valuable being a lease option over being a owner finance does it does that affect the value of that of that deal um so probably in order of value the lease option is probably going to be on the bottom of that um again not to say that it's not valuable but I'm probably gonna pay more for uh a d trust than I am for lease option okay getting feedback is that me yeah I'm not sure who that was but um Melissa's back welcome back hey Melissa over here pretty much the Story of My Life um quick question about the lease option though okay so let's say that we we did a lease option with someone and we met you guys and you're like okay we'll pay we'll pay more for de of trust and not so much for lease options could we go back to that lease option um buyer and re you know redo the deal like start a dot yeah absolutely and then sell it to you okay absolutely yeah we would recommend yeah so so so kind of kind of you know piggybacking off of what she's saying a lot of times what we do is when we advertise for the owner finance buyers we have our lease option is say 5% 5% down and then our owner finance would be 10 to 15% down um would B kind of like what she's saying if I took the 5% down and then in a year say okay you still got ontime payments let's go ahead and convert it without you coming with the rest of the down payments um would that be something that would and then and then immediately turn around and you know call you guys and say hey I've got this owner finance um situation or or deal for sale uh I guess it'd be a note at that point would that affect anything so a couple of things I'll Dave I'll get you in a sec but so uh 10 Perc down is better than 5 percent down for sure of course you've got now 12 year 12 months of pay history though as well that's also something uh so that even even though even though that's technically rental payment uh yeah no they're making regular pay seasoning right right even rental payments are seasoning yeah and you may say listen I have two payments but then you say listen I have 12 month of rental payments I can prove that's more attractive than some brand new person right think about if you're buying a rental property if you're going to buy a performing rental right what do you do with situation where the you know if property already rented out for a year you feel good about that renter yeah or if it's brand new rental you going to buy it performing rental and then brand new it's not so attractive so months kind of offsets that a bit that the 5 per down oh okay that was that was going to be my next question because a lot of times we wait for them to come up with the rest of the down payment to convert them over but it sounds like we'd be just fine just moving them over into an owner owner finance as it is yeah and and so maybe that's the next thing we should get into daveid we've had another question about that about what kind of terms we're looking for that kind of thing maybe that's the next step here yep go narrow checklist here so go ahead and start off yeah oh you want me to sorry hey go ahead sorry okay so we're looking at a few different things when we're looking at a note um down payment is is the first thing so the bigger the down payment the better uh it shows that that person's got skin in the game and you guys all know this this is this is what you do uh but that bigger the down payment the more skin in the game um the safer it is for somebody to take that on and have confidence that they're going to continue to make payments long term so that's that's number one down payment bigger the better uh I would say as a general rule I would go 10% Dave you looking anything different is that about right no it's weird right with this seller finance world with Bank of reginia notes this never was a problem was never an issue so it then now the world is I'm more worried about LTV now because of what's going on out there than actually down payment per se so on a $5,000 I would think more percentage wise so if that note is five grand but it's a $50,000 Note versus a $100,000 note to me that percentage is big but I can figure out the percentage wise so down payment will allow me to figure out the percentage that was down made for me that's more attractive than a dollar amount yeah good point before we get to our list I wanted to make sure that you guys have some more General now before we dive into it and we're going to have a form I'll put it in the chat box here for you guys that will um allow you to get the full list of items that we want um any not buy one actually so one thing you have to figure out is are you a borrower or a lender and what I mean by that is a lot of you guys out there are sub2 buyers where you bought a property subject to and you're technically a borrower to the other one but then you're a lender to the new owner owner and there's some dodf Frank rules behind what you're doing to make sure it stay legal we're not going to get too deep into that right now but if there's a question about that we can kind of hit on things but we got to make sure that if you're borrower and A lender we may make sure we're buying that second lean that's created or that cfd whatever you're creating is able to pay off the first and the contract shows the fact that we can do that in addition to that making sure you let the bar know that the first lean is still there you need to let the borrower know that the subject to lean is there or because there subject to situations if you have questions we have matx on to explain a little bit more about that but you need to make sure your borrowers know that the first lean on there um some other things are um theorization upb um where to get into what that means but understand there's a upv unpaid principal balance as the note goes down and that should stay onization wise and that relates to a payment right when you make a payment that's 742 and 36 if they pay 740 that wasn't a full payment it sounds foolish but it affects the way the balloon on the end of the payment is even that change because if you take 10 cents and multiply by 360 payments there's a balloon at the end of it and that will change everything out and if it gets contested in foreclosure we buy it and starts defaulting that all come back into play so I have I I have a quick question I can go back to the subject to question uh the subject to discussion it and correct me if I'm wrong but if I have an underlying mortgage and then I have a wrap note on it and you buy that second lean note it would wipe out the first and make you the first lean holder correct yes yeah okay and and it has to happen that way right does it have to yeah I guess it does I mean it doesn't have to we prefer to let's put that way yeah right because I again another thing is if you're buying a first lean or buying a second lean the the pricing changes just like seasoning so the first lean is is not as risky as the second which means I'm going to buy that second at a much Deeper Discount okay so let's let's say I have an underlying lean that's dang near the same as the if if if I because I I'll buy I'll buy subject to um houses that have no equity in them and then I'll wrap them you know obviously I can't I can't sell just that second lean right you can actually I love it I love yes okay I guess I guess I'm confused if if I sell that second lean let's let's use real numbers here you bought a 72 property for 40 Grand you're into it you rewrote a note on that property say $100,000 so you have total debt of$ 140,000 if I sit there and give you say 80 grand for it you can take 40 of that grand pay off the first which I I would I would want and then you get 40 Grand in your pocket and you walk away and then I'm in first position now right and if I don't and if I don't pay off that first lean wouldn't wouldn't that first lean get paid off at closing so there's no closing here right we're not doing a title closing here all this is not a property sale this is a note sale just notes okay I love it I love this is there is there any is there any legality there that I should be you know concerned with you know with in a situation like that because if that first note gets called I mean I'm I'm technically I'm I'm out of the Woodworks there what why do why why would I pay off that lean is that sense I mean I know I would ethically but correct yeah why would somebody pay that off our contract probably set up that we would pay off the first inside of net screw kind of account in that contract with you guys Hey listen I need to payoff balance that first make sure it's included in our contract would say this would happen and we probably run it through like an escro or attorney to ensure that money gets Devi correctly okay to be quasi closing I kind of set up that's how I would probably do it in that situation I haven't done it yet but that's my thought process okay so so why would why would somebody only sell the second lean you can't why would somebody why would somebody even buy the just the second Lan so second lean holders are a little bit of a different it's a it's a different spin on the same thing that we're talking about they have all kinds of reasons Dave go ahead I don't do s let's say you have a lot of loans were created with piggyback right 8020 loans right you have a $100,000 property you we can use a million dollar prop whatever they first one's like a 60 the other one's a 20 right 20 grand total 80 grand so now you have up to 80 grand on$ th property you have LTV at 80% which is not the best but fair now I can go and buy that second lean for 20 grand or I could buy for 10 grand say right and I can start receiving payments on that second I'm not a secure as the first right I can get won get all that stuff but I can buy it but the problem is if that property drops in value my second lean gets squeezed with Equity but that's a that's that'd be in a in a second lean smaller in a smaller second lean against the house versus a wraparound mortgage so in a w so in a wraparound situation we need to pay off personally yes because you say you have you know $100,000 seconds right and a 40 $40,000 first technically right and the property is only worth say 90 you're up to 140 I would need you to pay off that first for me to get in position right okay that's that's I guess that's where I got lost because I I was like wait a minute in a WRA situation you got to pay off the first yeah we're getting a lot of questions in the chat I appreciate you guys uh so again we're in the numbers if I sit there and bought if you if you bought a 72 and you bought for 40 Grand whatever the situation is and the balance of that first lean is 40 Grand you then create a new note save for you know 80 grand whatever 100 Grand I can come in buy that $100,000 note for a discount say 70,000 75,000 you then would pay off the first for 40 Grand you would collect 35 in your pocket we then our lean because the fact that the other one gone moves up the first position and now we're in first position of your new C created note so so would you would you buy that would you buy that as if it was a first position lean or would you still buy it with a it that way yes yeah okay the risk level is less there because it's a first lean it will be a first lean yeah okay right we'd have that understanding that the first is gonna get paid off so that would put us into first position and Melissa did you have a question on that too well I had a question based off of the fact that let's say uh like Justin said we have a deal that has no equity but then we created money with it um we owner financed it let's say you know the house is worth 100,000 and we sold it for 140,000 right you say you buy those how do you buy those since you're not buying against the LTV apparently we're basically buying based on returns right right look at LTB as a factor but we want to look the fact that we're buying a bond initially right it's a bond with maturity dat and most of the time bonds are calculated by yield so we're going to say what would our annual return be on this situation we're going to buy it based on the annual return 10% 12% 8% whatever the number is calculate different things differently so that's one of the factors is making sure your interest rate is a pretty good high number because the lower the interest rate the lower my discount has to be or more my discount be right so if you're creating notes at 12% you're doing much better than someone creating 8% so then going back to your thing with the equity um you know if it's a $140,000 note and the house is only worth a hundred we're probably going to price that on the value of the house in that situation because because technically it's underwater according to to present value of the property so we're we're not going to you know we're not going to play the game where we think that the price is going to go up on the the value is going to go up on the house I and I'm not saying that's a bad game to play that not our game we're going to do it on today's values today's unpaid principal balance today's property value whatever it is right now do that make sense uh no because if you're saying that you can sell a note that um does not have any equity in it so can you can't you yes you can but the pricing is going to be based on the lower of the two if if the property value is lower than the unpaid balance we're going to do the pricing based on the property value and vice versa and and what what would that pricing look like it depends on state step to yeah it there's a lot of questions go into that um sorry someone ask how ask questions in the chat feel free to put in the chat we'll definitely answer as we can um so pricing based on state for us and we always price the fact that it may go non-performing so that means I may have to foreclose on it and different states have different regulations and rules and pricing on foreclosures where Texas is awesome Missouri is great go up to Chicago you're having more problems right Northeast is just disastrous California some of the states out here have a long for culture process which means I'm have to whole that property and tax everything else longer so my my return is going to be less I also have debt license to worry about so there's different things that go into the notes side of buying things and if you're looking to learn about the notes side um feel free to reach out to us we run a class on stuff about this stuff for note buyers but you guys as sellers you guys have to know the fact that every asset a little bit different based on price value of the house if this is a $40,000 house or $150,000 property that changes my pricing yeah right pricing yeah interest is a big deal uh which state it's in is a big deal seasoning plays A Part uh down payment to some extent like d says about loan to value so all those things kind of go in and we've got a list of those kind of things we're getting to stuff right yeah so one of the things we want to make sure you guys know is that there's thing called a legal bals too I I recently ran into a seller finance person it was going to sell me a note and they said here's the upb and we're trying to figure out how they came up with the unpaid bounds currently and what they did included like property taxes they paid up well we have to find out is that that's a separate dollar amount separate from the unpaid balance the unpaid balance F follows theorization schedule like a t and anything extra insurances taxes anything corporate advances is part of a legal balance when you collect Leal bals you can make an arrangement with the borrower or if it goes foreclosure I can add it to my bounds at the auction so make sure you have the unpaid balance there so then the unpaid balance uh that's and Melissa I would I don't want to pick on you but I just just to point it out that's the problem with apartments.com is that it doesn't calculate principal and interest all it's tracking is monthly payment which is good and we we definitely want to know that number but we also because we have an amortization schedule to follow we need to know how much principal and how much interest is being paid every month which is where a serer comes in so we get let me let me jump one thing before we get there yeah know the fact that please don't give us Piti for those who don't know principal interest tax Insurance all we care about is principal in interest why tax insurances are something we don't receive as not buyers I'm sure like you guys we don't receive it you guys may and then it gets paid out right our servicer typically does an escrow and pays that money out so we don't see that all we care about is that principal interest which does not change no matter what happens with taxes or the the the insurance part right so all these kind of deals of numbers and making sure that you don't receive part payment or you pay they receive more and it make sure it applies correctly using different services are great there are software out there to manage these things right however like landlording we have things called note servicers note servicers will reach out to the borrower they'll send monthly statements to the borrower they'll resolve issues with the borrower they'll if you're a defaulted loan they'll reach out and try to negotiate with them try save mods there are property manager in the note world what they also do is provide a system of tracking the payments unlike apartments.com where it's a rental system serer is actually meant for notes they'll actually have a system where it shows your payment and what they call a next due date like an adoration schedule if they don't pay for three months the next due date doesn't move until the next payment's made so if they haven't paid in two years the next payment gets applied two years prior okay where rental par.com if I say give me a payment history you guys will show me a payment history but I don't know which one that applies to and there ends the problem especially if we get to foreclose on it and that's the thing all of all of that information is important for us in for our worst case scenario for which is for us is foreclosure so we have to have all that information has to be accurate and correct and up toate so that we can give it to the attorneys so they can do the Foreclosure so that's that's a main focus for us as far as why it's important to track those payments the way that we'd like them to be tracked um and not even that we like but we need them to be tracked that way so that we can prepare Lo goes into bankruptcy they're going to want to see thec right if it goes to foreclosure prove the actual balance of the loan how do you prove it right with payments are all over the place and stuff like that um so one thing when we ask for our numbers which we'll share and we'll we'll share your link to a form we can give you they'll email you over the whole list of items um is we want to know them the you can go to a servicer and get the dashboard we have so how on here it can explain a little bit if you have questions where you can literally take a picture of the dashboard and it will tell you all the numbers that we would ask for right we also provide you monthly statements notes from the the the the borrower so if they reach out to the borrower all those notes are there so the interactions and all us note buyers wouldn't want want that information because it helps us know what the life of the loan's going on yeah yeah so one question we've had too is how much are Note servicers yeah well so we don't ever get involved with because most of our loans are Bank originated is you guys can put these in the note agreement so you can have the borrower pay for it the renter yeah if that borrower pays for it guess what our price will actually be higher we don't got to net that out pretty pretty significantly higher too I believe right I mean it's a pretty it's a pretty hefty um increase I know when Dave and I talked about that note I had for sale um I mean it increased the the the value of the note by like three or four thousand like oh wow because for next 10 years I'm not paying a a servicing fee I'm collecting a whole p&i amount right right I mean luckily for me we were we were kind of taught to when we use our service to put that in the agreement that the the serer pays or the borrower pays the serer and that servicing fee can be a significant portion of that of that payment sometimes yes sometimes not it's usually it's a flat fee so let's have soil chime in here yeah uh maybe you don't want to get into prising I don't know but uh which question there he is let me uh flip it over here sorry guys there we go flip over my uh system over here so so so how welcome um I appreciate you being part of it um I do want to ask you a question about this pricing thing we would like to know from you how much is it cost for a note originator to charge to for the fee for a monthly servicing for a performing note with home key so with us with home key um we have an all-inclusive monthly fee which is $35 um that includes managing collecting the payment managing the escros taking care of the tax statements at the end of the year if there is an underlying lean that you need us to manage for you we will also do that at the same price there's no additional cost um it's $35 flat fee we do charge a $100 setup fee which goes to our service provider for tax certifications and things like that but $35 is all we charge and there are servicers out there who may charge a little bit less who may charge a little bit more but then it's not an allinclusive fee they they tend to be more all card the more services you use the more you pay the less fewer Services you use the amount is a little bit less in our case it's all inclusive yeah so um we did have a question real quick about what information we need no buyers to buy um I put in the chat a link for a form fill it out and you'll get an email with all the data points we're going to get into in a few minutes what information we need as no buyers from you guys cool so guys this stuff is really cool stuff right and you can use a serer like homy to set up a situation where you literally can send us the payment history servicing notes you can send everything we need all the data pointing to get to but before you get to that I want to make make sure you guys figure one thing out please make sure that you're understand that if you're selling a note that you're into it for 40 Grand and we price it 50 understand that 10 grand may not be a big amount but if you can do that four times in one year that sniply return is amazing right so you got to make sure that your PR when you see an offer from us calculate that as a Ang return versus a one-time lumpsum Roi because that will dramatically increase your returns no matter what you do and you could do this if you could do this four times a year season it for two months sell it to us season it sell it over and over again that 10 grand on 40 multiplies and and yes we're more than happy to buy notes from you all through the year any day twice on Sunday I I tell you guys a funny a funny thing about the serer I I was because I've always used the serer and I didn't know that there was any the other way um I had no idea how much my the my borrowers actually paying I didn't even know that they were paying for the servicing I know we originally put it in there but I had to actually reach out to soale because he Services my notes and I I got I got one of their statements and I was like oh well this makes sense I was worried about taxes and all this other stuff and all that stuff was just taken care of by so and just made it so much easier and again the borrower paid for it hey there you go excellent nice so um just looking at some of the questions we got here um what states that servicers cover um understand the fact that you're right servicers are teching licens in certain States and don't need licens in other states every servicer is a little different um some servicers are not at all 50 states but you may not need all 50 states if you're originally notes only in Texas that's all you care about right I know Justin uses soow on home key if you're originally in in Texas just call home key and they can do it I know so how is working on adding additional licenses on um but yes so yes States for servicers matter so um I know we had another question from Michelle about um servicing Services I would say that your services from your servicer is more about tracking the notes right they're not going to do the they can sign up for door knock stuff like that but they're really just your property manager to collect and deal with issues and they I would have them do in yeah have them do more than less um they're set up to handle all kinds of stuff but but you're right Dave mostly it's it's taking care of the payments and everything surrounding the payments that's that's the servicers main job uh so how right now you guys are in Texas are you guys looking to get licensed in a few more States as well yes we're awaiting licensing in Georgia Tennessee Ohio um and then in January will apply for Florida as well um additionally we will enter Virginia Colorado and uh Indiana in uh February as well awesome awesome well North Carolina so what is the problem with North Carolina I am not a big fan of North Carolina yet um they are a little bit strict their their audit requirements uh from what I've heard from other servicers do tend to be a little bit challenging and what's worse is the audits do happen every two years at a minimum and their auditor prefers to come down over to your home office sit there and audit the books versus just doing it from North Carolina itself because all our records are online anyway and we have to pay for their expenses their flight their hotel their food things like that goodness yeah but but we do know other servicing companies that cover North Carolina South Carolina yes oh there's some really good services that do cover those States yeah we happy Yeah we actually I have a list of them on my due diligence portal portal.

jkp holdings.com servicers you can find it there the list um but I want to make sure that you know that so how really work with owner finance investors he understands your world that's why we brought him on we work with a lot of servicers a lot of them will get the paperwork from these kind of people and actually push them away because it's not as clean cut as Bank of America right that makes sense for everyone it looks a little different it's yeah paperwork is a little bit different and yeah they just they just want quick and easy yeah then there's other ones that'll dig in and look at the actual documents uh individually because that often is what it takes so how feel free to put in the Facebook Chat also the your website too if you want I know you're on there as well um Alex asked a question um any issue buying a note that's in first that has a second third or anything else behind it are there discounts that come with that do you even care about the supported notes straight answer don't not really the only time that come to play is if we go to foreclosure right and it actually comes to sale their notes are going to get paid but we're going to get paid off as well right we're going to get our unpaid balance say it's 60 Grand we foreclose on it we're going to get our 60 we can't collect anything above our unpaid balance our legal balance sorry we can't collect if it sells for 100 we can't collect the the equity on that right if it reverts back to us we get the equity but we don't get the equity or a proy the above or legal bound because we're not entitled to that money so these answers no no don't care the the things that we would care about is um outstanding taxes or Municipal leans things like that uh those place above a first lean in order of priority so those things affect our bottom line so yes we care about those things but any subordinate leans seconds thirds whatever no doesn't doesn't really make a difference man there's so much more to cover yes this is great I love the conversation you guys to have and I love the fact you guys are asking a lot of questions because this is a field I've talked with Justin numerous times and he's still learning what we're talking about half the time because it's a new world of of stuff and we're looking to do a webinar and hopefully you guys all stay tuned we do webinars every other week but we're primarily been focused on Note buyers and teaching them stuff um so we wanted to were we working on getting a webinar on there about how to create a note a successful note to make sure you're licensed correctly and that's what we'll bring on and stuff like that to talk about what you can and can't do such as the dod Frank laws right you can't write a note to an owner owner occupied property without certain restrictions there things like that will come into play and we'll talk more about that stuff on the upcoming Adventures just out of curiosity Justin Melissa do you guys have you heard of Don Frank do you know what that is okay yeah okay I've heard of him but or I've heard of it okay but um get that it has its place um yeah all right the big the biggest thing for me for for me is my understanding is the the limitations of of how many notes that we can create that we can originate um without having a an originator license right doank is a very big big legal document and there's things that we don't fully understand either that's part of it Max is the expert I always defer to him when I've got questions I'll call him and say hey can I do this yeah that's that's the main reason I even use an rmlo and an attorney just say hey here make sure I'm good yeah right max if you can chime real quick what do you guys charge for underwriting a note to make sure it's do FR compliant yeah great question Dave um standard underwrite is 679 um and that's a a Bonafide fee that can be passed onto your borrower uh but your borrower can't pay it before being offered a loan and so uh one of the lending laws um Fair Credit Reporting Act and Equal Credit Opportunity Act so FAA and ecoa state that uh you're not allowed to charge anything to a borrower prior to offering them a loan except for the only fee that's transferable to a borrower upfront is a credit report fee and in our case we pull the credit for you so you can't even charge that to your borrower so a standard DOD Frank underwrite is 679 we invoice you in two pieces we invoice you 1119 up front and then we uh get with your borrower and we gather all of the documents necessary for a file we work the file all the way to completion um and then if we can get your borrower to meet Dodd Frank with requirements and certify them then we would invoice you the final 560 at loan approval so on the loan estimate um or the old uh HUD one if you're familiar with old style lending that loan estimate um you as the lender have to disclose all of the cost of credit to your borrower and so that 679 underwriting fee would be added onto your borrower column uh as one of their loan origination expenses so you would front us the 119 we'd get your borrower qualified and then at closing uh that other 560 would uh you actually basically uh the entire 679 would be a Bor closing cost so you can recoup that cost uh at the closing table nice awesome and I know I Max has been extremely helpful for me when I'm doing some originations and and like I said I've gone to him with questions can I do this is that okay and he'll let me know yeah or nay and just a quick uh side note too uh Nathan for anybody that doesn't know um we don't just underwrite for Dodd Frank so uh I do a lot of commercial work and a lot of uh non-owner occupied work and so if you're ever in question as to why would you want to underwrite something if the law doesn't make you um I could have a discussion with you and give you a lot of good reasons why uh just in a nutshell though a couple of the big ones would be like for instance we have an investor in New York that buys a lot of uh apartment buildings and basically flips them and and resells them to other investors they can be speculative Ventures we underwrite his borrowers to his standard that's the beauty of non owner occupied is then Dodd Frank is out of the picture cfpb is out of the picture and you and I sit down together as an investment team and we set the criteria that you want us to underwrite your borrower bu uh and so what we're doing is we're uh ensuring your best interest from a uh risk of default standpoint uh the other thing that it's doing is it's creating a consistent um due diligence uh file for your Ventures and then when you want to go and resell those notes uh to somebody like Nathan and David um we've got files that you can present to those note buyers that demonstrate the professional consistency uh with which all of your borrowers are vetted uh and that can bring a lot of value to your note awesome um max so for those who don't know Max is co underr you can go to caller.com um he's he can talk about all this stuff in much more detail than we can I know Michelle is asking about that Sydney thank you for jumping in there I appreciate that so all that good stuff thanks Cindy Michelle I want just wanted to come back to your question about so we act you actually act like refinancing yes yes yes we want to refinance you so you can go out and go and buy you know create more notes and then sell them to us again and again and again uh take whatever profit we don't care yeah we want you to make a profit uh we're in it for a different reason so we're more than happy to have you make a profit off of us selling it to us and then you go and do it again and again and again and we'll buy those all day long so what what makes it a valuable note we won't get into the legal side of it but understand the fact that for us we have performing and nonperforming assets and those need certain data points to figure these things out we're going to go through them quickly here but again in the chat there's a whole click this the form link click on it you actually go to a form fill it out real quick for us um phone number is not required but that will actually send you an email out directly from jkp holdings.com if you don't get it reach out to us and we'll go from there but what they'll do is it give you a link to either PDF or spreadsheet that you guys can get and actually just fill it out and send it to us if you want to make it nice and easy for you so what do we need and what do we not need let's start what we don't need um it it's it's comical because in the last couple weeks we've seen a lot of notes Mel fiance coming up to this webinar I don't need to know what kind of fridge is in the kitchen yeah don't care I don't care what rehab you did I don't care the borrower was a locksmith and his grandmother was the mayor I don't care credit score oddly enough I don't care we actually car very little about the borrower themselves yep because Max or someone else underr the the paper that it's legal and it's for closable we want to make sure that the the collateral is proposable so our attorneys will review it as well make sure it's for closable legal paper because performing assets great doesn't matter if performs forever it matters if it defaults that's when the paperwork kicks in so um if you have questions again feel free to put in comments or or send us an email you'll get that um we also have lean position matters why we talked before about the fact that first second third fourth we can buy a fourth lean but understand we're going to buy a sniffing a discount because if it goes to foreclosure and there's not enough money to pay we get wiped out it can happen original balance is another item we require we need to know what the original balance not what you sold it for but what the original balance was of the no creative so after the down payment what was that amount that you are financing the amount that you're actually financing yep term what was the original term on the note was it 10 years 120 months was it 360 months right what was that term when was a first payment date what that helps us do is figure out when the maturity date is going to be right if you originated this date usually a month and a half later or whatever it is we need know what the first payment was made and going back to term we we deal in number of months so we talk about 240 months or 360 months or something like that if you just have it in years that's fine as long as it's like a round number so if it's 18 years that's that's fine we'll figure out how many months that is but if it's 18 years and six months we need to know that we need to know that too right would would it not be easier to just give you the maturity date so that too so there's ways to figure out how many months a term is by using formulas and financial cers we can right and if you're not able to do it let us know we can either figure it out for you or we can there's different ways to figure out the other numbers through math through a financial calculator or through spreadsheet numbers to figure out what that number is but if you have it which should be on the Note the term should be on the note first payment number of payments maturity date um and a balloon amount which will'll get you right we need know the balloon and how much that balloon is for because if it balloons a certain date a certain dollar amount that changes the the monthly payment in the numbers in between and we're we're mostly we are going to ask for maturity date as well um it helps us just to make sure it's accurate yes that there wasn't there wasn't a mistake where it's one one way or the other modification let me let me let me ask you maybe this is a question for Max but like in in a situation where we create a note that's amortized for 30 years but there's a balloon at 10 years I I mean I I've never even done that for the reason of I thought it was you know I thought it was more beneficial to put it out for 360 months go ahead Max yeah yeah the biggest issue is uh there's certain risky features that are prohibited in dodf Frank uh and then there's other features that are you can do them with limitations if this then you can do this but if this you can't do this so typically in dodf Frank so we're talking owner occupied one to four family you're allowed to balloon after the 60th month so if you do want to do balloons just kind of try to think about it this way the the entire spirit intent and flavor of Dodd Frank is to prevent uh home owners right families from being displaced and creating another 2007 housing bubble burst so uh when when we talk about putting somebody into a brand new home um you you can't put them in a home that next year all of a sudden if they can't refy it they're looking at being foreclosed on and losing their home and so the Federal government requires a certain uh standard of uh consistency and predictability with respect to how soon do the terms of this agreement change uh and so for Dodd Frank uh one to four family occupancy think about keeping them in there for five years typically I actually prefer no balloon it's it's if nothing else it's easier math en I prefer not having a moon Dave do you care no I mean it's a math equation for us but it pretty much doesn't matter to me because most likely we're not going to get there most the time understand most loans don't last 30 years they just either paid off or if something happens to the house they sell it something always happens most people don't hold a house in 30 years so I'm not too to wored about that ju Just so you guys know too when when we underwrite for you we can always produce an amortization table for you uh and give that to you right off the bat so if you're working with uh Nathan and Dave that gives you kind of that opportunity to start looking at that thing ahead of time and and get a read on what it's going to look like awesome yeah perfect um question about uh the form Phil hit the form at the brand new form we have um we put it out yesterday uh and a cabat um I did have this private message sent me no Nathan and I are two different companies um we're just good friends so we would make two different offers to you that's why I yeah we're Cooperative but we're also competitive right so um so another thing we mentioned here is that you make sure it give us the pi p& not the Piti we need the tax Insurance you can make it a different row but just a p& is what we need at interest rate that's a definite thing we need it allows us to figure out if the payments make sense it also tells us the loan if you present me a loan that's a 3% coupon rate either a I'm not going to bid on it or B if you need me to bid on it my this my price will be dramatically discount compared to the balance alone because for me to get a 3% coupon up to say a 8 nine 10 12 14 whatever I'm shooting for I'm GNA give you a significantly lower payment so most there are looking for a bunch of money and they don't care but understand the fact that for me to buy a 440,000 $40,000 note at 2% it must be a much higher upb much higher yeah so so general advice write it at a high interest rate without going over user laws and user laws are specific to every state so check that out for whatever state you're in but as high as you can is great and that helps us that helps you get the most money when you're selling it to us let's put it that way what about what about um taxes and insurance being escro does that affect the value at all nope no so if it's not so if it's not escro and you rely on the on the borrower to make that payment at the end of the year every year you're y that doesn't affect your risk at all okay it doesn't it should but it doesn't technically um if the borrower doesn't pay it I have to pay it anyway and if they default I'm gonna pay anyway right okay I can ask them to pay it in es I can always talk to my service or and get it that screwed if they want to um I can do mod but no it won't affect my pricing now one uh one quick point also when you're talking about trying to get your borrowers qualified we're talking about debt to income ratio and state specific residual income just bear in mind that while you can write a term of almost any number of months you want um it's all usually in your and the buyer's best interest to draw along longer amortization period because uh as David or one of them mentioned anyway yep most of these uh transactions won't uh last throughout the term of the amortization anyway but what it does for their pni is dramatic in terms of meeting debt to income ratio so I have a lot of folks send me term sheets and they'll send me a term sheet with a maybe let's say a 180 month term and then when we calculate debt to income ratio these people are over uh DTI and simply by uh getting a hold of the investor and saying if you'll bump that to 240 or 360 uh we can save this deal for you so don't don't get wrapped around the axle with the idea that uh you know I need the pni to amortise in 180 months or bust uh because a lot of times that will bust but uh I don't think and these guys can correct me if I'm wrong but from a their standpoint a 360 month term isn't going to hurt your uh value at all but it's G to bring in a lot broader category of borrowers who can meet that uh requirement absolutely right yeah a 30 years is pretty typical yeah absolutely we just price everything according to an annual return so yes you're you're going to get different price at there 20 years left but it's just a different risk level and return level so um next one we need to know is your type of property please let us know if it's land if it's a mobile home a condo what we don't buy is I don't buy land notes um Nathan do you buy land notes I don't no okay I don't buy things in Mobile Homes typically um I know a couple the owner finance people have been mentioning it um they're just there's a little bit different type of note um that I'm not familiar with as much as typical real estate and Commercial so that's a little bit different for me um same I don't I don't love mobile homes I I'd look at it but it would have to be special yeah so say quick question when you say mobile homes mobile homes with land or in on in the park exactly that's the problem right so yeah mobile homes could be land included it can be a mobile home with a rented land it becomes a little bit fishy for us um which we don't get to uh one question we had is what kind of note documents need from us um we're g to assume you're the originator so we won't get into the other note craziness um if you're buying and selling a note to us we'll need more documents um but typically we just need the mortgage the note and for those who not wear make sure you get a title policy title policy ensures the fact that there's no elens and it's clear title um if you don't go get one uh that makes it more attractive to us make sure there's no additional leans prior to sale the property um and it doesn't cost a lot it's well worth so all right so so I have an interesting question so I bought a house um subject two that was owner financed um and I ended up having to refinance it because the daughter came in long story short I ended up having to refinance it with a bank I almost wonder if I should have just bought that note from her but if I bought that note from her how would that affect me selling it later not at all you can resell it I mean you could broker it out if you wanted to yeah you don't even have to own it yourself you could sell it to us interesting and and then could I could I still own that subject too yeah because because that that one got really interesting really fast I ended up I ended up offering her you know I think I we owed like 65 and I offered her 50 and she ended up taking it um which ended up being beneficial for us and we ended up doing a cash out but looking back on it I'm like well maybe we should have just bought the note from her and then sold it and then I don't know yeah you could do that but that but that but that makes more sense to me yeah we won't get into it but basically what you need then is an assignment of that just like you guys do assignments but we see assignment of the mortgage and then uh and then you have the alwn which attach the note that would just transfer from one seller to the next and if we buy the note from you we be creating that same paperwork you're selling to us and you're basically you transfer the note transfer from your name to our name and it's a paper process and then we record with County records so it's official that the lean transferred over from you to us very easy process there's really not a whole lot involved with that so yeah so as we go down the line um we need the property city property address street address City the state and zip code it alls allows us to figure out how much the property is worth so we can figure out these kind of numbers maturity date we mentioned before the current unpaid principal balance which is the balance of loan as you've moved along again if you're using apartments.com this will be much more difficult to figure out recommend moving to a serer or buying a servicing software and figuring it out and apply payments as per se um then we also need yeah yeah if you've got something that you've only ever had with apartments.com and they're especially if they're just if they've been totally regular and same amount every month um send that along um I can I mean we can do the math on it it's it's a little bit trickier but we can do it yeah so if you've got something that oh shoot I'm screwed no not necessarily yeah but us now um maturity date per pay balance next due date and we explained before the next due date is next date in part of the amortization schedule not the last payment received it's based on the amortization schedule most time if it's performing the next due dates next month last payment received that is just telling us when you get receive that payment it could have been yesterday could been today ideas and last two is a balloon if there's a balloon just need to know how much the balloon is and the date of the balloon it helps us figure out the numbers for us and things like that uh the last one is modification more than likely you guys never touched modifications um but if the loan is modified we need to know the date of it and what that new terms are interest rate and balance all that good stuff if you didn't change interest rate that's fine but all they good stuff is there question about Equity need go for it um again you you and I Dave have talked yes you know extensively about equity and you're not as concerned with Equity as I was I I I thought that equity and interest rate were like the biggest things that we needed to look at here um I had I had a note that had a ton of equity but that really didn't affect the price of the why that is and and and I'm trying I'm trying to I'm still trying to wrap my head around I I understand that if it if it goes to foreclosure you're only entitled to what the but but the does it does the equity reach a certain point where it stops making as much uh it stop stops being as much uh affecting the the value of the note give us numbers give us an example if you can okay so I had aund I had $150,000 house that I had a note on it for 65,000 um that note was worth 55,000 essentially so I had you know $80,000 in equity they the borrower has $80,000 in equity yeah there's the key right but if but in in in a situation where the borrower only had like $20,000 in equities that wouldn't affect the the purchase PR how much you would pay for that note I would say this LTV loan value affects if I'm gonna buy it or not if you're looking at the fact that my loan of value is 90% I'm gonna probably pass on it because the risk of what's going on in the market it doesn't affect me with my numbers because if you're say $85,000 in equity I have to foreclose on it which is stupid for the borrower to have to get foreclose on a property of equity when you do that I go to the auction I can only collect up to that balance so even if they have 20% I still can't get the other 20% I can collect up to that legal bounds I'm paid bounds plus corporate advances I can only collect up the legal balance now if it flipped upside down right the property worth 50 and unpaid bounds worth 100 we're gonna be bidding based on that value of 50,000 you're not going to get much because there's no equity I'm going to be bidding 40,000 30,000 and you say well there's a lot of unpaid balance here well I can't buy it because if I go to forclosure I'm not gonna get that money back that property is not worth that much money the collateral and an investor is probably going to buy that but if there's and and like you said you'd pass up on it if there was only $20,000 in equity percentage L did go right okay right yeah if you're looking at you know a property it's worth 40 you know it worth 60 and for 40 that's a different number than it's worth you know 130 and you have 110 Noe so so investors investors like to buy at 75% so as long as we as long as we're sitting around that 75% Mark we feel pretty comfortable about that number is moving as we go along here with the market right right right right we said in the last webinar we had me and Nathan when we first got started we didn't look at eity back in 2010 because there was not there was never Equity ever everything was underwater so for us to now play with LTV it's kind of a new thing for us because nothing end on the value and that's only been true since probably 201 18 yes is that's probably the first time that I saw any equity in any loan that I looked at I'm like oh that's shoot what do I do with that and we had to actually kind of invent and figure out what we're gonna do when they did have equ so the negative does not scare us at all no but just understand we're pricing it on the lower of the two either if it if it's underwater we're gonna base our bid on property value if there's a lot of equity we're going to base our our bid on the unpaid balance so so on so on like Melissa's example where she has $100,000 house the borrower borrower borrowed $40,000 you would probably pay only 60 or 70,000 for that note if if the house is worth a hundred right we'd base it off to $100,000 okay yeah absolutely okay yeah there's more numbers but yes that's of course yeah I'm just trying to be as round as possible yeah okay okay this has been um again we I put in the in the chat uh what the link is for the form that you can fill out if you have assets you're looking to sell if you have stuff feel free to use that fill it out send it back to us um we did uh cover most of the stuff in that list if we have to change anything or update anything we will let you guys know um but we we think this was helpful if you feel this was helpful and you would like us to do a webinar on how to create a successful note um what would make it more valuable um let us know we we'll work on something for January um to make sure you guys can included in that if you're looking to learn about note buying and understand our world reach out to we have you know webinars and videos and we also have a intense Advanced course we're starting back up in January 3D um it's a huge course about how to buy notes um numbers figuring out things what's important all the systems um all that good stuff Dave can I ask another quick question and this is something that I kind of had saved up uh I wanted and I think you just answered it um but I was wondering about how the Market's gonna affect like the values of of our notes is it gonna affect them ask questions I I I that's that's kind of been my biggest question lately is is how how that and I guess it's just affecting the values of the houses at this point and then you buy it based on the values of the houses yeah so that's why the LTV comes going to play a little bit here because if we're 75 or 60 or 65 whatever the number we bigger in our head if it justs down we know the fact we have some buffer room um but yeah that's when it plays in part but the reason we say you can't ask a question is that's our question for you guys and know you guys are new to our webinars and all stuff and those who are are still on our Facebook live um we want to ask you guys a question go ahead Nathan yeah where do you guys see so we've got our our world right where we're predicting things coming in the future from the seller finance world how do you guys see for me I see it as an advantage because if banks are going to quit lending will continue to lend you know and I'm sure I'm sure Melissa can can can attest to this where you know where Banks aren't aren't lending to a lot of people we can lend to them um and we can dang their name our price at that point Melissa what do you think where do you see houses the house market going right now in your world you see values dropping staying flat what are you seeing well that depends right because I own houses all over North Carolina there's some where the values are going down um but there are some where the values are still the same as they were um for examp example if like my house is at the beach right they're not they're not dropping in value um my houses where I live like in Hickory North Carolina yeah they're dropping in value but they're dropping value the same at the same rate they do every time this year gotcha so I don't really feel like we're GNA know what's going on with this Market until like March of next year where we have a full year to look and see what's happened from last year to this year because right now the values are the same as they would be three years ago in December you know because they always drop about 20% from late September to February right then comes springtime when everybody starts looking for houses and sun is shining and weather is warm then the values start going back up again so yeah all of that being said yeah interesting interesting we like to hear from Outsiders what they see the market real estate going in the crystal ball six months to a year none of us really know but we like to play that world of that crystal ball idea but what we really appreciate you guys having your your strength of knowing origination in this world of creating dollars magically in thin air um we were trying to bridge the gap between you guys originating and US buying and making that marriage happen smoothly so you guys can go ahead and buy more sell more buy more create more U we can talk at Parcels we can you can sell par payments but you can also sell a whole loan and it's more attractive for us so well great I need some money and I have a whole list of notes that you guys can excellent It's Easy like that right you literally can sit there and sell us the entire note and get money out or not that it's always the most attractive but you literally can sell a part of the payment string next five years six years 10 years and keep the back end that's also available David let me let me ask you guys a question um and then uh sort of get a gauge on from your perspective how the the correlation to the fanny Freddy rates and what note Originators can uh you know make a rate how that's how that's going to affect things so for example when the aps were 2.78 uh we were creating notes consistently at 89 so you know we were a little more than a six points spread over and it was very easy to do and borrowers still could meet DTI and residual income at 8% 8 and a half per.

now that the aps uh in the conventional Market are in the sevens uh or approaching sevens to get that same kind of spread now you'd be looking at uh HCM loans with rates of around 15 which is next to impossible to get we're getting them in trailers but we're not really getting them in Stick Built Homes um and the percentage of seller financed borrowers that can meet debt to income ratio uh and residual income at a 15% APR uh is much lower so if that Trend continues with Fanny and Freddy keeping conventional rates that High um how do you guys see that affecting us all uh in note creation and then on your end on Note buying so for for me um we have a certain return we have to get right and that return is now increasing based the fact that money is a lot more expensive so for me my desire return increases it used to be here now I'm up here so my price is going to change um that's my quick and easy answer for it Nathan yeah it'll be interesting to see what happens here interest rates um inflation all kinds of things going on in the world um as it makes it more difficult for for people to get loans uh people like the seller finance crew they fill a major role we're at the same time we're also feeling a secondary role we're more than happy to buy the notes that are coming from the seller finance at the same time we're also more than happy to buy the non-performers so if and when people start defaulting on their loans uh those are also very attractive to us that's that's both Dave and I that's our Roots that's our major major thing uh so I don't know what kind of pressure is going to be put on to people um in general and and where does it all end and where when does it begin good question I don't know but it's it's looking interesting um we did have a question on Facebook and I'm presuming you guys are okay with this if you're not let me know um some people want to have your contact information I will provide emails only um are you guys Melissa Justin you guys okay with it I know soal is okay with it um for those who are looking to learn U May reach out to you for some education all that good stuff um if you're okay with I'll share your email addresses uh to those who just complete the form I'll do click reply on form responses and you'll get their information awesome in there too because I know Dave you got yours on there but I don't think mine is actually on your oh yeah we we forgot that part of it right we checked it last night make sure the form response was adequate we totally forgot to that Nathan on there um it's in there but I'll I'll I'll fix the other form as well make sure and Nathan gets the responses the emails for the form as well so he'll get the email responses and he can reply uh to any questions you've got um Justin Melissa so how Max thank you very much for joining us we're going to cut off the live feed in the second stay on for a few minutes before Max I appreciate it your information will be also out there guys if you're looking for a serer to get your things right reach out the home key uh if you're looking for someone to unrate your law your loans make sure you reach out the max call the underwriter and um he'll make sure everything happens on the up and up if you question another one of these do kind of a followup one in January um more about I think we're going to do more on the origination side yeah how to make it more attractive how to make it legal making sure that we have all the stuff needed so how to write that so that you can sell it to us at at the selling table if you want cool awesome great stuff guys thank you hey thanks all right.