Bursting YOUR Note Investing Beliefs | Real Estate Notes Show

Episode: MYTHBUSTING! Bursting YOUR Note Investing beliefs! Full Length Dave's Goals and Plans: - Updating the DME website which is halfway finished - Recently processed three bankruptcies with one showing 18 months of non-payment - Closing out deals and buying pools of assets with collateral files - Observing increased deal flow from some sources but less from others - Recommends minimum $50,000 startup capital for note investing in today's market Nathan's Goals and Plans: - Looking at another pool of reverse mortgages - Raising capital and getting very close to monthly goal - Updating DME and planning a 5-week class starting soon - Will send out big announcement about DME event coming in June - Best case scenario in note investing is to never own the property Key Recommendations: - Minimum $50,000 startup capital needed for note investing in current market conditions - Keep cash reserve ready for closing within a week - notes move faster than traditional real estate - Account for fixed costs including servicing fees, legal fees, and demand letters regardless of note size - Real estate investors should not assume they can directly transition to note investing - Do not rely purely on IRA funds for non-performing notes due to additional funding needs for legal and servicing costs Topics Discussed: - Common myths about note investing startup capital requirements - Differences between real estate investing and note investing - Current market conditions and increased bankruptcy deal flow - Fixed costs structure in note investing - Exit strategies and borrower unpredictability - ROI, yield, and Net Present Value calculations Guest Insights: - Nathan Turner emphasizes notes are real estate related but are not real estate - you're buying something attached to real estate, not the property itself - Borrowers are unpredictable and will do things investors never anticipate - Ideal exit strategy is to never take ownership of the property things um some sellers won't give you service notes yeah right and some sellers are used to working with small investors which makes it easier for us to work with them and make things happen it'll be easier and quicker um and some sellers will work with Nathan definitely they work with us sure right yeah I mean we don't get the tapes anymore right we know who they didn't get the tapes and I do right like why and it's yeah who we are just it is what it is well and and the one what I wrote down here was um sellers all sellers just want to screw you over they all they want to do is take it back and leave very good set yeah are all notes on sellers tapes bad no no not at all not at all and having been on the other side of the table and Dave you know this um sellers often don't have all the information and so when it when a buyer comes in and says okay well I found this and this and this and you're like oh really I had no idea yeah we're not screwing the seller's not screwing when they say they don't know most of the time um most of the time yeah understand the fact that the ones that are trying to screw you over uh what we've learned over the years is the ones that do try to screw you over uh they don't last long no so you know it's not worth it for people for the sellers to be out there just like trying to mess everyone over and you know sell a bunch of crappy because you're dealing with a seller who seems to be not sure what's going on yeah ask others you're gonna find out that the people either know them already that they're Joker Brokers right um more likely and understand the fact that sellers sometimes what's most big sellers do really big sellers do is they'll buy a full of say 100 assets and they'll do 20 assets and send them out and sell off 20 for profit to pay for was under their corporation they he converted it to chapter seven and then just this week they contested that and the judge confirmed nope it's gone chapter seven too bad so sad they were doing all kinds of really stupid things in their bankruptcy and thank heavens we finally are able to Prevail on that one but holy smokes that one has been one for the books I'll write a book about that one one day that's not um so I'm curious you know when people look at this stuff and they start looking at stuff like this and we on our list we're gonna go jump around a little bit here um you know don't predict the fact that the borrower because it's vacant that it's going to go one way or another um most people say well I only buy bacon I only buy occupied and when this is the fact that I think it's a myth that just because it's occupied means that I'm going to get a reinstatement right or a modification and it's a great win with situation for sure and vice versa just because it's occupied doesn't necessarily mean that you're going to take back that property I've had it where I thought it was vacant and surprise surprise no it wasn't um and vice versa I've had it the other way around where I thought it was occupied and then it was bacon yeah so you can you you know you gather the best Intel you've got and and then it goes whichever direction it's going to go I mean it's really hard to predict so with that said I think what most people don't realize is occupied unoccupied he can go they can move back into home they can maybe they die maybe they moved or there's so many scenarios there that occupied equals this and not occupies doing so as we move forward right I started doing Roi and I started getting into yield and I understand what yield does and when I met my one of my partners in 2016 we really dived into yield and he explained it as a bond guy what yield equates to and I see some posts about this um and Larry I love your idea um so what most people don't realize that yield is based on annual return until maturity date it's a bond equation right get that Bond equate so maturity date in 30 years your annual return over average will be X return right what explain to me what he was surprised by is that I'm bidding everything based on a yield number or an irr until maturity date okay and what we then shifted to was okay what is the average loan time frame that we're going to hold it the borrower's not going to refi or sell the property right and what we've realized started feeling out is that if we look at irr or yield to maturity date we're actually predicting that something that is very rarely happening most people sell the property they re-file um all kinds of stuff happens the default whatever it is and more likely they'll default before it happens right or sell the property really pay off whatever yeah yep early payoff is a huge one right so what I would say is that what we did was we shifted from an you know an IR thing uh idea to a Net Present Value number which is a reverse of an irr um so what we did was and I was doing this a lot was I would actually set my price and keep tweaking like bid price to get to the return I wanted versus start with the return and go based on Net Present Value so if you don't know what Net Present Value is definitely dive in it's a very newer thing for me no investing has a lot of Curiosities to it right A lot of people wondering what it's all about um but also a lot of ideas out there that people don't realize um are what you think they may be but you're not sure everything else so well our mission today was really kind of talk to everyone about some of the big time myths out there and some of the um not so miss some of the facts out there um and we want to really kind of dive into those kind of factors um because I think what we're going to find is some of stuff out there is a myth per se but there's some truth to it as well yeah so and this is going to be interesting because Dave and I we we didn't discuss this beforehand so we're purposely got his list I've got my list and we're just going to kind of hit each other with what we've got so this would be kind of fun and entertaining we'll see uh what kind of myths we come across and uh which what what off our lists are the same and what's different so this would be interesting to see how this goes oh boy is I think up today so um hopefully we won't have too many issues but I'll make sure we get a some things happen here so all right come on there we go that's better holy moly yeah we wanted to talk about myths because I think people out there really don't have a grasp of some of the big Essences of note investing and what they really mean um because when you talk about no investing there's a lot of curiosity out there that are just not true um and I struggle with that because when you talk about notes in general it's complicated space um I do think that you can play with the 50 000 more successfully than if you are doing it strictly based on um you know the goal of you know buying stuff and being non-passive complete aggressive of stuff and making a business out of it you need to have some money um and be careful joint venturing with someone with money because that can cause a problem eventually right yeah 10 years ago uh it was a different number ten years ago I said probably you could you could start with around 30.

yes yes yep because of those notes were more available pricing was cheaper um a lot of things made that more possible yes but in today's market I'd say you're looking you know minimum 50 000 to get started yes there's so many other things that now involved that they weren't before sorry cool yeah Patrick made the comment about you know property tax Force Place Insurance especially not performing um et cetera Etc well said Patrick so when we talk about this stuff and reason we do this is because there's a lot of people out there that just don't realize what's going on and then they get involved with something just doesn't make sense so to remind everyone if you do catching this late will be on YouTube and all that good stuff on the podcast as well so that's another myth that leads right into another myth that I wrote down here is um if you have been a real estate investor in the past you can just move straight into notes and why is that that's a big No-No all kinds of reasons but real estate it's I and I this is one of my catchphrases is um it's real estate related but it is not real estate uh it's it's in that World um and and it's again it's related to real estate we're buying something attached to real estate but you're not buying the real estate yeah and ideally and depending on your exit strategy and everything else but all about having done this for a number of years now I can tell you the best case scenario is hello fellow new investor Dave putz here and this week Nathan Turner and I sit down together talk about some of the myths of note investing and some of the facts some are not as black and white as that is and we talk about if how much money you need to get started and while you're through the process of buying notes how do you know what the outcome was going to be is there a factual truth that you know what's going to happen when it happens vacancy is that a good thing or bad thing is self-servicing a positive or negative and we also talk about really good in-depth math calculations from Roi to yield to Net Present Value so definitely tune in watch the whole thing and feel free to send us any comments questions you may have enjoy [Music] well welcome everyone Dave put some jkp Holdings alongside me Mr Nathan Turner hello hello everything is going well it's going well it's going well I am in the middle of updating the DME website if you go to it now you're going to see it halfway finished more information coming it's pretty exciting it's it's good stuff so keep checking back so I apologize everyone for the technical thing I'm so used to setting up for three people and I wasn't so hopeful all is well um I appreciate I see some people texting and messaging all the good stuff um and whatnot so what we want to do is get started with everyone and kind of catch up for a minute because I'm realizing recently that bankruptcy things are going to open up deals are trying to change again from last week we had three other bks that country started processing uh the blue and we're weeding about I don't know 18 months for one of them that just did not make a payments and you've add things in there that may not be fully what you think they should be they become even more complicated and not true yeah so what's what's your first one what's uh we want to talk yes so what we want to talk about first is talking about getting into note investing yeah um and having money right there's a idea that in real estate you have to have a lot of money 20 down these kind of things to buy properties and when you find out that you typically don't need as much in notes as you do in brick and mortar right 20 down if you want to fix it up rentals you need to go get a good mortgage everything else we're notes you don't need a lot to get started you don't however actually Cindy and I are on both on a call yesterday where this came up where you don't need a lot but you do need cash you can't uh there's no lending on notes not really there's some again maybe I just created another myth there's not any lending on notes that's not necessarily true but you're not going to be able to go get a mortgage to go and buy notes or or a line of credit from a bank to go and buy notes uh that that doesn't exist correct however but you do have to have cash uh because it moves a lot faster in a lot of ways than real estate yes you're putting in an offer on with real estate you can take your time and closing doesn't happen for a month or or longer uh where as in notes you're expected to be able to close in most cases you're looking at closing like within a week so you've got to have your cash ready to go on the spot uh and close when you say you're going to close sure that's a big deal so if you guys do have issues hearing us at all let us know or seeing us um we'll do our best to do our tracking our comments and whatnot um I would definitely tell you guys if you are watching us on any of feed you'll never own the property yeah that I know even when I got started I was after the property I wanted to get the property that's of course you need to get property and it is and it can be but experience has taught me that uh your best case scenario is never to own it that's that's really what you should be going after it's in my opinion it's the best exit absolutely so you know that that's a good question that most people don't realize there that they should be having it themselves is that if you're ideally going for a property in a scenario you're gonna be having some issues um because you can't predict what a borrower is going to do don't predict the extra strategy before it comes um I know that when I first got started that was one of the goals like okay this is going to go this direction and this is going to happen this is going to happen um no yeah that's the thing that you can have an idea where you think it might go or a most likely case scenario but uh but when you're dealing with borrowers especially man people are unpredictable and they do all kinds of weird things that you would never think of and so be prepared for it to go off the rails outside of whatever plan you had for it yeah that was another one of mine is everything always goes according to plan no yes at all we can all look at acid and say this is probably going to do X Y and Z yeah and we have a good feeling but I wouldn't count on your feeling as an investment that's more of a gamble than investment right right right um and feel free if you guys have any ideas of myths or even facts you're kind of curious put it in the chat and we'll definitely check into it um and talk about it so um when we talk about going from a property going to Real Estate it's hard to grasp the idea that you can't actually evaluate the property yeah that you mean I can't look at the property I can't check it out I can't get inside of it um before I buy it that's really um are you seeing more yep we're seeing a lot more now I'm seeing people want to move things pricing hasn't changed too much yet but I think we're on the way I think so too I've seen uh deal flow it's been more from some people and less from others and so it's it's been a little bit different than uh has been in the past but uh it's still certainly there yeah so we got a few people checking in before we get started Jay saying hi um also uh Larry I see Cindy everyone else so uh I appreciate everyone I mute my phone for a minute I appreciate everyone kind of jumping in and checking out what we've got going on today yeah um we I have been closing out a few more deals uh we did we were in a process of buying a pool of assets uh they trickled down eventually when reading a collateral file um so they're not as crisp as we want to be and we get everything but we did get a bunch which is really cool um are you what are you seeing now I know we're looking at uh when we're talking last you're looking to reverse mortgages and whatnot what's Been On Your Horizon yeah I've got another Pool of reverse mortgages that I'm looking at right now um I'm still raising capital and so I'm I'm uh getting very close to my my goal for this month which is great and because we're only a weekend but uh but that's really good um spending some time here updating for DME coming up in June I know it's a little ways off but uh that's I'll send out a big announcement something a little later today uh we've got our class that we're starting out for five week uh which is pretty exciting as well and man Lots going on Lots going on it's been very good so if you're if you're kind of new to this whole area of note investing um what you're going to find from a lot of this conversation we're having today um is primarily we're looking at the Facebook group feed uh for comments feel free to jump in there but we are on LinkedIn and the Facebook page and whatnot so getting started notes definitely there's a money attribute to this right there is a field where money is needed however you know you can find a decent deal for a little bit of money as long as you're going for the assets all that are desired around the low mine um you know we have Ira money um and I don't need twenty thousand dollars Ira money to get into a partial right now granted if you're buying non-performers and you're gonna buy one for five thousand and that's all you have that's a problem that'll be a problem that'll be an issue yeah and and why is that Dave why is that a problem so you can stop performing you have a lot of fees a lot of extras a lot of costs to come play with that um from servicing fees you have to make sure that you're gonna be funding that while you're non-performer you're also going to be funding legal fees demand letters things like that and if you're doing your IRA well what do you do with that money how if especially if it's a raw how would you come up with additional funds right to handle the legal fees and the servicing fees and things like that so the model is things are fixed costs so whether it's a note you bought for 5 000 or 500 000 those costs are going to be the exact same number uh but percentage-wise that that could wipe you up yeah so I I typically what I I'll see what you say Dave but I do when people are asking me how much money do I need to get started in notes typically I recommend around fifty thousand if you've got about 50 000 that's a pretty good number to start with you can get a decent note for that plus have enough money left uh in reserve for all these costs that are involved yes I would agree with that I think that the thought process of having no money at all is dangerous difficult for a lot of Real Estate Investors yes right yeah and it's hard to say well well but what if you just uh kind of snuck in or what if you knocked on the door no no don't do it don't do it don't do it you're gonna get in trouble yeah you might get away with it once or twice but you're gonna get in trouble it's a bad idea don't do it and just be prepared for that yes you don't know the inside of the house you don't know what it looks like so we'll be ready to be surprised yes so and what I can say is in all my years and this is why I say this is part of why I say uh you don't want the property and I've been doing this a number of years now since really since 2008.

um I I could go back and look to be sure but I think probably 90 or more of the time uh if I've ever lost money on a on buying a mortgage note which is not often it doesn't happen very often but if I ever do lose any money on it or or don't make a profit let's put it that way if I ever don't make a profit it's when I take back the property I don't know that I've ever not made a profit in any other scenario uh we've never we're gonna go weird or off and you know the only scenario would go weird off is if it goes to a foreclosure and you're really tell your numbers and you file they file BK and they contest it and fight it um I've gotten expensive foreclosure especially like Florida where they can test it it takes a long time um and it's frustrating right well real quick I just had one just finally this week these guys have been have been playing the game literally for 10 years uh I didn't buy the loan that long ago but uh but they've been doing BK this that and the other forever finally the judge um last month got fed up and converted their bankruptcy it was a chapter 11 it means that here's the problem with non-occupied is a habitable is it a good property or is it destroyed which we've run too many times in the background yeah and and is it occupied okay great is it the owner occupying that is there a renter in there is it a squatter in there so what does occupied mean just because you sent the my Google's trying to talk to me just because uh it's occupied doesn't necessarily mean you're going to get a reinstatement like I said like it could be occupied by somebody other than the owner Maybe the owner I had this where the owner passed away and then it was an error living there they didn't actually have the right to live there but they just kind of moved in uh so it was occupied but not by the correct person and I mean it you get all kinds of fun and interesting stories that happen so you can't assume I think that's the bottom line you can't assume uh that it's just because of these factors in the beginning you can't assume that it's going to end up in this yes and I want to make sure people understand that is that don't predict anything before you get into it that's a big myth yeah next was you know um you talk about foreclosing you know you're going to do something when it happens even if it's in foreclosure don't predict the fact you're gonna go to auction Camp oh good one so we'll jump around here Rock by by renter well said Cindy so let's flip here for a second just for a second here let's say that the loan is performing yeah right it's going to continue to perform right forever and ever we hear someone all the time say it has 12 months 24 months of seasoning right so what investors typically do is they bid we'll get into bidding ideas they'll bid this based on a performing thing and say lock key done right and so I think it was Dr Phil that said the best predictor of future that's how you do it I think you made good point right services are is our hurdle times but also our savior times right yeah they avoid us having to do this full-time yeah at times right um even the mass scale Big Time investors rely on servicers to do a lot of the work absolutely so and you should yes um but granted we understand the fact that not all servicers care about the asset as much as we do you can it's our asset right um so does passive side can be things such as a performing note that's going great and not worrying about it at all right so can this be passive yes yeah no worries if it performs forever like a great renter right that performs forever or performs to a point where they pay it off that makes sense great right and you're definitely going to have those those yes like not to say that those are you know the Unicorn that doesn't exist those absolutely exist they absolutely exist so if you can get yourself a portfolio where that's all it does then absolutely it can be totally totally hands-off passive you don't have to do a thing and if you buy a partial that's another side of it usually partial is passive until it's not yeah good point right so so we're going to skip one because a little bit of math with doing it but we're talking about servicing right and on our list looking down is self-servicing it's easy there's nothing to it there's people out there who say you're crazy for hiring a service so you can do it all yourself yep can you service yourself and is that easy all right so I've got a really good friend uh lives down in Texas and uh he has his own portfolio he's got I don't I find to be a myth some people find to be helpful and I was just talking to someone just last night is understanding the math behind notes yeah right can I calculate everything in a way that we calculate you know you know a rehab project or whatnot um some people do Roi some people do how long until you get my money back right right some people say well how much open my percentage of borrowed money yeah and Tom Henderson talks about this quite a bit we had him on a few months back and talks about this all the time and he talks about yield is something that's realized when the money comes in anything that you put on paper that's a projected income yes it's not it's not money until it's money in your account yes so it's all fine and good to make projections um but you don't make the money until it actually comes in yes so I think what most people don't realize about that is that you can do all the math you want um and things change right and not to say you shouldn't do the math because you definitely should yes but be prepared for twists and turns yeah and I think what people don't realize when they're doing the math is well that math seems to be a little too difficult so I'm gonna go a little bit easier Roi is one of the basic terms that I used to use no you know I used to use it a lot yeah however what you find out with it is if I do a p and I times 12 divided by purchase price to figure out if my return is good right you clearly take out the entire note process of it right because it may not be 12 months it may be 24 50 months 60 months and that's great and wonderful but you're dividing a month angle by a purchase price this reinstatement come and play in there just servicing fees that increase um there's always Little Things on the flip side things like your value your property you can order BPL where you can talk to an agent which can't be automated you've got to reach out the agent talk to them reading over servicing notes I highly recommend you do yeah agreed understand the pay history but service notes is a huge thing it's your eyes on the property it's like you're getting inside the property yeah you're getting eyes and ears into the borrower situation and if you don't know what's going on with it the service notes give you a lot of insight yeah it's so valuable to know the story so they've been struggling with payments okay why and if you got the servicing notes you get a lot of those conversations that come through or not maybe all you see is the servicers tried to reach out 20 times over the last two months and just has zero response but you gotta like if you know that whatever it is uh you can start to put together the story a little bit and then figure out where do you go from here you know just to bring up some of the things I've seen over the years in servicing notes um a modification we've talked about before what a big seller I know I bought a loan for a modification was getting in the process of um house was on fire wow right what happened the borrower called the house on fire I wonder what happened to fire damage yeah right was repaired was the money paid out yeah was it work done do we have pictures of that work yeah those kind of things um another big one is like if they've done property work in a property you know they've done property preservation on a house or didn't do proper preservation on a house in the North right yeah you haven't looked at the property in two years to two winners yeah you have no key you haven't winterized it yeah yeah somewhere in Michigan or I mean any you know pick a state Wisconsin anything where it's gonna freeze behavior is past Behavior so are they going to continue to make payments if they've made 12 consecutive payments yeah maybe yeah at least for the next you know few months probably and and let's not DB from the situation is not that they decide to it could be a whole different reasons why they can lose a job all of a sudden they can get sick die anything we've had loans where borrowers stop making payments simply to allow their kid to go to college right yeah I had one where I quit making payments because they were paying for their daughter's wedding uh you know the list is endless so there's all kinds of reasons why people don't make payments uh but that happens all the time all the time so be prepared that's kind of the the moral of that be prepared for it to go in on performing make sure that you've purchased it at a reasonable price so that if it does go non-performing uh you're not coming out to dry yeah so looking at our list a little bit more to see what we got going on here um we want to talk about no investing being passive yes it's a huge myth per se yeah is it a full myth or is it partially factual at all so that's one that I had on my list as well is once it's performing you give it to the or even if it's non-performing you give it to the servicer the servicer will take care of everything kind of and here's the thing I don't mean to give Services a bad rap at all I think that's a very difficult job uh you've got you know hundreds thousands of loans that you're dealing with you've got hundreds of different investors with all different kind of um expectations and you know ideas of where they would like this note to go like it's a really tough job for a know a couple of hundred loans that he's he Services all himself uh guy makes a bundle of money and he's a great guy and I love him to death and I I aspired to be like him one day except for the self-servicing part it's a lot of work man like even just one aspect let's talk about escrow uh if you're collecting escrow to pay for taxes and insurance that kind of thing you're going to have to keep that separate not only do you have to keep it separate you have to keep meticulous records of exactly what is in escrow when you know taxes were paid insurance was paid and how much are there any adjustments to be made because the tax bill went up or down you know like just that alone you're talking about on one loan and then you've got to do that how many times 10 20 100 times I think you can get to be a huge job just that part of it and when you first get in the space never self-service agreed yeah you have no clue what you can can't do it's not like getting a private land alone to somebody and calling them up and say I want my money right there's so many regulations in the space that the self the servicers handle for us um unless you have a good idea I wouldn't speak to the borrower yourself either right you just you're walking on fire there um can you always get in trouble no there are ways to prevent yourself from being in trouble however you don't know those ways you don't know what you can and can't say and and you don't realize what trouble you can get into right so self-servicing is once you get it cracking you only have a portfolio small or in performing yes you can self-service and make it happen and save yourself fifteen twenty thirty dollars a month especially if you're talking about like one local area so my friend in Texas he's in Lubbock everything he has is is you know an hour's Drive of Lubbock so it's all same county same state same decrease based on things like that so please be sure that if you're calculating being on Roi that you understand what the math is if you're using it a basis is great yeah the other point is yields um a lot of people continue to use a yield calculation you can use a calculator we have a workshop that allows you to figure out yield in the spreadsheet where you can run 100 assets through it and figure out a purchase price on an X yield which is great yeah Nathan when you first got started what did you bid based on besides okay let's get real quick another myth out there please don't bid based on upb yeah or BPO if you talk that reach out we'll explain why it's bad um because it leads a whole everything of the new out of place you have no interest rate in there which means you have no clue what the p i is and just because the upb is 50 000 and you bid based on 50 000 and you're hoping that the return is good um it's dangerous however we used to do that so when you got first got started what did you do so when I first got started you got to go back in time a little bit because when I first got started everything was underwater everything yes like there was never any Equity is what I'm saying so if the house is worth a hundred they owed 150 or 125 at least every every loan they without exception so in that case bidding based on whatever the payoff was or whatever the unpaid balance was made zero sense because the house wasn't worth as much as that so the chances of you collecting that were completely zero like there's no way you were ever gonna come you know collect 150 000 on a house worth a hundred yeah so that just didn't work so back in the day I was always based on property value and then that was that was the main thing and again going way way back when I very first started I was always after the property so my strategy at the time was I only bought uh distressed loans on vacant properties and only in Columbus Ohio is in one city we all started in Columbus yeah yeah good place but that was that was a strategy so uh either I was going to foreclose or get a Dina Loop and that that was like it that was what I was after so when I was bidding it was always based on property value whatever was left on the Node that actually just became uh something that I could use when I was talking to the borrower where I'd say Hey listen you all you owe 150 000 on this what I'm willing to let you do is walk away from that so just sign this Dean Lou give me the property and it all goes away we we filed this release of lean and you don't owe that money anymore and at the time it worked great and that was uh that was a good strategy this idea of bidding at a percentage was because pricing was low back then yes right um I made jokes back in the day that if we bid above 40 of the upb that'd be ridiculous yeah right so understand the fact that stair sets back then made a lot of sense because everything we did had a really high yield if we knew it or not we didn't realize what we're doing because we didn't talk about that stuff right no and we didn't really need to in a lot of forty percent thirty percent I mean you calculate any of the deals out there I don't care if the two percent loan yeah and your bit of 30 because you just didn't know any better yeah yeah there was that was a great time to get started because you could make all kinds of mistakes and I'm sure you're good yeah and we still came out okay and that so that was great yeah absolutely but you so you have to know what you're so don't you know uh don't I'm not the expert on it but I actually sat down uh with Tom and talked about this and he said listen that's where you want to go the other flip side is you should be predicting that either selling the note borrow refi out borrow sell the property is within a time period and what you're going to find out is that Roi doesn't help calculate this irr doesn't help calculate this what you need to do is do a schedule on every asset and say in five years in seven years and 10 years and three years if I sell it at X dollar that point where will I be during that period of time right so if I want to hold it for five years and I'm gonna get X return and then in five years either I'm gonna sell it or I'm gonna X whatever is going to happen I want that return to be during that period of time right and this is done by a hedge fund guy and my my bond partner and figuring that out which was a completely different mindset yeah but it was the same conversation we all say it more likely we're not holding on for 20 years so when we figure yield or IR to the end of the schedule we're actually lying ourselves and what we realized was that we can actually buy in lower yield to a seller they figure yield them based on a number we'll actually our yield numbers lower than our actual bid because our IR internally for a three or ten or whatever it is is higher but the yield is lower which is really interesting math so yeah yeah slider I see your point MPV is a really cool idea it reverses the irr yeah and and we had this conversation when I was getting the fund started and making sure because mine is a five-year fund and so it's what does that look like at the end of five years and then one of the big questions to look at it when you're doing that is okay uh then how much can I sell that loan four or five years from now yes you know at what percentage of like what yield do I have to sell it at yes in order to be and and the question how much do you do how much can you hire out uh how much is too much if there is such a thing how do you handle due diligence uh on a small scale on a larger scale and that's a good one that somebody else will do it for you yeah I get you know so the question is what do the big dogs do right you know um we're friends with some of the bigger players and stuff like that um they they do have team to handle things right understand the fact that they collateral file can be reviewed by an attorney or collateral management company get all that yeah your value of property is just we've talked about that a lot right um Larry is an attorney for all due diligence I do too um I have one generic attorney unless it's state Pacific and I really have a question about something to go to attorney inside that state you can hire big management companies who can review things and take a look at it um and there are companies out there who will review all the cloud files for you they're not attorneys they can figure it out right um missing the name off top of my head right now out in California but they'll they'll take on clients they'll review collateral files and they're vast in the in the entire country um but the bottom line that you you've got to have human eyes on it yes it can't be done by you know electronic means not fully there's going to be a person there that knows what they're doing that's looking at it some even a VA uh if they're specifically trained to be able to go through and see a collateral file and know what it means okay great most aren't no and so just be aware and there's little caveats that most people will miss on it right I just we saw fall the other day where the forbearance agreement wasn't signed by the seller right is that legitimate for branch agreement if both parties in Simon right servicer to to kind of manage everything and and make sure that everybody's happy all the time I I think it's a near impossible job so that being said uh you know then you've got a servicer where give you a scenario so let's say that I've got a loan uh the let's call it a non-performing loan I've got a non-performing loan it's occupied um the guy hasn't made a payment for 18 months let's say um where do I want that one to go do I want that one to re-perform am I more interested in taking back a property um what is my investor looking for out of this note and at what and when uh you know there's all kinds of factors in there so when a servicer gets that note you know their thinking might be we're going to do everything we can to get a re-performing yep well I also know the history of this note and the guy hasn't made a payment for 18 months he'd made payments for three months and then for two years before that he hadn't been making payments and he had had you know two bankruptcies in the last five years and and and so so my strategy on that one may not be actually to get him re-performing in most cases it is but let's just for the outlier you know let's say that on this case I actually would rather just be done with it and um and take back a property so if the the person comes back and wants to make a partial payment the servicer in that situation might be like oh yeah that's great everything we can do to get them re-performing whereas my thing might be you know what full reinstatement or nothing uh and that's the way it's going to be and so it it makes it very difficult so so when you're talking about totally passive I think that's nearly impossible um unless you've got a massive portfolio and and then you just do let the servicer do what they're going to do and the average is are in your favor and rules you know and he knows them very well inside and out and so he's he can do that if you're talking about having loans in Texas and then in Michigan and then in Tennessee and then in North Carolina sure you know you're talking about different rules and different things you can and can't do and get sticey yeah so um before we go to the next one we want to remind everyone does those people who are beginners slash get into planar advance and learning these myths are really cool um we do have a five-week course that's going to be coming up on the 23rd of October uh be five individual weeks each week we'll be building on the next homework tons of resources take a look at the the website for more details I can post a link below um what we're doing is on a weekly basis you'll be going through actual assets and figure out issues and problems and questions and have homework um we'll provide resources such as Statue limitations and timelines and and licenses and stuff like that that we've never shared before um so if you and you can bring a partner for half off so if you are interested in getting involved with this and getting really actually in advance we'll be covering due diligence and whatnot please take a look at the website um sign up if you have any problems reach out to us and we'll uh jump on that yeah this is very practical very Hands-On so you're gonna go through assets and you know we're going to give you homework such as find the problem right we know the problem you're going to dive into it and gonna be again a whole file collateral file or you'd be reaching out to the actual local agents you're gonna be doing things like that to get your hands dirty and get your hands a little messy um but we'll be sharing resources that we've never shared before and the information will be Priceless I promise you I'm really excited about this opportunity yeah get on board it's gonna be great so we talked about a lot of the foreclosures getting involved we have another issue that I see in on this Friday afternoon um we'll be back probably at the end of October um and uh let us know if you have any questions if there's anything going on or Curiosities that's happening um there's a lot of curiosity about default loans and stuff like that don't get too excited about that understand the fact that a lot of stuff is held by the federal government Fanny and Freddie here not gonna get those loans or defaulting and there's a lot of articles about that um so just be careful what you read that loans defaulting like crazy doesn't mean they're trickling down uh to you anytime in next six months those will probably be pushed out a little bit longer so all right well Nathan thanks for man joining uh we'll be welcome first soon and again 23rd of October will be uh Tuesday nights we'll be jumping on at eight o'clock we'll talk to everyone then okay thanks everybody take care able to you know like back into it that way so therefore I can spend this much on it today knowing that in five years I'll be able to sell it for XML yeah and I I see Patrick combat this is all about time value money absolutely it is however if you use time value money yield and say okay what's my yield or irr to maturity you're missing out on the fact that if you sell it or something happens in five years in seven years and ten years or two years all those different scenarios should be played out because you don't know what's going to happen and you most likely are probably over bidding and hoping for a high return which means you lose out on assets yeah um and whatnot so it's a really difficult math but for exactly what Nathan's saying for his fund Sunset of five years even if there's 15 more years on it he has to predict what he'll sell it for most likely in yield number right and to know the fact that if I sell it at an X yield in five years I'll get that as an income so what will my irr be in five for over those five years including that payment coming in right so yes I think it's a huge thing that most people don't get it's complicated so I apologize for that long-winded answer um but Roi is something I get it's easy how long to get your money back is a feel-good thing right um and you say well it's five years you can only money back I don't I always look to a point if I had a rental property or Fix and Flip would Roi apply there would I be looking at different numbers and remember guys remember you can figure out irr on non-performing assets because the time value of money still works if you foreclose on a property yeah it does yeah absolutely right um so I wanted to pivot for a minute make sure if anyone has any kind of myths or ideas out there please let us know one of the things that came out to me recently is this conversation of what's going to happen in the future right um let's the easy first myth is we don't know what's going to happen right let's get over it however what we do know are some of the things that are affecting the current buyers and people who are involved um I would keep an eye on things like arms how many percentage of arms are being created yeah um because arms if someone can't afford something they usually get an arm and then if that adjusts what happens yeah and he locks is another one to keep an eye out for how many helocs are being created right now or have been created in the last two years yes house prices are going up free money is all over the place there's all kinds of things you can buy uh all of a sudden Equity is being created when it wasn't there before and people are making helocs happen where maybe maybe they shouldn't have would but we learn anything back in 06 yeah right yeah um yes so sending me the comment you know just be careful predictions in the future as inflation is direct correlation to real yield yes right so at 10 return right now is great however if everything else goes off that 10 drops down right you should be aiming for a little higher return um if you can get it um and again going back to that whole idea of schedule and if anyone's I know Larry's probably jumping an idea um if figuring this out this new schedule it you can literally buy a little higher return with a lower yield because of the way the equations figures out yeah so I wanted to bring up also due diligence due diligence is a big factor that most people want to learn about but struggle um and I've seen this post on a couple different Facebook groups um my team has brought this up to me as well No One's Gonna Do your due diligence for you right um yeah you need to know that stuff I have again way way way way back when uh when I was very first touring properties on some loans that uh I'd purchased way back then I went into a property in Michigan and the basement literally had six feet of water in it uh where you could not get down in the basement and you know how were you going to know that you know and and uh obviously and had us had there been servicing notes at that time I could have seen you know like it's been empty for this long and winterization never took place okay so we've got a better idea of what's a possible problems and it comes back to if they're not paying a forced Place insurance right and the borrower's not paying is there no insurance on it at all you know is there insurance on it we always talk about there's two different kinds of insurance out there please watch our video before that's a huge one right so knowing those kind of insights on the service notes yes Jay yes tell the story of the borrower it tells the story of the loan itself what's happened in the past what interactions had the borrowing non-performing but they've been talking to the servicer yeah poor houses I've seen servers notes where it says borrower called and no response yeah the servicer didn't respond to a bar or call to me that means that holy crap this bar wants to do something and the service are just did what do they do right um yes so it's huge so servicing notes is something you cannot Outsource I would do it in-house I would do it yourself review it you could probably teach a VA to do it however there's so many little caveats we're like oh I wonder what happened here or hey look at this the person died but then who's this other person involved oh they rented it out or the the sis the daughter took over um what's going on it tells you a huge story um they got a new job all kind of stuff and and it's hard to have that hired out and then get the full story yeah you're the other 75.

yeah very often and sometimes they put good stuff in there sometimes you just cut it down and they just make it happen yeah um in a little caveat since this doesn't happen anymore and I'm sure the gentleman doesn't we won't mention names there's some sellers out there that'll send you a different tape then they'll send somebody else right um for those who are part of our group that they know we're talking about this is one of the reasons we start our our little private group that some sellers will sing you a tape send me a tape and send someone I'll say all different assets yeah yeah and just and yeah interesting yeah and they rotate them right so sellers try to do anything they can to get the high prices right as much as they can to pay off other things um also it could be effect of a sunset where deals may be sunsetting or the fun sun setting where we're or irr we talked earlier is projecting a two-year if we go three years our IR drops right we have to sell two years and make that irr work yeah so we have to make it happen yeah yeah and which is great and I've definitely been the recipient of that where uh seller calls me up and says hey I've got these two loans that's all that's left in the portfolio I got to get rid of them I can let them go for cheap absolutely I'm your guy every day twice in the sun yeah yeah so um I'm really glad that we talked about a lot of the stuff um and if these are other myths or questions feel free to let us know I'm curious where people are with this stuff um I think that um there are a lot of myths out there but there's also a lot of truths um and bet your sellers as you would an investor yes um and let's clear something up right one of the biggest things we say is vet your sellers that you're everyone else some people know what that means right and I'll tell you what it means to me um very much seller means I reach out to people I trust and ask if they know who they are do you know this person and if a bunch of people don't know they gonna get somebody let's say you've hired a VA to go through that and make a few notes that's fine but how how complete are those notes and are they gonna have the same effect as you're reading through and go oh wait so then if that happened then what about this and then and it can get you started on a different train of thought that you wouldn't have had otherwise yeah um another Mythic came to mind when I was talking this morning um is that all sellers are the same yes yes Jay you need to feel the nuances of the deal all sellers are the same is something that I find humorous it's a huge myth I don't know if two sellers are the same at all I mean just look at tapes one seller may not be the same tape from one cell tape to another it's like no and then you get my brother-in-law the engineer who's like oh and then you could just like automate the the tape so you get I'm like dude no I mean yeah possibly but you'd have to convert all of them into one format before you could do any kind of yeah analysis on that so so we have a huge one thing somebody adding in our five-week class is my pivot table which is probably invaluable since 2017 I think I started I recorded every single header and basically normalize the whole list I can literally look up anything and say okay it means this granted just last week another tape was a header that came across it was a misspelling uh and is what else right so yes that would have sell is different how they want to work it yeah some sellers don't want you to counter if you have an asset you make an offer listen we gave you the Clutter file it's a final offer you have to order your own E's some sellers are very flexible with are doesn't mean they're bad yet just means the fact they don't know them well then I can dive in deeper I look at the company I look at their situation are they a large company right is there a large company then they're legit right either small company more likely they have no clue they're doing right you can look at the the county records and see what's happened yeah right um if there's small investor most likely everyone has heard of them they've probably done something to someone else so that's my vetting process however most of the people I buy from I repeat buy from them I don't buy unless the single asset from one seller who said listen I originated right and and I buy from both but uh but yeah I the repeat when you get in with somebody and then you can buy from them over and over again that's your best case scenario and then you know them they know you and you know that you know you've got a good working relationship but it's important to be able to know who's who's the seller on this I've got some that I bought like in 2015 that I still haven't uh resolved where they they sold the loans they shouldn't have and I'm not sure that they actually knew that but that's a different story but uh but we're still just getting that resolved and this is this is many years later and you know they've had my money for this long and hopefully that's being refunded very soon we'll see and make sure guys if you see someone say give me your money I'll send you wired loans it's actually legit you know yeah I would if you're at that point you should already know if your seller's legit or not and they are legit you should be able to trust that right escrow is a big question mark in our space that I get that for Brick and Mortar investors and used to Escrow but legitimate sellers that's how they work um in general escrow still isn't widely used I'm personally I'm okay with that all right yep I mean Jay I bought probably from Jay before we bought a couple uh Parcels to him and it was no escrow he's wired money over and be done with it right um because the trust is there for another investors that's kind of weird yeah you can trusting this person that you emailed back for it you haven't met you probably haven't talked to yeah um and whatnot yeah guys I I hate to cut it off there um I would say that this is a really cool fun topic and I really hope that we can do this again I love to get more missing facts um I've got more on my list so we'll we'll have to do another round and yeah we won't be together for next week we have some things on agenda so we back double backed it up um it's gonna be getting a little crazy uh but we'd love for you guys to take a look at I posted uh we posted into the chat box uh the comment box the five week that we're coming up with please take a look at that um even if you're experienced the resources available in there are gonna be probably unheard of I was talking to someone the other day that was part of a big training program and some of the resources that we're sharing isn't there um and there's a reason why we can't share some of the resources um publicly but we're going to give it to the group and they jump in there so a lot of it is our private stuff this is what we use on our own business yes so we don't normally share that kind of thing right now yes and as a reminder um DME will be kicking off in June uh yeah the site will be updated shortly if you missed the beginning um it's in process yes I'm gonna check it out it's in Nashville next June so um if you're looking I'll do it for Nathan if you want to sponsor anything please reach out to them um I'm not involved in the organization of this um but Reach Out Nathan set up some more sponsorships if you're looking to do that um and he'll Reign for speaking of influence so it's gonna be a lot of fun we've got a lot of cool things fun things yeah so there's a cool and get there night before make sure you get the night before for relax throwing which is gonna be fun yeah be a lot of fun we'll have more information yes as we go well guys I appreciate you guys tuning hello fellow new investor Dave putz here and this week Nathan Turner and I sit down together talk about some of the myths of note investing and some of the facts some are not as black and white as that is and we talk about if how much money you need to get started and while you're through the process of buying notes how do you know what the outcome was going to be is there a factual truth that you know what's going to happen when it happens vacancy is that a good thing or bad thing is self-servicing a positive or negative and we also talk about really good in-depth math calculations from Roi to yield to Net Present Value so definitely tune in watch the whole thing and feel free to send us any comments questions you may have enjoy well welcome everyone Dave put some jkp Holdings alongside me Mr Nathan Turner hello hello everything is going well it's going well it's going well I am in the middle of updating the DME website if you go to it now you're going to see it halfway finished more information coming it's pretty exciting it's it's good stuff so keep checking back so I apologize everyone for the technical thing I'm so used to setting up for three people and I wasn't so hopeful all is well um I appreciate I see some people texting and messaging all the good stuff um and whatnot so what we want to do is get started with everyone and kind of catch up for a minute because I'm realizing recently that bankruptcy things are going to open up deals are trying to change again from last week we had three other bks that country started processing uh the blue and we're weeding about I don't know 18 months for one of them that just did not make a payments um are you seeing more yep we're seeing a lot more now I'm seeing people want to move things pricing hasn't changed too much yet but I think we're on the way I think so too I've seen uh deal flow it's been more from some people and less from others and so it's it's been a little bit different than uh has been in the past but uh it's still certainly there yeah so we got a few people checking in before we get started Jay saying hi um also uh Larry I see Cindy everyone else so uh I appreciate everyone I mute my phone for a minute I appreciate everyone kind of jumping in and checking out what we've got going on today yeah um we I have been closing out a few more deals uh we did we were in a process of buying a pool of assets uh they trickled down eventually when reading a collateral file um so they're not as crisp as we want to be and we get everything but we did get a bunch which is really cool um are you what are you seeing now I know we're looking at uh when we're talking last you're looking to reverse mortgages and whatnot what's Been On Your Horizon yeah I've got another Pool of reverse mortgages that I'm looking at right now um I'm still raising capital and so I'm I'm uh getting very close to my my goal for this month which is great and because we're only a weekend but uh but that's really good um spending some time here updating for DME coming up in June I know it's a little ways off but uh that's I'll send out a big announcement something a little later today uh we've got our class that we're starting out for five week uh which is pretty exciting as well and man Lots going on Lots going on it's been very good so if you're if you're kind of new to this whole area of note investing um what you're going to find from a lot of this conversation we're having today um is no investing has a lot of Curiosities to it right A lot of people wondering what it's all about um but also a lot of ideas out there that people don't realize um are what you think they may be but you're not sure everything else so well our mission today was really kind of talk to everyone about some of the big time myths out there and some of the um not so miss some of the facts out there um and we want to really kind of dive into those kind of factors um because I think what we're going to find is some of stuff out there is a myth per se but there's some truth to it as well yeah so and this is going to be interesting because Dave and I we we didn't discuss this beforehand so we're purposely got his list I've got my list and we're just going to kind of hit each other with what we've got so this would be kind of fun and entertaining we'll see uh what kind of myths we come across and uh which what what off our lists are the same and what's different so this would be interesting to see how this goes oh boy is I think up today so um hopefully we won't have too many issues but I'll make sure we get a some things happen here so all right come on there we go that's better holy moly yeah we wanted to talk about myths because I think people out there really don't have a grasp of some of the big Essences of note investing and what they really mean um because when you talk about no investing there's a lot of curiosity out there that are just not true um and I struggle with that because when you talk about notes in general it's complicated space and you've add things in there that may not be fully what you think they should be they become even more complicated and not true yeah so what's what's your first one what's uh we want to talk yes so what we want to talk about first is talking about getting into note investing yeah um and having money right there's a idea that in real estate you have to have a lot of money 20 down these kind of things to buy properties and when you find out that you typically don't need as much in notes as you do in brick and mortar right 20 down if you want to fix it up rentals you need to go get a good mortgage everything else we're notes you don't need a lot to get started you don't however actually Cindy and I are on both on a call yesterday where this came up where you don't need a lot but you do need cash you can't uh there's no lending on notes not really there's some again maybe I just created another myth there's not any lending on notes that's not necessarily true but you're not going to be able to go get a mortgage to go and buy notes or or a line of credit from a bank to go and buy notes uh that that doesn't exist correct however but you do have to have cash uh because it moves a lot faster in a lot of ways than real estate yes you're putting in an offer on with real estate you can take your time and closing doesn't happen for a month or or longer uh where as in notes you're expected to be able to close in most cases you're looking at closing like within a week so you've got to have your cash ready to go on the spot uh and close when you say you're going to close sure that's a big deal so if you guys do have issues hearing us at all let us know or seeing us um we'll do our best to do our tracking our comments and whatnot um I would definitely tell you guys if you are watching us on any of feed primarily we're looking at the Facebook group feed uh for comments feel free to jump in there but we are on LinkedIn and the Facebook page and whatnot so getting started notes definitely there's a money attribute to this right there is a field where money is needed however you know you can find a decent deal for a little bit of money as long as you're going for the assets all that are desired around the low mine um you know we have Ira money um and I don't need twenty thousand dollars Ira money to get into a partial right now granted if you're buying non-performers and you're gonna buy one for five thousand and that's all you have that's a problem that'll be a problem that'll be an issue yeah and and why is that Dave why is that a problem so you can stop performing you have a lot of fees a lot of extras a lot of costs to come play with that um from servicing fees you have to make sure that you're gonna be funding that while you're non-performer you're also going to be funding legal fees demand letters things like that and if you're doing your IRA well what do you do with that money how if especially if it's a raw how would you come up with additional funds right to handle the legal fees and the servicing fees and things like that so the model is things are fixed costs so whether it's a note you bought for 5 000 or 500 000 those costs are going to be the exact same number uh but percentage-wise that that could wipe you up yeah so I I typically what I I'll see what you say Dave but I do when people are asking me how much money do I need to get started in notes typically I recommend around fifty thousand if you've got about 50 000 that's a pretty good number to start with you can get a decent note for that plus have enough money left uh in reserve for all these costs that are involved yes I would agree with that I think that the thought process of having no money at all is dangerous um I do think that you can play with the 50 000 more successfully than if you are doing it strictly based on um you know the goal of you know buying stuff and being non-passive complete aggressive of stuff and making a business out of it you need to have some money um and be careful joint venturing with someone with money because that can cause a problem eventually right yeah 10 years ago uh it was a different number ten years ago I said probably you could you could start with around 30.

yes yes yep because of those notes were more available pricing was cheaper um a lot of things made that more possible yes but in today's market I'd say you're looking you know minimum 50 000 to get started yes there's so many other things that now involved that they weren't before sorry cool yeah Patrick made the comment about you know property tax Force Place Insurance especially not performing um et cetera Etc well said Patrick so when we talk about this stuff and reason we do this is because there's a lot of people out there that just don't realize what's going on and then they get involved with something just doesn't make sense so to remind everyone if you do catching this late will be on YouTube and all that good stuff on the podcast as well so that's another myth that leads right into another myth that I wrote down here is um if you have been a real estate investor in the past you can just move straight into notes and why is that that's a big No-No all kinds of reasons but real estate it's I and I this is one of my catchphrases is um it's real estate related but it is not real estate uh it's it's in that World um and and it's again it's related to real estate we're buying something attached to real estate but you're not buying the real estate yeah and ideally and depending on your exit strategy and everything else but all about having done this for a number of years now I can tell you the best case scenario is you'll never own the property yeah that I know even when I got started I was after the property I wanted to get the property that's of course you need to get property and it is and it can be but experience has taught me that uh your best case scenario is never to own it that's that's really what you should be going after it's in my opinion it's the best exit absolutely so you know that that's a good question that most people don't realize there that they should be having it themselves is that if you're ideally going for a property in a scenario you're gonna be having some issues um because you can't predict what a borrower is going to do don't predict the extra strategy before it comes um I know that when I first got started that was one of the goals like okay this is going to go this direction and this is going to happen this is going to happen um no yeah that's the thing that you can have an idea where you think it might go or a most likely case scenario but uh but when you're dealing with borrowers especially man people are unpredictable and they do all kinds of weird things that you would never think of and so be prepared for it to go off the rails outside of whatever plan you had for it yeah that was another one of mine is everything always goes according to plan no yes at all we can all look at acid and say this is probably going to do X Y and Z yeah and we have a good feeling but I wouldn't count on your feeling as an investment that's more of a gamble than investment right right right um and feel free if you guys have any ideas of myths or even facts you're kind of curious put it in the chat and we'll definitely check into it um and talk about it so um when we talk about going from a property going to Real Estate it's hard to grasp the idea that you can't actually evaluate the property yeah that you mean I can't look at the property I can't check it out I can't get inside of it um before I buy it that's really difficult for a lot of Real Estate Investors yes right yeah and it's hard to say well well but what if you just uh kind of snuck in or what if you knocked on the door no no don't do it don't do it don't do it you're gonna get in trouble yeah you might get away with it once or twice but you're gonna get in trouble it's a bad idea don't do it and just be prepared for that yes you don't know the inside of the house you don't know what it looks like so we'll be ready to be surprised yes so and what I can say is in all my years and this is why I say this is part of why I say uh you don't want the property and I've been doing this a number of years now since really since 2008.

um I I could go back and look to be sure but I think probably 90 or more of the time uh if I've ever lost money on a on buying a mortgage note which is not often it doesn't happen very often but if I ever do lose any money on it or or don't make a profit let's put it that way if I ever don't make a profit it's when I take back the property I don't know that I've ever not made a profit in any other scenario uh we've never we're gonna go weird or off and you know the only scenario would go weird off is if it goes to a foreclosure and you're really tell your numbers and you file they file BK and they contest it and fight it um I've gotten expensive foreclosure especially like Florida where they can test it it takes a long time um and it's frustrating right well real quick I just had one just finally this week these guys have been have been playing the game literally for 10 years uh I didn't buy the loan that long ago but uh but they've been doing BK this that and the other forever finally the judge um last month got fed up and converted their bankruptcy it was a chapter 11 it was under their corporation they he converted it to chapter seven and then just this week they contested that and the judge confirmed nope it's gone chapter seven too bad so sad they were doing all kinds of really stupid things in their bankruptcy and thank heavens we finally are able to Prevail on that one but holy smokes that one has been one for the books I'll write a book about that one one day that's not um so I'm curious you know when people look at this stuff and they start looking at stuff like this and we on our list we're gonna go jump around a little bit here um you know don't predict the fact that the borrower because it's vacant that it's going to go one way or another um most people say well I only buy bacon I only buy occupied and when this is the fact that I think it's a myth that just because it's occupied means that I'm going to get a reinstatement right or a modification and it's a great win with situation for sure and vice versa just because it's occupied doesn't necessarily mean that you're going to take back that property I've had it where I thought it was vacant and surprise surprise no it wasn't um and vice versa I've had it the other way around where I thought it was occupied and then it was bacon yeah so you can you you know you gather the best Intel you've got and and then it goes whichever direction it's going to go I mean it's really hard to predict so with that said I think what most people don't realize is occupied unoccupied he can go they can move back into home they can maybe they die maybe they moved or there's so many scenarios there that occupied equals this and not occupies means that here's the problem with non-occupied is a habitable is it a good property or is it destroyed which we've run too many times in the background yeah and and is it occupied okay great is it the owner occupying that is there a renter in there is it a squatter in there so what does occupied mean just because you sent the my Google's trying to talk to me just because uh it's occupied doesn't necessarily mean you're going to get a reinstatement like I said like it could be occupied by somebody other than the owner Maybe the owner I had this where the owner passed away and then it was an error living there they didn't actually have the right to live there but they just kind of moved in uh so it was occupied but not by the correct person and I mean it you get all kinds of fun and interesting stories that happen so you can't assume I think that's the bottom line you can't assume uh that it's just because of these factors in the beginning you can't assume that it's going to end up in this yes and I want to make sure people understand that is that don't predict anything before you get into it that's a big myth yeah next was you know um you talk about foreclosing you know you're going to do something when it happens even if it's in foreclosure don't predict the fact you're gonna go to auction Camp oh good one so we'll jump around here Rock by by renter well said Cindy so let's flip here for a second just for a second here let's say that the loan is performing yeah right it's going to continue to perform right forever and ever we hear someone all the time say it has 12 months 24 months of seasoning right so what investors typically do is they bid we'll get into bidding ideas they'll bid this based on a performing thing and say lock key done right and so I think it was Dr Phil that said the best predictor of future behavior is past Behavior so are they going to continue to make payments if they've made 12 consecutive payments yeah maybe yeah at least for the next you know few months probably and and let's not DB from the situation is not that they decide to it could be a whole different reasons why they can lose a job all of a sudden they can get sick die anything we've had loans where borrowers stop making payments simply to allow their kid to go to college right yeah I had one where I quit making payments because they were paying for their daughter's wedding uh you know the list is endless so there's all kinds of reasons why people don't make payments uh but that happens all the time all the time so be prepared that's kind of the the moral of that be prepared for it to go in on performing make sure that you've purchased it at a reasonable price so that if it does go non-performing uh you're not coming out to dry yeah so looking at our list a little bit more to see what we got going on here um we want to talk about no investing being passive yes it's a huge myth per se yeah is it a full myth or is it partially factual at all so that's one that I had on my list as well is once it's performing you give it to the or even if it's non-performing you give it to the servicer the servicer will take care of everything kind of and here's the thing I don't mean to give Services a bad rap at all I think that's a very difficult job uh you've got you know hundreds thousands of loans that you're dealing with you've got hundreds of different investors with all different kind of um expectations and you know ideas of where they would like this note to go like it's a really tough job for a servicer to to kind of manage everything and and make sure that everybody's happy all the time I I think it's a near impossible job so that being said uh you know then you've got a servicer where give you a scenario so let's say that I've got a loan uh the let's call it a non-performing loan I've got a non-performing loan it's occupied um the guy hasn't made a payment for 18 months let's say um where do I want that one to go do I want that one to re-perform am I more interested in taking back a property um what is my investor looking for out of this note and at what and when uh you know there's all kinds of factors in there so when a servicer gets that note you know their thinking might be we're going to do everything we can to get a re-performing yep well I also know the history of this note and the guy hasn't made a payment for 18 months he'd made payments for three months and then for two years before that he hadn't been making payments and he had had you know two bankruptcies in the last five years and and and so so my strategy on that one may not be actually to get him re-performing in most cases it is but let's just for the outlier you know let's say that on this case I actually would rather just be done with it and um and take back a property so if the the person comes back and wants to make a partial payment the servicer in that situation might be like oh yeah that's great everything we can do to get them re-performing whereas my thing might be you know what full reinstatement or nothing uh and that's the way it's going to be and so it it makes it very difficult so so when you're talking about totally passive I think that's nearly impossible um unless you've got a massive portfolio and and then you just do let the servicer do what they're going to do and the average is are in your favor and that's how you do it I think you made good point right services are is our hurdle times but also our savior times right yeah they avoid us having to do this full-time yeah at times right um even the mass scale Big Time investors rely on servicers to do a lot of the work absolutely so and you should yes um but granted we understand the fact that not all servicers care about the asset as much as we do you can it's our asset right um so does passive side can be things such as a performing note that's going great and not worrying about it at all right so can this be passive yes yeah no worries if it performs forever like a great renter right that performs forever or performs to a point where they pay it off that makes sense great right and you're definitely going to have those those yes like not to say that those are you know the Unicorn that doesn't exist those absolutely exist they absolutely exist so if you can get yourself a portfolio where that's all it does then absolutely it can be totally totally hands-off passive you don't have to do a thing and if you buy a partial that's another side of it usually partial is passive until it's not yeah good point right so so we're going to skip one because a little bit of math with doing it but we're talking about servicing right and on our list looking down is self-servicing it's easy there's nothing to it there's people out there who say you're crazy for hiring a service so you can do it all yourself yep can you service yourself and is that easy all right so I've got a really good friend uh lives down in Texas and uh he has his own portfolio he's got I don't know a couple of hundred loans that he's he Services all himself uh guy makes a bundle of money and he's a great guy and I love him to death and I I aspired to be like him one day except for the self-servicing part it's a lot of work man like even just one aspect let's talk about escrow uh if you're collecting escrow to pay for taxes and insurance that kind of thing you're going to have to keep that separate not only do you have to keep it separate you have to keep meticulous records of exactly what is in escrow when you know taxes were paid insurance was paid and how much are there any adjustments to be made because the tax bill went up or down you know like just that alone you're talking about on one loan and then you've got to do that how many times 10 20 100 times I think you can get to be a huge job just that part of it and when you first get in the space never self-service agreed yeah you have no clue what you can can't do it's not like getting a private land alone to somebody and calling them up and say I want my money right there's so many regulations in the space that the self the servicers handle for us um unless you have a good idea I wouldn't speak to the borrower yourself either right you just you're walking on fire there um can you always get in trouble no there are ways to prevent yourself from being in trouble however you don't know those ways you don't know what you can and can't say and and you don't realize what trouble you can get into right so self-servicing is once you get it cracking you only have a portfolio small or in performing yes you can self-service and make it happen and save yourself fifteen twenty thirty dollars a month especially if you're talking about like one local area so my friend in Texas he's in Lubbock everything he has is is you know an hour's Drive of Lubbock so it's all same county same state same rules you know and he knows them very well inside and out and so he's he can do that if you're talking about having loans in Texas and then in Michigan and then in Tennessee and then in North Carolina sure you know you're talking about different rules and different things you can and can't do and get sticey yeah so um before we go to the next one we want to remind everyone does those people who are beginners slash get into planar advance and learning these myths are really cool um we do have a five-week course that's going to be coming up on the 23rd of October uh be five individual weeks each week we'll be building on the next homework tons of resources take a look at the the website for more details I can post a link below um what we're doing is on a weekly basis you'll be going through actual assets and figure out issues and problems and questions and have homework um we'll provide resources such as Statue limitations and timelines and and licenses and stuff like that that we've never shared before um so if you and you can bring a partner for half off so if you are interested in getting involved with this and getting really actually in advance we'll be covering due diligence and whatnot please take a look at the website um sign up if you have any problems reach out to us and we'll uh jump on that yeah this is very practical very Hands-On so you're gonna go through assets and you know we're going to give you homework such as find the problem right we know the problem you're going to dive into it and gonna be again a whole file collateral file or you'd be reaching out to the actual local agents you're gonna be doing things like that to get your hands dirty and get your hands a little messy um but we'll be sharing resources that we've never shared before and the information will be Priceless I promise you I'm really excited about this opportunity yeah get on board it's gonna be great so we talked about a lot of the foreclosures getting involved we have another issue that I see I find to be a myth some people find to be helpful and I was just talking to someone just last night is understanding the math behind notes yeah right can I calculate everything in a way that we calculate you know you know a rehab project or whatnot um some people do Roi some people do how long until you get my money back right right some people say well how much open my percentage of borrowed money yeah and Tom Henderson talks about this quite a bit we had him on a few months back and talks about this all the time and he talks about yield is something that's realized when the money comes in anything that you put on paper that's a projected income yes it's not it's not money until it's money in your account yes so it's all fine and good to make projections um but you don't make the money until it actually comes in yes so I think what most people don't realize about that is that you can do all the math you want um and things change right and not to say you shouldn't do the math because you definitely should yes but be prepared for twists and turns yeah and I think what people don't realize when they're doing the math is well that math seems to be a little too difficult so I'm gonna go a little bit easier Roi is one of the basic terms that I used to use no you know I used to use it a lot yeah however what you find out with it is if I do a p and I times 12 divided by purchase price to figure out if my return is good right you clearly take out the entire note process of it right because it may not be 12 months it may be 24 50 months 60 months and that's great and wonderful but you're dividing a month angle by a purchase price this reinstatement come and play in there just servicing fees that increase decrease based on things like that so please be sure that if you're calculating being on Roi that you understand what the math is if you're using it a basis is great yeah the other point is yields um a lot of people continue to use a yield calculation you can use a calculator we have a workshop that allows you to figure out yield in the spreadsheet where you can run 100 assets through it and figure out a purchase price on an X yield which is great yeah Nathan when you first got started what did you bid based on besides okay let's get real quick another myth out there please don't bid based on upb yeah or BPO if you talk that reach out we'll explain why it's bad um because it leads a whole everything of the new out of place you have no interest rate in there which means you have no clue what the p i is and just because the upb is 50 000 and you bid based on 50 000 and you're hoping that the return is good um it's dangerous however we used to do that so when you got first got started what did you do so when I first got started you got to go back in time a little bit because when I first got started everything was underwater everything yes like there was never any Equity is what I'm saying so if the house is worth a hundred they owed 150 or 125 at least every every loan they without exception so in that case bidding based on whatever the payoff was or whatever the unpaid balance was made zero sense because the house wasn't worth as much as that so the chances of you collecting that were completely zero like there's no way you were ever gonna come you know collect 150 000 on a house worth a hundred yeah so that just didn't work so back in the day I was always based on property value and then that was that was the main thing and again going way way back when I very first started I was always after the property so my strategy at the time was I only bought uh distressed loans on vacant properties and only in Columbus Ohio is in one city we all started in Columbus yeah yeah good place but that was that was a strategy so uh either I was going to foreclose or get a Dina Loop and that that was like it that was what I was after so when I was bidding it was always based on property value whatever was left on the Node that actually just became uh something that I could use when I was talking to the borrower where I'd say Hey listen you all you owe 150 000 on this what I'm willing to let you do is walk away from that so just sign this Dean Lou give me the property and it all goes away we we filed this release of lean and you don't owe that money anymore and at the time it worked great and that was uh that was a good strategy this idea of bidding at a percentage was because pricing was low back then yes right um I made jokes back in the day that if we bid above 40 of the upb that'd be ridiculous yeah right so understand the fact that stair sets back then made a lot of sense because everything we did had a really high yield if we knew it or not we didn't realize what we're doing because we didn't talk about that stuff right no and we didn't really need to in a lot of forty percent thirty percent I mean you calculate any of the deals out there I don't care if the two percent loan yeah and your bit of 30 because you just didn't know any better yeah yeah there was that was a great time to get started because you could make all kinds of mistakes and I'm sure you're good yeah and we still came out okay and that so that was great yeah absolutely but you so you have to know what you're doing so as we move forward right I started doing Roi and I started getting into yield and I understand what yield does and when I met my one of my partners in 2016 we really dived into yield and he explained it as a bond guy what yield equates to and I see some posts about this um and Larry I love your idea um so what most people don't realize that yield is based on annual return until maturity date it's a bond equation right get that Bond equate so maturity date in 30 years your annual return over average will be X return right what explain to me what he was surprised by is that I'm bidding everything based on a yield number or an irr until maturity date okay and what we then shifted to was okay what is the average loan time frame that we're going to hold it the borrower's not going to refi or sell the property right and what we've realized started feeling out is that if we look at irr or yield to maturity date we're actually predicting that something that is very rarely happening most people sell the property they re-file um all kinds of stuff happens the default whatever it is and more likely they'll default before it happens right or sell the property really pay off whatever yeah yep early payoff is a huge one right so what I would say is that what we did was we shifted from an you know an IR thing uh idea to a Net Present Value number which is a reverse of an irr um so what we did was and I was doing this a lot was I would actually set my price and keep tweaking like bid price to get to the return I wanted versus start with the return and go based on Net Present Value so if you don't know what Net Present Value is definitely dive in it's a very newer thing for me so don't you know uh don't I'm not the expert on it but I actually sat down uh with Tom and talked about this and he said listen that's where you want to go the other flip side is you should be predicting that either selling the note borrow refi out borrow sell the property is within a time period and what you're going to find out is that Roi doesn't help calculate this irr doesn't help calculate this what you need to do is do a schedule on every asset and say in five years in seven years and 10 years and three years if I sell it at X dollar that point where will I be during that period of time right so if I want to hold it for five years and I'm gonna get X return and then in five years either I'm gonna sell it or I'm gonna X whatever is going to happen I want that return to be during that period of time right and this is done by a hedge fund guy and my my bond partner and figuring that out which was a completely different mindset yeah but it was the same conversation we all say it more likely we're not holding on for 20 years so when we figure yield or IR to the end of the schedule we're actually lying ourselves and what we realized was that we can actually buy in lower yield to a seller they figure yield them based on a number we'll actually our yield numbers lower than our actual bid because our IR internally for a three or ten or whatever it is is higher but the yield is lower which is really interesting math so yeah yeah slider I see your point MPV is a really cool idea it reverses the irr yeah and and we had this conversation when I was getting the fund started and making sure because mine is a five-year fund and so it's what does that look like at the end of five years and then one of the big questions to look at it when you're doing that is okay uh then how much can I sell that loan four or five years from now yes you know at what percentage of like what yield do I have to sell it at yes in order to be able to you know like back into it that way so therefore I can spend this much on it today knowing that in five years I'll be able to sell it for XML yeah and I I see Patrick combat this is all about time value money absolutely it is however if you use time value money yield and say okay what's my yield or irr to maturity you're missing out on the fact that if you sell it or something happens in five years in seven years and ten years or two years all those different scenarios should be played out because you don't know what's going to happen and you most likely are probably over bidding and hoping for a high return which means you lose out on assets yeah um and whatnot so it's a really difficult math but for exactly what Nathan's saying for his fund Sunset of five years even if there's 15 more years on it he has to predict what he'll sell it for most likely in yield number right and to know the fact that if I sell it at an X yield in five years I'll get that as an income so what will my irr be in five for over those five years including that payment coming in right so yes I think it's a huge thing that most people don't get it's complicated so I apologize for that long-winded answer um but Roi is something I get it's easy how long to get your money back is a feel-good thing right um and you say well it's five years you can only money back I don't I always look to a point if I had a rental property or Fix and Flip would Roi apply there would I be looking at different numbers and remember guys remember you can figure out irr on non-performing assets because the time value of money still works if you foreclose on a property yeah it does yeah absolutely right um so I wanted to pivot for a minute make sure if anyone has any kind of myths or ideas out there please let us know one of the things that came out to me recently is this conversation of what's going to happen in the future right um let's the easy first myth is we don't know what's going to happen right let's get over it however what we do know are some of the things that are affecting the current buyers and people who are involved um I would keep an eye on things like arms how many percentage of arms are being created yeah um because arms if someone can't afford something they usually get an arm and then if that adjusts what happens yeah and he locks is another one to keep an eye out for how many helocs are being created right now or have been created in the last two years yes house prices are going up free money is all over the place there's all kinds of things you can buy uh all of a sudden Equity is being created when it wasn't there before and people are making helocs happen where maybe maybe they shouldn't have would but we learn anything back in 06 yeah right yeah um yes so sending me the comment you know just be careful predictions in the future as inflation is direct correlation to real yield yes right so at 10 return right now is great however if everything else goes off that 10 drops down right you should be aiming for a little higher return um if you can get it um and again going back to that whole idea of schedule and if anyone's I know Larry's probably jumping an idea um if figuring this out this new schedule it you can literally buy a little higher return with a lower yield because of the way the equations figures out yeah so I wanted to bring up also due diligence due diligence is a big factor that most people want to learn about but struggle um and I've seen this post on a couple different Facebook groups um my team has brought this up to me as well No One's Gonna Do your due diligence for you right and and the question how much do you do how much can you hire out uh how much is too much if there is such a thing how do you handle due diligence uh on a small scale on a larger scale and that's a good one that somebody else will do it for you yeah I get you know so the question is what do the big dogs do right you know um we're friends with some of the bigger players and stuff like that um they they do have team to handle things right understand the fact that they collateral file can be reviewed by an attorney or collateral management company get all that yeah your value of property is just we've talked about that a lot right um Larry is an attorney for all due diligence I do too um I have one generic attorney unless it's state Pacific and I really have a question about something to go to attorney inside that state you can hire big management companies who can review things and take a look at it um and there are companies out there who will review all the cloud files for you they're not attorneys they can figure it out right um missing the name off top of my head right now out in California but they'll they'll take on clients they'll review collateral files and they're vast in the in the entire country um but the bottom line that you you've got to have human eyes on it yes it can't be done by you know electronic means not fully there's going to be a person there that knows what they're doing that's looking at it some even a VA uh if they're specifically trained to be able to go through and see a collateral file and know what it means okay great most aren't no and so just be aware and there's little caveats that most people will miss on it right I just we saw fall the other day where the forbearance agreement wasn't signed by the seller right is that legitimate for branch agreement if both parties in Simon right um there's always Little Things on the flip side things like your value your property you can order BPL where you can talk to an agent which can't be automated you've got to reach out the agent talk to them reading over servicing notes I highly recommend you do yeah agreed understand the pay history but service notes is a huge thing it's your eyes on the property it's like you're getting inside the property yeah you're getting eyes and ears into the borrower situation and if you don't know what's going on with it the service notes give you a lot of insight yeah it's so valuable to know the story so they've been struggling with payments okay why and if you got the servicing notes you get a lot of those conversations that come through or not maybe all you see is the servicers tried to reach out 20 times over the last two months and just has zero response but you gotta like if you know that whatever it is uh you can start to put together the story a little bit and then figure out where do you go from here you know just to bring up some of the things I've seen over the years in servicing notes um a modification we've talked about before what a big seller I know I bought a loan for a modification was getting in the process of um house was on fire wow right what happened the borrower called the house on fire I wonder what happened to fire damage yeah right was repaired was the money paid out yeah was it work done do we have pictures of that work yeah those kind of things um another big one is like if they've done property work in a property you know they've done property preservation on a house or didn't do proper preservation on a house in the North right yeah you haven't looked at the property in two years to two winners yeah you have no key you haven't winterized it yeah yeah somewhere in Michigan or I mean any you know pick a state Wisconsin anything where it's gonna freeze um yeah you need to know that stuff I have again way way way way back when uh when I was very first touring properties on some loans that uh I'd purchased way back then I went into a property in Michigan and the basement literally had six feet of water in it uh where you could not get down in the basement and you know how were you going to know that you know and and uh obviously and had us had there been servicing notes at that time I could have seen you know like it's been empty for this long and winterization never took place okay so we've got a better idea of what's a possible problems and it comes back to if they're not paying a forced Place insurance right and the borrower's not paying is there no insurance on it at all you know is there insurance on it we always talk about there's two different kinds of insurance out there please watch our video before that's a huge one right so knowing those kind of insights on the service notes yes Jay yes tell the story of the borrower it tells the story of the loan itself what's happened in the past what interactions had the borrowing non-performing but they've been talking to the servicer yeah poor houses I've seen servers notes where it says borrower called and no response yeah the servicer didn't respond to a bar or call to me that means that holy crap this bar wants to do something and the service are just did what do they do right um yes so it's huge so servicing notes is something you cannot Outsource I would do it in-house I would do it yourself review it you could probably teach a VA to do it however there's so many little caveats we're like oh I wonder what happened here or hey look at this the person died but then who's this other person involved oh they rented it out or the the sis the daughter took over um what's going on it tells you a huge story um they got a new job all kind of stuff and and it's hard to have that hired out and then get the full story yeah you're gonna get somebody let's say you've hired a VA to go through that and make a few notes that's fine but how how complete are those notes and are they gonna have the same effect as you're reading through and go oh wait so then if that happened then what about this and then and it can get you started on a different train of thought that you wouldn't have had otherwise yeah um another Mythic came to mind when I was talking this morning um is that all sellers are the same yes yes Jay you need to feel the nuances of the deal all sellers are the same is something that I find humorous it's a huge myth I don't know if two sellers are the same at all I mean just look at tapes one seller may not be the same tape from one cell tape to another it's like no and then you get my brother-in-law the engineer who's like oh and then you could just like automate the the tape so you get I'm like dude no I mean yeah possibly but you'd have to convert all of them into one format before you could do any kind of yeah analysis on that so so we have a huge one thing somebody adding in our five-week class is my pivot table which is probably invaluable since 2017 I think I started I recorded every single header and basically normalize the whole list I can literally look up anything and say okay it means this granted just last week another tape was a header that came across it was a misspelling uh and is what else right so yes that would have sell is different how they want to work it yeah some sellers don't want you to counter if you have an asset you make an offer listen we gave you the Clutter file it's a final offer you have to order your own E's some sellers are very flexible with things um some sellers won't give you service notes yeah right and some sellers are used to working with small investors which makes it easier for us to work with them and make things happen it'll be easier and quicker um and some sellers will work with Nathan definitely they work with us sure right yeah I mean we don't get the tapes anymore right we know who they didn't get the tapes and I do right like why and it's yeah who we are just it is what it is well and and the one what I wrote down here was um sellers all sellers just want to screw you over they all they want to do is take it back and leave very good set yeah are all notes on sellers tapes bad no no not at all not at all and having been on the other side of the table and Dave you know this um sellers often don't have all the information and so when it when a buyer comes in and says okay well I found this and this and this and you're like oh really I had no idea yeah we're not screwing the seller's not screwing when they say they don't know most of the time um most of the time yeah understand the fact that the ones that are trying to screw you over uh what we've learned over the years is the ones that do try to screw you over uh they don't last long no so you know it's not worth it for people for the sellers to be out there just like trying to mess everyone over and you know sell a bunch of crappy because you're dealing with a seller who seems to be not sure what's going on yeah ask others you're gonna find out that the people either know them already that they're Joker Brokers right um more likely and understand the fact that sellers sometimes what's most big sellers do really big sellers do is they'll buy a full of say 100 assets and they'll do 20 assets and send them out and sell off 20 for profit to pay for the other 75.

yeah very often and sometimes they put good stuff in there sometimes you just cut it down and they just make it happen yeah um in a little caveat since this doesn't happen anymore and I'm sure the gentleman doesn't we won't mention names there's some sellers out there that'll send you a different tape then they'll send somebody else right um for those who are part of our group that they know we're talking about this is one of the reasons we start our our little private group that some sellers will sing you a tape send me a tape and send someone I'll say all different assets yeah yeah and just and yeah interesting yeah and they rotate them right so sellers try to do anything they can to get the high prices right as much as they can to pay off other things um also it could be effect of a sunset where deals may be sunsetting or the fun sun setting where we're or irr we talked earlier is projecting a two-year if we go three years our IR drops right we have to sell two years and make that irr work yeah so we have to make it happen yeah yeah and which is great and I've definitely been the recipient of that where uh seller calls me up and says hey I've got these two loans that's all that's left in the portfolio I got to get rid of them I can let them go for cheap absolutely I'm your guy every day twice in the sun yeah yeah so um I'm really glad that we talked about a lot of the stuff um and if these are other myths or questions feel free to let us know I'm curious where people are with this stuff um I think that um there are a lot of myths out there but there's also a lot of truths um and bet your sellers as you would an investor yes um and let's clear something up right one of the biggest things we say is vet your sellers that you're everyone else some people know what that means right and I'll tell you what it means to me um very much seller means I reach out to people I trust and ask if they know who they are do you know this person and if a bunch of people don't know they are doesn't mean they're bad yet just means the fact they don't know them well then I can dive in deeper I look at the company I look at their situation are they a large company right is there a large company then they're legit right either small company more likely they have no clue they're doing right you can look at the the county records and see what's happened yeah right um if there's small investor most likely everyone has heard of them they've probably done something to someone else so that's my vetting process however most of the people I buy from I repeat buy from them I don't buy unless the single asset from one seller who said listen I originated right and and I buy from both but uh but yeah I the repeat when you get in with somebody and then you can buy from them over and over again that's your best case scenario and then you know them they know you and you know that you know you've got a good working relationship but it's important to be able to know who's who's the seller on this I've got some that I bought like in 2015 that I still haven't uh resolved where they they sold the loans they shouldn't have and I'm not sure that they actually knew that but that's a different story but uh but we're still just getting that resolved and this is this is many years later and you know they've had my money for this long and hopefully that's being refunded very soon we'll see and make sure guys if you see someone say give me your money I'll send you wired loans it's actually legit you know yeah I would if you're at that point you should already know if your seller's legit or not and they are legit you should be able to trust that right escrow is a big question mark in our space that I get that for Brick and Mortar investors and used to Escrow but legitimate sellers that's how they work um in general escrow still isn't widely used I'm personally I'm okay with that all right yep I mean Jay I bought probably from Jay before we bought a couple uh Parcels to him and it was no escrow he's wired money over and be done with it right um because the trust is there for another investors that's kind of weird yeah you can trusting this person that you emailed back for it you haven't met you probably haven't talked to yeah um and whatnot yeah guys I I hate to cut it off there um I would say that this is a really cool fun topic and I really hope that we can do this again I love to get more missing facts um I've got more on my list so we'll we'll have to do another round and yeah we won't be together for next week we have some things on agenda so we back double backed it up um it's gonna be getting a little crazy uh but we'd love for you guys to take a look at I posted uh we posted into the chat box uh the comment box the five week that we're coming up with please take a look at that um even if you're experienced the resources available in there are gonna be probably unheard of I was talking to someone the other day that was part of a big training program and some of the resources that we're sharing isn't there um and there's a reason why we can't share some of the resources um publicly but we're going to give it to the group and they jump in there so a lot of it is our private stuff this is what we use on our own business yes so we don't normally share that kind of thing right now yes and as a reminder um DME will be kicking off in June uh yeah the site will be updated shortly if you missed the beginning um it's in process yes I'm gonna check it out it's in Nashville next June so um if you're looking I'll do it for Nathan if you want to sponsor anything please reach out to them um I'm not involved in the organization of this um but Reach Out Nathan set up some more sponsorships if you're looking to do that um and he'll Reign for speaking of influence so it's gonna be a lot of fun we've got a lot of cool things fun things yeah so there's a cool and get there night before make sure you get the night before for relax throwing which is gonna be fun yeah be a lot of fun we'll have more information yes as we go well guys I appreciate you guys tuning in on this Friday afternoon um we'll be back probably at the end of October um and uh let us know if you have any questions if there's anything going on or Curiosities that's happening um there's a lot of curiosity about default loans and stuff like that don't get too excited about that understand the fact that a lot of stuff is held by the federal government Fanny and Freddie here not gonna get those loans or defaulting and there's a lot of articles about that um so just be careful what you read that loans defaulting like crazy doesn't mean they're trickling down uh to you anytime in next six months those will probably be pushed out a little bit longer so all right well Nathan thanks for man joining uh we'll be welcome first soon and again 23rd of October will be uh Tuesday nights we'll be jumping on at eight o'clock we'll talk to everyone then okay thanks everybody take care hello fellow new investor Dave putz here and this week Nathan Turner and I sit down together talk about some of the myths of note investing and some of the facts some are not as black and white as that is and we talk about if how much money you need to get started and while you're through the process of buying notes how do you know what the outcome was going to be is there a factual truth that you know what's going to happen when it happens vacancy is that a good thing or bad thing is self-servicing a positive or negative and we also talk about really good in-depth math calculations from Roi to yield to Net Present Value so definitely tune in watch the whole thing and feel free to send us any comments questions you may have enjoy well welcome everyone Dave put some jkp Holdings alongside me Mr Nathan Turner hello hello everything is going well it's going well it's going well I am in the middle of updating the DME website if you go to it now you're going to see it halfway finished more information coming it's pretty exciting it's it's good stuff so keep checking back so I apologize everyone for the technical thing I'm so used to setting up for three people and I wasn't so hopeful all is well um I appreciate I see some people texting and messaging all the good stuff um and whatnot so what we want to do is get started with everyone and kind of catch up for a minute because I'm realizing recently that bankruptcy things are going to open up deals are trying to change again from last week we had three other bks that country started processing uh the blue and we're weeding about I don't know 18 months for one of them that just did not make a payments um are you seeing more yep we're seeing a lot more now I'm seeing people want to move things pricing hasn't changed too much yet but I think we're on the way I think so too I've seen uh deal flow it's been more from some people and less from others and so it's it's been a little bit different than uh has been in the past but uh it's still certainly there yeah so we got a few people checking in before we get started Jay saying hi um also uh Larry I see Cindy everyone else so uh I appreciate everyone I mute my phone for a minute I appreciate everyone kind of jumping in and checking out what we've got going on today yeah um we I have been closing out a few more deals uh we did we were in a process of buying a pool of assets uh they trickled down eventually when reading a collateral file um so they're not as crisp as we want to be and we get everything but we did get a bunch which is really cool um are you what are you seeing now I know we're looking at uh when we're talking last you're looking to reverse mortgages and whatnot what's Been On Your Horizon yeah I've got another Pool of reverse mortgages that I'm looking at right now um I'm still raising capital and so I'm I'm uh getting very close to my my goal for this month which is great and because we're only a weekend but uh but that's really good um spending some time here updating for DME coming up in June I know it's a little ways off but uh that's I'll send out a big announcement something a little later today uh we've got our class that we're starting out for five week uh which is pretty exciting as well and man Lots going on Lots going on it's been very good so if you're if you're kind of new to this whole area of note investing um what you're going to find from a lot of this conversation we're having today um is no investing has a lot of Curiosities to it right A lot of people wondering what it's all about um but also a lot of ideas out there that people don't realize um are what you think they may be but you're not sure everything else so well our mission today was really kind of talk to everyone about some of the big time myths out there and some of the um not so miss some of the facts out there um and we want to really kind of dive into those kind of factors um because I think what we're going to find is some of stuff out there is a myth per se but there's some truth to it as well yeah so and this is going to be interesting because Dave and I we we didn't discuss this beforehand so we're purposely got his list I've got my list and we're just going to kind of hit each other with what we've got so this would be kind of fun and entertaining we'll see uh what kind of myths we come across and uh which what what off our lists are the same and what's different so this would be interesting to see how this goes oh boy is I think up today so um hopefully we won't have too many issues but I'll make sure we get a some things happen here so all right come on there we go that's better holy moly yeah we wanted to talk about myths because I think people out there really don't have a grasp of some of the big Essences of note investing and what they really mean um because when you talk about no investing there's a lot of curiosity out there that are just not true um and I struggle with that because when you talk about notes in general it's complicated space and you've add things in there that may not be fully what you think they should be they become even more complicated and not true yeah so what's what's your first one what's uh we want to talk yes so what we want to talk about first is talking about getting into note investing yeah um and having money right there's a idea that in real estate you have to have a lot of money 20 down these kind of things to buy properties and when you find out that you typically don't need as much in notes as you do in brick and mortar right 20 down if you want to fix it up rentals you need to go get a good mortgage everything else we're notes you don't need a lot to get started you don't however actually Cindy and I are on both on a call yesterday where this came up where you don't need a lot but you do need cash you can't uh there's no lending on notes not really there's some again maybe I just created another myth there's not any lending on notes that's not necessarily true but you're not going to be able to go get a mortgage to go and buy notes or or a line of credit from a bank to go and buy notes uh that that doesn't exist correct however but you do have to have cash uh because it moves a lot faster in a lot of ways than real estate yes you're putting in an offer on with real estate you can take your time and closing doesn't happen for a month or or longer uh where as in notes you're expected to be able to close in most cases you're looking at closing like within a week so you've got to have your cash ready to go on the spot uh and close when you say you're going to close sure that's a big deal so if you guys do have issues hearing us at all let us know or seeing us um we'll do our best to do our tracking our comments and whatnot um I would definitely tell you guys if you are watching us on any of feed primarily we're looking at the Facebook group feed uh for comments feel free to jump in there but we are on LinkedIn and the Facebook page and whatnot so getting started notes definitely there's a money attribute to this right there is a field where money is needed however you know you can find a decent deal for a little bit of money as long as you're going for the assets all that are desired around the low mine um you know we have Ira money um and I don't need twenty thousand dollars Ira money to get into a partial right now granted if you're buying non-performers and you're gonna buy one for five thousand and that's all you have that's a problem that'll be a problem that'll be an issue yeah and and why is that Dave why is that a problem so you can stop performing you have a lot of fees a lot of extras a lot of costs to come play with that um from servicing fees you have to make sure that you're gonna be funding that while you're non-performer you're also going to be funding legal fees demand letters things like that and if you're doing your IRA well what do you do with that money how if especially if it's a raw how would you come up with additional funds right to handle the legal fees and the servicing fees and things like that so the model is things are fixed costs so whether it's a note you bought for 5 000 or 500 000 those costs are going to be the exact same number uh but percentage-wise that that could wipe you up yeah so I I typically what I I'll see what you say Dave but I do when people are asking me how much money do I need to get started in notes typically I recommend around fifty thousand if you've got about 50 000 that's a pretty good number to start with you can get a decent note for that plus have enough money left uh in reserve for all these costs that are involved yes I would agree with that I think that the thought process of having no money at all is dangerous um I do think that you can play with the 50 000 more successfully than if you are doing it strictly based on um you know the goal of you know buying stuff and being non-passive complete aggressive of stuff and making a business out of it you need to have some money um and be careful joint venturing with someone with money because that can cause a problem eventually right yeah 10 years ago uh it was a different number ten years ago I said probably you could you could start with around 30.

yes yes yep because of those notes were more available pricing was cheaper um a lot of things made that more possible yes but in today's market I'd say you're looking you know minimum 50 000 to get started yes there's so many other things that now involved that they weren't before sorry cool yeah Patrick made the comment about you know property tax Force Place Insurance especially not performing um et cetera Etc well said Patrick so when we talk about this stuff and reason we do this is because there's a lot of people out there that just don't realize what's going on and then they get involved with something just doesn't make sense so to remind everyone if you do catching this late will be on YouTube and all that good stuff on the podcast as well so that's another myth that leads right into another myth that I wrote down here is um if you have been a real estate investor in the past you can just move straight into notes and why is that that's a big No-No all kinds of reasons but real estate it's I and I this is one of my catchphrases is um it's real estate related but it is not real estate uh it's it's in that World um and and it's again it's related to real estate we're buying something attached to real estate but you're not buying the real estate yeah and ideally and depending on your exit strategy and everything else but all about having done this for a number of years now I can tell you the best case scenario is you'll never own the property yeah that I know even when I got started I was after the property I wanted to get the property that's of course you need to get property and it is and it can be but experience has taught me that uh your best case scenario is never to own it that's that's really what you should be going after it's in my opinion it's the best exit absolutely so you know that that's a good question that most people don't realize there that they should be having it themselves is that if you're ideally going for a property in a scenario you're gonna be having some issues um because you can't predict what a borrower is going to do don't predict the extra strategy before it comes um I know that when I first got started that was one of the goals like okay this is going to go this direction and this is going to happen this is going to happen um no yeah that's the thing that you can have an idea where you think it might go or a most likely case scenario but uh but when you're dealing with borrowers especially man people are unpredictable and they do all kinds of weird things that you would never think of and so be prepared for it to go off the rails outside of whatever plan you had for it yeah that was another one of mine is everything always goes according to plan no yes at all we can all look at acid and say this is probably going to do X Y and Z yeah and we have a good feeling but I wouldn't count on your feeling as an investment that's more of a gamble than investment right right right um and feel free if you guys have any ideas of myths or even facts you're kind of curious put it in the chat and we'll definitely check into it um and talk about it so um when we talk about going from a property going to Real Estate it's hard to grasp the idea that you can't actually evaluate the property yeah that you mean I can't look at the property I can't check it out I can't get inside of it um before I buy it that's really difficult for a lot of Real Estate Investors yes right yeah and it's hard to say well well but what if you just uh kind of snuck in or what if you knocked on the door no no don't do it don't do it don't do it you're gonna get in trouble yeah you might get away with it once or twice but you're gonna get in trouble it's a bad idea don't do it and just be prepared for that yes you don't know the inside of the house you don't know what it looks like so we'll be ready to be surprised yes so and what I can say is in all my years and this is why I say this is part of why I say uh you don't want the property and I've been doing this a number of years now since really since 2008.

um I I could go back and look to be sure but I think probably 90 or more of the time uh if I've ever lost money on a on buying a mortgage note which is not often it doesn't happen very often but if I ever do lose any money on it or or don't make a profit let's put it that way if I ever don't make a profit it's when I take back the property I don't know that I've ever not made a profit in any other scenario uh we've never we're gonna go weird or off and you know the only scenario would go weird off is if it goes to a foreclosure and you're really tell your numbers and you file they file BK and they contest it and fight it um I've gotten expensive foreclosure especially like Florida where they can test it it takes a long time um and it's frustrating right well real quick I just had one just finally this week these guys have been have been playing the game literally for 10 years uh I didn't buy the loan that long ago but uh but they've been doing BK this that and the other forever finally the judge um last month got fed up and converted their bankruptcy it was a chapter 11 it was under their corporation they he converted it to chapter seven and then just this week they contested that and the judge confirmed nope it's gone chapter seven too bad so sad they were doing all kinds of really stupid things in their bankruptcy and thank heavens we finally are able to Prevail on that one but holy smokes that one has been one for the books I'll write a book about that one one day that's not um so I'm curious you know when people look at this stuff and they start looking at stuff like this and we on our list we're gonna go jump around a little bit here um you know don't predict the fact that the borrower because it's vacant that it's going to go one way or another um most people say well I only buy bacon I only buy occupied and when this is the fact that I think it's a myth that just because it's occupied means that I'm going to get a reinstatement right or a modification and it's a great win with situation for sure and vice versa just because it's occupied doesn't necessarily mean that you're going to take back that property I've had it where I thought it was vacant and surprise surprise no it wasn't um and vice versa I've had it the other way around where I thought it was occupied and then it was bacon yeah so you can you you know you gather the best Intel you've got and and then it goes whichever direction it's going to go I mean it's really hard to predict so with that said I think what most people don't realize is occupied unoccupied he can go they can move back into home they can maybe they die maybe they moved or there's so many scenarios there that occupied equals this and not occupies means that here's the problem with non-occupied is a habitable is it a good property or is it destroyed which we've run too many times in the background yeah and and is it occupied okay great is it the owner occupying that is there a renter in there is it a squatter in there so what does occupied mean just because you sent the my Google's trying to talk to me just because uh it's occupied doesn't necessarily mean you're going to get a reinstatement like I said like it could be occupied by somebody other than the owner Maybe the owner I had this where the owner passed away and then it was an error living there they didn't actually have the right to live there but they just kind of moved in uh so it was occupied but not by the correct person and I mean it you get all kinds of fun and interesting stories that happen so you can't assume I think that's the bottom line you can't assume uh that it's just because of these factors in the beginning you can't assume that it's going to end up in this yes and I want to make sure people understand that is that don't predict anything before you get into it that's a big myth yeah next was you know um you talk about foreclosing you know you're going to do something when it happens even if it's in foreclosure don't predict the fact you're gonna go to auction Camp oh good one so we'll jump around here Rock by by renter well said Cindy so let's flip here for a second just for a second here let's say that the loan is performing yeah right it's going to continue to perform right forever and ever we hear someone all the time say it has 12 months 24 months of seasoning right so what investors typically do is they bid we'll get into bidding ideas they'll bid this based on a performing thing and say lock key done right and so I think it was Dr Phil that said the best predictor of future behavior is past Behavior so are they going to continue to make payments if they've made 12 consecutive payments yeah maybe yeah at least for the next you know few months probably and and let's not DB from the situation is not that they decide to it could be a whole different reasons why they can lose a job all of a sudden they can get sick die anything we've had loans where borrowers stop making payments simply to allow their kid to go to college right yeah I had one where I quit making payments because they were paying for their daughter's wedding uh you know the list is endless so there's all kinds of reasons why people don't make payments uh but that happens all the time all the time so be prepared that's kind of the the moral of that be prepared for it to go in on performing make sure that you've purchased it at a reasonable price so that if it does go non-performing uh you're not coming out to dry yeah so looking at our list a little bit more to see what we got going on here um we want to talk about no investing being passive yes it's a huge myth per se yeah is it a full myth or is it partially factual at all so that's one that I had on my list as well is once it's performing you give it to the or even if it's non-performing you give it to the servicer the servicer will take care of everything kind of and here's the thing I don't mean to give Services a bad rap at all I think that's a very difficult job uh you've got you know hundreds thousands of loans that you're dealing with you've got hundreds of different investors with all different kind of um expectations and you know ideas of where they would like this note to go like it's a really tough job for a servicer to to kind of manage everything and and make sure that everybody's happy all the time I I think it's a near impossible job so that being said uh you know then you've got a servicer where give you a scenario so let's say that I've got a loan uh the let's call it a non-performing loan I've got a non-performing loan it's occupied um the guy hasn't made a payment for 18 months let's say um where do I want that one to go do I want that one to re-perform am I more interested in taking back a property um what is my investor looking for out of this note and at what and when uh you know there's all kinds of factors in there so when a servicer gets that note you know their thinking might be we're going to do everything we can to get a re-performing yep well I also know the history of this note and the guy hasn't made a payment for 18 months he'd made payments for three months and then for two years before that he hadn't been making payments and he had had you know two bankruptcies in the last five years and and and so so my strategy on that one may not be actually to get him re-performing in most cases it is but let's just for the outlier you know let's say that on this case I actually would rather just be done with it and um and take back a property so if the the person comes back and wants to make a partial payment the servicer in that situation might be like oh yeah that's great everything we can do to get them re-performing whereas my thing might be you know what full reinstatement or nothing uh and that's the way it's going to be and so it it makes it very difficult so so when you're talking about totally passive I think that's nearly impossible um unless you've got a massive portfolio and and then you just do let the servicer do what they're going to do and the average is are in your favor and that's how you do it I think you made good point right services are is our hurdle times but also our savior times right yeah they avoid us having to do this full-time yeah at times right um even the mass scale Big Time investors rely on servicers to do a lot of the work absolutely so and you should yes um but granted we understand the fact that not all servicers care about the asset as much as we do you can it's our asset right um so does passive side can be things such as a performing note that's going great and not worrying about it at all right so can this be passive yes yeah no worries if it performs forever like a great renter right that performs forever or performs to a point where they pay it off that makes sense great right and you're definitely going to have those those yes like not to say that those are you know the Unicorn that doesn't exist those absolutely exist they absolutely exist so if you can get yourself a portfolio where that's all it does then absolutely it can be totally totally hands-off passive you don't have to do a thing and if you buy a partial that's another side of it usually partial is passive until it's not yeah good point right so so we're going to skip one because a little bit of math with doing it but we're talking about servicing right and on our list looking down is self-servicing it's easy there's nothing to it there's people out there who say you're crazy for hiring a service so you can do it all yourself yep can you service yourself and is that easy all right so I've got a really good friend uh lives down in Texas and uh he has his own portfolio he's got I don't know a couple of hundred loans that he's he Services all himself uh guy makes a bundle of money and he's a great guy and I love him to death and I I aspired to be like him one day except for the self-servicing part it's a lot of work man like even just one aspect let's talk about escrow uh if you're collecting escrow to pay for taxes and insurance that kind of thing you're going to have to keep that separate not only do you have to keep it separate you have to keep meticulous records of exactly what is in escrow when you know taxes were paid insurance was paid and how much are there any adjustments to be made because the tax bill went up or down you know like just that alone you're talking about on one loan and then you've got to do that how many times 10 20 100 times I think you can get to be a huge job just that part of it and when you first get in the space never self-service agreed yeah you have no clue what you can can't do it's not like getting a private land alone to somebody and calling them up and say I want my money right there's so many regulations in the space that the self the servicers handle for us um unless you have a good idea I wouldn't speak to the borrower yourself either right you just you're walking on fire there um can you always get in trouble no there are ways to prevent yourself from being in trouble however you don't know those ways you don't know what you can and can't say and and you don't realize what trouble you can get into right so self-servicing is once you get it cracking you only have a portfolio small or in performing yes you can self-service and make it happen and save yourself fifteen twenty thirty dollars a month especially if you're talking about like one local area so my friend in Texas he's in Lubbock everything he has is is you know an hour's Drive of Lubbock so it's all same county same state same rules you know and he knows them very well inside and out and so he's he can do that if you're talking about having loans in Texas and then in Michigan and then in Tennessee and then in North Carolina sure you know you're talking about different rules and different things you can and can't do and get sticey yeah so um before we go to the next one we want to remind everyone does those people who are beginners slash get into planar advance and learning these myths are really cool um we do have a five-week course that's going to be coming up on the 23rd of October uh be five individual weeks each week we'll be building on the next homework tons of resources take a look at the the website for more details I can post a link below um what we're doing is on a weekly basis you'll be going through actual assets and figure out issues and problems and questions and have homework um we'll provide resources such as Statue limitations and timelines and and licenses and stuff like that that we've never shared before um so if you and you can bring a partner for half off so if you are interested in getting involved with this and getting really actually in advance we'll be covering due diligence and whatnot please take a look at the website um sign up if you have any problems reach out to us and we'll uh jump on that yeah this is very practical very Hands-On so you're gonna go through assets and you know we're going to give you homework such as find the problem right we know the problem you're going to dive into it and gonna be again a whole file collateral file or you'd be reaching out to the actual local agents you're gonna be doing things like that to get your hands dirty and get your hands a little messy um but we'll be sharing resources that we've never shared before and the information will be Priceless I promise you I'm really excited about this opportunity yeah get on board it's gonna be great so we talked about a lot of the foreclosures getting involved we have another issue that I see I find to be a myth some people find to be helpful and I was just talking to someone just last night is understanding the math behind notes yeah right can I calculate everything in a way that we calculate you know you know a rehab project or whatnot um some people do Roi some people do how long until you get my money back right right some people say well how much open my percentage of borrowed money yeah and Tom Henderson talks about this quite a bit we had him on a few months back and talks about this all the time and he talks about yield is something that's realized when the money comes in anything that you put on paper that's a projected income yes it's not it's not money until it's money in your accoun....