Land Trusts and Collateral Assignments for Note Investing | Real Estate Notes Show

Episode: Philip Klinck Note Investing Land Trusts and Collateral Assignments Dave's Goals and Plans: - Putting in multiple offers on assets from different sources in Florida, Texas, Missouri, and some CFDs and first mortgages - Still working on some summer finance deals - Shifting strategy to hold performers for the first time ever and raising money in the next few weeks - Exploring how to leverage existing inventory without selling anything - Using investor IRA money to put to work, sometimes through LLC and sometimes direct from IRA Nathan's Goals and Plans: - Just went into contract on a note in Oklahoma where foreclosure auction is scheduled for July - Got a big enough discount on the deal that it looks profitable - Had realtor verify property value overnight with interior pictures - Plans to finish the deal before end of summer - Operates as a short-term investor who doesn't want to hold notes long-term Key Recommendations: - Use trusts as vehicles for holding real estate notes and properties - Easy to form trusts and can change trustees with notarized appointment and county filing - Different entity structures needed depending on whether assets are in IRA or not - For IRA investments, trustee cannot be a related party - Trade/exchange notes and property rather than sell to avoid discounts and leverage into better deals - Attend national conferences like Society of Exchange Counselors meetings to network and learn alternative strategies Topics Discussed: - Land trusts and trust-based entity structures for note investing - Collateral assignments and trading notes - IRA investing structures: LLC vs trust considerations - Short-term vs long-term note holding strategies - Leveraging existing note inventory without selling - 1031 exchanges and property/note trading benefits - JKP Holdings beginner video series on note investing basics Guest Insights: - Philip Klinck: Started with subject-to deals using trusts, then immediately seller-financed to turn properties into notes - Philip Klinck: The exchange/trading community is like a hidden society until you're part of it, similar to note investing - Philip Klinck: Trading is valuable because you can exchange illiquid assets at full value to the right buyer instead of taking discounts from cash sales - Philip Klinck: All trusts have one LLC as beneficiary with different trustees per deal depending on property type and IRA status hey fellow no investor are you looking to learn the basics of note investing so you can get started however you don't want to spend a few hundreds or thousands of dollars and hours online on some training program have you thought about attending a notes conference however you don't want to spend the money or the time away from your family well we have a tremendous beginners video series of 20 different topics with each video being less than 15 minutes this means each video is less fluff and direct to the content visit www.jkpholdings.com beginner dash series to learn more again w w w slash beginner dash series we've got 12 o'clock computer go all right 11 59 we had seconds clock honestly will it you set it up so it starts automatically every time i do that it's like 10 seconds off so i'm like i'll just jump manually yeah make it happen so i never figured out i'm like i tested one time i was like oh 10 seconds next time i was like eight seconds it's all even consistent crap okay [Music] [Music] hey everybody dave putz here from jkp holdings good afternoon nathan what's up amanda hello hello hello all right well hopefully just kidding that life is good hopefully we don't get a computer problem this week like we did last week right um my assistant will make sure i say this if you guys like this stuff we actually post our stuff on youtube we have a podcast go check out our youtube channel hit the bell or reminder stuff make sure you get those things done so you can get anything we post on there uh we also have the podcast which records this and you guys can tune in listen to it on your drive or wherever you're at so all done a lot of people will watch it later because they're at work or whatever yeah that's fine we get a lot of watch later you know my uh lauren say check out it's like dave look at this man i'm like well i don't have to leave the live music but the recording is great so i get it right not everyone's home everyone's available they're busy um and the information is always killer just talk someone earlier today they're like dude their lives are awesome just wish they were like it six o'clock at night all right um so i'm glad to see what's going on man i know that we've made some progress this week uh we put a few more offers in a few assets um that were coming in from a different source um a couple florida assets texas asset uh missouri us and some of that um some cfds actually and a couple first um but we're still working on some summer finance deals how about yourself what's going on i actually just went into contract this morning on uh i i was contacted by a seller who's got uh it's a property in oklahoma where the loan the foreclosure is actually right at the end they've got foreclosure auctions already scheduled in july um and they're willing to give me a big of people doing this yeah that's really cool and they have to know a little bit about everything because everybody ends up with something you know they end up seller financing a commercial property and now they have something that's going to zero and they want to get back into real estate so they're there to trade the commercial note and go up maybe maybe they own something outright for a million dollars they took three hundred thousand down and they've got seven hundred thousand dollar note well that's a good 25 down payment on a on a large multi-family that you can get good paper you know good debt on right now wow so you're leveraging the the note you own to basically get into bigger and better things and leverage it through what's the vehicle you typically leverage that through so so it depends i put everything in trust and we have one llc that's the beneficiary of all the trusts and then we have trustees that depending on the deal different trustees depending on which which property it is which if it's in an ira it has to be not somebody related so we just put different trustees on this but the trustee is not that important they just sign the papers for you and you can change the trustees with a simple piece of paper and take it to the county and file it there just has to be a notarized appointment of new trustee so for those who are familiar share what the big difference between an llc and a trust why trust versus llc what's the benefit of it and how is it how are they different in the setup as well yeah for me it's really easy to form a trust you can form a trust in front of a notary so i can form a trust in five minutes and assign the beneficial interest one minute afterwards i don't have to consult with a governing body to create my trust llcs you're supposed to i i bet 99 of people don't do this but you're supposed to keep meeting minutes and enough discount that it looks pretty good to me i had my realtor check it out overnight just to make sure the value is there and we've got interior pictures so that's unusual but very helpful interior looks pretty good um we're pretty confident on the value so yeah looking good we're excited to go forward on that one is it a note or a cfd or it's a note it's mortgage that's just finishing up and then if we can finish out the foreclosure uh we'll turn around and sell it i figure we'll have this one done before the end of summer so wow i'm sure the you're the way nathan i'm sure you guys all know nathan's structure uh nathan is a short-term investor kind of with notes he doesn't want to hold things too long um it's just something he just doesn't do so if you know for us we're i like the performers and hopefully nate don't get into it in the near future yeah and that's that's a shift that we're taking on this summer when we're with our fund is is this close to being done and we'll start raising money here in the next few weeks but that's a that's a big shift we're going to be holding on to the performers for the first time ever and if you guys missed it we actually did a facebook live with uh his attorney a few weeks back yeah probably more than that even though um so i think for you know us uh we private equity we have cash around themselves and uh if we do need capital we go to a debt level where we have pretty good angle on stuff yeah um and it's interesting too because a lot of times we get stuck with deals um where you know we we borrow money at debt level sometimes we need to but you know i'm kind of doing a little transition here i think that what we've heard about and we've talked about if we discussed at conferences and whatnot is like how can we take the inventory we have and and make it you know even more how can we without selling anything i don't want to sell a partial maybe either i don't understand it or i just don't want to but i want to leverage that and then another topic that comes up a lot is you know entities and i've talked about ira investing i know nathan you know i'm able to do higher rate of testing but in my ira you know there's a question about do you do an llc ira or trussell uh fire red and then what i've come across a lot of people asking why llc is ever chosen for notes right and most people do real estate analysis um most stuff you've done llc's right llcs are are by far the most common uh we i get that all the time i get so i don't have an ira because i'm canadian but but i've i on a very large basis actually we use i use investors ira money to put it to work and sometimes it comes through straight from the ira other times it goes through an llc and and i haven't gotten involved in any kind of advice on that because i i'm not the guy to ask on that and get accurate information but uh something to figure out but then there's other ways to do this as well and we're learning more about that and that's why we're here and hopefully we can learn something here today and yeah with everybody else so it's amazing you know we we we look for people to join our facebook live to kind of learn for ourselves and share with everyone else and i love the fact that people come on here and comment and do some of that because that's valuable to me because questions i may not realize all right so i think for me if you can do stuff like that it's awesome so i've seen phil post in multiple groups which is great i've seen phil do a lot of stuff real estate and most of the time i'm not sure exactly what he's talking about because i have no experience in it and i'm not jealous of them i just wanted to get around him and talk to him and you know get around people as we shared previously before we got online we got we want to be able to be in a room where a deal comes up and we all play the angle and find the angle and the more knowledge we have the more opportunity we get our ability to find a way to make a deal work so and as much as we've both had people come to us and say they've they've learned something from our our talks and things that so we and that's that's no lie i've taken nuggets from several of our speakers and be like oh that's a good idea i'll try that and you know so yeah so this is a we're all learning together here so this is good yeah so guys i i like to it's just phillip phillips been around notes in real estate for a long time so phil welcome to our friday live um can you share how did you get into real estate notes what's your background my man sure uh some philip clank i live in the upstate of south carolina i've had my life my real estate license for over a decade didn't really use it that much and didn't really like the retail side of selling real estate so when i found the investor side it was much more interesting to me and i i started going to local meetings and just meeting the local investors and seeing what they were doing well i didn't have any money so at the time i had to find a strategy that allowed me to do deals with no money or very little money um the first one that i started doing was buying houses subject to the existing debt and so trusts came up in in that they were i was told to use a trust it doesn't work how everybody acts like it works but it is good to put it in there just because um then i didn't want to manage i had never managed property before so i always bought and then seller financed immediately whether at the closing table or right afterwards so i started out almost in notes you know i had real estate for moments or months and turned it right into paper and another reason to do that was to recoup the back payments uh that i had to pay to hit the property yeah so you know that was some of the the thing that i had to do to to get going um getting notes in general so i've got uh family here with me you know going from uh notes to other types of deals exchanges things like that um was more going to national meetings so i go to the society of exchange counselor meetings and they do everything exchanging notes for property property for notes options at just every type of thing situation you can do and and i think most of this was brought down from wall street they do all the same things and these guys just do it strictly inside of real estate so why does somebody want to trade something rather than sell it [Music] a lot of the time especially with real estate is to go straight into the the next transaction if you go from an illiquid type of property let's say land uh to cash and then to something else most likely you're gonna take a discount but if you take land and trade it to somebody who builds multifamily on land they may take it at full value for a limited partnership in their multifamily or for a property outright and so you can go from something that doesn't produce income straight into something that produces income and they get something that they can get some lift on so it has to be a match has to be something that works for both sides interesting and then you meet these people you said at national conventions and things like that yep the society of exchange counselors has eight meetings a year and then the nce which i don't really go to um they they have meetings and then there's regional meetings local meetings there's there's lots of these exchange type meetings so it kind of sounds like notes in that way where there's there's kind of this hidden society kind of the club uh that nobody knows about until you're until you know about it and then all of a sudden you see oh there's lots all sorts of things that to keep it uh compliant but most people don't and they just say they do trust you don't have to do any of that you just have a trust and it holds your whatever it is uh everything you can put it's your suits your you could put everything in trust if you wanted to so why why is trust so safe first off and why is trust a easy vehicle to transfer an asset well the trustee is the the owner for record but they're not liable for anything the beneficiary is the true equity holder and so they get all benefit from that trust but they don't have any liability either because they're just a beneficiary so it's a good way to split up ownership and equity and the ownership isn't liable so it's if it gets sued if the trustee gets sued they can't be sued for anything the beneficiary doesn't actually own it so they can't be sued for anything so if something happens that you know now obviously just like with the llc or any good iteration you can pierce the corporate bail if you do something fragile but that's the only thing you have to worry about just don't be a fraud so for those who are familiar when i want to sell an asset in my llc and sell you a note i got to create an assignment a launch personal agreement i gotta sell it all to you and create all these documents and transfer it and record the county records i'm gonna play dumb here you gotta do the same thing with trust right you can you could have a hundred notes in in a trust being held by a trust and just assign the beneficial interest of the trust if you wanted to transfer ownership of all of those now you have to do your own due diligence on are they leveraged do they have you know good are they real notes what are they secured by all that stuff but if you're if you're sure that all those are good notes and they're secured well and there's nothing wrong with them then you could just take that trust to a notary locally to you and and assign the beneficial interest in front of a notary so it's amazing to hear because we will do assignments and lunges all day long to other investors where this is a trust i literally can just assign the beneficiary there's no assignments there's no launches because literally the name of the entity who owns it doesn't change the trustee is the same person yeah but that never changes or unless you change it at the same time you can make it you know make a different trustee or code trustee you can do whatever you want really that was really interesting wow just trying to get my head around that that's really cool you know it's amazing because we all play with these assignments on lounges and you know llc's and stuff like that and i know this is really big on real estate because this is a way to avoid you know that the tax on the sale price and everything else because it just doesn't sell it never actually sells because the beneficiary change that's it um yep yeah transfer it's a it's a transfer of ownership where only really the irs knows because you have to claim the income but for everybody else's purposes nobody else really knows that's that's just awesome so with the when you go to the recorder of the notaries office what do you typically need one of the questions that brian asks is what do you typically forms you need to create that trust well you'll need the trust documentation so you'll need a trust and and they're a little bit different for each state so you might end up paying a thousand or fifteen hundred dollars just to have a local attorney that's familiar with real estate form a trust for you a revocable trust that has everything in it that that state likes so it's kind of a one-time deal for that and then as far as any other documents you need you need an assignment of beneficial interest and an appointment of trustee and you can appoint new trustees and assign beneficial interests all you want with an id and a notary it's amazing that sounds really interesting so how come not everyone's doing this like is there a downside here or is there a reason why somebody would not do that um i think it's just not understood and it's not most of the time people are not doing enough deals where they get annoyed forming new llcs you know if you're doing 100 deals a year you do not want 100 llcs right yeah one llc is plenty and then you can just put everything else in its own individual trust wow huh and and do you typically do this with real estate brick and mortar and notes or one versus the other yeah each each real estate uh transaction goes into its own trust but the um the notes can go into the llc or their own trust so you could have one trust that holds all your notes but just because there's not any not much liability with those almost yeah yeah you're not worried about what there is but not much yeah there's not as much you know falls or lawsuits that come out unless you're doing something really criminal which is crazy right so you know i'm amazed with the conversation of this whole collateral assignment thought process of being able to leverage an asset without selling it can you share a little about what your knowledge about collateral assignment is have you used it before yeah so i've got multiple notes that i hypothecated and so you basically just put them up as collateral just like a free and clear rental house you just say hey i'm going to give you first position and we're going to create a note that secures that and so you can the note that secures it can be for whatever you want it can be a partial it can be a loan it can be i'm gonna buy you know you may need to do that i think with with note brokers you're probably gonna need to be doing some type of volume to need a license if you're just you know doing a note here there i don't i don't think it's going to be a big deal yeah right that's it's so cool because it's a wild west we thought we were a lot less major and like you hear this like this even wilder west because they make notes look like a vanilla real estate transaction nowadays right like you're leveraging you can literally sell a note to go get a boat i mean like that's the kind of stuff that's nuts right um we could pay college tuition with that stuff i don't know but you know but what's the craziest kind of exchange you've seen or heard of that that that's just so we can get creative for a moment well um a lady that one of the bigger ones that i saw a lady bought a house on the water in um on the coast of south carolina and she let's see she bought it in like 2011 or 12 which just stole it it was a million bucks and it was worth about 5.5 if i remember right recently and instead of selling it she just exchanged it for a triple net property that just direct exchange wow because she was she was getting older and she wanted something that would just for the next 30 years it's gonna pay yeah it was a it was a cbs guaranteed lease you're just basically transferring deed ownership to it then or you know yeah lean ownership of it um you just you get this when i get that one you swap it just that's just the deed for these transactions yeah yeah and that's just you know i know people with rental portfolios who want to sell off right and they want to go buy something else and there could be a possibility of like i want to get into commercial and i have a bunch of rentals your note and give you an option to buy it back uh so you can do whatever you whatever you want within the legal balance and when you put it up for collateral a collateral assignment it's going to be a loan or a partial but if you actually sell the note with an option back that's even a little safer because if they don't buy it back you just keep it you don't have to worry about getting the collateral getting the actual note can you give us an example of what you've thought about collateral assignments sure i mean i i got a couple of um the the very first notes that i got i did it was a trade uh so i got these little 50 maybe 58 000 notes two of them and they were five percent interest but they ballooned in four years well they're not very saleable until the balloons very close or you know and so i put them up for a alone against them and i borrowed 25 and 28 against each of them and i'm just waiting until they balloon out wow that was one i mean there's a there's a bunch of other ones but that's probably the easiest yeah what do you typically do i mean you're finding someone who'll give you money against the loan and is that hard to do or is there is that a sector of people that we're just not familiar with it's just like any private money that you would borrow against a house you just say hey i'll give you my first position and i'll pay you this much against the first position so you're literally just subordinating to them so now you're in second position with your uh note and they have first that that's not exactly how it works but just think of it that way okay you're you're giving up first so that the whole idea of trading is is really interesting it reminds me of like when i was a teenager in our church group we played a game called bigger and better and we'd all start and i think we started with like a toothpick or something like that or a nail or you know something stupid and we'd have to go around and just like randomly knock on doors go to friends houses whatever and trade up and just say hey i'll give you this toothpick for something bigger and better and and it was hilarious by the end of the night you'd have guys that came back with like a broken down car and you know whatever all kinds of just weird stuff yeah but it but i you know one man's junk is another one's treasure and and that whole idea and so that trading idea um i if i think about it that way that makes sense to me where i've got land to me land is is worth nothing but to to a builder that's gold yeah that's true to somebody that knows what they can do with it that's right yeah yeah so um someone posted that collateral sign versus absolute assignment are you familiar with those two terms yeah so just an absolute assignment is you're just assigning it because they're buying it and you get cash they get whatever it is you're selling them a collateral assignment is for the for a loan you're going to get a note against it and some kind of terms are going to be there um you're just putting it up as collateral okay and they do this this came from wall street i mean they do this all the time if you're the repo market they put up treasuries as collateral and get overnight cash and uh and we're doing the same thing it's just not overnight and it's not as cheap [Laughter] as they do on a massive scale yeah yeah so what kind of problems sorry guys i was just gonna say how long you've been doing this like how how how do you build up that network about five or six years okay um for the actual exchanging we had uh an old exchanger come to our group that he actually did deals with peter fortunato and jack miller i don't know if you've heard of those two guys yeah um john shaw so back in the 70s and 80s they just had to it wasn't we want to do exchanges it was there's no money there's no credit and we're going to have to exchange or we can't do any deals okay and so they did a lot of this stuff because of just necessity it didn't have anything to do with anything else what are some of the risks to doing collateral assignments well just like putting up anything that you own if you put up a rental house you don't pay then they can take it and if you're collaterally assigning your note and you don't pay they get your note and most likely if you're not paying it's because the original collateral is not paying so probably my whoever is paying my note they're not getting it rented out anymore some somewhere there's a breakdown in the income it's like a landlord not paying the mortgage payment i got you yeah gotcha so what happens if that goes to court what typically happens when an assignment isn't fully paid or what what typically happens there it's just like a foreclosure you're going to have to go to go through a foreclosure or if it's a trustee state you'll go you know four closes that way um and it's obviously it's quicker so yeah but same exact thing so when you're doing those things make sure it's worth it to you and understand the that you're going to have to pay a lawyer to get this piece of collateral for you so if it's a really small deal a good way to do it is just to do the full assignment and with an option to buy back just give them the option to buy back or you if you know whichever direction you're going gotcha um that's a it is such a cool idea because it's something we never get into just because creativity and just as we said before last time we did was very vanilla right um notes to most brick and mortar notes is like really crazy idea in collateral assignments and partial loss is more of a is more intricacy and creativity um now i know patrick asked uh posted a question about that presentation lender as you're right where you want until you feel re fulfill the terms of the newton created with them or gets a note with them um so with these cloud assignments how much can you leverage i mean where is there is there a cap on stuff or it's just how creative you can be yeah it's it's going to be up to you and the person providing the cash if they think there's plenty of collateral and it's a good enough rate they might lend the full amount i don't know why they would they just buy the note at that point but it doesn't it's just up to you and the person that's that you're doing the deal with um and maybe they don't want to own it maybe they want to lend or maybe there's a maybe there's a blend maybe you've got you know 10 different notes and they're lending against the 10 different notes they don't want they don't want to ever have to worry about having to go take those properties and do anything with them they want you to have to deal with that and i would i wouldn't want to lose whatever it is i have so if i stopped getting paid i'd just take care of it they would never know i just keep paying them what's the typical interest rate on these loans so i've gotten everything from six percent to 12 it just depends on what it's paying and what kind of collateral it is you know those first notes that i got were low low interest over uh you know there were seller finance so that houses are probably worth 50 and there are 58 000 notes um and just it just depends on the collateral the original collateral awesome i mean i love the fact that you have to be very creative because that's a game that you can always win because if you're the most creative person in the room you can get almost anything done um sometimes you have to tell smart people just by being creative and thinking inside the box and with the trust being able to be almost a better shield llc and the ability to transfer things so much easier typically and then with the collateral assignment you can leverage portfolios because most people want to buy loans and look for people who will lend money on loans listen i'm going to buy a loan but i want to borrow money for you to buy notes unless you're doing big scale that's not common right unless you're doing large stuff you can't i'm going to borrow 100 grand to go buy notes go good luck you're not going to find that letter bill willing to do that right but if you can find a way to buy some notes right and even if you start small and be able to leverage that into additional assets at a decent industry you have a great way to jumpstart your situation well and the best way to do that is get somebody else with money to buy the notes the first notes that you go buy and and then borrow against it because they don't know how to do any of that they don't know how to buy the note in the first place and they and by performing stuff so that you can borrow against it and you have income to pay the payments so get them into some seven eight nine ten whatever it is percent you know yield notes and then borrow some money against them at maybe 70 60 so you get some more cash and go get some non-performing and then get those performing and then just rinse and repeat but you got to you kind of got to make them rich while you're making money yeah make them happy yeah right so are most people you know where you're in are they in certain areas of the country doing this or is this a nationwide gun they know we're just not familiar with just like notes yeah it's it's nationwide um you know guys in new york california colorado is big there was a lot of exchanging so there's a deep pool of exchanges in colorado for hundreds of years they've been exchanging so that they've got a kind of the jump on the rest of the country um wow but yeah it's it's a there's a lot of people doing it but there's not a lot of transactions happening necessarily right now um when there's a lot of cash in the system there's not a lot of exchanging that even really needs to happen there's just yeah if somebody would pay a two cap for something why would you need to exchange or do anything else yeah so that's amazing because i think that you know for me you can exchange anything and is there license requirements and stuff at all not in the free states i don't know about california and new york they like to regulate everything but yeah there maybe there's a license somewhere but you do have to follow the 1031 exchange guidelines and those are there those were there before the starker exchange where you can sell something for cash have a qualified intermediary hold the cash and then exchange so that's kind of new to the exchange world relatively in the last whatever it is 70 years they were exchanging and they had exchange rules in the tax code way before you did any of that stuff so you can't have un uh let's see prohibited exchanges so you can't exchange gold for real estate well and not pay a tax you can exchange anything for anything but you're gonna have to pay a tax it'll be a taxable event so a note for real estate is a taxable event you don't pay all your taxes up front but you have to start paying taxes based on that note and that's why you say like the irs knows about this but really nobody else necessarily right yeah you're you're gonna you gotta pay your taxes one way or the other so they they know about everything well and they don't really care about how you hold stuff i mean if you lease option something for 30 years or more they consider you the owner they don't care that you don't have the deed to it or any of that stuff that just a matter of equitable title contradicts that's just equitable title you don't have the deed but that doesn't matter the irs you're getting taxed on it and you can depreciate it and all that sure jesus christ how about ira money can this be done with ira without a problem or yeah so my one of the things that i started with was my dad's ira so we opened an ira the first two deals we did were inside the ira itself and had to go through all the forms and nonsense that you have to do when the money is being held by them so we gotta you put all the money in the llc um so i would suggest that rocket dollar i haven't transferred his over to that but i know a bunch of people that have rocket dollar for their for their ira and and it's real seamless they don't even i don't think they do it at all where they hold the money it's uh presumably rocky dollar is a custodian that allows you to self-directed uh were you doing checkbook ira stuff yeah and they only do that i think i don't think they'll hold it yeah so for those who are unfamiliar with checkbook iowa versus ira is that most time when you have an ira you're going through a custodian you have to go to them they are great to oversee a situation to tell you if something's wrong with it or whatever but you can also self-direct it with a checkbook where you literally can have a checkbook to an account and write out a check right now and buy whatever you want in ira there's no one over looking overlooking the situation so that if your own experience with it i wouldn't recommend checking fire right off stop your head because there are limitations that you may not be aware of um but yeah they're a company out there to allow you to do a checkbook they set it up they have the background you can ask questions and you basically have an account and you can write checks out of it whenever you want to but notes and options are perfect for iras there's almost no way you can mess up by buying those instruments you can mess up by buying real estate you know you don't want your whole ira liable because somebody slipped and fell on one piece of real estate being held in your ira right so so so dave mentioned you're posting on facebook and things are are you teaching this or are you what's what's your deal no i i just post stuff that i um i'm either trying to sell or trying to buy or raise money on or just or fishing you know sometimes just post something to see what the interest is in in that instrument um maybe a big note that pays off really fast that we were we had one against a property that was a three-year note it was a big three million dollar note that paid off in three years well it didn't pay any interest but it paid off real fast well if you had a portfolio of six or seven percent notice that we had a 30-year term on them and you were 80 you might want to swap for that gotcha you lose the interest but you shorten your duration yeah yeah you get your money back faster so if somebody wants to learn more about exchanges where would you recommend them starting the society of exchange counselors website which i think is se counselors has some good information on their website okay um and then the nce i think it's the national councilor council of exchanges i'm not i'm not familiar with that but that's uh they they do it as well and i think they have good information on theirs um but there's local meetings so you can you can seek it out uh there's cree in kentucky and oak creek and uh ohio and there's some other you know local ones and there's one in like the one in colorado i don't remember the name of that one but there's they're all over the country it's amazing because you know there's license to become a no broker right you have to become a new broker through a license where changes can you broker an exchange i mean is that possible if i you guys have something and i connect you guys and i get a cut of it well and i'm i'm a licensed agent in south carolina and so i i can broker and i can co-broker with people in other states uh for and i try to do that with large transactions that i'm not gonna be a principal in um but yeah you're gonna need a either real estate license or if you're in a state where they require a license for for note brokerage well maybe someone who wants to get a commercial once again to residential could make a swap is there online exchanges where like you can find more people that like i want to buy a commercial building and this is available like to like a match.com for exchanging kind of but i i find that even with overzoom it's hard to make a transaction happen um you really need to be in a room with the people go out to eat with them afterwards and and really talk the transaction through it's it's hard to do a five or ten million dollar transaction not in person but i mean just to know the fact that nathan wants to sell commercial building he wants to exchange it for rentals just to know that it's how do you find out that nathan wants or you know i have assets i want to exchange how do you find out what i want to exchange yeah you hang a sign around your neck or like what do you get you'd have to go ask everybody i post if i have something for sale i put on there will seller finance will exchange will take property in as a down payment i mean i put on there all the different things that i'll do so when people search okay you know they can find that and and people are always trying to make a deal on you know facebook marketplace or somewhere like that and i'll do a deal with them but i gotta know what they've got and value it and all that sure because yeah no one knows what you want to exchange without it being public it's just not you know and i would think in exchange you're right you need to be handshaking and get to know it but just to connect the two people to say hey listen i have something i have something i'm looking for i'm looking for your rental properties or i'm looking for commercial hey i got this big home that we're looking to exchange and just be able to swap it and know it's out there um that would be cool if they had that possibility yeah if it was like a the problem is they don't know what they want the sellers don't really understand most of this stuff but there's a lot of people that own a ton of property and they have no clue what the next step is right so you know they just they knew that they made a lot of money in whatever business and they knew that if they bought cvs's they won't go away and then they end up with cvs's and they don't know what to do after that gotcha so you you kind of have to counsel that's why it's the society of exchange counselors you have to count counsel them on what is it you really want to do next you know i wanted to bring up you know what you guys do you end up with performing notes or a property after you take it back you can one thing that i like to do is i would like somebody to put up a free and clear property and don't give me a down payment so let's say i've got um a hundred thousand dollar house but i can sell it for 125 000 owner finance right yep i'd rather them give me a free and clear property as additional collateral and now my note is more saleable because it's 50 or 60 percent loan to value gotcha so think about if i have a 9 note that's 50 or 60 percent loan to value secured against two properties that's in the secondary market that's easier to sell i don't have to take a discount almost at all right right so really you're you the notes covered by two properties not one yep so i like to do that rather than take a down payment it's harder to get 25 30 down from a regular owner finance buyer yeah i'll take zero down if you'll put up your free and clear rental well would most people who don't have the capital put down have a free and clear house well think about a rental portfolio guy that's got three or four of them and he's yep he doesn't want to go to the bank and he wants to sell her finance most time but hey listen can you sell our finances go to me you're like i can he said listen put down because i i i i'm cast strapped in this direction this is the house that you know the house that you get back you get this perform in non-performing note and you take back the collateral well you don't really either have to flip it or you can sell or finance it to somebody local that will that will rent and you can sell it for more seller finance with zero down if they can just put up some additional collateral hey sorry guys one second yeah no problem so i'm intrigued by that because that you make a lot of sense because most landlords who are looking to increase their inventory they don't have cash that's why they go sell financing right they they find the seller financing notes which is often difficult to find um but with being able to leverage is there a way to do or maybe they can put up if they're still have debt on other houses or a way to kind of structure that the equity of the other house and maybe it's not 50 maybe it increases that percentage that fact that hey listen i got 50 equity in this house and we use that as collateral as well sure it's all up to you if you're willing to take a second against a house with a lot of collateral that's fine too and just think about your note buyer let's say you get performing notes you know good and performing and you go to the big institutional buyer that pays too much for everything they're gonna like that more than they like a single note against a house with a 10 15 percent down payment yeah yeah absolutely jesus i i never this is cool stuff man i felt like i appreciate jumping on because i don't think anyone ever talks about this kind of creativity yeah um and i thought a lot of landlords like listen you know i don't got cash i got strapped and they teach you the secret of finding ways to be creative to find loans and private equity people and borrowing money and you know server financing but never talk about leveraging their other properties the burst strategies always you know the rich repeat constitution refinance refinance refinance but you don't have to refinance because you can just use the leverage yeah or use a note that you have so if i've got a seventy five thousand dollar note against a hundred thousand dollar property and i go hey i wanna buy your rental but i don't wanna give you any cash down they might say well that's i i'm not going to do that well but i can give you a first position against this house over here as additional collateral because you have first position you are there yeah you know you're giving them a ton of collateral and if they can understand it if you can convey that to them yeah because then literally if something happens they have a freeing they have a they have a lien against the property that already has equity they'll probably get bit in at the sale they probably won't even get the properties yeah they'll just get full cap you know oh yeah that's a down pop payment and a half cool wow so i like collateral better than i like cash down payments sure yeah yeah yeah that's amazing i just i've never even heard people at conferences talk about this office yeah no first time i'm hearing about that that's really interesting digesting yourself frozen weekend would be crazy yeah um well if it's if you really want to make a note liquid that's the way to do it yeah so if i'm trying to do everything that's what i want to do yeah you're really not selling anything you're really just exchanging a situation versus get cash and then you now have to go find another asset anyway to get into where i don't have to sell anything i was exchanging it i'm already in i'm skipping a step well you know i'm taking their collat so they're going to be paying me from my house i'm taking their collateral as additional collateral and i've got a super liquid note that i can sell at any moment or i can just hold it yeah whatever i'm going to do yeah that's cool well guys if you have any additional questions phil you shared some awesome stuff today i appreciate it you know this is stuff that we want to learn about and digest and you know re-listen to stuff again if you want to listen to podcasts you can or the youtube video we post on the facebook group but re-listen to stuff i want to hear some people doing this stuff i'm going to see if i can leverage some of our portfolio um and i have some you know some partners with rental properties we're trying to sell them and this may be a different angle for them to get into because we're trying to buy some more commercial stuff as well and it's a way to kind of exchange it it's just it's an education to the to the buyer usually or a seller vice versa to teach them about this little angle that is much more valuable to both sides than selling an asset and stuff like that yeah really you said you've got some rental rental properties that you're wanting to sell yeah yeah we have some real property yes so it's an interesting angle they're a lower end city area so it's not a great area but yeah so there's a portfolio of rentals that you know may not be a desirable thing to sell but for an exchange it may work well in i'd go find you know the people in that area that have a large portfolio and say i'll give them to you enough nothing down if you'll secure me against all your other stuff wow yeah i got a couple of those as well hmm interesting yeah you just have someone at the full price yeah you're just not getting cash you're getting you're you're 10 30 wanting it really or you're just creating paper yeah yeah it's going straight to paper and full price paper and maybe higher than full price paper because they're not they're not coming out of pocket for anything just make it make them be able to cash flow or break even just say hey just hand them to them here you go yeah here's a bunch of breakeven stuff now you own it just i want one note secured by you know cross-collateralized across all these and your stuff well victor wagner said and i could say it's kind of a short-term thing like five years it's up to you you can do whatever you want but when you've got tons of collateral you don't have a balloon right if you've got a high enough rate and tons of collateral who cares you'll sell for almost par anyway so brian asks cash flow how do you have cash flow can you explain that tommy's uh on just in general yeah cash flow i guess the fact that if you sell an asset how are you getting cash flow for the new asset i guess probably if you can correct me if i'm wrong there but how are you typically if you're exchanging an asset you're gonna get immediate cash flow how does that typically happen well let's say i have a asset that has no cash flow like land i can exchange a million dollar piece of commercial land for something that has income that somebody else has already done all the work on and they're finished it may be a low cap rate it may not have no upside to it but they want the land because they can create a lot of upside they might make a million dollars on my land but i don't have the money to put into the land i don't know how to do it i'm not a land guy i may have got the land in exchange but necessarily want but i took it to sell something else so oftentimes people that do these exchanges they might take a million dollar piece of land as a down payment and three million dollars in cash and then they have to figure out what to do with the land okay because it's a good deal because it was a good deal they got full price the land really is worth a million dollars it's not that liquid it doesn't sell super fast but it really it wasn't a fake million piece of land it was a real million piece of land this might take a year to sell and it has your properties and you're probably worth nine my products were 950 and you're gonna get a million dollar property instead of 950 or 900 i'm going to get a million dollars in a collateral yeah oh yeah i'll take that exchange well you might let's say they're both a million and yours pays six percent it's got it's a six cap property and mine's just a million dollar piece of land but my my million dollar piece of land in two years after doing some engineering and what it might be a two million dollar piece of land right correct so there's lift in mind there's no lift in yours just six six caps not going anywhere it's as good as it's going to get but you want the cap i want the cash flow and i already got three million dollars on the other property i sold i just took the piece of land because because the deal is good that's awesome so i got full price yeah what a way to get out of the station it's difficult to get out of or to get a better price maybe then you can get because someone's desperate to get rid of something they don't want um because they can't do it with it that's cool yeah well brian hopefully you should answer your question um is it part of the group everything else if you have any questions you can tag them on there but you know the information you share has been awesome man i i think it's something to food for thought that a lot of people really should think about because you get into bad situations where a deal is just bad but if you can exchange it for somebody because a bad deal for you could be a good deal for me and vice versa because of our skill sets and maybe that leverage is equate and we're both in back in a position we like or it made me decision i don't like but i can leverage it to go get nathan's creation and exchange it later knowing the fact that nathan wants land i exchange view for land and i can change with nathan and make it almost like a double close or double exchange and make it happen and you can take free and clear property that you have that you don't want to sell and create paper against it to go buy stuff so you don't have to wait to sell it and get the paper you can say well i'll give you a million dollar note against my land that i'm going to develop my i don't want you to get all the upside i'll give you a million dollar note against it and as a down payment to buy your multi-family or whatever so you can create paper when you own stuff and go buy stuff with you don't have to wait till you sell so brady asks do you service all facets it's a collateral assignment to assignee for non-institutional non-investor savvy assignee i'm not sure exactly i understood all that but if you did i'm not sure brave you can uh rephrase that question i'm not following it is a friday and i know um it's a nice day outside i i i apologize brady if i misinterpreted that but i did post it if you can reword it before we close up um i'll definitely uh phil can definitely get on to it um well and as far as like where the note was originated i don't really care whether it's institutional or private you just read the note see what it is and how it was collateralized the i don't deal with banks i've never bought anything from a bank so i don't know anything about that part so if there was a question if that was had something to do with it i'm not sure but i've got notes that thanks originated that somebody bought and i was the second person or the third or whatever but yeah i just don't know i don't deal with him directly i guess he says if the asset goes not performing who deals with the workout i've always dealt with it myself um so i think what brady's asking kind of like a servicing question i guess it's like if i exchange a deal with you right and you now take my note that's not performing um you own my note i own your land i no longer have to deal with anything that's not performing it's you bought a performing note for me right you exchange for land if that goes not performing it's not a partial where you can trade it back you deal with the consequences of the performing note going on performing i i think i get it now it might be on the collateral assignment so let's say i put my note up as a collateral assignment for to borrow money to hypothecate and my note goes bad maybe that's what he's asking what what do you do in that case in my case i always just keep paying my lender and i work out the issue because i don't want to lose my note there's usually a bunch of uh equity above the person that i borrowed the money from and i don't want to lose my equity in the note okay so what happens if you don't i lose my note and then and most likely if i stop paying it's because the original asset is not paying and so they're going to go straight through my note to the original asset anyway so they're at like 50 or 40 percent you know investment of value or loan to value in in their position they they just hope and pray all day that we don't pay yeah so if it's if in exchange from there is nothing right if i exchange one for one there's no responsibility on the seller to handle that performing note that we're not performing but that's no longer in the name it's just like if you sold a note to somebody else you have no control over what if it goes not performing it's just yeah and it's just like if you exchanged a property and the lease went bad i don't have anything to do with the property anymore i'm not the tenant yeah yeah as patrick said you hold the pink slip right you know you exchange pink slips for each other and you now own that asset and the responsibility of it in that exchange well partial's a little bit different those who are enough for their partials there are sometimes in the contract that if a partial is bad there the seller will help out with stuff like that so what exchange it's like selling it it's really selling it but instead of think of it if those who are not familiar or confused i'm exchanging money for my notes instead of doing that i'm exchanging up something for my notes right it's the same concept but we're typically exchanging cash for an asset but instead of cash it's something else but that exchange still took place and you traded it yeah and i didn't bring it but we have this this pyramid of uh of value and at the top is cash and not because it's the most important but because it's the the most scarce there's the least amount of cash around and so it's the hardest one to trade and so it gets the biggest discount the next thing down is maybe triple net property and then the next thing down is is notes and the next thing down is multi-family and houses and and then you get all the way down to encumbered land or something you know something that's really hard to do anything with very illiterate sure children so when you're when you're exchanging it's hard to go from encumbered land straight to cash you're gonna have to take a massive discount but you might be able to go from encumbered land to land bringing clear land and then go from free and clear land to a down payment on multifamily and sign a big note for you know from the bank to get the rest of the cash to them yeah you kind of work your way up the ladder and don't take all those huge discounts and you might do better than just going straight to cash you do that bigger or better game and you do something just a little better but a little better a little better and better yeah cool and the other way around let's say i've got a bunch of notes that are high you know high rate good collateral notes i can go down and get huge value because it's almost like cash right if i go by land with my notes i'm getting a huge discount because i can just sit back and collect or i can buy your land and you take my notes and i better get a good deal on the land yeah and then if you want to build on it or whatever you want to do go for it but yeah yeah what typical attorneys is this typically a true you know residential attorney doing it like what kind of it is about this yeah yeah you need an attorney that understands it and most of the time you have to explain it to them i'm teaching the attorney yeah oh but i found that with real estate in general so i don't know what you guys experience is with it but they don't really know a lot about most of this stuff man we always think that you know you think your cpa knows a lot and you think your attorney knows a lot not really i've talked a lot of them they're like listen we don't know much you just think we do is we look like we do right because they know more than we do about their topic right yeah you know i'm very curious because you got me intrigued because even performing assets that are really high yields or low yields that matter and you want to get into something different even if you're going up and you're getting it you're not going to get the discount you're looking for but you can still exchange it for a commercial space right if you want to move from residential brick-and-mortar you know nodes to a mixed-use new or a commercial building you could go up that line and they maybe want to come down for whatever reason and see what happens that's cool let's say that you've got and here's here's a way to hypothecate the other way around so let's say i've got a note 100 000 note and i go to somebody that's in distress it's got a house that's in the stress and i don't want to give them a hundred thousand dollars for their equity in the house and take over their payments i might say well i've got this note that pays nine percent but i would never give it to you in exchange for your equity but i will give you a note against my note at zero percent at a thousand dollars a month until paid off for your equity so now i'm creating a note against my note to give them for their equity and then i'll take over their their first mortgage with the bank and how do you record the note on the new it's a collateral assignment a mortgage and create and create a note and give it to them and assign that note to them and then they deed the house to me so i get their equity in exchange for a note that i created against my note because i don't want to get i don't want to give up the nine percent to them i want to get 50 i just give them the zero percent they're getting full value but not really time value money they're not right yeah boy you have to teach them that's all this stuff too i presume you have to like really educate the people because they're like no i just want you to buy my house yeah well and that's that's why this stuff is much more difficult in the hot market yeah because they'll say well i'll just list it for sale and get 10 over yeah you're right they're right and they are right yeah but in a distressed market it's different yeah in a flat market it's different i mean yeah just if it was just a flat market we'd be in a totally different situation yeah so for the distress mark is that something you foresee coming down the pipe i i stopped being a shoe sailer and a crystal ball reader i have no idea i've been thinking for three or four years that it was going to do that so since i'm not good at predicting i just stopped doing that what's your thoughts about people saying that this is a new market because inflation's gone up that prices are where they should be because of inflation the the way i see it we take on more and more debt as a country and that's deflationary and the fed and the government are trying to work against that and just they're just fighting the battle they're fighting a losing battle yeah we'll continue to have these big bouts of deflation and then they'll inflate or reflect and we'll have a big battle to play and it's just going to go back and forth okay fair enough well guys if you have any questions feel free to reach out to him he's in the group he's on facebook um he's very easy to talk to very easy to learn from um especially if you have something you want to exchange with them please reach out to him and he'll be happy to exchange um you know and he can connect you with some attorneys that can you know help make that transaction happen um but as you said you need to really kind of work the intercess of the deal because you're not exchanging money for the new you're exchanging something else and you both have to learn what the other side is before you make that exchange happen so well all those green pieces of paper that everybody likes are federal reserve notes those are just notes that don't pay interest or payments that's right so we just create our own currency and make it make deals with that okay very cool yeah well guys thank you very much for tuning in this weekend we'll be back next week um and we'll fill again check out the youtube page all the podcast stuff and make sure you share with your friends if they're really interested in this kind of stuff and reach out to us check out the facebook events page and the youtube stuff um we got a lot of stuff coming up too in the workbook down for another month or so which is great um so stay tuned with some more stuff please reach out to phil if you have any questions and uh we look forward to hearing from everybody soon have a great weekend everybody thank you thanks guys all right cool deal man thanks a lot phil i appreciate it man um [Music] yes okay um and they're willing to give me a big enough discount that it looks pretty good to me i had my realtor check it out overnight just to make sure the value is there and we've got interior pictures so that's unusual but very helpful interior looks pretty good um we're pretty confident on the value so yeah looking good we're excited to go forward on that one is it a note or a cfd or it's a note it's mortgage that's just finishing up and then if we can finish out the foreclosure uh we'll turn around and sell it i figure we'll have this one done before the end of summer so wow i'm sure the you're the way nathan i'm sure you guys all know nathan's structure uh nathan is a short-term investor kind of with notes he doesn't want to hold things too long um it's just something he just doesn't do so if you know for us we're i like the performers and hopefully nate don't get into it in the near future yeah and that's that's a shift that we're taking on this summer when we're with our fund is is this close to being done and we'll start raising money here in the next few weeks but that's a that's a big shift we're going to be holding on to the performers for the first time ever and if you guys missed it we actually did a facebook live with uh his attorney a few weeks back yeah probably more than that even though um so i think for you know us uh we private equity we have cash around themselves and uh if we do need capital we go to a debt level where we have pretty good angle on stuff yeah um and it's interesting too because a lot of times we get stuck with deals um where you know we we borrow money at debt level sometimes we need to but you know i'm kind of doing a little transition here i think that what we've heard about and we've talked about if we discussed at conferences and whatnot is like how can we take the inventory we have and and make it you know even more how can we without selling anything i don't want to sell a partial maybe either i don't understand it or i just don't want to but i want to leverage that and then another topic that comes up a lot is you know entities and i've talked about ira investing i know nathan you know i'm able to do higher rate of testing but in my ira you know there's a question about do you do an llc ira or trussell uh fire red and then what i've come across a lot of people asking why llc is ever chosen for notes right and most people do real estate analysis um most stuff you've done llc's right llcs are are by far the most common uh we i get that all the time i get so i don't have an ira because i'm canadian but but i've i on a very large basis actually we use i use investors ira money to put it to work and sometimes it comes through straight from the ira other times it goes through an llc and and i haven't gotten involved in any kind of advice on that because i i'm not the guy to ask on that and get accurate information but uh something to figure out but then there's other ways to do this as well and we're learning more about that and that's why we're here and hopefully we can learn something here today and yeah with everybody else so it's amazing you know we we we look for people to join our facebook live to kind of learn for ourselves and share with everyone else and i love the fact that people come on here and comment and do some of that because that's valuable to me because questions i may not realize all right so i think for me if you can do stuff like that it's awesome so i've seen phil post in multiple groups which is great i've seen phil do a lot of stuff real estate and most of the time i'm not sure exactly what he's talking about because i have no experience in it and i'm not jealous of them i just wanted to get around him and talk to him and you know get around people as we shared previously before we got online we got we want to be able to be in a room where a deal comes up and we all play the angle and find the angle and the more knowledge we have the more opportunity we get our ability to find a way to make a deal work so and as much as we've both had people come to us and say they've they've learned something from our our talks and things that so we and that's that's no lie i've taken nuggets from several of our speakers and be like oh that's a good idea i'll try that and you know so yeah so this is a we're all learning together here so this is good yeah so guys i i like to it's just phillip phillips been around notes in real estate for a long time so phil welcome to our friday live um can you share how did you get into real estate notes what's your background my man sure uh some philip clank i live in the upstate of south carolina i've had my life my real estate license for over a decade didn't really use it that much and didn't really like the retail side of selling real estate so when i found the investor side it was much more interesting to me and i i started going to local meetings and just meeting the local investors and seeing what they were doing well i didn't have any money so at the time i had to find a strategy that allowed me to do deals with no money or very little money um the first one that i started doing was buying houses subject to the existing debt and so trusts came up in in that they were i was told to use a trust it doesn't work how everybody acts like it works but it is good to put it in there just because um then i didn't want to manage i had never managed property before so i always bought and then seller financed immediately whether at the closing table or right afterwards so i started out almost in notes you know i had real estate for moments or months and turned it right into paper and another reason to do that was to recoup the back payments uh that i had to pay to hit the property yeah so you know that was some of the the thing that i had to do to to get going um getting notes in general so i've got uh family here with me you know going from uh notes to other types of deals exchanges things like that um was more going to national meetings so i go to the society of exchange counselor meetings and they do everything exchanging notes for property property for notes options at just every type of thing situation you can do and and i think most of this was brought down from wall street they do all the same things and these guys just do it strictly inside of real estate so why does somebody want to trade something rather than sell it [Music] a lot of the time especially with real estate is to go straight into the the next transaction if you go from an illiquid type of property let's say land uh to cash and then to something else most likely you're gonna take a discount but if you take land and trade it to somebody who builds multifamily on land they may take it at full value for a limited partnership in their multifamily or for a property outright and so you can go from something that doesn't produce income straight into something that produces income and they get something that they can get some lift on so it has to be a match has to be something that works for both sides interesting and then you meet these people you said at national conventions and things like that yep the society of exchange counselors has eight meetings a year and then the nce which i don't really go to um they they have meetings and then there's regional meetings local meetings there's there's lots of these exchange type meetings so it kind of sounds like notes in that way where there's there's kind of this hidden society kind of the club uh that nobody knows about until you're until you know about it and then all of a sudden you see oh there's lots of people doing this yeah that's really cool and they have to know a little bit about everything because everybody ends up with something you know they end up seller financing a commercial property and now they have something that's going to zero and they want to get back into real estate so they're there to trade the commercial note and go up maybe maybe they own something outright for a million dollars they took three hundred thousand down and they've got seven hundred thousand dollar note well that's a good 25 down payment on a on a large multi-family that you can get good paper you know good debt on right now wow so you're leveraging the the note you own to basically get into bigger and better things and leverage it through what's the vehicle you typically leverage that through so so it depends i put everything in trust and we have one llc that's the beneficiary of all the trusts and then we have trustees that depending on the deal different trustees depending on which which property it is which if it's in an ira it has to be not somebody related so we just put different trustees on this but the trustee is not that important they just sign the papers for you and you can change the trustees with a simple piece of paper and take it to the county and file it there just has to be a notarized appointment of new trustee so for those who are familiar share what the big difference between an llc and a trust why trust versus llc what's the benefit of it and how is it how are they different in the setup as well yeah for me it's really easy to form a trust you can form a trust in front of a notary so i can form a trust in five minutes and assign the beneficial interest one minute afterwards i don't have to consult with a governing body to create my trust llcs you're supposed to i i bet 99 of people don't do this but you're supposed to keep meeting minutes and all sorts of things that to keep it uh compliant but most people don't and they just say they do trust you don't have to do any of that you just have a trust and it holds your whatever it is uh everything you can put it's your suits your you could put everything in trust if you wanted to so why why is trust so safe first off and why is trust a easy vehicle to transfer an asset well the trustee is the the owner for record but they're not liable for anything the beneficiary is the true equity holder and so they get all benefit from that trust but they don't have any liability either because they're just a beneficiary so it's a good way to split up ownership and equity and the ownership isn't liable so it's if it gets sued if the trustee gets sued they can't be sued for anything the beneficiary doesn't actually own it so they can't be sued for anything so if something happens that you know now obviously just like with the llc or any good iteration you can pierce the corporate bail if you do something fragile but that's the only thing you have to worry about just don't be a fraud so for those who are familiar when i want to sell an asset in my llc and sell you a note i got to create an assignment a launch personal agreement i gotta sell it all to you and create all these documents and transfer it and record the county records i'm gonna play dumb here you gotta do the same thing with trust right you can you could have a hundred notes in in a trust being held by a trust and just assign the beneficial interest of the trust if you wanted to transfer ownership of all of those now you have to do your own due diligence on are they leveraged do they have you know good are they real notes what are they secured by all that stuff but if you're if you're sure that all those are good notes and they're secured well and there's nothing wrong with them then you could just take that trust to a notary locally to you and and assign the beneficial interest in front of a notary so it's amazing to hear because we will do assignments and lunges all day long to other investors where this is a trust i literally can just assign the beneficiary there's no assignments there's no launches because literally the name of the entity who owns it doesn't change the trustee is the same person yeah but that never changes or unless you change it at the same time you can make it you know make a different trustee or code trustee you can do whatever you want really that was really interesting wow just trying to get my head around that that's really cool you know it's amazing because we all play with these assignments on lounges and you know llc's and stuff like that and i know this is really big on real estate because this is a way to avoid you know that the tax on the sale price and everything else because it just doesn't sell it never actually sells because the beneficiary change that's it um yep yeah transfer it's a it's a transfer of ownership where only really the irs knows because you have to claim the income but for everybody else's purposes nobody else really knows that's that's just awesome so with the when you go to the recorder of the notaries office what do you typically need one of the questions that brian asks is what do you typically forms you need to create that trust well you'll need the trust documentation so you'll need a trust and and they're a little bit different for each state so you might end up paying a thousand or fifteen hundred dollars just to have a local attorney that's familiar with real estate form a trust for you a revocable trust that has everything in it that that state likes so it's kind of a one-time deal for that and then as far as any other documents you need you need an assignment of beneficial interest and an appointment of trustee and you can appoint new trustees and assign beneficial interests all you want with an id and a notary it's amazing that sounds really interesting so how come not everyone's doing this like is there a downside here or is there a reason why somebody would not do that um i think it's just not understood and it's not most of the time people are not doing enough deals where they get annoyed forming new llcs you know if you're doing 100 deals a year you do not want 100 llcs right yeah one llc is plenty and then you can just put everything else in its own individual trust wow huh and and do you typically do this with real estate brick and mortar and notes or one versus the other yeah each each real estate uh transaction goes into its own trust but the um the notes can go into the llc or their own trust so you could have one trust that holds all your notes but just because there's not any not much liability with those almost yeah yeah you're not worried about what there is but not much yeah there's not as much you know falls or lawsuits that come out unless you're doing something really criminal which is crazy right so you know i'm amazed with the conversation of this whole collateral assignment thought process of being able to leverage an asset without selling it can you share a little about what your knowledge about collateral assignment is have you used it before yeah so i've got multiple notes that i hypothecated and so you basically just put them up as collateral just like a free and clear rental house you just say hey i'm going to give you first position and we're going to create a note that secures that and so you can the note that secures it can be for whatever you want it can be a partial it can be a loan it can be i'm gonna buy your note and give you an option to buy it back uh so you can do whatever you whatever you want within the legal balance and when you put it up for collateral a collateral assignment it's going to be a loan or a partial but if you actually sell the note with an option back that's even a little safer because if they don't buy it back you just keep it you don't have to worry about getting the collateral getting the actual note can you give us an example of what you've thought about collateral assignments sure i mean i i got a couple of um the the very first notes that i got i did it was a trade uh so i got these little 50 maybe 58 000 notes two of them and they were five percent interest but they ballooned in four years well they're not very saleable until the balloons very close or you know and so i put them up for a alone against them and i borrowed 25 and 28 against each of them and i'm just waiting until they balloon out wow that was one i mean there's a there's a bunch of other ones but that's probably the easiest yeah what do you typically do i mean you're finding someone who'll give you money against the loan and is that hard to do or is there is that a sector of people that we're just not familiar with it's just like any private money that you would borrow against a house you just say hey i'll give you my first position and i'll pay you this much against the first position so you're literally just subordinating to them so now you're in second position with your uh note and they have first that that's not exactly how it works but just think of it that way okay you're you're giving up first so that the whole idea of trading is is really interesting it reminds me of like when i was a teenager in our church group we played a game called bigger and better and we'd all start and i think we started with like a toothpick or something like that or a nail or you know something stupid and we'd have to go around and just like randomly knock on doors go to friends houses whatever and trade up and just say hey i'll give you this toothpick for something bigger and better and and it was hilarious by the end of the night you'd have guys that came back with like a broken down car and you know whatever all kinds of just weird stuff yeah but it but i you know one man's junk is another one's treasure and and that whole idea and so that trading idea um i if i think about it that way that makes sense to me where i've got land to me land is is worth nothing but to to a builder that's gold yeah that's true to somebody that knows what they can do with it that's right yeah yeah so um someone posted that collateral sign versus absolute assignment are you familiar with those two terms yeah so just an absolute assignment is you're just assigning it because they're buying it and you get cash they get whatever it is you're selling them a collateral assignment is for the for a loan you're going to get a note against it and some kind of terms are going to be there um you're just putting it up as collateral okay and they do this this came from wall street i mean they do this all the time if you're the repo market they put up treasuries as collateral and get overnight cash and uh and we're doing the same thing it's just not overnight and it's not as cheap [Laughter] as they do on a massive scale yeah yeah so what kind of problems sorry guys i was just gonna say how long you've been doing this like how how how do you build up that network about five or six years okay um for the actual exchanging we had uh an old exchanger come to our group that he actually did deals with peter fortunato and jack miller i don't know if you've heard of those two guys yeah um john shaw so back in the 70s and 80s they just had to it wasn't we want to do exchanges it was there's no money there's no credit and we're going to have to exchange or we can't do any deals okay and so they did a lot of this stuff because of just necessity it didn't have anything to do with anything else what are some of the risks to doing collateral assignments well just like putting up anything that you own if you put up a rental house you don't pay then they can take it and if you're collaterally assigning your note and you don't pay they get your note and most likely if you're not paying it's because the original collateral is not paying so probably my whoever is paying my note they're not getting it rented out anymore some somewhere there's a breakdown in the income it's like a landlord not paying the mortgage payment i got you yeah gotcha so what happens if that goes to court what typically happens when an assignment isn't fully paid or what what typically happens there it's just like a foreclosure you're going to have to go to go through a foreclosure or if it's a trustee state you'll go you know four closes that way um and it's obviously it's quicker so yeah but same exact thing so when you're doing those things make sure it's worth it to you and understand the that you're going to have to pay a lawyer to get this piece of collateral for you so if it's a really small deal a good way to do it is just to do the full assignment and with an option to buy back just give them the option to buy back or you if you know whichever direction you're going gotcha um that's a it is such a cool idea because it's something we never get into just because creativity and just as we said before last time we did was very vanilla right um notes to most brick and mortar notes is like really crazy idea in collateral assignments and partial loss is more of a is more intricacy and creativity um now i know patrick asked uh posted a question about that presentation lender as you're right where you want until you feel re fulfill the terms of the newton created with them or gets a note with them um so with these cloud assignments how much can you leverage i mean where is there is there a cap on stuff or it's just how creative you can be yeah it's it's going to be up to you and the person providing the cash if they think there's plenty of collateral and it's a good enough rate they might lend the full amount i don't know why they would they just buy the note at that point but it doesn't it's just up to you and the person that's that you're doing the deal with um and maybe they don't want to own it maybe they want to lend or maybe there's a maybe there's a blend maybe you've got you know 10 different notes and they're lending against the 10 different notes they don't want they don't want to ever have to worry about having to go take those properties and do anything with them they want you to have to deal with that and i would i wouldn't want to lose whatever it is i have so if i stopped getting paid i'd just take care of it they would never know i just keep paying them what's the typical interest rate on these loans so i've gotten everything from six percent to 12 it just depends on what it's paying and what kind of collateral it is you know those first notes that i got were low low interest over uh you know there were seller finance so that houses are probably worth 50 and there are 58 000 notes um and just it just depends on the collateral the original collateral awesome i mean i love the fact that you have to be very creative because that's a game that you can always win because if you're the most creative person in the room you can get almost anything done um sometimes you have to tell smart people just by being creative and thinking inside the box and with the trust being able to be almost a better shield llc and the ability to transfer things so much easier typically and then with the collateral assignment you can leverage portfolios because most people want to buy loans and look for people who will lend money on loans listen i'm going to buy a loan but i want to borrow money for you to buy notes unless you're doing big scale that's not common right unless you're doing large stuff you can't i'm going to borrow 100 grand to go buy notes go good luck you're not going to find that letter bill willing to do that right but if you can find a way to buy some notes right and even if you start small and be able to leverage that into additional assets at a decent industry you have a great way to jumpstart your situation well and the best way to do that is get somebody else with money to buy the notes the first notes that you go buy and and then borrow against it because they don't know how to do any of that they don't know how to buy the note in the first place and they and by performing stuff so that you can borrow against it and you have income to pay the payments so get them into some seven eight nine ten whatever it is percent you know yield notes and then borrow some money against them at maybe 70 60 so you get some more cash and go get some non-performing and then get those performing and then just rinse and repeat but you got to you kind of got to make them rich while you're making money yeah make them happy yeah right so are most people you know where you're in are they in certain areas of the country doing this or is this a nationwide gun they know we're just not familiar with just like notes yeah it's it's nationwide um you know guys in new york california colorado is big there was a lot of exchanging so there's a deep pool of exchanges in colorado for hundreds of years they've been exchanging so that they've got a kind of the jump on the rest of the country um wow but yeah it's it's a there's a lot of people doing it but there's not a lot of transactions happening necessarily right now um when there's a lot of cash in the system there's not a lot of exchanging that even really needs to happen there's just yeah if somebody would pay a two cap for something why would you need to exchange or do anything else yeah so that's amazing because i think that you know for me you can exchange anything and is there license requirements and stuff at all not in the free states i don't know about california and new york they like to regulate everything but yeah there maybe there's a license somewhere but you do have to follow the 1031 exchange guidelines and those are there those were there before the starker exchange where you can sell something for cash have a qualified intermediary hold the cash and then exchange so that's kind of new to the exchange world relatively in the last whatever it is 70 years they were exchanging and they had exchange rules in the tax code way before you did any of that stuff so you can't have un uh let's see prohibited exchanges so you can't exchange gold for real estate well and not pay a tax you can exchange anything for anything but you're gonna have to pay a tax it'll be a taxable event so a note for real estate is a taxable event you don't pay all your taxes up front but you have to start paying taxes based on that note and that's why you say like the irs knows about this but really nobody else necessarily right yeah you're you're gonna you gotta pay your taxes one way or the other so they they know about everything well and they don't really care about how you hold stuff i mean if you lease option something for 30 years or more they consider you the owner they don't care that you don't have the deed to it or any of that stuff that just a matter of equitable title contradicts that's just equitable title you don't have the deed but that doesn't matter the irs you're getting taxed on it and you can depreciate it and all that sure jesus christ how about ira money can this be done with ira without a problem or yeah so my one of the things that i started with was my dad's ira so we opened an ira the first two deals we did were inside the ira itself and had to go through all the forms and nonsense that you have to do when the money is being held by them so we gotta you put all the money in the llc um so i would suggest that rocket dollar i haven't transferred his over to that but i know a bunch of people that have rocket dollar for their for their ira and and it's real seamless they don't even i don't think they do it at all where they hold the money it's uh presumably rocky dollar is a custodian that allows you to self-directed uh were you doing checkbook ira stuff yeah and they only do that i think i don't think they'll hold it yeah so for those who are unfamiliar with checkbook iowa versus ira is that most time when you have an ira you're going through a custodian you have to go to them they are great to oversee a situation to tell you if something's wrong with it or whatever but you can also self-direct it with a checkbook where you literally can have a checkbook to an account and write out a check right now and buy whatever you want in ira there's no one over looking overlooking the situation so that if your own experience with it i wouldn't recommend checking fire right off stop your head because there are limitations that you may not be aware of um but yeah they're a company out there to allow you to do a checkbook they set it up they have the background you can ask questions and you basically have an account and you can write checks out of it whenever you want to but notes and options are perfect for iras there's almost no way you can mess up by buying those instruments you can mess up by buying real estate you know you don't want your whole ira liable because somebody slipped and fell on one piece of real estate being held in your ira right so so so dave mentioned you're posting on facebook and things are are you teaching this or are you what's what's your deal no i i just post stuff that i um i'm either trying to sell or trying to buy or raise money on or just or fishing you know sometimes just post something to see what the interest is in in that instrument um maybe a big note that pays off really fast that we were we had one against a property that was a three-year note it was a big three million dollar note that paid off in three years well it didn't pay any interest but it paid off real fast well if you had a portfolio of six or seven percent notice that we had a 30-year term on them and you were 80 you might want to swap for that gotcha you lose the interest but you shorten your duration yeah yeah you get your money back faster so if somebody wants to learn more about exchanges where would you recommend them starting the society of exchange counselors website which i think is se counselors has some good information on their website okay um and then the nce i think it's the national councilor council of exchanges i'm not i'm not familiar with that but that's uh they they do it as well and i think they have good information on theirs um but there's local meetings so you can you can seek it out uh there's cree in kentucky and oak creek and uh ohio and there's some other you know local ones and there's one in like the one in colorado i don't remember the name of that one but there's they're all over the country it's amazing because you know there's license to become a no broker right you have to become a new broker through a license where changes can you broker an exchange i mean is that possible if i you guys have something and i connect you guys and i get a cut of it well and i'm i'm a licensed agent in south carolina and so i i can broker and i can co-broker with people in other states uh for and i try to do that with large transactions that i'm not gonna be a principal in um but yeah you're gonna need a either real estate license or if you're in a state where they require a license for for note brokerage you know you may need to do that i think with with note brokers you're probably gonna need to be doing some type of volume to need a license if you're just you know doing a note here there i don't i don't think it's going to be a big deal yeah right that's it's so cool because it's a wild west we thought we were a lot less major and like you hear this like this even wilder west because they make notes look like a vanilla real estate transaction nowadays right like you're leveraging you can literally sell a note to go get a boat i mean like that's the kind of stuff that's nuts right um we could pay college tuition with that stuff i don't know but you know but what's the craziest kind of exchange you've seen or heard of that that that's just so we can get creative for a moment well um a lady that one of the bigger ones that i saw a lady bought a house on the water in um on the coast of south carolina and she let's see she bought it in like 2011 or 12 which just stole it it was a million bucks and it was worth about 5.5 if i remember right recently and instead of selling it she just exchanged it for a triple net property that just direct exchange wow because she was she was getting older and she wanted something that would just for the next 30 years it's gonna pay yeah it was a it was a cbs guaranteed lease you're just basically transferring deed ownership to it then or you know yeah lean ownership of it um you just you get this when i get that one you swap it just that's just the deed for these transactions yeah yeah and that's just you know i know people with rental portfolios who want to sell off right and they want to go buy something else and there could be a possibility of like i want to get into commercial and i have a bunch of rentals well maybe someone who wants to get a commercial once again to residential could make a swap is there online exchanges where like you can find more people that like i want to buy a commercial building and this is available like to like a match.com for exchanging kind of but i i find that even with overzoom it's hard to make a transaction happen um you really need to be in a room with the people go out to eat with them afterwards and and really talk the transaction through it's it's hard to do a five or ten million dollar transaction not in person but i mean just to know the fact that nathan wants to sell commercial building he wants to exchange it for rentals just to know that it's how do you find out that nathan wants or you know i have assets i want to exchange how do you find out what i want to exchange yeah you hang a sign around your neck or like what do you get you'd have to go ask everybody i post if i have something for sale i put on there will seller finance will exchange will take property in as a down payment i mean i put on there all the different things that i'll do so when people search okay you know they can find that and and people are always trying to make a deal on you know facebook marketplace or somewhere like that and i'll do a deal with them but i gotta know what they've got and value it and all that sure because yeah no one knows what you want to exchange without it being public it's just not you know and i would think in exchange you're right you need to be handshaking and get to know it but just to connect the two people to say hey listen i have something i have something i'm looking for i'm looking for your rental properties or i'm looking for commercial hey i got this big home that we're looking to exchange and just be able to swap it and know it's out there um that would be cool if they had that possibility yeah if it was like a the problem is they don't know what they want the sellers don't really understand most of this stuff but there's a lot of people that own a ton of property and they have no clue what the next step is right so you know they just they knew that they made a lot of money in whatever business and they knew that if they bought cvs's they won't go away and then they end up with cvs's and they don't know what to do after that gotcha so you you kind of have to counsel that's why it's the society of exchange counselors you have to count counsel them on what is it you really want to do next you know i wanted to bring up you know what you guys do you end up with performing notes or a property after you take it back you can one thing that i like to do is i would like somebody to put up a free and clear property and don't give me a down payment so let's say i've got um a hundred thousand dollar house but i can sell it for 125 000 owner finance right yep i'd rather them give me a free and clear property as additional collateral and now my note is more saleable because it's 50 or 60 percent loan to value gotcha so think about if i have a 9 note that's 50 or 60 percent loan to value secured against two properties that's in the secondary market that's easier to sell i don't have to take a discount almost at all right right so really you're you the notes covered by two properties not one yep so i like to do that rather than take a down payment it's harder to get 25 30 down from a regular owner finance buyer yeah i'll take zero down if you'll put up your free and clear rental well would most people who don't have the capital put down have a free and clear house well think about a rental portfolio guy that's got three or four of them and he's yep he doesn't want to go to the bank and he wants to sell her finance most time but hey listen can you sell our finances go to me you're like i can he said listen put down because i i i i'm cast strapped in this direction this is the house that you know the house that you get back you get this perform in non-performing note and you take back the collateral well you don't really either have to flip it or you can sell or finance it to somebody local that will that will rent and you can sell it for more seller finance with zero down if they can just put up some additional collateral hey sorry guys one second yeah no problem so i'm intrigued by that because that you make a lot of sense because most landlords who are looking to increase their inventory they don't have cash that's why they go sell financing right they they find the seller financing notes which is often difficult to find um but with being able to leverage is there a way to do or maybe they can put up if they're still have debt on other houses or a way to kind of structure that the equity of the other house and maybe it's not 50 maybe it increases that percentage that fact that hey listen i got 50 equity in this house and we use that as collateral as well sure it's all up to you if you're willing to take a second against a house with a lot of collateral that's fine too and just think about your note buyer let's say you get performing notes you know good and performing and you go to the big institutional buyer that pays too much for everything they're gonna like that more than they like a single note against a house with a 10 15 percent down payment yeah yeah absolutely jesus i i never this is cool stuff man i felt like i appreciate jumping on because i don't think anyone ever talks about this kind of creativity yeah um and i thought a lot of landlords like listen you know i don't got cash i got strapped and they teach you the secret of finding ways to be creative to find loans and private equity people and borrowing money and you know server financing but never talk about leveraging their other properties the burst strategies always you know the rich repeat constitution refinance refinance refinance but you don't have to refinance because you can just use the leverage yeah or use a note that you have so if i've got a seventy five thousand dollar note against a hundred thousand dollar property and i go hey i wanna buy your rental but i don't wanna give you any cash down they might say well that's i i'm not going to do that well but i can give you a first position against this house over here as additional collateral because you have first position you are there yeah you know you're giving them a ton of collateral and if they can understand it if you can convey that to them yeah because then literally if something happens they have a freeing they have a they have a lien against the property that already has equity they'll probably get bit in at the sale they probably won't even get the properties yeah they'll just get full cap you know oh yeah that's a down pop payment and a half cool wow so i like collateral better than i like cash down payments sure yeah yeah yeah that's amazing i just i've never even heard people at conferences talk about this office yeah no first time i'm hearing about that that's really interesting digesting yourself frozen weekend would be crazy yeah um well if it's if you really want to make a note liquid that's the way to do it yeah so if i'm trying to do everything that's what i want to do yeah you're really not selling anything you're really just exchanging a situation versus get cash and then you now have to go find another asset anyway to get into where i don't have to sell anything i was exchanging it i'm already in i'm skipping a step well you know i'm taking their collat so they're going to be paying me from my house i'm taking their collateral as additional collateral and i've got a super liquid note that i can sell at any moment or i can just hold it yeah whatever i'm going to do yeah that's cool well guys if you have any additional questions phil you shared some awesome stuff today i appreciate it you know this is stuff that we want to learn about and digest and you know re-listen to stuff again if you want to listen to podcasts you can or the youtube video we post on the facebook group but re-listen to stuff i want to hear some people doing this stuff i'm going to see if i can leverage some of our portfolio um and i have some you know some partners with rental properties we're trying to sell them and this may be a different angle for them to get into because we're trying to buy some more commercial stuff as well and it's a way to kind of exchange it it's just it's an education to the to the buyer usually or a seller vice versa to teach them about this little angle that is much more valuable to both sides than selling an asset and stuff like that yeah really you said you've got some rental rental properties that you're wanting to sell yeah yeah we have some real property yes so it's an interesting angle they're a lower end city area so it's not a great area but yeah so there's a portfolio of rentals that you know may not be a desirable thing to sell but for an exchange it may work well in i'd go find you know the people in that area that have a large portfolio and say i'll give them to you enough nothing down if you'll secure me against all your other stuff wow yeah i got a couple of those as well hmm interesting yeah you just have someone at the full price yeah you're just not getting cash you're getting you're you're 10 30 wanting it really or you're just creating paper yeah yeah it's going straight to paper and full price paper and maybe higher than full price paper because they're not they're not coming out of pocket for anything just make it make them be able to cash flow or break even just say hey just hand them to them here you go yeah here's a bunch of breakeven stuff now you own it just i want one note secured by you know cross-collateralized across all these and your stuff well victor wagner said and i could say it's kind of a short-term thing like five years it's up to you you can do whatever you want but when you've got tons of collateral you don't have a balloon right if you've got a high enough rate and tons of collateral who cares you'll sell for almost par anyway so brian asks cash flow how do you have cash flow can you explain that tommy's uh on just in general yeah cash flow i guess the fact that if you sell an asset how are you getting cash flow for the new asset i guess probably if you can correct me if i'm wrong there but how are you typically if you're exchanging an asset you're gonna get immediate cash flow how does that typically happen well let's say i have a asset that has no cash flow like land i can exchange a million dollar piece of commercial land for something that has income that somebody else has already done all the work on and they're finished it may be a low cap rate it may not have no upside to it but they want the land because they can create a lot of upside they might make a million dollars on my land but i don't have the money to put into the land i don't know how to do it i'm not a land guy i may have got the land in exchange but necessarily want but i took it to sell something else so oftentimes people that do these exchanges they might take a million dollar piece of land as a down payment and three million dollars in cash and then they have to figure out what to do with the land okay because it's a good deal because it was a good deal they got full price the land really is worth a million dollars it's not that liquid it doesn't sell super fast but it really it wasn't a fake million piece of land it was a real million piece of land this might take a year to sell and it has your properties and you're probably worth nine my products were 950 and you're gonna get a million dollar property instead of 950 or 900 i'm going to get a million dollars in a collateral yeah oh yeah i'll take that exchange well you might let's say they're both a million and yours pays six percent it's got it's a six cap property and mine's just a million dollar piece of land but my my million dollar piece of land in two years after doing some engineering and what it might be a two million dollar piece of land right correct so there's lift in mind there's no lift in yours just six six caps not going anywhere it's as good as it's going to get but you want the cap i want the cash flow and i already got three million dollars on the other property i sold i just took the piece of land because because the deal is good that's awesome so i got full price yeah what a way to get out of the station it's difficult to get out of or to get a better price maybe then you can get because someone's desperate to get rid of something they don't want um because they can't do it with it that's cool yeah well brian hopefully you should answer your question um is it part of the group everything else if you have any questions you can tag them on there but you know the information you share has been awesome man i i think it's something to food for thought that a lot of people really should think about because you get into bad situations where a deal is just bad but if you can exchange it for somebody because a bad deal for you could be a good deal for me and vice versa because of our skill sets and maybe that leverage is equate and we're both in back in a position we like or it made me decision i don't like but i can leverage it to go get nathan's creation and exchange it later knowing the fact that nathan wants land i exchange view for land and i can change with nathan and make it almost like a double close or double exchange and make it happen and you can take free and clear property that you have that you don't want to sell and create paper against it to go buy stuff so you don't have to wait to sell it and get the paper you can say well i'll give you a million dollar note against my land that i'm going to develop my i don't want you to get all the upside i'll give you a million dollar note against it and as a down payment to buy your multi-family or whatever so you can create paper when you own stuff and go buy stuff with you don't have to wait till you sell so brady asks do you service all facets it's a collateral assignment to assignee for non-institutional non-investor savvy assignee i'm not sure exactly i understood all that but if you did i'm not sure brave you can uh rephrase that question i'm not following it is a friday and i know um it's a nice day outside i i i apologize brady if i misinterpreted that but i did post it if you can reword it before we close up um i'll definitely uh phil can definitely get on to it um well and as far as like where the note was originated i don't really care whether it's institutional or private you just read the note see what it is and how it was collateralized the i don't deal with banks i've never bought anything from a bank so i don't know anything about that part so if there was a question if that was had something to do with it i'm not sure but i've got notes that thanks originated that somebody bought and i was the second person or the third or whatever but yeah i just don't know i don't deal with him directly i guess he says if the asset goes not performing who deals with the workout i've always dealt with it myself um so i think what brady's asking kind of like a servicing question i guess it's like if i exchange a deal with you right and you now take my note that's not performing um you own my note i own your land i no longer have to deal with anything that's not performing it's you bought a performing note for me right you exchange for land if that goes not performing it's not a partial where you can trade it back you deal with the consequences of the performing note going on performing i i think i get it now it might be on the collateral assignment so let's say i put my note up as a collateral assignment for to borrow money to hypothecate and my note goes bad maybe that's what he's asking what what do you do in that case in my case i always just keep paying my lender and i work out the issue because i don't want to lose my note there's usually a bunch of uh equity above the person that i borrowed the money from and i don't want to lose my equity in the note okay so what happens if you don't i lose my note and then and most likely if i stop paying it's because the original asset is not paying and so they're going to go straight through my note to the original asset anyway so they're at like 50 or 40 percent you know investment of value or loan to value in in their position they they just hope and pray all day that we don't pay yeah so if it's if in exchange from there is nothing right if i exchange one for one there's no responsibility on the seller to handle that performing note that we're not performing but that's no longer in the name it's just like if you sold a note to somebody else you have no control over what if it goes not performing it's just yeah and it's just like if you exchanged a property and the lease went bad i don't have anything to do with the property anymore i'm not the tenant yeah yeah as patrick said you hold the pink slip right you know you exchange pink slips for each other and you now own that asset and the responsibility of it in that exchange well partial's a little bit different those who are enough for their partials there are sometimes in the contract that if a partial is bad there the seller will help out with stuff like that so what exchange it's like selling it it's really selling it but instead of think of it if those who are not familiar or confused i'm exchanging money for my notes instead of doing that i'm exchanging up something for my notes right it's the same concept but we're typically exchanging cash for an asset but instead of cash it's something else but that exchange still took place and you traded it yeah and i didn't bring it but we have this this pyramid of uh of value and at the top is cash and not because it's the most important but because it's the the most scarce there's the least amount of cash around and so it's the hardest one to trade and so it gets the biggest discount the next thing down is maybe triple net property and then the next thing down is is notes and the next thing down is multi-family and houses and and then you get all the way down to encumbered land or something you know something that's really hard to do anything with very illiterate sure children so when you're when you're exchanging it's hard to go from encumbered land straight to cash you're gonna have to take a massive discount but you might be able to go from encumbered land to land bringing clear land and then go from free and clear land to a down payment on multifamily and sign a big note for you know from the bank to get the rest of the cash to them yeah you kind of work your way up the ladder and don't take all those huge discounts and you might do better than just going straight to cash you do that bigger or better game and you do something just a little better but a little better a little better and better yeah cool and the other way around let's say i've got a bunch of notes that are high you know high rate good collateral notes i can go down and get huge value because it's almost like cash right if i go by land with my notes i'm getting a huge discount because i can just sit back and collect or i can buy your land and you take my notes and i better get a good deal on the land yeah and then if you want to build on it or whatever you want to do go for it but yeah yeah what typical attorneys is this typically a true you know residential attorney doing it like what kind of it is about this yeah yeah you need an attorney that understands it and most of the time you have to explain it to them i'm teaching the attorney yeah oh but i found that with real estate in general so i don't know what you guys experience is with it but they don't really know a lot about most of this stuff man we always think that you know you think your cpa knows a lot and you think your attorney knows a lot not really i've talked a lot of them they're like listen we don't know much you just think we do is we look like we do right because they know more than we do about their topic right yeah you know i'm very curious because you got me intrigued because even performing assets that are really high yields or low yields that matter and you want to get into something different even if you're going up and you're getting it you're not going to get the discount you're looking for but you can still exchange it for a commercial space right if you want to move from residential brick-and-mortar you know nodes to a mixed-use new or a commercial building you could go up that line and they maybe want to come down for whatever reason and see what happens that's cool let's say that you've got and here's here's a way to hypothecate the other way around so let's say i've got a note 100 000 note and i go to somebody that's in distress it's got a house that's in the stress and i don't want to give them a hundred thousand dollars for their equity in the house and take over their payments i might say well i've got this note that pays nine percent but i would never give it to you in exchange for your equity but i will give you a note against my note at zero percent at a thousand dollars a month until paid off for your equity so now i'm creating a note against my note to give them for their equity and then i'll take over their their first mortgage with the bank and how do you record the note on the new it's a collateral assignment a mortgage and create and create a note and give it to them and assign that note to them and then they deed the house to me so i get their equity in exchange for a note that i created against my note because i don't want to get i don't want to give up the nine percent to them i want to get 50 i just give them the zero percent they're getting full value but not really time value money they're not right yeah boy you have to teach them that's all this stuff too i presume you have to like really educate the people because they're like no i just want you to buy my house yeah well and that's that's why this stuff is much more difficult in the hot market yeah because they'll say well i'll just list it for sale and get 10 over yeah you're right they're right and they are right yeah but in a distressed market it's different yeah in a flat market it's different i mean yeah just if it was just a flat market we'd be in a totally different situation yeah so for the distress mark is that something you foresee coming down the pipe i i stopped being a shoe sailer and a crystal ball reader i have no idea i've been thinking for three or four years that it was going to do that so since i'm not good at predicting i just stopped doing that what's your thoughts about people saying that this is a new market because inflation's gone up that prices are where they should be because of inflation the the way i see it we take on more and more debt as a country and that's deflationary and the fed and the government are trying to work against that and just they're just fighting the battle they're fighting a losing battle yeah we'll continue to have these big bouts of deflation and then they'll inflate or reflect and we'll have a big battle to play and it's just going to go back and forth okay fair enough well guys if you have any questions feel free to reach out to him he's in the group he's on facebook um he's very easy to talk to very easy to learn from um especially if you have something you want to exchange with them please reach out to him and he'll be happy to exchange um you know and he can connect you with some attorneys that can you know help make that transaction happen um but as you said you need to really kind of work the intercess of the deal because you're not exchanging money for the new you're exchanging something else and you both have to learn what the other side is before you make that exchange happen so well all those green pieces of paper that everybody likes are federal reserve notes those are just notes that don't pay interest or payments that's right so we just create our own currency and make it make deals with that okay very cool yeah well guys thank you very much for tuning in this weekend we'll be back next week um and we'll fill again check out the youtube page all the podcast stuff and make sure you share with your friends if they're really interested in this kind of stuff and reach out to us check out the facebook events page and the youtube stuff um we got a lot of stuff coming up too in the workbook down for another month or so which is great um so stay tuned with some more stuff please reach out to phil if you have any questions and uh we look forward to hearing from everybody soon have a great weekend everybody thank you thanks guys all right cool deal man thanks a lot phil i appreciate it man um [Music] yes okay hey fellow no investor are you looking to learn the basics of note investing so you can get started however you don't want to spend a few hundreds or thousands of dollars and hours online on some training program have you thought about attending a notes conference however you don't want to spend the money or the time away from your family well we have a tremendous beginners video series of 20 different topics with each video being less than 15 minutes this means each video is less fluff and direct to the content visit www.jkpholdings.com beginner dash series to learn more again w w w slash beginner dash series we've got 12 o'clock computer go all right 11 59 we had seconds clock honestly will it you set it up so it starts automatically every time i do that it's like 10 seconds off so i'm like i'll just jump manually yeah make it happen so i never figured out i'm like i tested one time i was like oh 10 seconds next time i was like eight seconds it's all even consistent crap okay [Music] [Music] hey everybody dave putz here from jkp holdings good afternoon nathan what's up amanda hello hello hello all right well hopefully just kidding that life is good hopefully we don't get a computer problem this week like we did last week right um my assistant will make sure i say this if you guys like this stuff we actually post our stuff on youtube we have a podcast go check out our youtube channel hit the bell or reminder stuff make sure you get those things done so you can get anything we post on there uh we also have the podcast which records this and you guys can tune in listen to it on your drive or wherever you're at so all done a lot of people will watch it later because they're at work or whatever yeah that's fine we get a lot of watch later you know my uh lauren say check out it's like dave look at this man i'm like well i don't have to leave the live music but the recording is great so i get it right not everyone's home everyone's available they're busy um and the information is always killer just talk someone earlier today they're like dude their lives are awesome just wish they were like it six o'clock at night all right um so i'm glad to see what's going on man i know that we've made some progress this week uh we put a few more offers in a few assets um that were coming in from a different source um a couple florida assets texas asset uh missouri us and some of that um some cfds actually and a couple first um but we're still working on some summer finance deals how about yourself what's going on i actually just went into contract this morning on uh i i was contacted by a seller who's got uh it's a property in oklahoma where the loan the foreclosure is actually right at the end they've got foreclosure auctions already scheduled in july um and they're willing to give me a big enough discount that it looks pretty good to me i had my realtor check it out overnight just to make sure the value is there and we've got interior pictures so that's unusual but very helpful interior looks pretty good um we're pretty confident on the value so yeah looking good we're excited to go forward on that one is it a note or a cfd or it's a note it's mortgage that's just finishing up and then if we can finish out the foreclosure uh we'll turn around and sell it i figure we'll have this one done before the end of summer so wow i'm sure the you're the way nathan i'm sure you guys all know nathan's structure uh nathan is a short-term investor kind of with notes he doesn't want to hold things too long um it's just something he just doesn't do so if you know for us we're i like the performers and hopefully nate don't get into it in the near future yeah and that's that's a shift that we're taking on this summer when we're with our fund is is this close to being done and we'll start raising money here in the next few weeks but that's a that's a big shift we're going to be holding on to the performers for the first time ever and if you guys missed it we actually did a facebook live with uh his attorney a few weeks back yeah probably more than that even though um so i think for you know us uh we private equity we have cash around themselves and uh if we do need capital we go to a debt level where we have pretty good angle on stuff yeah um and it's interesting too because a lot of times we get stuck with deals um where you know we we borrow money at debt level sometimes we need to but you know i'm kind of doing a little transition here i think that what we've heard about and we've talked about if we discussed at conferences and whatnot is like how can we take the inventory we have and and make it you know even more how can we without selling anything i don't want to sell a partial maybe either i don't understand it or i just don't want to but i want to leverage that and then another topic that comes up a lot is you know entities and i've talked about ira investing i know nathan you know i'm able to do higher rate of testing but in my ira you know there's a question about do you do an llc ira or trussell uh fire red and then what i've come across a lot of people asking why llc is ever chosen for notes right and most people do real estate analysis um most stuff you've done llc's right llcs are are by far the most common uh we i get that all the time i get so i don't have an ira because i'm canadian but but i've i on a very large basis actually we use i use investors ira money to put it to work and sometimes it comes through straight from the ira other times it goes through an llc and and i haven't gotten involved in any kind of advice on that because i i'm not the guy to ask on that and get accurate information but uh something to figure out but then there's other ways to do this as well and we're learning more about that and that's why we're here and hopefully we can learn something here today and yeah with everybody else so it's amazing you know we we we look for people to join our facebook live to kind of learn for ourselves and share with everyone else and i love the fact that people come on here and comment and do some of that because that's valuable to me because questions i may not realize all right so i think for me if you can do stuff like that it's awesome so i've seen phil post in multiple groups which is great i've seen phil do a lot of stuff real estate and most of the time i'm not sure exactly what he's talking about because i have no experience in it and i'm not jealous of them i just wanted to get around him and talk to him and you know get around people as we shared previously before we got online we got we want to be able to be in a room where a deal comes up and we all play the angle and find the angle and the more knowledge we have the more opportunity we get our ability to find a way to make a deal work so and as much as we've both had people come to us and say they've they've learned something from our our talks and things that so we and that's that's no lie i've taken nuggets from several of our speakers and be like oh that's a good idea i'll try that and you know so yeah so this is a we're all learning together here so this is good yeah so guys i i like to it's just phillip phillips been around notes in real estate for a long time so phil welcome to our friday live um can you share how did you get into real estate notes what's your background my man sure uh some philip clank i live in the upstate of south carolina i've had my life my real estate license for over a decade didn't really use it that much and didn't really like the retail side of selling real estate so when i found the investor side it was much more interesting to me and i i started going to local meetings and just meeting the local investors and seeing what they were doing well i didn't have any money so at the time i had to find a strategy that allowed me to do deals with no money or very little money um the first one that i started doing was buying houses subject to the existing debt and so trusts came up in in that they were i was told to use a trust it doesn't work how everybody acts like it works but it is good to put it in there just because um then i didn't want to manage i had never managed property before so i always bought and then seller financed immediately whether at the closing table or right afterwards so i started out almost in notes you know i had real estate for moments or months and turned it right into paper and another reason to do that was to recoup the back payments uh that i had to pay to hit the property yeah so you know that was some of the the thing that i had to do to to get going um getting notes in general so i've got uh family here with me you know going from uh notes to other types of deals exchanges things like that um was more going to national meetings so i go to the society of exchange counselor meetings and they do everything exchanging notes for property property for notes options at just every type of thing situation you can do and and i think most of this was brought down from wall street they do all the same things and these guys just do it strictly inside of real estate so why does somebody want to trade something rather than sell it [Music] a lot of the time especially with real estate is to go straight into the the next transaction if you go from an illiquid type of property let's say land uh to cash and then to something else most likely you're gonna take a discount but if you take land and trade it to somebody who builds multifamily on land they may take it at full value for a limited partnership in their multifamily or for a property outright and so you can go from something that doesn't produce income straight into something that produces income and they get something that they can get some lift on so it has to be a match has to be something that works for both sides interesting and then you meet these people you said at national conventions and things like that yep the society of exchange counselors has eight meetings a year and then the nce which i don't really go to um they they have meetings and then there's regional meetings local meetings there's there's lots of these exchange type meetings so it kind of sounds like notes in that way where there's there's kind of this hidden society kind of the club uh that nobody knows about until you're until you know about it and then all of a sudden you see oh there's lots of people doing this yeah that's really cool and they have to know a little bit about everything because everybody ends up with something you know they end up seller financing a commercial property and now they have something that's going to zero and they want to get back into real estate so they're there to trade the commercial note and go up maybe maybe they own something outright for a million dollars they took three hundred thousand down and they've got seven hundred thousand dollar note well that's a good 25 down payment on a on a large multi-family that you can get good paper you know good debt on right now wow so you're leveraging the the note you own to basically get into bigger and better things and leverage it through what's the vehicle you typically leverage that through so so it depends i put everything in trust and we have one llc that's the beneficiary of all the trusts and then we have trustees that depending on the deal different trustees depending on which which property it is which if it's in an ira it has to be not somebody related so we just put different trustees on this but the trustee is not that important they just sign the papers for you and you can change the trustees with a simple piece of paper and take it to the county and file it there just has to be a notarized appointment of new trustee so for those who are familiar share what the big difference between an llc and a trust why trust versus llc what's the benefit of it and how is it how are they different in the setup as well yeah for me it's really easy to form a trust you can form a trust in front of a notary so i can form a trust in five minutes and assign the beneficial interest one minute afterwards i don't have to consult with a governing body to create my trust llcs you're supposed to i i bet 99 of people don't do this but you're supposed to keep meeting minutes and all sorts of things that to keep it uh compliant but most people don't and they just say they do trust you don't have to do any of that you just have a trust and it holds your whatever it is uh everything you can put it's your suits your you could put everything in trust if you wanted to so why why is trust so safe first off and why is trust a easy vehicle to transfer an asset well the trustee is the the owner for record but they're not liable for anything the beneficiary is the true equity holder and so they get all benefit from that trust but they don't have any liability either because they're just a beneficiary so it's a good way to split up ownership and equity and the ownership isn't liable so it's if it gets sued if the trustee gets sued they can't be sued for anything the beneficiary doesn't actually own it so they can't be sued for anything so if something happens that you know now obviously just like with the llc or any good iteration you can pierce the corporate bail if you do something fragile but that's the only thing you have to worry about just don't be a fraud so for those who are familiar when i want to sell an asset in my llc and sell you a note i got to create an assignment a launch personal agreement i gotta sell it all to you and create all these documents and transfer it and record the county records i'm gonna play dumb here you gotta do the same thing with trust right you can you could have a hundred notes in in a trust being held by a trust and just assign the beneficial interest of the trust if you wanted to transfer ownership of all of those now you have to do your own due diligence on are they leveraged do they have you know good are they real notes what are they secured by all that stuff but if you're if you're sure that all those are good notes and they're secured well and there's nothing wrong with them then you could just take that trust to a notary locally to you and and assign the beneficial interest in front of a notary so it's amazing to hear because we will do assignments and lunges all day long to other investors where this is a trust i literally can just assign the beneficiary there's no assignments there's no launches because literally the name of the entity who owns it doesn't change the trustee is the same person yeah but that never changes or unless you change it at the same time you can make it you know make a different trustee or code trustee you can do whatever you want really that was really interesting wow just trying to get my head around that that's really cool you know it's amazing because we all play with these assignments on lounges and you know llc's and stuff like that and i know this is really big on real estate because this is a way to avoid you know that the tax on the sale price and everything else because it just doesn't sell it never actually sells because the beneficiary change that's it um yep yeah transfer it's a it's a transfer of ownership where only really the irs knows because you have to claim the income but for everybody else's purposes nobody else really knows that's that's just awesome so with the when you go to the recorder of the notaries office what do you typically need one of the questions that brian asks is what do you typically forms you need to create that trust well you'll need the trust documentation so you'll need a trust and and they're a little bit different for each state so you might end up paying a thousand or fifteen hundred dollars just to have a local attorney that's familiar with real estate form a trust for you a revocable trust that has everything in it that that state likes so it's kind of a one-time deal for that and then as far as any other documents you need you need an assignment of beneficial interest and an appointment of trustee and you can appoint new trustees and assign beneficial interests all you want with an id and a notary it's amazing that sounds really interesting so how come not everyone's doing this like is there a downside here or is there a reason why somebody would not do that um i think it's just not understood and it's not most of the time people are not doing enough deals where they get annoyed forming new llcs you know if you're doing 100 deals a year you do not want 100 llcs right yeah one llc is plenty and then you can just put everything else in its own individual trust wow huh and and do you typically do this with real estate brick and mortar and notes or one versus the other yeah each each real estate uh transaction goes into its own trust but the um the notes can go into the llc or their own trust so you could have one trust that holds all your notes but just because there's not any not much liability with those almost yeah yeah you're not worried about what there is but not much yeah there's not as much you know falls or lawsuits that come out unless you're doing something really criminal which is crazy right so you know i'm amazed with the conversation of this whole collateral assignment thought process of being able to leverage an asset without selling it can you share a little about what your knowledge about collateral assignment is have you used it before yeah so i've got multiple notes that i hypothecated and so you basically just put them up as collateral just like a free and clear rental house you just say hey i'm going to give you first position and we're going to create a note that secures that and so you can the note that secures it can be for whatever you want it can be a partial it can be a loan it can be i'm gonna buy your note and give you an option to buy it back uh so you can do whatever you whatever you want within the legal balance and when you put it up for collateral a collateral assignment it's going to be a loan or a partial but if you actually sell the note with an option back that's even a little safer because if they don't buy it back you just keep it you don't have to worry about getting the collateral getting the actual note can you give us an example of what you've thought about collateral assignments sure i mean i i got a couple of um the the very first notes that i got i did it was a trade uh so i got these little 50 maybe 58 000 notes two of them and they were five percent interest but they ballooned in four years well they're not very saleable until the balloons very close or you know and so i put them up for a alone against them and i borrowed 25 and 28 against each of them and i'm just waiting until they balloon out wow that was one i mean there's a there's a bunch of other ones but that's probably the easiest yeah what do you typically do i mean you're finding someone who'll give you money against the loan and is that hard to do or is there is that a sector of people that we're just not familiar with it's just like any private money that you would borrow against a house you just say hey i'll give you my first position and i'll pay you this much against the first position so you're literally just subordinating to them so now you're in second position with your uh note and they have first that that's not exactly how it works but just think of it that way okay you're you're giving up first so that the whole idea of trading is is really interesting it reminds me of like when i was a teenager in our church group we played a game called bigger and better and we'd all start and i think we started with like a toothpick or something like that or a nail or you know something stupid and we'd have to go around and just like randomly knock on doors go to friends houses whatever and trade up and just say hey i'll give you this toothpick for something bigger and better and and it was hilarious by the end of the night you'd have guys that came back with like a broken down car and you know whatever all kinds of just weird stuff yeah but it but i you know one man's junk is another one's treasure and and that whole idea and so that trading idea um i if i think about it that way that makes sense to me where i've got land to me land is is worth nothing but to to a builder that's gold yeah that's true to somebody that knows what they can do with it that's right yeah yeah so um someone posted that collateral sign versus absolute assignment are you familiar with those two terms yeah so just an absolute assignment is you're just assigning it because they're buying it and you get cash they get whatever it is you're selling them a collateral assignment is for the for a loan you're going to get a note against it and some kind of terms are going to be there um you're just putting it up as collateral okay and they do this this came from wall street i mean they do this all the time if you're the repo market they put up treasuries as collateral and get overnight cash and uh and we're doing the same thing it's just not overnight and it's not as cheap [Laughter] as they do on a massive scale yeah yeah so what kind of problems sorry guys i was just gonna say how long you've been doing this like how how how do you build up that network about five or six years okay um for the actual exchanging we had uh an old exchanger come to our group that he actually did deals with peter fortunato and jack miller i don't know if you've heard of those two guys yeah um john shaw so back in the 70s and 80s they just had to it wasn't we want to do exchanges it was there's no money there's no credit and we're going to have to exchange or we can't do any deals okay and so they did a lot of this stuff because of just necessity it didn't have anything to do with anything else what are some of the risks to doing collateral assignments well just like putting up anything that you own if you put up a rental house you don't pay then they can take it and if you're collaterally assigning your note and you don't pay they get your note and most likely if you're not paying it's because the original collateral is not paying so probably my whoever is paying my note they're not getting it rented out anymore some somewhere there's a breakdown in the income it's like a landlord not paying the mortgage payment i got you yeah gotcha so what happens if that goes to court what typically happens when an assignment isn't fully paid or what what typically happens there it's just like a foreclosure you're going to have to go to go through a foreclosure or if it's a trustee state you'll go you know four closes that way um and it's obviously it's quicker so yeah but same exact thing so when you're doing those things make sure it's worth it to you and understand the that you're going to have to pay a lawyer to get this piece of collateral for you so if it's a really small deal a good way to do it is just to do the full assignment and with an option to buy back just give them the option to buy back or you if you know whichever direction you're going gotcha um that's a it is such a cool idea because it's something we never get into just because creativity and just as we said before last time we did was very vanilla right um notes to most brick and mortar notes is like really crazy idea in collateral assignments and partial loss is more of a is more intricacy and creativity um now i know patrick asked uh posted a question about that presentation lender as you're right where you want until you feel re fulfill the terms of the newton created with them or gets a note with them um so with these cloud assignments how much can you leverage i mean where is there is there a cap on stuff or it's just how creative you can be yeah it's it's going to be up to you and the person providing the cash if they think there's plenty of collateral and it's a good enough rate they might lend the full amount i don't know why they would they just buy the note at that point but it doesn't it's just up to you and the person that's that you're doing the deal with um and maybe they don't want to own it maybe they want to lend or maybe there's a maybe there's a blend maybe you've got you know 10 different notes and they're lending against the 10 different notes they don't want they don't want to ever have to worry about having to go take those properties and do anything with them they want you to have to deal with that and i would i wouldn't want to lose whatever it is i have so if i stopped getting paid i'd just take care of it they would never know i just keep paying them what's the typical interest rate on these loans so i've gotten everything from six percent to 12 it just depends on what it's paying and what kind of collateral it is you know those first notes that i got were low low interest over uh you know there were seller finance so that houses are probably worth 50 and there are 58 000 notes um and just it just depends on the collateral the original collateral awesome i mean i love the fact that you have to be very creative because that's a game that you can always win because if you're the most creative person in the room you can get almost anything done um sometimes you have to tell smart people just by being creative and thinking inside the box and with the trust being able to be almost a better shield llc and the ability to transfer things so much easier typically and then with the collateral assignment you can leverage portfolios because most people want to buy loans and look for people who will lend money on loans listen i'm going to buy a loan but i want to borrow money for you to buy notes unless you're doing big scale that's not common right unless you're doing large stuff you can't i'm going to borrow 100 grand to go buy notes go good luck you're not going to find that letter bill willing to do that right but if you can find a way to buy some notes right and even if you start small and be able to leverage that into additional assets at a decent industry you have a great way to jumpstart your situation well and the best way to do that is get somebody else with money to buy the notes the first notes that you go buy and and then borrow against it because they don't know how to do any of that they don't know how to buy the note in the first place and they and by performing stuff so that you can borrow against it and you have income to pay the payments so get them into some seven eight nine ten whatever it is percent you know yield notes and then borrow some money against them at maybe 70 60 so you get some more cash and go get some non-performing and then get those performing and then just rinse and repeat but you got to you kind of got to make them rich while you're making money yeah make them happy yeah right so are most people you know where you're in are they in certain areas of the country doing this or is this a nationwide gun they know we're just not familiar with just like notes yeah it's it's nationwide um you know guys in new york california colorado is big there was a lot of exchanging so there's a deep pool of exchanges in colorado for hundreds of years they've been exchanging so that they've got a kind of the jump on the rest of the country um wow but yeah it's it's a there's a lot of people doing it but there's not a lot of transactions happening necessarily right now um when there's a lot of cash in the system there's not a lot of exchanging that even really needs to happen there's just yeah if somebody would pay a two cap for something why would you need to exchange or do anything else yeah so that's amazing because i think that you know for me you can exchange anything and is there license requirements and stuff at all not in the free states i don't know about california and new york they like to regulate everything but yeah there maybe there's a license somewhere but you do have to follow the 1031 exchange guidelines and those are there those were there before the starker exchange where you can sell something for cash have a qualified intermediary hold the cash and then exchange so that's kind of new to the exchange world relatively in the last whatever it is 70 years they were exchanging and they had exchange rules in the tax code way before you did any of that stuff so you can't have un uh let's see prohibited exchanges so you can't exchange gold for real estate well and not pay a tax you can exchange anything for anything but you're gonna have to pay a tax it'll be a taxable event so a note for real estate is a taxable event you don't pay all your taxes up front but you have to start paying taxes based on that note and that's why you say like the irs knows about this but really nobody else necessarily right yeah you're you're gonna you gotta pay your taxes one way or the other so they they know about everything well and they don't really care about how you hold stuff i mean if you lease option something for 30 years or more they consider you the owner they don't care that you don't have the deed to it or any of that stuff that just a matter of equitable title contradicts that's just equitable title you don't have the deed but that doesn't matter the irs you're getting taxed on it and you can depreciate it and all th....