Unveiling 2024's Top Note Investments with Kevin Shortle | Real Estate Notes Show

Episode: Unveiling 2024's Top Note Investments with Kevin Shortle Dave's Goals and Plans: - Finally getting to the end of long foreclosures and evictions that have been taking forever - Still seeing property values plateau or stay the same in most areas, with some gains in certain regions - Holding a private free class on how to create notes that are valuable for note buyers - Planning to do a show next month with an attorney about proper note document requirements - Sold a note to Marty Granoff five years ago that is still performing Nathan's Goals and Plans: - Portfolio notes are still performing well overall - Haven't seen significant property value drops despite predictions, days on market still low - Seeing a trickle of issues in commercial real estate space - Concerns about low-quality notes being created in the market - Planning advanced class on building calculators for both performing and non-performing scenarios with IR schedules Key Recommendations: - Investors buying performing notes need to be prepared for the possibility they could go non-performing - Note originators and buyers should understand proper note documentation requirements before default occurs - Attend DME (end of May in Nashville) for connections with originators and buyers - Register for free class on creating valuable notes for buyers by filling out form in comments - Consult with attorney about what clauses and protections are needed in note documents Topics Discussed: - 2024 investment opportunities and market outlook - Commercial real estate stress and apartment syndication foreclosures - Difficulty finding quality performing secondary notes - Transition from non-performing to performing note investments - Risk of performing notes transitioning to non-performing status - Importance of proper note documentation and legal protection - DME conference networking opportunities Guest Insights: - Kevin Shortle has 34 years in the note business, starting with seller financing before modern banking options existed - During Carter Administration, bank rates were 18% which drove people to seller financing at 9% - Started by wholesaling/brokering notes before having capital to buy them, finding leads at courthouses - Early career included work as commercial real estate appraiser and real estate sales before discovering note investing - Used assumable non-qualifying loans in early property investment before note business [Music] hey everyone welcome back to another episode of the real estate notes show I would love to talk about today about the most attractive hottest notes of 2024 before we do that I'm your host Dave puts from jkp Holdings alongside me as always Nathan Turner hello man what's going on what's going on hopefully everything's going well going well going well getting pumped for DME it's oh we're just a couple months away a couple months out I know it's exciting right so I think that people who are tuning into US probably heard about it but I know that if you haven't if you are an originator or not buyer the DME will be the place to go to end of May it's down in Nashville uh where you can definitely uh share some details about that um and I think for most people I'll put the link in the comments right now uh so people have it but if you are at all in either those kind of brackets please feel free to uh to check it out take a look at that I see Josh on Facebook over there saying he'll be there which is great um which is which is really cool so for those people you know 2023 is a kind of a weird time period for a lot of people notes were kind of Uncertain right real estate in general was very questionable we didn't know what was happening and um very much so yeah we just in it kind of a we didn't know when things were to fall we've been talking about forever but we're starting to see things start kind of falling apart it's coming and yeah yeah we're seeing uh especially on the commercial side uh I was talking to somebody just the other day where he said he's he has invested into two different apartment syndications and both of them are in time doing this over a decade both of us doing notes we've seen transition for the first nine 10 years not performing was our world I don't think I you know buying a performing note look boring and now it's going of flip we're buying the non-performers are too expensive um in the risk levels there um yeah but the Performing has been pretty solid right we've been buying a lot of these things um some people buying partials some people just buying but what most people don't realize is that performing notes have the chance to go non-performing and I think a lot of new investors don't realize that and it's shocking for them which is unfortunate and again you know I was speaking with somebody yesterday and he's part of an investing group where they they one of the things they talk about is note investing so he says in the Facebook group their private Facebook group some people have bought some performing notes and they've gone non-performing and so they're like shoot now what do I do and they they're totally un prepared for that reality about like what happens when it goes not performing so and they bought it as a performing note expecting it to perform forever and it's like that's not fully true right yeah so not necessarily it might yes but you have to be prepared for both sides and we do have a class on that advanced people that you want to build a calculator for both scenarios um with ir schedules and debt licenses and all the kind of good about if you should feel free to let us know I real quick shout out I got a I got an email just uh yesterday the day before uh Marty granoff who is one of the very first guys I ever heard talk about structured debt and buying structured debt way back in 2009 and I've just always kind of looked up to him so I sold him a note five years ago and I got an email from him just the other day he'd mentioned he saw me on a podcast and then he said you know that note I bought from you it's still performing I'm like yes I'm soad w but you never know you know you never know what a borrow is gonna do no no so I was really glad because I've always foreclosure and I oh I am so sorry man like that is terrible but when these when these projects started up at 3% and now all of a sudden they're having to refinance or or their rate goes back up to you know seven or eight percent yeah that makes that's a huge cut to the bottom line for those apartment syndications so not to say they're all bad or anything like that but it's it's um it's showing some weaknesses for sure absolutely you know it and in your own portfolio what have you been seeing have things been defaulting performing what's your your current portfolio looking like for me there hasn't been really much of a change um still performing everyone that has been performing is doing well I'm uh finally getting to the end of some really long uh foreclosures and evictions that have been just taking forever and so we're finally finishing those up which is also very exciting yeah what do you do you see anything with property values yet no we're still seeing that that the plateau values either staying the same or bits and pieces of the country still kind of uh going up in certain areas which makes no sense at all and I think it's that idea that there's not a lot of people out there who are selling and the rates are high making still a sellers Market which is just unbelievable we're talking I keep think yeah I keep thinking it's gonna start dropping off and so far same thing I haven't really seen it drop off very much at all anything staying just pretty much the same some gains in some other places so it's it's been very interesting and days a market still low which is just shocking to me in most parts of the country and it we've been talking forever now that this is going to happen and we're all predictors here right it doesn't happen however we have been seeing a little trickle in the commercial spaces right and we there was a 60 Minute special on that that commercial is going to start falling and which we don't completely understand um it just makes questionable what what we move forward for and what liked Marty and I I would hate to be the the guy that like Nathan so uh I know we say this every time but reminder this will be uh the podcast will go probably Sunday morning uh this will be recorded it will be on our YouTube CH the YouTube channel um feel free to subscribe and all that good stuff um and whatnot if you look we're going to have Kevin come on in a second if you look for Kevin information you'll see in the comments a link to a form just fill it out and you'll get Kevin's information without further Ado let's bring on Mr Kevin how are you my man I'm doing great good to see you guys yes speaking of guys that I totally admire in the business my goodness oh Kevin's one of the good ones right and Kevin's been a pivot a person we kind of go to for a lot of questions even those experience go to Kevin for a lot of questions Curiosities and whatnot and we all learn from each other at the same time Kevin how long you been in the note game somewhere around 34 years and you know it's I start to measure things and I I was either just married or about to get married so we we're coming up on our 34th wedding anniversary here in uh in April so somewhere around that uh around that time frame so the very early you know days of of this business really kind of the Genesis of it just getting started and you know it's it's interesting you guys were mentioned it coming in about 10 years ago um so the story before that uh you know seller financing was the only thing that we really had we didn't have the bank funnel we didn't have all these you know creative stuff that's going on today it was all Bank notes and and what happened back then was during the Carter Administration you had interest rates at Banks every thinks you know 7% high it was 18% you know and so people were in a position of they wanted to sell their looking at broker you know there are good ways and bad ways of broker um do yourself a favor you know listen to the people who are doing it because please don't broker other people's notes um you may not have permission to do it um you may be in a spot where you don't want to be so do it right ask people how to do it correctly and you'll get a good idea Kevin when you got into it you know um were you buying in a particular states were you buying in Focus areas we went Nationwide so what it used to be you know we had to go to the courthouse and I'm talking going through microfilm again microfilm is something that some of you don't know what the heck that is but it's basically a clear tape that you're in front of a screen and just scrolling through looking for somebody who who owns a note you know and and that's how we started and then thank thank thankfully a list company came around so internet and stuff was starting to come around and some of the stuff got online so we were able to buy lists of people who uh sell sold a note now we didn't know excuse me people who created we didn't know if they wanted to sell or not but that's what we had to do so we would go out and contact them you know by phone and things like that see if they wanted to sell and then we went to the big Brokers some of which are still around I mean fak has been doing that for 40 years I mean so they were one of the original companies they're still around some of the other ones uh interestingly enough uh you know Metropolitan out of spoky in Washington was a big one but when the founder died his kids didn't want to take it over and that kind of splintered some other people you might know Allied you know Allied Servicing Company they came from there oh wow B Bob repass from revolve Capital now he came from there wow I did not know that yeah yeah so there was a lot of things that splintered out of out of that as well so it is interesting to see that there's still a handful of us that uh awesome back in back in those days yeah yeah it was prettyy wild we were doing some interesting things too it wasn't just because we had finite inventory back then yeah how many people did sell our financing and then of those question before we start talking about into the future I got Nathan interested all find it fascinating um and that's actually Marty gr off that's in that 2009 conference that's what he was talking about lottery winnings and stuff and I I just like blew my mind back in the day yeah well see back then there was no lump sum in the lottery when you won the lottery you a million dollar you get a 20 or 30 year annity so you're getting after taxes maybe 30 grand a year and because it was public we would reach out to you and say look would you rather have 600,000 now or 30 grand a year for the next 30 Years yeah and a lot of people would say I'll I'll take the 600,000 so we pay the 600,000 and then we collect the the payments and everything is guaranteed by the state collateral is the state ironically enough do some Google searching everybody and you'll find that Illinois defaulted on lottery winners did you know that did not know that about two three years ago because their budget is so out of control lottery winners they just couldn't pay them wow you imagine that they deferred that so back then we were the source you know we were the ones that were cashing people out and the states caught wind of that and they looked at they us as an industry and said well you guys are making too much money you know on these you're buying them making 18% returns or whatever it was yeah yeah probably higher so they basically they didn't say you couldn't do it but they said if anybody sells their Lottery winning the state has the right to discontinu payments wow which effectively you're like well then we you know so you so the industry overnight changed and then very shortly afterwards all of a sudden States offered a lumps and when you go to calculate the yields we were much better we were paying a lot more money than the the just crazy but that's you know that's how that's how it worked so I'm will be the new wave of investing uh as we kind of shift we always have to be pivoting and being aware yeah we do have somebody uh same as last year at DME we had somebody from the Mortgage Bankers Association so we've got somebody coming out again this year awesome uh their predictions last year were pretty much bang on and so they're really great resource just to see you know what they're seeing and just from a macro View um you know some of their predictions so far they've been pretty bang on so I'm curious to see what they're going to see this this year as well yeah so as we talk about all these kind of weird times I know seconds has been a really difficult time right now because not a lot of seconds are available uh performing and on I know uh you know people come to us and say hey what are you seeing and what are you know what are the prices of notes going for and we for those who are originating notes and creating notes we do hold a private class on for free just show you how to create a note that makes it valuable for a note buyer to buy for the top dollar so if you interested let us know about that um but we're seeing the fact that there's a lot of notes coming out that are kind of garbage um which is scary um and those who are creating really bad notes they don't do it purposely they just kind of do a back door when those things default I don't know what's going to happen and we hate to see that happen to any investor yeah yeah and it it causes major problems down the road and and for somebody that's just creating the note of course they're they're never thinking about in case of default not really you know they they've got a clause in there in their in their one-page note document but how much does that really hold water um yeah we're actually going to do a show on that here coming up next month with an attorney that'll kind of walk us through and what do you need and what do you not need in your note document yeah which is crucial for both note buyers as well as Originators to know what's proper what's not proper right so um you know we've seen in our house but nobody wanted to lock in a 18% 30-year loan so a lot of people were were said well I'll Finance it for you you know and they would Finance them at 9% which back then was a huge deal you pay 18% of the bank or or pay me 9% and you know when I first got going and and discovered that we this is dating myself here but this is before the internet this is before cell phones um I had to go to the courthouse and and try to find leads of people who did sell our finance notes and because I started without having any money to buy notes I basically just wholesal the notes you know what we call brokering brokering the notes and that's really how I I got started in the in the business all those years ago you probably have people in this call I'm sure you've heard it before who are not even 34 years old yet so yeah you know uh that's awesome not right how did you get open to the idea of buying notes where you a landl first tell us the backstory yeah I as soon as I graduated college I got into real estate it was always something I I was attracted to and and uh I started as a commercial real estate appraiser and I did that for a couple years then I thought boy the the big money is is real estate sales you know so I I switched from that went into real estate sales and uh that lasted a year because I committed myself to a year and I didn't make any money so um what I did get was my first property investment property because back then we used to have what called a&q loans assumable non-qualifying and basically you just signed a document you took over the payments there was nothing else that you had to do a cable non-qualifying yeah and this guy comes into the real estate office I'm working on a on a Sunday you know working the desk and uh he he walks in he had this place a two better two and half bath town home and uh here in Orlando and I was like well I'll buy it you know it never got past me and and I just took over the loan and then had a how many wanted to sell that it was a f out amount of of of leads and at some point in time it kind of burnt it burnt through you know there there just wasn't enough inventory left and I even left the business too and got involved you know a lot of people know me from notes but I've done 150 rehabs I did money lending landlord stuff so I've done a lot within real estate um um but it always led me back to you know back to notes uh ultimately as as what I think is the best area to focus on uh but the you know inventory shifts and everything you know completely uh completely changes and you know that's where you have to adapt and and have a good understanding because not only were we buying uh the real estate notes but we bought lottery winnings Casino winnings wow professional athlete contracts um sell phone tower leases billboard leases I mean just stuff you wouldn't even think of but the Comm denominator is just like in real estate notes what's the collateral how much is it worth you know how quickly might might we be able to sell it if we take it back and what am I investing you know so it's a professional athletes contract or you know any of those other things I mentioned you know record royalties I mean all kinds of stuff you know all just what's it back by what are we investing what's our return you know the same principle lot of real estate notes yeah absolutely that's cool you know we I've never branched out that far right I I I think it's amazing you have to have a lot of skill set to know the other aspects right but it comes down to being a note what is secured by what's my collateral and how can I get back if something happens yeah yeah we we bought um well one of the deals fell through it was a professional football player and he was a lineman uh he W he was making about 600,000 a year and they get paid one 16 throughout the football season that that's how it works and the standard NFL contract is really only two pages that's all it is now if you're a superstar there's an addendum you know curious like back when at the 18% interest days when people were offering well I'll just give you 9% 9% seller financing yeah was that um was were there ever people doing that to scale it it seems like surely there must have been like people that would do like you know several a month instead of just like one-offs here and there well these these were really the bulk of that inventory back then were consumers what I call today the mom and pop loans you know these are somebody who you know inherited a house or owned a house free and clear and they just couldn't sell it because no wanted an 18% so they said we'll find and that's the only note they've ever created you know so it wasn't really a business that was buying houses and like today where they're buying houses and then selling with financing yeah this was typically a consumer and gotta you know that's a big play today you know or I know we're g move forward to some of these other other notes but that's a great funnel look at because those consumers who own those notes a lot of them don't even know they can sell them right Y and if the economy gets tighter things are getting more expensive inflation's getting up a couple of the precursors to non-performing mortgages are credit card debt and automobile debt both of which are getting historically High againa rates are getting historically high again so the next Domino typically is the the mortgages so you're gonna have some of these mom and pop note owners who just own one note that's all they've ever had and uh boy they'd rather get cash now you know they become motivated Sellers and then you know you're not competing with uh you know people on tapes and bidding and all that sort of stuff you're reaching out directly to a person and today you can still buy names and and addresses of of people that fall into that that interesting yeah because that's a funnel that both Dave and I are seeing are people that are doing it as a business where they're acquiring property selling it on a note and then they're like wait I can sell that had a roommate come in you know so uh that that was kind of my my start into into that world and and I started looking at real estate you know more as as the investment side of it but it's tough right even wholesaling properties and and borrowing money and and all that sort of stuff was tough and what happened was my my wife actually introduced me to a guy who just made about $155,000 on a note deal which I never really heard of and I'm like what's what's a note deal so he explained what it was and I mean $155,000 is a lot of money now but I mean you go back 34 years ago how did you make that you know and so uh we hit it off and and I said you know explained the thing to me and and I said well man I'd like to do this as well so my idea became because I had a little bit of a a marketing sense okay and I said well why don't we do this I'll write a program where we can teach other people how to find the notes right how to you know complete the form and get all the information about the note they'll send it in to us and then we'll get it sold and we'll make a fee and they'll make a fee and that made it scalable so we started doing that in that program I mean this is back when uh the program was in three- ring binder you know with cassette tapes for those who don't know what cassette tapes are I know got that's is before CDs yeah before streaming so it was all in cassette tapes you know and and and but I taught people how to do that so as they got in the program of course that became our national bird dog Network so we went from really a a brand new company to within six months we were probably a top 20 six months after that we are top five company and always always was from from then on uh because I had so many people doing that and and again was making money throughout the the whole funnel but that's what made it you know scalable into a into a larger business wow so for those who out there who are that's 10 times as big saying that doesn't apply to me this doesn't apply to me that so the same concept that we utilize and and that that we uh apply I should say in looking at real estate is well what are the risks you know what do I have to protect myself so in the case of a professional athlete NFL contract with this guy he wanted to sell next year's Sal for today so mathematically we can do that what would we pay today you know in now and then get that money 116th in the in the during the football season yep but there were two other things you to look at in the contract so important to read these contracts everybody when you're doing due diligence you have to know what you're buying a lot of Real Estate Investors go to a closing table and just sign sign sign sign sign they never read what's in there of course in the note business that is what you're buying you have to know what's in there so the NFL contract for example as a parallel there were two things of concern one was it says very vaguely by the way that his on andof field Behavior has to be up to team standards okay just say team standards well what that standards those standards you know what I mean and you know so we got to protect ourselves the other one was your Fitness level has to be up to team standards which again can change so identifying that risk how do we cover it well same thing in real estate insurance covers some of these things right so we always make sure that our collaterals ured in case it burns down the you know the house and all that sort of stuff to protect our investment in this case had to get a Lloyds of London policy to cover that in case you know he gets in a fight or something you know outside the football Feld sure the contract is null and void you know so a lot of the same parallels you know what you know that you run your numbers you look at what your risk is you identify what you might be able to do to uh to cover that risk and then of course you always have the unknown risk as you guys were talking about earlier the economy we can't control that part of it but you know we there are certain risk that we absolutely uh can control so one more awesome yes they'll sell it to somebody like us yeah and that's inevitably what happens is you do you will if you're pursuing those Mom Pop notes you will run into somebody who does it on a regular basis we just bought a client of mine just bought a deal a couple of months ago in Louisiana and the it was you know doing our research on the thing the guy who owned the house sold it with financing is carrying back the note we looked him up and he's doing it through a real estate company well you know two seconds on public records and I this guy sold like 40 of these so not only does he have this note but he's got probably 40 other notes and I told my client follow up with this guy you're buying this one you want to be his go-to guy yep and by the way you know as he's pursuing those 40 notes he can't afford to buy all of those 40 notes doesn't have to right because he could buy the ones that he likes and then what yep share over you on the other ones yeah exactly exactly so before we got on the call and before we get into the big topic here I wanted a key thing in we've I we've been approached Nathan Abbi about rap notes and buying rap notes yeah and we're just going to hit this point move on Kevin when you're going to buy a rap note and there's an underlying lean that's not the the seller of the note there's an underline borrower that's a thirdparty borrower what do you do with that first lean are you taking over the first lean or are you doing what Nathan and I are doing and having to pay that lean off 100% you anytime you buy wraps because it's it's not a New Concept we're starting to see elevated inventories but again you know years ago we had a lot of those wrap mortgages too before the big crash of of 2008 and such and know it you just lock in your brain uh if you're buying a wrap out of the proceeds of that you absolutely have that underlying first paid off and by the way that's done automatically don't give that money to the person you're buying the r from and say now don't forget to pay off that underlying loan it's handled separately right you go Bo you send the money there dropped 20% in that example all right now your collateral is worth 80 but you're still in it for less than 30 makes a lot of sense proper yield and those sorts of things all all come into play so those are really good the another part of the partials that is especially good for beginners but also I'm looking at a lot more with um with clients of mine is buying partials yeah you know instead of buying a whole performing note just come in and buy a partial because again you lower your risk you're getting the same type of returns that you could get if not higher on that and you have a vested party who owns the back end of that note that wants it to go well also and I think that makes a nice combination because some people are starting to price these performing notes a little too high umk gives some push back on that and it takes some time but what I found is even a lot of people who are selling notes they you know they're not trained you know to the to to the fullest extent and they don't even think about selling a partial but when they look at it they go oh you know well that that can make a lot of sense so it's opening up an opport to get around these people who are are are you know pricing the market without having them to you know wait and react and go gee why isn't my note selling in you know 90 days I've had it listed out in paper stack or something you know it's not selling well because it's price too high so either lower your price or you know do some kind of a a partial but those are those are good easy notes to get into emerging notes new notes to yeah yeah um we're starting to see the home home equity conversion mortgages which all heom they're known as and also we're starting to see these short-term Bridge loans and those are pretty new to the industry yeah so it's time for everybody listening and watching learn about these things study them because they're starting to grow for example the bridge loans these are typically two-year loans and they get the rest of of the money but that's the only way to do it we get so many rap people saying why you paying off 3% debt and the answer is we're going to it doesn't it's it may not make sense to you but we have to you know some of the things that you can run into with that and some other other type of notes is you can buy a note and get lucky and not really go through all the due diligence and miss some of the missing paperwork and and gloss over some things but the way I always look at these the way I teach my my clients is sure if you don't correct this now it's never going to be a problem if the person pays but what you don't want to do is identify something uh or miss it and not have it corrected and then five years from now now it's a huge problem now now you're now now you're now you're in trouble because they stop paying and you're trying to fight it and your legal expenses and time frame and everything else goes through the roof and you just can't do it that way so you know you've got to look at these things always as we hope for best case scenario but prepare for worst absolutely so 2023 with a weird year talking earlier about that and what we're seeing is some new kind of inventory start trickling out right and we talked off air about this is that the mom and pop first lean second lean residential houses are kind of being kind of on still right now but there's new inventory coming about right this 2024 inventory is something that we haven't seen a lot of in the past can you share some of your thoughts on like there's it's always shifting you know you were doing you were doing those seller finance deals and then you go to lottery winnings cuz that works the lot of Wis all of a sudden are no good so then you move to something else and so what are we seeing today yeah the in the market today it's the smart play right now is performing notes and it has been for the last couple of of of years a lot of these notes are reforming notes that came out of the non-performing notes that we were all buying back in 2008 9 sometimes one-year loans that are given by private investment companies sometimes private individuals that are typically High rate and they're meant for a short payback period of time not quite hard money loans but they're you know Bridging the Gap uh between getting regular financing so a lot of times the properties are being renovated you know so you got a private uh investor buying a piece of real estate needs money they go to a private lender say lend me the money for a couple years I'll get it fixed up I'll get it rented I'll get whatever then I'll I'll cash you out by refinancing because I've improved the value great the problem that they're running into now is because of inflation the original numbers that some of these people looked at a year ago where they said okay we're going to buy the property for this here's what our fix up cost is going to be here's our after repaired value here's our typical days on Market those numbers have fundamentally changed right W Lumber prices appliances I mean all just the every expense involved in renovating a house is much higher Y and that's starting to squeeze those margins for the real estate investor who supposed to pay back this loan and when they start to recalculate and labor is up too right so when they start to recalculate their numbers they start to see a profit margin that's just either unacceptable or they're upside down and they're walking away and it's easier sometimes for these investors the real estate investor to walk away because most of the time the loan's not in their name it's in an LLC and so they have no personal liability I would never by the way if if I'm doing a loan for somebody which I have done a lot of those on somebody rehab they're personally signing that as well because I want that pressure up that's going to affect their credit if it's not affecting their their credit it's easier for them to to walk away now you get a money lender who has this non-performing loan and a half rehabed property and they're not in the business of renovating they don't want to get in that business so instead what we've got to people who were over 62 years of age right so we have approximately 60 million people that fit that category and surprisingly enough in the United States about 40% of the homes are owned free and clear now mostly that's a generational thing first of all I mean everybody listening typically if it wasn't your parents in my case because I'm older my parents it was it was always you pay it off you pay off the house and it was free and clear my grandparents same thing so everybody listening probably your grandparents um that was their thing and they live in the same home my mother to this day I was just visiting her this weekend in Fort Lauderdale you know in the same home I grew up in so it's just one of those generational things from the World War II generation and then pass to their their children so you have the combination of a growing of generations right 80 million 60 million people right now in those age groups we got another 20 million that are only 7 years away from being in that so that's a substantial wave of of humanity that's getting older and people are living longer and many of them you know you don't have jobs you know my dad was a police officer so you know he got a lifetime pension a lot of people work for factories and things like that had lifelong pensions when was the last time you had you saw somebody with a job that has a lifetime pension you know it's just it's so some people are starting to outlive what what the you know that they have left but they've got that home sitting there right and what are you doing with heams right now what in a note space what's your angle with them that you're playing so what happens then with with the heum is somebody borrows money from from the lender right and they have to pay it back uh really out of three things they either pass away uh or they move out of the house they have to live if they've if they moved out of the house into a home or something like that and a year goes by these things say you got to pay it off you know um so how do they pay off those those homes if about a year ago and that's when I first started seeing some of these things trickle in but again I think with the demographics and when you look at the economy and things getting tougher and you know that sort of thing it just but I don't know if if you look at the demographics it's just it's just logical that these are going to be there and and people are going to pass away they're starting to pass away in in larger numbers that's just you know the way the world this is going to be something that's there and somebody's got to cure the problem so you know if can you I've got a bid on one I'll find out on Monday hopefully hopefully we'll win we'll see gotcha I'm a big fan I think they're a great asset and I think they're they're just a it's a good opportunity and it's just because something's new and it's different don't count it out you know check it out and have a look and study it out go and watch that that podcast that we did check out Kevin's training they're great notes they can be a really good resource so we did a question from Josh uh when s a partial performing uh the owns is it better to sell a true partial or or hypothecation um and then if you're true partial how do you protect yourself from the partial buyer working something out with the borrower in the event of a default and cutting you out of the back end so I think what you're doing is you're fusing we have a video on to partial versus hypothecation they're two different instruments right where partial you actually own the note for a period of time where hypothecation is you're using the note as collateral to get a loan where that if you do hypothecation is I'm going to instead of leveraging the house as collateral you're leveraging the Noti is collateral where partial is you actually own it for 60 months and if anything happens you're technically in charge of the note in that 60 Monon period Josh so I'm not sure if you're confusing sorry if Jos question is should I do a partial or hypothecation the answer is well do you 10 11 12 so non-performing was the play back then because inventory levels were elevated prices were down and there were great opport opportunities with government funds and everything else that was the proper play now a lot of those loans that were purchased nonperforming and are reperform they've been reperform for 10 years and Equity has gone up so you can find a lot of very good performing notes and that would probably be the easiest way for anybody listening or watching this to get involved in notes by what I call a nice turn key note at least two years of payment history at least 30% Equity uh in in the property and you're going to be good because you can buy those in about a 10 to 12% return you know all day long so that's an easy play and it's a continued play I saw too many people I I I know we had people going oh the big crash is coming I wasn't one of those people I said there's too much Equity you know and and Banks really are pressured heavily by the government because of do Frank which changed everything in our industry by the way but because of Dove Frank banks are highly pressured if somebody's in trouble and they have Equity you got to work you got to work with them you got to do a workout they don't go right to foreclosure because you got to remember the government owns over 90% of all the loans the banks are just face you know Fanny May Freddy Mack and Jenny may actually own all these these loans so that funnel that we used to have of non-performing loans which were Bank originated loans that were sold by auctions and tripled down that is that that that funnel has been squeezed that's that's really a small amount of of inventory uh today with what's bigger is you've got the companies that bought those non-performing notes got them reperform and now they're starting to cash out of their portfolios leaving a perfect scenario where you can just small example get $100,000 house but they only owe 30 grand now on the on the house and you're paying less than 30 grand for that note you know your investment to Value ratio you're perfectly safe even if property values are they doing selling nonperforming Lo shortterm loan and this is where you know those of you who do have real estate backgrounds especially like I said I've done 150 rehabs uh and it's no problem you know if you have that mindset of going well again do my numbers work you know if I could buy this not note at a deep enough discount yep then I can finish the house myself and sell it to somebody with financing or a lot of times what I advise people to do I'm in a situation right now with with a client uh who's taking a property back and it needs rehab I said well part partner with a rehabber you just had a guy go out and say secure the property he's looked through the whole thing he's Tak picture thing so Finance it for him let him fix it up and you guys you know split some the profit in meantime he he's paying you and then you sell the property and and you guys do some kind of a profit split you know so there's absolutely and you know that's an interesting play is that there is a lot of rehabs kind of falling off the Wayside and I think a lot of no investors gotten lazy over the years not wanting to do anything manually right and I think that if we just get out of our own way we're actually make some more money on the fact of buying these assets are non-performing because you're right like the banks in 2008 2009 2010 they weren't doing a lot of foreclosure they want to get rid of the assets and allow other people to do the foreclosure and that's where we stepped in and if we can be that solution for these people they were more than willing to sell off those assets to allow to get off their books so they can go buy another you know lend that money back out just like the banks did back in the day yeah good play yeah and you know in my mind mind and and I've said this for for years you know I've been training in this business for well over 25 years now and and you know one of my key comense was always if you truly want to master this you have to understand the numbers and the story it's got to be both if you just look at the numbers at some point in time you're G to get burned because you didn't know the story if you just know the story not the numbers at some point in time you're G to get burned so part of it is unpeeling this this onion here to find somebody sells the house and pays off the loan great if somebody um moves into a a home and the the um uh the beneficiaries The Heirs if you will or the sons and daughters in that case because the person's still living if they want to pay off the loan and keep the house they can do that as well what happens though in many cases is somebody passes away and now it goes into a probate and the person pass away doesn't magically come off the deed of the property you know so the owner of that note has to foreclose right and sometimes that has to go through probates sometimes there's heirs there that want the house and you have this process and I think you alluded to it earlier Dave where you said sometimes these companies just don't want to deal with that yeah that's true you know so so that's the play you know that's the one where somebody passed away and this issue is unresolved they may or may not have erors and this company just wants to get rid of it let somebody else work work that out and they're willing to just move on because you know when you think about it the ones who create these these home equity conversion mortgages they're not they don't have the Personnel to do all these workouts so for them just cut run and go you deal with that you know if we take a hit we'll take it now and and move on but you can make a lot of money in that in that in that play there you know because we've worked on a couple where there were just no errors you know but it has to go through a period of time people make claims and things like that then you do a you know a foreclosure sale again it's on an empty home everybody so I'm not saying we're buying these and we're foreclosing on old people that is absolutely not we're doing by the way just for total clarification house is empty the person has passed away yeah and again it's just what do we do and the lenders who created these things don't want to deal with them so they're selling a problem and you know what when you know when you make money in this business you're always solving a problem so you identify what these problems are you come up with a solution and that's want lump sum and no payments for a period of time or do you want uh monthly payments for a period of time and lump sum and and that's really your your your difference between between the two you know the hypothecation you're going to borrow it as as Dave was saying you got lump sum and now you're making a spread on what the income from the note let's say $1,000 a month but you got to pay $600 a month on on the loan so you're making $400 there but you got whatever lump you need it um on a partial you could probably get more money lumpsum because you could chop it up how about if you're the buyer how about from the buyer side how do you prefer there on the one more if you're if you're buying it would you rather be buying a partial or buying doing hypothecation and loaning money against a note oh no I I would much rather buy a partial because if if I'm loaning on with hypo with hypothecation the whole goal is you want a low interest rate loan from a bank say 6% you're making 12 you know that's that's how hypothecation is going to going to help Josh in that case if he did that uh but if I'm buying a you know I'd much rather buy the note and make my make my 10 12% and when you do hypothecation you have to understand that that what you're concerned about the back end you really have in contract that if anything between the borrower and that person who leverag their note has to communicate with you if they don't communicate with you you have to assume and all that kind of stuff so hypothecation become a little problems some is a is a person who lends on them where partial is clean cut you're you're direct with the asset where if at default you know about it immediately um they can't resell the note all this stuff where apothec if you come across some that's not too nice they can hypothecate three people if you don't do it correctly or whatnot so we encourage you to sell you can sell the partial as well as buy the partial I think partials are a really good way for beginners to get involved if they got three four $5,000 is they can go buy a six Monon 12 month partial not right easily and learn out and then just do your numbers make sense and if you know the story you have a lot more of an educated guess as to what the workout is going to be what's the most likely scenario least likely scenario and if I can make money on least likely to most likely I'm good yeah you know I'll make money it's just a matter of how much and when because sometimes again we don't know exactly how it's going to work out because sometimes you know it's not totally in our control yeah which again comes back to a point that that we've hit on many times like uh for any kind of note if you're doing a seller finance get it with a serer yeah and the serer is going to keep records of the of those conversations they've had with the borrowers which is really invaluable to us because we want to know the story How likely is it that something's going to happen and you know what's been the history where's it gonna go there some sellers there's some sellers that don't provide that right they have access to it but they don't provide that but boy when the ones that they do it's like oh this is going to be some good reading here right out everything that's been going on with this with this deal yeah yeah sometimes it's as simple as you know they there's bad blood where they've had you know an argument with the the old note holder and and now you're stepping in you're the great guy that's going to solve everything you're not going to do anything different than the last guy but you're somebody different and that's all that matters we've also seen it where the servicers didn't communicate with the borrower like the Bor you see call coming in and no corresponds back with this servicer and that made you say wait if I step in here and just answer a phone call I may stop the day which is amazing to see I think the servicing notes are are golden Keys's business to see what's going on maybe they're having a problem oh man it's great absolutely inable let's talk about those heckum loans a little bit because I've done I've done several of those and I really like them so I'm I'm curious to hear your take on so real quick what's a heckum loan for those who may not know home equity conversion mortgage a reverse mortgage you know you can say and the demographics are there where your money is my experience with those is you you get back the property and they tend to be in really good shape yeah these are not people that fell behind on payments because they lost their job or they're just dead beats or whatever that that's not the case these are people that were good people you know they lived in the house their whole lives they've been taken care of it and they passed away if you want if you want a we did a full episode on this too if you ever want to back in November with Randy so it is a huge opportunity for people who want to get into it find your local person who's creating these things and become good friends with them because if that person either moves out maybe has to go to you know rehab facility for long term or they pass away you have the opportunity to buy this thing for close solve their problem because realize the fact that reverse mortgage is what it sounds like they're paying the borrower over and over and over again on a monthly basis to get their capital and that the upb constantly increases to the point where it stops and then it's defaulted and you're basically buying that debt when they would have to foreclose so in that kind of world I agree the baby boom boom boom generation is huge and that's when the retire is coming we're gonna see a lot of these things moving forward I yeah if if Tom celic has his way right there he's he's on TV if you don't know in the ads you know promoting mortgages and you know over time these revers mortgages had a bad reputation um but with the heckum and the way that they're done um they can be really good solutions for some people like I said not all you know baby boomers are going to do this of course we don't need them all to but there is a percentage and by the way they can get lump some they can get paid over time they can get paid for a period of time they can have a line of credit uh it could be a combination of lump sum and line of credit so again that's where I I I look back and I I was looking this up and I I put a training together on this the game that way too yeah hypothecation is definitely more difficult today than than it was before partials you're right how do you protect yourself in the contract that's that's how you always protect yourself so build in your contract in a partial contract build in there what happens if uh there goes into default uh what happens if the notes paid off uh I just partnered with with somebody on a on a note uh um we just it was a 5-year note they paid off in a year and a half because they sold the property but we knew exactly who who got what why it was in the contract it was outlined the contract and and very simp yeah absolutely so with the whole idea of doing these Bridge loans what are the things that your your due diligence different from buying a normal note that you want to know about these Bridge loans that maybe be a little bit different yeah with so I used to do hard money loans right right so I was used to doing shortterm six months I usually did six Monon loans uh High interest 18% you know that sort of thing and charge a couple of points and um you know that was that was very lucrative until the market crashed and rehabbers didn't have uh weren't weren't as busy and that same thing is kind of happening here where rehabbers it's tougher to find discounted properties you know right now that are good prices and and the rehab is is more expensive so we're definitely seeing a Slowdown on that so these short-term Bridge loans are essentially that they're they're they're meant to be paid off quickly and if they're not what you really have to get a hold of is what is the property worth in current condition what's it GNA cost so it definitely bleeds over to real estate skills what's it going to cost me to fix the rest now hopefully who's ever you know uh been the lender they've been getting pictures and you know things like that are are you know so important and and you're not always going to get that but if you have pictures of the rehab if you have estimated what needs to be done obviously that gives you a a big leg up um and if the lender if it's look I'm gonna engage with 10 people I'm gonna have 10 conversations today with different people and your events three days right yeah correct yeah two two days two days okay you got two days so set an agenda of who you're going to talk and how many business cards you're going to hand out that particular day and hold yourself accountable because if you just go there and kind of watch the shows so to speak and don't get involved you wasted your money in my opinion AB you're SP a up on some things but you'll go home you'll retain about 30% of what you you and you'll go home empty-handed going well that was interesting now what do I do don't because the biggest hurdle I think a lot of people go through is that they're away from their family for a weekend that's a that's a journey for people right including us with younger kids and you're probably going to spend about $1,000 so the collection of the two was really nerve-wracking for beginners but I'm going to tell you from our personal experience I've never been to a conference where I felt guilty when I went home going man I shouldn't have went because it's abolutely always beneficial it's always worth that $ thousand if not more yeah and as you're sitting there listening to all the other presenters take a note and go I gotta meet that person for this I gotta meet that person for for that and and really push yourself to do that because y you know I know some people go to these things and they're in well I'm brand new and I nobody cares nobody cares you know you go up and say hey here's what I'm doing I'm I'm I'm brand new I like what you said about this can you tell me more do you have a business card you know and approachable yeah yeah absolutely so fantastic so we we're always curious about with our different guest and you've got a lot of experience uh going back so I I'm curious because you said you're you're not expecting a big crash so we're we're looking for Kevin's crystal ball what do you see coming down the pipe here the next 12 24 months yeah don't see a big surge of of nonperforming loans um yes we're going to have you know the office Market you know everybody knows right I mean that the writing's on the wall for that and that's what's collapsing first the a non-performing bridge loan they should have access to that property a lock boox or something like that so if you got to pay somebody to go out there take pictures or reassess it Gathering all that information is going to be very very important for you and then it just comes down to that basic premise again of investment to Value so what am I paying for this note you know you're not going to get uh it reperform that that rehabber is walked doesn't you might not get another rehabber to step in and start paying that loan yeah right you know so you got an alternative for for that you know start looking at the local real estate clubs and promoting that even before you buy it you might have somebody says yeah I'll come in and just take over the loan and um you know work it that way or be prepared yourself and I think it's a better play fix it up yourself and and uh sell it find a local GC right to go look at the property and see what the rehab has to be done to get it back and working or see where outside third party can come in and take a look at the job and see was permits pulled right um did half to work get done they stopped for some particular reason and I think that I wouldn't buy them unless I get that information because you're buying not a residential property yeah you don't want to buy and then find out the house has just been gutted and the guy never really started started your expenses and and margin go up so yeah or they opened up the wall and found some kind of you know DP problem right whoa you know absolutely and so they for a beginning investor you know probably not the first note right go back to what I said and look at the easier stuff you know burn key notes because you know there's a difference when you know the properties are not in the same state as you you know and you're trying to do a longdistance rehab if you if you're not really sharp on that that could be like a longdistance relationship which usually doesn't last right you got to kind of look at these things am I prepared to take that on so I think those are for a little bit more advanced people but you know again you look for problems in the industry it it commercial side but traditionally we don't see too many commercial loans the bigger players have a tendency to absorb those so if someone's looking like well I'm I'm waiting for this office but you're gonna be waiting a long time it's they're not coming the bigger players are going to be be involved in that but it is going to merge into a banking crisis um so there's probably going to be a merger of some other Banks but again these banks are under a lot of pressure with the dodf Frank laws to really try to do loan resolutions so I know there's been some people that said hey keep your powder dry keep your your money on the sidelines wait for these big loans mistake put your money to work and if if the Market's telling you right now there's good prices good deals low risk good reward on performing notes put it there for now because is you know what we have a liquid market right so if if you you know I was talking with somebody the other day and he's like I don't know if I have investors who who want to put you know their money locked away for 20 years I'm like they're not locked away for 20 years you know they could buy a note now and sell it in six months if they wanted to or needed it's very liquid yeah we have a we have a liquid Marketplace which is a a fairly new new reality business so um I don't see that coming I see uh eventually there'll be a a trickle of those and I think that um you know these emerging notes will be a small small part of that again I'm not saying build a business just around that you know where you're going to focus on that but keep your eyes open for those opportunities but I think we're in a way for just a long performing uh session right now uh paper stack did their numbers for year end and and I think their little study of activity on their site is reflective of the overall industry where it's 9010 I was surprised I thought we were 80 20 maybe 7030 70% uh performing uh 30% not performing paper stack came out 9010 and I have a 10 but it's closer in the overall industry yeah to um you guys were not at the non-performing uh right it was a good return When rates were at 3% and now rates went up so we have to go to 15 it's like well do you think you're going to hold this known for a year if you hold see for five years rates go back down you're back in a place where 10 to 12 is good yeah so I agree with you we got to look at the longterm thing and stay with the numbers be conservative but be be smart on the fact that don't snapshot and say well 15% today well what happened at 11% four years ago why is it no longer good and solid so yeah yeah well I had a guy this is a couple years ago but um he wasn't a client of mine and he was he was really happy about this one note he goes yeah I bought this note and I'm I'm making 14% and uh said oh well good for you what' you do he goes well I'm going to round the numbers for everybody but it's a $100,000 house a guy put five grand down and got a $95,000 note but he wrote it at 14% so I bought the note for about 93,000 bucks I'm making I'm gonna make 15% I'm like who cares if it if it goes to fall that's it the guy pays if it goes to fall congratulations you just paid 93 grand for $100,000 house now you gotta put your forclosure cost you've lost money so you're right you know and the other thing is you don't want to force yourself into a deal for the sake of getting a deal look I've been training a long time I I'm you know I I know this industry inside it out and um you know I'll have clients I've got plenty of clients I've gotten in the deal in the first 30 days because I'm working with them oneon-one on Zoom going through everything and you know I tell them I you know your goal is 30 days great I said we're GNA work towards that but if we don't find something that is right get you into a deal that doesn't make sense for you and and again every one of you have different risk tolerance you have different reward expectations different amount of time and effort you're going to put into this so you really have to focus on that first and then see what's available within the industry that that fits you but don't just get so aggressive where you pull the trigger now I agree part of my God what are you doing it is amazing when you see a CD that's six months higher than one it's three years I don't think in my lifetime I've ever seen a CD where a two-year CD is lower than a six month it just revers you know the the whole reverse but so Kevin this Friday afternoon has been awesome man I I I it almost feel like we're not even on camera just chatting in circles hang how long we were going it feels like going yeah it's fun this is good yeah I know Patrick made a comment uh over there so it's cool to see Patrick on here and his sharing Uh Kevin I know that we'll be seeing you soon upcoming conferences and whatnot um if you want to get a hold of Kevin we share his information in uh the chat if you have any District questions reach out to them Kevin thank you so much for your Friday afternoon and uh spending some time with us yeah absolutely no it's a pleasure man it's a lot of fun thank you good thanks it just comes down to that and and these are emerging problems so we're seeing notes that we we haven't really uh seen that much before in the industry so again you go back and you you start to think through and read through them and and identify those risks learn the story and and uh you know creates opportunity so the sooner that people do that I mean I I work with you guys know I work with people one-on-one so I do personal mentoring I walk people through every single step you know of of the way on that um so if you've got someone like that um okay you know you can be a little bit more aggressive but if you're a beginner um I wouldn't jump right into short-term Bridge low buying I'd stick with the and Kevin I'm gonna kind of give you a softball question here what is the easiest way to kind of get involved in notes is it sit home on your computer and watch YouTube or get out there and get to networking on and conferences and other events well you yeah it's it's a people business you know real estate in general is a it's a people business so the skill set again numbers and story is one thing but without knowing vendors and sellers and and and really you know how how people ultimately learn is from the experience of other people uh learning on your own is very expensive because you have to make mistakes to learn from them and how many mistakes do you want to make versus verus you know working like I said I'll just use myself as an example working somebody like me who's I pretty much I'm not I'm not stumped on hardly ever you know if ever because I've just been around long enough and I've seen that so I can lend that experience to other people to prevent them from from doing that so sure coming to I W I won't make it to Nashville I think that's my birthday weekend actually yeah so I won't be out there for for your event but event likes that you'll you get a lot of exposure a lot of networking and what you find is you'll meet somebody that oh let me give you this advice everybody if you go to these events and you should go there with an agenda challenge yourself to say conference in Orlando right the imn no I didn't go there I know went to the one in California gotta I was there I think it was a couple weeks ago and um a lot of people on the non-performing side inventory inventory inventory you know and that the that's the thing I think you will find some non-performing loans but a lot of them are overpriced right now yes and you know the other thing I would say is um you know you got to stick with with your numbers if you start bending some of these rules and getting too aggressive and overpaying for these non-performing loans again you're going to find out at some point in time that you that you overpaid I think people get jealous of other ones who said oh you know post social media I bought four loans or I bought five and it's like well did they buy a smart did they buy buy a good price or they buy a bad price and now you're chin chase them and I got to buy something and sometimes it's just don't buy right we go back to 2006 and S and go if you went back to yourself looking over their shoulder would you told yourself to buy Properties or hold your cash and being real careful and I think we're in that kind of Market where yeah don't be fooled by someone buying something that you think that they bought well because they may not have we don't know it's it is a delicate balance because I have seen investors um and of course if they're if they're clients of mine I'm like I got to reset your expectations because they start to look at notes and go well I'm not buying anything unless I can make a 15% return I'm like well good luck you're gonna be waiting a while yeah you know you're gonna be waiting on the sidelines and in the meantime you could put that money to work right now at 10: at 11 at 12 and have a good safe solid note you have to do don't do anything with but you want to sit on the sidelines to put a Line in the Sand say I'm waiting for 15% don't don't make that mistake so have expect true but but make them within what the reality is in the industry because I promise you the note industry is not going to adjust to you you know gotjust to you make a great point though because I think what we don't realize four five six years ago 10 to 12 was a good number you know as good as I I I I feel I am and know I am in in in educating people part of this education is you do have to do a deal you know you can't teach you know you guys teach on the other this too yeah you can't teach everything nobody can teach everything about this bus just have to you know it's when we show case studies you do this you do that but for 30 grand it's like did I do the right thing or am I we just you what you said before hit a point we've run to too many people at these conferences who saying I'm buying performing notes and their calculators is a flra calculator and say well that works until it stops def it defaults so right I'm not saying the final calc is bad I'm saying it's limited and people need to realize that just because you bought a performing note unless you get a guarantee from that seller perform for 30 years which you will never get you need to know the fact even if you do it's not worth anything that's true you need to know the fact it's gonna defa or could default and if you sit there and you bought it at a percentage of upb which is another scam out there right and you bought it at a 14 yield and at default like the $93,000 deal that's a bad situation to be in because you didn't understand the risks of a note buyer and then you sit there and we go well we'll buy at 72 and you go whoa that's really cheap you're buying it at 22% yield well there's a risk problem here too sometimes we can buy it at 12 yield and makes sense for both sides sometimes you can't yeah it's never one number it's a combination of numbers and you know what else it is I mentioned to you when I first graduated college I became a commercial real estate appraiser and the first thing they tell tell you about appraising which is assessing the value of of real estate in that case but what do we do we assess value of notes they tell you as a as an appraiser this is an art not a science there's no magic formula that tells you what a house is worth because at the end of the day it's what a willing buyer and willing seller in an arms link transaction is willing to buy and sell it for that's what it is and what you're trying to work on is the probabilities of that and part of that is yes we can find out what other similar homes are selling per square foot and we can make adjustments and everything else but a part of that is your inter interpretation of what that is and it works the same way in notes essentially when we're doing our due diligence on a note we're coming up with an assessment a value an appraisal of that note and by secondary we're looking at our collateral and coming up with what's the value of that you know we're not going to be exact but are we in the in a good ballpark where we could absorb adjustments and and that's really a part so let me throw out one more one more possibility if people are looking for a 10 12 per yield and they're just not finding it another option settle for 8% totally passive and give it to somebody oh like me that's got fun right that's willing to do the work for you and just pay you sure for most people that is such a much easier task right you don't worry about stuff you don't concern yourself with the issues or problems of being a note investor buying a note is the first step of many owning a note right dealing with a borrower the emotions the struggles the finances you may have to come up at 15 grand to get a tax bill paid up like there's a lot of other extras that go into here that just get lost so if you are someone that says I don't want that risk look into a fund like Nathan's and say listen I can settle and be happy with this opportunity and you can learn on as you go too I'm G tell you're probably not going to want to but you can learn as you go and I think that works for a lot of people who are retired and just looking for some you know passive income yeah and it is it is funny when you you you start to see a lot of yield Hunters you know in in this business you know and they're 8% 8% is a good return where else you know an 8% return that there's assets that are backing it you know today even you know Banks it's it it's crazy you know the inflation and all that stuff is up and Banks should be paying higher on savings accounts but good Lord look at CD rates and stuff oh can say and the demographics are there we've got to people who were over 62 years of age right so we have approximately 60 million people that fit that category and surprisingly enough in the United States about 40% of the homes are owned free and clear now mostly that's a generational thing first of all I mean everybody listening typically if it wasn't your parents in my case because I'm older my parents it was it was always you pay it off you pay off the house and it was free and clear my grandparents same thing so everybody listening probably your grandparents um that was their thing and they live in the same home my mother to this day I was just visiting her this weekend in Fort Lauderdale you know in the same home I grew up in so it's just one of those generational things from the World War II generation and then pass to their their children so you have the combination of a growing of generations right 80 million 60 million people right now in those age groups we got another 20 million that are only 7 years away from being in that so that's a substantial wave of of humanity that's getting older and people are living longer and many of them you know you don't have jobs you know my dad was a police officer so you know he got a lifetime pension a lot of people work for factories and things like that had lifelong pensions when was the last time you had you saw somebody with a job that has a lifetime pension you know it's just it's so some people are starting to outlive what what the you know that they have left but they've got that home sitting there right and what are you doing with heams right now what in a note space what's your angle with them that you're playing so what happens then with with the heum is somebody borrows money from from the lender right and they have to pay it back uh really out of three things they either pass away uh or they move out of the house they have to live if they've if they moved out of the house into a home or something like that and a year goes by these things say you got to pay it off you know um so how do they pay off those those homes if somebody sells the house and pays off the loan great if somebody um moves into a a home and the the um uh the beneficiaries The Heirs if you will or the sons and daughters in that case because the person's still living if they want to pay off the loan and keep the house they can do that as well what happens though in many cases is somebody passes away and now it goes into a probate and the person pass away doesn't magically come off the deed of the property you know so the owner of that note has to foreclose right and sometimes that has to go through probates sometimes there's heirs there that want the house and you have this process and I think you alluded to it earlier Dave where you said sometimes these companies just don't want to deal with that yeah that's true you know so so that's the play you know that's the one where somebody passed away and this issue is unresolved they may or may not have erors and this company just wants to get rid of it let somebody else work work that out and they're willing to just move on because you know when you think about it the ones who create these these home equity conversion mortgages they're not they don't have the Personnel to do all these workouts so for them just cut run and go you deal with that you know if we take a hit we'll take it now and and move on but you can make a lot of money in that in that in that play there you know because we've worked on a couple where there were just no errors you know but it has to go through a period of time people make claims and things like that then you do a you know a foreclosure sale again it's on an empty home everybody so I'm not saying we're buying these and we're foreclosing on old people that is absolutely not we're doing by the way just for total clarification house is empty the person has passed away yeah and again it's just what do we do and the lenders who created these things don't want to deal with them so they're selling a problem and you know what when you know when you make money in this business you're always solving a problem so you identify what these problems are you come up with a solution and that's where your money is my experience with those is you you get back the property and they tend to be in really good shape yeah these are not people that fell behind on payments because they lost their job or they're just dead beats or whatever that that's not the case these are people that were good people you know they lived in the house their whole lives they've been taken care of it and they passed away if you want if you want a we did a full episode on this too if you ever want to back in November with Randy so it is a huge opportunity for people who want to get into it find your local person who's creating these things and become good friends with them because if that person either moves out maybe has to go to you know rehab facility for long term or they pass away you have the opportunity to buy this thing for close solve their problem because realize the fact that reverse mortgage is what it sounds like they're paying the borrower over and over and over again on a monthly basis to get their capital and that the upb constantly increases to the point where it stops and then it's defaulted and you're basically buying that debt when they would have to foreclose so in that kind of world I agree the baby boom boom boom generation is huge and that's when the retire is coming we're gonna see a lot of these things moving forward I yeah if if Tom celic has his way right there he's he's on TV if you don't know in the ads you know promoting mortgages and you know over time these revers mortgages had a bad reputation um but with the heckum and the way that they're done um they can be really good solutions for some people like I said not all you know baby boomers are going to do this of course we don't need them all to but there is a percentage and by the way they can get lump some they can get paid over time they can get paid for a period of time they can have a line of credit uh it could be a combination of lump sum and line of credit so again that's where I I I look back and I I was looking this up and I I put a training together on this about a year ago and that's when I first started seeing some of these things trickle in but again I think with the demographics and when you look at the economy and things getting tougher and you know that sort of thing it just but I don't know if if you look at the demographics it's just it's just logical that these are going to be there and and people are going to pass away they're starting to pass away in in larger numbers that's just you know the way the world this is going to be something that's there and somebody's got to cure the problem so you know if can you I've got a bid on one I'll find out on Monday hopefully hopefully we'll win we'll see gotcha I'm a big fan I think they're a great asset and I think they're they're just a it's a good opportunity and it's just because something's new and it's different don't count it out you know check it out and have a look and study it out go and watch that that podcast that we did check out Kevin's training they're great notes they can be a really good resource so we did a question from Josh uh when s a partial performing uh the owns is it better to sell a true partial or or hypothecation um and then if you're true partial how do you protect yourself from the partial buyer working something out with the borrower in the event of a default and cutting you out of the back end so I think what you're doing is you're fusing we have a video on to partial versus hypothecation they're two different instruments right where partial you actually own the note for a period of time where hypothecation is you're using the note as collateral to get a loan where that if you do hypothecation is I'm going to instead of leveraging the house as collateral you're leveraging the Noti is collateral where partial is you actually own it for 60 months and if anything happens you're technically in charge of the note in that 60 Monon period Josh so I'm not sure if you're confusing sorry if Jos question is should I do a partial or hypothecation the answer is well do you want lump sum and no payments for a period of time or do you want uh monthly payments for a period of time and lump sum and and that's really your your your difference between between the two you know the hypothecation you're going to borrow it as as Dave was saying you got lump sum and now you're making a spread on what the income from the note let's say $1,000 a month but you got to pay $600 a month on on the loan so you're making $400 there but you got whatever lump you need it um on a partial you could probably get more money lumpsum because you could chop it up how about if you're the buyer how about from the buyer side how do you prefer there on the one more if you're if you're buying it would you rather be buying a partial or buying doing hypothecation and loaning money against a note oh no I I would much rather buy a partial because if if I'm loaning on with hypo with hypothecation the whole goal is you want a low interest rate loan from a bank say 6% you're making 12 you know that's that's how hypothecation is going to going to help Josh in that case if he did that uh but if I'm buying a you know I'd much rather buy the note and make my make my 10 12% and when you do hypothecation you have to understand that that what you're concerned about the back end you really have in contract that if anything between the borrower and that person who leverag their note has to communicate with you if they don't communicate with you you have to assume and all that kind of stuff so hypothecation become a little problems some is a is a person who lends on them where partial is clean cut you're you're direct with the asset where if at default you know about it immediately um they can't resell the note all this stuff where apothec if you come across some that's not too nice they can hypothecate three people if you don't do it correctly or whatnot so we encourage you to sell you can sell the partial as well as buy the partial I think partials are a really good way for beginners to get involved if they got three four $5,000 is they can go buy a six Monon 12 month partial not right easily and learn.