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A Practical Guide To Investing In Real Estate And Partial Notes With Eric Smith

February 11, 2021

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GDNI 139 | Partial Notes Investing

Creating your strategy in real estate investing is essential in making money and preparing for the difficulties along the journey. A commercial real estate broker and army soldier, Eric Smith, joins Jamie Bateman in the show to share how he started in real estate investing and how he transitioned to partial note investing from full. Eric talks about his experiences and challenges in flipping property, showing how creating cash flow is not all sunshine and rainbows; he went through the rain in hard money deals and notes investing in order to discover what works for him. Tune in and find out what strategy from Eric and Jamie’s conversation best fits your risk tolerance and your target portfolio notes to grow your wealth. Learn about partials, hypothecation, life insurance companies, and more.

Listen to the podcast here:

A Practical Guide To Investing In Real Estate And Partial Notes With Eric Smith

In this episode, we’re joined by Eric Smith. Eric, you’re out in California. How are you doing?

I’m good.

Eric and I have worked together a little bit before. We’ll get into that. Eric, you’ve also worked with Chris Seveney. Before but before we get into all that, why don’t you tell us a little bit about your background?

I’ll probably start college forward. I got out of college which is when real life starts. Out of college, I was a do-gooder. I was a teacher in the inner cities in New York. I did that and jumped into the military like you so we’ve got that common bond of some army love which was great.

Army officer experience.

That’s where my journey started. I did my do-gooder period as a young man, and it became apparent to me that I needed to go make money. I changed the world but now I’ve got to go make money. Like a lot of people, I got into real estate. I didn’t get into real estate, I got into commercial real estate brokerage and joined a firm out here in the regional brokerage, where I sell and lease warehouses. I started to make some decent money after a while, but it’s not the grand money that you all think. I started to get into investments myself personally, knowing that I was making some nice money, it’s a little bit lumpy. I’ve got to even it out. My first journey into notes was, I had a couple of friends that were flipping houses, and this is back in 2012, 2013, or 2014 when it was good to be a flipper. I wasn’t on the TV shows. I was in the bank, writing notes to some friends and all of those deals went well, up until the last one, and became the last one. That was my first foreclosure.

Why don’t you talk a little bit more in detail about how that all happened before your foreclosure? Were you approached by some friends? How did that get going?

No, there was a local real estate investment club. I had been to a few meetings and got to know a few of the people. This was one of the leaders, one of the guys was a mover and shaker. He was flipping single-family homes here in Southern California so I was flipping homes locally. We were creating hard money loans and at the time the market was two points and 12% and they were short loans. We’re the 1st and 2nd.

Most of our audience deals more on the owner-occupied mostly first lien, but we have some second lien note investors but less on the hard money space. Briefly, if you can highlight how the mechanics go, do you go through an attorney? How does that work?

You have to know that trust was pretty high because I came to know this person personally. To answer your question, to create the notes for that, we used an attorney through the club. He came in as a package if you will. He was associated with this club. We used him to prepare. He’s a good attorney by the way to no fault of theirs. Myself and my partner in the deal who was doing the actual flipping went to the attorney and said, “Would you prepare the note?” That’s how we put it together. It wasn’t first class, but it got the deal done. We went through a local attorney that prepared that for us.

You did a few hard money deals that went well.

We did five and four went well.

Let’s talk about the fifth one.

This is good for the audience. As we progress, one of the themes we’ll talk about is you can have trust in people that you’re working with, but you always need to do your due diligence and keep your eye on the ball. When you’ve done a couple of deals with somebody, you tend to become somewhat complacent and we were bordering that territory where it was to the point where he’d come to me and say, “Eric, I got the next deal. Here’s the paperwork, the book, and the values. We could almost do it.” I’d almost give him a check. We didn’t get there but ultimately, how this panned out is, I took a second position. The first was Wells Fargo and he was using that second position to fund the flip. He was managing multiple flips at that time and got ahead of himself.

He had too many loans. He took on a big project that I wasn’t involved in. He took on a multi-million dollar flip that didn’t go well. It’s a different market. Selling $300,000 and $400,000 houses is totally different than selling multi-million dollar houses. They don’t sell in a matter of weeks. It’s a tough market. Unfortunately, he had been successful and got in over his head, however it may be, I got the property back in the middle of the flip and the house that was supposed to have four walls had three walls. The pool was no longer pool. It was more of a swamp and even in Southern California where the weather is generally pretty good, it can beat up a property pretty bad.

You were in the second position, and you got the property back. How did that work?

I went through the foreclosure process. For whatever reason, he did not give me the keys or a deed in lieu. He did make me foreclose. It wasn’t contentious, but I did have to go through the process. With California, it’s not a quick process. I want to say that with him not fighting us, uncontested foreclosure pre-COVID. This is 2014. It took every bit of six months. We had to go to the courthouse steps and when I got to the house, it was in rough shape.

How much real estate experience did you have at that point?

I had been a commercial real estate broker at that point for 2 to 3 years so I was dangerous enough but it was apples and oranges because this is a single-family house and I’m selling warehouses. It probably resembled more of a warehouse at this point.

What would you do with the property?

We fire sold it. We sold it for I won’t say pennies on the dollar but there was a small loss on it. It was a learning lesson, but I turned around and I sold it to another investor who was a flipper. He was also a realtor who was able to rehab it, put it on the market, and sell it. Truthfully, I could have done the work. I knew the people, I had access to a community where I could get the rehabbers to do the work but I hadn’t done it before. It’s funny when I hear Chris talk about some of his notes. Some of them you can do the work and you can probably get out and be made whole or you can update and sell it.

Our Nightmare On Elm Street, our 337 Elm Street in Cecil County, Maryland we did a whole episode on that one, but it’s similar in some senses. We could have managed the rehab. I live 1.25 hours from the property. There was meat on the bone still to make some money, but it didn’t make sense and it’s not what we do. I’ve done rehabs myself and managed them before but this would have been slightly outside of our comfort zone. We probably would have come in around the same dollar figure as far as profit or loss, but it would have taken so much work, time, and it’s better to get that money working again, for you.

You’re exactly right. I could have been made whole, but I would have had to put a lot of blood, sweat, and tears. It was also my ego because I didn’t want to take the loss. On my day job, as a commercial broker, I sell one building, I do one big lease in a quicker amount of time than I can do this, I’d take a loss.

That’s good. It’s about your perspective and keeping the big picture in mind. Would you say, looking at that portfolio as a whole, it wasn’t a portfolio per se, but those five that you did. Did you still make money?

We still made money. The loss at the end hurt, but if you looked at it on the aggregate, I probably made money. It wasn’t great. I definitely made money. It was a great. I confirmed that I did not want to be a flipper.

That’s a key lesson to take from that so how did you pivot from there?

I went back to my day job. I put that behind me and kept making money. With the eye of trying to get into the commercial real estate investment market, I was brokering deals, doing good, understanding the process, and knew the players but at the end of the day, here in Orange County or the Southern California market is capital intensive. I wasn’t ready to make that leap. We’ve been in such a bull market, here locally for warehouses, that you have to know what you’re doing. You have to be well-capitalized and make that jump.

You can trust the people you're working with, but you always need to do your due diligence and keep your eye on the ball. Click To Tweet

I was like, “I’ve got a decent amount of money. How do I start making it cash? How do I make the money make money?” By virtue, I was listening to a podcast and I stumbled on notes. I said, “I know real estate. Its core. I know notes. I know, foreclosed now.” I wasn’t scared of it at that point. I start investigating it. I listened to a few podcasts amongst people and called a few people. I started picking up the phone and calling people, as a commercial real estate broker.

You do that all day long anyway.

It doesn’t bother me to talk to people on the phone or in person. I started calling note investors and educators. I determined that there was a decent amount of note education out there that I could subscribe to and I decided not to. There is a well-known educator. He’s got a program and it was a significant amount of money. I said, “No, I can learn it otherwise,” which is how I got into partials. I do have a lot more partials than I do have notes myself. It’s turned out to be probably a little bit more fitting for the goals that I have but I was able to learn notes through people like Chris, listening to his podcast, talking, getting into Facebook communities, getting into the Notes and Bolts Community but I’m not an expert. I’d be more of an expert in how to buy partials.

You touched on it, but what led you to partials versus going ahead and buying your own whole note?

I determined that notes were a route that I wanted to go.

Why is that? Are there any particular reasons?

Going back to it is, the note for me is the perfect size chunk. It’s the right size deal. The note, anywhere from a couple of thousands up to hundreds of thousands of dollars but I could get into a note unlike a piece of real estate pretty quickly. They were nice and bite-sized. They were commission size chunks. I had a commission from my day job and I’d go buy a note. That was attractive to me that I could do that.

It also sounds like the fact that I know people invest from a distance now with buy and hold turnkey properties and that kind of thing. It sounds like the fact that you can invest in other geographic areas in notes, where it makes sense dollar-wise, or investment capital wise was a key factor as well. That’s something I love about notes. I have the same Elm Street property. It’s the only property I’ve been to. We have 35 notes and one under contract. That’s not a lot compared to a lot of people but I’ve never been to almost all of those properties. You can do it from anywhere you can with a cell phone and internet connection. You were looking at notes, and you decided, at least at that point that you wouldn’t go ahead and be a full note buyer.

Let me go back and say that there was that component. There was a nice bite-sized chunk that was creating cashflow and I saw the value of the velocity of money. I thought that I had a high velocity in buying notes. In my own personal economy, it was valuable. I wanted a lot of cashflow. I’ve got nice chunks of money from my day job, I need cashflow, and make sure I pay the bills. More importantly, the more I can get money in, get it out, get it coming back as an investment.

This velocity money was one of the keys that I wanted to focus on. It became my investment thesis and I saw the odds that’s a great avenue. On a monthly basis, I’m getting my principal back, and I’m getting my interest back. I did a rough spreadsheet on Excel and I said, “If I make this amount of money, I put it in notes, I get this return and I keep reinvesting it.” It’s the beauty of compound interest. It’s not overnight but over years and decades, that compound interest in that velocity of money was something that I couldn’t ignore.

That consistent cashflow like you’ve already hit on a couple of times. Growing up, my father is still technically a real estate agent. He sold the Elm Street property. That’s the third reference to that one. I’m the oldest of seven kids, but so we had periods where he was making good money and periods where he wasn’t. It ebbed and flowed. Had we pursued more of a consistent cashflow return from some of that money that may have helped even things out a little bit. Hopefully, he doesn’t read this. Go ahead.

It felt a fit for a lot of reasons. I was anxious to get into the community, get involved, and start buying partials. I found a couple of people, talked to them, and vetted them. All my partners on the partial side, you and Chris included, I have four total partners and started buying notes and in partials through that. All of them have been some hybrid of the partial idea. A couple of them, 1 or 2, is more like a joint venture, but they’ve all been on the performing side. I am not a non-performing guy because that goes back to my thesis of trying to get the compound interest and trying to get money in the door on a monthly basis rather than wait.

I have calls with different newer note investors and we also did a blog post. We’ve done a couple that hit on these topics we’re covering but I personally think non-performing notes work better for joint ventures or they work better with a non-performing note, I should say and partials certainly work better on performing notes. You want that consistency. One of the upsides is consistent cashflow. One of the downsides would be there’s not a lot of upside potential. There’s none so but you’ve got that with your day job.

GDNI 139 | Partial Notes Investing

Partial Notes Investing : The interest amount on a partial or even a note is good on a performing one compared to other investment opportunities you could make in the stock market.

 

You hit the nail on the head. It’s not all sunshine, rainbows, and puppy dog tails. With it, you’re creating cashflow. The interest amount on a partial or even a note is good on a performing one compared to other investment opportunities that you could make in the stock market or etc. If you’re approaching double-digit interest, that’s pretty good.

It’s collateralized too. There’s no collateral with the stock.

Stocks are tough. It’s a lot of anxiety. Very early I crossed that off and said, “That’s too much anxiety.” I’m seeing up and down arrows, red and green, and being up one day. I remember while doing the dishes, I had an amazing day in the stock market. I felt so great. I finally made so much money. The next day, I was doing dishes, and all that money was gone and in fact, I was down triple that. I pretty quickly mark that off as passive cashflow. Back to your point, notes are great but you are not going to get some of the other added benefits of investments like hard real estate. You’re not going to get the appreciation pop and the deductions. It’s a little bit harder to leverage. I was in a way your kind of you all. The partial manager is a way of leveraging.

It’s another blog post we have. Note Partials versus Hypothecation. Hypothecation is the true version of leveraging a note, but it’s essentially accomplishing the same thing as a note and as a partial seller. I’m taking your investment, your cash, and I’m going out and either wasting all that money, or ideally, I’m going in buying another note. I’m using my portfolio of notes, in a sense as collateral for that leverage. It can be done, it’s much more difficult than hard real estate like you said.

It’s the consistent cashflow but what I’m not getting in real estate if you were to buy an investment property or whatever it may be, apartments, single-family, turnkey, or commercial real estate investment is getting consistent cashflow on it. I’m getting my principal back on it too. Going back to the velocity of money is nice. It’s nice to get that principal back where that money in real estate is tied up and that’s not necessarily a bad thing if you’ve leveraged against it but it’s your avenue. For me, partials have been a great investment thus far.

It’s a good point, as far as principal coming back, because a lot most of the time in a joint venture or a note fund, it’s typically structured, where you’re not getting most and certainly not all of that principal back. Whereas you are getting a good portion of that back monthly. Where are you now with your note investing strategy? Have you determined that you never want to be an active note investor per se? How are you looking at things?

“Compound interest is the eighth wonder of the world.” Click To Tweet

I don’t know how you’re going to title this episode, but it’s something on partials or hypothecation. That is likely what I will be. I’ll be a partial buyer. There are a couple of reasons for that. Notes are intriguing. I’ve had some experience. I know the players, servicers. I’ve educated myself enough to be dangerous, and I do several notes myself personally. I ran up to the edge of the precipice of becoming a note investor and saw that I can make X amount of dollars or X return doing it myself putting in a lot of time and effort or I could find a qualified partner, an expert.

Take a little less on the return side and get some of that time back. That’s what has put me in the box of partial. It’s finding you and Chris. I can do the note and non-performing. It’s not my cup of tea, but I could be performing pretty good. If it’s non-performing or I hit the hiccup, there is time that you have to invest in it. I would rather you deal with this. For me, being a partial buyer has been pretty good.

You made me think of a couple of things here. One is, you hear a lot of more experienced investors across different asset classes talk about the importance of the return of capital not return on investment. Return of investment not only ROI. Everybody likes to throw their money at these 20%-plus ROI deals like IRR or whatever. At the end of the day, protecting your bottom line is critical so getting that principal back is key.

Another thing with partials and the way you have approached it, not partials but you’ve spread out your risk. If you had originally done that foreclosure as a hard money deal and that was the only one you did, maybe you wouldn’t be doing any version of note investing at this point. You do hear that from some note investors. They’ll say, “I bought a pool of five notes and one of them was terrible but because I had the other four, I’m still a note investor.” It’s circling back around the partials. You are able to structure the buy-in price. There’s some flexibility there so you can spread that risk so you’ve got $50,000 to invest. You don’t have to buy one performing note and it goes south. You can spread that risk around to 5 or 10 partials potentially. Did you say you do have some whole notes yourself?

I do. I have a second and I have three firsts that I have. All of them are performing now. They haven’t always been. I bought a couple of partials and I said that I was ready to make the next step to get into notes so I bought a couple. There’s nothing wrong with them but you got to take a look at the amount of time involved.

How do you manage those as far as software? Is it Excel? Personally, I tell people, 5 to 10 notes are when you should start to consider using a system like Podio or some workflow system to manage everything. I would say maybe you’re not quite at that point, especially the partials being so passive, but how do you manage through your portfolio of notes?

It’s on Excel spreadsheets. What I saw is to take the next step. You need the systems and processes. It’s like all things in life in all investments. It is a commitment to creating the systems and the processes to get in and the commitment wasn’t there for me.

Chris and I like to point out the good, the bad, and the ugly. Note investing is not quite as passive as many people would lead you to believe. You’re taking a realistic approach, and some of that is from your personal experience, as well. It sounds like you’re not thinking you’re not looking to buy any more home notes at this point.

Probably not for the time being. I’ve had a good experience with you and Chris. For the amount of time for me in and being “high-income earner” focusing on my job and making income and letting you all do the work. Know that I’m getting above-average and consistent returns. It’s the win for me. Definitely, I could get into the notes space. I’m sure it could be successful, but I’d have to build the systems, the processes, and vetting it out. I know if there’s one guy who knows systems and processes, it’s definitely Chris.

He did a webinar on it and a lot of people’s jaws were hitting the desk.

Yourself as well. For the other people that I have partials with all of them, with the exception of one that has good systems and processes, and I’ve been the beneficiary of that and that’s good.

Briefly, before we get into the commercial space, touch on infinite banking, if you would. I know you’ve started down that road but if you don’t mind, a lot of our audience either maybe has heard of IBC, the Infinite Banking Concept, but not sure what that means or they’ve decided it’s not for them or whatever. It is something that I personally practice, but where are you in that part of your journey?

I’ve been on the sidelines. I’ve been a pretty active partial buyer of Chris’ and yours. I’ve taken a quick cut on a couple of months to get the infinite banking set up. The reason being, if you go back to my investment thesis on compound interest and the velocity of money, it’s getting it in, getting out, and making a turn for you creating your own personal economy. In speaking with you is a concept that I had heard about. As I explored it was the next step in continuing the acceleration of my personal economy of taking money and putting it in a high cash value dividend and paying a life insurance policy, which is essentially what infinite banking is.

It’s being to take that money out in a loan that’s a lot easier to take than taking a real estate loan or something along those lines of a HELOC. Some loan from a bank is taking it from myself, having that money remain in my personal economy continuing to grow compound interest. As you’ve heard, “Compound interest is the eighth wonder of the world.” That’s been my investment thesis and that’s it exactly. If my money can continue to stay in my life insurance policy and earn 3% to 5%, even while I have it taken out earning another 8% to 12% or more depending on where they are as a note investor. Is it in there? I only meant three. I’m still pretty new and into it.

My personal take is it doesn’t need to be as controversial as it seems to be out there. There are a lot of maybe not so ethical insurance agents, and maybe that is part of the issue. You, frankly, have Dave Ramsey spouting off incorrect information about it. The Wealth Without Wall Street guys did a podcast on Dave Ramsey’s video on this topic. We don’t need to go too far down that path.

We can. There’s a point to be made and that’s who you work with. Not to make your head and Chris’s head too big but I enjoy working with you all because you’re qualified in your domain. You are experts in that. If you work with that on the life insurance side of things, you can get extraordinary results as well. Here’s the story. In exploring infinite banking, I’ve got a good golf buddy out here that I play with, who’s an insurance broker and I discussed the concept in a round of golf with him. He said, “I’ll use it. I’m a proponent of it.” I was getting down the line but even as a friend of mine, who has this as his business, pointed me down the wrong path. I won’t go into the concept too much, but he was having to use stock insurance companies rather than mutual health insurance companies that are motivated rather than being a member.

That was one of the things Dave Ramsey incorrectly said. He said that one of the big insurance companies out there is a mutual company and if you google it, and they haven’t been a mutual company for years. That is a key point so the key. A couple of key takeaways are it’s critical who you’re working with. Not on the notes side, but also on the insurance side, and in general. Most life insurance policies are not well structured for this. They have to be intentionally structured to use for infinite banking or some version of infinite banking. This is not a show on infinite banking, but I wanted to touch on that. How do you foresee using that in the future?

GDNI 139 | Partial Notes Investing

Partial Notes Investing : Know who you’re working with and vet them. Even if the trust is high, make sure your paperwork is correct. The value of working with the right people would be a big one.

 

I’ll finish off that point. It is a podcast on making sure that you’re using the right people that you’re vetting that are providing you what you’re looking for. Even your friends might not be the person for you. Sometimes, and not for this particular individual but I see it in commercial real estate is using friends. Sometimes somebody will have a building to sell and they say, “You’re my friend and a commercial real estate agent. Sell my building for me?”

When you have an industrial warehouse broker, selling your office building or selling your retail property, they’re not the most qualified person or even worse, when you have a residential broker trying to sell your real estate for you. They’re not the most qualified person, and you can get burned that way. My friend is an insurance broker. I couldn’t get him to give me the product that I wanted. He couldn’t shake off the shackles of his job to get me what I wanted or what I was trying to create. I had to find a different service provider that could do that.

How do you plan to use it in the future?

To take policy loans against that money. That’s my capital source now and buy partials. The beauty of it, although I haven’t done it but looking at it conceptually is, I take money that’s in my cash value, that’s my money to take out and I borrow against it. I’d be borrowing 4% to 5%. It’s growing at that same amount of money. I’m beginning to grow my cash value and it continues to grow inside that vault, but then you can take that money and invest it in a partial or real estate.

You’re arbitraging that same money. You’re making the difference. There’s still a death benefit.

There’s the whole death benefit side of it. That’s the thing. You always got to figure out how to sell to your spouse. I was taught, “I can take these best policy loans, this and that.” It didn’t make any sense to her and it’s some witchcraft, but when I told her, “There’s a death benefit. If I die, you get a lot of money.”

Let’s pivot over briefly to your day job and if you don’t mind, speaking about, where do you see things going after the whole pandemic is behind us? What are the different asset classes? How have they been affected by the pandemic? Office, retail, and the whole commercial space in general. Where do you see things going?

It’s been unique getting into commercial real estate in 2012 and 2013. I got to see things coming out of the depths of the recession. I’ve seen it continue now being years into commercial real estate. When I was getting into it, I should tell you that I’m an industrial broker, which is code for warehouses, manufacturing buildings, and land. I do some office and retail deals but what I farm and what I work on, and the clients that I try to work with are all industrial and warehouse. We’ve seen technology has had an interesting effect on commercial real estate. The Amazons and the eBays of the world have made warehouses more valuable. People need to warehouse their inventory.

From 2012 if we took it up to COVID, that’s been the demographic changes on how people shop and how the economy functioned increased the importance and the value of industrial warehouse real estate. I’ve seen some significant appreciation on both the sales side and on the lease rate. I’m exposed and do deals in the office and retail. I have not seen those same increases that we’ve seen in the warehouses. I remember when I first got in the business in 2013, I was out there cold calling, knocking on doors and I had a guy tell me that the value of a warehouse will never be more than $100 a square foot which is the metric that we use. We use square foot prices on the lease on the sales side. I knocked on his door in 2020, pre-pandemic, and the sale price was well over $300.

In that period of time to see some prices almost triple but that takes us up to COVID. Let me back to this. I’ve seen the value of warehouses continue to increase. I saw what the office struggled through. We went through a couple of iterations. Creative offices and co-working became popular but it was all trying to keep office products live. Retail, conversely, has been struggling as well. There have been a lot of successful retail projects, but they’re exponential.

Meaning for consumers, they go to retail real estate for an experience, whether it’s a shopping experience of restaurants, ambiance, and atmosphere, or maybe it’s something that’s sports-oriented. The exponential retail market has been doing okay but the traditional real estate or retail market of the neighborhood shopping centers, where you’re going to go buy a pair of shoes, or some consumer good has been suffering because people have been doing it online.

That led us up to the pandemic and in COVID. As with most of the world was when it hit the world stopped and took a breath for a moment and tried to figure out what we were going to do. What it did was exacerbate what was already happening. Industrial warehouse real estate became white hot. Where it was white hot previously, it was white hot now. For me, locally in the markets where I work, it’s the lowest vacancy rate that we’ve ever had and now we have even crazier low interest rates, and we have a whole load of money.

The cost of capital is low and there’s a lot of money still sitting there.

Business is good for brokers here. I would say that 95% of my clients are doing better and they have been doing better for quite some time. The pandemic was almost like, “Can we take March to figure out what’s going on? April, we thought we were dying. May, life was returning, I won’t say to normal, but from a business perspective, it was.” From then on, the bites been on and across the board, my clients have been doing well with their industrial base manufacturers, contractors warehousing, and eCommerce.

It’s one of those balancing acts. You don’t want to minimize the pain and suffering that has been real for a lot of people in 2020. Chris and I talked about this and that’s not at all what you or I were doing. The truth is, people have had good years as well in 2020. Not only that typically behind every problem is an opportunity. You’ve got your systems in place. I’m sure you’re probably going to tweak things a little bit and pivot somewhat, but don’t bury your head in the sand. You got to go out there and still make things work. Are you looking forward to changing things in any way or are you full steam ahead as far as comparing maybe 2019 to 2021?

It’s full steam ahead and even if the market wasn’t the way it was, or would it still be full steam ahead. As to whether we’re shifting things, no. The pedal to the floor on all accounts is I continue to stay focused on industrial warehouse real estate. I won the lottery when I worked on that asset class. That has been the beneficiary of all this is what I generally work in. It’s continuing to work on that. The takeaway is, within that vertical, which industries do I want to work with and winners in this market now are eCommerce businesses but that’s not to say that contractors are also doing well. Manufacturing depends on what industry. For example, aerospace manufacturing right now is not doing great, understandably so. It’s focusing on businesses that are focused on eCommerce. There are some young guys out there that are doing some awesome stuff.

The winners in this market now are eCommerce businesses. Click To Tweet

Anything else, as we wrap up here, Eric, that you want to touch on whether it be related to your background, hard money lending, notes, partials, infinite banking, or commercial real estate? We’ve hit on a lot of valuable topics.

If there’s a theme in this that you can extract, but maybe one of them would be, know who you’re working with and vet them. Even if the trust is high with them, make sure your paperwork is correct and that the value of working with the right people would be a big one.

That’s probably the biggest takeaway from this and I’ve learned that myself. That’s an episode for another day, but not every deal is going to go well even if you fully vet this person you’re working with, but one of the keys is communication through the process. If you’re working with someone that has a track record and is ethical, they’re going to communicate with you and tell you, “We thought things were going to go well. We plan for X, Y, and Z, but we didn’t plan for COVID.” Things can go wrong at the dealer level but if you’re working with someone that you know, trust, and is an expert, not a friend of yours, no offense to your golfing, buddy but that can go a long way.

Another takeaway is from your story. Don’t put all your eggs in one basket. You did five hard money deals, you have a few whole notes of your own, you have four different partial sellers. You’re still here to talk about it. You’re in the commercial space, but your investment in notes is mostly in the strategy is mostly in the residential space so you’re not putting all your eggs in one asset class or anything like that. That’s another key takeaway as well. Anything else you want to add, Eric?

No. That was a beautiful summary. I’m appreciative that a lowly little guy like me could get some airtime.

It’s too bad Chris was afraid to come on with you. You were too intimidating. He gets scared like that. Chris was tied up at his real job. It gets in the way sometimes. For all the readers out there, I would say check out our Facebook group if you haven’t already. It’s the Notes and Bolts from the Good Deeds Note Investing Podcast Group. There’s a lot of free knowledge floating around and a lot of helpful people. It’s one good way to get connected with partial sellers and other note investors. Don’t forget to give us reviews on all the outlets and go out and do some good deeds. Thanks, everyone.

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About Eric Smith

GDNI 139 | Partial Notes InvestingEric Smith is an alumnus of the University Southern California. Prior to commercial real estate, Eric taught for Teach for America and flew UH-60s Blackhawk helicopters for the Army National Guard. Since 2013, Eric has been a commercial real estate broker focused on industrial real estate. Eric has completed over 300+ transactions and owns approximately 25 mortgage notes individually and in partnership.

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