The note industry changes every year depending on the evolving trends and fluctuating demands, but this year brought a huge shift because of the COVID-19 pandemic. Jamie Bateman challenges the 2020 predictions laid out by Chris Seveney last year to see how close they are to what really happened. They talk about the status of the note industry in terms of quality, quantity, and pricing, as well as the huge shift in pop-up trainers and note regulations. Chris and Jamie also discuss how far they have come in their podcasting journey as the year nears its end.

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Listen to the podcast here:

A Review On 2020 Predictions On The Note Industry

Jamie, how are you?

I’m good, Chris. How are you?

I’m good. We did an interview with Dave Van Horn. We have an interesting topic where Jamie is going to grill me on my five predictions from 2019 and see how I did from a year ago. I’ll give you a little prelude to it. I did not predict COVID but it will be interesting as we go through this. It’s going to be a fun episode. As always, before we start, Jamie’s trials and tribulations. What have you got going on?

A couple of updates to things I’ve talked about before. I talked about how I was looking at this asset where the guy was a highly qualified borrower. He made three payments and he passed away so I bid on this asset. I was excited about it but it turns out somebody came in and bought the entire tape which plays into our main topic. I don’t know this to be 100% true but what the broker told me was that whoever the buyer was, came in and bought the whole tape of nonperforming loans at a 90% UPB at about a 5% yield. Generally speaking, these were high equity, highly qualified borrowers. The paper was clean and high quality but I couldn’t believe that. I lost out on that one but it was good practice.

Any wins?

My second update is the New York loans. They are not fully transferred yet but we have approved goodbye letters and FCI has approved the transfer date of 12/4/2020. That’s exciting considering how much waiting and work we’ve put into this.

As somebody originally from New England, one of my early memories from sports was with Bill Buckner’s through the legs in ‘86 World Series against the Mets. It looks like it’s in the bag and all of a sudden, chaos hits. On the New York loans, I’m going to say let’s hope we don’t have a Bill Buckner moment on them because you never know who we’re dealing with.

It’s true especially since I’ve already paid you.

Not everything. I haven’t seen it come through yet. It’s check in the mail, right?

Yes. Those are my trials and tribulations.

For me, I had launched a new fund where we raised close to $1 million and I got approximately $750,000 in assets under agreement. That’s a good start to get the ball rolling on that fund. I also put in some additional offers on some assets by the sellers who are like, “I got a tape that we want to sell a whole tape and send it out to a few people. Are you interested?” I’m like, “Sure, how quickly can you get bids?” He’s like, “When do you need them? The sooner, the better. Can you get it?” I’m like, “I’ll have it in two hours.” I went into DataTree. I started pulling up information and my bid is in.

That’s impressive. You said you have several bids out every single day.

There’s something in the pipeline. That will slow once the New Year hits because of what I’ve got on my agenda. When you launch a fund, you want to get that money working as fast as possible. As you’re gearing up to close it and everything, you start putting offers on stuff because you don’t want to wait until the fund closes and wait two months to not have any assets in that fund. If you’re given a preferred interest, that money is burning a hole in the pockets of doing nothing. That’s one. It’s a little Note and Bolt there. A few interesting things I’ll mention. I had to appear for two hearings in court. They potentially would have been bench trials which were a quick trial with a judge on two land contracts. It did not get to that point.

One of them was a land contract in Michigan that had been going on for a while where we did get the judgment. The borrower has 90 days to reinstate the loan from the offer through date. I’m hoping and fingers crossed. I liked to work with this borrower if we can to keep the property and we made some offers to her. In the past, it hasn’t been successful. The other one was interesting because the borrower showed up late.

He was more than an hour late for the call. The judge was not happy. He did not have his attorney on the Zoom call because the attorney was in quarantine. The judge said, “It’s a Zoom call. He doesn’t have to be here. He has to be on Zoom. Who’s he quarantining against?” Let’s say I sat very quietly. It’s like when you and a family member go do something, the other one gets caught, mom and dad are screaming at them and you’re like, “I’m going to be quiet.”

 

My kids are good at that.

That’s some of the stuff. I’ll mention one of the other things because this is another important tip. It took a little while but I start reaching out to people from IMN, the conference which has been free for people to register on. I went through and when you’re on there, it gives you the list of everyone that’s on and there’s a little email system in there. I sent emails to many people on there and said, “This is who I am. I spoke but I didn’t have time to touch base with you. I wonder if we could set up a call to see what your business does and learn about mine. There might be a way we could potentially work together in the future or know somebody who could help each other.”

I would say it’s well over at a 10% success rate. People were responding back and setting up phone calls. When you look at hundreds of people, you’re getting not five calls, you’re getting 50 phone calls with people. The first day I started calling people, I got three tapes from investors. I learned a few more about REO disposition companies and some new cool software that’s coming down the pipe by networking.

One company was a $5 billion fund in DC. Clearly, there was not the ability for us to do business but they liked to hear what mainstream investors like myself were doing and so forth. I like to hear what they’re doing and share what they think is going to happen in what they’re seeing because they’re talking much higher levels of people than we are. I got an understanding of what’s going on. That’s my second Note and Bolt.

Early for a double feature. I’m curious, which event was this that you were talking about? Is that the servicing one?

No, this is the one that you and I spoke at. The servicing one is what I’m going to be doing next. I can go through that list and pick and choose certain ones to set up some conversations. You may have seen a few things at the event. Even if it was months ago, you still have access. Go out and reach out to people. It never hurts. What’s the worst they say? They don’t reply.

That’s happened before, right?

Yes, that’s happened a few times. Let’s roll into our main topic where Professor Bateman is going to evaluate my thesis on my top five predictions, which were for 2020 because in upcoming episodes, we are going to do what Jamie’s plans are for 2021, what my plans are and then we’re going to do what our predictions are. We’ve got multiple episodes talking about 2021. It will be interesting but Jamie, I will let you take the lead on this. I will get defensive and try to spin it in a way to make it look I was correct.

I don’t know if you’re going to need to. A lot of these seem that they may have held through. It was episode 90. Chris, you said, you’re going to present your top five predictions and then we’ll come back and reevaluate. The first prediction, the first three topics have to do with the quality of assets, quantity and pricing. The first one, what you’re going to see sellers coming is that they’re going to want people to take multiple assets instead of one-offs. You’re going to see more assets have a little more hair on the collateral side. I don’t know which one of those was your first.

First was the assets that are more challenging with more hair.

What do you think?

I thought I’ve seen a lot more assets this 2020 that had some missing assignments on them, some potential title issues, incorrect property descriptions. Where you see a lot more of those, it is typically on the CFD side but we’ve seen a lot less CFDs. I don’t know if we talked about that or not but we can. I’ve seen for my paper stuff that had a lot more hair on it including assets that hadn’t been paid in 5 or 10 years. You’re dealing with the statute of limitations issues, deceased borrowers with probates. The paper that I’ve seen this 2020, I learned about the MERS issue up in Maine. I thought I saw a lot more paper that was more challenging. I don’t know about some of the stuff that you’ve seen.

I would agree with that. I don’t know if some of that is the fact that both of us were expanding and you might buy a whole pool of 50 assets and 10 of them are junk. Some of that could be our own business models and growth but you’re right. In general, I can’t disagree. I think that was the case. A lot of the assets that were floating around out there years before had been bought up and people are holding them.

I used to post a Distressed Toxic Asset List as part of the group which most of that stuff could be bought and sometimes I’ll still see that stuff come through. It could be who we see the assets from. I know there’s a clean paper out there which we’ll talk about costs. Certain people I buy from, the stuff they do have is a little hairier but I also get a significantly better discount. One of the other things that I talked about besides hair is finding assets in a specific market not only here, but when we talk quality. It’s what this topic was. People like to be in a major city near a university and above a certain population in a certain type of neighborhood. What are your thoughts from what you have seen as well on that?

I’ve had to be less picky with that thing. If I want to close on deals, I’ve got to loosen my own restrictions on my buybacks as far as buying. People talk about how I want to buy close to a metropolitan area to have boots on the ground. You’ve talked in previous episodes about buying in rural areas is not always a bad thing. It’s one of those where you’ve had to open up your buying expectations or open up your buy box, as I said, and geographically, be open to more places.

By doing so, you’re going to wage the risk and discount things more but if you’re looking at assets because of the quantity that’s out there, it’s much more difficult to find some of those things. Especially to new investors, they’re looking to get something a little less pricey. When you’re looking at a major metropolitan area, property values might be under $200,000. If it’s UPB of $80,000 and you only got $20,000. You’re not going to get something in that area. How did I do? What’s my grade?

It's not about the price. It's about solving problems. Click To Tweet

I’ll give you a B+ on that one. That definitely came true.

That’s the quality. Let’s talk about quantity. As part of quantity the ability to buy, one of my predictions was it’s tougher to buy one-offs and we’re going to see more sellers looking to want buyers to take down more pools.

One of the things you said was, “From a quantity perspective, I’m starting to see a lot less product on the market from people. I think it’s going to continue to be more difficult as the economy is still doing very well.” You talked about a meeting you had with a well-known economist. It sounds like from a quantity perspective, what we’re already touching on is there are fewer assets out there and that came true. It’s been more of a challenge to find quality assets. Those two are tied, the quantity and quality. We can’t separate them completely. I don’t have numbers to back this up but it seems like from 2019 to 2020, there were fewer tapes floating around. What do you think?

I agree. Let’s get to the meat of it with COVID, the pandemic and moratoriums. Certain sellers would sit on their assets. They want to see where things shake out because people may be pricing. We’ll get the pricing next but pricing dictates also availability. If certain asset type pricing drops because of a specific event like COVID, nonperforming loans, people are getting much more conservative on them. Pricing seemed to soften or have the appearance of softening and sellers weren’t going to liquidate it at that price. Even though there might be a tape out there but it’s not getting sold. That is a component where we’ll get the pricing but pricing relates to quantity in that sense of back to quality, they’re all interchanged. COVID had some restrictions on pricing because the people that were selling are the people that needed to sell. The people who didn’t need to sell were sitting and holding tight to see what is happening or what was going on.

There was a major standstill across the note space and real estate in general. The expectations were way different between buyers and sellers.

I also mentioned I had breakfast one time with Martin Saenz. We were talking about pools versus individuals. Some of the conversations he was having with people at that time were sellers are much more preferable in pools because there were newer investors coming in not closing deals. We were talking about the potential to even pre-qualify people. I haven’t seen that but what I have seen is sellers giving preferential treatment, meaning if you’ve bid on something and closed five times with them and you’re closed, you’re going to get that asset versus somebody who’s buying a one-off from that pool that may have bid a little more but they haven’t worked with that person. If I’ve got $500,000 to buy as an example, I bid $400,000 on a pool and they’ve got one asset, I’m not waiting around after they tell me that asset is gone to wait for something. They’ve got somebody on the hot stove like that. Back to the risk factor.

It’s risk mitigation because they figured the deal will close.

One other thing that I’ll mention in regards to the one-offs and this is a prediction that honestly, if I thought about it inside, I was wrong is Paperstac and the explosion of Paperstac. I was curious when that came out, how would it be treated because there are other platforms that come out in the past that had some success and so forth but slowly went away. Paperstac is one where you can buy one-off assets. It’s been sustainable, they continue to grow, and they’re smart enough to understand these other markets and business models.

They can add to their business line to continue to grow the business. I talk to Brett once every other month or so for what they’ve got going on. It’s great to see a site like this and there are a few others as well where if you’re new, you can go on interact and they walk you through that whole process. That’s important. That’s one thing that I’ll say I got wrong in the sense of the one-offs, the perspective of there is that ability there. That’s great for investors who are starting out.

They’ve done a good job. Some of this stuff I’m reading as far as the overall economy that you didn’t predict the pandemic, Chris. The economy was humming along at that point.

An economist that’s been in a lot of conferences is awesome. He joked about, “If you’re an economist and Aladdin was standing in front of you, what three wishes would you grant?” He said, “Increased wages, low unemployment and low inflation,” which until COVID we had. If you still look at what we have even during this, unemployment is back down to specific levels. That doesn’t mean the economy is humming. We’re in for some pain but prior to COVID, which nobody could predict, you were looking at the first half of 2020 being stronger.

With the election, companies do cause the economy to slow down a little bit which the stock market has been going nuts. The reason why is they want to know if there is a new transition, what they’re going to do. I’ve used an example like Blue Cross. There was something regarding health insurance company that the government will run healthcare, Blue Cross is going to be an important player in that and be like, “I’m not going to buy office space. I’m not going to hire people if I may not have a business or my business might get reduced by 75%.” There’s a lot of that. We talked about quality, quantity, let’s talk pricing. This is the one I was the most accurate at.

Let’s say you got B+ on the quantity as well.

You are not grading me at Georgetown.

It’s a completely arbitrary grading scale. I want to give you room for growth. You have right here, “You have to focus more on bulk versus the one-off.” Do you want to touch on that again?

For a pricing perspective, you’re going to get a better deal if you’re buying multiple assets. Here’s the other thing I’ll mention. If there’s a tape of six assets on a tape and I’ll say this more for new investors and they’re like, “Four of them are horrific and two of them are good. This is what we’re trying to get for these.” They understand that the four of them are bad and they throw low numbers at them. I them. What I mean by that is, it was a tape one would be for the holiday is one year where it was four assets that they want to sell all of them. One of them was a grand slam and the other three appear to be junk. One of them was junk, one of them was decent and the other one was in between.

The cost that we’re paying when you took all four of them added up still made that first deal a good deal. You had that upside. Other people were like, “I don’t want to deal with those other ones so I just want to buy that one.” The seller was like, “I need to get rid of all of them.” They’re like, “We’ll buy all of them.” By doing so, you’re solving that person’s problem of, “I need to get rid of this crap. I’m not going to give you the gold brick. I want you to take the polished turd along with it.” Sometimes, you’ve got to take that component and you’ll be surprised how many deals can come along after that because they know you’ll take on something. Think about it. The asset was $20,000. You can get it for $18,000 and you’re buying two other assets at $1,000 a piece, you’re still paying $20,000. Think of that asset and the other two were almost free.

I’m rereading Chris Voss’ book Never Split the Difference. You’ve reminded me of it. Instead of being narrow-minded about the particular deal that you’re looking at and looking at it from your own perspective running through your performing calculator or whatever calculator you’re using, think about it from the other person’s perspective. It factors into a negotiation, in general. As you said, you’re putting yourself in their shoes and you’re solving that problem for them. It’s not about the price. It’s about solving problems.

Here’s an example of a problem I solved for somebody. Let me know how this works, how this turned out. It’s a qualified Chapter 7 that haven’t paid in six years. It’s a condo worth about $40,000. Condo fees are paid. Taxes are paid. It gets thrown into a pool of assets I bought. The number on it was $1,500. I’m like, “A $1,500 asset that hasn’t paid in six years on a condo in a tough area. The holding costs would be about $10,000. There’s still some money to be made in this thing, potentially.” Condos can get tough and if this needed work and stuff, the condo is basically a $10,000 condo.

The borrower’s attorney reached out to my attorney as we sent a letter and says, “The borrower thought because of Chapter 7, they didn’t have to pay the debt and they got the house for free.” My attorney is like, “You’re an attorney, hello.” She’s like, “I know. What can we do? The UPB is $40,000 to $50,000. The total payoff is $80,000. Can we get a mod?” “Yes.” $1,500 down is what I paid for it. “Let’s get on a payment plan and then I’ll wave whatever I can do.” All of a sudden, this person got paid. I took an asset that I thought was worthless and I’m not going to make anything. Now, it’s turned into a complete grand slam or it’s looking like it should be. I never count my chickens before they hatch but sometimes crazy stuff like that happens when you deal with numbers and in bulk.

As you’re listening to their side and figuring out a creative way to solve the problem.

In regards to pricing, I talk about you have to focus more on bulk first one-off. I said performing notes on CFDs were originally at 15% and 18%. At the beginning of ‘19, they were 12% to 15%. A note would be between 9% and 11% and a performing CFD is 10% to 13%, a nonperforming stuff, I thought we’re going to see them over 50%.

You nailed it on the performing. I’d say both.

If you give me a B+, I’ll reach through Zoom, strung you on this one.

That’s a solid A for sure. On the CFDs and performing notes, yields have come down.

I’m sitting on 50-plus performing assets and it’s like, “Do I sell them or hold them?” You’ve got to look at all three of these in perspective. It’s in a fund that I have. If I turn around and sell them, what am I going to do with that money? I don’t want to buy a performing asset over 50%. There are pools I can buy and so forth, but my fund closes in 2021. If I’d buy nonperformers, do I have time to flip them which I don’t think I do. It’s like, “We’ll go. Let them sit.” I thought this 2020 because of COVID, people were paying for performers. I always thought there would be a greater chance for them going delinquent because of the risk involved.

As COVID hit, the first stock process I had was nonperforming pricing may go up and performing pricing may go down because you see more people coming into the business so it would be more demand versus supply like on the housing market. I thought that would drive up the price but it’s been the opposite which is backwards for me. I’ve seen nonperforming dip a little bit because of the foreclosure timeframes and the performing has gone up. I almost see that, so I’ve been buying a lot more nonperforming because I’m factoring in the foreclosure timeframes and getting them well under 50%. In the performing, I’ll buy one-offs here and there because I thought they’re too high in price.

Your approach is logical. A lot of other people frankly were more basing their pricing and their expectations out of emotion. The people want safety at a time like a global pandemic. That makes sense. You rushed to what appears to be safe which may be a performing asset with equity as opposed to buying something with moratoriums in place and you don’t know how it’s going to play out. There are a lot more variables in there potentially on nonperformer as far as a timeline. It makes a lot of sense what you did. The pricing on performing notes and CFDs has gone up and yields have come down. You nailed that one for sure. I do think that there has been more of a gap in pricing between performers and nonperformers. In 2018, 2019, tell me if I’m wrong, it seems like the pricing had merged a little bit. It was almost hard to tear them apart whereas now there’s a lot more separation. Would you agree with that?

I would. One of the things that I talk about as well, “For people who are getting into the business and do it on their own, it’s not the most ideal time.” I’m being honest. I’m not pushing people away. I love the business. It’s a great business but I was telling people be careful. You may want to look to partner with somebody to get a better understanding of those things. I’m telling people warning signs are off on getting assets that are much hairier, collateral issues and borrower issues and people were paying more for them. Pricing was going up, assets are getting hairier which increases risk, things can turn ugly quickly. Doomsday is what I put in here but I was thinking people should be more cautious running into the business blindfolded.

That makes a lot of sense and people have lost money. We don’t like to talk about that so much but we’ll talk about 2021 later. I’m curious to get your thoughts on that. That was a side note after the first three predictions. We’re going B+, B+, A.

The next one was the pop-up trainers.

Don't get all spun up on the regulations and licensing. Be legal, be ethical, and figure out a way to be successful. Click To Tweet

You’re going to see a lot more people pop up in training who could be questionable whether they should be doing training or not.

I did say that in 2020 that I would not have any training. It was a hard no because you’ve got to be all-in. At that time, I don’t have the time. On 2021, our business plan could change. With the pop-up trainers, I thought people need to make over $1 million in something, not somebody who made $50,000 off of buying ten notes. Have you seen any more pop-up trainers?

In the general landscape of note training, there are more people that I’m aware of now that are doing some training.

For this, I was going down two roads. One was the pop-up trainers. It’s somebody random and coming up with a training course. The other one is the individuals who throw out a new training from one day to the next where one day they’re teaching notes, the next day they’re teaching infinite banking, subject to, wholesaling, multifamily properties, lease options and these different lifestyles as well. I’ve seen people come up with those. I thought there would be a lot more personally. There have been trainers who I’m surprised they’re still doing training that has come out. I thought people would get a little hungrier, try and take advantage of people getting in the business. I haven’t seen that much of an increase. I thought I would have seen a lot more increase on this one.

You have to go B- on this one.

I’ll offset that from B+ because I want to give myself a C I know.

I don’t think there’s been a major change. I’ve noticed a couple of other people starting some training whether it’s online or in-person. I’m not suggesting they shouldn’t be but I’ve become aware of more people introducing some training. You don’t have to name names but big-name trainers, can you think of any who are no longer doing it? What I’m getting is I would say there are more training programs out there than there was the previous year.

I’ve seen people ramp up. If they’re doing something once a quarter, now it looks like a lot of them are trying to do stuff once a month. It’s not the number of people but the frequency I’ve seen increased. In some aspects, I’ve also seen pricing significantly increased on training as well.

There’s not a major change there. The last one has to do with regulation and oversight. You say that you’re going to have to see more people getting licensed in certain states. You say as investors, 99% of us try to do the right thing and try to follow the rules but that’s not always the case with all hedge funds or other investors.

I see investors who will take a property, they’ll buy under a land contract, try and wrap it under lease option financing, and create chaos. There was one instance where a woman bought a property with hard money then got it under land contract with somebody but refused to give them a signed copy of the land contract. They stopped paying but they’re living in the house and they went after the guy. We’re looking at it and I’m like, “If I’m this guy’s attorney, I’m not paying because I have no contract in place. By the way, give me my deposit back.” The hard money guy was foreclosing on the individual because they weren’t paying and then they go, “We’ll sell you the contract.” I’m like, “I’ll give you $0.20 on the dollar because of all the issues that are going on with it and stuff. I could buy a foreclosure sale.”

This is a topic we need to dive into in future episodes. As far as licensing and regulations, it’s more than one episode. On one hand, you have newer note investors who are afraid to do anything because there’s a risk with licensing and regulation and all this stuff. The CFPB, Dodd-Frank and state-level securities organizations. They end up not doing anything and the other people is doing whatever they want.

It was like the person in our Facebook group and I can’t remember the name but they’re like, “I want to buy a property that’s boarded at FCI. The borrower is deceased. It’s in foreclosure. I want to buy it but I don’t want to board it with a servicer.” I post something like, “What would happen if it’s not serviced?” I’m thinking if you can’t answer that question, you should not be buying a note. It was first out of my head. Secondly, if you want to understand the licensing in a state, talk to an attorney in that state that goes through this. There’s a website, NMLS. Google that and you can look up every state.

In most instances, you’re a lender but not considered a debt collector. There are different avenues for that. You’ve got to read through which one it is but also talk to an attorney and see what they say. You get an understanding, talk to them then read NMLS and so forth. Regulation-wise, everything with COVID got put on hold. There was regulation within COVID but a lot of states and stuff that are working on laws and everything. It got pushed and put on hold because of everyone working from home and remote. People are trying to keep their heads above water. With the new administration is coming in the door, I don’t think CFPB will get a little more teeth back through their bite.

I don’t think we’re going to see any major changes. This will be 2021 predictions but talking about 2020, you’ve still got to be careful because of lawsuits with Harbour Portfolio, Vision Properties especially on the CFD front. Even on the note space, it’s good to be smart about it and don’t do something stupid. They just come out with and I haven’t been able to analyze the new debt collection laws or regulations that impact text messaging and how many times you can call. There’s a lot of information that’s still being digested because that decision came out on October 30th, 2020. I am a member of ACA International where they do webinars and stuff on this. Once I get on those, I’ll share a lot of that information for people. It’s going to be interesting. They’re finally updating laws based off of email and text messaging and what you can and cannot do.

I know you’ve had attorneys on with regard to Ohio CFDs and everyone got spun up about Maryland or whoever was interested in Maryland having a debt collector license.

 

I still go back and look at that. That was the boy who screamed fire or cried wolf because everyone is like, “You need it.” You’re behind the scenes like, “No, you don’t.” It’s the opposite but I was buying up Maryland assets left and right from people who prayed and dumping them. It was like Eddie Murphy’s movie, Trading Places, at the end they switched the briefcase and they knew what was going to happen. Eddie is sitting there. That was me. All of a sudden, it’s like, “You don’t need it.” I’m like, “I’ll sell.” That reminded me of Maryland.

For Georgia, Chris and I will buy all your Georgia assets.

In Georgia, you didn’t need a license.

You do. That’s I guess the converse. The point I was getting to was neither of those came to fruition. As far as Ohio or Maryland cracking down, it does seem like people do get spun up on some of this for particular states and then sometimes it doesn’t happen.

There are two things with Ohio. I talked to Franco not too long ago. He said that’s stalled but Ohio has licensing now that is restrictive in how it’s understood. I was on the phone with their regulators where to get that license, you have to have an in-house MLO with three years of experience. Most known investors do not have that. I’m curious people will go, “I’ve got an Ohio license.” I post on groups and I’m like, “Somebody sent me a picture. I’m curious what your Ohio license looks like.” It’s crickets.

Is this for a debt collector license or for lending loan?

No, it’s for owning notes. The question they asked me is, “I don’t service loan. I have a third party. Have you ever modified loan in the past?” I’m like, “Yes.” They’re like, “You’re a lender. You fall under an MLO because you modify loan and we want that person in-house.” Thankfully, I had the foresight to get an MLO license. This April 2021, I will hit my three-year mark of having an MLO.

Looking back at 2020, you’re in 34 states or something. Your number of states equals my number of loans. COVID was a major factor. You’ve already touched on that but any major changes in 2020 with regards to licensing.

Certain states that had licensing they’re starting to look at it a little harder because they see what’s coming down the pike in 2021. I played by the rules. I try and stay as compliant, if I ever miss something and hopefully, I don’t but I’ll fix it quickly. Knock on wood, nobody’s ever picked up the phone and said, “Do you have this and so forth?” I’d say there hasn’t been.

It doesn’t seem there have been major changes or tweaks as far as across the country. Again, that’s pandemic. With our interview of Dave Van Horn, one of the cool things I took away was he said, “Tell me what the rules are and I’ll figure out how to win.” I’m paraphrasing but don’t get all spun up on what might happen as far as the regulations and licensing. Be legal, be ethical and still figure out a way to be successful.

That’s how I run my business.

We’re not talking 2021 but I think states are going to be cash hungry with hanging out all these benefits to people. With the unemployment rates high, that means people aren’t working. Revenue per states has been down in 2020. My cynical side says they’re going to be cash hungry in 2021 and ratchet up some of the regulations and licensing for that reason.

Some additions to this, we talk about people pulling out a stock market and looking for others to invest in. That’s always the case. People in real estate, the stock market is at all-time highs, if you’ve been in it, great. I always think people are going to try and diversify. That’s a cop-out statement almost.

I don’t know if it’s the world I’m running in but I do get that sense that more people are looking for an alternative.

Here’s an interesting thing is we had targeted 2019 having 12,000 downloads and we ended up with over 55,000. I questioned the numbers on four different occasions but as you have 100 episodes sitting out there and people are at home and listening, I have exceeded expectations on the number of downloads that we’ve hit in 2020. We are over 800,000 out.

It’s impressive.

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I had them checked out three times.

Do you pay your VA to download 500 times a day or something? I’m kidding.

I do pay the VA to post stuff on Instagram with the new episodes and stuff like that. We get some downloads in Israel and some other countries as well. It’s not new listeners because new listeners will jump in and say we started out with 300 or 500 listeners or whatever it may which isn’t a lot. If you’re adding a few listeners every month going back and downloading all the old episodes, along with the new ones, ten people downloaded every episode. The downloads versus listens, that’s another topic but if ten people downloaded all of them, there are 1,200 downloads right then and there. We are over 100 plus episodes. I always wonder how long would this last and stuff. Like anything in business, if you are consistent and keep doing it and that’s what we took away with Dave Van Horn. Keep plugging away and good things happen.

He was talking about how he would write for BiggerPockets for 7 or 8 months and didn’t think anybody was reading it but eventually it caught on. On the fifth one, I’m going to give you a solid B because nothing changed too much. We’ll say B to B+ overall.

To try and predict as I started this, it’s like taking a dart and throwing it against the wall. For 2021, we’ll see what our predictions will be. We’ll have to be a little harder on ourselves on certain things. The question will be, “Is it going to be cheating if we say foreclosure timelines are going to take a long time because quotes are going to be backed up. We can say that. We’re going to be right. There are still things we should throw out there to let people know because new investors need to know that information.

A couple of them should be some bold predictions.

Would you like to add anything? What did you think was going to happen in 2021?

I don’t have any commentary on that. You did a good job, for sure.

On our next episode, what we’re going to do is talk about what did we think for our businesses, how we would do in 2020 and how did we do.

This is not a prediction but when everything started shutting down in March, April, May 2020, a lot of note investors and people in general were stopped in their tracks and people were saying, “Do I not do anything?” I get it for a little bit but at some point, what I would say is you can’t wait around. As you said, if you have money, do you want to have it sitting there waiting for this great deal 6 to 8 months down the road? I kept buying through this 2020. I know you did as well. I’m not suggesting you bury your head in the sand and don’t adjust to the market conditions and circumstances but you don’t know what’s going to happen, so you keep moving forward. It’s a free Note and Bolt.

Here’s my Note and Bolt because an email popped in and this is a Note and Bolt that you may want to take a look at as well. I had a property that we sent the demand letter, it came back returned to sender, vacant and unable to find borrower. I asked the attorney, “Can we winterize the property?” She said, “The mortgage does not give you the right to secure a property if it’s vacant. The mortgage scars for lender protections. I haven’t looked at this issue for some time because 99 out of 100 times, the mortgage usually has the right to secure property if it’s vacant. There’s someone in a bank I can call in the meantime but do not take steps to scale the property.”

I have a couple of questions. One, what state is that in?

Pennsylvania.

I’m assuming that’s not a CFD.

It’s a note.

 

It’s one upside to a CFD. It’s your property. That’s a positive there. I need to research that for at least two of these New York loans.

I’ll reach out to her because if I go in and winterize a property, will they know, but in the same token, if they see the sticker there, they’ll be like, “What were you doing in the property? You didn’t have the right.” She said, “I could certify it as vacant but it’s very expensive in that process.” I have to find him. That’s a Note and Bolt. As Matt Kelly says, “Read your mortgage and note because it will tell you what you can and cannot do.”

The first one was a bonus. My real Note and Bolt is to check out NoteRules.com. It’s the portfolio activity center. Richard McGrew made this software based on Podio. This is what we use for our workflow system. I’m not trying to push it on anyone but we’re happy with it. If you have any questions about that, let me know. There are different payment options and you can do all kinds of things. It’s Podio but it’s a software that’s meant for note investing. That’s what we use and we’re happy with it.

Let me ask this question because I’m not familiar with it. I have a call with Richard. We will talk about that but I want to get a better understanding of the software. I told him, “I have no interest in using it. I already spent $20,000 on software. I’m not going to spend and change the software.” I was curious. Is this for somebody that only has one note or you should have ten notes? What type of investors should be looking at this? Is it for a newbie? Can you scale with it up to 50 or 100 notes?

You don’t need it if you have 2 or 3 notes but if you have 5 to 10 notes and you’re planning to scale, you need something like this. It doesn’t have to be this product. One nice thing about it, it is inexpensive. You can go with a basic plan. If somebody has eight notes and they don’t want to pay a lot, it could work well. It’s not a fancy looking system. If you’ve seen Podio, it doesn’t have all kinds of bells and whistles as far as how it looks but I find it user-friendly. I think Citrix bought Podio. I asked Richard, I said, “If something happens to you then what?”

I didn’t know Citrix bought Podio.

It’s backed up by a high-quality company. I don’t think it’s going anywhere. There are better systems out there if you want to go crazy.

The Mortgage Office has a great system and if you run a fund, there’s another $10,000.

The short answer is 5 to 10 notes. I don’t know about you if you can remember when you had ten notes. Once you get double-digit notes, it’s a lot to keep track of if these are nonperformers, CFDs, and you need some workflow management. We have that for our workflow management and then we also have Google Drive and other systems. The second part of your question is it does give you the ability to scale.

One of the things he started to do is get into doc prep and automating that process which is pretty neat. We haven’t started with that yet but that’s something we’re looking to in 2021 as far as automating doc prep for all kinds of different reasons. Also, he is starting to pull in servicing information directly into this workflow system into Podio so that you don’t have to necessarily go into the servicers portal. We’ll see how it all plays out. He’s expanding the system but there are different levels so that you can scale within that system.

We could do a whole other episode on where I started. I was using Pipedrive originally. I integrated and spent a few thousand bucks in using Infusionsoft. I implemented a management system in Infusionsoft which was tied to something called Airtable but that went quick because I used that when I had 40 to 50 notes. I went and started a fund and bought a 90 pool of assets. That was the point of like, “I need something that can be robust.” I was talking to Juniper and some of these other third-party fund managers. They wanted $1,500 a month minimum. You look at it at the course of 24 to 36 months of a fund, that’s $36,000 to $48,000.

For me, that’s where I was like, “I’ll go with The Mortgage Office.” I bought it. It roughly costs $10,000 for the main system. That was my investment. The fund portal component to it because it’s completely separate, it’s charged to the fund. On a monthly basis, I’d have to pay and stuff for the number of users I have on there and the number of funds I have. It’s still got a monthly recurrence but some of that is recoverable from the funds. At the end of the day, it saves the fund money because instead of spending $36,000-plus on a 24-month fund, it may have cost you $12,000 to $15,000. That’s $20,000 and that’s a good amount of money.

This is a software that servicers use, right?

Yes. I know Madison uses it. Your buddies at Lake City used it. Allied does not use it. FCI created their own system that’s based on The Mortgage Office. There may have been a dispute or a lawsuit on that. I heard that through a grapevine. I don’t know if it’s true or not but a servicer told me that. It’s something to check and see but it doesn’t matter. FCI has an awesome portal. That’s how I run mine. I’ve already tossed a few Notes and Bolts in there for people. Is there anything else as we wrap up this episode, Jamie?

No, sir.

As always, go out and do some good deeds. Thank you.

Important Links:

• DataTree
• Paperstac
• Never Split the Difference
• NMLS
• ACA International
• NoteRules.com
• Citrix
• The Mortgage Office

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