As we wrap up 2022, Lauren Wells and Chris Seveney look back on everything that has happened on their team in this 2022 Year in Review episode. They share how they grew from two to ten people, achieved growth in the asset management side, and do their due diligence process now that they have more inventory. Chris talks about his case studies, their mission to make mortgage notes investing more accessible, and his market predictions for 2023.

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Creating Wealth Simplified’s A Year In Review 2022

Welcome, everyone, to the Creating Wealth Simplified show, where each week, we bring you education and information that will help you take your next step in building wealth through real estate. Thank you, folks, so much for joining us. My name is Lauren Wells, and I am joined by my cohost, Chris Seveney. Chris, long time no see on the show. Yes, it’s been a long time. Lauren and I have been going back and forth recording episodes on the show because both of us have been having very busy schedules. Lauren, on the investor relations side, has been extremely busy, and myself on leading the acquisition side of things in acquiring assets. We are back together again. It feels good. In this episode, we want to talk about a 2022 year in review. Talk about our company, our team, how that’s scaled, how the raise is going, talk about some case studies of some borrowers we’ve helped, and talk about what we’ve seen this year 2022 in the industry and what we think. We cannot predict the future, but what we anticipate we’ll see in 2023. Let’s start it off with our staff from where we were in January to where we are now. It was us two in January. The company has been around for a while, but this new fund and this entity was a new project and a bigger undertaking. We went from 2 to 10 in a year. We now have an awesome team. I’ll speak to my side and you can speak to your side a little bit. On the investor relations side of the house, as Chris said, this has been a very busy time of year for us. The amount of interest and people I’m speaking with has ticked up. We have Katie. She came on in July, but she was onboarding investors and working with investors who had already invested. Now she’s starting to work alongside me, taking some investor calls and answering questions people might have, so that’s been great. We have Toni, who started with marketing and has now moved into a marketing and investor relations hybrid, working with current investors who might have questions about their statements or distributions. We like to focus on having that personal touch. We want people to know and I get this question a lot when people call, “Am I going to speak with a person or am I going to go to an automated machine? Am I going to get an automated email or is an actual person going to email me?” I think I get that question at least five times a week. It’s nice to have a good team that is committed to that experience for our investors. I’m excited about this. We brought on Katrina as an intern for our marketing side to help with making sure that we’re staying on top of everything. On our end, as we’ll talk about the significant growth we had this year with the company, on the asset management side, along with running the company, I oversee a lot of the asset management with our team of Delaney and Chi, who manage our directors of asset management. Delaney is more focused on operations at this point in time of a lot of integration between asset management and investor relations and overall company process and procedures. She, along with Larissa managing the assets. We have Jen, who’s our transaction coordinator. I think a little side note I want to touch upon is the amount of work that goes into the acquisition of not only the due diligence and putting numbers to it. After you acquire the asset getting all the paperwork in order and getting everything from the prior sellers, there’s a lot and it’s pretty intense. With having over a hundred assets that we’ve brought into the company in the past five months, it’s been a lot of work. I love the team, as you mentioned earlier. We have a great team in place. We’ve got this team in place to grow with us as we continue to scale the company. One thing, like you said, that undertaking of not only doing the due diligence and everything that goes with that. That whole escrow period where we’re making sure the numbers that we put there that were accepted make sense and that we can work with these loans. Something you mentioned I want to touch upon is you’re like, “We scaled to a hundred loans in the past five months.” I forgot that the first few months of the year were a lot of working with the SEC to get qualified. We’ve talked about this before in past episodes, but a Regulation D offering and what we’re doing in Regulation A are very different. The qualification process that you have to go through for Regulation A is a lot more intensive. When you look at the timeline of what’s happened, the business again has been around for a while, but this new offering started in 2021. You had this last August. A Regulation D offering is very different from a Regulation A. The qualification process you must go through for Regulation A is much more intensive. Click To Tweet You had started pulling the pieces together, but we didn’t start making significant. We’re going to do this. Forming the entity in February and going through that qualification process starting in April. We were qualified as of July and, since then, have been raising capital, acquiring assets, working with borrowers and all the things. Chris, do you have anything to add? No, I’ll let you keep going. You’re doing a wonderful job. Thank you. As far as some of the stats when it comes to the fund, as Chris mentioned, we have over a hundred assets in the fund. We have over 200 investors, about 10% of the raise hit. Chris, I’m going to let you talk about this on the asset management side more of it. We’ve worked with a lot of borrowers to either help them renegotiate their loan, remodify their loan or do a forbearance plan. That’s something unique to us that, at a larger scale, which we touched upon in our last webinar, is not scalable or repeatable. Chris, let’s you have two case studies that have happened since the fun launch that you want to talk about and give people who are reading an idea of the work we’re doing. I’ll give you one that just happened, which is we acquired a loan where the borrower was approximately about ten months behind. The borrower previously had trouble again getting in contact with the prior servicing company and getting a response to seeing what could be done to try and work out the loan. We acquired the loan. We’re able to make what’s called right-party contact. Contact the right person who owns the loan and work out an agreement where the borrower can put $1,500 down and pay a little extra, about $250 every month extra, until they’re caught up. That allows them because they had a short unemployment, but now they’re employed and have a better job. It allows them to catch up on the loan. It avoids any type of legal or any type of foreclosure action against the borrower. Allow the borrower also to get caught up on their loan. During this time, we’re going to waive any late fees as we go through this process and work with the borrower. It’s an example of, like you mentioned, focusing and targeting each loan, working on each loan and coming up with some common sense solutions. We’ve done other case studies where we’ve had loans that we’ve acquired that were behind by a significant period of time. As we talked about on our other episodes, we always paint that 3D picture of what’s going on with each loan. In this instance, a borrower had lost a significant other and was getting readjusted and with life after such an event. We’re able to modify that loan and rework the loan with the borrower to get them on payment plans that work. Those are two off the top of our head. We’ve got many from the last few years that I could sit here for hours to talk about. It’s that common theme where a lot of times it’s going to sound like every case study typically happens of one of three situations of what happens in that person’s life. Whether it’s a loss of a loved one, a loss of a job or a medical issue, that’s probably a significant number of loans where we can go in and purchase these loans because they’ve been neglected for such a long period of time. I realized as we started this episode for people who are reading, you probably read this before, but I made that assumption. I want to go back a little bit. We talked about how we launched this fund, but we didn’t talk about what it was. I want to go back and talk about that for people who might not have read the Regulation A offering episode or might not be on our marketing email list. When we’re talking about all this and the reason we’re doing this whole year in review and showing you the growth, so when I say we went to be qualified by the SEC, we went to launch and be qualified for a Regulation A offering. You might be wondering, if you’re not familiar with us already, what that means. Essentially that means we are qualified to accept money from both accredited and non-accredited investors. Most funds can only accept money from accredited. We wanted to open this up to anyone and I try not to say this term, but I’m going to say it. We wanted to democratize alternative investing. Chris’s laughing. She came out with it. I said it. I always try to explain it in a way that doesn’t use that word because I think it’s like overkill and said so much, but that’s where my heart is. What we are trying to do is give everyone an option to get in. We launched this fund. It has a minimum of $500 investment. We are offering bonus shares and part of our recap here is, if you are wondering, we still have bonus shares available, starting at a $25,000 investment. Again, it’s open to accredited and non-accredited investors and we can work with people who have self-directed IRAs as. One thing I want to add is we talk about the Regulation A plus offering and for people who have been reading for years, you know this but if you’re a newer listener or coming through our channels through the Regulation A plus offering. Years ago, we started what the Good Deeds Note Investing show originally. As I’ve been investing in notes for the last six years, the reason why I started this Regulation A offering and there’s always the why. As we had in our prior funds, the Regulation D and 506(c) were limited to accredited investors only. I had worked with a lot of investors and helped them by notes or whatever the case may be, who were interested, but they didn’t hit that accredited status and they wanted to get involved. They wanted to learn a little bit about notes, but they were left out. One of the things when we wanted to come up with this Regulation A offering was, like you mentioned, to democratize it, give everyone the ability to invest in mortgage notes, as well as our mission is also trying to work with those borrowers on that end. Many other funds go the Regulation D route. There are a lot of people who are interested, like I said, to invest and we wanted to make sure we were giving everybody that opportunity.   Probably should have started off with all of that, but again, I forget that people come and go into the podcast world. I wanted to make sure that we covered what this fund was that we were talking about in this company that we scaled to ten people. An important thing is we came out of the moratoriums, lock up, all of that and started to see those legal proceedings move forward in some states and return to normal as a world. What have we seen since that’s happened in our industry? Do you want to talk to that a little bit? 2022 was the tail of two years this year. The first half and the second half of the year were extremely different. I think the economy, in general, and the world, in general, have seen a lot happen over the last six months. The beginning of the year was very conservative and slow in the note investing space or not. We were seeing assets which we always see plenty of assets, but it wasn’t a typical year on average because there were still some of the backlogs from the COVID and the moratoriums. In the middle of the year, in June, rates and inflation started to take off. I think people realized that was the pinnacle of housing. Now, we’ve come over that little hump and where it ends up, nobody knows, but we’re starting to see some slide in housing. You’re starting to see a slide in the markets and we’re starting to see also the uptick in inventory in that mortgage note space over the last six months. As a perfect example, over the last days, we have seen come through over 250 assets, 50 plus million in assets for sale. Weeks ago, there were about 160 million in assets. This month, we’ve seen over a quarter billion in assets come through available for purchase and that doesn’t even include some others that we’ll be seeing as well as we wrap up the end of 2022. Pretty much seeing that on a consistent basis, it’s over $1 billion a year. As we mentioned in the past, we’re trying to scratch the surface by growing a company to target that $75 million in a $500 billion distressed debt industry. When you talk about that because I’m speaking with people all day who are asking questions about the fund and the industry and whatnot, we have more inventory now. How does that affect what we do, like how we’re approaching our due diligence process? Our due diligence practice, I’d say it’s pretty much the same. We go through the same process on every single asset. When we see a lot more assets, we’re going to be a little bit pickier because if there are a thousand assets on the list, we’re not going to go through all a thousand. We have to buy boxing criteria that we’ll look at and fit in, whether it’s state, price or unpaid balance of the loan. We have a buy box that we will filter those things through and start and go through those assets and look at, do those fit our criteria. We’ll look through those and bid accordingly.   You would say pricing one, you can be picky and we can be pickier. Two, pricing has softened a bit because there’s more inventory out there. Pricing has softened within the space and we’ll continue to see it softened as we go out because a lot of funds were getting their money. The larger funds, a lot of them might get their money from institutional such as insurance companies and others, which in the past, they may have been getting money at a very cheap rate, but everybody knows where what has happened with the cost of money over the last six months. It’s more than doubled. They’re starting to liquidate some of their portfolios to get some additional cash. Now looking ahead to 2023, what are your predictions? You can go with the company or, I was going to say, the market regarding our asset class. I’ll let you talk about what you’re excellent at and I’ll talk on the asset side of things and where I think that’s headed. I’ll also talk overall markets. I’m not a market analyst. I like to look at common sense a lot of times for where things will be headed. From an overall market, we’re going to continue to see some softening in house prices. There are going to be limited transactions on the house front because if people don’t have to move, why would you move? Unless housing prices continue to go down because if you’re locked in, they have 3% interest rate. Rates are probably going to float somewhere between 5% and 6% in 2022. My first house was in 2001 when I bought it, which I was at 6%. Five percent to 6% is probably more normal and the 3% is what is more not normal or abnormal. Along with that, because of what the Fed is doing with the interest rates, there’s a stat that like 60% of homeowners live paycheck to paycheck. As core inflation is still around 6% and still expected to go throughout 2023, I think people who had some savings or were saving up during COVID, a lot of that savings is starting to dwindle down. We’re going to see a lot more distress in the market. Again, I’m not predicting crashes or anything along those lines, but the number of stress loans has been at all-time lows over the last few because the economy’s been so good. People who had some savings during the COVID pandemic are now experiencing dwindling funds. This may cause a lot more distress in the market in 2023. Click To Tweet That’s going to start to uptick and we’re going to start to see more of that. We’ll see some softening in housing. Along with that, we’re going to see more inventory for us coming through at reasonable prices because of that uptick. Internally, our company is the right size. We spent a lot of time looking at and analyzing the company’s growth and the people we need. We’re not being reactive. We’re always been proactive on the company side of things. We have the right team for the right growth going into 2023 to continue to manage our assets to work with our borrowers, buy loans, and liquidate some of the loans from our portfolio to regenerate some of that. In the new year, I feel like people will be looking more outside of traditional stocks and bonds. The Regulation A plus is still in the very infancy stages of how it’s continuing to grow. A lot of companies now are using that as a method or a path for alternative investments. For investors, it’s something that is going to become a lot more mainstream as we continue to go down these paths because it’s that interlude between the public companies with the stocks only. Other types of investments in this alternative investment is a good vehicle to go down. With the notes with our business, we’re not as dependent on housing pricing and interest rates and the correlation between those compared to things like real estate syndications. That is where you’re buying a multifamily building that is correlated to interest rates, rent rates and valuations, which include cap rates for us being uncorrelated. We’ve talked about that a lot more, which is a whole other episode we could talk about. That also gives us an advantage. What else, Lauren? I didn’t have much for this episode. It was just a recap of the year, what we’ve seen as this year closes out and what we’re looking in anticipating in 2023. Do you have any final thoughts? For people, again, if they have questions. Do you want me to do a spiel? I’ll let you give your spiel, but I do want to just first before throwing that out there. I do want to thank everyone for reading the episodes, people who have invested with us and people who have been supportive of us over these years. I truly want to say thank you. Without all of you, we wouldn’t be able to do this or be where we are now. I want to give a shout-out to the investors, my vendors, the team, Lauren and the IR staff and Delaney, Chi, Larissa, Jen, Katie, Toni, and Katrina. Did I miss somebody? Julie. Julie, as well. I should remember Julie. I paid all the bills. I was going to say the same thing, thank you to us. I know Katie and Toni would feel the same and I’m sure Chris feels the same. We love our investors. We have some awesome people. We’re thankful for them and also the readers of this show. Not only that, it’s awesome to see when someone will organically, like unprompted, post something about 7E Investments and receive their first dividend check.   Someone who may not have invested $250,000, $300,000 or $400,000. Someone might have started with $500, the minimum and to notice that, they’re like, “I got my first dividend check.” It’s pretty cool to see that. We’ve seen randomly tagged in a few comments on LinkedIn and on Facebook, so it’s cool to see that as well. Not only helping the borrowers but also seeing the investors get that. I think the other thing that, for me, is I had a call with somebody where they’re like, “I feel like I know you,” because they’ve been reading the episodes for so many years. That makes me feel good that we add value to people and we try and educate people on note investing. The other is we found out that we won an award through another website. NoteInvestor.com awarded us the best social media networking group. We have a Facebook group with over 2,000 people in it. Being recognized by people outside of our group and having that group and that culture, to me, it makes me feel a lot better, warmer inside, knowing that we are helping not only investors or borrowers but also other investors who not even investing in the fund, just educate them on the space. Maybe this sounds cheesy, but I like the fact that we’re doing things differently. The mission is to do things differently. The Regulation A offering, which is very rare for note funds. The way we structured the corporation to provide potential tax advantages. We’re not CPAs or accountants. Check with your CPA and accountant. I always got to give that. We are trying to do things differently and I think we are doing things differently. When we were at conferences this year, people were, “Look at what they’re doing.” It’s not rocket science what we’re doing and we’re not doing anything I say is risky of what we’re doing. We structure things in a way that benefits all the parties involved. That’s all the way down to the simple fact that if you look at our offering, we don’t have management fees, acquisition fees, disposition fees and all these other fees that you see in a lot of other funds because a lot of those are profit centers. I’ve worked for companies and stuff that have funds. I know what is a part of them. I’ve studied and read a lot of SEC offerings. I understand that. We want to do things differently that benefits for everybody. You like that tagline. You said it like four times. Thanks again, everyone, for joining us. Thank you for reading the episodes. As we’ve mentioned before, if there’s anything specific you want to hear, we have some awesome interviews lined up for 2023, but if there’s anything specific or you’re hoping to hear about on the show. As we said, this is about educating you and giving you information to start investing in yourself and your future. Please feel free to email us. You can email me at Lauren@7EInvestments.com. If you have any ideas, you can email Toni@7EInvestments.com. This show is for you, folks, so please, feedback is appreciated and always welcome. One last thing, because we didn’t get to answer all the questions in the chat, we apologize. We will reach out independently to all of you and answer those questions for you. Thank you, folks, so much again for joining us on this episode. If you enjoy the show, share it with a friend, subscribe, or leave us a review. Until the next episode. Thank you.  

Important Links

• NoteInvestor.com
• Facebook Group – Creating Wealth Simplified
• Lauren@7EInvestments.com
• Toni@7EInvestments.com