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From Live-In House Flipper To Part-Time Note Investor With Mike Schultz

January 12, 2022

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GDNI 186 | Part Time Note Investing

It’s safe to say that every person’s goal is to retire with a continuously growing cashflow. But you don’t always need to wait for retirement to make that happen. In fact, you can do note investing part-time and still reap the benefits. Jamie Bateman is joined by Mike Schultz to talk more about mortgage note investing and how it generates a passive cashflow. From being a snowmobile racer to delving into real estate, Mike surely has come a long way. Listen in as Mike recalls how he ended up flipping and selling his first property and how he realized his goal of long-term wealth building.

Listen to the podcast here:

From Live-In House Flipper To Part-Time Note Investor With Mike Schultz

Welcome everybody to another episode. I am joined by a newer note investor, Mike Schultz. Mike, how are you doing?

I’m doing pretty good. How about you?

Good. Where are you, Mike?

I am located basically directly between Milwaukee and Chicago on the Illinois side.

That’s where you grew up?

It is where I grew up. I’m married for several years now. I have three kids. I just started notes on my own in April 2021.

This would be a really good show for everybody, but especially newer note investors or people who are kicking the tires a little bit, who have heard about mortgage note investing, know somebody who does it or maybe they have bought under ten notes. There will be some real value here. For our audience, I have been working with Mike for the better part of a year.

I think about April or even March 2021 is when we first touched base and our first couple of phone calls.

At the end of the day, Mike, it’s your show to run. I’m here to support and do what I can to help you make progress along the way. For those unfamiliar with you, being the famous guy that you are, there’s always 1 or 2 people who haven’t heard of Mike Schultz. Let’s dive into your background. We already did a little bit but let’s get a little more specific. What do you do for a living? How you stumbled across mortgage note investing and real estate investing? Why don’t you take it from here?

I grew up racing snowmobiles, snocross, pretty similar to motocross like dirt bikes. I did that until about 2010, I had a pretty bad injury, a punctured lung. I decided to that hang up, and it worked out good. It was 2011. The mark was low. I sold all my racing stuff. I ended up buying my first property, a little ranch, 3-bedroom, 1-bath house, in November of 2011. I picked it up for a whopping $73,000. I ended up living there for about five years. During that time, I became really good friends with the realtor that I worked with.

He tried to get me more involved in investing at the time but being young and dumb, I just wanted to spend money and buy nice stuff. A twenty-year-old, I ended up doing a live-in flip in that house. My newly married wife and I decided to put it on the market and see if it sells. We ended up selling it in three days for over asking price.

Part Time Note Investing: It’s so sexy to talk about real estate investing, but remember that you have your personal financial situation right in front of you that you probably should be addressing first.

When was this?

That was the spool of 2015 or 2016, I believe, right in there. I ended having to live in my mom’s basement with my newly married wife within 30 days because they wanted a quick close, which was fun. My realtor’s term is a rat hole on a bunch of money until we found our “forever home.” We end up purchasing another foreclosure, bought that one, completely remodeled it, moved in, had our first son while we were there. We’ve got bored and said, “Let’s see if we can list it again.” We sold that one in seven days.

It was a super slow market at that point.

I wasn’t making big money on these live-in flips. I, unfortunately, like to do things the right way, which costs a little extra money, especially when it comes to mechanicals being my background. I was able to put a little bit of money in the bank. We were in that house, had our first son, bought a car. We sold that house and decided it was time to have another kid while living in a rental.

Quick question. When you did these two live-in flips, was that the intention with each one going in or did it just turn out that way?

The first one, I closed on it on my 21st birthday. I didn’t know much about anything. We saw a couple of modeling shows and weird people flipping houses. As I said, my realtor was big into that.

I don’t think I was going to pass my 22nd birthday when I was 21. I get it. I have never done a live-in flip but I know if you reside in the property for two of the previous several years, you don’t pay capital gains on any of the profit up until $350,000, whatever it is. That’s a high amount. It sounds like you didn’t quite hit that threshold but because you and your spouse lived in that property for at least two of the previous five years, you were able to keep all that profit tax-free. Is that fair to say?

That’s correct.

I imagine it’s not an easy thing to do a live-in flip.

No, it wasn’t. I did have one of my best friends living with us for a while and made him work from sunup to sundown. I had a job at the time, and that tested our friendship a little bit but we ended up getting the whole house down over three years. I really focused on it and did it slowly.

Remind me never to come to visit you.

We put everybody to work.

Achieving a goal takes a lot of work, discipline, and sticking to your plan. Click To Tweet

The second one went well also, and then you were living in a rental, you said?

My wife’s friend had a rental pretty close, so we moved in there. My wife was pregnant with our second son and took that summer looking at over 200 houses or properties. I went back and forth of, “Should we look at building again or just buy another foreclosure, or buy the house from somebody?” It was coming down to the wire on the foreclosure in my wife’s hometown, and it was a VA foreclosure. The first time we went to closing, they spelled our last name wrong under her name. They messed up one letter, and the VA completely shut everything down, and we’ve got pushed another month.

My son was due at the beginning of November, and this was already July when the first closing got pushed, and we had to do a full remodel on this house before moving in. We ended up closing at the end of August and really kicked it in high gear and remodeled a 4-bed, 2.5-bath, 2,000-square foot house, about two and a half months. We will have a lot of help from some friends in the trade. A lot of sleepless nights but I’ve got it done. We moved in about two and a half weeks before my son was born. I have been living there ever since. It has been a few years now.

You have done three full rehabs.

The first one is the only one I technically lived in a while remodeling. The other two, we were living at my mom’s house for that one. The last one, we had a rental that we were staying in.

That sounds like the financing was the challenge that pushed everything back that created more challenges. I know people talk about rehabs and the BRRRR Method and all that, which is great. It can be a very powerful tool or strategy but making sure that financing is lined up can be the part where you gloss right over like, “I will just get a loan and pay off my hard money lender.” What if you don’t? Nowadays, lending guidelines have gotten even tighter. That can be a challenge for sure.

We just did a new build in Florida, and the closing itself kept getting pushed back for specific reasons, not related to the financing. When it came down to it, “We’ve got to redo the appraisal for the lender now.” It’s a lot of moving parts with rehab or flip, or a new build. Financing is a big piece of it. You are still residing there in that third house, is that right?

Yes. Throughout this whole process, obviously, with selling stuff and making a little bit of money, I became more interested in real estate and talking with our realtor. He pointed me on the path of rental properties. Throughout that time, I was taking a lot out on-call for work, commercial, industrial heating, and technicians. It can be up and down but I was taking a lot on-call at the time, especially trying to get some more funds to remodel these houses.

My wife was like, “We don’t need a rental. We don’t need a tenant. You are on-call in the middle of the night, you are already working enough.” She shut that down. I eventually convinced her to sit down with a realtor when we were at our second house. I will never forget the conversation. We invite him over to see the remodel, what we did. He was really into that stuff. I was like, “We are interested in being real estate investors and landlords.” He’s like, “Hand me $30,000.” Who has $30,000 cash sitting around? I don’t have that money. He started looking around the house and he’s like, “You have a nice TV on the wall, a nice Jeep in the driveway, you’ve got a decent pickup truck. What are you doing with all your money?”

This was a realtor?

Yes. If you have met him, he’s a great guy. He’s brutally honest, says exactly how it is, there’s no BS. That’s what I really like about him. We keep in touch to this day and I was like, “He’s right. We make decent money but I don’t have a lot of savings.” He was like, “How are you going to go buy a rental property if you don’t have 30% to put down?” I don’t know, I only put 5% down on these houses. That’s where I’ve got laser-focused on budgeting.

I found BiggerPockets and started listening to their podcasts and hammered down. Mine and my wife’s budget was tense for the first 3 to 6 months, to say the least, with managing money, especially newly married and stuff like that. Honestly, we are still close to the same budget numbers as we were several years ago.

GDNI 186 | Part Time Note Investing

Part Time Note Investing: Do not put the cart before the horse. The tendency for most people and the reality is, when their income goes up, their expenses go up just as much, if not more.

As far as what you are spending?

What we were spending, and then actually putting it in the savings for investing on other things. It’s something I tell a lot of people to start there.

It’s a good point. It came up in the Mark Owens episode. It’s sexy to talk about real estate investing and entrepreneur note investing. You have your personal financial situation right in front of you that you probably should be addressing first. Let’s not put the cart before the horse. The reality is most people when your income goes up, your expenses go up just as much, if not more.

It sounds like you and your wife decided at that point to take ownership of your personal financial situation and really take it seriously. How old were you at this point in approximately? I’m curious because it’s easy to talk about all this stuff but when you are eighteen years old, you don’t want to hear about budgeting.

I grew up in a family where we really didn’t talk a whole lot about money at all or do with money. It was a “poor dad” mentality, go to work, pay taxes, and borrow money if you can’t afford it.

When you were already looking for a rental, was the goal more cashflow, long-term wealth building or did you just know you wanted a rental?

It was more long-term wealth building. Once I’ve got focused on the budget, I really was hammering down about retirement than making more cashflow during my working years, so to say. Over the past couple of years, it was more focused on trying to build up some cashflow and do the retirement thing at the same time.

Was it the BiggerPockets podcast and their forums and website?

Mostly the podcast. I drive a lot for work, sometimes three hours a day, constantly listening to all their episodes, anything I could find on finance, and how to budget better. We ended up with a large sum of cash and it’s like, “I have been doing this budgeting, now what do I do?”

How did you end up with this large sum of cash?

By setting the budgets and actually pushing the money into accounts.

That’s funny because the answer is right there in front of you but that sounds boring and you just followed the process that you had laid out for you. You both had agreed upon that you followed your budget. Eventually, it grows, and there you have a large sum of cash. It almost sounded like you’ve got this large sum of cash one day that just showed up but there’s a lot of work and discipline and sticking to your plan to get to that point. What happened next?

When you think about things too much, you'll just get paralyzed by it. Click To Tweet

Typical back and forth with my wife about getting into rentals and real estate. With the market going, I don’t remember the time but the prices are coming up on everything, and talking with our realtor again. He’s like, “Hold off.” My wife wasn’t really for it. We just kept pushing money to the side, and I kept trying to push the rental thing, and she was not having it. I’m like, “There’s got to be a different way.”

It was the summer of 2019 when I stumbled upon Dave Van Horn’s episode on BiggerPockets and was like, “This sounds interesting and easy. Other people can do it, why can’t I?” I started asking other people around me if they had ever heard of this, and they told me it was illegal. I was going to go to jail. “You can’t own somebody’s mortgage, you are not a bank,” and things like that. I said, “Screw it.” I kept listening to podcasts and searched more and came across Dan Zitofsky. He’s still doing the podcast, the We Close Notes crew, and was listening to him for a while. I stumbled upon Dan in one of his interviews one time. Something about Dan, I was like, “I really like the way this guy talks, the way he speaks. He seemed to know about a lot of things. I want to reach out to him.” Finally, one day, I called him on my way home from work and had a one-hour call.

Dan seems like a real guy, very authentic. I know he had a previous career as an aerospace engineer or something like that.

Something very technical.

He presents himself as an average guy.

I find him easy to talk to the first couple of times we talked. I figured out the whole process of getting on his mailing list, JV deals. This was at the summer that we were searching for our we are in now. My wife was pregnant. I came home and was like, “I’ve got this plan. I’m going to do these JV deals with this guy.” She’s like, “You have never met this guy. Is this guy real? Are you crazy? We have a one-year-old. I’m pregnant. We are living in a small rental. We are trying to buy a house.” The day after we closed, I’m taking some of our cash, and I’m doing this JV deal. There was an interesting conversation but she agreed.

Do you think that was more about the reason she agreed? Do you think that was more about the timing of what was going on with your life, your family life or do you think it was like, “I’m on board with notes but not rentals?”

She thought I was crazy and didn’t understand that you could buy a note or mortgage and do any of that stuff when being pregnant. We are trying to close. She knew I had lots of hours to demo and start redoing things. It was a lot for her while being pregnant at the same time. She somehow agreed, and the day after we closed, I went to my bank and I was like, “I have never sent a wire before.” I sat down and figured that out. After I left the bank, I was like, “I just wired a decent amount of money to somebody I have talked to six times.” I did do some due diligence. I looked him up on the internet. I didn’t just go blindly into it, and Chris freaks out.

At some point, you are taking a risk. You can’t control every little facet of every deal or every partnership you go into.

You will get paralyzed by it if you think about it too much. I was like, “Whatever.”

That was one JV deal?

It got funded in September of 2019 that lasted for about eleven months. There was a sub-performing loan that Dan was able to work with the borrower or get them re-performing. I don’t know if he sold it on Paperstack or where but I’m getting a decent price for it and got a 23% return.

Part Time Note Investing: Having a mentor and having someone who you can reach out to and ask twice about daily matters or whatever it is to actually get pointed in the right direction helps a lot.

Dan was willing to go over things and have you involved in the JV deal. Listening to the podcasts, I didn’t want to be the investor that’s actually bothering somebody, “I don’t want to work with this guy in the future because he’s calling me or emailing me.” I sat on the side of the line and waited for coordinated statements.

Joint ventures, it’s a controversial topic, and it doesn’t need to be, in my opinion. JV deals happen all the time, not just in notes but in real estate and other asset classes and investment strategies. It’s not passive, you are supposed to be involved in the higher-level decision-making, at least because a passive investment could be seen as a security if it’s entirely passive on your part. Dan or whoever the operator is responsible for the day-to-day. Typically, how it’s structured is one party is responsible for the day-to-day management of the deal. It sounds like he did a great job on that side of things.

I have no complaints. If the deal flow were there, I probably would have just stopped doing JV deals with him but he had several other investors that were on a waiting list. It sounded like there was nothing coming down the pipe soon. At the same time, I should back up. It was a pretty scary moment. It was two weeks after I wired Dan the funds, there’s not a whole lot of communication between the whole time there.

It came out about the person that ran the podcast and all their issues and I’m like, “I found Dan because of this person. How much are they associated?” I had a mild panic attack. I called Dan right away, and we talked through everything. He answered all the questions I had. He didn’t get offended by any. I’m trying to group them together with him and talk it through. That was a little nerve-wracking for a minute but Dan came through on everything he said he was going to do.

That was pretty wild. I remember that information coming out. I was actually in Taiwan visiting my brother. I was on the Good Deeds podcast that week as a guest. It was the varsity episode or something. I remember when all the news broke out about what you were talking about. Thankfully there are some honest, understanding people who were part of that training program and can move forward. What did you do? You did the one successful JV deal, then what was next?

After that, I was really into it. After the 23% return, I stumbled upon Gail and Chris’ podcast. That became a daily thing of listening to probably every single one of their podcasts, 2 or 3 times trying to learn. Finally, I reached out to Chris, had a call with him. I was really busy with work at the time, and he was going to ask me if this was something I wanted to do on my own or just be more passive? We decided at that time, passive is the better thing. I’ve got into one of his funds. It goes on. In the fall of 2020, that one is still going on. Shortly after that is when you took over for Gail on the podcast. I was like, “Let me call this Jamie guy. He’s got the partial.”

We decided to call you. I reached out to buy a couple of partials, get some of the funds we had left over from our remodel working, and you convinced me to become a note investor myself. We discussed my goals and what I wanted to do, expectations on returns, and almost try it yourself and see what happens. The rest is history.

Now you own three notes, right?

I own three CFDs. One is in Arkansas, one is in Ohio, and one is in Mississippi.

I know we are not going to have time to get into all the weeds of how your decision-making went but do you have anything to offer for the newbie note investor as far as deciding 1st versus 2nds or CFDs versus notes, or probably, more importantly, non-performing versus performing?

With the little experience I have, I would say go for something that’s performing or at least sub-performing where there is contact with the borrower. With a full-time job and three kids, three and under, it’s a little hectic to stay on top of everything that you would probably need to do with non-performers, timelines and deadlines, and stuff like that. As far as CFDs, that was basically the only thing I could really find.

That’s what was available. 1st versus 2nds. It goes back to what was available. That’s the world that Dan, Chris, and I were in. There are a lot more first position notes out there than seconds, and seconds can be a niche within this niche. What would you say has been the biggest challenge so far as going through the process of buying your first three notes, CFDs? What has been the biggest surprise as far as a challenge?

It's good to be a part of a community where you can bounce questions off of people who are dedicated to seeing you succeed. Click To Tweet

Working with servicers. Some of the vendors I use for due diligence were really good, great at communicating. I was like, “What are Chris and Jamie talking about this vendor nonsense?” Emails back and forth, phone calls, and then it got to the servicer part. I was like, “Now I understand why.”

How many times have I told you, “I told you so. See what I mean?” Quickly, we get to the phrase that you tease me for is, “It depends.” It really depends. There are some great servicers out there. Every servicer has pros and cons but this is why we started because there’s an opportunity for improvement there in the note space. Certainly not easy to start a servicing company and effectively run one but to say there’s frustration in the note investor space with servicers would be the understatement of 2021. You are working with a couple of different servicers, I believe, is that right?

Yes. I have two different ones now.

What would you say has been in this a surprise as far as what was maybe a little bit easier than you expected?

Honestly, the easiest part would be having a mentor and prop you up on some high pilots but still having someone that you can reach out to ask for advice. Daily, weekly, monthly, whatever it is to actually get pointed in the right direction because there are different ways to respond to emails, attorneys, servicers, what to say, what not to say.

Apparently, I don’t respond to emails.

We need to work on that a little bit.

I actually think I’m pretty good with it. That one, I don’t know what happened there. I apologize.  That’s made it easier for you, having somebody to bounce things off of and to lead you a little bit.

If we end that conversation like, “If you would like me to try this on your own, you sound like you could work your way through it,” and that was the end of the conversation, it would probably take 2 or 3 years to get to even where the point I’m at now because even the LLC paperwork and the bank account. The thing is that I didn’t really think about that much until you actually have to start doing it, and it’s on you to do. There’s a lot more than, “I’m going to analyze this deal, put an offer, work with somebody for some funds.”

We could spend a whole episode just on that. We love to talk about due diligence on a deal. That’s obviously important. I know people who have their first deal, didn’t actually exist. In other words, somebody that I know, his first mortgage note that he purchased turned out to not be real. That’s a problem. I’m certainly not saying don’t do due diligence on a particular deal but that is only one part of this business.

I will be honest, when I started doing mentorship, I underestimated certain things I had done previously from our rental business and things like that. Setting up your LLC or your bank account for your LLC is a good example of, “That’s right.” I didn’t expect to be mentoring about that, frankly, but that’s a really good example of, “You are not going to find this in a note investing course, most likely.” It’s good to be a part of a community where you can bounce questions off of people or have an actual mentor who’s dedicated to seeing you succeed.

My role, personally, has been to just give you information on what’s worked for me and what hasn’t worked, and hopefully cut your learning curve, cut that time down. At the end of the day, you are the one that’s the active note investor, and I’m just here to provide support and guidance. At this point, you’ve got your three notes. They are all CFDs. Are they performing? Nonperforming? How’s that looking?

GDNI 186 | Part Time Note Investing

Part Time Note Investing: Be stern with your vendors. You don’t have to be rude or arrogant, but you need to stick up for yourself.

I will call one a performer, one a partial sub performer. They pay, then they don’t pay for 2 to 3 months. The lumpy payer. The other one, that borrower is about months behind now. There is communication, and they do make double payments here and there but it seems like they are slowly falling more behind. We have reached out and tried to have an open line of communication with the borrower to find out if there’s something we can work on together to get her back on track. Altogether, seven partials. Three partials with you, three with Chris, and still with Dan. I like those. It’s real boring but it’s nice. Once a month, you check your bank, and money is there.

There are different ways to do partials versus hypothecation. It can definitely be more on the passive side of things and as the partial buyer. I have been a partial buyer myself and it is nice. It’s like, “That’s right. I have this other thing that pays me every month.” That’s a whole topic in and of itself. You’ve got three whole notes. You’ve got seven partials and some other notes, and you mentioned the fund.

Two funds.

We are hitting on the fact that there are many ways to skin the cat. You don’t have to be an “active” note investor. You can be more passive. There are many ways to make money and notes. It really depends on your goals, your personal situation. You have three young kids, you don’t have a lot of free time, and you do pretty well at your real job. We have talked about this previously but one thing to mention is, it’s easy to make it your goal, to quit your job and become a full-time note investor, full-time real estate investor. That sounds great but maybe that’s not the smartest way to go.

I don’t want to put words in your mouth but with your circumstances, it makes more sense for you to keep note investing as a much more part-time thing as compared to your day job. I have told you it makes sense to just double down on your day job, and that doesn’t mean in 5 or 10 years, things can’t be different. I just love the fact that you can approach this from many different angles, and it’s up to you how you want to do it. Do you have anything to add to that?

If people are on the fence about getting started or they don’t like their job or want to leave their job, go out and try to buy a couple of notes and see if you like it or not. There are days where I really do enjoy going through a lot of this stuff in the “note business.” There are other days where I ask myself, “Why do I even bother?” I enjoy learning different avenues or whatever you want to call it. Most people that full disclosure, you paid to mentor, you wouldn’t be like, “I don’t think you should really focus on this as much.” It’s like, “If that person is telling you something, that’s some hardcore advice.”

It’s the truth. What I find good about our mentorship is that you have always been brutally honest all the way, from going through some of the due diligence to the questions I brought up. It’s like, “They are CFDs, this is what you are purchasing. Get it out of your head.” I love my day job. I like what I do for a living, I make some money doing it. My plan is to keep doing what I’m doing, maybe do this on the side, maybe convince my wife to buy some rentals if there’s never another downturn in the real estate market here.

That’s another part of it. With the pandemic and the foreclosure moratoria and eviction, the courts are shutting down, and everything and deal flow have been challenging. It’s not only your personal circumstances but it’s also the market conditions that can play a role in your decision-making processes. Maybe in 2022, I do think things will open back up, some as far as non-performing loans, and things can change outside of your own situation. The thing is now, you have a lot more knowledge than you had two years ago.

You are putting your money to work. If you buy a rental, you’ve now got the debt side of it and the mortgage note side of it. Not saying you are the expert in this space yet but you’ve got a lot of knowledge. Most people in the US have never even heard of mortgage note investing. You’ve got a lot of knowledge into this little niche that can really pay dividends down the road. Who knows where we will be in 5 or 10 years? We are running out of time here. I’m going to fly through some questions and see where it goes. What’s a mistake you have made so far in your note investing career?

Not being stern with a servicer that made some overpayments into my account, and I can’t get them the drawback funds before the end of the year. It’s driving me crazy. Be more stern with your vendors. You don’t have to be rude, ignorant or anything like that but stick up for yourself basically.

Room for improvement in your personal note business?

Staying more organized, staying on top of what the next steps are, how often to follow up, and not waste time going on and checking the servicer portals for no reason.

Take a breath every once in a while and look at your progress. Click To Tweet

That’s a really good one. We have a call after this to go through Podio.

I use Podio more to my advantage.

How about room for improvement in the note space in general? Not your business but what could the leaders in the note space work on to help improve note investing for everyone?

Honestly, the servicers. Have better communication, it seems like it’s the Wild West, which is why it’s appealing to people, and there’s money to be made but it’s crazy when you start thinking about how the processes are done at some places. How do you people sleep at night? Maybe it is for the mentors or the people that are out there teaching is maybe back up getting started in old business and say, “We need to focus on talking to an attorney about opening your LLC and how to structure things and what kind of bank accounts.” Bring it back to the basics, like you said, even you forgot about until I’m like, “How do I pull this off?”

It can cut both ways because I know people will use that as an excuse not to take action. I don’t know whether my business if I should buy notes in an LLC or a trust, and therefore, I’m going to research for all of 2022. The flip side is you do need to think about that. Not only that but what we talked about on the Wealth Without Wall Street podcast is your investor DNA. Should you be buying notes? Determining what type of investor you want to be, should you be buying rentals? Should you be buying notes? When you said back up, what my mind went to is, “Here’s how to do due diligence on a note or note is what you should be getting into.” Is that what you should be doing?

Especially in my background, a hands-on mechanical guy. I can turn on a computer, I can make some pulpy spreadsheets but remember when we first started, trying to go through some Excel stuff and some calculations. I was completely lost on a lot of stuff. It’s like, “Maybe I should have backed up and educated myself more with systems of that sort.” It seems like a lot of note investors are engineers.

That is true in notes in real estate, you get a lot of engineer types or Excel wizards, and math and science type people who are drawn to real estate investing and note investing because running the numbers is pretty important. That’s a key skill for sure but, again, Chris has said before, “Once you buy the deal, you can throw out your spreadsheet because that’s just what your projections were going in.” It’s pretty neat that you have shown that you don’t have to be an Excel wizard. You can still take action and become an active note investor when you are more of a hands-on trade person versus a computer genius.

Even after the first couple of our sessions, you were like, “Are you sure? You seem more of a rental, fix stuff type of thing.”

You will hear Brandon Turner talk about this on BiggerPockets. He knew how to fix things, so here’s a reason a hands-on person might not want to get into rentals. Don’t let your wife listen to this one but it’s hard to scale when you know how to fix things. You mentioned you had high standards on your rehabs, and maybe from a numbers standpoint, that didn’t help things, probably slowed things down, too.

It’s cool that you know how to go fix things, and I’m sure you fix all kinds of things on pretty much any residential property but you can’t scale that way. At some point, if your goal is to acquire more than 1 or 2 rental properties or if you want to do long-distance rental investing, you can’t be that guy.  That’s the person fixing things. Play to your strengths, and one of your strengths is you know the property itself, the building, how the mechanical systems function but that only goes so far.

I remember Brandon talking about that a lot when he was going through that transition. Josh was giving him a hard time about it all the time like, “Stop fixing the water heater. Stop doing this, focus on what you are good at.” Now, look at them.

We self-managed our rentals for many years. I recommend people do that initially, depending on the circumstances. That way, you know if your property manager is doing a good job, you know what a water heater costs, as an example. If I’m running around to my rentals, fixing stuff, I have no time to be looking for deals or doing my bookkeeping. If you are trying to make it more than just one rental or a couple of rentals in your retirement portfolio, then you can’t be that guy fixing everything. I know we’ve got off on a tangent there but how about your goals for notes in real estate? Anything specific in the next 5 or 10 years you want to accomplish?

Part Time Note Investing: You can either lose money and do what you want to do, or sit on the sidelines for years and never do anything- but you’re wasting money doing that too.

It’s market-dependent. I’m not independently wealthy by any means. Allocating money to certain things, there are a lot of thoughts that go into it. We just allocated the last little nest egg we had saved up for investing. Now, I’m out of money. The plan is to focus on my full-time job for the next six months, see what happens in the market. If there is another downturn, I would definitely like to take advantage and try to get some rentals under my belt. Staying away from the fix and flips just because I don’t have time or the energy for that. It’s up in the air and depends on what the market does. Trying to rat hole some money.

Last a couple of questions here. What is a good deed that you have done or you hope to do?

I haven’t done any in the note space yet, but hopefully, someday I can help a borrower stay in their home or help get them out of a bad situation, use more of the funds that we make from notes to give more to charities. My wife is a nurse, so she likes to give to the children’s hospital every year. I’m a big supporter of veterans, so we give to a different veterans’ association around the area.

We don’t talk about that enough. Entrepreneurs and business people can easily get painted as greedy, selfish, money-hungry people. For the most part, they give back, and you are able to control, influence, and support organizations and nonprofits. It sounds like you do, that’s good. How about a nugget? You have already covered a bunch of them but a Note and Bolt for our audience, something that they may not learn in a training program. How about just a piece of advice for a newer note investor?

If you are on the fence and it’s something you think you want to do, just do it. Even if you waste a little bit of money setting up an LLC, bank or whatever it doesn’t pan out well, at least you tried at the end of the day. You can sit on the sidelines for years and never do anything, you are wasting money doing that, too. Don’t get caught up in social media, the big players out there that are constantly posting videos in Rolls-Royce. Do your own thing, stay consistent. My thing is to stay quiet and humble.

A lot of people are big downers when you talk about investing, especially with real estate. I don’t take too much advice from people that haven’t done what I’m trying to do anymore. It was a big change in my life. It turned into analysis paralysis when you have people talking in your ear constantly about how their uncle lost $20,000 here.

Go about your things in a logical way and stay focused. I like what you said, “Take a breath every once in a while. Look back every 3, 6, 12 months and look at your progress.” Day-to-day, it’s like, “What am I doing?” If you look back to April or May, it’s like, “I didn’t have an LLC. I didn’t even know how to form an LLC.”

I’ve got a bunch of things that popped into my head there. In the Matt Fore episode, he talked about running your own race, and he’s really committed to just running his own race. Meaning he’s not running Mike Schultz’s race, he’s running Matt Fore’s race. Mike Schultz’s race may not be the one for him, and granted, he runs 100-mile races in real life.

This quote is credited to Bill Gates, you see different versions of this quote, “People overestimate what they can do in one year and underestimate what they can do in ten years.” You can change that to one day versus one year, the point being, if you look at the micro-level, it’s very easy to say, “I didn’t make progress today or this week.” Chris does his weekly Notes and Bolts from the Good Deeds Note Investing Facebook group. Every Friday, we do, “What happened this week?” Some weeks, it’s like, “I definitely felt busy but I don’t think I made a lot of progress.” It’s very easy to get down in that sense.

If you take a look at six months or a year, it’s, “I’m making progress.” It could be one step back for two steps forward. There were 7 or 8 Notes and Bolts in there for our audience. Mike, this has been really good. I didn’t give you a ton of warning, so I appreciate you hopping on. You could have said no but I gave you more warning than Steven got that one time with the five minutes.

He did great for five minutes.

We need to bring him back on. I told you once if you buy one more note, then you have one more than him, then you can mentor him. Is there anything else you want to add for our audience here?

Don't get caught up in social media and the big things. Just do your own thing and stay consistent. Click To Tweet

Stay consistent. That’s the biggest thing I have been learning. Surround yourself with people that are doing better or doing things that you want to do. I told you, just taking that breath and looking back, this year is changed. Working with you and talking with Chris, being around you guys has refocused a lot of things on family and work, and staying organized with life in general, all the great things that come with it.

I try to do the same thing. It takes a page out of somebody’s book that you respect, and then it doesn’t mean I have all the answers, doesn’t mean Chris has all the answers but I do have a mentorship program. Chris and I are really bad at promoting our own stuff on here. I am planning to add some more structure to my mentorship program, you, and some other people I have worked with. I do like the flexibility part of it but I’m going to add a little bit more structure to it. Chris has his membership group that is just taking off now. That’s going to be really good as far as a small community where you can learn from Chris but also each other. There are resources in there. I recommend people check out both of those things.

I did a couple of free episodes. I know Chris doesn’t like people being quiet. He will pick on you. I was in the middle of working on a boiler and listening just in the background, and he decided to pick on me because I wasn’t commenting. I’ve got a lot out of the three that I have done.

Chris is really good at challenging people and drawing out the best in them. I wouldn’t be on the show, I wouldn’t be here doing this if he didn’t pull that out of me. I don’t know if he will ever read this but thank you, Chris. We went a little long but those are two things people should check out for sure. Mike, I appreciate your time. I know you are a busy guy. I know you do well at your day job, so I appreciate the time you spent here with us. I know people are going to get a lot of value out of it. Where can people reach out to you if they would like to reach out?

Through the Good Deeds Note Investing Facebook podcasts group. You can find me there. I’m not very active by any means. I do comment every once in a while.

Your business name for your notes business.

It’s MK Notes. Nothing fancy.

Thank you, sir. I appreciate your time. For the readers out there, please share, like and subscribe. Don’t forget to go out and do some good deeds. Take care, everyone.

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