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How To Create Seller Financed-Notes With Justin Bogard

August 4, 2021

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GDNI 163 | Seller Financed Notes

 

When you make seller-financed notes, make sure you give value to your clients. Then go out there and let the world know what you do. The show’s guest in this episode is Justin Bogard, the President of BrightPath Notes. Justin talks with Chris Seveney and Jamie Bateman about how you shouldn’t be greedy on interest. You need to do what’s fair because the goal is to give value. And you earn along the way! Join in the conversation and discover the secrets behind Justin’s massive success. If Justin can do it, you can too! Tune in!

Listen to the podcast here:

How To Create Seller Financed-Notes With Justin Bogard

I’m with my fellow co-host, Chris Seveney. I feel like it’s been a while since we’ve been together. Now, we are joined by Justin Bogard of BrightPath Notes. Chris and Justin, how are you doing?

I’m doing fantastic and I got to watch the new Space Jam movie with my kids, so that was the fun thing I got to do.

Justin, why don’t you tell us about yourself and what you do and let the readers know about your company.

When you start a business, you have to get out and let the world know what you do and what value you provide. Click To Tweet

My name is Justin Bogard. I live close to Indianapolis, Indiana. It’s Lapel, Indiana. It’s a small town of about 3,000 people. Together with my wife and me, we’ve got four kids. You can imagine, that’s why I have no hair. I can’t grow hair because I keep losing it. I grow it down here on my face. I don’t grow so well on top of my head. It’s all wrestling with the kids, getting the carpet rug burn on the head. That’s what burned up. I’ve been in real estate for a few years now, specifically in the note space. I was like one of those guys that was watching HGTV and was seeing all these cool flips and were like, “How are they making all that money? I’m not that smart. I could probably do this because they don’t look that smart either.” I found how challenging it was.

I learned about note investing quickly after that, by one of my mentors coming to town and teaching about it. I got turned on to the idea of being the bank and investing passively and not having to deal with tenants, toilets, trash or contractors. I was like, “My life would be so much simpler doing this.” I changed my whole investing mantra over to notes and fast forward, I’m mainly in performing loans. I do a ton of seller financing, where we buy seller-financed loans, we also help create them and create them for our own inventory as well. That’s where we landed. We educate a lot somewhere to you guys, to our local community and across the country. We broadcast monthly to showcase our experiences with this note investing and we have our own podcast as well. We haven’t had you on, Jamie, but we had Chris on not too long ago.

GDNI 163 | Seller Financed Notes

Seller Financed Notes: We find most of our deals by doing old-fashioned direct mail type of campaigns.

 

Share with us the name of your podcast as well so people will know where they’ll look for information because we do have a lot of people who are interested in the seller financing component as well?

It’s called the 2 Wealth Show, which doesn’t focus mainly on note investing specifically. It’s how to grow your wealth or what’s the best way to put your wealth to work inside of real estate. One of my co-hosts is a short-term rental expert. She talks a lot about short-term rentals and I bring the note value to it.

I always joke with people on Facebook when they talk about how to build wealth quickly and don’t take this the wrong way. My first impression is because I always post them like, “Marry into it.” You’ll get a chuckle out of people. I had a few questions because I wanted to jump into seller financing and when you’re just talking about that. One, if you’re willing to share, I was curious who your mentor was? That was my first question. Secondly is being in rural Indiana, is there a lot of your deals in Indiana? Do you go outside of Indiana? What’s your target focus?

First and foremost is my mentor that got me into business has helped me numerous times. His name is Eddie Speed. He’s been in the business for many years and he’s got people that he’s mentored and taught that are very high level and those are also my mentors as well. Starting with the community that he built for his educational program is where I started and I branched off to others as well. That helps me along in specific topics in the note space and seller financing.

He’s been on our show as well. I recommend reading that episode. That was a really good episode.

You cannot walk away without learning something when Eddie talks, even if it’s for ten seconds. He adds so much value to whatever you do. I don’t invest in Indiana. I am lucky to find notes in Indiana because I live here. A lot of people who know me know that I’ve branded myself here in the region, so I do get some deals by happenstance but we find most of our deals doing old-fashioned direct mail type of campaigns. We’ll purchase a mailing list and stuff, and get deals that way. I like to invest in the blue-collar areas, the Midwestern states and some of the Southern states. That’s where we find a lot of our inventory and where we end up investing. You won’t probably see me in New York and New Jersey or California. I’ll probably land in the more unpaid balances that are in the $60,000 and below range.

You mentioned direct mail and one of the things people sometimes get caught up in is, “Direct mail you have to keep repeatedly doing it without getting too into the details.” Roughly how many letters do you send out? Do you create them yourself? Do you have a third party? What do you spend per month? What’s your hit rate? One of the things probably, based on what you said, that’s given you an added benefit is, it sounds like you’ve branded yourself in certain areas. When people know or say, “This is a perfect deal for Justin,” they probably go your way. It’s similar to something that I had with the seller on all of these hairy CFDs. They’re like, “This is Seveney loan, and so forth or Seveney take.” I’m curious from that perspective on that reach out. What’s that process and some information on that?

You have to be patient because the patient man wins. Click To Tweet

Starting a business, in general, you always have to get out and let the word be known of exactly what you do and the value add you can provide to somebody. Since there are very few people in the note space like ourselves that brand ourselves as note investors to go to, you’re not going to step over a lot of competition. It’s a niche business and a lot of people remember that, “That was something unique that Justin said. He’s in real estate but he doesn’t actually own the real estate. I wonder if this would fit for him.” Doing that over the past several years, people understand, realize and come to my direction as far as finding me in an REIA club, on the internet or locally. When somebody knows a real estate investor like, “Justin does land contracts, notes and mortgages. Go ask him.” That’s definitely one appall feed.

As for your question about direct mail, I typically send out about 1,000 to 1,500 letters at a time when I do direct mail. The response is good as far as what I consider the open rate. I’d say I get at least a 10% open rate. What I consider open rate is someone’s looking at our envelope. They opened the mail, read the letter, pick up the phone and call us out of curiosity, and be like, “Why the heck are you sending me a letter? I don’t understand. I want to understand what a note is.” They ask me all these fun questions. Let’s say we sent out a thousand letters and we may get 75 to 100 phone calls.

Out of those phone calls, they get weeded out quickly. There are a couple of F-bombs that get dropped perhaps or like, “Why are you bothering me?” Weed through that and then you can thin it down to maybe about twenty people that you’re talking to that are semi-serious and may be about ten people are able to get a quote to them. You should be able to get a couple of deals, maybe 3, 4 or 5 deals out of that. The selling cycle is long. It’s not like receiving a tape, going through it, putting your bid in, do you pass or fail? It’s not that quickly. You have to be patient and the patient man wins.

I’m sure it varies wildly but what discount do you typically get on a note like that?

You can imagine these notes that are created by what I call mom-and-pop sellers. They are not written the same way a bank or fund would write their notes. There are many challenges within this document that you need to sift through and fix. The discounts can range anywhere from 20% to even close to 50% off of whatever current balance is even for performing loans. It also depends on how motivated the seller is. I tell people all the time that the best deals I’ve ever done are seller finance deals but they’re the most work, too. They’d need a lot of help to bring them back up to a level that you and I can sell them at to somebody that’s a first-timer that needs something more turnkey.

You’re adding value to the asset.

Prop a good point there, too. Jamie and I got sent a seller finance deal from somebody who I’ve done deals with and they do a lot of seller financing like yourself. It was a land contract. Unfortunately, it’s in Illinois and I’m looking at it. The land contract, the way it was written and I’m reading it as, “This is going to be almost impossible. If they go delinquent, they try and take this thing back.” They got it under contract for a decent price but it was still probably more than what I would even be willing to pay because it’s so much hair-on. Just because it’s a land contract, there’s still a lot of devil in the details where people need to understand that these are written by people who probably have gotten one off of Facebook or somewhere else. It’s very rarely were they written by an actual attorney.

Even the ones written by an attorney, you can poke holes in it far. I’m sure you’ve seen thousands of loans by now and documents to where it’s easy to poke holes to some of this stuff. I look at them and browse through them quickly. I’ll send it off to somebody that knows documents well and I found a resource for them to look things over for me and poke holes in it to save me on time. It is funny when you look at stuff and they got their amortizations wrong. They don’t have a maturity date in there, a beginning date or they’re trying to add taxes and insurance into a full payment and not breaking out P&I. I would say probably 9 times out of 10, I’m amending that contract before I even buy it. I’ll have the original lender and the borrower both sign it to move forward. I already know that ahead of time and build that into my cost.

GDNI 163 | Seller Financed Notes

Seller Financed Notes: Make sure to vet pay history to ensure you have a quality tenant or borrower.

 

What does your buy box look like? Do you have a threshold as far as principal balance or a minimum number of payments made? Does that vary?

It does vary a lot and you know there are 6 or 7 values we can all agree on that value is on the note before we’d even buy it. Those same rules apply to seller financing. I bought a loan with one-month seasoning and that was because it was a $50,000 down payment on a $50,000 note. I didn’t see a lot of risk in it, so I bought it and it still paid off pretty well. I’ve also seen a note to where it had hardly any down payment, basically zero but I needed to see at least two years of seller financing pay history for me to believe that borrow was invested in staying in that property.

I bought deals that way. There are a lot of things that weigh into my calculation. I don’t have a steadfast rule but I’m a gunslinger. I look at a deal and I get a feeling about, “Do I like this or not? Something’s off about this.” Chris and I talked about it before. You can look at something and if something’s off about it, you walk away from it because you know it’s going to be a problem. I’m lucky I don’t have to be desperate enough to buy a deal. I can pick and choose what I want now since I have more inventory to choose from.

Before you hop on, I told Jamie, “I like this guy.” Jamie’s laughing because now Jamie’s like, “This guy is just like Chris.” “What we mean by that and I’ll go a little detailed because people call me a gunslinger as well in certain details but you hit the nail on the head like I want to jump through and give you a hug.” You talk about risk. People put everything into a box and never measure the risk. People bid it all the same. A $50,000 note with a $50,000 down payment on newly originated, compared to a $50,000 note with a $2,000 down payment, you’re going to bid that differently, even though the numbers are 90% of them are all the same. It’s the same thing on some of the newer stuff that has a lower down payment. You do want to see those 12 or 24 months because that does have an impact. I find too many people in this business. They’re like, “I got a calculator. I just put everything in it and it does what it tells me.” It’s like, “That’s one aspect of it but you’ve completely ignored risk from that perspective.” That’s why I wanted to digress a little bit more on that.

Every note has the numbers and a story. There’s art and science to evaluating every deal. It makes a lot of sense. What does your portfolio look like or what’s your plan with each note that you buy? Are you brokering notes? How are you exiting most of your deals? What’s your focus?

The portfolio as it stands is 100% performing. We haven’t bought non-performing in a few years for our portfolio. There has been a couple of people that we’ve sold non-performers to that are seasoned enough to handle it. We typically don’t want to walk a deal with somebody that’s non-performing, especially their first time. We don’t like that model as much. A lot of people do that. It doesn’t fit what I do. I love the performing part of it. Through COVID, we were very fortunate. We had excellent underwriting because of the payment history.

We didn’t see a glitch on our radar for any of our portfolios. Out of our investor’s portfolio that we manage and see, we probably have about 75 to 80 notes that we see easily. We had about three that I can think of that even had a problem during COVID. We made sure that we vetted those pay histories very strongly to ensure a quality tenant or borrower so that they wouldn’t have a problem in cases like this. That’s our portfolio the way it looks now.

Our intention on what we do with an asset that we buy is based on where that debt came from if it was debt. In our company portfolio, we have cash and debt service that we have as well to buy loans with. In our retirement accounts, those are a little bit different. I’ll probably put more conservative investments in my retirement account, my wife’s account and our kids’ trust accounts, just because I’m playing the longer play there, I’m not trying to aggressively manage that account. I want to set and forget it. On my company account, when we work with investors, we go in a different direction because we can be more aggressive with it. We don’t buy aggressive notes that are performing per se, but we can take on a little bit more risk like what we talked about earlier.

When the numbers make sense, do it. Click To Tweet

Here’s my question I was going to go to. It sounds like, you don’t have many if any, loans that are performing that typically go full non-performing. They may miss a payment here and there and you’ll work with them but if you add a percentage, it seems like it’d probably be very low of the loans that were performing that flat out goes 100% non-performing that you may have to either sell or take legal action on to set a fair statement.

We’ve been very fortunate. I’d say probably 2 out of 100 that I can think of have gone south, either we’ve owned, sold to an investor or helped buy foreign investor. We were or they were then very well protected in the event that this would happen to where there’s a ton of security for them to where they probably don’t feel like they’re going to even come close to what they have into it, so it will be above what they have into it.

One of the things that I’ve heard about the seller financing part of the due diligence that I think is, there’s the underwriting component but what I see a lot of times on the seller financing deals is inflated property value where the property is worth like $60,000 or $70,000 and they’re writing $100,000 note because they’re trying to get that note to be comparable with rents and so forth. Is that a true statement or am I being a media person like one little thing happens and it gets blown out of proportion?

Everything happens with seller finance. These people get very creative. We’ve had people that said, “I’m going to write a 0% note but I’m going to put $25,000 above the purchase price to cover my interest.” They don’t have to pay taxes on it. I’ve got people that think they’re going to outsmart the government. We’ve seen all sorts of weird things. I’d say more times than not, they end up selling the property, a little bit above what they should but most of the time, it’s on par and with the appreciation going up, I haven’t seen a lot of underwater land contract or note mortgages that are seller financing.

Are most of yours notes, are they mostly contract for deeds or land contracts?

They’re mostly land contracts. I harp on people all the time in my local area about don’t write land contracts. You need to write a note mortgage or deed of trust, whatever state you’re in. I say, “There is a time and a place to write a land contract but if you don’t have debt underneath it, you should be writing a note mortgage.” “Why do you buy land contracts?” I go, “That’s a good question because the deals are too good to pass up and then I can convert them.” If I want to, I can convert them and add more value to them but it’s the culture of the Midwest. Everybody thought the land contract was the right thing to do because they could evict or forfeit, have the borrower be forfeited in their contract and we all know that judges are not going down that route very often.

I’m not heavy into land contracts anymore but I still have 100 in my portfolio. For example, back in the day, Ohio and Indiana used to be land contract countries essentially because you could do the forfeiture. In Ohio, it gets lengthy and expensive to foreclose. In Indiana, it’s the same thing. In Michigan, honestly, there are some redemption rights but I didn’t think it was that much of a difference from that process. One of the things where I see people, as you start getting into some of the nonjudicial states to South of you, Missouri and some of these other states, they’re writing these land contracts.

I’ve found that it’s faster to foreclose with a mortgage and note because a lot of these courts don’t understand land contracts, and it’s a nonjudicial state that you’d be able to foreclose anyways in 90 or 120 days. People go online or have some gurus say, “Do land contract no matter where you are.” There are certain states like Iowa, if it’s not recorded, it’s a $200 a day penalty from when the date it originated. Maryland has some crazy laws as well. Do you see that in the Midwest, where people sometimes fall in love with a land contract and don’t know the reason why they even did one?

GDNI 163 | Seller Financed Notes

Seller Financed Notes: Don’t write land contracts. You need to write a note mortgage or deed of trust.

 

It’s culture and driven by the old guys that did it before them, who they learned from and that’s what we’re trying to get rid of. We’re trying to wash that mentality out and let people understand you can write a land contract and it’s still an enforceable document. It’s just not the best document for the lender. I feel that you’re a lot better off not being on that deed. That’s why I love the note mortgage but we have way more land contracts in our portfolio than we do note mortgages.

I got an updated water bill for the one I have. It’s up to $26,000 on one of the properties.

Did they just leave the water on for two years?

They haven’t paid it since 2009 or something like that.

That is one thing I will say about land contracts. They do give a lot of podcast material, generally speaking.

They get a lot of press than note mortgage.

Here’s the other thing I hate about land contracts. My go-to post office box, all this is like tax bills and everything of land contracts.

We did get a letter in the mail from a satellite company wanting to throw down a dish or one of their towers on the property that I had the land contract on thinking that I was the owner of it. I’m laughing, “That’d be great to get an extra $400 or $500 a month just leasing that sucker on there.” It’s funny what you get in the mail for being on the deeds.

You said you do also originate some owner-financed deals. Can you walk through an example for us?

One of the last deals I did was a fun case study. I’ll try to be quick with it. It was a piece of land that I bought in Florida in one of my retirement accounts. It was a small retirement account and I did this back in 2017. I had forgotten about it. When I first got it, I was like, “I’m going to be able to put a sign in the yard and someone’s going to buy this piece of land from me.” I found out I overpaid by a few thousand bucks on this piece of land. I didn’t get anybody to jump on. They want to lowball me and I’m like, “This sucks.”

I moved on with my life and I had forgotten about it for a couple of years. I remember I was like, “I have this account here. I’m not even leveraging this account or building it up. It’s sitting there with a piece of land in Florida. I’m paying taxes on it every year.” I then thought, “Why don’t I seller finance that?” I figured out that there was a special Facebook marketplace in the area where this piece of land was. I put an advertisement there like anyone else selling seller financing down there and did the same type of description and plotted the four points around the lot and stuff.

Sure enough, I was getting flooded with Facebook Messenger messages about, “I’ll do seller financing.” I was doing $1,000 down and it was a $6,500 note. It was small. I ended up finding somebody and going through the closing process and got that cash flowing as I creating a note, and then I ended up selling that note to somebody else after I seasoned it for 5 or 6 months. I ended up making a profit on it. If somebody paid cash for that piece of land, I would have lost $2,000. Instead, I seller-financed it, worked my way out of this problem, and ended up making about $1,500 on that deal. It took me years to do it but I got smarter as I was in the note business.

It’s great to have that tool in your tool belt to be able to work your way out of a problem because most people are needing seller financing because they’re not banking financeable because the box is so narrow to fit in there. Unless you’ve got a great down payment or an exceptional credit history, you’re going to be struggling to get financial help for these properties lower than $150,000. We’ll help other investors that find properties and want to sell them to a borrower. We’ll help them vet it and flip them over. If they’re in Indiana, we have attorneys that can write note mortgages quickly. We’ll do deals like that for ourselves, and then also for other people as well.

What type of credit score is typically when you originate notes do you see the people in range? A credit score is one thing. It’s important but it comes down to their ability to repay because people go through a lot of different things in life, whether some people get divorced, which can kill their credit and then they get cleaned up. It goes back to you got to look at each one uniquely and stuff but I was curious, what you’re seeing from some of your originated stuff.

Ability to repay is my exact words I tell everybody and don’t worry about the credit score as much, 500 is the lowest that you should be compliant with the loan but we’ll see them from 550 to 650 commonly.

I don’t even know what’s good anymore. Was 650 good? Didn’t they go from 800 to 900, then they bumped it up by 100 points or something?

We have 800 here, you’re exceptional in the credit world. Is that right, Jamie?

Yes, 800 is definitely very good for sure. You hit on a key point, Justin, which is it’s one more tool in your tool belt because who knows what the economy is going to bring? What market conditions are going to be for note investors or real estate investors? Now, you’re able to originate a note if you have to take back a property, whether, through a non-performer or something else, you’re not stuck. That’s what one thing I love about this whole space. You can think creatively and figure out a way out but now you’ve been down that road. You know how to originate notes and that’s one more tool that you have.

I was going to ask out of curiosity from sourcing deals with COVID, has it increased or decreased? More people are looking to maybe liquidate certain assets during this time or from your business and ours has been hit or miss. I’m curious with yours if you’ve seen in sourcing product, has it gotten better, worse or stayed about the same?

It’s gotten a little worse for me. My usual sources of inventory, they’ve dried up a little bit for performing loans and got a little bit heavy on non-performing, which is nice to see. I’ve had to shift my business and get back to sending out messages to those moms-and-pops to buy their land contracts and note mortgages. I’ve been heavy into marketing to them, which has helped my inventory challenge but also too, I’ve had people reach out to me and during COVID wanting to buy the loan back or figure out how to sell their loan.

I started figuring out, “Why don’t I buy a partial of their loan?” Once I walked through the deal with them and showed them the numbers, I was able to get the requirement of return that I want from them by not buying the entire loan because the discount would be too big, I’d buy a piece of it now, and then give them the rest of the money in the future, and give them more than what they have into it as well. When we run the numbers for them, it definitely makes their ROI, and then for us, it meets our requirement and we’ve got less money into the asset. We also got a lot shorter time period as well. We’ve been finding ways to do that.

You can't be greedy on interest. You need to do what's fair. Click To Tweet

When you do originate a note, do you do it on a 10, 15 or 20-year term? What’s typically the longest you’ll go on a term? What’s the average interest rate that you see or that you try and push for? Are there certain standards or boxes that you try and fill-in? I’ve been told in the past you’d go minimum 10, 10, 10 rule, which is 10% down, 9.9% interest rate over ten years. I’m curious if that’s something people follow. Every deal is unique and different to try and make payments work. I was curious if there’s a ballpark or range where you’d like to play in?

In a 10, 10, 10 rule, usually, the bigger wholesalers know that rule and that’s what they stick by when they do seller financing, which is a fine model, as long as the borrower can make those payments. We’re typically seeing with the professionals writing the agreements, let’s say if it’s under $50,000, you’re probably going to see rates in between 8% to 11% interest rates. Over that, the interest rate is going to tier down a little bit by every $15,000 or $20,000 in principal balance. When I’m creating loans, it depends on the story. That small piece of land that I sold, I had an 11% interest rate on it. I could have gotten 14 and probably could have gone higher but the numbers are so small. It doesn’t matter.

I found that 11% made sense, back to the gunslinger thing. I throw a dart and be like, that number does make sense and that’s what I’m going to do. Legally, you want to stay around probably easily the 6% to 9% window for an interest rate in general. If you’re doing a million-dollar mortgage, I don’t think it makes sense to do a 9% interest rate. You have to be reasonable and understand someone’s going to be paying that debt back and want them to be able to pay that. It’s a sliding scale for me but I’m typically landing in the 7% to 9% window, easily creating notes.

It’s one thing for everyone reading, make sure you run it by your attorney if you’re going to do this because states do have Usury Laws. For example, in Pennsylvania, the max you can go is 6%. There used to be a lot of loans that originated back in the day were 9% and 10%. Harbor got a little bit of hot water back in the day, I believe for having the adjuster refinance a lot of those or convert them. People who bought loans from Harbor were confounds with the attorney general, I believe, working through one investor who was, sharing a store with me. Be careful on the state because Ohio also has some Usury Laws as well. I’m not sure what it is. I thought it was 9% or 10%.

For both of you, what’s the highest interest rate you’ve ever bought that was on a note that you bought?

It was 12%.

Mine was 14%.

Mine was 14.385%. We lowered it because of the Usury Laws in Missouri and then all of a sudden, the borrowers loved us, too.

I would say people reading this, if you’re trying to lend on real estate and get as much interest as you can, you cannot be greedy on interest. You need to do what’s fair if you buy the property for $50,000 and it’s worth $75,000, you don’t understand your yield is way better than you think. You resell even at 6% or 5%, your yield is looking very good. You have to remember what you have into it.

When you plug it into an amortization table, it’s similar to yields on returns on some notes. If it’s like a $20,000 or $30,000 loan, 0.5% or 1% doesn’t move the needle. Over 100 loans, 1% of every single one, that moves the needle. For investors who have $20,000 to $40,000, they’re putting in, that’s their one deal. To make the numbers work, 0.5% or 1% is not going to change your life dramatically is what I’d say from that perspective.

Justin, I’m curious how is a business set up? You have kids, so your day may be difficult to predict. What does a day look like or a week look like for you as a note investor?

How I work as I get most of my highly functional work done, just me brain work-wise in the morning part of the day or the first half of the day, and the last half of the day, I usually set up meetings and stuff. I’m waking up before anyone else in the house and going to my office for a couple of hours. I’ll get work done, come and have breakfast, share time with the kids over the summer break because they’re home and hang out with them for a little bit, and then I’ll go back out in the office and work until lunch depending on my schedule if I’m filming, recording something or doing live. I’ll set meetings towards the end of the day.

I’ll hit my due diligence early in the morning. I set aside time to where I’m not bothered and focused on underwriting deals and evaluating my business. It’s me as an employee of the company but I have several virtual assistants. I partner with other investors and collaborate, and we have different entities that we can collaborate in. I do have other partners that I lean on and stuff for support but I rely heavily on vendors and my other collaborating partners to do some of the workloads for me. I’m not a specialist in everything. There are certain things I do well and certain things I don’t have a business doing like looking over land contracts. I have someone else that looks them over because I don’t trust myself. There are too many times where I’ve missed things. I’d be like, “I didn’t even know that was important.” I’m like, “You know what’s it’s important. I want you to look it over and tell me what’s wrong with it,” I’m happy to pay somebody else to look through something that I’m not a specialist in.

GDNI 163 | Seller Financed Notes

Seller Financed Notes: Show first-time investors what you believe is the right way to do things.

 

What do you use for a workflow? What software do you use?

I have a Microsoft Office 365 account for the basic tools and functions of running a business. Inside of my Podio CRM, I have custom-built software that you might use, too.

Richard has been on our show as well, Note Rules.

I mainly use that. It’s great for me because it’s almost like a good checklist of walking through from A to Z when I look at a note for when I’m trying to deal with stuff, post-closing, getting my interim payments and recording documents. We use it as a CRM as well. That’s my world. It’s using that software to run the note business, and then for my communication with my team, we use like the Microsoft Teams software so that we have a control of every message that goes through and we can find a conversation very easily, or we do standard operating tasks. We build that so someone else can pick up where we left off at. That’s how we’re running the business.

I’ve switched from the Google platform over to Microsoft.

Typically, as we wrap up our episodes, we like to try and give people a Note and Bolt, which is something like tidbit and you’ve already given us a lot of them but if there’s a lesson learned or something you see, a common mistake you see a lot of people make in this industry and doing something wrong, something along those lines that we share and if you had anything and if not, we’ll jump it over to Jamie and he can come up with one. I don’t have mine yet. I got to think of one. If you have one, go ahead.

I work with a lot of first-time investors, which is fun for me and that’s what I love about what I do to show them what I believe is the right way to do things. The two biggest hang-ups that people have when they first get in the business is, number one, they don’t feel comfortable buying something that’s not in their backyard when they’re buying an asset like this alone. Number two is they are so focused on the ROI or the yield on the investment that they don’t understand what they have. I show people to put blinders on at first and be like, “Don’t worry about where it’s at and what the return is. Look at what you have in front of you.”

Chris, we talked about risk. It’s like, “Look at this deal. It’s a 3% interest rate and you’re getting a good discount. It may not be like a double-digit return but if you’re getting a 6%, 7%, 8% return on it at full maturity, you don’t understand this sucker is going to pay off early. I don’t know how or when but it’s going to pay off early and you’re going to get a big pop and that pop is going to shoot your yield way up.” Don’t get hung up on yield is what I tell people. Focus on, “Look at this asset. You have a solid investment. You have a very low risk in this versus what you could have been and the return is going to work itself out because you know you’ve been in the business long enough, these loans never go to full maturity.” They’re always paying off somehow or some way.

If you’re a homeowner, how many of us over the years had refinanced our loan? Most people have or you’ve moved. If I looked at twenty people around me in many years, how many have either refinanced or moved?

Four times in the last few years.

Granted, I’m sure your credit is much higher than your borrowers’ but in the same token, they have a lot of changes in life circumstances where they can improve. The economy is going well up until COVID, so things have been well and even now, it’s still strong and housing is increased. People look at these rates of 8% they’re getting or 7% and it gives them the incentive to refinance. That’s why one of the things I don’t like to buy loans is 0% because there’s no pop. The person is never going to probably refinance. They’re going to move. When it’s at like 7% or 8%, there’s a greater chance once they clean their stuff up, that they can get a loan for 3.5%, 4% or 14.5%.

Justin, were those live and flips or why did you move so many times?

I’ve gotten divorced back in 2015 to 2016. I moved out of the house that we lived in and got into another one. What I wanted to do is my dad and I saw this house in this area called Fishers and we’re like, “Cool.” This was right before the real estate got hot to where the prices were out of control. We found this and thought we could put some money into it and flip it really quickly while I could live somewhere else. This is why I don’t do flips because I made the thing look exactly how I wanted to live there. There was no way in hell that I was selling that thing. I ended up living in that house, and then I did sell it after a few years when I met my future wife. I ended up making a good amount of money on it, so it catapulted me to this next house and that was too small for six of us. We had to move into another house, and then we got a dog and a cat now, so if we’re moving again, I hope not. I’m tired of moving, a couple of them were live and flips.

It’s best to pay somebody to handle a task you’re not a specialist in. Click To Tweet

My Note and Bolt is I’m going to piggyback on something you already said, Justin, but that is don’t be afraid to outsource and go to the experts. You said you have people who do a collateral review for you. You don’t need to be the expert. You probably shouldn’t be the expert on too many things. If you are, you’re probably doing something wrong, to be honest. It’s difficult to scale a note business or any other business if you’re the expert on each facet of the business. My note and bold is to be open to outsourcing and going to the experts for different pieces of your business.

I’m going to tag off on that one because mine was going to be, I have a land contract in Indiana. We didn’t pick up at the time we bought this that the legal description in the land contract is the wrong legal description on the property. It has the right property address but the wrong legal description. When the borrower had defaulted, they were about five months behind, so I sent to the attorney and said, “Can we send a demand?” They looked at it and the paralegal is like, “No, because it’s got the wrong legal description on it.” I didn’t give up. I went and asked an attorney who I run everything by, and I said, “If you’re in a situation where you have a land contract that has the right property address, a person’s living in the property but has the wrong legal description, what would you do?” He said, “You could do quiet title and so forth, and ask him to do this.”

I turned around and asked the attorney. I’m like, “This is incorrect but I was speaking with my in-house counsel and they mentioned that we should attempt to do this.” She comes back to me and she’s like, “Let me run that by the attorney but it sounds like that’s something that’s viable.” It’s like your kid asking for a cookie, the first time you say no, don’t always accept no, because they certainly don’t. Follow up or ask somebody else, as they asked me for the cookie. It’s usually either way. It’s usually, “Ask mom.” She says no.

Ask dad, “Sure. Go ahead.” We reiterate sometimes there are issues that come up. There’s typically always a solution. It’s trying to find out who to go to and that’s one of the things that people to get advanced in this business, it’s knowing who to go to. A lot of times the answer is an attorney or somebody else because we aren’t the experts like Jamie mentioned. Justin, thanks for joining us. We enjoyed having you on. Any final thoughts and also let people know how to reach out to you, a little bit more about your show. You have a meetup group as well that meets monthly. You can share information on that before we end this episode.

Thanks for having me on. I always love to be a part of people’s shows and also learn from you as well. Thanks for sharing what you did. Thanks, Chris, for being on our show before as well and Jamie, we’re definitely going to have you on now so Chris doesn’t one-up you here. The name of our show is 2 Wealth Show on all podcast directories. If you go to the BrightPath Notes YouTube channel, you’re going to see all of our recorded video streams of that show and then also our monthly broadcast we do, which is like a glorified meetup except it’s online. We keep it to streaming only because we have such a large reach of audience across the US that it’s easier to control it that way. We record all of those as well. We’ve had guests on like Chris and other people in the note business that you would recognize.

The best way to get a hold of me is to reach out to me via email. It’s my first name, Justin@BrightPathNotes.com. I’ll be happy to answer your questions. The good deed that I do is I pay it forward with my education and knowledge. I’m happy like Chris and Jamie to share my experiences and help you out in any way I can. If there’s a chance we can do business together, that’s great. At the end of the day, I want you to know what is the right thing to do in a situation. I look forward to helping anyone out that needs help.

Justin, thank you for coming to the Good Deeds Note Investing show.

You’re welcome.

Thank you for joining us on this episode and for our readers, as always, feel free to download and share this. Thank you all.

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About Justin Bogard

GDNI 163 | Seller Financed NotesBrightPath Notes was founded by investor and entrepreneur Justin Bogard.

Transformation Over Time

Justin first began Real Estate Investing in early 2000’s. While other young professionals were renting fancy apartments and putting investing far off into the future, he saw the advantages of making his dwelling place dollar grow quicker via property turnover.

His first venture was the purchase of a foreclosed home. Using sweat equity, he sold it for a profit. Although his full-time job was not in the real estate world, he developed an affinity for the purchase and resale of homes during this period. Justin used his profits to invest in himself by getting professional training in Real Estate Investing. Justin’s next phase was to quit his full-time job and start a fix and flip business. He purchased blighted homes that had lots of potential. Some even turned out to be rental property. The success of this phase of his real estate journey allowed him to get specialized training in discounted real estate note investing.

Real Estate Notes: The Game Changer Over the past several years Justin has networked with thousands of other investors in real estate and traveled across the USA to consult with the most successful people in the note business. He has become a successful note investor and continues to speak about the subject. Concurrently to this activity he has successfully started 4 businesses including BrightPath Notes and developed a “Power Team”.

Justin is a firm believer that discounted real estate notes have always and will continue to be the best way to build wealth.

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