Do you know that getting a 1% response rate from your email list is great? Encouraging leads to go further down the sales funnel is a huge accomplishment! Chris Seveney and Jamie Bateman welcome Marco Bario, a Real Estate Note Investor and the President at Porch Swing Funding. Join in the conversation as Marco emphasizes realistic rules. When you answer ten calls, you will probably close deals with only one of them. The key to getting even just one deal out of ten is consistency. Keep putting effort and energy out into the world. Why? Because something comes back every single time. Tune in!
Listen to the podcast here:
Sales Funnel: What To Expect And How To Succeed With Marco Bario
We are joined by Marco Bario in this episode. Marco, how are you doing?
I’m doing good. How are you doing?
We are good.
Jamie scheduled this at the time to get Marco to roll out of bed as he is on the West Coast but it’s quite early on the West Coast.
You already said before we hit record that you are not normally working necessarily. Is that fair?
I don’t. I’m not worth a damn these days before about 9:00 AM my time, so it’s better not to unleash me to the world. This will be fun.
We will have to get into it. For the readers out there who don’t know who you are, do you mind sharing a little bit of your background and what you are up to these days?
I will start with what I’m up to these days. It’s really simple. I market mom-and-pops who own notes. These are people who owned a property at some point and sold it in carryback paper. As I say, they no longer own the property but they own the paper, and that’s nothing but a different type of asset that can be bought and sold. I had started buying institutional notes. We will dabble with those a little bit but what I prefer, and I’m sure we will talk about it in this episode, is dealing with individual noteholders.
How I’ve got here is a longer story. I started investing in real estate a couple of years ago. It started when I went to a local real estate meetup. I’m in Southern California. We have got a lot of great real estate investors and great groups here. This one, in particular, was called For Investors By Investors. There are several chapters around Southern California. I know it’s similar to a note servicing company.
Jamie and I looked at each other. We have a story about that for another day and time.
I know the founders of that group well and they are good guys. You probably know Ellis San Jose. He’s one of the Founders of that group. He’s active in Facebook groups, and a guy named Jeremy Roll, who I have learned a lot from. I started by going to those meetings. For those who go to real estate meetings, every week is a new topic, and there’s a shiny object that I want to go invest in. I’m like, “I’m going to wholesale. I’m going to invest in syndications. I’m going to start my own commercial syndications.”
Chris should not go to those groups then.
I’m researching, printing three concrete homes. Look up COBOD. They have 3D printers up to three stories top.
The problem is Chris will prove us wrong and he will be successful in all of it, so then it’s like, “That was a good idea.”
You are dangerous because you have got the building, engineering, and financial backgrounds, so unfortunately, your toolbox is too large. If you can convince yourself, you can do it. That’s how that started for me a couple of years ago. I started investing in syndications because I had money. In hindsight, I wish I had waited but I had money in the stock market that had done very well. It’s not because I’m smart but because the stock market had done very well.
I had ridden it down 50% or so after the last stock market fell off to the point that I don’t want to have to work for the rest of my life and ride out another market correction, which could be longer. I thought, “What else can I do with this?” It so happens that Dave Cote, who was one of the guys who runs one of the FIBI chapters, knew a lot about self-directed retirement investing. I met him for drinks and he taught me about that, which led to me rolling those funds over into, ultimately, my solo 401(k) and starting to invest in syndication. That’s how I started.
I’m curious. At that point, were you working full-time? What was your personal situation a couple of years ago?
A lot of things were happening at once. I’m working backward and we will get to the work part. I had a career that, in hindsight, was winding up for me in the film and television industry. That is the overarching piece of all this for me is, “What do I want to be when I grow up?” The first was to take care of these retirement assets because I want to make sure they are there and I don’t want to ride out a correction but then it was, “How can I not go back to what I have been doing for my career?” It’s not that I did not love it.
I started in the television industry working on TV shows, network prime time sitcoms, mostly for camera sitcoms over the laugh track. I have worked on a lot of those over the years on a lot of different studios, networks, and ultimately, became a Line Producer. I oversaw the budgets, schedules, crews, and delivered each episode every week.
I transitioned into post-production. After all the footage leaves the set, it’s post-production. Back in those days, it was a combination of film and videotape. I ended up working at Technicolor. It’s known more in the post-production business but we were a big player at the time. Eventually, I transitioned into feature film post-production and oversaw theatrical post-production for Technicolor on the West Coast.
Being on the West Coast, we were involved with projects starting in London, Canada, New York, and everywhere else. I worked on a lot of major studios, feature films and oversaw post-production services. We were transitioning to digital at the time, so there was a lot of technology, color science, color management, and new services. It was really cool stuff I was fortunate to be a part of but it’s not something that I want to do anymore. Part of the reason for that is technology took over. We would invest $1 million in a suite to do a certain task. Moore’s Law takes over, and not just that but also globalization.Convince yourself that you can do what you want to do. Click To Tweet
The work that we did in Los Angeles is now done all over the world, and there is a lot more competition because the cost of entry is less. Frankly, as a guy approaching middle age and making a good salary as an executive at a big company, my days were numbered there. All that was happening at once. That’s a long answer to your question. First, take care of retirement. Second, how do I buy groceries and stay busy?
We all have different stories as to how we’ve got here in the note space, so that’s pretty interesting. I did not know a lot of that about you.
It’s interesting because I enjoy hearing the different aspects of how people do things. We had a gentleman on who did very similar to you but strictly with the land where he was reaching out, mass mailings, finding land to turn around, owner finance it, and go through that perspective. There are many different aspects of note investing.
There’s buying existing paper from hedge funds and doing what you are doing with finding mom-and-pops who may have seller financing notes here and there. What made you go down that path of note investing? You mentioned you did some institutional prior but I’m curious, what was the overarching reason why you jumped into this side?
My professional journey has been a path of working with studio executives, demanding producers, and creative people like directors, editors, and so forth to these nice, simple mom-and-pop noteholders who are wonderful to deal with. I love that part of my job, and that has been the magnet that has drawn me deeper into this world. That’s the honest answer.
I believe there are other ways to make more money in real estate. I have got to hustle to get each deal, but what I love is talking to the noteholders. I get to help them. People who buy houses identify more with this and at the level I buy notes. Real estate is about solving people’s problems. Those who knock on doors or send postcards to buy houses will tell you it’s not always cash that solves the problem. It’s finding the people what they need and how they need it that solves the problem, and then it becomes a win-win deal for both.
In my case, I closed on a note to help a woman and her husband buy a new home in the same mobile home park community that they were living in but it was a big deal for them because their home was falling apart and they needed to move. I help people relocate to be closer to children and grandchildren. I help people whose dad died and left the notes to the three siblings and the last thing they want is A) To split up the note payment three ways but, B) To be reminded of their old man each month when the payment comes in.
They want to move on or a spouse whose husband died. It’s the same thing. They are like, “That was the house we used to live in. I want to move on from those memories.” Surprisingly, people open up to me with their stories. In that way, I continued in the story business but in a much different touchy-feely way, and that’s my favorite part of it.
If you have read the book, Never Split the Difference by Chris Voss, when you were speaking, I thought about that. He talks about in negotiation, typically, the price is not the main factor. It’s an important factor but it’s usually something else that’s the driving factor for the other party. It sounds like you are focused on that and you are able to solve people’s problems. That’s cool. We talked about this with Dan. Every deal has the numbers but then also has a story, and it seems like you are pretty focused on that human element in the story, which I think is cool.
We have got plenty of content for the good deeds that Marco has already done.
I was thinking that, too. He checked it. He has done a bunch of good deeds that we have already talked about.
I have a few questions based on the stuff you do. You do a lot of mailings and stuff like that. How many leads do you get per month based on spending X amount of marketing? Some people think they can spend $200 on mailings and think they are going to get ten leads. I know that’s not the case. I spoke to one that said they spend $3,000 to $5,000 per month and they maybe get a handful of leads and close on 1 or 2 deals.
I don’t need hard numbers but explain to the business so people understand because you can go on Facebook and someone says, “If you spend $250 a month on mailings. You will get all these leads coming in your door.” I know it takes five mailings to get someone to even respond to you. We like to talk about reality, so I’m curious. What is somewhat the reality?
I hate sending letters, and I have not sent one for years. I imagine most people are going to be surprised to know this but I market online. I will probably get back into sending letters, and the thing that has motivated that is I closed a couple of notes from the same seller. His old man has passed away. Things were pretty banged up.
That’s a case where I had sent a postcard to somebody and his dad threw it in a file with a note, which is what he wanted to happen because then, the son found it when he was going through the records and gave me a call. We ended up doing business together and that’s great. You will hear this from every person who teaches sending mail. You have to be consistent with it. You can’t expect deals to close. If you get a 1% return rate, that’s great. You will probably close 1 in 10 of those phone calls you received. Those are the realistic rules.
I hate rejection and the 1 in 10 part, so what I started doing is marketing online. I will be honest with you, you are all welcome to do it. You are all welcome to pay Google a lot of your money. I have spent more than many very expensive note mastermind seminars on Google Ads as I figured it out. We are talking thousands of dollars but I was determined to be further down in the funnel. For those who understand marketing, it’s a funnel.
If you send a postcard to somebody, you generally get phone calls from people who are tire kickers. They are like, “I wonder what my note is worth.” They may or may not have any intention of closing a deal with you. However, if they are on Google and they say, “Sell my mortgage note,” they were at the point to do business.
I tend to close about 1 in 3 of those deals but I have had to pay and I have had to invest in it. It has been a long path to get there. There is only a handful of us out there. I know who I compete against for those clicks. We all have our own methods. If another dozen of you want to get in the space, you are going to mess it up for all of us.
I don’t discourage anybody. I’m not going to go too deep into my methods but it’s something I have done myself. I had a call with a professional company that does this. The hard part about what we do is it’s so niche. You can imagine somebody typing the term mortgage into Google. Immediately, you are competing with Quicken Loans and Rocket Mortgage because Google assumes, “This person needs a mortgage.
They are buying a house.” You can imagine what those companies are paying for their online marketing or you can go down the road of contract for deed and land contract. There’s a lot of that in the seller finance space but the term contract is so generic, and you get mixed in with everything from household sellers to you name it.
One question I was going to ask, and you hinted upon that the paperwork is usually probably very hairy, when they go to sell it, do they expect to sell it at a discount? If the balance on the loan is $25,000, which they probably don’t even know what the balance is because they don’t run any amortization tables and just collect the payments, they are probably not getting $25,000 or is it when they think they are going to sell this, they think that it’s worth that plus sum?
I can tell from the first minute or so of the conversation if I’m going to get a deal, and that’s one of the things that I look for. A lot of it is gender. Guys are numbers people, and they will call and say, “I have got 100 and however many payments left on this note. Each payment is worth X. You are going to get all this money. You should pay me more than the value.” My chances in closing that deal are less than zero, I promise or someone will come in with the logic of, “This note is paying 4%.” Mortgages are still below 4% or they are starting to go up. They will come in the logic like, “That’s a good return.”You have to be consistent to close business deals. Click To Tweet
I will be like, “In the secondary note market, it’s not, and here are the reasons why.” Back to never split the difference, logic does not close deals. Emotional connection closes deals. I never go for the juggler. It’s not how I do business but some people are ready to sell the note, and it’s not about price. When it comes to the numbers, that does not happen.
Occasionally, people will reach out, and I’m sure you have people that ask you questions or newer note investors who ask questions. I’ve got a question through Facebook from somebody, and since you buy these types of notes, I’m curious what you would say. I’m not going to read the whole thing. It’s pretty long but he’s looking at buying a note that’s in Texas that is 2 to 3 years old. They have been paying but the pay history is pretty much non-existent. There are photos of checks for the last couple of months.
As a note investor or note buyer, and again, this is not from a mom-and-pop directly but it’s similar to the type of paper that you buy, what would you do to clean that up? Is that something you would still buy where there’s not a clear payment history, and if so, what can you do to mitigate that risk going forward? Is it an estoppel agreement or affidavit?
Yes. I do estoppel. You said there are photos of the checks?
Photos of the last couple of months but the first 1 to 2 years, there’s nothing.
I’m doing backflips.
Is it not an issue from a foreclosure standpoint? It’s not that your goal is to foreclose, I understand that but how does that affect the value of the note for you if you are looking at a deal like that?
Photos of checks for the last couple of months are great. First of all, more of these than you probably would realize are professionally serviced not by servicing companies. Often, title companies and escrow companies have what they call long-term escrowed divisions in services they provide, and they are collecting payment mission statements. Probably more than half of what I see is that. We talked about the others.
I look for photocopies of checks. I know the jury is out on whether I should or not but I do a payer interview if I’m buying. People I sell to, perform these as well in the seller finance space. It’s high-level. It’s mostly informational like, “We are going to buy this. I want you to understand. The only thing that will change is where you are going to send your payments. This is what we showed in the balance. Does that sound correct? Would it be okay if we send a document to you? It’s called estoppel. Would you sign it?”
Do you do that before you buy, as far as the estoppel goes?
The estoppel is required in order to close. Once you have closed, you can’t get anybody to do anything, so the estoppel is done before.
A lot of these sellers probably have some connection or relationship with the borrower where, again, you are having that conversation. You are not asking them, “You need to make your payments.” You are introducing yourself. It’s almost like a conversation of a future hello letter of, “Here’s what’s going to happen. Here are some of the things,” and then you can probably get a good sense from them as well what you might be able to anticipate or expect from them.
I will say, “Are you enjoying the house? I heard you are living there.” “No. I’m renting it out to my sister.” “That’s interesting.” Real casual conversation. If the door seems open, you might ask, “Have you had to invest in the house? Does it need any repairs?” They might find out the roof is leaking. You never know what might come up. Open-ended questions lead to a lot of information is what I’m saying.
When you are buying these, I’m sure you have different exit strategies but are you looking to buy and hold these or do you flip them? You mentioned notes that you sell. How do you determine what you are going to do with that note?
I’m a note hoarder. I can’t say. I can’t do it. I have sold some partials. I have sold a couple of whole notes but mostly, they sit.
How many ground average go non-performing?
I will tell you a story. I did not speak to a guy before I bought a note but I spoke to him right after. He was angry that the guy sold the note to me. I said, “He told me that he had spoken to you a couple of times during the process. I’m sorry. I caught you off guard.” That comes up a lot. Sometimes payers are mad that the notes are being sold for no particular reason.
He was really mad and used several four-letter words. I said, “I’m in California but the company I used to collect the payments is in such and such.” The guy was in Oklahoma. He said, “California?” He was so mad that I was in California. He then said, “FU,” and hung up the phone on me. That was the end of that conversation.
He never sent a payment after that. It had been a performing note. I was like, “Is that not special?” The story has a happy ending because it went down the foreclosure route with him. We’ve got a simple follow-up and so forth. It was quiet for 4 or 5 months, and then his attorney sent a payment in. Our attorney received a full payoff from him and that was it. He did not want anything with me. It’s a really small percentage. I don’t tend to buy the stuff that’s that hairy.
Are most of the stuff had been originated several years? It’s not mostly new stuff. It’s stuff that has probably been around for five years. Do you look at that at all when you are making your analysis?
Yes. The pay history for me is number one. I’m looking at credit, the professional, and the institutional borrower. Everybody is looking at credit in this world, and it’s a certain determination. Six hundred and thirty above is considered where you want to be. If I see a payment history that’s five years and it’s a family in the house, and they are doing everything they need to do to keep a roof over their head for the family. Everybody deals with some emotional equity aspect of note investing. To me, that’s a sound investment. They may run late every now and then but they are going to find a way to keep the roof over the head for themselves and the family.
I don’t dip into this space but I have had some people send me some notes that do what you do but it does not fit their criteria. What I have seen with a lot of stuff that has been originated is the properties have been a little more distressed and may have been on the market for $50,000 but the note now is $80,000. The property sat for eight months on the market at $50,000, and they’ve finally got somebody at $80,000. I will look at it and I’m like, “That’s probably only worth as a $30,000 property.” I see a lot of that on the institutional side more than on the individual mom-and-pop side but I was curious if you ever see any of that on the mom-and-pop side as well.Logic doesn't close deals; emotional connection does. Click To Tweet
Yes, I’m buying one. It’s a non-performer. Let’s say it this way. The restaurant I had dinner at probably had more people dining there than the population of this town where the note is located. I don’t usually do these. One thing that’s powerful for me is referrals from attorneys, accountants, and people like that. When an attorney reaches out to me, I bend over backward to make the relationship go. For a very small investment, I’m going to take on this note. It’s non-performing.
The balance of the note is probably double what the property is worth. I was honest about that. It’s not that there are many comps but looking at Zillow, which is the high-end company modeled with the BPO on this particular one. I said, “Here’s the most I could get for this property. We are certainly going to have to go take back the property. Therefore, here’s what I can pay. It’s not much money. Are you willing to do it?” He’s like, “Yes.” This attorney’s client had inherited this from the father. He does not want the headache or the memory. I’m like, “That sounds great.” He’s like, “Can you close in 30 days?” I will be like, “Okay.”
I’m curious because I have bought a few of these types of loans and I have run into some Usury Law issues. One, in particular, stands out. The note rate when I bought it was 14.385% coupon rate on the note itself, and lowered it to 10% after legal advice. I’ve still got it at a good price. I’m curious if you run into that situation sometimes in the seller finance space.
Honestly, the rates are too low. People often have a relationship with the person they are selling to, so for that reason, they will do it at 0%, 2% or 3%. When I wrote this law, we are charging 4% or 5%, so that’s what I charge them. I advise people when they call me in advance, and some do. The reasons they would not do that is, A) The bank does not lend their own money. They lend other people’s money. B) The banks tend to get billed out when there’s a problem of a mass proportion.
Are most of the stuff you buy are single-families or have you bought other things? I joked to Jamie that I was looking at one that was a horse track that was sent my way. I haven’t pulled the trigger on it yet, but still negotiating. I’m curious if you see pretty much everything or is most of the stuff you see manufactured or single-families?
I do. Some stuff leaks through less and less as I have refined my online marketing but first of all, I get business notes sent in sometimes, which is interesting. I have had notes secured by bail bond companies, podiatrists, and a commercial building that housed the magazine business, which you can imagine printed magazines we are suffering, to begin with.
This particular guy specialized in bridal magazines, and this was during the pandemic. There were not a lot of weddings. Therefore, there were not a lot of ad sales in that business. He was hurting. The valuable property under the NFL stadium in Minneapolis. Those are interesting. I see less and less of them because I have refined my marketing.
There are some buyers for business notes. There’s one in particular who has been a security financial. I did the Tracy and Fred Cervantes. Usually, I deal with their son. They are great people and really knowledgeable. I would not buy one of those. Personally, I don’t know how to underwrite them. If anybody reading this ever gets one, take it to these guys because Mark will put you on the call when he talks to the seller. I have done 3 or 4 of those with him. We have never closed a deal, unfortunately, but the education I have gotten on those calls or his initial list of questions he comes back with is incredible. They are so deep.
I have one to mention. Someone submitted to me a land lease. He owns a large parcel of land in Colorado and he’s negotiating with the local power company that wants to lease a subsection of his land to build a wind farm. The payor is a large utility company. They are probably not going over- follow. I don’t know who the buyer would be for that. They are big dollars. I don’t know what to do with that yet, but those are interesting. They come up every now and then.
Who do you look up to in this space? You have mentioned a couple of names already but you are in such a niche within this note investing world. It does not seem like there would be that many experts that you could look up to, learn from, and trust. I’m curious which people or organizations you consume information from.
I’m a member of Tracy and Fred’s mastermind group. Chris, I know you have one now as well. When I run into something that stumps me, I reach out to them. Tracy is more of the deals person and Fred is more of the marketing person. They will help talk me through what my next move might be. That’s a really valuable resource.
You had posted and I’m curious if you have gotten anywhere with this. It was a note that was on a single-family Woodstock property that had a UCC lien. I’m curious if you found out any more about that. That seems odd because I know of UCC liens, and I mentioned posts. Those are more on personal property type things of businesses, cars or if you did a JV deal, someone may put a UCC lien. On property, I would think there are mortgages or deeds of trust. I’m curious if you found out any more information on that.
I’m a little stumped as to why they did it. It’s a note on a property in Washington State. I have submitted it to a servicer who happens to be based in Washington State. They have weighed in with their opinion but we have also sent it to an attorney for review. I have not heard back on that yet. The question is, whether that lien is enforceable because it was never filed with the land records in King County. The property is located there in Washington State.
This particular attorney initially has responded and said they dealt with something very similar in California, which has similar laws, and because the UCC lien was not filed with the land records, it was not enforceable, unfortunately. She’s going to check the Washington Laws to see as well. There was a property sold in 2004. There was a Bank of America data trust filed at that time with purchased money, and that still remains. There has been no release of that.
The stuff I see, there is a deed of trust that was filed several years later and granted to a bail bond company. This is a nicer house in a nice area in King County, which is an expensive real estate county these days. This other UCC thing came up. It’s payable to an attorney. One of my last comments on that Facebook thread was you would think this will be on the bar exam. They are not a real estate attorney but you would think they would know to file a deed of trust rather than a UCC lien.
That’s why I figured there must be some reason they went that route. We joked that on Friday mornings, you don’t do work, but as a seller financing note investor, what’s does your day look like?
Every day, I work on Google Ads. One of the keys to success in Google Ads is negative keywords. I look at the searches that were done the previous day and I carve out certain terms I don’t want, which is interesting feedback for me too because I see what people are searching for. Google has restricted a lot of what you can see but you get to see a certain amount, so I get inside the heads of people.
It’s instant information. I usually have some emails that come in. Being on the West Coast, I do get emails from a financial accounting who is on East Coast time, or they are buyers or other people that I will deal with. I follow up on deals. You’ve got to nudge people along the way to get them to commit, hopefully. I have also launched a newsletter.
It’s nice, clean, short, and sweet. I can copy it but I’m like, “No.” Jamie will know I’m the squirrel with the shiny object. if something is more than a few scrolls on the phone or there’s too much reading, you lose people.
You are welcome to copy it because I have subscribed to James Clear’s newsletter. He’s great. I read his book twice in 2021 and tried the best I can to implement that for improving habits. He has a great newsletter. His are very short and sweet.
What’s his name?
James Clear. It’s Atomic Habits. It’s good. He does not put down goals necessarily because you have got to know where you are going but it’s all about habits. They are much more powerful than having these lofty goals without being able to execute them anyway. That’s my two cents. I follow him as well. He’s great.Be on the path you’re on because there are lessons along the way. Click To Tweet
The idea of short, little tidbits was borrowed from there. His attorney will be calling me now. Thanks, guys.
They are small, bite-sized but tons of good knowledge in there. Are you working 12 to 15 hours a day? It seems like you have got a fairly flexible setup. Is that fair to say?
One of the things that were important to me when I was transitioning careers is I wanted something I could do from anywhere. I can do what I do from anywhere. I was in Cabo, and I did not work much there but I had my computer. I could check-in and could follow up on some deals. The most time-consuming piece is underwriting deals. For all of us in the notes space, it’s similar. I want to know as much as I can find online about the property, title records, taxes, and all that stuff. I like to do as much as I can.
I buy some of my deals and submit some of my deals. I generate fees as that wholesaler, broker or whatever. I like to know as much as I can before I submit. I may or may not pull credit but I do pretty much everything else before I submit it. It takes a fair amount of time. I’m guilty. Sometimes, I will go down the wormhole. I’m like, “That’s a neat town. How many parks do they have there? How much is a house is going for? I could live there someday.”
It’s easy to do. Looking back in a couple of years you have been in the space, what’s one of the big mistakes you have made if there is one or something you might change with hindsight that you do a little bit differently?
I don’t know. I went through my midlife thing around the time all this was happening. To me, being an entrepreneur is personal growth or the same thing. I’m a big believer in being on the path that I’m on. There are lessons presented along the way. This is going to turn into a different show here if I keep going. I have gotten into a lot of deals knowing that I did not know how I was going to get out because I wanted to learn from them.
When I first started investing in notes, people were like, “Are you a 1st person or a 2nd person?” I used to say I was a second person but I was buying everything because I wanted to figure out how to get out of them. Houdini would say, “You are going to lock me in this box. You are going to put chains and drop me into a tank of water and I’m going to figure out how to get out.” You had a pretty good idea how I was going to get out, I’m sure. That’s what note investing is and what drew me to it. There are deals that were uglier than I thought they would be but I come out alive every single time.
It seems like you have a good perspective on looking at maybe a blessing in disguise as opposed to treating it like a problem.
There’s a mentor who I take classes and learn from. He calls those seminars. When we lose money on a deal, that was another seminar free.
We had Rod Khleif on. He uses that term.
As we wrap up this episode, you have already given us plenty of good deeds you have done but we also ask people if they have a Note and Bolt or a little tidbit of information that you learned and carried with you through the years that isn’t part of any high-level training course.
On the entrepreneur thing, I will leave you with something. My significant other coaches small business owners. She’s an Executive Coach and former CEO who works a lot with small business owners. She’s got a great phrase, “Commotion creates motion.” I find on the days where I’m stuck to go down the path of launching a newsletter or making some calls to some people who might be on the fence about selling. Sometimes, those don’t directly lead to deals but there’s something about putting that effort and energy out into the world that something comes back every single time. This commotion creates motion that’s a key part of being an entrepreneur.
James Clear talks about that as well. It’s similar where it’s if you are laying your shoes out before bed to go running or getting out the door to get started, that creates motion and creates progress. It may not be an immediate return but as you are saying, it does create positive results normally, so that’s good. Chris, did you come up with yours?
I touched upon some of the things that I thought were excellent from this episode. One is the way Marco approaches these deals of really getting to know the seller and even the borrower because he can do a lot of evaluation from that standpoint. It’s another part of due diligence. Every aspect of investing has its own type of due diligence, and you always want to think of ways that are legal.
If these were all non-performing, you are probably not going to want to get on the phone with the borrower, to be honest, from that perspective. You want to be careful but understand the due diligence and what’s involved, and most importantly, put yourself in those people’s shoes. That’s the one thing I would say about note investing that I constantly come back to. It’s like playing Blackjack. You’ve got to play the odds.
If there’s somebody that has been in the property for 30 years, they had a tragic event happen, they are getting back on their feet, and there’s a lot of equity in the property, again, more than likely, you would want to work with them because if you don’t, they are going to file bankruptcy. They are not going to leave this house.
I had a woman email me or Facebook message me that she was looking at a note in Philadelphia that hasn’t been performing. She knows an elderly woman who has been there for 36 years. She’s like, “I’m going to buy the note. I’m going to go get them on a deed in lieu and get the property.” I said, “The deed in lieu has happened probably 1% of the time, and that is average. The longer the person has been in the property, the less chance there is of a deed in lieu because there is that emotional equity.”
If someone has been in the property for two years and the market’s crashed, and the property is near or underwater, there’s no emotional equity in that property but somebody who has been there and had their kids grow up there and so forth, you are not getting a deed in lieu. I had a family member that had a major fire at their house. You can’t even get them to move out of the house to get it fixed from the fire. They’ve got so much emotional equity in this house. Playing the odds is what my nut and bolt.
My nut and bolt are that, for the institutional note investor out there, start learning about seller finance now. It’s not going away. I think lending is harder.
When you say seller finance, there are different aspects of it. There’s originating a paper or buying seller financing, which is what Marco does but I would say, learn all about the entire process. That’s what you are getting at.
I’m not talking about CFDs originated hedge funds. I’m talking about the mom-and-pop seller finance and buying that paper like Marco’s doing because it’s not going away. It’s only going to grow at least in the near to midterm because it’s harder to qualify for a bank loan. That $50,000 to $150,000 property, I’m guessing, is your sweet spot, Marco, but I’m not sure. At least learn about it.
There’s one more thing. There’s no reason you should not read Marco’s newsletter, reach out to Fred and Tracy or start researching if you have never dabbled in this area. I’m not saying be reckless and go buy something that you don’t know what you are doing but expose yourself to that type of note and understand it because it’s not going away, and you can add one more tool to your tool belt.When you put effort and energy out into the world, something comes back every single time. Click To Tweet
Also, by networking with people even if they are not doing your thing. We were speaking briefly before. There are a few between websites and Facebook groups of people in this business that might be doing different things that you get information on. It’s continuing to grow. Your network is huge. It’s part of any business. Any business needs to continue to grow and advance its network.
Think of yourself as a big business. You want to continue to grow, advance, find new connections, and see how other people are doing things because it might give you a creative idea where you can implement something they are doing into your business that could either save you time, be more efficient or save costs.
That was a freebie.
I give them away once in a while. Marco, thank you for joining us. If people wanted to reach out to you, where can they reach out to you or sign up for your newsletter? How can they get in touch with you?
Call me. My number is (818) 330-1100. I’m an introvert but for some reason, I can talk endlessly about real estate, and I work alone, so I’m lonely. Also, my company’s website is, PorchSwingFunding.com. I have a newsletter. Sign up on the website. My email is Marco@PorchSwingFunding.com. I help people out all the time who want to learn how to find notes or found a note and they want me to buy it. I say, “Here, submit it to financial accounting. Here’s who I deal with.” I don’t get in the middle of those trends.
It’s not that we know each other super well but you have a good reputation in the space, so I would encourage readers to take you up on that offer.
Jamie, do you want to wrap us up?
Marco, once again, thanks a ton for joining us. To the readers out there, please give us only positive reviews. We do appreciate them. It does go a long way. We want you to be honest. Thanks for joining us and don’t forget to go out and do some good deeds, everyone. Take care.
- Marco Bario
- Never Split the Difference
- Newsletter – Porch Swing Funding
- Newsletter – James Clear
- Atomic Habits
- Rod Khleif – Past Episode
About Marco Bario
My company purchases existing seller-financed real estate loans. We provide noteholders lump-sum cash, rather than continuing to collect payments from borrowers over time.
I also publish a weekly email newsletter on seller financing called Seller Financing Sunday. Subscribe here: https://porchswingfunding.com/newsletter