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Three-Dimensional Approach To Note Investing

September 7, 2022

chrisseveney

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CWS 216 | Three-Dimensional Note Investing

 

Stability comes in threes. Hence, the three-legged stool or why the triangle is often referred to as the most stable shape. The same goes for note investing. In this episode, Lauren Wells and Chris Seveney introduce us to the three-dimensional approach to note investing they take when evaluating, acquiring, and bringing a note to resolution. Through this approach, they look at three important things: the property, the person, and the position. They break down each aspect and present examples of where possible challenges may arise and how you can work around them. Ultimately, there are a million reasons why people are no longer interested in a property. Equipping yourself with an approach to properly analyze the situation can give you a better picture of what you’re getting into. 

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Three-Dimensional Approach To Note Investing

In this episode, we want to talk about note investing. As some of you might know, this show started out as a note investing show. Specifically, we want to talk about the three-dimensional approach to note investing that we take when evaluating, acquiring, and bringing a note to resolution. Chris, what is the three-dimensional approach that we take?

We also call the three-dimensional approach the three P’s, where we talk about the Property, that is defining the property condition, value, and shape of the property. We’ll dive into much more detail in regards to some of the other aspects of the property. The next is the Person, which involves why. Why is the loan distressed? What’s a little background history on this person? Get an understanding of the situation that caused the delinquency.

The third P is Position. What is the individual or the borrower’s financial position currently, or the current status of that position? What was it at the time of default? At the high level, those are the three P’s that we look at when we’re not only acquiring a deal but also after acquisition if we do proceed with acquiring the deal to the type of workout we’re going to be attempting to remediate with the delinquency.

Why is this different from approaches other companies might take? How is this approach unique?

It’s unique based on the person and the why, and truly understanding that situation. We’re talking about first position notes, which is what we primarily invest in. We do invest in some seconds, but our main bread and butter is that first position. In the first position, you’re taught to focus on the property. What are the value and the condition of the property? Does it have a clean title? Are the taxes paid?

A lot of times they’ll say, “You don’t need to worry about the borrower because your recourse is that property on default.” Us adding the person or the why adds tremendous value. How we first evaluate that why is during the due diligence before we buy a loan, we will request from the seller the servicing comments, which are all the comments or conversations that have gone back and forth throughout the years to go through those and read them.

Some could be 100 pages to understand the whole process of what happened. The borrower may have been paying for seven years, and then there was a life event. What was that life event? Is that life event something that has been remediated? Has it caused a change in lifestyle or financial situation, which is the position? If we do acquire that note first, we will look at whether or not we will still acquire it, and what the best solution is to try and work something out with that borrower.

Let’s start back at the beginning and we’ll go through these as we would if we were looking to acquire. If we received a tape of ten notes, what’s the first thing you look at? When you first glance at it, what are you looking at?

When we first glance at it, we look at the amount they owe, how far they are behind, and the property. We will take the information. The tape is a list of assets for sale. We do have a calculator that we have created that analyzes the financials on the loan in regards to if the borrower would try and modify the loan. How do the financials look? If we did, unfortunately, have to foreclose, what do the financials look like? If the borrower is in or decides to file bankruptcy, what do the financials look like? We evaluate pretty much every situation possible to make sure that the exit strategies that we want to implement still make it viable for us and our investors, but also a potentially viable solution for the borrower.

Loan-to-value is just the ratio of the amount of the loan versus the asset value. Click To Tweet

When we break it down, you mentioned earlier, property, person, and position. Can you talk about the different parts of the property and what we look at specifically?

One thing I want to remind everybody is that we don’t get to look at the insides of these properties. If you own a house and your lender goes by, you’re not letting your lender in your house to inspect your house. The only time you do is if you’re getting it reappraised. You have to evaluate the house based on a visual inspection. We will send somebody by the property to take a look at the property to provide a report that’s a visual inspection.

Typically, or the majority of the time, if the house isn’t cared for on the outside, chances are it’s not cared for on the inside. If it’s cared for on the outside, there’s a higher chance that it’s cared for on the inside, but that doesn’t mean anything because I’ve had houses that look great on the outside and have scraped an entire mold off the walls and 4 feet of water in the basement.

You can’t always judge the property by just the outside. Looking at the property is that one aspect. The other part of the property that we look at is the title on the property. Is the title clean? How many liens are on the property? Are the taxes paid on the property? That is the property P or the many different aspects that we try and roll up to determine what is the value of the property when we’re evaluating a note.

Is there a specific loan-to-value that you look for when you’re evaluating a note? I speak with people all day who are interested in that question.

First, for people reading or asking that question, I will first say we discount our price based on the lower of the amount owed or the property value. Back there in the downturn, several years ago, you heard the term underwater, where people may owe $300,000 on their house and it’s only worth $200,000. That means they’re underwater. Their loan-to-value is 150%. In that situation, we’d be bidding off the $200,000 value of the property. I would say we look to bid off of an acquisition price to value, which is the lower of those two. By the same token, properties that do have equity are less risky.

Backing up for a second because I realized maybe not everyone knows how to calculate loan-to-value. How do you calculate loan-to-value? I know we’re going down a little bit of a rabbit hole. I’ll keep us back on track.

Loan-to-value is the ratio of the amount of the loan versus the asset value. Let’s say you owe $100,000 on your house and it’s worth $200,000. Your loan-to-value is 50%. That’s a good loan-to-value. Lenders like to see it at 80% or less, which is why if you have it greater when you’re buying a house, you might be involved in mortgage insurance, which protects the lender in those situations. The lower, the better.

The lower, the better in note investing is the reason why if in this situation you owe $200,000, if that property drops by 25%, now the property is worth $150,000. You still owe $100,000. You still have a positive less than one loan-to-value. When it’s greater than one, that goes back to that comment, I made earlier about being underwater.

CWS 216 | Three-Dimensional Note Investing

Three-Dimensional Note Investing: We evaluate every situation possible to ensure that the exit strategies we want to implement still make it viable for us, our investors, and borrowers.

 

Do you have something specific?

We don’t. One of the aspects that make us different when we’ve been on assets is we look at the type of return we’re looking for and the risk. If there’s a higher or closer to one loan-to-value, we still acquire that asset, but we’re going to reduce our price because of the risk involved. That’s why I mentioned previously that it’s more an acquisition price to value because the higher the risk, to reduce that risk, we’re going to lower our number. If we don’t get it, we don’t get it. In many instances now, people are aggressive. In my mind, they’re overbidding, which we don’t do. They are taking on significant risk compared to the potential return they may obtain.

You’re not afraid to walk away from a deal is what you’re saying.

We walk away from many deals. On average, it fluctuates. Earlier on, there was probably a higher percentage because we were seeing a lot of assets that either the property or the information that we got was not accurate. As information’s gotten more accurate, the rate of loans that we do not buy after we have them under agreement is probably somewhere around 25%.

To clarify again for those who might not be as familiar with the process, once you give your indicative bids, you have a 2 to 4-week period where you’re able to do further due diligence, do that property condition report, look at the borrower notes, look at the borrower’s financial position. Do you then adjust your bids based on what you find? How does that work?

That’s the best way to explain it. It’s similar to buying a house. You have it under agreement, then you got several weeks to do all your inspections and so forth. That’s the same with a note because we’re given little information early on when you’re bidding on those assets. If we find out, for example, that the borrower has delinquent taxes, we’ll reduce the bid by the amount of taxes. The lender says the house is worth $250,000. We do an inspection and say it’s worth $220,000. We would discount our bid in that situation. A lender says the loan has been performing. We find out the borrower pays 3 times a year and 4 months at a time. That’s not considered a performing loan.

They’re bringing the loan current, but performing to me is consistent monthly payments. There are all of those issues. There are many others as well. I just rattled off a few. Those would cause us to change our bid. I’ll go back to most people involved who know how to buy a home to do a home inspection and realize it’s going to need a new roof or a new HVAC system. You reduce your number. It is part of your due diligence. You find something that devalued the property from your initial bid. It’s no different from note investing, where we find things that are potential errors that could cost additional money. We would then discount our final number based on that.

That covers more than the property. We went a little off track there, but it’s important to talk through the valuation and acquisition process. Say we purchased a bunch of notes, then we’re looking at the person in the position. Can you talk a little bit about both? Let’s start with the person.

I’ll start with the person. We will do research on that individual and skip trace, which is something that you can look people up that’s all public record. You can look people up where it gets their age, address, criminal history, bankruptcy history, and if they own any companies, essentially websites like Whitepages. It’s similar to that on steroids, where we’ll look up information on the borrowers to start painting that picture of their why. We’ll get those servicing notes, go through them, and read them. Sometimes I’ll search keywords as well. We want to understand what the cause was. It could’ve been a divorce, a death in the family, or a temporary loss of a job.

A good loan-to-value typically follows the lower, the better. Click To Tweet

Those are typically the most common ones, but also, we evaluate the why to see if it’s a loan that we want to continue to move forward on. I say that because here’s an example. We’re looking at a loan where the borrower had previously filed for bankruptcy three times. It was a single mother who had gotten divorced and had four kids, all under the age of twelve. The borrower could not afford the property.

This was a situation where looking at it, there was no way we could help this borrower. I wasn’t going to be the one to buy this loan to then turn around and foreclose on somebody in that situation. It was one where we decided to pass because to us, it didn’t fit the criteria for a lot of the things we look for. That’s one example. Some of the areas, the why, it’s many different things. The other one is health issues. Health issues and people may not have insurance and they rack the health bills. That’s a common one we see as well.

I speak with a lot of people on my end to think that you acquire the note straight to foreclosure. There’s no other option. You full steam ahead foreclosure even if the borrower’s willing to work with you. That’s not what we do at Seveney.

One of the other things with the why is that there might be instances where there hasn’t been a lot of borrower communications. In those instances, we’re not afraid where we still may proceed with acquiring that loan, but that is a loan where we will have an attorney and legal get involved sooner to bring them to the table or to try and bring that individual to the table to start having the discussions. When people typically get behind on debt, their initial reaction is an embarrassment. If they don’t have an answer, they’re not going to take the phone call. A lot of times, those debt collectors will be calling you three times a day nonstop. “Leave me alone,” is probably the initial reaction.

You want to make sure that they are aware that there’s a new lender, but they’re probably still going to ignore you because they think you’re the same as every other lender. We do sometimes have to get that attorney involved much sooner to get them to the table. Once we get an attorney involved and send what’s called that demand letter, which is the first stage, we’re still willing to work with that borrower. The cost to send that information is not extraordinary.

That is the key time when the borrower has the best chance of working out a deal. Any deal typically is beneficial to both sides, but once a lender starts having to start spending attorney fees, it makes it a lot harder to work out certain deals. If you’re going to require them to bring more money to the table, because if you do take a little bit of money and start over, let’s say I spent $5,000 on legal, and then we accept $1,000 for them, we accept that money and they fail, then we start over.

We’re going to have to go spend that $5,000 again. It’s the communication and making sure neither side gets caught in the hamster wheel in that situation. We do try and work with them early on. If they are in communication, then the servicer is key as a member of the team who’s the person who collects the payments and keeps us compliant with all the state laws and federal laws. They will work something out and get an understanding of what happened so they can explain to us the next steps, or the next phase of the process so we can again go through that evaluation process.

The key thing that you touched upon there is communication. I’ve had a handful of notes before. To give some examples where the borrower was so old that they didn’t know how many times their loan had been transferred. Once I sent the demand letter, they immediately brought their loan current. It’s like they didn’t know where to send their payment, which happens more often than I would have realized.

One of the reasons why is that most people mail a check or whatever. Your mortgage payment typically hasn’t changed. Sometimes they may get a letter from their lender and they throw it away. They don’t even open it and recycle it to see that the loan has been sold. That creates a snowball effect. The other is that when loans do get transferred, letters get mailed. To me, I would think that there’s something that should be sent certified. It’s not, and because it’s not, it probably gets lost in the shuffle.

CWS 216 | Three-Dimensional Note Investing

Three-Dimensional Note Investing: When people typically get behind on debt, their initial reaction is embarrassment, or if they don’t have an answer, they’re not going to take the phone call.

 

I had one instance where a borrower filed Chapter 7 bankruptcy, which we’re not going to go deep dive into, but it wipes you of all your debt. You’re not responsible for any of your debt. There is a little asterisk there that you don’t get the free house. You still have to pay what’s owed or the lender can still foreclose, but they can’t go after you for any money. They just take the property. That’s their only remedy.

This woman didn’t notice. This woman was elderly. We couldn’t get in contact with her. We send a demand letter. An attorney called, who handle the bankruptcy, and said, “She hasn’t paid in seven years.” Between the accrued interest, late charges, and everything, it was a huge number. He said, “She didn’t realize that Chapter 7. Can you do something with this borrower?” We said, “Yes.” We did what’s called a forbearance plan or trial payment plan, which is we don’t modify the incomplete terms of a loan. We’re like, “Let’s put them on a training wheels plan and see if they can make the payments. If they make the payments, then we’ll restructure the entire loan.” We did that.

The woman paid like clockwork. We ended up remodifying and structuring the loan that fit her criteria. For us, they fit within the parameters that we are looking for, for returns. Again, that’s another example of when we are getting that why, we also were seeing that in the servicing notes, nobody was ever reaching out to this person. That’s pretty common. When that happens, you may not know the story, but the person probably does want to still pay, especially if they’re living there, but nobody’s ever reached out to them. It’s out of sight, out of mind.

It goes back to that communication, not only from the borrower to the servicer and the new lender but also from the new lender to the borrower. The biggest difference in how we approach notes is trying to figure out what that why is. It could be that they didn’t know their loan was sold, and then you have this increased awareness of everything being a scam. I received a letter that says my note has been sold. I don’t know. Before being in this industry, I’d probably be like, “Is it really?” I would have called my bank or my previous lender. People have a heightened awareness of something being a scam. I’ve heard that before from borrowers.

I want to jump in a little bit on that because you’re right about the scam. I’m going to use banks that everybody knows. It’s not going from PNC to Wells or to Chase. It’s going to a company that’s like Johnny’s Note Buying, LLC might be buying this. If I saw that, I’d be like, “What is this?” It sometimes reeks of scams because there are many scams nowadays. The other thing to look at is if it was you, would you read this letter? I would call the person who I was sending payments to verify it, and then they would confirm it. Initial blush would be like, “Take this with a grain of salt.”

That’s where the demand letter comes in. When we say we send a demand letter, it’s to show we have a valid claim to this specific note and show that it isn’t a scam. Even if you send the welcome packet and they don’t respond, you’ve tried calling and reaching out, that’s where the demand letter comes in as like, “This is for real.” That’s why a lot more people come to the table after the demand letter is sent. People might have differing opinions on that. You’ve been in the industry longer.

I also think it’s from an attorney. Anytime you see something from an attorney, it’s an initial like, “I better open this.”

Talked about the property, the person, how the communication is key to get to know what the why is and see the whole story, and then you have this person’s come to the table and they’re wanting to get back on track what we talk about the position of the borrower. Can you talk a little bit about that?

Similar to if somebody was applying for a loan, the service will request, “Can you provide us your tax returns? Can you provide us with your bank statements? Can you provide us with your W-2? Provide us the information so we can evaluate what you can afford if you can afford it.” Unfortunately, a lot of times I’ll go back to my 27-year-old self where I had two expensive cars, high credit card debt, a lot of those things, that is what you see a lot.

Once a lender starts having to really start spending attorney fees, it makes it a lot harder to work out certain deals. Click To Tweet

One of the things that I’ll mention for us, an ethical situation is someone will say, “I’m borrowing $2,500 to put this down and then I’ll afford $1,000 a month,” and they haven’t paid in four years. If you haven’t paid your mortgage in four years and you don’t have $1,000 to your name and your situation hasn’t changed, chances are you can’t afford the $1,000. I would rather not take that person’s money only to then turn around and foreclose on them.

That’s one thing to evaluate, but it’s a process of confirming. This is what Dodd-Frank would say which was past several years ago. It’s the borrower’s ability to repay. What is the likelihood that they do have that ability to repay? I’ve seen borrowers who order out all day long on Amazon, and they have four car loans, a high cable bill, and a high cell phone bill. You like to get them help or some type of credit specialist to work with them, to try to reduce, minimize, and modify that debt.

In some instances, there’s potential for success. Unfortunately, in most instances, it’s not successful. That’s where you go back to that why sometimes to see what that why is. If it’s somebody’s lifestyle, the lifestyle change is challenging to get somebody to change your financial position. Again, if you’re looking at the why and the financial position are tied, because if it was a one-off instance or a change from a divorce or health where they’re back working and making that money again. They can’t make that big lump sum payment, because it’s a snowball effect if you miss one payment.

Now the bank is saying, “You got to give me both, the 1 you missed and the new 1,” then you’re like, “I don’t,” and then it goes to the next month. You’ve got to make the previous 2 plus the 1 so it’s 3. It’s a snowball effect of, “I could pay you a 1, or I could pay you 1.5.” Some lender is like, “No, I need all three.” It keeps coming, the late fees, the interest, the charges. That’s an area where you need to evaluate that financial situation, say, “We can take the $2,500 down.” It does look like you can afford $700 or $1,000 per month, whatever that payment is going to be. We will put you again on a trial plan to make sure you get adjusted to making those payments and can live within your means during that time.

There’s that snowball effect. I might owe $50,000, but I had something happen, which was my why. It’s not my lifestyle, but I do have the money to pay and get back on track. From our perspective, we can work with them to get them back on track without requiring that $50,000 upfront.

In most instances, yes. Again, I have to put a stipulation. We’ve got a loan right now that has a $400,000 reinstatement on it. In that instance, it’s got a high mortgage payment. Fortunately, $50,000 is not a lot compared to where the loan is. Typically, we’re usually talking $250,000 homes with a $150,000 balance and they might be $10,000 or $15,000 behind.

We try and work with them to try and get 5 or 6 payments from them. Again, we evaluate the situation. We don’t have a hard fast rule. We work with somebody who likes to have everything black and white sometimes. It’s somewhat of a gray area of there are no set rules, that gray area bending to see what fits what situation. That still could be a win-win for both sides.

You’ve mentioned a trial payment plan forbearance on modification. What are some other options available to borrowers as they come to the table to work something out?

Those payment plans that we try, if the borrower either doesn’t want the house or can’t afford the property and recognizes that, then there’s what’s called a deed-in-lieu of foreclosure. Instead of having us go through the foreclosure process, we will have them reissue us the deed as long as again, it’s a clean title and there are no other issues on the property.

CWS 216 | Three-Dimensional Note Investing

Three-Dimensional Note Investing: The thing that people need to remember is that we are buying these properties at a discount, so we do have the ability to negotiate a little more freely. We have more wiggle room on all of these options.

 

In many instances, we would do cash for keys, which is when they go to move out, we give them a cash stipend to pay for their moving expenses because we didn’t have to absorb those legal fees or give that money to an attorney. We are not opposed to working with them to give them those funds to maybe put as a deposit on a rental property, pay for moving, whatever that case may be. That is another option.

If it’s underwater, meaning they owe more than what the property’s worth, we potentially would allow them to do a short sale. With a short sale, unlike what people probably have in the back of their head that, “A short sale lenders take forever. There’s so much red tape. They never get put through,” we’re an investment company.

We can approve a short sale in five minutes. We have a number already in mind of what we would approve. If it hits that number, we’ll make a decision instantaneously or within 24 hours and work on that process. We don’t have seven levels or layers to go through different departments to get that approval, which could take months if you are a nationwide lender.

We’ll know that with all of these, the thing that people need to remember is that we are buying these at a discount. We do have the ability to negotiate a little more freely. We have more wiggle room on all of these options. That’s something that people always might forget. “Why can’t a bank do this? Why can’t whoever the original note holder do this?” In this market with home prices, what they are, another option would be to sell the home.

What we see a lot now is that people don’t want to sell because their credit might be hit and interest rates are high and rents are high. They don’t have a place to go. Their rent might be more than a mortgage payment, then they’ll file for bankruptcy. Bankruptcy isn’t a bad thing.

People think, “Bankruptcy? Maybe I won’t go this far.” It’s like when we had that episode on debt when used correctly.

Bankruptcy, if it’s a Chapter 13, which is it’s a restructuring of your debt, it’s taking all your debt, taking what’s secured, what’s unsecured, figuring out how much you can afford, and putting you on a time plan for typically five years to get yourself back on track. Unfortunately, everybody wants everything instantaneously. Real estate investors want to make $1 million and buy ten properties in their first month. People want cryptocurrency to triple their money, whatever it is. Everyone wants everything instantaneously in this world. Unfortunately, that’s not reality.

Five years is a lot of time, but in bankruptcy, you have five years to restructure that debt. How it typically works on the notes that we buy is that the borrower still makes that monthly payment that they owe. Whatever was past due is rolled up in a ball, divided by 60 months or 60 payments. You’re paid chunks of that on a monthly basis as well. What’s nice about bankruptcy is if the borrower hasn’t been communicating with you, they’re not going to communicate with you because they can’t in bankruptcy, but they have to fill out a lot of financial information to provide to the courts. It’s almost as if they’re communicating to you because all of that information becomes available for you to see.

As investors, obviously, you see someone who is a serial filer. That’s a different story. It can be used for borrowers as a tool to help them get back on track. It has a negative connotation because of serial filers. Again, I’ve had a borrower who was on bankruptcy or was on bankruptcy who filed for bankruptcy. I was getting those consistent payments and everything got back on track. It’s not necessarily always a bad thing.

Bankruptcy is a restructuring of your debt. It's taking all your debt, taking what's secured and unsecured, figuring out how much you can afford, and putting you on a time plan. Click To Tweet

If I had to guess, and again, I have not analyzed this data as of now, so I’m spit balling it. If we had 100 loans that are delinquent and which bucket they fell into how many do we try and modify to work out? How many go to bankruptcy versus how many go to foreclosure? I’ll ask you, what do you think the foreclosure would be out of 100?

I’ve gone through this with specifically 100 notes. This is funny. I’d say 30 of them are in our portfolio. I haven’t analyzed it as of now, but in a fund specifically, maybe 30 of them are performing. The rest, the other 70 are non-performing. I’d say maybe 10 to 15 of those go to foreclosure, maybe even last all the way through. Is that what you were going to say?

Yes, 10 to 15.

That’s the thing. I go through this whole analogy with people who are interested in our workout process and 30 of them are performing. That leaves 70. Of those 70, we would say, “Try to get in contact with the borrower.” Probably send me a letter of those 70. Let’s say half those come to the table and are ready and willing. We haven’t discussed this, but having worked with you and having done my own, I’d say of those 70, 35 come to the table and are like, “Let’s do something.” It’s maybe because they thought it was a scam or they’re an older borrower who didn’t know or couldn’t follow how many times their loan was being sold.

You have 35 more that might take a little bit more to come to the table, whether that’s you need to go to another step in the foreclosure process. They realize you’re serious, then they’ll come to the table. You have 10 to 15. Even of those 10 to 15, I’d say 5 are totally either vacant or borrower’s deceased or something super crazy. Maybe leaving 10 of those that are all the way through.

When you get to that point as a lender or at least we at Seveney, we’ve made every effort to reach out to the borrower to try to get them to come to the table, to evaluate their why, and what their financial position is. They’ve been like, “I haven’t paid in ten years. I’m not paying you a dime.” That is a different stance from someone who’s like, “I had a major health scare. I couldn’t afford my mortgage. Help me,” versus someone who will say to your face, “I’m not going to give a thing. I haven’t paid. Why would I start paying now?”

Those numbers are spot on, and the balance and bankruptcy are as well. I have some of those foreclosures. You hit the nail on the head. Most of them don’t want the property. That’s where we ended up taking back, whether it’s a family member who passed away, divorce, relocation, they didn’t feel like listing it or selling it, or they had to move quickly, whatever the case may be.

There are a million different reasons why people need to move or are no longer interested in that property. It goes back to that why. The person in the why is what is that story that we try and analyze. When we’re analyzing that, we make sure the numbers still work, which is an aspect that a lot of people do not take into account. Analyzing it, again also gives us a better picture of the risk that we’re getting into.

I’ve worked with a few different investors, you, and prior to you, that did things differently. I know someone whom I worked with that would go straight to foreclosure. It didn’t matter what the why or the financial position was. It was like, “We’re moving forward full steam ahead.” I’ve worked with people who no matter what, don’t go to foreclosure at all. They have only tried to work something out with the borrower. They have had good success, which is not what you would think when you’re getting into this business because that’s not how it’s described.

CWS 216 | Three-Dimensional Note Investing

Three-Dimensional Note Investing: Being able to work with the borrower because of their position and their why all stems from what you purchased the property at and doing a good job on the purchase or not.

 

I know another investor. They will foreclose and they buy loans to foreclose on them. The way the economy and housing have been the last few years is profitable for that individual because they get it, they foreclose, they get the property, and that property keeps appreciating month over month. Will that continue in the next few years? That’s another time, another debate.

Someone made a comment like, “Why didn’t you change your philosophy to that?” I’m like, “That’s not my philosophy. That’s not our business plan. That’s not the way we operate.” It’s like any business. There are other ways people can make money or do better in one area versus the other. For us, the way we analyze things, by getting them to work out, we can do well. If we take it back, we still do well.

A lot of times, they like to do home run hitters. They either want to hit a home run every time, or they also strike out a lot as well. For us, we’re much happier getting our singles, doubles, and triples. As part of that, we’ll get a hanging curveball down the middle that we can also hit for a home run. We have a lot more doubles, triples, and home runs than we do strikeouts. That’s for sure.

It’s that consistency. We’re still able to meet our investors, meet what we promise to investors, and do well.

Past performance is not an indicator of future success because I was talking about things. I want to make that stipulation again.

I also believe in karma. I took that from someone who would only do workouts for that reason. There’s a level of karma that goes into it.

We’re not going to argue whether karma is real, but if it’s things where you believe in it, then yes. I got a question for you. Of the three, person, position, or property, which one is the most important?

The property.

It still is. It still comes down to the property being the most important.

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You’re evaluating whether you’re going to hit a single, double, triple, or whatever. Baseball is not my favorite sport. The property is the most important because it helps you dictate whether you’re going to purchase that property ad or that no ad. The rest flows from there. Being able to work with the borrower because of their position and their why all stems from what you purchased the property at and doing a good job on the purchase or not.

Most people, because it’s most important, they do a one-dimensional. They’ll look at the property itself. Going back to that three-dimensional picture of property, person, and position, it does give us a competitive advantage.

Any final thoughts?

That was my final thought.

That was good. With that, I will wrap it up. Thank you, guys, so much for joining us on this episode. If you enjoyed the show, share it with a friend or subscribe and leave us a review. Thanks, guys. Until next time.

Take care.

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