When To Leave Your Day Job As A Note Investor

November 27, 2020




Want to get into the note investing business but don’t know the first thing about it? Chris Seveney has got your back on this as he goes back into the basics of and frequently asked questions in note investing in this episode. What are notes? What is the difference between a note and a mortgage? How to they work together? What are deeds? Everything you need to know to get started is here. Join in!

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Note Investing Basics And FAQs

Welcome, everybody to another episode of the Good Deeds Note Investing podcast where Jamie and I share our stories, trials, and tribulations in our note investing journey. Jamie, how are you?

I’m doing well. How are you doing, Chris?

Good. We’ll spin it up a little differently, but it is Friday the 13th in 2020, so it’s going to be a wonderful day. I’m visualizing borrowers mailing in. It’s Friday, getting their paychecks and sending them all through, ones that I haven’t heard from in years.

I don’t know if that’s 2020, but I’ll take it.

It could be. You never know what’s going on in 2020. Thank you, everyone, for reading. We’re going to have an interesting episode. It’s going to be a therapy session with Jamie, we joke. We’re going to be talking about leaving your full-time job. As many of you know, I don’t have an interest in my full-time job. I like it, and people always wonder how I get everything done, which I’ll do a webinar for people to explain my systems and so forth at some point in time. We’re going to talk about that process, where Jamie needs to be, and where I need to be. Before we get into that, let’s start out with our difficult topic of our latest trials and tribulations. Jamie, all yours.

I had a couple of other things I was going to mention, but I’m going to talk about this note I did. I’m curious to see where it goes. It might not go anywhere. I may have sent it over to Chris to take a peek.

It’s like playing pitch with my buddies, by the way, when you sent that to me. Full disclosure, I looked at it, but I didn’t do a deep dive.

I’ve been on a note and it’s an expensive note in Georgia. It was part of a tape that you could cherry-pick off of. I’m curious to see it as a non-QM note. The borrower had been approved based on twelve months of business records, so he’s got a high credit score. I haven’t seen his business records, but I imagine the income was there at least to satisfy this note. From the information I had, the borrower looked highly qualified, and there’s a good amount of equity in this property. UPB is probably $156,000 or something, and I’m curious to see how this plays out. It might not go anywhere at all, but from doing some quick research, I found out that he just passed away.

How did you find that? Because people ask like, “How do you find this out?”

I initially put his name on Facebook and then didn’t find him. I put it into Google, and then Legacy.com with his obituary came up with his middle initial and everything, and the same city. Maybe the seller knows that but I’m not sure. This came over in a tape. It’s not this one-off that they’re selling and they’re a larger player because he made three on-time payments and then stopped. He bought this house for $185,000 in that general ballpark, and then it just stopped. On the surface, you’re thinking, “COVID.” The pandemic and the shutdown caused a lot of people to be behind. I’m wondering if they even know that he passed away. I’m hoping not. I did put a bid in, so we’ll see where it goes. There’s a potential for a good return there. If I do get the bid, I need to find $100,000.

I laugh because I get this. I got a message one night at 10:49 PM. “Are you up still?” I’m sitting there and laughing. I’m playing cards with my buddies and I was going to reply sarcastically like, “It’s only 10:50. It’s still working hours.”

My only surprise was that you didn’t reply within three minutes.

Thursday nights, I play cards with some college buddies and we play on an app called Trickster Cards. I use my phone to play so you can’t switch between Messenger and so forth when you’re playing. We’re in between games when he texted and I had my computer next to me. I popped it open and I was like, “Yeah, I’m still up. It’s funny you’re sending me this stuff and I’m playing.” I’m sitting there looking at due diligence and they’re like, “What are you doing?” I’m like, “A buddy sent me an asset and stuff and so forth.” I was multitasking.

Is it the first time you’ve done that?

Yeah. I didn’t do too well. I went 4 and 3 in our 7 games. I’m surprised, too, you didn’t mention. I’ve got some assets that I sold to Jamie.

That was on my list.

It’s funny you mentioned that because right after you sent me a message, I got a message.

Is this in reference to the New York loans?

Yup. I got an email at 11:49 asking if I’m available in the morning because they need my assistance to answer those questions that they post. I replied, “The answer to all of them is no.”

People are a little lost.

I did get a reply back in the morning at 12:05. “Thank you. I’m going to reply with the answers and goodbye letters in the morning. The funds in escrow should be released early next week at the latest.”

We’ve been trying to get these New York loans boarded with SCI. We don’t have to buy letters. It’s crazy. SCI is not even that complicated, but it’s a shortlist of questions, yes or no, that the prior servicer needs to answer. They haven’t even been able to answer this in 5 or 6 weeks.

What’s scary is the fact that I can answer them and they can’t because I don’t think they understand the questions. It’s a good learning lesson because sometimes, servicing transfers are painful like this one is. It goes back to communication between the two parties. Now you and I joke about it, but it’s serious in the same sense. In the same token, I’m like, “You can’t get mad at me yet because technically, he hasn’t paid me but if you will send me money, you could get more upset.” Long story behind that, that’s one of my trials and tribulations. One thing I want to mention, too, because there’s been a lot going on in the industry and so forth, is I do want to touch base upon one of the things that I found shocking.

This is when Martin signs from note investing made easier and I decided to shut down his Facebook group. He’s leaving Facebook and I can absolutely see why he’s leaving Facebook. I went through this, where I was considering moving the group to a different network. After speaking with some consultants, in the same token, I don’t like Facebook and I don’t use it a lot personally, but it is an avenue for business to drive growth and revenue. I decided to keep it and he made a decision for moral purposes to close it down, which honestly surprised me. I’m not sure if it surprised you as well.

It did for sure. I had no idea. I’ve seen different people saying that they were leaving. That came out of nowhere for me.

He’s moving his platforms over to LinkedIn, YouTube, and so forth, which I start doing more YouTube videos, but I’ve got some other things in the works as you know, Jamie. Relaunching my website was just phase one of my master plan to build my empire from that perspective. As part of that website, I did launch out some mentoring, which I’m working on with some people and stuff like that. The reason I wanted to bring this up as a trial and tribulation is things change quickly and rapidly in this world and in this business. Sometimes, you’ve got to react and stay focused, too. It’s the biggest thing I would tell people. You got to focus on yourself, what’s best for you, and make these decisions in the best interest of everyone around you.

You can’t predict what’s going to happen. This surprised both of us. If you have your systems in place and your own goals, principles, and priorities, then you can adjust quickly.

Let’s roll into our main segment, in which we’re going to talk about leaving your 9:00 to 5:00 job. I mentioned this and Jamie was like, “Ooh.” I almost got the sense from Jamie. He’s like, “I may announce on this show that I’m leaving my 9:00 to 5:00 job.” I’m going to be poking the bear this entire time because I’ll be honest with you, I’m not.

We can still learn from that though as to why you’re not.

I do want to talk about what it would take for me, where I’m at, and the reason why because people are like, “Why aren’t you?” My income from notes matches or exceeds my 9:00 to 5:00 income. People are like, “Why wouldn’t you?” I’ll talk about that, but I want to talk about you first. Sit on the black couch, close your eyes, and tell me how you’re feeling.

We’ll see where things go. I know I did a Facebook poll on the topics that we might cover on the podcast and I was surprised that this wasn’t more of a popular one. As far as us doing this, I said to Chris, “This is dangerous. I may not go back next week to my real job.” Also, my wife who has no interest in joining us on the podcast threatened to come on this one to make sure I didn’t leave my job.

One of my goals for 2021 is to get her on the podcast. Two, seeing you not leaving the job. To be clear, I’m not forcing anyone to do something that could affect them, their family, their kids, and so forth. We say this tongue in cheek.

I’m not quitting my job, but I’ve been headed in that direction. I went part-time in 2015, so I only work three days a week. It’s not maybe the exact same decision that somebody else would have. Every situation is different. The one big hang-up for me is health insurance. I work for the government and I get full-time benefits. I am still working part-time and I get paid less than a full-timer would, but it is nice to have that health insurance, so that is one big factor.

I would almost tell you you’re nuts to consider it. Here’s the reason why. One of the reasons I like my full-time job, besides I like what I do, is the access I have. Working in commercial real estate, I’m part of other groups and segments that most people may not. I was on a call with some extremely high net worth individuals and we’re talking numbers that start with a B. Hearing how they view the election and real estate. It’s not only them, but they’re hearing this from all their advisors who are probably $1,000 plus an hour. I get all that information free in some sense.

We are never going to go into some political spectrum on this show, but the average health insurance from what I was hearing, premiums are going up anywhere between 10% and 30% in 2021. Look at where our country is from what’s going on in the crisis. We got 150,000 cases a day. It’s going back up, and then there’s going to be more hospital expenses and stuff, and the government is paying for that. Whatever the case may be, these insurance companies are going to get more expensive. I’m working for the government and my wife works for an international organization, so they’re self-insured. Health insurance has got to be one of your top priorities.

Personally, it may be a $20,000 per year benefit, but that doesn’t mean I can go out and just pay for that myself anyway. It doesn’t mean I can keep the same insurance. It’s more of probably a $30,000 to $40,000 a year benefit that I’ve got there.

You got to recall, too. You could get insurance for $15,000 to $20,000, but it’s not going to be anywhere near the program policy.

That is a factor. My job is a little different than yours. Everything is compartmentalized on one hand. I can talk 100% about what I do. The government deems me as reliable and trustworthy. As far as my individual job, not everyone needs to know too much about that, but it is nice that it is a separate thing. Once I leave there, I don’t bring it home. One thing I know people struggle with, especially during COVID and working from home, is finding that line between, “I’m not doing my real job, my W2. I’m doing notes. How do you compartmentalize that?”

I don’t have an issue with that at all. I’m not able to work on my note business while I’m at work but once I’m out of there, I don’t have to work on my W2, so that is a nice perk. At the end of the day, I’m hoping to grow my note business to the point where it’s not even a conversation on whether it’s just notes or real estate. I don’t want to limit it, but I want to grow my side hustle into a business where we don’t even need to have the discussion about whether I should stay or not. At this point, it’s still a discussion.

I’m not looking to quit. I’ll take 2021 and reevaluate. I can dial back my hours even more, believe it or not. I make fun of myself at work that I’m never there as it is. If it were just me, I would have left already, but it’s not just me. It’s my family. Having a stable income has given me the confidence to go out and maybe take some risks in other parts of my life. Working for the government is one of the more stable paychecks you can have. We’ll see. Nothing is stable anymore.

I was laughing because when you think of government stability from a job perspective, yes.

Who knows what’s stable these days?

The other thing I’ll mention, too, and you didn’t touch upon it but I will because it impacts me, is where you live. You live in Maryland outside Washington, DC, where I live. The cost of housing here is high. If I graduate college now, I would be starting a job somewhere around $80,000 to give people an idea. I say that because you could be an investor in other parts of the country where the cost of housing where we invest and stuff is you can get a 3-bedroom, 2-bath house for $100,000. $80,000 here might be $40,000 there, and that’s a big difference.

I’ve been in the corporate world for twenty plus years, so I make good money. To try and replace that is challenging in that perspective. The other that I want to reiterate or re-emphasize is by having that job, you can take risks but be less risky. What I mean by that is I tell people, “I have income coming in. If I never buy another note in my life, it will make no difference to me. I don’t need to stretch to make sure I’m buying notes to get into a bad deal to try and keep some cashflow coming in the door.”

You can sell partials and defer some of that income down the road because you’ve got the income from your W2 and your wife’s W2, right?

Yup. Before she was a US citizen, she didn’t get W2 and she was tax-deferred. She’s tax-free at one point in time. She’s not paying taxes because she works for the World Bank. If you’re not a US citizen in the World Bank, you don’t pay taxes, which is crazy. She then became a citizen and paid taxes. Here’s the struggle. It allows you to scale or spend that money you make to reinvest in your business, but you lose the component of time. This is my big thing. I have a vision that I want to build an empire, but the thing that stops me is time.

It’s like building a property or building a house. You use your business. I’ve been setting this foundation for future growth by reinvesting. People ask how I do it. I spent $20,000 on software to manage my assets that servicers use, and I hear servicers complain that it’s expensive. I have the same stuff, but it allows me not to have managing employees. I’m setting all those systems in place and get to a point where I can scale. I have 250 notes. If I went and sold 50 of them and say the average UPB was $50,000. Say I sold them for $0.50 on the dollar.

I took those 50 that I sold that had $50,000 UPBs and I bought 15 of them that had $150,000 UPBs. I lowered the amount of business I have to do but kept the same numbers. Eventually, that’s for me to grow is not about the number of notes, but it’s about the size of the notes. They start out small and growing. If my 250 all of a sudden became 50, but each one had a $250,000 balance, I’ll be like, “What am I going to do with myself in my free time?” It would then give me that time to continue to work. It takes that time factor and moves it away.

A lot of real estate investors do the same thing where they move. Essentially, what you’re talking about is moving from more active to more passive management. I don’t think you’ll ever be passive. I remember Bob Malecki saying the same thing where it takes as much work for a $500,000 note or a $50,000 note. You’re going to end up getting lower returns. It might be a little bit safer, but it’s less work if you have higher balance notes.

One thing I wanted to touch on, and you hear this on different podcasts, is I replaced my W2 income with my real estate investment or my note business, so then I quit my job. You can speak to this. It’s not an overnight thing. You’re building up your business. Maybe you’re making $100,000 at your real job and you’re making $100,000 with your notes. While you’re doing that for 3 or 4 years, once you quit your W2 job, you’re going to lose some income. That’s what I’m getting to.

People act like, “My business, my side hustle replaced my W2 income, so I can quit and have no loss in income.” It’s like, “No, you just lost your W2 income.” It’s not an overnight thing. It’s a process. For me, it boils down to where you can add the most value because profit eventually follows that value-add, if you will. Since it’s a therapy session, it comes down to your priorities and your philosophy. It is a mindset thing. It’s not necessarily for me. People talk about, “Do what you love and follow your passion.”

That’s fine, but you need to add value. You’re going to start loving what you do when you’re making more money. You’re going to do that by adding value to people and solving problems. What I’m getting to is in my W2 job, I’m finding that I’m just not adding as much value as I used to down the road. It’s getting in the way of me adding value to other note investors or my own portfolio or borrowers and adding value there, then it may be time to shift toward full-time notes or full-time real estate. That’s how I look at it.

I’ve mentioned this in previous podcasts. My philosophy is a little different. First, I want to jump back about those notes and scales. It’s similar to buying single-family homes and then buying a multifamily building. You have sixteen doors and now it’s just under one versus separate. My ten-year plan is if I can double my salary for the next ten years, then I can do whatever I want. I’ve almost made twenty years of earnings in years. The other component to that, too, and you can relate to this, is the note investor journey starts off with you. Buy a few notes with your own money, then you start doing JVs. You lose all your hair, and then you start doing funds and raising money.

For me, I would like to use my own money and not manage funds or do anything. In ten years, I’ve got a stack of cash sitting there and I’m continually reinvesting my note money. There’s going to come to a point in time where, “This income, between my partials and some of this other stuff, is generating $50,000, $30,000, or whatever thousand dollars per month.” It’s like, “Why am I going to go out and raise money? Why do I need that hassle?” Maybe I still have the drive for that. I might have a drive for something else. I have other careers or other ambitions in life outside of the real estate of things that I might want to get into.

That’s interesting you mentioned that because it’s not a show about retirement, but I’ve changed my views on retirement in general. I don’t think the old school way of looking at retirement. I’m not judging anyone who’s retired and is sitting on a beach right now, but there’s value in work. For me, I don’t look forward to not working at all. I’d love to dial it back a little bit and work less. I’ve heard people say, “You should figure out what you’re retiring to. Not what you’re retiring from.” To me, it’s not so much about leaving my job. It’s about what am I going to?

I’m the type of person, between my wife and I, that there’s no way we’re going to be just sitting around having a cup of tea and doing nothing. People think I’m high energy and get stuff done. My wife works five times harder than me. I used to joke to Gail. I’m like, “My wife calls me lazy sometimes.” To give people a perspective of thinking I’m driven. My wife is not a human. I don’t know how she does it.

Gail used to talk about how your wife thought you had this cute little hobby of notes down in the basement or something.

I keep it hidden from her, but she didn’t care. She’ll ask me now. She’s like, “How’s your portfolio?” I tell her some of these stories and stuff like that. We have a healthy marriage in the sense of, I don’t bring up every little bad thing that happens in business unless it’s going to have a negative impact on our family. In the same token, I don’t celebrate all the wins because it’s going to even out where I make money on one and I may lose some on another. It’s like, “Here’s the balance.”

We treat it for us. Any money we make is like the gravy in that sense of we don’t have it spent in that perspective. That’s why I also contribute to reinvest it in why not leaving your job sometimes it’s a benefit because you have that, I’ll call it a nest egg, where it allows you to grow and scale faster because you’ve got that other income coming in the door. This is the stuff that you can look to reinvest.

We’ll see where it goes for me. It is tempting now, more so than ever. We can’t for my job. We don’t work from home. With the COVID numbers positivity rate going back up, they’re talking about potentially doing shift work. Selfishly, I’m like, “I’m not doing this.” They’re going to push me out, but in reality, I don’t think I’m ready to leave.

That’s impossible to fire anyone in the government. They can be watching adult videos at work and stuff, and you’ll get written up. You don’t get fired. What they’ll do is they’ll suspend you with pay, so you’re working from home.

I will say we have hard-working people where I work. Is every organization necessary? We went down to 25% capacity and seemed like we were fine. That’s a different discussion, but that’s more about being busy versus being effective or necessary. The people I work with are hard workers and they’re good people, but you’re absolutely right. If you don’t commit timecard fraud, you’re probably going to stick around. It’s stable in that regard.

Let me ask you this question because someone has occurred to me. I’ve had this happen on several occasions and one, was a little surprised by my response, but someone says, “I got $5 million and I want to invest it with you, but I want you to quit your full-time job. Manage my money.” I don’t think I gave it three seconds of thought to be sorry. I said, “No.” For me, I personally don’t think that’s enough. Where I would need to be would probably be double or triple that under assets, under management for me to safely want to exit.

I probably have between $3 million and $5 million of cash. My assets are probably $10 million of assets, but we probably pay $4 million or $5 million under management. If somebody came to me and said, “Here’s this,” and didn’t want me to step back and didn’t want me managing anybody else. I was specifically exclusive to them or both of these situations. I was like, “No.” I’m curious if somebody walked up to you and said, “Here you go,” would it entice you?

One of the things that drive me is having my own business and starting to build my own team. It’s my thing. I’m not opposed to partnering with people on deals or even a particular business or that kind of thing, but I like having my own thing. I’m creating it. I’m not saying it’s all about me, but you have that control and that direct influence. That doesn’t appeal to me either. I know that’s for a separate episode. We should do one on managing a fund that was a popular one on that Facebook poll that you could speak to more than I can at this point. That’s my answer. That’s not mine. It’s just another job. That’s not what I’m looking for.

It’s enticing and it’s a one-stop-shop and stuff. It’s also in the same token like, “What’s the managerial role and so forth of how things shake out from that perspective?”

It could be beneficial for your own portfolio and your own business. It’s like property managers or probably even note servicers. Property managers will usually have their own little portfolio that they manage of rentals, but they also manage maybe 100 other properties for other people, so it could work together like that.

We’ve talked about why we wouldn’t. Let’s talk about some advice to give people who are going to make the leap because there are people who are in a job that they don’t like. They want to get out and they may have gotten into notes and may have some income streams coming in the door. What would be some of the advice you would give people?

Be careful not to make the leap too quickly. At the end of the day, you could go back and get your job back. It depends on the industry you’re in. I would say health insurance and these things we’ve talked about, make sure they’re lined up. It is up to the individual person so it’s hard to say. What are you trying to do long term? Reverse engineer that. Where do you want your life to be in ten years? Dial that back to now.

For me, I would tell people, “If you’re doing it, make sure you’ve got some reserves in the back.” The other thing would be, “If you’re doing deals and raising other people’s money, don’t get caught or get yourself in trouble. If you have bad deals, all sudden, you go quiet on them and you don’t reach out to them.” You’re posting everything on Facebook about how great things are, but most people are lying to themselves when they post on Facebook in some sense. Having these deals go bad, people chasing you for money, and you’re ignoring them and stuff because reality is, if you tarnish that reputation, this is such a small business, and it’s going to go around quickly.

You’re going to not be able to raise that money and it’s going to be challenging for you. It made me think of the one-way dialogue on Facebook where somebody went after me hard on Facebook because I gave them some constructive criticism. I was a little bit harsh on them, but I personally don’t think the person has handled it properly in a mature, unresponsive way. When that happens, especially in a public forum, it’s not good for you.

That was entertaining but unfortunate.

That’s what I would tell people, “If you’re going to leave, make sure of that, but also make sure you put a plan in place and follow it.” Don’t just shoot from the hip and say, “I’m leaving my job because I’m making this much on notes,” or whatnot. What is your plan for the next 3, 6, or 12 months? What is your plan if things slow down or if COVID hits and borrowers stop paying? How are you going to put food on your table? I always plan for the worst of things that could happen and then if something happens that’s better, it’s like bidding. I see people who bid sometimes on the best-case scenario on these assets and sometimes people bid on the worst case, which you can’t always do, because then you’re never going to buy anything, but in the same token, make sure you evaluate. The other thing, too, is to talk to people. Don’t talk to your buddies. Talk to people like, “What are your thoughts?” Talk to people who are in the business.

People who’ve done it, who are successful. That is a good piece of advice. We always go to our family or whoever is closest. My extended family, we have a lot of teachers and educators, not a lot of entrepreneurs. They might think that leaving my job and starting a business is risky. One thing I wanted to say about that, too, is doing nothing can be risky as well. It comes down to opportunity cost and what you could have done if you should have left your job, blew up, and started this business. Think about all the people you could help and all the success you could have, but instead, you didn’t take that leap.

Starting a business and leaving your job might sound risky, but it could be risky to sit back and do nothing and just work your W2. Make the excuse, “That’s too risky.” I’m not suggesting you just quit out of the blue and throw caution to the wind. In fact, a lot of people do make the excuse that, “I’ve got a W2 so I can’t start a business.” You have a lot of free time, you have a lot more free time than you think. My point is, you don’t want to look back on your life and regret not trying. Don’t use your W2 as an excuse either, not to take the leap if that’s what’s right for you.

One recommendation I have for people too is if you’ve never had a lot of management in what you do, try and get some experience or some education. One of the things I take for granted is, throughout my career, I’ve been in project management. For construction, you’re running projects. I’ve run projects up to $100 million-plus. When you’re doing that, it’s like its own business because it’s a building in a set location that has its own set budget and ownership structure and entity. Managing a general contractor, 50 to 60 subcontractors, architects, and consultants. Managing the whole gamut.

Doing budgets every month, getting $3, $4 million of cashflow out the door every month. You see a lot of understanding budgets, P&Ls, balance sheets, and things that can go wrong, what’s the contingency, how much risk is involved? I take that for granted having that experience but that is the primary reason why I’ve been able to scale and do as much as I do because I’m used to managing a lot of people and things and juggling a lot of balls. If you’ve never done that, then it’s challenging.

To piggyback on that, David Greene on the BiggerPockets Podcast talks about doing your best where you are. We don’t need to go into his whole story but he used to be a police officer and now, he’s a successful real estate investor and real estate agent out in California. One of the keys to his success was looking around and trying to add value to his supervisors and his coworkers and just trying to work as hard as he can in his job. It’s touching on what you what you’re talking about. You don’t know where your W2 job and success there might parlay into success outside of that. I’ve had similar leadership experiences, maybe not direct construction, budgeting experience, but a lot of experience that can translate into success outside of my W2. Don’t sit back and not try your real job because, “I want to be a full time note investor. This sucks.”

The other thing that I’d say the note investing also helps in my fulltime job is like this podcast. I started out doing it in videos and stuff, I wasn’t comfortable and I wasn’t good at it. Now, if I’m at work and have to do a presentation, most people hate doing presentations, for me, it’s just like, “Whatever.” I remember doing a presentation down in Fort Belvoir for a project we were chasing down there. I was going to be the manager on it. This was BRAC days, it was 2009, ’10 timeframe. I had to give a presentation and we’re having computer issues like doing a PowerPoint. PowerPoint was somewhat still new at that point in time.

You have the little button to flip on the white screen, that pull-down screen and stuff. It wasn’t like on the TVs. I remember, we were having technical difficulties and I’m just shaking, sweating, and so nervous during the presentation. Never I don’t think I was scared in my life. I was shaking like, “Oh my God.” I look back at it, much have grown because you share these experiences just like you share experiences with borrowers or you get a letter from an attorney. The first time they’ll go, “Oh my God.” Now it’s like, “Throw it in a pile.” The life experiences, management, some of the marketing, networking, and being able to communicate, your communication skills are enhanced. Not only has my full-time job help my note business, but my note business has also enhanced my full-time job.

The podcast is a separate set of skills. A lot of note investors get into it because they’re more introverts and more analytical. We’ve touched on this before, I can hide in my office and be a note investor. This puts you out there a little bit.

Let’s step back and talk about that for a second. This is your 6th, 7th, 8th, 10th?

It’s under ten.

Under ten episodes, do you feel like you’ve grown a lot since you started?

The first few, I was more tense and stiff. Yes, I do like to have a general plan of what we’re going to talk about, that helps me relax and do this. Whereas I said, “Chris, what are we talking about?” You said, “It’s not 7:45 AM on Friday, we record at 8:00, I’ll let you know fifteen minutes beforehand.”

I was laughing too because I’ve had a lot going on. You send an email and I’m thinking, “It’s only Wednesday.” I know you like the plan and stuff. It’s funny. I’ll be honest, I am structured and planned but my schedule, going back to my work, I do critical path scheduling. I’ve got a million things that need to be done and if this one doesn’t get done now, all the blocks fall over. I joke and I’m like, “Wednesday night, if I don’t reply to you on what our topic is. Does it collapse?” No. It’s like that little matrix, if this happens, yes or no? It’s like, “If Jamie doesn’t have an answer, is he going to go spend the rest of the night crying in bed?” Yes. If he does, then great. We get more entertainment. If he doesn’t, I’ll let him know tomorrow.

I’m just going to plan out the next six months of podcasts for us and I’ll let you know. To answer your question, I do think I’ve gotten more relaxed. Not only just doing the show itself, or doing the episode, but also thinking about and taking a step back and looking at my own business. The podcast has enabled me to look at my business almost from a third-party perspective because I’m going to have to come on here and talk about it. What have I been dealing with now? What’s my note and bolt? What’s our main topic? This isn’t all just for the podcast itself, it’s also helping my own business.

Speaking of notes and bolts, it’s that time of the episode. I know you got yours written down somewhere. I’m sitting here and thinking, “What’s my note and bolt?” Go ahead.

I have notes here.

I’m ACB. Is that what is? Here are my notes.

My note and bolt is about forbearance agreements. We think of forbearance agreements as temporary, or at least I do, and a modification that is permanent. A couple of notes that I’m under contract to buy, they have forbearance agreements in place that are for the life of the loan, just throwing that out there. for newer note investors. There are a million ways to structure a forbearance agreement. On these two notes that I’m buying, they’re performing loans with forbearance agreements in place. A lot of times, you’ll see a forbearance agreement with a trial payment plan before you do a modification.

When I first came across these notes, I was a little bit confused because, “What do you mean they’re performing with a life of the loan forbearance agreement?” As soon as this thing goes nonperforming, I can foreclose and the forbearance agreement is out the window. I have to confirm this, but all the rears that had been waived are back in play because the forbearance agreement is null and void at that point. In a sense, it gives the lender a little more flexibility than doing a permanent modification but it is also somewhat permanent. A little nuance on forbearance agreements.

If somebody fails on a forbearance agreement, it’s like bankruptcy, it’s like it never existed. Everything goes back into play from that perspective. My note and bolt is on something I found out because I don’t invest heavily in the state of Maine. There were two assets in the same town on a tape by bid. They were decent assets, probably bear market values, $250,000 to $300,000. UPV is somewhere in the mid-1s. Maine is an extremely long foreclosure state so I had them under agreement for $0.50 on the dollar with equity.

The seller reached out to me and said, “I want to let you know. On these, these have the MERS issue.” I was like, “What’s the MERS issue?” There was a lawsuit where the courts in Maine, and this is what they told me, I am waiting for my attorney to come back, with the issue with the robo signs from several years ago, the MERS assignments now, they’re not accepting as an assignment. You physically need to get an assignment from each lender that was part of it and not from MERS. They’re like, “That’s problematic especially on nonperforming loans.”

I’m in the process of having my attorney review to see, “If these people continue to non-perform, am I screwed and I can’t foreclose? Is it worth nothing or what is happening with that?” I also want to mention how I’m going about reviewing this because a lot of times people will hear something and then be like, “Okay. What’s the process, Chris, for you to deep dive into this?” For me, I do have an attorney up in that area who I’ve reached out to. I’ve also reached out to a second attorney. I’d like to get the opinions on something like this from two different attorneys because sometimes some attorneys are overly conservative and some are a little more aggressive.

A perfect example was some time ago when everyone was going berserk about Maryland needing a debt collectors license. I was sitting there laughing behind the scenes at the time, “Okay, everyone. Send me your Maryland notes because I’m closing left and right without a debt collectors license.” They’re never asking for it and I did well with that. On the podcast, I mentioned that, or in the group, I did. People who don’t listen or don’t pay attention in the group, shame on them. That’s my process. I took this information, and I’m reaching out to several experts to try and get it. I also reached out to a servicer to say, “What do you about this issue?” Picking on different people, my next is going to go talking with a title company as well because sometimes people refinance. It’s like, “How do I know you’re the actual lender with this, or if it impacts?” I don’t see it impacting a refi. I can see it from a foreclosure.

Can they get title insurance?

Yeah. The question is, “If there is a risk, do you take it? What’s involved? If the person’s wanted to stay, what would I do on the property?” The first thing I’d do is be like, “How about I knock $10,000 balance off your note if we sign this new document?” That’s when you’re buying this stuff at a discount, there are ways that you can get people. If someone has been in their property for twenty years, do you think they want out? No. You got to entice them.

That’s a good point about multiple points of view. We think about that with doctors. “I need to get a second opinion.” That’s common, but with attorneys or title companies, it may not be all that common. If you think about it, that’s how attorneys add value is to show you the risks involved and try to protect you. If you only go to one conservative attorney, everything’s going to look risky. You’re never going to do anything.

I’ll reiterate a million times no two attorneys are the same. No two title companies are the same. I know that for a fact. No two servers are the same. Each one has strengths and weaknesses. That’s my note and bolt. Jamie, final thoughts as we wrap up our Friday the 13th episode?

It’s exciting. I’m happy to be a part of what you and Gail started on this. I’m excited about the coming year for the growth of both of our businesses.

Before we wrap up, I want to talk about some of the guests we’ve got coming on. We’ve added some heavy hitters coming up. Who do we got coming up, Jamie?

We’re interviewing Dave Van Horn with PPR. That should be interesting. He’s a legend not only the note space, but he’s done pretty much everything you can do in real estate, too.

We’ve got Dave coming on. We’ve booked Eddie Speed for early 2021. He’s coming on. Debbie Mullins is going to come on in December. I have her on every December to talk about what you should be doing towards the end of the year and starting your year off right with your books. Jay Scott from Bigger Pockets, coordinating date and time to have him on. He’s agreed to come on the podcast as well. I’ve spoken past with trying to coordinate time James Wise in Cleveland from Holton-Wise, who can be controversial in many ways but he’s a decent guy. Russell Brazil, who’s also another Bigger Pockets guy. He’s in our backyard. He lives five minutes from where I work and we keep talking about getting lunch at Stanford Grill in Rockville, but COVID has been more challenging.

Another guy, we haven’t nailed down the date and time yet but Carson Ferris. I was on the IMN panel with him. He’s a commercial lender. That’s a different perspective than what you and I deal with.

The guy from Flipping Boston has reached out to us, just trying to coordinate some stuff with him, trying to see if we can get him on. We say this because we’re trying to bring on a different mix, different people to talk about different aspects of real estate, but also how that can be integrated with note investing. One of the things with a lot of these people who invest in fix and flips and others, we should be best friends with them because when I take back an REO, who do you want to sell it to?

Absolutely, it’s a fix and flipper.

Thank you again, everybody, for joining us on the show. As always, go out and do some good deeds. Thank you all.

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