Turning Flips into Freedom with Debt for a Life of Wealth and Wisdom with Nathan Turner

[0:00] Welcome to the REI Agent, a holistic approach to life through real estate. I’m Matthias, an agent and investor. And I’m Erica, a licensed therapist. Join us as we interview guests that also strive to live bold and fulfilled lives through business and real estate investing. Tune in every week for interviews with real estate agents and investors. Ready to level up? Let’s do it.

[0:23] Welcome back to the REI Agent, your friendly host Matthias here. We had Nathan Turner on the show today. Nathan is a note investor and he has a fund that you can potentially invest in if you’re interested. I think it’s a really interesting way of diversifying maybe if you’re into that syndication or fund-to-funds phase of life. But yeah, I think with anything that comes to investing and learning your trade, your business, or your finances in general, I think it’s just good to have more information to kind of make a better decision about where you can kind of allocate your funds. So this is certainly something that you could use within a IRA, a directed IRA. He has something that you could, a contact that could help you do that with.

[1:20] But yeah, I think it’s interesting. It wasn’t a topic I knew as much about. So it was a good conversation for me to have. So I hope you also learn from this. And I don’t just look naive. But like I said, it was a good conversation. I mean, I’m going to keep this one short since it was a great conversation and don’t want to take up all your time with my blabbering. So without further ado, here we have Nathan Turner.

[1:51] Welcome back to the REI Agent. I have the honor of having Nathan Turner here on the podcast today. Nathan, thanks so much for joining us. Pleasure to be here. Thank you. Nathan, tell us a little bit about your niche first and then let’s kind of get into how you got there. Yeah. So I know you’re specifically targeting real estate investor agents and people who are getting in from that direction. So mine’s a little bit different. It’s real estate related, but it’s not exactly real estate. So I’m buying residential mortgages, loans, contracts for deed, land contracts, whatever you want to call them in different states. But essentially loans against property. That’s what I’m buying all over the country.

[2:31] So that’s my niche. It happens to be secured by real estate. So that’s the real estate piece of it. Sure. Okay. Well, we’ve definitely had lenders on the show as well. So that’s not too far off. But before we dive into the nuances of that, let’s kind of get into how you got started in real estate in general or in this space. Sure. Yeah. I got started in real estate in the heyday, I want to say. You know, 2005, 2006, where everything was going so well and it was really easy to make some money off of real estate. And it was great. You know, the timing was perfect. I started doing fix and flip. I live in Canada. So I was living in Montreal. All the houses I was flipping were in Saskatoon. So just to give you some context, Montreal is right above Vermont.

[3:20] Saskatoon is just straight north from eastern Montana. So clear across the country. But I would buy it with the help of a realtor in town there. And I would fly out with my suitcase full of tools and a sleeping bag and sleep on the floor. Just work like crazy for, you know, 14, 16 hour days for a week and bang out whatever I could. Mostly cosmetic. You know, I wasn’t doing anything too crazy because the market didn’t demand it. And so it was easy enough just to clean it up and then resell it for a really nice profit. And again, like I say, the market was a huge help in that. Honestly, I could have just bought it, waited a month and resold it for a profit back in those days. Yeah, I heard of people doing that actually.

[4:09] Yeah. Guests on my show. He got burnt from it. But yeah, he was basically just doing that. Just sitting on it for a little bit and selling it. Maybe a year. Maybe there was a year lease kind of situation. Anyway, keep going. Yeah. Yeah. So I did that for a couple of years and then just as the market turned, I got hung with one property. And it was my last one. I only did half a dozen or so, eight, seven or eight, something like that. But it was this very last one. And, you know, I didn’t know very much about real estate. And so I ended up renting it out because that’s what you do, of course. If you can’t sell it, you rent it. And so I did that, but it was one property, one residential door, basically, in the middle of town.

[4:54] Not a very nice neighborhood. And, you know, no volume. There’s one property. So I could find one guy in this city, you know, small, small city, 200,000 people, but prairie town, very sleepy. There’s one guy that I could get to take care of this property. And he was terrible. He was absolutely awful where every single month I’d have to call him up and be like, hey, man, so did we get paid? Like, what’s going on? Oh, yeah, yeah, yeah, for sure. Yeah, I just got to do some accounting. I’ll get this to you. And they did. And for the most part, people paid and it was fine. But every time we did have turnover, it was actually cheaper for me to hop back on a plane with my suitcase full of tools and go fix it up and then rent it out to the next person.

[5:41] I was like, I don’t know, man. This is a lot of work. I don’t know. I’m not really sure about this. Do you still own it? No. We ended up finally selling in 2009, I think it was. Okay. But was it long enough to realize a profit or did you just kind of take a hit and move on? No, we still turned to profit. But, you know, and then with the marketing conditions at the time, I really liked flipping and I thought that was really fun. But this renting thing, the market wasn’t right for flipping anymore at that point. Yeah. And the rental, I was like, I don’t know. It seems like a lot of work for, you know, whatever it was, 400 bucks a month or something like that. Yeah. I’m like, I don’t really get it.

[6:23] So I was kind of turned off, to tell you the truth. And then it was about a year or so later. So this is like 2000, fall of 2008. A friend of mine called me and says, hey, do you want to help me out with this real estate project in the US? I’m like, sure. What you got? And I just sold my other business. And so I was ready for something else. And it was, we had all these properties, about 60 properties, mostly centered in the Midwest. And it was a situation where they had bought these properties in like the spring of 2007. So like top, top, top of the market. So they way overpaid for this stuff. It was supposed to just be a quick flip. They were supposed to just sell it off to another organization.

[7:05] And then deal went sideways. That deal never happened. And so when I got on board, it was like, oh, shoot, what do we do now? We’re stuck with all these properties that were in really rough shape, spread out all over, you know, three or four states. And how do we deal with it? They’re all based in California. So none of them knew anything or, you know, had no real estate experience at all. So that was the charge. And so we kind of thought we’d, a couple of Canadian boys, we thought we’d invented seller financing. We started selling these houses on terms and creating notes and didn’t know any of the terminology, didn’t know that’s what it was, didn’t know how to do that properly. So I made all kinds of mistakes.

[7:45] But at the same time, it was a great base. It was a way to get started in it. So that was my introduction to notes was creating notes without knowing that’s what they were. Okay. Okay. Okay. So now you are, this is your primary thing and you are, tell me how you, let me, walk me through a deal that you would do to kind of help me get some more context on this. Yeah. So you mentioned you’ve had some lenders on the show, which is great. And I would love to meet them because what I do, I don’t actually lend out money. I look for somebody else that has already done that. Then I approach them and say, Hey, any of those loans, are you looking to recapitalize for a variety of reasons? Whether it’s because they’re not paying anymore for some reason, or because they’re just looking to get cash back out so they can turn it around, do it again.

[8:37] Or they’ve got a different investment or they want to send a kid to college, whatever it is. They want cash for that long-term payment stream. They would rather have a lump sum today. Sure. And that’s where I come in. And so I say, well, you’ve already done the work to create the note. I will cash you out of that, of your position and take over as the new, you know, quote unquote lender, even though I’m not actually technically lending the money out. Yeah. So the terms don’t change. Right. And, okay. So is this then primarily, I think, is it primarily seller financing kind of deals that you’re doing this with? It is today. When I first got started, it was all about non-performing loans. And the vast majority of those were bank loans at some kind of institution.

[9:24] But it’s shifted over time, like as the economy has changed and there’s less and less of the defaulted notes out there, which is great. But the banks aren’t necessarily selling, not in small quantities to a guy like me. They’re performing loans. So I’m now turned around. It’s kind of fun. I’m going back to full circle and looking for those people that were doing exactly what I was doing when I got started and creating notes. And then I’m offering to buy them out and step into that place. When you were doing the bank ones, was that, I mean, were they like Freddie Fannie kind of loans? I mean, were they big institutions, not just like, you know, like your in-house loan that, you know, your bank at the corner.

[10:10] So these are big institutions that you’re approaching about buying their mortgage from? Yeah, typically the way it would go is like a bigger hedge fund would buy a big pool from banks. Like U.S. Bank, we got a lot from them. No, not like Chase or Well. Well, we did have some Wells actually. But typically, you know, tier B type banks, it’s kind of smaller banks. But they would, the hedge funds would go in and do a purchase for 100 million. And then they would say, okay, here’s our parameters. This is what we want. Anything that falls outside of that, we sell off. And so that’s where I came in. And I was the guy buying whatever didn’t fit their box. Okay. Now, is this on like Facebook Marketplace?

[10:59] Is there a portal somewhere you can go to like where, I mean, I understand this isn’t happening as much now. But like, yeah, I’m just having a connection to these places or networking, like so much networking. So I started going to conferences in 2009. And that was it is just, I, you know, called myself the Canadian note guy, just to help, you know, get some recognition, some kind of branding. And it worked pretty well. People got to know who I was. And, you know, if I say I want to buy that, I would actually follow through. And so got a fairly good reputation that way. And people knew I was for real. So, yeah, it worked out great. And we’ve been just doing that for years and years. And then, like I say, we transitioned over to performing more these days.

[11:45] Yeah. Okay. So now when you’re looking at, yeah, the owner finance kind of deals, how are you finding them? Are you looking for like delinquent kind of things? Or what’s that look like? It’s still the same kind of thing. A lot of networking. So I actually took over a conference a few years ago. So we’re running that now. And that’s been huge where people, again, just recognition to know kind of who I am and what I’m about, which is great. And so I’m actively looking for loans that people are looking to sell off for, like I say, all kinds of different reasons. And is there, so obviously you’d be getting the interest that is already agreed upon. I would imagine you can’t change the terms to the borrower.

[12:33] Do you get a cut then off the top as well for like kind of doing this? Like do you get like some sort of fee like to, yeah. Like I have a $100,000 note currently. Are you getting like, am I getting like $95,000 so that you, or something like that? Right. Yeah. It’s going to be some kind of discount. And that’s, it’s calculated. There’s a few factors. So very first thing is what’s the interest rate on the note. If, if somebody wrote a note at 4%, 5%, my target yield that I’m looking for, for my fund is 12. So my discount is going to be pretty hefty. You know, if it’s a hundred thousand balance, maybe 50%, and that’s not great. You’re probably not going to like my offer. Right. So if it’s a, if it’s a note that was written at nine or 10%, we’re going to be much, much closer.

[13:27] My, my discount is going to be much smaller. So we’re more likely to make a deal. Okay. That makes sense. Um, yeah. And there, there’s probably more of those out there. Um, is there, I mean, just hard money. I know that’s usually short term. Um, is that kind of come into play as well? Yeah. And it’s funny. So I look for either short term or really long term. So it’s either, you know, one to two years or 25 to 30 years, but that in between time is not so great for me actually. So it’s either got to be really short or really long. Okay. Yeah. And if, if there’s a person that is, uh, lending at a nine or 10% interest rate, um, and it’s, and it, is that ever like a 25, 30 year product? And if so, what are like the circumstances?

[14:15] Is it just somebody that couldn’t qualify otherwise? Yeah. We actually find those a lot. Um, more often than not, that kind of a loan, like a long-term higher interest seller finance note, you find a lot of those in Texas. Uh, not to say that’s the only place, but that’s the biggest concentration for sure. Uh, the buyers are going to be anything from somebody who’s self-employed to a ITIN borrower. So like they, you know, they’re not here illegally, but they’re not citizens either. Right. Uh, the, those are kind of the two major qualifiers, uh, or just somebody that didn’t qualify to a bank because of whatever. Uh, it could be lower credit score or it could be, you know, any number of things that made it so that they couldn’t qualify.

[15:03] Okay. Yeah. That makes sense. Um, yeah, that’s interesting. Uh, so, so you’re said you’re investors. Uh, so you have like a fund. Is that a, is it a fund set up then to, um, you know, people can, can invest with you. Uh, it is secured by real estate. Um, so that’s probably a selling point there. Then you have like a target, uh, return on investment. Um, there does IRR come into play as well in this circumstance? Like, do, do people get paid out, um, at a certain time or is it kind of more of a long-term kind of holding? Uh, I would consider it more of a long-term thing. It’s just, it’s a debt fund. Um, because we’re buying performing notes. When I resell that note, there’s, there’s not actually a bump.

[15:48] Like we’re not selling for more at a future date. So because of that, we’re not doing an equity share cause there’s no extra equity to be had. So it’s a, it’s, it’s, this is your, you know, set it and forget it. You use IRA funds, something like that, uh, where it just collecting interest and off you go. You can compound it if you want, you know, instead of taking the distribution, you just reinvest it. And that compounds, that’s another option, but yeah, it’s, it’s the long-term stuff. That’s going to be your best bet on this. Well, yeah. And I mean, like 12% is, is great. Um, and okay. So then on, as on top of that, I’m curious, um, how often you’ve had to like, uh, if people have defaulted, how often you’ve had to, uh, foreclose and what that process looks like.

[16:35] Yeah, it’s interesting. So when I got my start, it was all non-performing, uh, so foreclosure is a, it’s a great tool. Uh, I’ll tell you the vast majority of the time, like more than 90%, 95% of the time when I foreclose, it’s because the house is vacant. So either they’ve passed away or they’ve abandoned the property. Those are really most of the foreclosures that we do. Uh, it’s really rare that I actually foreclose on a person. I’m mostly foreclosing just on an empty house. Okay. So I, I, and I don’t like to be that guy, you know, like I, that’s not what I’m about. I don’t want to kick people out of their homes. So we’ve got all kinds of options because I bought it at a discount. I’m far more flexible than the bank would be initially.

[17:17] So, or whoever the original lender was. So because of that flexibility, I can go in and say, look, you know, your $800 payment, uh, isn’t working for you, obviously. So what’s more realistic, you know, maybe we get this situation all the time where somebody, you know, lost their job and now they’ve got this other job. Okay, great. So first of all, do they just need one or two months to get caught back up? If that’s the case, no problem. We can tack that back onto the end of the loan. No issue. We’ll just keep on going. Uh, if it’s the better job or the other job doesn’t pay as well. Okay. So $800 a month doesn’t work. Could you do seven or how about six 50 or six? And we come up with whatever terms are going to make sense for both of us.

[18:00] And, uh, and then it’s a modification of the loan. It’s recorded the County. And now that’s the new loan. That’s the terms. So in that circumstance, I would imagine you’re adding years to the end of the loan to make up for the, the less payment. You know, maybe that’s one option. And that’s where it gets really fun and creative because we can say, okay. Um, and I’ve done all kinds. We’ve raised interest rates or lowered them, stretched out payment time or shortened it. Uh, payments have gone up or down and it just really depends on what, what the, really the borrower is looking for. The person living in the home, uh, what’s going to make most sense. And then we come to terms and that’s the new law.

[18:44] Yeah, no, I, I’ve done, uh, I’ve personally done one, um, owner financing creative deal. If you want to call it that. Um, and there was a lot of moving parts with it. Um, it was kind of a unique situation. My parents were buying, uh, one, it’s a, it’s a very nice quadruplex or actually two duplexes put together. They were buying one apartment to live in, to downsize in and it’s a perfect like scenario for them in a great location. Beautiful, beautiful place. Um, we did owner financing on the rest. Um, and I actually put it all on one half of the duplex. So that, that half of the duplex is over leveraged, but you know, an appraiser, you don’t, doesn’t matter. Right. It’s the same thing to the owner.

[19:26] Um, and then now that allows me some flexibility to, if my parents were like, you know, God forbid they had, you know, an emergency, they need to get to the, um, to, to a nursing home or whatever. I can do a refinance on just that half and get their money out and let them, let them do their thing. Um, so there was just, it’s just fun when you get to that space because you can kind of custom tailor. Um, yeah, it perfect for that situation and where it’s a win for everybody. Um, yeah. Love that. That’s awesome. And, you know, at the time I felt like I was probably paying too much for it. I don’t know if maybe that was just my ego, but at the, at the end of the day, I got, you know, a great terms.

[20:06] I only had to bring $30,000 of my own money into the deal, which made it a win for me. Um, and it’s a great, like I said, it’s a great property. My parents are super happy. So it’s just, it’s just a win-win all around. Yeah, that’s perfect. And then, so one other option is instead of refinancing, you can sell off the note. And, and that’s where somebody like me would come in and say, well, you can, I mean, maybe it’s because you don’t want to refinance with the bank because of, I don’t know, because you don’t like the bank or maybe it’s because this is faster or whatever the case might be. But it’s another option. I say there’s people, me or somebody like me. And if it’s not me, I can refer you to one of my colleagues and say, so this, this one’s not really in my wheelhouse, but you know what?

[20:50] Call Dave. Call Dave. He’s got you. Well, and the thought was like securing more debt, um, on it. So is that possible as well? Yeah, that’s, it’s a little unusual, but yeah, that’s doable for sure. That was like, you know, kind of like a worst case scenario where I, you know, we don’t really have, um, you know, they need to, they need to move faster than we have really built up the equity or the, uh, appreciation, uh, to, to be able to do other options. Um, and so, you know, worst case scenario, then we’re very over leveraged if we have to be for a period of time. Um, but you know, again, we, we structured this with a, you know, on a 20 year note with the owner. Um, and that hurt extra because again, the, the rents were lower.

[21:35] I felt like I overpaid because of that. Um, but it’s all turning. So it’s, it’s great. Um, it’s a really good situation. And again, I’m just bringing that up because it’s the beauty of this space is that you can really fine tune the situation for the, yeah, or fine tune the, the, the note, the scenario, all the details of it, all the terms, uh, for the scenario itself. And that’s cool that you had the flexibility to do that big banks. They can’t, I mean, they just don’t have the capacity. It’s just like, this is our box. That’s the thing. The capacity, the imagination. I’m not sure which it is. In any case. Yeah. They just, they won’t do it. You know, they’ll, they’ve got, this is what we can do and that’s it.

[22:18] And anything outside of that, well, you’re out of luck. And then, you know, somebody like us takes over and we’re like, oh man, are you kidding me? There’s all kinds of flexibility here and there. And we can structure this way or that let’s figure it out. And yeah, like, I mean, any agent listening to this probably has had experiences with, uh, you know, a bigger bank that they, they, like, uh, one thing that comes to mind for me is I have a, we don’t have a ton of condos in my area and there’s a condo that, um, does, you know, it’s, it’s warrantable or whatever the word is for, uh, you know, Fannie Freddie and sold multiple times, like tons of them have sold this way. Um, and then, but have a big bank come involved and they see something in the, like disclosure pack that they don’t like, and they’re out just, they’re just done.

[23:00] And now we have a buyer thinking like this place, I won’t be able to sell it again. I’m like, no, like we’ve literally had VA FHA, every kind of different loan you can imagine it happened. It’s just, it was a big bank that has a box and they have very low risk tolerance and don’t care about their reputation going forward. Cause they have plenty of business coming in. Yeah. Yeah, exactly. Exactly. And they’re big enough that they, yeah, you don’t actually matter. Yeah. Not at all. You work with a local lender, um, you know, their, their, their skin is on the line every time they want to make sure that deal goes through, um, unless there’s absolutely something they can’t avoid. Right. And that’s, that’s going to be the same for you.

[23:39] I mean, that’s, you know, your, your reputation’s on the line, your, your, your networking to get your business. So like, it’s, it’s important to you. Yeah. Yeah. And so, and then really where, where I like to come in in that situation is I’ll let you go ahead and do all of that part of it. You know, qualifying the borrower and figuring out how to make the payments work and all this and that. I’ll let you do all that part. And then I just come in and say like, so what’s, what are the terms again? Okay. This is how much I’ll give you for that. I’m, I’m the after effect. Sure. Sure. But it’s cool that if, if there is a bumpy roads, you can get a little creative and yeah, definitely. Yeah. For everybody.

[24:17] Um, yeah, that’s awesome. Um, so is, is there any other, well, I guess a better question. Um, yeah, how is the market in your, in your area now? Um, do you, do you see, uh, things slowing down at all? Um, has, has there been any price, um, drops, um, since, you know, the craziness of 2021, I guess maybe the peak. And, and if so, uh, what similarities do you see from that, the 2008 kind of market? Yeah, it’s, it’s so interesting to see, and you kind of look back over time and see how things have changed and, and there definitely has been a change. So just to give you an idea, my first non-performing note purchase in 2010, uh, it was a package of three different loans on three different properties, all based in Columbus, Ohio.

[25:13] Uh, three different loans, three different properties, total purchase price for me was $10,000. And it, that was, I was talking with a friend, a colleague and he had the deal and I’m like 10 grand really for all three of those. That’s insane. Okay. And so I’m like, you know what, it’s worth a $10,000 experiment to see what happens. And, and it worked out amazingly well. And I’m like, okay, this is awesome. I love this. Let’s, let’s do this. Go from there to, you know, coming up 2018, 19, uh, non-performing notes were, were trading at almost the same price as a performing note. So in other words, if the balance of that note was a hundred thousand dollars and it was, it had not been paying for the last year.

[25:58] Um, the purchase price for that at the time was probably around like 70, 75, maybe 80 cents even, uh, and if it was performing, if they had been making payments, I could buy it for almost the same amount. And so it just, the, the margins got so slim on that and, and just availability went way, way down. And so that was interested in this. Is that why? I, you know, it was a combination of things where there, there was much more interest in non-performers and so demand was much higher. Um, and then at the same time, just market conditions had changed enough of the 2008 inventory had moved through. So there was just less availability there and, you know, they didn’t have to lower the price as much, uh, the whole supply and demand thing.

[26:48] So, yeah, because of that, we started really thinking. And then when COVID hit, it was like, okay, let’s rethink what we’re doing here and how do we want to change things up? And it just, you know, gave us, for me, it was kind of nice. We had a little bit of a break just to slow down enough to say, okay, let’s start working on the business instead of in the business and, and rethink some things and decide how we want to go forward. So that’s where we kind of first thought of, you know what, maybe we should just change over and start doing some performing loans. And the biggest advantage disadvantage there is with the non-performers, the potential for higher returns is much greater, uh, because you’re buying at a bigger discount and then it can take several different paths and all of them good.

[27:33] Um, and depending on how you bought it and if it goes this direction or that direction, you’re still making money, maybe a little more, maybe a little less, but it’s generally speaking, you’re going to get higher returns off of that. There’s a lot more work and more time involved in those things. Um, but like I say, it’s, it tends to be worth it in the end with availability and pricing changing. Uh, it didn’t make as much sense. Then you started looking at the performing loans, performing loans have been around forever. Like that’s been the mainstay of, of node investing for literally centuries for a long, long, long time. Um, lower returns generally, uh, but a lot less work, a lot less involvement needed once you’ve purchased this loan, not none, but less.

[28:19] And so we started looking at that and looking at, you know, my kids are getting older and those sorts of things and looking at how I want to be spending my time. And that was, that was really the, the catalyst for everything that we’re doing today with the fund. Um, yeah, that, and then it’s just interesting. You start looking at it and going, okay, so not only is it better for me, but it’s actually also better for the investor because then they’re instantly diversified into a pool of funds. And, you know, there’s increased safety, there’s increased predictability on when and how much they’re getting paid. Like, yeah, okay. All right. We’ll, we’ll do it. Okay. Yeah. Yeah. I love it. I love it.

[29:02] Um, I’ve, I’ve definitely talked to different people, um, in different areas. Um, and I think the, the areas that are seeing price declines, uh, are definitely in the opinion of maybe those markets being the canary in the coal mine for something bigger. Um, it’s really interesting how differing, uh, the opinions are between, uh, different people as to like kind of the future. Uh, I really say, obviously nobody. Has a crystal ball. Um, but it, you know, to me, it definitely, especially in my market seems very different than anything than 2008, um, inventory levels alone is, is kind of the biggest thing. Um, you know, the, the, the lending practices seem to be much cleaner, uh, as well. Yeah, much.

[29:51] Um, so yeah, I guess it’s just, it’s just always interesting to hear, to have people’s opinions on, on. Um, yeah. And you know, it was really interesting. So we just ran, I mentioned, we took over this conference. We just had it, uh, just a few weeks back and, um, same kind of thing. We had somebody there from mortgage bankers association. So he’s got all his charts and all his graphs and everything showing, uh, trends that have been happening over, over the last, I don’t know, going back 20 years and looking to see where the line’s going. And, and it is going up, um, from, yeah. From the like defaults, uh, and, and closure starts and things like that. So we are definitely seeing like, and, and, uh, you know, I would kind of consider that mainstream where, uh, that kind of information is coming out where there is an uptick in a lot of these, uh, defaults and people starting to struggle with the mortgage payments right after the mortgage bankers guy.

[30:49] Uh, we had a different panel on and it’s more people that are like in the, in the trenches and doing this day to day. And, and, uh, I think a lot of that information that they’ve got at mortgage bankers doesn’t account for a lot of the smaller investors like us and, you know, smaller being under a hundred million where we’re not reporting to the same agencies. So that information is not included in those bigger charts. And we’re definitely seeing that, um, on our side where there is definitely an increase in, uh, short-term especially, uh, has been struggling, uh, just with payments and defaults. And even in the longterm, there’s been a small uptick. It hasn’t been massive, but there has been a small uptick.

[31:32] And so we’re all kind of watching and waiting to see what’s going to happen. And are we going to see a bunch of these non-performers coming back? We’ll see. Yeah. I thought to, uh, uh, he was a realtor that helps people avoid foreclosure. Okay. And he had kind of a whole fund. He went through it himself in, in, in 2008. And so he went through the whole process, has a lot of pain with it. And most of the time people just don’t really understand their options and what they can do to, to try to advocate for themselves and try to, you know, right the ship. So he does his best to help them. Um, and he was saying that he, he believed that there was a lot of, um, like the, the bailouts that were happening that are happening are a lot more consumer related as opposed to like a big bailout to a bank, which he thinks is a good thing.

[32:25] Uh, but he also wonders if that also kind of artificially creates a backlog of future, uh, foreclosures that could come, um, and yeah, down the line all of a sudden. So, yeah, it’s hard to know. It’s hard to know for sure what’s going on. I, you know, I, I actually, I would agree with that because like in 2019, um, we were all doing our thing and, and having conversations about like, okay, just if you look over history, we’re due, uh, timing is such that we’re due for some kind of a downturn and it wasn’t happening yet. So when COVID hit, same thing, we all got on these calls and had this, you know, big 20 person zoom call and we’re like, okay, so this is it, right. And we’re going to see all these defaults coming through.

[33:09] And then it didn’t. And a whole bunch of money got pumped in and, and really artificially propped everything up. Uh, and so good or bad, right or wrong. I don’t know, but I’m just looking at the after effects and, and I think we’re, we are starting to see, and I think we’re going to continue to see it over the next year or so a lot of those COVID payments that were helping prop things up are starting to fall apart and it’s, it’s getting tough for people. Yeah. Yeah. Yeah. Certainly if, if people, um, didn’t take advantage of, uh, or bought something after those crazy low interest rates, um, it can be, it can be a high payment. I mean, we actually just, you know, we, we did a cash out refinance on a property we were flipping and I think our payment on, you know, a house that’s about a thousand square feet is I think a little bit more than our payment on our 46,000 square foot house.

[34:07] So it’s just like, I mean, you know, we, we got it a while back too. So there’s a lot of, uh, appreciation and, um, yeah, anyway, but it’s, it’s just kind of interesting to see and it’s, it can be tough. So I guess anybody out there looking to buy, definitely, I think it’s good to, to try to be conservative on numbers and make sure you got, uh, yeah, you, you don’t max out your possible mortgage. Yeah. If you’re looking at that, like worst case scenario, middle case scenario, best case scenario, maybe stick with the low, low worst case scenario for now. Yeah. Yeah. But yeah. And other news, um, I, I think did, did it get past that the a hundred percent depreciation would come back, I guess that wouldn’t really apply to your world.

[34:51] Um, since you’re not actually owning the asset. Yeah. You know, and it’s really interesting. And, and as much as things are going on in all over, you know, inflation and, and different rules changing and announcements coming out every day and changing the next day. And there’s a lot of uncertainty and, and like, again, I don’t care what side of your aisle you’re on or whatever I’m Canadian. So I’m totally agnostic when it comes to that. But, but, uh, but really the key word today is, is uncertain. Um, and which means change and it means, you know, fear for a lot of people and, and uncertain is the word. The cool thing is with notes is because what I bought is an established set of terms. Very little of that matters.

[35:35] You know, whatever inflation is doing, whatever it’s doing, you know, pricing and this, that and everything else, eggs can be more or less for the most part. It doesn’t really make a difference to me. Um, yeah. My payment is the monthly payment. The interest rate is the, the interest rate and it is what it is. And either you can pay or you can’t, if you can’t, I can probably help you fix that. Uh, but we’re relatively unaffected. So it’s, you know, nothing is recession proof, but sure. We’re definitely resistant. Well, that makes a lot of sense. I mean, yeah, you’re not again, tied to the pricing of the house so much. I mean, if, if it’s not really bad and you owed more than, uh, what the house was worth, that might be a different story.

[36:16] But, um, yeah, buying at a steep discount, that’s, that’s really, that’s a really good point. Um, which actually brings me to my next question, which would be like, are people that are investing in your fund, do they have to be accredited investors or what does that look like? Yeah. For my fund it is, it’s, it’s one of those government rules and, and again, government good or bad, right or wrong that it is what it is. And so that’s, uh, that’s what they’ve set up and accredited. I wish we could do something different to tell you the truth, but, uh, but my hands are tied. Yeah. So to, to hash out what that means to people that are listening, that’s a net worth of a million or more outside of your primary residency, um, or making what?

[36:58] 200,000 single 300,000 married. Is that right? Yeah. Right. Yeah, that’s right. Um, and that’s what, for the past two years, I believe. Uh, yes. Um, and I mean, if you’ve just had that one year, you know, still come and talk to me and we’ll see what we can figure out. But, uh, but those are the, you know, that’s, what’s on the records. That’s, that’s what’s in the books. Yeah. And it’s just, it’s good to know about these options. I think like, uh, uh, one of the things that I think is really good for agents to know, is that this world exists. And, um, you know, as you know, for many syndications, um, they can take advantage of the tax benefits with, um, yeah, you know, apartment buildings or whatever, getting that accelerated appreciation is all, is all gravy as well.

[37:45] But, uh, the beauty of all this is, is you can look at it kind of like a stock portfolio as well, where you can kind of diversify and, and, you know, place a certain portion into something like what you’re doing, uh, where it’s going to not be as dependent upon what the value of the, of the asset is, um, and you can get that steady kind of income from it. Um, and it’s, it’s hands off and, and, you know, related to your field. So. Yeah. Yeah, exactly. And that’s what I say to people as well. It’s like, look, don’t put all your eggs in any basket, you know, split it up. And if you want to put some into some kind of a syndication, great. Uh, truth is over time, you’re probably going to get a higher return out of that, but you’re probably also going to have to wait for it.

[38:29] Uh, where it’s something like mine is it’s, you know, we’re generating income day one. As soon as the money comes in, we buy a note and that money is coming in month after month after month. Uh, so it’s not a promise of some future projected return. Uh, this is, we know exactly what the return is as soon as we buy a note. So it’s, it’s in that way. I like the security of it. Uh, and then, you know, you mentioned like the, the housing prices going down. That’s another beauty, you know? So that a hundred thousand dollar balance that we bought, the house is probably worth more like one 50. Uh, and then we also bought a discount. So our investment to value is really, really low. And so we’ve got a lot of room there for the, what if just in cases, whatever happens at some future point.

[39:17] That makes a lot of sense. So when, when people are investing in a fund, like, like what you have, um, I know that with syndications, um, this is different than a fund of course, but with syndications, you’re, you’re kind of presented the, the, the, the deal, right? Like you have to like vet kind of the operators, which would be an operator. Uh, you would have to vet, um, the deal itself. Uh, but in this circumstance, you’re more like kind of giving like your buy box, if you will. Um, and, and, and so it wouldn’t be, they’re not going to be presented each mortgage you’re going to buy or each note you’re going to buy. Right. Right. Yeah. No. And I think the important thing is for people getting involved in something like this is, is make sure you have just at least some understanding of how it works, uh, so that you can be comfortable knowing what you’re investing in.

[40:04] But after that, you really don’t have to think about it. Uh, you, you know, right. It’s, it’s the mailbox money of all mailbox monies is, is, uh, it’s just coming into you without you really having to do anything at all. You can review the report. That’s it. Yeah. No, that’s a, it is, uh, the beauty of it. Cause I mean, I, with, again, with like a syndication, like there’s a, there’s kind of a game plan they usually lay out. Um, and so, you know, it’s not a bad idea to check in to make sure that that game plan is kind of being executed. Um, and so even though it is very passive, um, it is also maybe a little bit more, um, work than what, what you would be, uh, providing. So, yeah, I mean, it’s, it’s a, it’s a, and the whole accredited investor thing is, is really boiling down to people.

[40:49] The government doesn’t want, um, people like just spending money that they don’t have, or they can, can’t afford to lose. Um, this is kind of like an asset class that would be a little bit less traditional. Some might see risky, um, and there’s risk always with all this stuff. Always. Yeah. But, um, but yeah, so that’s, that’s kind of the point behind it. And when you become, um, you know, successful enough, uh, in, you know, your pursuits of real estate or whatever, um, it’s just opened some more doors where you can, you can kind of the, the sum of all this money piled together can kind of, you know, the magnitude of what it can do, it becomes a lot bigger. Yeah. No, exactly. And, and again, this is a great IRA investment or a solo 401k or, you know, any of those retirement plans, any of those work for this kind of an investment.

[41:41] Does it have to be self-directed to do that? Uh, yes. Uh, and if you, if you are with fidelity or somebody like that, that doesn’t let you do it, we can hook you up with somebody that will let you, we’ll let you do that so that you can put it wherever you’d like. Yeah. It’s, it’s a great point. A lot of people, uh, could take advantage of that as well. So, yeah. Well, yeah, I mean, so that’s, this has been a super interesting conversation. Uh, not one that I really, uh, was as familiar with, uh, to be honest. Um, so that’s great. And educational for me, I hope it’s been good for everybody else. Um, before you, we sign off here, I’m curious if you have any golden nuggets you want to share with our, uh, audience.

[42:27] You know, you, you mentioned that before we got on and, and I think first and foremost is just to know that this kind of thing exists, uh, and that it’s not some weird idea. Literally you can go back in the Bible and find verses about buying and selling debts. Like it’s, it’s been around forever. Uh, so it’s not a new idea. It’s not a new concept. It’s been around for a long, long time. For some reason, it’s not very well known, but, but know that it’s out there. And if you’re a realtor that, uh, where you’re looking to sell a property and maybe you’re having a harder time selling it, seller financing is a great option. Uh, and there’s different ways that you can set that up and, and I’d be happy to have a conversation with you and knowing that there’s a backend.

[43:07] Uh, if you’ve got a seller who is looking for total cash out, that’s still a possibility, um, with seller financing in place. So we can have those kinds of conversations if you’d like. I think my, you know, my last thing that I, I’d like to tell people is I think back, back in those days when I was, uh, you know, flipping properties and things like that. That was almost 20 years ago now. And I just think, you know, if I can go back and talk to that guy, 20 years ago, me is just things are bumpy and there’s always going to be ups and downs. And there’s always going to be some kind of rollercoaster. Just keep going. Just keep going. There’s, there’s so much out there. There’s so much opportunity and there’s so much to learn.

[43:52] Sometimes you got to learn it the hard way I did. Uh, and, but that’s what makes it better. So just keep going. Yeah. I love that. Having that perseverance. Um, yeah. Not getting too bogged down on the, on the current moment. Yeah. Um, do you have any books that you, uh, think are fundamental that like you think everybody should read or maybe something you’re just currently enjoying? Uh, if you want, so there’s a man I like to read. So there’s a few books, um, on note investing. There’s not a lot of books out there. The one that I would say is kind of the granddaddy of note investing is called invest in debt by Jimmy Napier. Uh, it’s a little bit harder to come by cause it’s older. It’s like from the early eighties, late seventies, maybe.

[44:40] So it’s, it’s an old one and the numbers are kind of frustrating, kind of embarrassing almost. But you know, when he talks about buying a house for, for $50,000 and the kind of payments and like, really? Yeah. But, uh, but the principles are there and you know, add zero or whatever you got to do, but, but the principles are there and they’re correct. And so they’re, it’s a great read. Uh, and that’s a good base for what we do in the note investing world. That’s a great one. That’s a fun one. Okay, cool. Um, if, if people are interested in, um, learning more about what you do or, uh, potentially wanting to invest with you, uh, where, where, where can they find you? Um, best place to go is my website.

[45:24] Uh, it’s earnest investing.com and that’s E A R N E S T. So earnest investing.com. And then, uh, there’s, you know, links there for the conference. Not, we won’t do that again until next year, but if you’re interested in being more hands-on, that’s, that’s a great place to come and learn about that. Uh, we don’t do any coaching or anything like that, or, you know, nobody’s going to try to sell you anything at the conference, but, uh, but it’s a great place to come and learn and network. Um, but otherwise, you know, there’s a little more information about note investing and some ways to contact me through the site, but that’s the place to go. Okay. Well, Nathan, thanks so much for being on the show.

[46:00] It’s been a pleasure. Hey, thank you so much. Good to be here. Thanks for listening to the REI agent. If you enjoyed this episode, hit subscribe to catch new shows every week. Visit REIAgent.com for more content. Until next time, keep building the life you want. All content in the show is not investment advice or mental health therapy. It is intended for entertainment purposes only.