Scott Carson talks to Wayne Snell with Platinum Ventures about going from 1 to 300 Notes in 3 years.
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Wayne Snell with Platinum Ventures
Today’s guest, as always, I’m excited to have him on along with other guests. We always feel great to have people to take time on their very, very busy schedule. This guy is really busy lately doing amazing things with him and his partner and just really kicking butts and taking names. This individual has closed on over 300 notes in the last three years. He’s my good buddy and brother from another mother, Mr. Wayne Snell. How are you doing?
Hey, Scott. Thanks for having me on.
I’m glad to have you. You’re getting ready to jump on a plane into an IRA cruise here in the next couple of days, aren’t you?
Tell us a little bit about your background; who you are, where you’re from.
My name is Wayne Snell and I own a company named Platinum Ventures. I’ve been a real estate investor going on twelve years now. My old job was I ran marketing for software companies. I was doing that for 30 years. Most recently, I worked for a global company. I had a team of people in London, in Dallas where I live. I was travelling all over the world, not really liking it. It was kicking my butt. It’s a good paycheck, but just like any other job, the day the paycheck’s gone, you look at other things. I got involved in real estate. I started out essentially as a buy and hold rental guy. I really like rentals, so I’m not going to knock them. However, at the time here in Dallas where I was focused, we recovered really well quickly. The whole sale was making it very hard to buy the assets at the price points I wanted.
Somebody recommended to me I look into notes at the time as a way to get more rentals. That was seven years ago. I looked at them for a year and a half worth anything, I bought with my first note. It was actually six years ago, I guess. I didn’t really do anything seriously. I called it a hobby until about three years ago. The rest is history. I brought in a business partner about a year and a half ago, almost two years ago now. We’ve just exploded since that happened. I’m part of Scott’s Mastermind, which I love. I love the camaraderie and the network. For my business, Mastermind has been a phenomenal leverage point because you just learn from everybody else. That’s what I think is the best thing about it.
That’s one of the things we keep in mind with the podcast too here is making sure to provide great content for everybody so they can pick people’s brains. Everybody we’ve had on has been very approachable. The most successful people are the most approachable people, no matter what line of work you’re in, especially in real estate. They’re often the best people to talk to. They’ll take time to visit with you if you’re serious. They don’t want to waste their time, but if you’re serious and have some questions, people are really good about that. You’ve really done a great job of doing that. Let’s dive into a couple of things. We’ll probably come back to your business model, but you’ve spent a lot of time raising a lot of capital on BiggerPockets. You’re commenting on there and really sharing your business model. Will you talk a little bit about that?
I’m a fairly strong networker to begin with. That’s been one of the things I really am good at. I’m a very social person, which can be great or bad, depending upon how you look at it. I try to look for the good in everybody and just helping people. I love giving my philosophy on things and try to help people with their problems, particularly as it relates to real estate in general and notes. I like to pay it forward. That’s actually how I got involved with BiggerPockets in the beginning.
I joined BiggerPockets and I had just almost lost some money. I didn’t lose any money, but I wrote it in a blog post about a deal that we’re looking at in Florida. I wrote this blog post and at the time, Liz Brumer Smith reached out to me. I didn’t even know her back then. She was just so impressed with it so she talked to me and she’s like, “You should write more experiences.” We became really good friends. I see a lot of people asking questions about notes. There is always a little bit of time to help somebody else who’s got a question because you just never know. Along the way, people started reaching out to me with, “I don’t really want to do notes myself but I wouldn’t mind getting involved in them. Do you let people invest with you?” I’m like, “Yeah, I do joint venture.” Next thing you know, I’ve got a pretty strong pipeline of investors that joint venture with me because of BiggerPockets.
Let’s talk a bit about your business model and what your philosophy is. We had Adam Adams on the previous episode talking about he looks for cashflow. He doesn’t look for the fix and flip side. He’s looking for the cashflow. He’s either going to reinstate or he’s going to end up evicting Cash for Keys, foreclosure and keep it as a rental in his market. What’s your philosophy behind the 300 plus notes you’ve bought, Wayne?
We’re fairly similar to how Adam does it. To be honest, I very much look for only occupied properties as the starting point. We really try whenever possible to reinstate a borrower, to work with them. My business partner, Natalie, is really good at turning over the rock, so to speak, to find the folks who are more likely to reinstate. We find elderly who’ve been in the house a long time and they’re just struggling to stay in their home. We can work with them on that, and we try to do that whenever possible. The same thing with military veterans are another big soft spot for us. If they show pride of ownership on the property or something, we’re going to buy that, with the intent of, “Let’s see if we can modify them.” I’m okay with making less money on it if I could help somebody stay in their house, as long as we’re making money. I feel it’s a win-win for everybody. Unfortunately, half the people don’t reinstate.
Therefore, our other part of our model is what are we going to do with the property if we take it back? We try and offer Cash for Keys or deed in lieu whenever possible if the loan is such that we can do it, sometimes there are too many leans against the property and things like that. If we can do that, we’ll do that and give them a dignified way out. I’m all about trying to give them dignity because they go through a lot. There are those people that have really just tried to game the system, and we’ve met a few of those, and you can figure that out pretty quickly. I don’t have any problem getting them out of the house.
But whenever possible, we try to work with them. If we have to foreclose, then we look at, “Now that we’ve turned essentially a lemon into some lemonade, let’s figure out how can we make this a value for the community, for somebody new.” We give a great opportunity for new families who can’t qualify for straight normal loans, a great way to get a house. Most of these people are extremely excited to be able to buy a house through our own financing program, for example.
You use a licensed mortgage loan originator to help you out with that to make sure they comply?
Yes. In fact, we work with a couple. We have attorneys with title companies. Whenever possible, we will write a contract for deed as opposed to a first lien mortgage. It depends on the state. It depends on the condition of the property. It depends on the credit score of the people that are buying the house, because we do check that. I don’t necessarily care what their score is as long as they have one. If it’s 300, we got a problem. In all honesty, we’re more interested in making sure that they are able to make the payments. That’s what the mortgage loan officers are going to look for. Can they successfully make the payments and keep us compliant with the laws that are passed through and protect the consumer? We understand that and we want to make sure that that works as well for us.
Biggest goal, cashflow. Has your business model changed the last couple of years?
I think it has. When I first got involved with the business, I was more of a capital appreciation guy. I was trying to catch up. I had a fairly devastating embezzlement ten years ago now. I talked about being in the software industry. I actually helped sell a company. We made some pretty good money, seven figures quite frankly, that I was planning to not work really hard at this point in my life. Unfortunately, I made a mistake and I invested it with some Ponzi scheme, for lack of a better term. When I got involved in notes, even before that with the rentals, the idea was that I was trying to double my wealth every two and a half years. When we were buying notes originally, it was all about, “Let’s see how we can appreciate capitals as quickly as possible.”
However, I started realizing that I hated my job more and more every day. It was nice when you start selling houses and you’re getting some capital back in the door, but the stress of the job, and I was hitting 100-hour, 80-hour weeks, I was flying all over the world. Back in those days, I would try and make a bid and I’d be calling Scott from London and it was like 2 AM there and you’re in California once, it was really bizarre. I just decided that it was taking its toll on my health and my well-being, and I needed to get out. As luck would have it, the company I was working for, decided to sell it. We took it to a private equity firm, so it was just a great opportunity to get out.
That caused me to start looking at how do I increase cashflow, because cashflow is what I wanted to live on running the business. I brought in a business partner, so then I was thinking about keeping her family fed. We’ve now added an intern, but we’re actually thinking about bringing a fourth person in. For me, the cashflow is what is feeding the families in the business. That was a big shift. It really happened about eighteen months ago. It took a while to get there. When you started buying the second hundred notes, it was actually all about cashflow. They’re not all cashflowing. We talked recently about how do you identify what the right amount of money you’re making on a note is and to calculate what you need to live on. That’s a pretty easy number, quite frankly.
For us, the average loan is paying us somewhere between $300 and $500 a month. If you figure when you say $400 a month, I know what I needed to live on. I know what my business partner needs to live on. I also downsized my lifestyle a little bit because I really didn’t need to blow and go anymore. I had some life changes. I’m all about personally travelling now. I’m doing the bucket list stuff. My doctor warned me I was going to die a few years ago because of my lifestyle. I’ve gotten a lot healthier and cleaned up my world, so to speak. Stress levels are down. The notes has allowed me to do that. I thought about it and there’s an awful lot of stuff I still want to do and I don’t want to be missing out on it. I don’t want to wait until I’m 70 with the hope someday I might do this. That was a big change for me personally.
What’s one of the big bucket list you want to do? I’m always curious what’s on everybody’s bucket lists.
For me, I want to go to Tahiti. I want to do the entire South Pacific. I really am interested in Bali. I’ve never been down there. I’ve been to Australia for work, which isn’t the same as going to Australia for fun. I want to go to New Zealand. I’ve never really been to the orient either, Asia. I’ve flown through places, but I’ve never really spent any time to enjoy it. My thought is in 2018, I’m going to do some Asian countries. I’ve been to Europe a hundred times and it was always for work. You get to see London and that’s great, but the rest of Europe is pretty much an anomaly to me. I would love to go see some of the places.
That’s the beauty about notes. It’s giving the freedom because you can do this basically from anywhere. You posted a photo about how you were down in Cabo just recently for a quick little getaway trip. You were negotiating a loan mod by the poolside, right?
That’s right. I didn’t realize that I was half-dressed in the picture. I was actually at the pool. I just got off the phone with the attorney and the borrower and we had negotiated a deal. I was just excited. That’s the cool thing. If you have a phone and you have internet connection, you can do notes. I’m not suggesting it’s easy. It’s not hard, by the way, it’s work. It’s a matter of how hard you want to work. You write your own ticket, so to speak. That was the cool thing for me.
It took me a while to realize it. I was my own worst enemy in the beginning. I used my own capital, as opposed to raising capital, so you run out of money while you’re waiting for notes to finish up. A lot of people start out saying, “I got to do this with my own money.” If they have no money, they just don’t do anything. I was that guy, I have to admit it. Luckily, I had some capital to start with. If I could do the one thing over, it would be I wouldn’t have just wasted a year waiting for my own money to run through the system. When I raised my first capital, I was like, “That wasn’t as hard as I thought.” My business took off because of that.
You’re exponentially growing your stuff versus being limited. People sometimes got $200,000 sitting from their retirement account or their 401(K). They focus on the $200,000, what can they spend with it? They got to realize there’s $7 trillion in private money out there. There’s $250 million in zero-bearing accounts at Quest IRA from clients there. There’s a sea of money out there that they can use to leverage.
Most note investors that come into this think about the capital gains. They don’t think about, “Focus on some stuff that brings some cashflow in and start checking off the boxes of your monthly expenses.” Honestly, that’s where you’re truly financial independent is. If you don’t work this month, your bills are covered because stuff is coming in monthly. Figure out what that number is whether those numbers are going to be $10,000 before you leave your job or $5,000. If you’ve got $400 a month on average, that’s 25 deals to get your $10,000 done. How many notes did you do your first full year in the note industry, Wayne?
It wasn’t a lot. It was twelve maybe on the first year. It’s probably less than that even the first year. It was the second year that we really kicked. It was because I started with my own money. I think we bought four.
You were still working a tremendous amount though. Eighty hours a week, you still found the time to pull some triggers.
My motivation was I lost $1 million. I know people stole it, but I couldn’t blame anybody but myself because as much due diligence that I thought I did on these guys and the investment I made, it turns out I still lost a million dollars. That was supposed to be the retirement money, the lake house, the college fund for my son, all that I was working really hard for. All of a sudden it’s like, “That’s a kick in the groin. What next?” I was already doing the 80-hour week, so it wasn’t like, “I’ll only add another 20, 30, 40, 50 hours and it will make up.” You just can’t. Then I’ve got to get smarter in how I do this.
Thankfully, I fell into notes. It was an accidental thing because I went in a different direction first. I still have rentals, too. The note business creates rentals so I like that. I was going the apartment route, that’s where I was headed. It never went that way. At least for me, I feel like the notes has been a blessing. I owe a lot of it to you, Scott. You kicked me in the butt when I was trudging along a little bit on my own. I appreciate that. I’ve spent a lot of money on education. Most people spend a lot of money on education and don’t do anything. At least I do stuff with it. I feel like I was able to create my own little system, which may not be great for everybody, but it’s working for us.
That’s all that really matters. If it works for you and Natalie and the Platinum Ventures team, that’s all that matters. If you’re happy with what’s going on and you got your niche aspect of the investing game, great. That’s the beauty about it. There are so many different ways to, pardon the term to our PETA friends out there, but skin a cat.
I mentioned travelling. I do travel for work, but I get to pick and choose what I’m doing now. I travel a lot more for pleasure, where it used to be getting on the plane was, “I can’t believe I got to get on another plane. Where am I going this week?” I used to live out of a suit case. This is actually fun stuff now and I really think it’s neat. The cruise next week, that’s fun and work so it’d be interesting to see it. It’s a different work because it’s not working a job and showing up in an office and just looking at a different hotel room. We’re going to actually have some education, networking, which is always great. There are a lot of investors there, which is better. I get to see glaciers.
That’s good. You’re in the Plano area of Dallas. You go to two events a week roughly?
At least. Quest IRA in Dallas has their meet up. I go every Wednesday to that consistently. Every week, there’s another meet up around real estate. There’s the North Texas Area Real Estate Investors Association I go to a couple of times a month. I’ve actually joined some local real estate-based meet-ups here in town. I actually live in Frisco, not Plano. I’m part of Kimberly Banks Fawcett’s DFW Note Closer’s meet-up. We try and do that at least once a month. A couple of hard money lenders have meet-ups, luncheons that I go to. I’m usually twice a week, sometimes three times a week. I even, believe it or not, get out of bed early to go to a breakfast meeting at 7 AM once a month that the Texas Legends, which is affiliated with the Dallas Mavericks, put on. That’s a great networking event too because I meet all business leaders that are local. We get passionate about things. Right now we’re working on a thing around a food drive for Hurricane Harvey victims and things like that as well.
Networking is huge and sometimes outside-the-box networking, you get involved or get exposed to different people who have deeper pockets or just successful entrepreneurs as you, but they don’t have the time but they’ve got the money. Oftentimes, it works out to be really good JV deals. Our favorite things to go out to is wine clubs.
There’s not a really good one here, but I have joined one and I’ve shown up a few times. I’m not a golfer, otherwise I think that would be a great place to go to one of the country clubs as well, but certainly, wine clubs are big. There are some local ones that are just starting to kick up. I’m paying attention to see how it goes.
You might just need to create your own. You’ve got Kimberly, you’ve got quite a few people up there in Dallas. You can start your own wine and note club. That’s the fun thing about notes. Adam talked about this on the earlier episode. He took some time off. He just got back in actually from being out travelling for two weeks hitting properties that he owns and other people own. It’s something you and Natalie did. Was it six months ago now?
Actually, it was a whole year ago. We were planning to do another one and then we started realizing we got so many other activities going on. We’re looking at possibly waiting until the spring to do it again. We did it a year ago. We did a tour. We left Dallas, which is where we’re based. We went and looked at as many of our Southern State assets all the way to the East Coast that we could go see. We plotted it out, we drove for a week and we went and looked at the major cities where we had our concentration of notes and/or houses and/or rehabs going on. We hit Shreveport, Louisiana and Birmingham, Alabama, Atlanta, and South Carolina, we actually visited. We went and looked at some assets for other folks and circled back through North Carolina and ended it really in Memphis. We have a lot of assets in Memphis. We spent some time with our property managers and rehabbers. That was a really good trip and we got to talk to some of our borrowers and did some interviews. We had a really good time and it showed people what we do. Believe it or not, we raised a lot of capital because of that. It shows that’s not hard, it’s just notes.
It’s just debt, you’re just dealing with people. Natalie does a really good job talking. You and her bounce off who’s talking to the borrowers to work out and stuff like that. What’s probably the most interesting story you’ve had from one of your borrowers that you ended up reinstating or working with?
A lot of them are just health issues. Somebody passed away; usually the husband passed away, wife doesn’t understand finance because they grew up in an era where the husband took care of everything. She knew she had to do something. She knew she had to pay bills, but she just got overwhelmed by it, or unfortunately all the health bills showed up at the hospital when somebody was sick. That’s what we see a lot of.
The most unusual one we got was when somebody tried to reinstate but they had admitted to us that they were a registered sex offender. Legally, we couldn’t kick him out but the guy wouldn’t cooperate anyway. It was a good way to get them out of the house. When we did, the team that cleaned out the house for us found all sorts of horrible things, which we had turned over to the authorities. The guy is back in prison now, which needs to be. I feel like we got somebody off the streets that we might not have otherwise done if somebody had not stood up to this.
We don’t have a lot of really terrible stories. The house that Adam went to look for us, we had sold about a year and a half ago on a land contract. The guy just admittedly called up and said, “I hate to say this. I can’t afford it. I’m really sorry. I started working on the house. I didn’t get very far with it. Stuff got away. Here are the keys.” We let him out of it because he cleaned it out, he did the best he could do, so why make it worse on the guy? He’s paid us for a year and a half before he decided he couldn’t do it. We’re going to sell it again and hopefully find another family like he was.
That’s a big, big thing I think we need to hit the nail in the head here. Always put eyes on your assets. Always pay to have somebody go out if you can’t get through drive-by. Always put eyes in the assets because it tells a whole different story. You drove by an asset for me, a little small asset down from the University of Alabama Birmingham. An ugly ass house, older lady who’s living in it, actually got her reinstated. It’s a phenomenal return on the deal, but it wasn’t the best of areas but your pictures showed me some of the descriptions on the assets. I was like, “Let’s make a phone call.” Sure enough, we were able to get her on the phone.
I can’t say that I would have done much more work if somebody hadn’t driven by and gave me a photo of it. It wasn’t the greatest of areas by far. Most properties around universities or big stadiums aren’t the greatest location anyway, but somebody who’s been there for quite a while has done a good job. That’s the thing, you help somebody out, they try to do something good, can’t stay involved in it, now you’re going to do the same thing again. You’re going to rinse and repeat, let somebody have a bad situation and give somebody an opportunity to afford the American dream.
He was apologizing to us. We really did give him an opportunity that he would not have had otherwise. I’m sad that it didn’t work for him, but I really appreciated that he called and didn’t just run out in the middle of the night or better yet just not pay. Then we have to evict and stuff. It was really a nice little situation.
Natalie and I just drove through some assets yesterday that we were looking at. Since we’re here in Dallas, I’m like, “I’ll jump in the truck and go looking at stuff in Dallas.” I got to tell you, you look at the picture of the house on Zillow and it’s a beautiful little town home and it looks amazing. The BPO from this seller was $107,000. We didn’t even get to the thing and I’m like, “I should have brought my gun.” It’s probably worth $20,000 on a good day. That’s why you got to get eyes on the property. It doesn’t mean I’m not going to buy it. I just know what it’s worth now and certainly I have an understanding of the options available to us. Where before if I didn’t get my eyes on the property, I might have just used that picture on Zillow, and some people do that and go, “This is a beautiful place. I’ll overpay,” which I wouldn’t want to do. You then get to talk to the neighbor who came out to see who we were and says, “There was a crack dealer in the next room.” It smelled like crap.
We’re like, “If we do end up working on this, can we call you?” “Yeah, I know people who might want to buy it.” That’s not how it’s always works. You got to look like you belong, first of all. From my perspective, the eyes on it, we always try and use a realtor who we can trust in addition to a BPO provider because I think it’s just double-checking. If I could do it myself, I will. I’m not going to go jump on a plane to go look at one asset. If I’m looking at 40 in the city, I might do that.
Forty is all worth it. The cost for a Southwest Airlines or American Airlines or whatever like that, to fly to a city and to ride off because you’re driving around, but that’s the best recon you can look at. Nobody is going to understand an asset better than you or me, unless it’s them looking through the assets. To understand truly what you have, it’s so worth the eyes on the asset if you can, for the most part. I want to ask you some of the things that you did while working full-time. We got a large chunk of the people that follow us online who are still working in their jobs. What are some pointers that you could give to people who want to do something full-time but their job is in the way? What are some things you did that can help them?
I would start with you really need to get efficient with your time. Time management is critical. It’s really easy to be the squirrel and chase the nuts. You have to look at what can you do after the work day is done without killing yourself. You do need sleep. That is one thing I would say, Scott. I’m probably really bad about giving that advice because I wasn’t that guy. My doctor told me, “You’re on the verge of a heart attack if you do not change your lifestyle.” For me, I’m travelling so I’m eating out of a hotel or plane or whatever.
If you’re in an office 9 to 5, when you go home, spend time with your family, and then set aside two hours or three hours at night. I always did it after they went to bed. That’s me because I’m a night owl. I know some people in the notes space, they’re real early. They get up at the crack of dawn. That’s not me, but if you could, two hours before work, get your work out and then get on the internet, researching values for properties. If you’re going to look at assets, get it all done so that you’re not impacting your work schedule. The thing about my particular job is I had a little bit of flexibility. If I had to make a phone call, I could step out. I know that’s not the reality for everybody, but for me it was. If you can’t and you have to step out, what I would suggest is bring your lunch and use your lunch hour to be making those phone calls to asset managers or to realtors, to your vendors if you’ve already bought a few assets.
The other thing is systematize. There is a lot of very inexpensive or even free stuff out there. Build your own ROI calculator. You need one. Once you do it, you’ll be surprised. If you use it, it works. It doesn’t matter that it’s perfect. You’ll iterate that, you’ll learn that, but you got to have one. If you don’t know Excel, it’s not hard to learn. There’s an Excel for dummies book. That should not be an intimidation.
Project management skills. We use a software called Pipedrive. It is not hard. If you’re not a software person, you don’t have to be scared of this stuff because it will do stuff for you. It will remind you to call this attorney on the day if you set it up that way. That’s the key, it’s all about automation wherever possible, so that the time you are spending on notes is important stuff, like talking to an asset manager when you’re trying to buy, or raising capital. By the way, raising capital, I do a lot of my raising capital at night after work. I never did it during the day because I never talked about my notes at the job. It’s just the thing I had. Some people do, I know that, and there’s nothing wrong with that. I was in a position where I probably shouldn’t have been doing both simultaneously anyway. I didn’t want to raise the ire of the corporate execs.
The last six months, you didn’t care, you were trying to get fired.
I did, that is true. I would have left sooner except that I had a bonus, a golden handcuff that was sitting there. I was trying to get let go with the severance package. Ultimately, I did get that. We agreed to that, which was nice, so it really helped out.
You are not going to be able to do this on your own, so you have to build a team. It can be a virtual team. One of the things that this podcast, you’ll get an understanding what this team needs to look like and realtors, attorneys. You’re going to want to use a BPO company to get values for your comps for your essential, whatever you’re buying. O&Es, Ownership and Encumbrance reports from ProTitle USA is the one I love. They’re good and they’re cheap. You know what it would take to get that information if you did it yourself? I don’t even know. Why do it? It tells you what to do with the note. It gives you some idea of the exit strategy. If there’s a ton of liens, you know you can’t do a deed in lieu, so why even pursue that?
Those are the kind of things that you’ll learn over time. Reading this stuff at night, it may not be the most exciting, actually, I do find it exciting. Natalie reads every single page of every single loan doc that we actually purchase. She has found money for us because in page 312 of loan file XYZ, there’s a little letter that says, “Help, I really would love to stay in my house. No one was listening to me. Can you please save me?” Those are the things you find and you go, “Borrower, we found this letter.” Lo and behold, you have a loan model.
There’s so much great information in the loan files, either the old stuff, the hardship letters, especially when we were trying to do a short sale before. You just literally dive into it and look at it. You get so much information, the collateral, the O&E, and all of that stuff. You will really paint the picture of what the borrower’s going through, and if they really want to stay or if they don’t. I’ll give you an example. We just had conversation literally fifteen minutes before this episode. We had a borrower we reached out to. We bought their contact for deed. We sent them a hello letter. The servicer and this pre-seller haven’t sent anything out yet. It’s been a month now. We’re like, “We can’t wait around. We’ve got to do something to get it out.” We sent it out.
People are trying to make their payments we found, and they’re getting turned away. We got to do something. We reached out, the borrower responds and sends a nasty email, somewhat aggressive. Jen in the office gets on the phone with them. The lady just talks over her being a bully just saying some ugly things. Jen is like, “I can’t talk to you anymore. If you’re going to talk like this and be rude to me,” and of course, the lady was cutting her off. This lady called back five times with five ugly, nasty voice mails, just a pissed-off person. I was like, “Don’t worry about it. I’ll take it over.” Jen was like, “I can’t deal with this lady.”
I sent her an email this morning. I said, “I’m available between 3:00 and 4:00.” The lady is like, “I’m only available between 3:30 and 4:00.” I said, “That’s fine. I’m available between 3:00 and 4:00.” Sure enough, 3:03, she’s calling Jen’s number, not mine. Walk over, pick up the phone when it rang, she’s like, “Who’s this? I’m looking for Jen.” “I’m Scott. I’m the guy in charge here. You’re talking to the head honcho. Let’s figure something out today. Let’s get this solved. Let’s figure a number out. Yes, you’re upset. Yes, you’re a single mom. I get it, you’re stressed out because of the house. You’re behind on payments. You don’t know how to pay. You’ve been out of work but you’re working again. Let’s come to a situation.” By the end of the call, she was laughing and calling me ‘darling’ and making her first payment tomorrow. We have all sorts of situations you deal with people. Some people are sick. Some people are out of work. It’s not a fun time if you’re ever behind on your mortgage.
The thing about it is, not everybody, there are some legitimate complaints. They’ve been treated like crap by some of these companies, the bigger banks. That’s the thing that we get. They’re usually concerned and suspicious at first like, “Why are you calling me? Who are you?” We don’t do make the calls anymore, but I used to do it. I loved doing it. I have to admit, I’m a sucker with that. The thing about it is they’re like, “You’re listening to me.” All of a sudden, you will get a borrower calling you, “I’m really sorry, I can’t pay, but I’m really sorry I can’t pay. Here, can I give you the keys back?” versus, “FUMF.” They truly know you tried to help them. I believe if you treat people with dignity, they will generally do the right thing.
If you’re not an expert at calling, because most people aren’t, let’s just face that, there are great companies out there besides the servicing companies that can help you out with it. Who do you guys use a lot?
I have servicers but I don’t really want them talking to the borrowers. We use the Law Offices of Daniel Singer who does our loss mitigation for any of our first position mortgages. We also work with Polaris on our contract for deeds. Although we haven’t bought a lot of contract for deeds lately, they do a fantastic job when we do. We’ve given that responsibility over to them because they are trained in dealing with conflict and conflict resolution, and we’re not. I’m not a conflict resolution type of guy. In fact, I get stressed out when somebody starts yelling at me. I’m a New Yorker and I might have fought back, which is a bad thing and you don’t want to do that. It’s easier not to do it, and it’s inexpensive.
When you look at the cost savings having a strategy within 30 days versus six months or however long, the servicers are going to get around to it. Polaris and The Law Office of Daniel Singer. Daniel Singer, one of the smartest attorneys we’ve seen. He came out to one of our Mastermind groups and did an hour and a half, two hours on how to do all the due diligence on bankruptcy stuff. I think he did it for Kimberly and Debbie’s DFW group as well.
You learn something every time and that’s what I really enjoy. By the way, I get them on the phone. I have not spoken to any of my servicers when I want them to call. I have to schedule the time. I actually have direct dials to all these guys. That’s not because Wayne has got 300 notes. That’s because that’s what they do. They pick up a phone for those who have two notes too, because they understand the business and they understand that time is money for us. I just fired a servicer. One of the reasons is because they have sat on some of my loan files where Singer actually negotiated a loan mod and it’s been three months. That crap drives me insane because it’s money out of my pocket and my investor’s pocket because obviously I have JV partners as well and that’s unacceptable. We literally fired one on Monday.
The beautiful thing about that is you want to keep the people that care about you. They’ll do it whether you got one note or 300 notes. Oftentimes, they realize it all starts with the first deal. Most people buying the first deal that works out well enough could buy a whole lot more hopefully in the future, right?
That’s true. You mentioned servicers in general. I don’t think they’re set up really well to be loss mitigation team. They’re great at collecting money when people are willing to pay the money. At least for the servicers, we’re still rounding areas to some of the servicers when they have an account with 10,000 loans. They might get to a call from us for a couple of days or a couple of weeks and that’s not good enough for me. When somebody’s not paying, I want them to realize that I’m here to help them or get rid of them pretty quickly.
You’ve got to be very active on your files, that’s the best way you can do that. A couple of questions here for you: What CRM do you use and how did you customize it?
We use Pipedrive. Pipedrive is a “CRM” to some degree. I have no idea how we customize it because I didn’t do it. I have Natalie do it. It’s fully configurable and actually, great plug for Adam Adams, he actually put together some pay-it-forward videos on how to customize Pipedrive. You can learn that and it’s very inexpensive. We also use Mailchimp. I wouldn’t call that a CRM either but it is my database and we use it as our way to communicate with our database.
How often are you emailing out to your database, Wayne?
Not as much as I should be. I will say that, being that I used to be a VP of Marketing, I should be doing a lot more than I am, but I do touch a lot of people a lot. I send out an email at least once a month. In fact, I wrote one that‘s going to go out today or tomorrow. Generally speaking, that’s still not good enough. Every other week for me is a fair thing. We just got a lot going on. I know some people who’ve touched people two or three times a week. For them that works great and I’m sure it’s helping them raise a lot of capital. I’m sure it’s allowing them to generate exponential returns. I probably ought to be doing that too, but I don’t.
Early on, you’re hitting two networking events a week at least. That’s a lot to be out networking a lot of people. That’s where you’re raising a lot of capital. Up there in Dallas, plenty of private money sitting out there, whether it’s Quest events every Wednesday there, Haley that runs the Dallas office puts on, the training stuff, other investment clubs out there. ROTI used to have a good one up there.
Tim Herriage and ROTI have merged theirs together, the DFW Realties. I go to that every month. Then I also communicate a lot on BiggerPockets. That is my one-to-one communication versus one-to-many, although to some degree when you chime in on a conversation, it becomes a one-to-many. Kimberly recorded me doing a session like this back last fall and put it on YouTube. I felt that it really was a good talk so I offered that as a pay-it-forward to people who are interested in getting started who just don’t know what to do. Maybe they’ve already spent the money to take a training class like Note CAMP for example, but now they’re just stalled or they haven’t gotten that far and they don’t know what to do. I would say you should probably go look at Note CAMP or one of the others out there, but here’s something for free just to see if it’s even interesting. More often than not, somebody would call me and ask me if we could talk. That’s how I do a lot of networking.
You’ve got to the point that when you guys are buying assets, you are usually buying with your own money first to take the stuff down. We had a question came in today, “If I want to use my own money to fund the initial purchases, how do I get my money out by bringing another investor’s IRA money in?”
We do it all the time actually. It’s all in the matter of calculating the estimated returns, first of all. I should step back. I mentioned that I started with my own capital. At one point when I ran out of money, I started with only other people’s capital. We switched from 100% JV money to now I’m really a third JV money, two-thirds Platinum Ventures money. We continued every month to purchase small pools with the idea of somewhere between fifteen to twenty loans a month-ish. Of that, we calculate an estimated return of investment for each of the notes in it. I mentioned our ROI calculator earlier. We actually have one that’s proprietary, I’m not going to share with people but I can tell you that we built it with the eye towards foreclosure always happening. If you use that mentality as a foreclosure, for us, we’re willing to joint venture on deals if a foreclosure occurs and we know we can offer a 12.5% return to the JV partner, in other words, 25% if you will. If that happens, we’ll offer it up.
Then I have a little format that I’ve built out. It’s a little deal sheet we call the Investment Analysis Summary. For every opportunity that I am offering under a joint venture, it’s the same format every time. It’s a little bit about the note. It’s a little bit about the borrower. Here are the projected three or four exit strategies based upon what we know and here’s the expected return. We’ve gotten pretty good at predicting those over 300 notes, but that’s not the point of it really. It’s not so much the prediction, it’s just showing people that this is real and that they don’t have to do any work, and that they can park their money for about twelve months to make some return that’s pretty good. I tell them everything up front, all the cost including work out costs. I don’t come back and say, “Now, pay this attorney for me.”
You are adding those costs into the funding amount?
Upfront. There are two reasons. One is because most people are using their IRA funds and every time you send money out, it’s a transaction fee. They can get a lot of transaction fees and they go, “I’m giving you the money upfront.” Yes, however, you’re also saving $400 or $500 in transaction fees. It’s awash. They all get it back at the end of it all.
They get it all in the end and it’s going to be a good return of the whole amount, not just your twenty initially. That’s something a lot of people don’t understand that, “Why am I funding $2,000 or $5,000 extra?” Because there are some workout costs involved with it. Your return, we’re figuring out this is off of those. If it doesn’t happen, great, it’s going to be a faster return to you. It’s a faster money return and a higher ROI at that point.
That’s actually a good point. Because I use foreclosure as our estimated ROI calculation always, if I don’t foreclose, that’s the best scenario. Sometimes a foreclosure goes a lot faster than we predicted. When they do, if I was targeting a 12%, 13%, 14% annualize return and I get it done in seven months, then it means it’s better than 12%, 13%, 14% because if you annualize that number, it’s 27%, and you can turn the money again. That’s actually one of the things we do. We have a set of joint venture partners who generally, whenever we finish a deal, they just say, “Let’s roll it,” because they just want to grow their money. There are others who say, “I’ve got something else I’ve got to do with it.” That’s fine, too.
Pull their money in, get it done, it becomes an exit strategy there, turn to key investment or a month then your arbitraging by bringing funds in with a flat 10%, 12% return. Pulling your money out, pulling another investor’s out that wants to churn their money and you’ve got something who’s making a pass. You’re probably still staying involved managing the deal, whether it’s a performing or a rental, correct?
That is correct, yes, we do. Sometimes at the end of the life of the note, so to speak, we have a couple of decisions to make where it might be, “Now that we’re making some cashflow every month, but it’s not time to sell the note yet. You want me to just buy you out?” I’m okay with that because I like the cashflow. Some people are like, “No, I like cash.” We give everybody the opportunity to participate however they want. We’ve actually had some investors say, “I want this rental. Can I buy you out?” “Sure, why not? That’s fine.” When you’re foreclosing something, you’re actually essentially getting the deed to the property. Now we own it 100% free and clear. One of the things we have done is we’ve created mortgages against these houses and then we use the mortgage, essentially take a lump sum out, 60% of loan-to-value is what we usually do. The rent is paying the mortgage monthly. Usually, Quest IRA people like this. We’re paying them every month. We use that funds to pay the return to our investor. Now they’re out and they’re happy because they made the return they’re expecting. We make a little bit and we keep the cashflow difference.
That’s just making money coming and going. It’s a win-win-win across the board. It’s a win for the finance investor, it’s a win for the back investor. It’s a win for the borrower actually as well, whether they stay in the property or leave or we bring in somebody new that buys the house on a new mortgage or contract for deed for the most part. Here’s the last question. Do you prefer or recommend CFDs versus notes?
I don’t know that I will prefer or not prefer. They’re both fine, they’re different. The thing about CFDs that I really like is generally speaking, they’re lower income people who don’t have a lot of options so they’re more willing to work with you to reinstate. They’re lower price points too, so you can get it at a lower price than, say, a first usually. Not always, but usually. A great example is we own one in Kokomo, Indiana. The only reason this sticks out is because the borrower still calls me all the time. They’re paying and it’s cool. What’s interesting about it is that before they were paying, and they weren’t paying, their payment is $392 a month. Borrower X wasn’t paying $392 a month. The average rent in that part of Kokomo, Indiana for a three-bedroom, one-bathroom house, which is what they’re in, was $850 a month. It’s a pretty simple discussion, “You’re not paying me $392 a month. How are you going to afford living in a rental with your family?” “Good point. I didn’t realize that.” Changes the whole conversation and then they start paying.
Those houses are usually not the greatest. We make sure that they’re safe. When we’re purchasing, we’re going to do something on the mechanical. I want to make sure the roof is not leaking because it’s protecting my asset essentially because it’s a contract for deed. I want to make sure they have heat. I don’t care if they have air-conditioning, but I do care if they have heat. That’s something you have to protect as well. Actually, in Texas you have to give them air-conditioning too but it could be a window unit. I want to make sure there are no leaks in the plumbing. Beyond that, there’s not a lot you need to do with it.
It’s all the same thing. We always compare what their existing payment is compared to market rents because that’s what they’ll be paying. In 99% percent of the time, they’ll be paying more on the road than they would if they stick with you.
I didn’t really answer the question. I like them both, that’s the thing. It’s just six and one half on the other. The higher end first, they reinstate good too and they foreclose too.
It all comes down to the deal. Each asset is going on with each deal.
I was going to say that too. There’s a lot of scrutiny on CFDs right now, which is really not why I’m not buying, I just haven’t seen anything I like recently. That’s going to work its way out too. They are lower-value houses usually, you could find some beauties in there, but there are usually pieces of crap. You just have to be aware of that. It could be pieces of craps first too, but it depends on the deal.
We look forward to seeing you in a couple of weeks. You’re speaking on a panel as well.
I am, and then I’m actually hosting a second panel. I’m speaking on the different ways to get involved in investing in distressed assets. Then I’m actually hosting the panel around raising capital.
How can people get a hold of you?
Thanks for taking time from your busy schedule to be here.
Absolutely, I appreciate the invitation.
Once again, you can catch Wayne at the Distressed Mortgage Expo September 16th and 17th, you can use the discount code WCN40 to get $40 off by going to Note.guru. As always if you like more information on note investing, you can always text the word ‘Notes’ to the phone number 72-000. Thanks for joining us. Until next time. Have a great day. We’ll see you all at the top.
About Wayne Snell
Wayne has been a real estate investor since 2006, and founded Platinum Ventures in 2011. PV is a private real estate investment firm focused on managing a portfolio of real estate notes (non-performing and performing mortgage loans) to produce above-average, safe and consistent returns for our investment partners.
Additionally, in 2016 he retired from the computer software industry after 25 years. During that time he helped small startups raise funds, launch products, grow to multi-million $$ revenues, and experience lucrative exits (sales, recapitalizations). He has assisted two organizations as they made the successful transition from on premise to Cloud-based SaaS companies while exponentially driving revenues and customer acquisition with limited funding.