EP 319 – Planning For Note Independence with Dan Deppen

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NCS 319 | Note Independence

NCS 319 | Note Independence


Learning by doing accelerates things. For note investor Dan Deppen, the journey to note independence started off when he read about note investing online and found Note Camp. It was the first real note training that he did. After six months or so of studying and trying to figure things out, he joint ventured with a more experienced note investor and right around the same time bought his first note. Dan says it’s great to go through all the theory and put together a model and figure out your game plan, but then when things actually start happening and you encounter different situations, that’s when you learn all the details and the mechanics of how the sales work. Dan talks about his first day as a full-time note investor, his path to quitting his job, and his goals of financial freedom.

Listen to the podcast here:

Planning For Note Independence with Dan Deppen

We’re excited to have a very special guest, a guy who did some great things in a very short period of time, but he’s doing a tremendous job. For those that don’t know who you are, why don’t you take a second here to Note Nation and share a little bit of who you are and your background.

My name is Dan Deppen. I was an engineer in the aerospace industry originally and I did my MBA. I had been a product manager in the software industry for the last several years and then got into notes about a year and a half ago. I have gone deep down the note rabbit hole since then.

It’s been a year and you get started learning online. How did you get your toes in the water? Do you start buying a bunch of notes yourself? Did you joint venture with a few people? What happened with that?

For me, it started off reading about it online. I found Note Camp. It was the first real note training that I did. I did about maybe six months or so of studying and trying to get things figured out. The first thing I did was I joint ventured with a more experienced note investor to try to learn from him and follow along. That deal worked okay. There wasn’t necessarily a lot of learning involved in that. Right about the same time I did that, I bought my first note on my own. That’s when things got going because it was great to go through all the theory and put together this model and figure out your game plan. Then when things actually start happening, that’s when you learn, when you start to encounter different situations and you learn all the details and the mechanics of how the sales work. It’s learning by doing accelerated things.

You also bought some performing notes to put in your IRA to start off with this. You’ve melded the performing and the nonperforming side to get it right.

Yes. I started with the performing notes because it took away a little bit of some of the degrees of freedom that you have on the nonperforming side. It was good for learning how the transactions work and what all the different pieces of paperwork are and how they go together. For me, also wrapping my head around some of the timelines. A lot of my investments have been in stocks and auctions. I had been very heavy into that since I was nineteen. If you want to buy a stock or trade an option, you click a button and the deal is on. In real estate, obviously things move a lot slower than that. It takes more time to get all the good things funded, get the paperwork done and get everything recorded. For me, it’s getting my mind around understanding how that whole process works.

It was performing for you. You are able to use the fundamentals, learn it and get to understand the timeframes for servicing transfers, paperwork and all that good stuff. How many notes have you bought since you bought your first one?

I’ve done thirteen.

That’s great you had a plan of action to get where you wanted to be. When did you start planning to go full-time with what you’re doing?

I started thinking about it hard probably back during the Mastermind at Cape Coral. My original thinking then was, “I’ll transition to full-time in about a year.” I’ll do that and then I’ll go back and watch the masters like it did a couple of years ago and that will be like my celebration thing. As I got going I was like, “Maybe I can do it the end of this year.” Then it ended up working out where it made sense for me to go ahead and do it now for a variety of reasons.

Do you want to share some of those reasons?

As I was scaling up the notes business, I was working full-time in my day job. That had actually been going well over the course of this year. Things started picking up where I got recognized by some of our exec team and they started having me help more with business development and putting together partnerships. I started to get invited to these executive strategy sessions which was all great, but it made it more challenging to do notes at the same time. Likewise, as I was starting to scale up notes, it started to become a little more of a challenge to keep up with everything.

NCS 319 | Note Independence

Note Independence: I’m definitely much more passionate about notes. For me, it provides a lot more personal upside than my day job did.

I’ve been able to stay on top of the notes that I have now, but as I looked out and said, “I have been doing this for thirteen notes now, what does this look like with 50?” Something was going to have to give. I was either going to do a crappy job at my day job, which I didn’t want to do, or I was going to have to slow roll the notes business, which I didn’t want to do. I felt like I’ve reached a point where I had to pick one or the other and it was an easy decision because I like my day job, I didn’t necessarily love it. I was definitely much more passionate about notes. For me, notes provide a lot more personal upside than my day job did. If I kick butt in my day job, I might get a 5% raise instead of a 3% raise, but that’s not quite the same upside that I’ll be able to have if I focus on notes.

Your wife came with you to the Mastermind. Did her mind get a little bit more at ease after the Mastermind? Did she meet a lot of people or was she a little hesitant? What was her mindset?

The Mastermind definitely helped her a lot. Prior to the Mastermind, she didn’t necessarily have any concerns about it, but she didn’t know anything about notes. She knew that I was into it. She was like, “That’s great. You go do your thing.” At the Mastermind, it was helpful for her to get to meet a bunch of people and talk to folks and understand more of the entrepreneur’s mindset and also listening through some of the deals where she could wrap her head around it and understand it. Her take away from that was, “I get it and all of this stuff makes sense.” She was always on board but she was more on board with the understanding of how everything works and why I was doing some of the things I was doing.

That’s what happens if you do good at one thing, you can’t chase two things.

I’ve always prided myself on being good at whatever things I decided to do. I didn’t want to be in a position where I was trying to do two things at once and not doing them as well as I should be.

You probably obviously sat down. What did your wife say when you approach the subject of, “I’m going to leave my job in a couple of weeks?”

She knew I was thinking about it. She actually pushed me to do it. I had been thinking about it for a while and we have talked about it. Her reaction was just like, “You should go do it. It’s obviously what you want to do.” Then the other thing that hit me she goes, “You need to be less conservative.” Which is funny coming from her because she’s an aerospace engineer like me and I’ve always viewed myself as a lot conservative than Jennifer. When she’s telling me to be less conservative, that’s a clue. It’s time to get going. You can’t ask for more support than that. It was almost more of a case where she was convincing me more than I was convincing her.

That’s awesome because it’s always good to have your family in your corner being supportive of you and pushing you towards the goal that you want to get. I know you from the time we spend together. You’ve planned things out. We’ve got some numbers for you over the next six to twelve months. Do you mind sharing that with everybody out there what your goals are and how you plan on accomplishing those?

I’ve got thirteen notes. My plan over the course of 2018, I want to do seventeen more, which will get me to 30. I haven’t made the detailed plans for ’19 yet but we’ll see how things are looking at the end of the year. What I ultimately want to do is get to a business that’s scalable where I can be doing 80 plus notes in a year, which I believe I can do. As I’ve set things up and everything I do, I have been thinking about how everything will work at a bigger scale instead of the one-off. I’m focused on building a notes business that’s going to be scalable. Getting to seventeen this year shouldn’t be a big deal. That’s maybe four or five a month. I’ve had several months where I’ve been doing three even working part-time. I think it’s a plan I should be able to hit. Hopefully, it will go well beyond that.

Are you using your own money? I know you’re using some of your IRA money for the performing notes we talked about that a while back, but are you using other people’s money to do this or are you using all your own money?

I’ve used a little bit of my own money, but I’ve got a couple of different funding partners already that had been funding notes. That for me was the biggest surprise. When I looked at doing notes full-time, I assume that getting funding partners would be the hardest part, but it was actually has been far easier than what I expected because the funding partners I have, it’s not like their previous close friends or family. These are other people who were interested in notes that wanted to do deals. A few can go out and find good deals. There’s plenty of money out there looking for them. That’s been the biggest surprise to me so far and set off the alarm bells that, “If I can get funding partners with a relatively low level of effort, if I have more time to dedicate and focus and do a lot more marketing, I should be able to scale that up.”

You were on one of our Note Night in America webinars and we’re going through a case study. I offered up a case study to jump on. You jumped on it and shared it. What happened with that deal? It looked like it was a pretty sweet deal.

That was great to go through that. I obviously thought it was a good deal beforehand, but then again I was pretty pumped after you liked it as well. I sent that video to some of the people who I had that were interested in investments and someone grabbed it pretty quickly and that was someone who I actually met at a local Denver Note Meetup. We had been talking a little bit and I sent him the link to that. I said, “Here’s the deal. I think this is pretty good. Here’s a video of an expert going through it.” He got back to me within a day or so and said, “Let’s do it.” That’s been awesome.

Did you ever get any backup offers of any other people that were excited?

I had a couple of others that were excited about it and came back the next day later and I was like, “Sorry, that one’s gone unfortunately.” That one definitely went pretty quick.

Will they be interested in funding the next one with you?

Yes. One guy funded the next one already. I’m at the point where I got to go out and find more.

Your goal is to hit seventeen more by the end of your second year, so you’d be at 30 in your second year. Has the marketing been a little bit more of a surprise for you, coming from your background?

Not really. I had taken some digital marketing courses in business school back when digital marketing was a brand-new thing at the University of Colorado. In fact, I think I took the first ever digital marketing program or course. It’s part of their MBA and I had done some other stuff before. I used to be big into poker during the poker boom. I actually wrote a book on that. I had done some marketing previously and built an email list and done some other things. A lot of that was eight, nine years ago. That’s obviously evolved quite a bit since then, but I came into notes understanding at least the basics of digital marketing. It wasn’t a completely brand-new thing to me. Then a lot of what I did as a product manager, more than half of that job was marketing. That’s different because that’s more high-tech marketing, but a lot of the concepts carry over.

Do you have a market? Obviously, you’ve got a plan you have probably put in place. What’s your weekly marketing plan for those that are listening out there?

What I’ve been doing is I send out a weekly email on Sunday nights and then on Tuesdays, I re-send that to everyone who didn’t open it. I’ve got an asset manager list. My asset manager emails have been a lot more irregular. I’ve intended to do it once a month, but that’s one of those things. There’s only so much time in the day doing a full-time day job at notes and family stuff and everything. That’s one area that’s lagging a little bit, but that hasn’t stopped me from being able to find deals. Now that I’m able to focus on this full-time, that asset manager reaches out and the phone calls that, I’ve got to be ratcheting it up.

NCS 319 | Note Independence

Note Independence: You need to find off-the-grid sources of notes.

I’ve got some good sources. When I talked to Jay Tenenbaum he said, “You need to find off the grid sources of notes.” I’ve got one that I would call mostly off the grid so far, but cultivating more of those is going to be a big focus for me over the next months. I’ll have more specific email campaigns around that, so I’ll do a lot of emailing there. The other thing that’s great is I’ll have time to be doing phone calls to the people who are opening the emails and looking at those. Working full-time, it was a challenge finding time for the phone calls. I’ve got pretty good at being able to sneak away to do some things, but it will be nice when I can time block and just dedicate a couple of hours to be able to sit down and make phone calls a couple times a week.

That’s a good thing. There’s nothing wrong with it all. You talk about systems, that’s the systems of doing stuff where it’s once a week or once a month out there. We have a question, “Are you borrowing from banks hedge funds? Which sources do you lean towards more so?”

It’s been hedge funds to date but my focus is going to be getting to banks. It’s one of those things I haven’t had enough time to do. I found a few things. It’s interesting too when you start reaching out to different asset managers, the interesting things you find. I was getting some stuff. I’ve got an interesting phone call one time from a retired banker who had sold the bank in the early ’90s and he was doing commercial stuff that often comes with a second residential. Residential seconds in South Florida weren’t my thing and I also got some tax liens on vacant lots. It’s amazing how many other deals are out there and I haven’t tried to chase those squirrels. I need to be able to do more of that so I started to get things that fit my model and my box.

You’ve been doing a weekly email for how long now?

I was sending it out every couple of weeks initially and then I think it was when I did the Fast Track when you said you need to be sending those out weekly. Since then, I’ve been really consistent about getting them out every Sunday.

How big is the email list that you’re sending it out to?

A little over a thousand.

What open rates are you getting?

I think it’s in the 25% to 30% range.

That’s phenomenal because most of the time it’s usually 20%, but you’re growing your list too as you’re going to events and networking, right?

Absolutely, and I’m even beginning to get some organic sign-ups through my website. As I’ve built out my website, I added a little widget there where people can sign up. That’s another thing I’m going to go back and spruce up. We are going to offer an eBook for people to sign up and things like that. I should be able to grow that quite a bit more than where it is. I think the open rate is good because it is a very targeted list, they’re all folks who are interested in note investing or came in through my website.

What’s the website name?


You being up in the Denver market, obviously there are some people that have been interested because you’re part of a note group. How big is that special interest group of note investors there?

That’s the group that Beth Hale runs. It’s called the Denver Note Mastermind Group, but there are usually about ten or twelve people at those. She puts those on a once a month, it’s every third Thursday of the month. Those have been good. I presented at one and I’m actually going to present one again. That’s been a good group.

You’re marketing out to a list of about a thousand which is not the biggest of list, but you’re having success with that raising capital in your own market. The people that you’ve raised from outside that weren’t friends and family, have they’ve been getting your emails for a while or you met at local events or other events? How those relationships blossomed?

It’s been a combination of things. A lot of people have been following the email list for quite a while. A lot of people, I had met face-to-face. One of them come through the Mastermind group and another one through the Denver Mastermind. It was actually a combination. I met him I think on BiggerPockets initially. I think a lot of them, there have been multiple points. Then this most recent one was through the email list, some of the other online activities. It’s a combination of things, but that’s another thing I’m going to be branching out where I’m going to be doing more of a new campaign towards people with IRAs. They aren’t necessarily note investors so I’m working on putting that whole battle plan together.

You’d be using some of the tools that gave you at the Fast Track Training?

Absolutely. That’s something I want to talk to you about more when we get to the Mastermind. I’ve got a nice list of folks in the Colorado area. The other advantage of leaving my day job is I was supposed to go to a conference in Las Vegas immediately after that, so it shortens the trip a little bit. It makes life a little bit easier on me. I’ve done enough trade shows and conferences at Vegas that it’s overrated. The first time I did it I was all excited, but I’ve done enough of those to be over it so I’m not missing that.

We have a question, “Dan, what is your biggest weakness as a note investor?”

I think to date it’s been just the time to do some of the targeted marketing and build out some of the materials, the eBook, and put together more case studies. I’ve got a whole laundry list of things I need to put together. A lot of the funding to date has been through a lot of face-to-face interactions at different meetups and events and some other online things. I have only been able to scratch the surface on the number of folks that have the potential to reach and message to.

We have a question, “What made you pivot to notes and leave your job?” Why don’t you go and restate that, Dan?

Why did I end up moving from product management to notes? For me, I’ve always been interested in investing. I got into stocks and options back when I was nineteen. I had always done that. I started to get concerned about my net worth that I had wrapped up in stocks between either throughout my 401(k) and other investments. I lived through the dot-com boom and bust and then the big financial crisis. I’m very well aware that you can lose 30% relatively quickly. It doesn’t take that much. With stocks especially, some are just the index funds and things that I’m in, you don’t have a lot of control. You’re just along for the ride. I decided that I needed to diversify and I wanted to get into real estate.

NCS 319 | Note Independence

Note Independence: There’s a big supply notes out there and a relatively small number of investors chasing those opportunities.

I originally looked at doing just traditional buy and hold rentals. I have had a lot of friends who have done that. I looked into that and did some research there. We have this very hot market here in the Denver area and the math on those and the cap rates didn’t make any sense. I kept looking for other kinds of real estate investments and that’s where I came across notes. That was interesting to me because my dad and my grandfather were actually in the loan business way back. I never worked in it but as a kid, I grew up around it. When I was in business school, I took a course in fixed income which is basically bond analysis, which I liked a lot. Notes resonated with me. The other thing was it’s a niche area. It’s not like fixing flips for everybody is trying to do it. There’s a big supply of notes out there and a relatively small number of note investors chasing those opportunities. Everything lined up for me.

I agree with a lot of those points. We have a question, “As another IT engineer, other than digital marketing, what other takeaways from your technical industry helped you in growing your business?”

For me, the big thing is just systems and processes. As a mechanical engineer in aerospace industry, I’m definitely very analytical. I think through the course of being a product manager, I learned a lot more about strategy and where to apply your efforts and not just trying to do everything but pick and choose. A lot of what I did was with product strategy in the IT industry and you’ll run into this issue where there are a million different markets and segments you can go at, but you’ve only got limited resources. Especially at the company I just left, we’re venture-backed. It’s the ability to execute, the ability to come up with the right process. Then also the ability to pick and choose where you want to go and not try to boil the ocean and do everything all at once. You can definitely tie yourself in knots and expand a lot of effort and not get anywhere if you do too much of that.

We have a question, “Prior to purchasing a note, what is your due diligence process for you?”

I do a couple of different things. I’m a big checklist guy so I’ve got a checklist that includes all the steps and a number of filters. I’m probably changing that on a weekly basis. What I do is within the tape, I actually take that checklist. I copy it into another sheet so I can go down and tick off the boxes. The other thing I found early on was when you get multiple tapes or you have multiple deals where you’re closing on one deal and bidding on another, it’s easy to get things messed up. I’ve got a step-by-step process that keeps me from forgetting any of the steps or getting mixed up between those.

I have it divided into a set of initial filters where I’ll filter for things like key states, value of the home, and I’ll strip out some of the lower balances. I’ll strip out some of the lower P&I amounts because the servicing fees will eat you up. I can get through those initial filters pretty quick and boil it down to maybe the handful that I’m going to be interested in. The next phase of the due diligence is a lot of the phone call. It’s checking on taxes and checking on utilities and calling the city to see if there are any liens or anything like that. I’ve also got a whole post-closing process that I’ve been working on to make sure you get insurance and get other things turned on and set up. It’s a pretty big process but I can get through it pretty quickly.

The checklist that we helped you, we can help you get started for those.

I used that as a basis and I’ve had some things that I took out, some things that I added. I’m adjusting my filters as my model changes over time. It’s definitely not static.

That’s going to happen across the board as you get more comfortable in specific states or markets. There are vendors that do a good job for you that you cut costs here if you find some great things to help you out with. You get a realtor that saved you $100 in BPO costs right off the bat and things like that too. Do you have kids, Dan?

Yes, I’ve got two daughters. They just turned ten and twelve, so they are a lot of fun. We’re coming up on the teen years, which is scaring me a little bit. You can see glimpses of what’s coming. They’re a blast. We’ve been having a lot of fun this summer.

You’ve got some little bit more freedom to enjoy some more of those teen years and be Mr. Dad a little bit more.

One of the things I’m doing, we’re going to go down to Florida where I grew up and where my parents still live so they can go hang out with the grandparents for a little bit before school starts back up here relatively shortly. It’s nice to have the freedom to be able to take off and do that because I can still work on notes and do the things I need to do while I’m down there.

Are you buying CFDs?

Yes, they’ve been primarily CFDs. As I get more time to be calling banks and other things, I expect to be doing more than the regular mortgages as time goes on.

We’ll have some good stuff to share with you here. I think you’re going to enjoy it as well. One of the great things is obviously the list that we give everybody at the Mastermind and the Fast Track Training, the asset manager list. If you need help with that, what we’ll spend some time on that going through who to call, when to call them and follow up stuff for you. Hopefully Dan, we’ll see your butt up at the Mastermind as well there too for you. You are shooting for 30 by the end of the year, which I think is very feasible for you. Then I think honestly, if I can recommend something to you, let’s look to double triple that number before next year.

When I look back at when Wayne Snell was going full-time or then when Jay Tenenbaum and a few others who are at the Mastermind in San Diego for years back, we’ve been through this where we loved to throw the SWOT analysis on the walls. We were going through that to challenge their goals. I said, “You guys are full-time. Once you knock out 100, push yourself towards 100 because when you miss and get 60, great. You’re still doing well but if you only shoot for 50 and you miss 25, you under-perform.” I’m challenging you to the triple digits next year.

NCS 319 | Note Independence

Note Independence: Notes are very much a rinse-and-repeat business.

That’s definitely doable. One of the other things I like about notes versus the engineering projects are done in the past where we built satellites and stuff, you build one and then it takes a few years and you’re starting from scratch. What I love about notes is it’s very much a rinse and repeat business. Once you have sources of notes and once you have funding partners and once you have processes for working them out, there’s nothing that stops you from scaling and that’s why I have gone along and I’m thinking in terms of a larger scale. There’s nothing getting in my way of doing that.

One of the ways to do that is obviously is to bring in more sources and more capital for you. You’ve done the right things marketing on a consistent basis, with your email list. Just grow that email list. When we get off here, I’ll give you some tips and then a couple of things I would recommend highly to do that have been helpful for us. You’re constantly tweaking the process. You’re constantly learning. You’re constantly networking. Throughout this, I want everybody to realize Dan’s doing the things that you have to do. The weekly emails, almost monthly, if not more so asset manager emails, and going out to the local REIA clubs and networking.

I haven’t had time to do that because that’s been a little bit limited. I’m definitely going to be hammering those.

Dan, any final words to support to those out there that are struggling or are looking to get their feet wet and they’re sitting on the sidelines?

It’s just to understand that it notes, none of this is rocket science. I say that as a former rocket scientist. All of this stuff can be figured out. It’s a lot of work, it’s a lot of details. I think that’s what stops a lot of people from going further with it. That’s why there’s a smaller number, but it’s definitely a very juicy niche. There are lots of opportunities and there are no barriers to entry. There’s nothing stopping you from going in there in doing it. It’s a matter of putting in the work and being consistent over time and not getting discouraged.

Dan, I want you to know that we’re so excited for you. We’re very proud of you. We’re here to help support you, obviously. The Mastermind members are proud of you too. Just keep up the good work and as always, you’re going to have a great time. I will tell you this, when you run into any hiccups or you run into where you’re like, “I need to be doing something,” feel free to pick up the phone. We’re always glad to jump on the phone with you and give you any support we can for you too.

I definitely will and thank you so much, Scott. I would not have been able to reach this point without your help and the help of the rest of the Mastermind folks and the general community. It’s been essential and it’s so nice where you’ve got a network of people that if you run into a question or you need some help on something, there’s always somebody there that’s going to be able to help out. It’s definitely not a do-it-alone type business that would be probably impossible.

That’s the beauty of the network. That’s the beauty of the Mastermind. That’s the beauty of WCN crew. We’re blessed to have good people and be surrounded by good people who believe in the phrase coopetition as Joel Markovitz created. We’re all out for our own business, but we’re all willing to help pull each other and cooperate working together. Dan, you have a great rest of your first day of independence.

I’ll do that. I already have a couple of phone calls scheduled with potential funding partners and things for later. I’m definitely staying busy.

Once again, you can reach out to FusionNotes.com. That’s Dan’s website, to find out a little bit more about what he’s doing. We’re actually doing a little special feature for Dan. We had Shannon, our marketing rock star here in the office, reach out asking some questions so we’ll be setting in a nice a blog and a press release talking about Dan and looking forward to that and helping to boost his butt out there as well too. He’s out there knocking it dead, being a note investor out there. Like he said, it’s not rocket science, it’s doing the same things and systems over and over again and rinsing and repeating. You can do that. You’ll find in success in about anything that you put your mind to. Go out and knock it dead and we’ll see you all at the top.

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About Dan Deppen

NCS 319 | Note IndependenceDan Deppen is the Managing Member of Fusion Notes and has been actively involved in real estate since 2001. He has a wide range of other investment experience going back to 1995 including stock and option trading and small businesses. Dan also is interested in strategy games and authored a book on poker called PLO8 Revealed in 2009. He worked as a mechanical design engineer in the defense industry for many years specializing in robotics design. In 2011 he completed his MBA from the University of Colorado and is a Product Manager at a startup software company. His extensive project management, analytical and budget/financial governance experience uniquely qualifies him to manage large pools of notes to produce the most optimal profit outcomes for the company and its investor partners.

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