EP 170 – Note Investor Randy Rodenhouse

NCS 170 | Note Investor

NCS 170 | Note Investor

On this episode of the Note Closers Show, Scott interviews long time note investor, Randy Rodenhouse. Randy shares with us his insights and experience as a note investor.

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Note Investor Randy Rodenhouse

Our special guest today is a long-time buddy of mine who does an amazing job with his own note business and has a little bit different background than most people in way of giving into notes. He’s going to share some of his stories today on some of the good, the bad, and the ugly of note investing. We have our good friend Randy Rodenhouse join us from South Carolina. 

How are you guys doing?

We’re doing well. For those who don’t know who you are and your background, why don’t you share your little bio, where you came from and why you got into notes?

My name is Randy Rodenhouse. Our company’s name is The Note Authority. Back in 2008, I quit my job. I was working fulltime for a corporate world. I was in a pharmaceutical chemical company. After eighteen years of making drugs, so to speak, I quit that and started doing real estate. At the time I didn’t have any idea about notes or what I was going to do in notes. In 2011, I got introduced to notes and found out that it really is the way I wanted to go. In 2012, I jumped in full-time, so it’s been about five years now full-time on notes. I bought a lot of notes and had a lot of fun. I love it. I still have a lot of rental properties and I still do some of that, but my passion’s in the notes and really feel that’s the way to go. You don’t have to deal with a lot headaches, just like the storm came through and I got calls of a few roofs leaking and things of that nature. If you have a note, no worries there. You just collect the coupon, as they say.

Nobody calls you to come unclog the toilet or fix the roofs. They let you know that the leak is there, but they ultimately are the owners of the property. You’re just the bank collecting the payments. If they don’t pay, they don’t stay, right?

Exactly. What I’m doing now, I’m really looking a lot more towards the passive side. All the notes I buy, my intention is to get them re-performing, keep that as a long-term cashflow. I pretty much keep probably 90% of what I buy, unless it goes to an REO and then I sell the house. A lot of times I sell the house and then it goes into a rental or selling a contract for deed or owner financing and things of that nature, which also produces more passive income. It’s a great business.

Where are majority of your rentals? Are they in one area or spread out in different areas?

I do have a lot of rentals where I live in South Carolina, but now I have rentals in Ohio, Indiana and Tennessee. I don’t get crazy on the rentals in terms of outside my own state, but I do have a lot of contract for deeds and seller-financed notes that I created from the houses that I got back as REOs in mostly Southeast and Midwest.

You’ve got teams there to help you to manage all that. You’re not the guy who’s going out knocking on the door.

NCS 170 | Note Investor

Note Investor: You can’t do everything yourself. You really need to get other people to help.

You have to have teams. What Scott says is very true and truthfully, I took it entirely little late. You can’t do everything yourself. You really need to get other people to help. You can really build your business much faster that way. There’s no way you can do it all. You could go crazy if you try to do it all yourself. Outsource as much as you can. You really have to understand it yourself first, to get a good handle on what you can and can’t do, so you can tell other people and explain to them what you want done.

A lot of people are like, “I want to outsource everything at first.” That’s great. It’s a good mentality to have but until you’ve actually walked a few steps in those shoes to begin with, you can’t really tell people which steps to take. What would you say has been your biggest a-ha moment in the last twelve months, if you’ve got one, compared to when you began?

In the last twelve months, I started to realize that since I’m keeping everything, I’m building so much passive income that I can almost buy a note or two every month just from the passive income. My passive income goals this year are $40,000 a month. Right now, I’m a little over $30,000, I’m trying to push to $40,000, and then obviously I’m going to keep pushing into hopefully six figures. It takes a while and this doesn’t happen overnight. You have to realize that it takes time to build this. If you start buying things, keeping them, if I get money back in terms of passive income, I automatically put that money right back into buying another note, and then that builds on itself. It just keeps feeding itself.

In 2013, I did a little experiment where I put in two accounts, $150,000 in one account and $170,000 in the other account. I would buy a note, and this is more re-performing, self-performing, and performing-type notes. That’s a different space than just non-performing. I just kept re-investing and re-investing. Now, I have over $1.2 million in those two accounts together. It builds on itself, you have to realize that. A lot of the ones that I have that are passive now became passive from the non-performing note space that I converted to a passive income. It all works together and that’s the beauty of it. That’s the a-ha, that I don’t have to work each and every day. If I wanted to take off, now I can just sit back. I do have income coming in to cover my needs, pay the house payments, pay the car, and feed the dog, that kind of thing.

You basically put $320,000 between two accounts. Is that correct?

Yeah, roughly.

You were using those accounts just to buy, bring cashflow in, or if you had to foreclose, sell the asset, reinvest that money into assets. Now it’s grown to where it’s got a value of $1.2 million over a four-year period? 

Yeah. Those are just ones in an IRA or Solo 401(k). They had nothing to do with my non-performing note business with Note Authority. That’s just a separate little thing, I just wanted to test it out. It just shows you the power of even just doing that. In the non-performing space, you can make 15%, 20%, 30%, 40%, 50%, 70%, 100%. In the performing space, it’s between somewhere in 10% and 20%. Again, it compounds. That’s the key, compound.

The most powerful tool in the world is compound interest, that’s the truth that Einstein did say. Having your self-directed IRA account or your Solo 401(k), it’s important to have and get things rock and rolling. You have a great chunk of change in there, but a lot of people can start those things with minimal amounts, and start using options.

You don’t have to have that much money. I just happened to do that. When I quit my job, some of the money came from there. I had some money in a different account. You could start with getting an option on a property, you could do a wholesale on property, you could do a wholesale note, you could do a lot of different things. I opened that account in 2007, it sat for almost five years doing nothing. If you look at the numbers in terms of the amount of money that sits in those, I think you mentioned this too, 20%, 30% sits as cash. Don’t say there’s no money out there. There’s tons of money out there. I was one of those people, the money is just sitting and doing nothing. I was busy, I was working. The money’s out there and if you have a good deal, then you can definitely find the money.

What would you say your biggest a-ha moment looking back now? If you could go back to Randy Rodenhouse, new note investor, and share that one thing with them to help them along their way, what would you get back and tell yourself?

I would say outsource more. I’m a real person that has to do it himself, wear all the hats. Don’t do that. Don’t do what I did. You don’t want to go crazy. You do want to learn the business yourself, but there are certain things you do want to outsource right away. Don’t get stingy on doing things like due diligence. I have a couple of examples. I bought a note, didn’t do the O&E or the title report and I missed a few things, a couple of big ones on taxes for example early on. They hurt, maybe $7,000, $8,000 issues of taxes I had to pay off and there’s no way around it. Again, that was my first few notes, did it wrong, but definitely do your due diligence and take it to heart.

When you talk about outsourcing, is there any specific sites that you use or anything that you’re using that you’d like to share with everybody on helping in the outsource stuff?

I outsource the typical things you talk about, everything from insurance, for example. My insurance is such that I can literally go on, click a button, put insurance on, take it off, similar to you. Outsourcing things like the collateral outsourcing. REO servicing has been a hard thing for me to find the right people to do. I have two rehabs going right now in Ohio. One’s a minor rehab, one’s a major one. Finding the people to do that is very tough. You want to build those relationships early.

You wouldn’t recommend doing a lot of remote rehabs right off the bat? 

You don’t want to be jumping in a plane and driving to every house. That’s one thing I have to say, I see people that do that and that’s fine, everybody’s different. I really haven’t visited any of the houses I bought or any of the notes I purchased.

You always put eyes on those assets before you’re buying. 

Absolutely. Don’t get me wrong. I always have somebody drive by, maybe use somebody like Sand Castle who drives by. I found them to be pretty good actually. I’ve had a lot of different people, probably three or four. They’ve been one where I’ve been pretty happy with so far in terms of borrower outreach or I want to send letters, somebody will knock on the door, stick a letter on their door or knock on the door and get them on the phone. There’s a lot of different ways to do it, but you definitely want to outsource as much as you can. A lot of these field servicers basically shut you off unless you’re buying 500 assets or something crazy. Most of us don’t do that.

They’re willing to work with a smaller amount for sure because they realize somebody’s got to start off somewhere to get to the big numbers. You mentioned early on that you want to buy stuff that you turn into passive cashflow for the most part. You didn’t want to do a lot of workouts. Is there anything specifically in your due diligence that you do to try to help identify those assets that fall into your wheelhouse? 

NCS 170 | Note Investor

Note Investor: I want to see rents that are in the same ballpark minus the tax and insurance.

When I do my due diligence, I’m looking into a few things. One, obviously the loan-to-value. You want to buy at a certain value range. I usually don’t go much over $0.65 on the dollar typically. It’s usually $0.50 to $0.65, depending on the asset, depending on the quality, depending on the area, that kind of thing. I want the P&I, principal and interest of payment to be high enough to support the payment that I want to make on the house. If it’s an asset I’m purchasing at $50,000, the payment better not be $400 a month because it’s just not going to work for me. Also, I want to see rents that are in the same ballpark minus the tax and insurance. For some reason I’d get it back and I can’t sell it, I have to rent it, then I can still make a decent return of 20% plus.

Those are the big things I look at. I like a high unpaid principal balance just because typically even if you forgive some of that debt, you can still make it work and have a good cashflow. Those are the kind of things I’m looking for. The last couple I bought, I wasn’t sure if it was occupied or vacant. It ended up to be vacant. Those are the ones I’m working on now in Ohio.

You could say occupied and still sometimes it just isn’t occupied, right? 

That’s right, you’ll see occupied on the BPO, then you drive by and the realtor says, “I’m not sure that’s occupied or not.” You just never know. You can check the power. There’s a lot of things you can do. I’ve had houses where the power was off and they were gone. I was pretty much sure and I bought the asset. The people moved back in the house once they found out that they could stay. They were worried that someone’s going to lock their furniture in the house and they couldn’t get it out. All kinds of crazy thoughts people have.

When it’s an occupied asset and you’re buying the note, do you do a lot of the borrower outreach yourself when you’re talking to the borrowers to get them to re-modify or reinstate or do you outsource a lot of it now?

We outsource a lot of that. Usually, we start off with some type of options letter, “Here are your options if you want to stay in the house or if you don’t want to stay in the house.” I give them four options for each. That works pretty good. It usually works better if you actually have someone go to the house and paste it on their door or knock on their door and hand it to them. That’s even better, so we definitely do that ourselves. We don’t usually do a lot of calling, we try to leave that up to the servicers to do that thing. You’ve got to be compliant and make sure everything’s good to go there.

We recently had a lady that didn’t show any bankruptcies but she did have an attorney. She had retained counsel. Basically, we ended up talking to her attorney and actually worked things out. You have to be a little careful. You’re not supposed to do certain things. We do some outreach in terms of letters, but we don’t do a lot of banging the phones. Until they get friendly with us, then we make sure that they’re happy with us. We try to outreach little things. I had an older lady, she’s 82. She gets very confused so I tried to help her through everything. I’ve actually conferenced called the servicer together. That’s a little much sometimes but sometimes you have to do what you have to do to get her going. Now I think I got her going. This particular servicer wouldn’t send her statements because she was in bankruptcy seven years ago, which to me is totally ridiculous, but that’s their rules. That rule is going to change by the way. In the end of this year, the CFPB is generating a rule that says they have to send payment statements out even if they’re in bankruptcy. That’s a little nugget that I read recently. Hopefully that website is accurate.

If somebody’s living in a property and they’re paying the taxes, usually they want to stay. Nobody wants to move. Nobody enjoys uprooting their family and packing everything in boxes and moving. If they’re working, usually they have some work ethics and stuff like that, they want to stay. We’ve experienced it a lot lately with letters going out to the assets we got, and the servicers send out letters afterwards and say, “You’ve got to do this specifically.” We already agreed to a lot of stuff with the borrowers, and we’re like, “Why are you doing that, stupid servicer? Don’t do that. We’ve already agreed to this with the borrowers. You work for us, we don’t work for you.” 

That’s what happens a lot of times. You feel like you’re working for the servicer. I have to tell you this and that, and then I have to tell the foreclosure attorney this, and I also have to tell the servicer. This is nuts. Anyway, you’ve got to play by the rules unfortunately. Sometimes some servicers are a pain, but there’s no perfect servicer either so it doesn’t matter who you use.

You work with what you got. Then it’s when the special servicers come in handy to fill in the gaps. They’re a lot more friendly and a little bit more flexible, and much more active on how fast they’re reaching out to borrowers. Would you agree to that, Randy?

Yes. They really understand our business more than a typical servicer that just collects payments typically for a performing note. Definitely getting those people in your camp would help.

If you’re looking at a pool of assets, is there a specific bread and butter asset that you like? In price range, value. You mentioned you like to have it where the UPB’s more than what the property is worth. You preferred to have it occupied. You want specific mortgage payments to be in a specific range along with the rents being higher in case you got to turn your rental. Is there a bread and butter, an asset, you got a tape in and if you see this specific asset on a tape or in your area, you just get excited?

In terms of area, Midwest, Southeast. I don’t really do a whole lot in the northeast. Again, I’ve done Virginia, West Virginia. I’ve been in probably about 26 states now, but those are my main ones; the Midwest, Michigan, Ohio, Indiana, Tennessee, and then the Southeast because I live in the Southeast. I just like the south. I love Texas but the notes are not too many there, but there’s some.

There’s some but they’re usually priced a little higher.

They’re always priced higher for a good reason. Then also again I’m looking for high UPB. I’m looking for something I can get re-performing. Occupied is usually a must unless I can get a really good deal on it. If I can buy at $0.45 to $0.50 on the dollar, then I’m willing to take a vacant note.

You like stuff in South Carolina, your home state? 

I bought probably the least there. It’s hard to find a lot of them. I probably bought five, ten here. I do like them when I find them because for some reason you feel good and that you can drive to it, even though I never do. I had one in Spartanburg recently. I kept saying I’ll drive up there, and I’m like, “Why should I drive three hours just to make myself feel good about something and just waste of day and time? I got other things to do.” I like Florida, I like Georgia, I got one in Alabama recently. I got them re-performing so that was a good one, even though there’s a Right to Redemption state.

Let’s talk about that really fast because some people ask about that. Define redemption period.

Redemption is that the homeowner, after the foreclosure auction, can get the house back if they pay everything that was past due. They have to pay all your attorney fees, all your cost, everything associated with that property. In Alabama, they just passed a law in January of 2016. It used to be 365 days, one year. Now it’s 180 days if it’s a homestead.

They still have one year though if it’s not a homestead?

If you don’t do a proper notice then it will be two years. If you do a proper notice, it’s 180 days. The one-year thing is gone now. Again, I’m not an attorney.

You’re not giving legal advice. That makes a big difference. I don’t mind cutting my own contract for deeds in Alabama because that’s more of an eviction than it is a foreclosure. A true non-performing note, a year of redemption period. I know Minnesota’s a year as well. I don’t want to have to worry about that. You can’t go and fix up the property properly either though in that year because if they do redeem it, you only get credit for maintenance of the property, not a full rehab. 

NCS 170 | Note Investor

Note Investor: You just have to make sure you take the time, be a little resourceful.

There are certain things you can fix. In certain states I was reading about where you can actually fix it up and they have to pay for that too, if you have the proper receipts or anything. Again, I don’t know which state I was reading about. I think actually in Alabama, that’s the case as well. You don’t want to go crazy because you just never know. Usually, it’s six months. Right now it’s taking me in Ohio, I’ve waited almost two months just to get my deed so I can sell the property. I have it all rehabbed and ready, I still don’t have the deed. You just have to make sure you take the time, be a little resourceful, go out on the internet, everything’s there, most everything, in terms of laws. Redemption rights, go to Nolo, redemption laws. They have a very good site and they’re pretty accurate. Read about it. Each state is a little different and you have to keep up with it. Right before you buy that asset, check it out, what’s the situation in that state.

How scary was it for you at first to be investing outside of your home market? A lot of people, when they’re first getting into notes are like, “I want something in my home state. I live in Minnesota, I want something in Minnesota. I live in Alabama, I want something in Alabama?” You live in South Carolina, was it stressful? How did you overcome that fear? Are you just a riverboat gambler?

I’m pretty aggressive in terms of risk, but overall, yes. The first time I had bought probably 30, 40 properties in my state as rentals. I sold them or kept them, but after a while I started doing this, I’m thinking, “I’m not going to be able to see it. I can’t touch it, feel it, go inside. How do you know what the inside is like? It could be destroyed.” That’s why you’re buying it at a discount. It’s a numbers game. You can’t just buy one. You could get bad luck your way, you buy one and it’s crappy, but if you buy 10, 20, 100, or 300, eventually it will work out. Don’t buy just one. You don’t have to buy ten. When you’re buying seconds, you definitely need to buy ten. When you’re buying first, buy one or two and see how it works out.

If you do your due diligence and the value is there, I can truly say I’ve never lost any money on any of these notes. There are some I maybe made $5,000 or something like that or a couple of grand sometimes. I had this one in Georgia that was a disaster. They took out nine of the biggest ones they have. It was a little teeny house and it had mold and everything. I sold it to a fix and flip guy and I was very happy. Actually, I owner financed part of it even for him. Bottom line, you’ve got to get creative in this business. I made my money back plus, even on a situation like that.

I’ve had some horror stories too. How the hell did people walk through the house if you’re pulling that much crap out of there, right?

Exactly, it’s crazy but again that’s the minority. The majority of the notes, you’re going to be good to go.

It’s true, it’s a numbers game. What advice would you give people out there that don’t have a lot of private capital or access their own funding as far as raising capital? Would you recommend they get out and start marketing today?

Absolutely. It’s one thing that I’m starting to do now finally. Actually, I’m still looking at a private place but I’m talking to a couple of attorneys right now. Bottom line is you don’t need to do that. You can go out, talk it up, you could talk to your neighbor. I went out with my neighbor across the street. He’s a doctor and he makes a lot of money. I went out and took him to a dinner with him and his wife. We didn’t really talk about notes. We didn’t talk about my business but things come up in conversation. I know the guy’s got money. You just tell them what you do and eventually, the money will come around. You definitely want to talk it up. Market in social media. Things that Scott teaches are wonderful. Take all those classes he has. You’re going to learn a ton and learn how to do it right instead of learning everything yourself. It would take a hundred years.

I think that’s one of the best things about the note investing community. It’s a much warmer marketplace than other niches.

Also JV, there’s times that I’ve JV with other note investors like myself and vice versa. We’re all doing the same thing but we’re even sometimes JV-ing with each other. Really getting out and talking, and telling people what you do. Get out there in social media and do it.

You wrote a book a year or two ago that was a marketing aspect for you too?

IRA & 401k Income Builder: A Guide To Increasing Your Income Through Real Estate, Mortgage Notes, And Private Lending Using Self Directed Retirement Plans

I actually just redid it. The name just wasn’t catchy. This one is IRA & 401k Income Builder. It’s basically about all the different government-sponsored savings plans. How you invest in real estate, notes, private lending, all this good stuff in your IRA or a Solo 401(k) or whatever type of vehicle you’re using. It gives all the rules and regulations and all that good stuff. I redid it because first of all, things change in that world. I had updated a bunch of things and then the book title, I wanted to make it a little more basic. The other title, I don’t think people understood it. I made it simple. It’s a Amazon, quick read. It’s 100 pages roughly. Check it out.

Do you go to a lot of events too? I know we met originally, I think it was at Noteworthy a couple of years ago. How often do you go to a conference or an expo?

I try to go once a year. For a while, I was going to multiple once a year. This past year, I haven’t gone to as many. I definitely wanted to do one more this year and plan on something next year. I think it’s important. If you’re just sitting in your house, you’ll go crazy, you’re looking at notes all the day. You need to interact and meet other people and get ideas. I don’t care how smart you think you are. You will always gain ideas from other people. If you’ve been in the business for one year, ten years, or twenty years, you’re going to learn from other people. Plus you network, you get pumped up. Definitely, get out there. What’s your next event you’re going to, Scott?

We’ve got Note Camp Convention that we do virtually. We had 700 people last time. That’s a virtual one obviously. You’ve been a part of that a couple of times. One thing I wanted to ask you is you’re tweaking to the market, you redid the book, you’re working more on marketing. What’s your big focus in the next six to twelve months?

Next six to twelve months, I’m really focusing on building this business.  What I’m looking at is starting an educational process for people that want to improve or increase their passive income. Someone that is a business professional, a person that is a doctor, lawyer or a business owner, it doesn’t matter what you do really, and you don’t have any passive income and you want to build your passive income. That’s what it’s going to be all about. That’s one thing I’m really working on in the next six months. It’s really to attract individuals not only to learn but actually deploy money to do it. I’m not looking to teach everyone every little thing about notes, private lending or everything. It’s just to give them an overview of what’s available, what are the opportunities out there. I’ll have guests on like yourself, Scott, people that are in that and they teach that particular field. I think a lot of people just don’t even realize what’s available to them. That they can get awesome returns secured by real estate and have it come in each and every month without having to worry.

A lot of people try to put money in the stock market, which is fine but again, that’s not guaranteed. I guess nothing’s guaranteed but it’s not secure, put it that way. Definitely, that’s what I will be working on and also just building my own business. On the passive side, I’m looking to get it to $40,000, $50,000 a month on my side where I’m buying notes and taking the houses back. That continues each and every month. I’m looking for new private hedge funds, maybe some servicers that had worked with me in terms of selling notes. Community banks, I actually reached out to one here in South Carolina. A lot of notes for sale there are still in distress but they’re mostly commercial and a little bit bigger price tag than I could handle. Again, if you don’t talk it up, you’re not going to know. You’ve got to get out there. Most people think, “Bank is not going to sell it to me.” I was actually surprised. I was talking to the CEO of the bank. I was surprised that I got on the horn with him. You’ve got to do it. Scott says, get out there. Put yourself out there. Take the risk and talk to people. There are banks that will sell notes even a few at a time.

Is that because that was such a passionate thing for you when you were working, you were looking to do things differently than being in the legal drug dealing aspect of things?

I think what it was when I was working, it was 24/7. I got up, went to work, came home, and still couldn’t forget about it. We were producing chemicals, chemical factory that made high-performance colorants, different rubber chemicals, and all these different wonderful chemicals. The people working there, when you’re working with chemicals, it’s not like baking a cake. I had to make sure of their safety. I had 100 employees. Each and every day, I had to worry about their safety. I got to the point where it’s pretty stressful. It never ends because the plant never shut down. It was 24/7, 365, Christmas, New Year’s, Thanksgiving. It didn’t matter, it ran. I wanted something where I’m getting income in when as soon as I leave you, Scott, I want to meet my friend for lunch, I’m still making money. If I do the math on how much money am I making in an hour, it’s going to be a lot. A lot more than I was even making with my other job. That’s what I wanted.

I would never quit and just have the passive income coming in because that’s just not me. It’s just not you either, Scott. It’s just in our nature to continue to learn and get into new businesses or just build our business. That’s really why I did it. I wanted to have all my things paid for in terms of my house payment, car payments, on automatic. If you think about it, you could buy a car by buying a note. You buy a note and the income off the note could pay for the car for five years, and then you have income streaming for the next twenty years from the note. How beautiful is that? Those are the kind of things that I like to teach people. Just to get them aware of what’s out there.

A lot of people look at that number of what their salary is or their monthly income is. It looks like an elephant to them. Start off and get one deal done. Get something coming in. It maybe $250. It maybe $500 a month, but that’s $500 a month. It just comes in forever.

That wasn’t there before. That’s a nice car. Think about it. You really should keep the money, in my opinion, and reinvest it but if you like to buy a car, buy it. If that’s your reward, do it. Do what you like. Everybody’s different. One asset could produce that car payment.

You’ve travelled quite a bit too over the last couple of years. What’s your favorite place to travel to?

We went to Italy recently. I do love Italy. It’s an awesome place. Food is great and people are great. We went there for ten days. It’s hard to see everything in ten days. We’ll probably go back there. There’s so many great places even in the United States. I was lucky as a child. My father took us to a lot of great places. We went skiing every year. We did everything. I was pretty lucky in that sense. There’s a lot of great places to see even in the US. I just went out to Tahoe skiing too. My favorite place is Aspen. We used to ski out there every year. My dad would pile us in the car from Michigan and we drive for two days, dreadful. Once we got there, we’d ski for five or six, hop back in the car and drive back home. We did that every year. My dad would take us out of school. Nine years in a row, he did that.

That’s the beautiful thing about the note. It’s not a “get rich quick” overnight. It’s a wealth-building avenue that if you work it and do it on a consistent basis, it’s a numbers game. You have wins. You have some losses. You have some home runs. The biggest idea is people have to realize it’s like a base hit. Every deal is a base hit. Sometimes double, sometimes triple, sometimes a home run. As long as you keep it in base hits and stuff like that, it adds up really relatively quick.

I did this one bankruptcy one recently. It was definitely a home run. I did a modification with them. I think the payment was $1,400 a month, $50,000 for that note. $1,400 a month, that’s PI. That’s not even tax and insurance. It was great. Now, are those going to happen all the time? No. I have other ones that were maybe making $400 a month, but still. I maybe paid $20,000 for the note, it’s still fantastic. These returns are phenomenal and you could sell the note again. There are so many ways to get your money back. You could sell the partial. Let’s say, you need money suddenly for a vacation or your kid’s college education and sell 60 payments to get that back. There are so many different avenues and that’s the beauty of this business.

You’re using your self-directed funds as well to help you.

All that money that I was talking about before, half is in the Solo, half is in the Roth though. That Roth is all tax-free. If I build it to $10 million, it’s all tax-free when I pull it out. There’s nothing better than that. I’ll tell you one last story. In 2008, 2009 when the market was coming down, I sold three properties that I had because I was a little nervous. I had a lot of rentals and I had some properties. I was just, “Let me sell these properties.” I made $323,000 on those properties. I had them for a while, a lot of appreciation. I had that money and about six months later, someone stole the $100,000 away from me. That person I never met. That person never helped me out in those houses. That person was Uncle Sam. That was one of the biggest reasons why I wrote that book, because I wasn’t going to let that happen to me again. That’s the big reason why I think it’s important not to put all your stuff in an IRA. It’s just when you’re working, you put 10%. “Will I put all my stuff in IRA? My business I don’t run through my IRA. No.” You buy one asset in there, maybe 10% of your income. Let’s say, you make $100,000. You put $10,000 worth of notes in there or whatever it maybe, so you have something when you retire. That’s important because most people aren’t going to have a lot of retirement if they don’t start working on it now. It’s a good thing. When you pull out tax-free, you’ll feel even better.

Looking back, what are three things that you would recommend to somebody brand new?

Your due diligence and the title search. If you have to do it multiple times, do it multiple times. Typically, you don’t. It’s so inexpensive. For $90 or whatever, just do it. Always check out the property. Do either a drive by or BPO. A lot of times I’ll do a drive by and I have a BPO if I have a really good indication of value. I’m very good at getting values. I feel pretty good about that typically, but I will do a drive by on the property.

Not yourself, but you’ll have realtors or somebody else go do that for you.

Exactly. When you talk about putting on a LinkedIn or some of those sites, BiggerPockets or whatever, there’s people also that will help you out. You’ve got to help them too. It’s give and take in this business. People in this business overall I think are very generous and kind. I think the real estate business, that’s one thing great. People aren’t, “Just me, me, me,” like a lot of businesses. Starting off, I would get a mentor and a person to help you out. Some of the stuff, you’ll never going to learn online. You can research it all you want. You probably are going to find Scott to learn from because he’s got a lot of stuff, a lot of good training. If you really want to get the real training where you’re talking face to face with a coach and mentor, take some kind of training, and of course I’m going to recommend Scott’s.

You’ve got to get educated. What you’re saying here is  education, get out, and network. Get out and talk to people whether it’s your local realty club meetings or local investors out there, whether it’s a workshop or whatever like that. It is important to get that because you can go from zero to 60 in six days versus six months, right?

NCS 170 | Note Investor

Note Investor: Network with people to find JV partners. Talk it up. Tell them what you do.

Right. There are so many moving parts in this business. There’s no way you’re going to know it all. You’ve got to work with attorneys. You’re working with title companies. You’re working with insurance companies. There are so many different things. I would definitely recommend that. The thing that I probably should have done earlier is to do a little more networking in social media or trying to get funds. Looking for funds and networking with people, trying to raise private capital essentially. I think that’s something that I should have done earlier. I had some capital and I relied on that too much but no matter how much money, that money’s going to be gone. It doesn’t last. If you have $1 million or $10 million, you could spend it all. Definitely, network with people to find JV partners. Talk it up. Tell them what you do. You can do it in a way that’s very subtle and then people will be asking. I’ll say, “This guy is getting 80% of his money.” “How can I get 80%?” That’s the kind of questions you will get if you do it in a way that’s not too in their face.

It’s just talking with people and asking questions. Let’s talk about your guy across the street. You went to dinner. You’re just building rapport, having fun with your friends, and the conversation probably came up about what you do a little bit. How did that transition for you?

I have another neighbor, he’s a doctor. He’s an allergist. My wife’s talking to him about what I do and now he’s all interested and talking to me. Even other people you know that you tell that might not be the direct person to you might find the person that might become your JV investor. It’s just a matter of talking it up, telling people what you do in a way that makes them interested. Not just, “This is how great I am. I’m doing these things.” Just tell them a little bit about, “I’m in real estate. These are some of the assets I purchased recently and I love it.” Get excited. If you’re excited, they’ll get excited.

If you talk down, nobody wants to deal with it. If you share what’s going on, you’re excited about what you do, it’s infectious. People like being around positive people. If you’re negative Nancy, nobody is going to invest with you. Nobody wants to be around you. They’re going to run for the hills screaming for the most part. What’s the best way for people to get a hold of you, Randy?

They could email me at Randy@TheNoteAuthority.com. My phone number is 843-754-8174. Those are the best two ways to reach out until I get that website finished up. That’s the best way to do it.

Once again, his book is IRA & 401k Income Builder. Check it out on Amazon. How many notes did you close in total? Do you have any idea? Do you keep track of that, Randy?

It’s 188 or something like that. I’m a little pickier now. These past couple of months, there’s probably about six or seven assets that I turned down right at the last minute because the collateral wasn’t right. I guess I could have taken a chance. They were good notes. It’s hard to decide sometimes because you’re like, “I love this note. I want this note. I think it’s going to be great.” But what if something happens and I can’t foreclose because the due diligence isn’t correct?” I had that situation recently. Sometimes, you take a chance. Sometimes, you don’t. Most of the time, I don’t take a chance anymore just because I don’t really have to. I wouldn’t recommend anybody starting off to do that either. I can probably take more of a chance now but I still don’t really have to. It’s not like I’m going to die if I don’t get that note.

There’s no reason to do a bad deal. I think that’s one of the great things out there. There’s plenty of it. I’m sure the seller, they couldn’t provide a clear collateral. They couldn’t get the things. You’re walking away. You’re not burning a bridge or anything like that. That’s the name of the game.

They understood. I said, “If you can get that to me, if you can find it, I’ll still buy it.” I had ones recently where the seller said, “Yes. You can buy this note,” confirmed the note price, and came back and said, “No. We sold it to someone else. You were the second highest bid.” Literally, I have the email that says, “You’re confirmed,” gives me the number, gives me the street address, everything. Those things really upset me.  I will never buy a note from that person again.

I’m a big advocate, if somebody’s going to tell you that you got that note, that’s not cool.

I didn’t hear anything. It was maybe 24 hours, not even. I just emailed back, “What’s up? Send me a contract.” Then I got an email, “You were actually the second highest bidder. Sorry.” The email was so formal that it got me too. It was just, “Congratulations.” I was actually surprised. Again, I’m sure it happens but you don’t want to do business continuously with someone like that.

There are a couple of companies that are doing that to investors out there and it’s not good business ethics. They will not be in business long because they’re burning their bridges. Who wouldn’t want to sell a note to somebody who’s closed on 200 deals? They know you’re solid. Now, they’ve lost your business from them. I’m the same way, that company I will never buy a note from them.

It takes time. I spend a lot of time on my notes doing due diligence. My time is valuable to me and it should be valuable with someone else.

Randy, thank you so much for joining us on. I know your day is pretty busy with doing stuff and living a life that you want to, the life of a note investor. Once again, check out his book on Amazon. Great little book there. I’ve already read it before when it was under the original title. Loved it. Good stuff on there.

Check us out on iTunes. We’ve got some new episodes that are being uploaded there on a daily basis for you. We’d love it if you leave a review if you really enjoy what we do. Also, if you have a topic or something you like to see us cover, feel free to email me at Scott@WeCloseNotes.com and just say “Podcast Title.” Give me a rundown on what you’d like us, to discuss because there are a variety of different topics out there. We’d love to hear any hot buttons that you love for us to cover. We appreciate your feedback. If you’d like to get more information on note investing, you can always text the word NOTES to 72000. You’ll get over 80 hours of video sent to you for some education for you. Otherwise, thanks for joining me on this episode of The Note Closers Show. We look forward to seeing you all at the top.


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About Randy Rodenhouse

NCS 170 | Note InvestorThe Note Authority LLC is a leader in buying distressed residential mortgage notes from financial institutions, hedge funds and private equity firms with its sole purpose in finding home retention solutions for the homeowners who desire to stay in their homes. We have been extremely successful in keeping people in their homes and our high percentage successful workouts is well above industry norms.

We treat every homeowner with dignity and respect as we work towards the stabilization of our communities. Through this philosophy and business model we have been able to turn non-performing mortgage notes into performing loans which creates revenue for our company and funds the preferred returns we offer our investors.

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