EP 219 – From Virtual Workshops To Joint Venture Note Closing with Donovan Lucio

NCS 219 | Joint Venture Note Closing

NCS 219 | Joint Venture Note Closing

Houston is a huge town with a lot of investors, but finding the few interested in buying notes is a challenge. Since it has become a niche in that area, Donovan Lucio, a relatively new note investor, focused more on the quality of deals rather than the quantity. By doing joint venture note closing, Donovan closed his first four deals with one property picking up $40,000 in a low value area. He was able to give back his JV partner’s money once everything was sold and doubled down on his next projects. Learn how he has reinvigorated the Houston Note Closers Group by following the big three rules in note closing.

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From Virtual Workshops To Joint Venture Note Closing with Donovan Lucio

First and foremost, I’ve got to give a big shout-out to one of our sponsors, Quest IRA. If you don’t have a self-directed IRA, do so. There are lots of great things you can do with that IRA. One of the great things to keep in mind too is also that ESAs are losing some of their luster based on some of the things going on in Washington. Get you a new educational savings account. Just open it up. Put $100 in there and it’s another great vehicle you can use to help you really grow your retirement and knock things out.

We are excited to have a guy who has really started off gangbusters, a very coachable guy who has done some amazing things. He’s probably going to do some even more amazing things in the New Year. It’s our good buddy, Donovan Lucio. Donovan, you are doing some great things out there. You’ve been very, very active online and some of the social media groups we see. You’ve also reinvigorated the Houston Note Closer’s Meetup group that goes out there. You are a relatively new note investor, correct?

Yes. My background actually is real estate. I was wholesaling for about four years prior to getting into notes. As far as non-performing notes, less than 90 days.

What did you do in the four years prior? Wholesaling, realtor, what did you do in the real estate beforehand?

To be more specific, I actually worked for two different gentlemen: One, at the beginning of my career who taught me everything. We’re talking what track stood for, very, very basic wholesaling 101. When I moved on to the second gentleman I was working for, I was his acquisitions manager, his buyer. When I say I was wholesaling, the leads would come in and we would wholesale them, keep them as rentals or resell them owner-financed, which is how I got exposed to notes in general.

That was basically exclusively in the Houston market though, correct?

Yes, exclusively in Houston.

What attracted you to the note game?

When I first started learning about reselling properties owner-financed, I was like a lot of other people. I assumed the only way to buy a house was to go to Wells Fargo. When he taught me that, I really, really just fell in love with how it was all just paper from when he would buy and then resell. How it all came together really intrigued me.

When did you take your first note class?

The Virtual Note Buying Workshop in August was my first official note class versus just Googling and reading what I saw online.

You took the class in August, you had actually come to our Fast Track Training in late September. You were dealing with the floods too in Houston, correct?

Yeah, Harvey hit us pretty hard. We’re still recovering from that. Houston is definitely back on track, but there are still a lot of people that were greatly affected by that.

You still came in. You were very motivated to be here and we were like, “There’s a flood. You’ve got to put it off.” You’re like, “No, I’m coming damn it all. I’m going to drive down tomorrow and come to the training.” That’s basically what you did. You drove down in your motorcycle and came in for three days of training and you immediately put some offers out the following week, correct?

I did actually bit off more than I could chew. I put in 60 offers because I was going off of you 10% where I was like, “I want to buy six notes, so I’ll make 60 offers.” I wasn’t expecting near as many counters. I think they ended up counter like 45 and I’m like, “I can’t buy 45 notes.”

That was one of the biggest things is you were really caught up on the raising capital side or the private money raising side. If I remember correctly, you understood the notes. You understood the concept. You understood all with your history of owner-financed. You understood the other stuff. It was the raising capital that really scared you. What are some of those fears that you had but a lot of people have as well?

NCS 219 | Joint Venture Note Closing

Joint Venture Note Closing: When I made the decision to focus exclusively on notes, I actually started by wholesaling owner-financed note.

To be completely honest, I made a huge mistake. When I first got into real estate, I did not focus on building the skill of raising private money. I was like, “Once I start doing my own deals, I’ll just go to a hard money lender or I know a few people who do some private lending.” I never really worked on that skill, tried to develop that skill or develop my own private lenders. I was like, “Somebody else will help me with that. I’m not worried about it.” When I made the decision to focus exclusively on notes, I actually started by wholesaling owner-financed note. I was reaching out to mom-and-pops. I sold one house three years ago owner-financed and I was like, “I’ll start by wholesaling those and eventually, I’ll start buying those notes for myself.” When I started to try to develop private lenders on that, I was coming from the real estate side. I was like, “You can’t put a lien on the house to secure your position because it’s already lien, then just lien the note.” They’re like, “What? I don’t understand.” It was a lot of miscommunication. It was all my fault. I wasn’t explaining it correctly. I wasn’t structuring the deals correctly. Even trying to reach out to some banks who understood how to do that but they were like, “We’ll only do it in Houston or in San Antonio and we want it to be a pretty house. We’re only going to give you 60% of the purchase price.” I was banging my head against the wall. It wasn’t until Fast Track when you explained how to structure the deals. That for me was my biggest a-ha. That alone right there was worth going to Fast Track, understanding that you structure them so much differently than you’d like a traditional real estate deal. After that, I’ve got no trouble explaining anymore.

You’ve also done something really, really tangible. You’ve gone from just going out networking to really leveraging your networking time to raise capital. What would you say is the biggest thing that you use to raise capital on a regular basis?

The biggest one is Quest. Quest, anything they did was a hit and miss for me. I would go if I had the time and whatever. Now coming back, I made the decision I was going to go to every Tuesday class and talk to as many people as I could there, and then their Friday night, their Ugly Sweater, pretty much anything they put on. After a while, a lot of people start seeing me and I’m saying the same thing. Eventually they’re like, “Can you explain that a little more to me? Maybe we can work something out.” It is advantageous that a lot of these people have known me for a few years. Even though we’ve never done any deals together, I’ve been around. They knew who I’m connected to, so I have a little bit of that working in my favor. Now, I’m just coming with a brand new message that is still taking a little bit of time for them to get used to hearing. Once they do, a lot of them are pretty intrigued.

You’re talking about deals that you’re working for not just, “I’m looking for money.” Correct?

Correct. One of the biggest things that the grizzled veterans will tell you is that once that switch flipped in their head that they get a mindset of, “I’m begging people for their money,” they start realizing, “I’m actually the one doing you the favor by bringing you this deal, this opportunity to invest in.” It was through FastTrack, it was the same switch that flipped. Now when I go, I really don’t start talking about borrowing or doing JV deals even if they’re like, “I’m a private lender.” I’m like, “That’s cool. I don’t care.” It’s not really until they’re interested to hear what I have to say. If they keep coming back for more information, and I talk about some of the deals I’m working through or some of the deals I have done or even just hypothetical example deals, if they keep asking more information and we’re starting going down that path, that’s when it comes to, “The next time you got something, let me know. Maybe we can do something.” Versus, “You’re a private lender. Please give me your money.”

You made 60 offers. You’ve got 45 countered. How many ended up closing on that list?


I like to tell people a lot of times, “Expect a 10% close ratio off of offers that get back in.” You came in at about 5% close ratio on the counters, which is still okay. Two is better than none. What happened with those other 40 though? They just countered back too expensive, too much taxes owed, property wasn’t in good condition, what happened as you dove into the due diligence on those?

Most of the ones that countered, a lot of them were just way too far apart. I actually did counter back some of those and the same thing. More times than not, we were just way too far apart. We actually didn’t really even get in too deep into what does the property actually look like, drive-bys, taxes. We couldn’t even really come to a number to even go that next step. We ended up agreeing on three and one fell out during due diligence. The values were too low. The rents were too low. The crime was too high. That’s how we ended up closing on two.

What happened with those two?

The one in Bedford, Indiana is actually set to reinstate. They want to stay; big shout-out to Steve from Polaris. He got a hold of the borrower immediately. It turned out it was a mom who had bought the house for her son and her son stopped paying. By the time it all came back around to mom, the lender wasn’t in the mood to mess around, so they just stopped talking to each other. We bought it. I put it with Polaris. Steve reached her almost immediately and she was like, “That’s fantastic. My other son actually wants to move in, start working on the house and start paying again.” We just actually finished executing the forbearance agreement and they should start making their first payment in January.

What’s that payment going to be?

The one in Indiana, we paid $10,522. Their payments are going to be $225.38.

$225.38 times 12, that’s $2,704. You’re probably into it for twelve now with servicing and other things. That’s a 22.5% ROI on that.

Not too bad.

What’s your goal with it? Do you keep them paying or then after twelve months sell off? What’s the value of the property as it is?


You’re into it very, very low, for probably 34%, 35% of value. If they don’t pay, you then finish the eviction foreclosure and then go from there, right?

Exactly, I have CFD.

You made offers on this in 1stof October, closed on it by the end of October if I remember it correctly, right?


You’ve got basically another deal for 60 days and you already got a reinstatement forbearance agreement, right?

Yes, exactly.

How did you raise capital for this asset?

Actually, a lot of it is what you taught us in the Virtual Note Buying Workshop and Fast Track. I started by throwing on Facebook, “Here are some of the different types of deals I’m going after now.” Someone who I’ve actually known for a couple of years just through going to the local REIAs, we have not known each other, we’ve never done a deal of any sort, but he contacted me. He’s like, “I’m interested in what you’re doing. Let’s go have lunch.” We had lunch and at that time, I hadn’t closed a deal, so everything I was telling him was pure theory. He was very much interested. He was like, “What are you working on?” I told him the two deals I’m working on. He’s like, “I’ve got some funds in my IRA. Let’s do this.” He ended up funding the acquisitions and the workouts and that’s it.

NCS 219 | Joint Venture Note Closing

Joint Venture Note Closing: A lot of it is what you taught us in the Virtual Note Buying Workshop and Fast Track. I started by throwing on Facebook, “Here are some of the different types of deals I’m going after now.”

Are you splitting the profit, splitting the cashflow? Was that what you were doing basically or that you get to charge him a flat yield?

We’re splitting profits. In the conversation we had beforehand, I was asking him, “What are you trying to accomplish? What are your goals? Are you looking for long-term, short-term?” He was just looking for somewhere to send his money and forget it. He was happy letting it ride. I told him the two main exit strategies. We would like to hold on to it for as long as we can. Now, if by chance after twelve months if it makes sense to flip it, we’ll flip it but more than likely, we’re probably going to hold on to this one for a while.

It’ll be about 12% frontend yield to hammer that 11%, 12% to bid it. Are you going to get the borrower to pay any extra into the backpayments by any chance?

Not right now. They weren’t really that far back to begin with. It’s like, “Just start paying.” We set them up on a twelve-month forbearance plan. After those twelve months, then we’ll go back in and talk about maybe dropping some of the rates, which really wasn’t much. They were just so excited about being able to start paying again that we didn’t want to rock the boat.

Obviously fix the property up, maintain it, increase the value too, so they’re building a little bit of emotional equity in there as well. That’s good. Let’s talk about the second deal that you closed on in October.

That one is in Birmingham, Alabama. Again, big shout-out to Steve from Polaris. He got a hold of the borrower immediately. Unfortunately, they were done. They were like, “We don’t want anything to do with this property. We just want to give it back.” It’s actually a cute story because the borrowers are friends and they just bit off more than they could chew buying this house. It actually damaged their friendship. We’re finding this out just through the course of getting the deal done. It was funny because since they both had to sign off on the cancellation, it forced them to get back together. They ended up reconciling and have basically fixed their friendship more or less. It was a small human interest part of it which was out of this bad situation they were able actually to come out of it stronger. They executed the cancellation. We just got it back and now the property is ours.

Let’s talk about the numbers on it. What’s the value of the property?

The value is $23,000.

What do they owe?

They owed $36,000.

What did you pick it up for?

We’re all into it for $14,000.

You’re at a little higher purchase price on that one versus the value then, correct?

Yes, in retrospect I think it really was a little more like, ‘I wanted to do a deal’ syndrome. As much as I hate to admit that, but that’s the truth. I really locked out because we didn’t have to foreclose or evict. They were already vacated. They just wanted to hand it back. If we had to have fought, it really could have been bad. I learned a very valuable lesson on this one.

Did it need a lot of work, just a rough area of town? What’s the situation?

It is in a little more of a low-valued area. The exterior is okay, about basically what we expected when we bought it. We have not been inside yet. I was on the road when I got the email and then doing this, so afterwards I’ll be getting with my realtor out there and see if we can take a peek inside and see what we’re dealing with.

Do you know what market rents are on that property?

$700, I believe.

That can be the saving grace for you if it’s in a decent enough condition to rent it. Get it rented and get a decent cashflow coming in even if you’ve got to drop a couple of grand into the deal being at twenty. You’ve got $700 a month in rent, so you can end up netting $550. That’s still a 24% yield to you and your cashflow for the most part. I’ve also given you a contact for there in Birmingham. We always reach out to big Dan Zitofsky because he’s doing some stuff down in Birmingham as well.

It’s funny you mentioned that because I have reached out to Dan a couple of times. He’s been very educational on what I’ve been learning about that area. I’ll be very cautious the next time I go to that particular part of Birmingham.

What was your biggest learning point about that? You said you had deal-itis, “I want to do a deal.”

NCS 219 | Joint Venture Note Closing

Joint Venture Note Closing: I probably should have been a little more crucial on the numbers, been a lot more careful on deciding to purchase it or maybe just dive into the due diligence just a little bit more.

I really think so in retrospect. I probably should have been a little more crucial on the numbers, been a lot more careful on deciding to purchase it or maybe just dive into the due diligence just a little bit more.

Did a realtor drive-by the property and give you a true valuation or you just go off online values?

No. I actually didn’t have a contact when we bought it. I went off the PPO.

You violated the first rule of note investing.

Afterwards, we did have two agents drive-by and they agreed with the values that I had already. I locked out.

I wouldn’t say you locked out at $23,000 and buying at $14,000. You locked out hopefully not in too bad a condition. How long has it been sitting vacant?

Not very long, maybe a month before we bought it and they’re just throwing hands up in the air.

Your biggest thing, if you can do this, is get somebody there ASAP before it starts getting trashed out or things like that. You’ve got to get eyes on the property. Get the lock changed. The good thing is if the two borrowers are nice enough they may be able to give some of the locks or have a realtor meet somewhere to save you a little bit of money initially in the frontend. How did you finance this purchase?

The same thing, they’re joint venture partner; the same one who financed the one in Bedford, Indiana.

Does he understand what’s going on with the deal?

Yeah. We’ve been in very, very much communication. We speak almost every other day. I let him know what’s going on. He’s a very experienced real estate investor but he is a little newer to the note game, so this is an education for him as well. We’re both understanding what we’re really dealing with here and which way we’re going to want to go with it.

Worst case, you get his money back to him and get this thing sold and his money back. You may not make much money on it, but at least get his investment covered back and then double down for something better going forward. The nice flexibility thing is that you basically sent his money and doesn’t really need access to it for the most part, right?

Yes, that helps out. He’s a very, very low-maintenance JV partner, which is nice.

That’s the thing about notes. I think a lot of people will be flipping. It’s a learning experience. You’re learning a lot of stuff. You can’t teach that in a class. You can’t teach that in a workshop. You’re learning more. You’re figuring out your systems and going from there. Those aren’t the only two deals you’ve done. You’ve done a couple more deals. Let’s talk about those other deals.

I purchased a third CFD in Indianapolis and they want to reinstate. Same thing, we split it with Polaris. Steve got a hold of them almost immediately. We knew the property was occupied. We thought it was owner-occupied. It turns out that they are renting. We’re getting all that information together. We did not know that going in, which was a lesson but it is what it is.

That’s an advantageous thing. This is a tenant-occupied asset then, it’s not owner-occupied. The contract for deed though is written to your borrower who is renting this property out for an ATM. You’ve talked to them already or Polaris has talked to them? Are they ready to reinstate and go and stay or what?

We’re in the process of getting the forbearance agreement written up now. We just closed it up not long ago, so we’re still waiting on servicing records to get over to Madison. The paralegal is helping us with the forbearance agreement, get her everything she needs. They should start paying on February.

Let’s talk about the numbers on that deal.

That one we purchased for $13,000 and their payments are going to be $238.35.

How many months behind are they? When was the last payment made?

Their last payment was made in January.

Here’s a big thing that you need to keep in mind. You also need to check the county records to find out how many other investment properties that borrower owns. What’s the market rent on that property?

I don’t have that in front of me.

You need to find that immediately because if he’s renting this thing out for $600 a month, he can afford to pay you $400, not the $200. Also, if he’s got other rental properties, he can afford to pay you more than the principal and interest amount. Keep that in mind. If it was an owner-occupied you’re dealing with, it’s a different story. I’d still ask for some skin in the game. Every $100 adds a tremendous boost to your ROI. That’s one thing I would keep in mind. If they can pay $100, great. That takes you to a bigger thing. What was the monthly P&I payment?

It is $238.35.

NCS 219 | Joint Venture Note Closing

Joint Venture Note Closing: The easy trick is go to Rentometer to see what market rents are in the area.

You paid $13,000 for this one. Based on that, that’s a 22% yield. That’s not including primarily your cost to Polaris and some other stuff you’ve got going on. If you can figure the rent rate, then if they bump it up instead of $235 to $335 times 12, divide that by $13,500, that bumps it up to almost 30% yield. You need to make sure if this guy is renting it. You need to have Polaris or whoever is handling the TPP, the Trial Payment Plan, how long it’s been occupied and what are they paying for rent. The easy trick is go to Rentometer to see what market rents are in the area. Then, figure out any taxes and insurance. This guy needs to provide proof of insurance since it’s a rental property for him as well. If he’s getting $500 a month, you still want to leave some money on the table for them to make some profits so you don’t have to deal with the maintenance. Still, make sure you get this borrower who’s using this as an ATM to make some extra payment to you. If he’s got even just one more rental property that’s doing well, he can rob from his other Peter to pay you, Paul. We have a question, “How often do you talk to your JV partner?”

I’m actually working with two different JV partners. The first JV partner that I have three deals with, we talk probably once every other couple of days. That’s more me reaching out to him. Even though he is very experienced with real estate, he’s still a little newer on the non-performing notes side. It just gives both of us a chance to make sure we’re on the exact same page. My second partner knows quite a bit about non-performing notes. That’s maybe once a week that we’ll get together and speaking. It’s more me reaching out more than him bothering me, per se. It just depends on the JV partner but really not that much. Even then, we’re not talking long conversations, five, ten-minute phone calls.

Pretty normal is once a month. It depends on the situation. If you’re buying contract for deeds, a lot of times depending on what’s going on, there may not be much activity initially going on with assets because it can take 30-plus days for you to get the servicing transferred. Was this coming from contract for deeds or was it coming from NAA?

Yeah, the first two. That took a minute for servicing to get transferred.

That can take 45 days. We just had some files show upon assets we bought about two months ago. Literally, our collateral files just showed up in our office throughout this week. While my staff is off, there’s a stack of probably about four-foot tall on top of Jen’s desk waiting for her to dive into when she gets here. The thing to keep in mind is you don’t always have updates every week on things. It’s once a month, it depends on what the situation is and then what’s discussed in the JV agreement. If roughly you’re not happy with the communication, pick up the phone and call. Pick up the phone and text, “Where are we on this?” It’s a very simple conversation. Donovan, you can reach out to your JV partners on a really quick basis because you’ve got four deals. When you’ve got 100 deals, that’s a little bit different. You’re going to be busy doing other things versus having a conversation once a week. Let’s dive into the fourth deal.

That one is in North Carolina and that was the only one that I say a true note, but a note in a deed of trust. The other three are contract for deeds. That one we purchased for $22,000. I usually don’t like to go after notes that I don’t think I have a good chance of reinstating and following the business model. I look for the telltale signs that there is a good chance. This one was a little bit of an oddball. The collateral file indicated that more likely we’re going to have to go straight to foreclosure. Because of that, I padded in about $6,000 for workout. I’d rather just have one, have and not need it than need and not have it. That one all ended at $28,000. We bought it for $22,000 and we got $6,000 in workout costs ready to go. Instead of going to Polaris, we placed that one straight with Daniel, with the Singer Law Group. The BPO came back at about $45,000. We actually did have an agent go out there before we bought it this time. They also agreed. They’re thinking as is it’s about $45,000, $46,000.

Occupied, vacant, what’s up with it now?

Occupied. I did the same thing. We’re looking for the telltale signs. One agent drove by to give us their opinion of value. We had another one go by to also second opinion of occupancy and they both agreed that it looked occupied.

Have you reached out to the borrower yet and had contact with him yet?

It’s with Daniel. We did have a conversation as to how we wanted to approach this, which he gave me a lot of valuable information on the best way to go about it. As far as I’m aware, I’m not sure if we’ve reached anybody yet.

When did you close on the deal?

Right before Thanksgiving.

Is the servicing transfer taking place yet or not yet?

The servicing transfer is taking place.

The big thing is you should be having right party contact. Make sure to follow-up with them. Make sure that they’re making phone calls. Try and track down the borrower and stuff like that as well. What’s the existing P&I payment on that?


Basically, you had it at $28,000 funded. Is that right?

Yes, rental for $28,000.

It’s a 22.8% yield right now if you’re going to reinstate for existing. How many months behind are they?

They are about nine months behind since they’ve last made a payment.

That’s the big thing too is you can get them to make an extra payment. They can bump that up pretty relatively easy to 30% by adding another $100 or $200 bucks to it. Have you got some big goals for 2018?

Yes. My goal at Fast Track was I wanted to close twenty in the first 90 days. I figured that if I could do twenty in the first 90 days that I should be able to do 80 in our first twelve months. I was basing that on your rule of thumb that at any given time, about half your portfolio is going to be performing and the other half is going to be in some state of liquidation. When we were engineering our numbers backwards I was thinking, “If I have 40 performing notes, on average kicking off let’s say $250 a month, that would be about $10,000 a month. The other half of the portfolio that’s in some state of liquidation, those funds would be used to basically run the business.” I only did four, so that means I need to buy 76 in the next nine months. That’s a big goal for 2018.

NCS 219 | Joint Venture Note Closing

Joint Venture Note Closing: I only did four, so that means I need to buy 76 in the next nine months. That’s a big goal for 2018.

Let’s talk about what you’ve been doing with the Note Closer’s Group as well, the Meetup group out there. What’s been your big goal for the Note Closer’s Group of Houston?

I really didn’t set any goals. When I came back from Fast Track, I immediately reached out to Chad Raggio, who’s running the group. Chad and I got together right away. He was very, very excited about getting the group back on track. He had gotten busy with life basically and he didn’t really have the time to dedicate to get it back and going. It was funny because right after Note CAMP, when you were talking about, “Note CAMPers, get together in your local areas. That way, you can meet the other people in your area that’s doing notecamp as well.” We decided, “Let’s do a get-together.” It was actually Kareena who’s in my area who had suggested it. We all decided to get together at this local iconic little restaurant here in Heights, which is this little area here in Houston. We had such a good time that we decided instead of making it a one-time thing, let’s go ahead and just keep it going. I was already working with Chad and Chad had the group going on Tuesdays. The common theme I was hearing is that people were like, “I really want to go but evenings don’t work for me.” I was like, “We had one in the morning.” What we decided to do was we said, “Let’s go ahead and have two meetings a month, one in the morning and one in the evening. That way, it accommodates everybody’s schedule.” Right now, we’re small enough to get away with that. So far, the people who have been showing up have had a very much great interest in it. We’ve already had about six different meetings, three in the morning, three in evening. We’re already starting to see who the regulars are at the meetings.

As far as a big goal, I never really anticipated it to get that big. Houston is a large city and there’s a ton of investors in town, but not too many that are really focused on notes. I thought to myself, “If this thing topped at 25 people, I was going to be impressed.” I just didn’t think it was going to be that many. Since it’s more of a niche in the area, I’m more focused on quality than quantity. One of the biggest goals is just really trying to provide in-depth value. We’re not here to sell education. You’ve got that corner. I’m not qualified enough to try to sit there and teach people anything. We still want to bring in value. We’re trying to figure out what’s going to be the best way to make this more organized. I guess that would be the big goals. Maybe bringing in some speakers or having particular topics or presentations but not necessarily, “We’re here to teach notes,” because that’s not what we’re trying to do.

The thing is you are teaching people, whether you believe it or not, in a good way. I’m very proud of the fact of how well you do. I tell you to do something and you go and do it and it pays off. Do you have a problem with having more deals or more capital now that you need to get done?

I’m more focused on the deals because it goes back to the way it is in real estate or anything else. When you find the deal, usually it’s not too hard to find the money. That’s what I’m more focused on is building that stable of asset managers and at the same time doing what you have recommended, which is still going, telling everybody in the world what I do. That way as the deals do start coming in, they’ve already heard me basically make the same pitch fifteen times over. They’re used to seeing me. They’re used to hearing me say what I do. They’re used to hearing me talk about the deals I do. By the time they do come in, now they’re a lot more interested. That way, I’m not just waiting around for it to magically appear.

One of the best things that I could recommend you do is you write up your four case studies right now. Photos of the property, the numbers like we’ve gone through and where you’re going and just keep them as updates. Those are great stories. Those are great videos that you can do as well about where you’re going and what’s going on and share that with your update, stuff like that. It works well too when you’re having your Meetup groups, having some case studies to just talk about. I know you’ve got a few people that are coming there and some are very green and others are more experienced. The more case studies you share, the better it’s going to make you look. It’s going to help build rapport. People are going to be able to trust you more because you’re going through it, you’re sharing the good, the bad, the ugly. That’s the whole thing that separates a lot of us is those that share the ins and outs end up raising more capital because people trust you more. You build a rapport because you’re just a straight shooter. We’ve got a question, “Looking back now as you’ve been in the business really for about less than 120 days, what’s been the biggest a-ha moment for you over the last four months?”

Just understanding how to structure the deals because I already understood the, “If you find the deal, you’ll find the money.” I already had that switch flipped which was, “I’m not here to beg for your money. I’m doing you the favor.” My biggest a-ha and which really was absolutely the biggest game-changer was how to structure the deal because I was shooting myself in the foot. When I was trying to put these deals together beforehand, I was basically un-selling myself. They were like, “What’s my security?” I’m like, “The notes are your security.” Once you taught me how the deal starts, that honestly was really the biggest, which went back and reinforced. Just because I need your money, it doesn’t necessarily mean I want your money. That was probably the biggest one out of everything.

That’s the hardest thing for most people too because they’re like, “I need money. I don’t have deals but I need money to close deals, so I must have money first.” It’s the other way around. Go get the deal and you’ll find the money as long as you do exactly like you’re supposed to do. You did a couple of things. You’ve gone out networking. You’re sharing on Facebook. You’re also going to Meetup groups and sharing things. You’re really hitting the big three out of the park.

NCS 219 | Joint Venture Note Closing

Joint Venture Note Closing: When I was wholesaling, when I was working, I treated it like a job.

I know you deal with this on a regular basis. In a situation to where it’s like, “I have some of my own money. Let me do the first couple of deals with my own cash. That way, when I am ready to go out and start hitting people up for money, I have something to show them.” I didn’t have that option. When I was wholesaling, when I was working, I treated it like a job. I did not reinvest in myself. I didn’t save money. I didn’t open an IRA. I lived off of it. When it came time to, “Now, I’m going to have to do these deals,” I didn’t have $100,000 in my IRA for, “Let me do my own first couple of deals. Then I would go out and try to hit people up for money.” It really forced me to have to say, “If I’m going to do this, I’ve got to go start looking for private funds or private capital now,” versus making that same mistake which is, “Let me wait to hone that skill.” I didn’t have that choice. Actually, it’s good that I didn’t because it’s forcing me now to hone that skill to learn how to go out and prospect for joint venture partners and prospect for joint venture money.

It forced you to get outside your comfort level more than anything else.

Yes, and it is still because I’m naturally very introverted. It still does get a little tricky sometimes forcing myself to go to Quest and not beg for money, but at the same time still go and say, “My name is Donovan. This is what I do.”

If you reach out to Nate or Nathan, Quincy or Ingrid or Anne Marie, especially if you’re working with Quest clients and sharing some of those case studies, they would love to probably have you stand up and talk a little bit more at Quest IRA because note deals make up the majority of Quest’s stuff. They have lending. They have people making loans or borrowing against it or going and buying property. Note business, that’s what Quincy and Nathan love so much. Make sure you mention something about your case studies there as well.

We have a question, “Does Polaris start quicker with borrower outreach than a law firm like the Daniel Singer law firm?” The answer to that is yes. If you realize Polaris is a not a debt collection agency. They’re a non-profit borrower advocate because they’re not collecting the funds. They’re not a debt collector. They’re reaching out on behalf of us, so they can legally reach out literally the day you fund to borrowers and try to track things down. I love them. They do a great job. They’re really good at what they do. They’ve been doing it for years. They love working with our Mastermind students and stuff like that too. I don’t think they take a lot of new clients outside of our Mastermind students, but they do a phenomenal job of reaching out. It’s just a 90-day contract you’re signing with them. A lot of times, it never makes it to 90 days because they have some resolution within the first 30 or 60 days. That’s the case that you have found on your deals there. What’s been a valid timeframe?

All three borrowers were reached in less than 30 days. The one in Birmingham is basically done less than 90 days. The other two, they’re set to reinstate in less than 90 days. I would agree with that 100%.

Where was the fourth one again?

Winston-Salem, North Carolina. I’ll tell a story about Richmond Monroe of what I just learned. I really like Richmond Monroe. I had sent them collateral files to review and they were able to help me out. The one in Winston-Salem, I had Daniel review the collateral file before we bought it, so I didn’t worry about sending that to them. Once we received the collateral file and this being a traditional note, it was originated with Citi, so it had all the allonges, all the assignments, everything all good to go. At this stage, I wanted to see how that works. I went ahead and contacted them and said, “I’d like to go ahead and send this one in for review now that we own it for collateral storage and for recording,” because we needed to record the new assignment. I made a huge mistake. I sent them everything. I had the money sent in the account. I get the email like, “We’re all ready. Everything looks good, but you still owe us X amount of money. The funds you had didn’t cover it.” I’m like, “How in the world didn’t it cover it? I just needed one document recorded and I needed just a handful reviewed.” I take the blame for this. It turns out they rerecorded all the assignments because I sent them everything. I guess because I never stipulated what needed to be recorded and what didn’t, I’m thinking, “I just need the one assignment recorded.” They rerecorded everything I sent them. That cost me quite a bit of money. That was a huge lesson learned that I’ll take responsibility for that. Next time I send them a collateral file, I’ll make sure to include stickies, “Record, don’t record.”

Those who don’t know who Richmond Monroe, they’re out of Branson West, Missouri. They’re a collateral review and collateral storage company. One of the big things that they do is they’ll take a look at your loan files and tell you exactly what’s missing in the chain of title, “You’re missing an assignment or missing an allonge here.” They also are really good about doing creative work for your chain of titles and things like this. If you’re missing an allonge, missing an assignment, they’ll go out on your behalf and track that stuff down for a fee obviously. One of the biggest things is they know each county is in the country. They’ll record but they’ll also help you create new assignments or allonges. Some counties require two notaries, sometimes two witnesses, sometimes it’s okay being on an 8×11. They know that they can as long as it’s 8×14. They charge an à la carte fee. Their one big Achilles heel is they don’t accept credit cards. You’ve either got to send them a check or send them a wire. That is frustrating. They will store your files as well. If you don’t have a fireproof, dog-proof, flood-proof in Donovan’s case being in Houston, file folder or a safe, you might want to store with them so that they can hold on to it and can then forward the file to your attorneys or whoever is out there.

We have a question, “When would you need someone as immediate as Polaris compared to waiting for Singer?” A lot of times the Law Office of Daniel Singer, they’re not going to start on a file until servicing was actually transferred. They’re a foreclosing attorney, so they’ve got to wait until that servicing transfer takes place. That’s a twelfth of your time. If you can get Polaris to call immediately and have a right party resolution or some sort of resolution within the first two weeks, so now by the time that the file does show up, you know you don’t have to try to work out a trial payment plan, forbearance, funding and go straight to foreclosure. Not only will it save you money because you know directly which way to go, it will exponentially increase your ROI because now you’re not waiting for 60 days. You have a resolution in two weeks, and now your foreclosure or eviction or CFD cancellation can be further along in 60 days versus still waiting for a resolution in 60 days or longer. That’s why you have to look at your business and decide, “Do I want to wait for 60 days for this to happen or do I want to go ahead and speed up?” By all means, I think Polaris charges $150 boarding fee and it’s a three-month contract for $150 a month plus any à la carte fees if they’ve got to send out a door knocker for $85 or stuff like that. It’s worth going and spending that extra $600 to $700 on the frontend so that you have something done. It’s going to save you a dramatic amount of money and lost time and lost servicing on the backend.

NCS 219 | Joint Venture Note Closing

Joint Venture Note Closing: What we do is once we buy an asset, we’ll drop a letter out within the first two weeks to the borrowers.

We’ve used Polaris quite a bit. I have in-house here for the most part. What we do is once we buy an asset, we’ll drop a letter out within the first two weeks to the borrowers. We’ve been getting a very good response rate. If the borrowers don’t respond to our letter, which is our own hello letters, “We bought your mortgage or we bought your note. We’re not a bank. Please call us to talk about payment plans,” if they don’t respond, then we immediately send it to the attorney to start the eviction process. We’re not waiting around. We have had Polaris do some files. We bought 60 and we got 30 borrowers to respond. If we sent 30 files of blips, that just saved us roughly $18,000 because 30 files times $600, that’s a lot of chunk of money that we’ve saved with just sending out a letter and one postage stamp. That’s to keep in mind. You have to look at what your portfolio is. If it’s a performing note, you’re not going to use Polaris. If it is a non-performing or if it’s contract for deed and it’s non-performing, you may want to go ahead and pony up the money to go ahead and get it done so you can speed things up.

If you’re listening on iTunes or Stitcher, please feel free to leave a five-star review if you’ve enjoyed the content. Really if you want to share this with your friends, families if you’re listening to an episode, we’d love to hear from you. You want to close on 100 deals in 2018, Donovan, right?

80 in the first twelve months.

You’ve already knocked out three months of your first time. Let’s talk about your goals, 80 assets in the first twelve months. 2018, I think you can close on 100 deals though.

Yes, I can.

One of the funny things is when we were doing goals for 2018, Donovan didn’t want to have to beg to be on the podcast. I was like, “Don, you’ve got to beg? You’ve closed on a couple of deals.” He was like, “I want to wait until I’ve gotten more experience.” We can always have you come back later on when you do close your 70th, 80th, 100th deal, it’s not a problem, and see how far you’ve come along. One big thing too that I don’t think you realized is what’s your big passion? You have a big hobby that you’re known for. What is that?

I like to ride motorcycles.

What kind of motorcycle do you have?

2016 Harley-Davidson Fat Boy. My girlfriend likes to point out, “There goes for fat boy on his Fat Boy.”

That’s a great way to be an ice breaker when you’re out raising capital. We can agree that a lot of people riding Harley-Davidsons that are all dressed up in the black and the orange have some money. Can we agree with that?

That’s what I’m starting to realize.

I’m going to give you a little bit of a key. What I would look at doing is the first weekend of the month in New Braunfels, Texas, especially in the Gruene Historic District, you need to come down, make the two-hour ride from Houston to New Braunfels and just park your Harley out in front and hang out in Gruene Hall. I’m giving you permission to drink cold beer and eat chicken fried and steak. I have found that you can definitely raise some great capital there because these are doctors, attorneys who are out having fun. They’re showing off. They’re the flashy riders versus the day-in and day-out riders like you are. That’s a great way to raise capital. You’re not talking to people, “What do you do? This is what I do.” It’s like the same thing. You talk about your bikes and things like that. It’s another way to network for you that would fall in line with two passions. One, motorcycles and the second one is a warm transition to, “What do you do?” “I’m in real estate.” You probably have a Harley dealership that you like to hang out and go to on a regular basis too.

One right down from where I live, which is where I bought my bike.

Something to keep in mind for you. You can start up a bikes and a real estate Meetup group.

That could be a good goal.

First of all, you’re doing a fantastic job. You’re on the right course for where you want to get to. Eighty deals in your first twelve months or 100 in 2018, we definitely expect that from you. You are doing something too that you started doing this. You started calling banks on a regular basis too, correct?

Yes. I wanted to not just sit around and wait. I really wanted to try to get after it immediately.

How many bank phone calls have you made?

This week, not much, but the past two weeks, close to 100.

Have you talked to a lot of people or has it gone to voicemail? What’s been your ratio?

End of the year, a lot of people had already pretty much checked out. Like everybody else, a lot of gatekeepers. It was actually funny because I didn’t do this when I started but halfway through, whoever answered, I tried to get their name as well. That way next time I call, I’d be able to ask for that person even though that wasn’t the right person, to try to get me to the right person. Beforehand, if they offered their name, I didn’t write it down, but I was like, “I really should be taking that information as well.” Then of course a lot of nos, but every no is closer to a yes.

Every no is a not now. It’s not a no, it’s a not now aspect of things too. You’ve had some success. You’ve got somebody that responded to your voicemail while working through the specifics of the deal. You were out and looked at some assets out in South Texas from one lender. It looks like it might be some deal we can work out with a guy and we go for there. For those that are interested, I would not be calling bank asset managers in the last two weeks of the year. Most of them are off. I would not start calling banks until roughly probably on the 15th which is part of Banking Blitzkrieg that we have going on over the end of January through middle of February. You’re a part of that Donovan, right?

NCS 219 | Joint Venture Note Closing

Joint Venture Note Closing: Every no is a not now. It’s not a no, it’s a not now aspect of things too.

Yes. That’s why I started now. I really didn’t expect anything, but I wanted to start because that would at least get me used to doing it. I go through the motions. I wasn’t really expecting to hear any yeses or to get anybody or anything at all. That way, when we do start the Blitzkrieg, I won’t be so scared. It won’t be new or uncharted territory, so I’m used to doing it now.

When is the next Note Closer’s meeting for those who are interested?

The morning meetings is the first Tuesday of every month at Quest. That’s why it starts at 11:30 because their class ends at 10:30. Since everybody knows where Quest is at and they’re familiar with them, we’ve just kept it real simple. The evenings is the third Thursday of the month and that’s at a restaurant called the Corner Bakery, which is a little bakery here in a part of town we call The Heights. That’s at 7:00 PM.

Are you using Meetup.com for that as well?

Yes. I push everything through Meetup. I keep it very up-to-date so that way everybody can always go and check when, where and what time.

Donovan, we’re very proud of you. We’ve got some really exciting news for you in the first year. We expect to hear some from you anyway. Keep us in tune with what’s going on in your case studies and any other stuff that you’re closing on to. Do you have a website for people to reach out to you or anything?

I do not, which is another one of 2018’s goals because I suffer from over-analysis paralysis. I didn’t want to be like, “Let me get the perfect logo and the perfect website name and the perfect business card before I make my first offer.” I was like, “Forget it. I’ll worry about all that other stuff later.” Part of 2018 is also getting that stuff set up.

Get your logo. Go to Wix. Get your website. What’s going to happen when you especially start reaching out to more asset managers this year, they’re going to go to your LinkedIn profile and they’re going to want to go and see if you have a website. Keep that in mind. That’ll help you out with more phone calls and callbacks from everybody. Great job, Donovan. I’m very proud of you. Go out and make something happen. Thank you for joining us on this episode of Note Closers. What’s your email for those that want to reach out to you directly?

It’s Donovan@LucioInvestmentsLLC.com.

Good job, Donovan. Go make something happen. We look forward to seeing you at the top. Thank you for joining us for this episode. If you’re listening to us on iTunes or Stitcher or any other podcast platforms, thank you for listening in 2017. Make sure to check out our back catalogue of episodes. We’ve got some great stuff from people and we’ve also got some big things planned for the New Year as well. Go out, make something happen. Make sure to share this video or like us on iTunes or Stitcher and give us a nice five-star rating. We appreciate that. We look forward to seeing everybody in the New Year at the top.

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