EP 398 – 2019 Focus

NCS 398 | Note Deals And Funding

NCS 398 | Note Deals And Funding

 

As 2019 kicks off, people are talking about what’s up with the market and the note industry. Scott discusses how you can change things up this year. This is a little bit different than previous episodes talking about what you should focus on the next year and where your business is going, as this is focused solely for note investors and people that are into the non-performing and the performing side of business. Scott talks about your 2019 focus on this episode of the Note Closers Show. He shares the places that you should be looking for deals and funding. Hint: It’s not where most others are looking!

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I’m excited about this episode. I’ve seen a lot of comments online about people frustrated with sellers and people frustrated with inventory. I saw a thread on BiggerPockets. I spent about 30 minutes in the late evenings before I head home looking at BiggerPockets and tracking that and commenting and seeing these posts on there as well. People are talking about, “What’s up with the market? What’s up with the note industry? Is everything overpriced?” Chad Urbshott, my buddy from Canada, talked about how he got on the phone with a hedge fund and they want to sell the assets at 70% of value, even though that’s way above what the unpaid balance is. When he called them out on it, they wanted full UPB which doesn’t make sense. What I wanted to talk about in this episode is about 2019 focus and how you got to change some things up. This is a little bit different than one of our previous episodes of talking about what you should focus on 2019 and where your business is going.

This is focused basically solely for those note investors out there. People who are focused on the nonperforming and the performing side of the business out there. I thought we would start first with that. I’ve seen this in our private Facebook group for our students that people are getting a little frustrated on some things. It’s funny because I see a lot of people who are frustrated with the lowest hanging fruit. The usual suspects, the usual people who are providing less on a regular basis. Those who are emailing out to the note database. What’s funny is Bill Bymel mentioned to me that I was one of the causes for the drive up in the industry. I laughed a little bit and I said, “I don’t think I’m the cause of it in our marketing and helping people finding deals. It’s just that we get a lot of people that come in within the note space because they’re not educated in what they should be paying.

Know What Assets Are Worth

You have a lot of funds that have bought assets or bought portfolios or bought a big chunk from another company and they think they’re selling it at REO pricing, which doesn’t make sense. You have this gap between what some of these new buyers and new sellers are looking at and then also the people that know what these assets are worth and know what the pricing should be. Of course, if you’re always buying premier assets of the pool, you’re going to pay above. If you see a tape of 500 and you’re buying the best two assets, you’re going to pay a premium for those. If you’re the buying bulk or you’re buying the best assets, you’re going to pay a premium. You have to remember that most sellers will price their portfolio for the top 25% at the highest and by the top 25%, it’s the top 25% to 30% of the assets. They’re the most valuable and the cleanest. The middle 50% is going to be something where you’re going to make the most amount of money and the bottom 25% is where they’re going to lose the money.

Anytime you can add in other assets that you can make something happen with, that low bottom of the barrel stuff, it’s going to help offset your pricing and also help you give a little more favorable aspect of things. When you’re looking at portfolios, keep that in mind. I know we often get bogged down with the OTSC season syndrome. That stands for “Oh that’s so cute. I love that asset.” We all run into that, “That’s a badass asset.” I’ve done that in the past, “That’s the waterfront Miami Beach condo. That’s a bachelor pad.” The thing I want to get at more than anything else out there is if somebody is trying to sell you something, it’s easy to say, “No, I’m sorry. You’re overpriced.” You just walk away.

What happens a lot of times is we see the pricing and we push back a little bit and you don’t think about it. You have to get some justifications on some things. We’ve got some yahoos out there that are trying to sell stuff above the value that doesn’t make sense and it’s going to have to wait for time. If somebody buys it from them, keep track of who bought it. There are a couple of different ways to keep track of who buys it and we’ll go into that. First and foremost, let’s talk about the sources. Where should you go for deal sources in 2019? As Chad Urbshott in Canada mentioned, he needed to get on the phone to the banks. That was one of the interesting threads I saw yesterday in BiggerPockets. It was like, “Scott Carson, you’ve made 50 phone calls a day for twelve years and he owns all of these assets. Nobody wants to deal with anybody else. I laugh about that. If I was making 50 phone calls a day for twelve years, I would not have any time for anything else for the most part. I will never be able to track down and follow back up with the asset managers. You’ve probably heard us discussed with Brecht Palombo from DistressedPro on either of the podcast here or on Note Night in America, Note CAMP that he was on, talking about you don’t need 100 banks in the assets.

If you start dialing for dollars and hitting the pavement or talking on a regular basis or using distressedpro to track down the banks that have stuff in reserves that gives them the opportunity to sell off these assets, you’ll find some banks that need to move some stuff. We’ve got quite a few of our students who’ve used distressedpro, but some of them are reaching out to banks. They’re getting one bank to send them 30 assets, one bank to send them 50 assets, one bank to send them on their list every quarter. I have some banks that send me a list once a quarter of what we ended up buying from. You have some that are nice. Most of it is cleaner than dealing with the hedge funds or dealing with the chop shops like how Granite used to be or even how Condor is or with some of the other names out there and stuff like that. They’re buying in bulk and they’re looking to sell the stuff off as fast as possible. That’s not always the case.

NCS 397 | Game Plan For New Year

Game Plan For New Year: It’s funny that people are frustrated with the lowest hanging fruit.

 

Buy The Better Assets

Some of those companies have gotten burned because they bought and tried to wholesale everything. That’s not always the case. When you’re buying the better assets, sometimes there’s no room for you to jack it up by 30%, 40% or 50%. You’ve got to work that asset out and take it back yourself. Keep that in mind. I think 2019 is going to be the wave of bank assets. You’re going to see much more people doing one of two things. They’re either getting out of the note business. They’re going into something else, traditional real estate or fix and flipping or turnkey stuff. There’s nothing wrong with that at all. There are those that build the business at this. They’re building bank connections. They’re pounding the pavement, dialing for dollars, picking up the phone and those closers, there are going to be deals for them. There are going to be deals that nobody sees because nobody’s calling these banks. Nobody’s calling the asset managers and marketing on a regular basis.

Talk To The Banks

Most of these asset managers are coming back from vacation. They clean up their books at the end of December and they’re taking the week to relax a little bit. The loan committee probably doesn’t meet until next week. Sending an email out to asset managers the first week of the year is the worst thing you could do. Wait until the second or third week of January if you’re going to send a list out and then start dialing for dollars and picking up the phones with those that actually open it. That’s the first part I would look at is talking to banks. Get on the phone, either via building an email list from some of the websites we’ve talked about before, Lane Guide and LinkedIn. LinkedIn is a mixed bag of things these days especially since they did away with publishing their emails. You used to be able to do a data download of all your contacts. You’ll get the first name, last name, email address, job title, and company.

I updated mine. I downloaded and there were only 29 email addresses on over 15,000 contacts. We won’t be doing data dump for a while until LinkedIn changes some things. It’s still a very valuable place to spend some time marketing for asset managers because the fact is that you have the InMails. You can send direct messages. That’s still a very valuable thing that anybody can do at any time. If you’re working full-time, that’s still a very valuable place to be and spend some time, 30 minutes a day in the evenings, on the weekends or even late at night. You can send a direct message to asset managers on LinkedIn. It’s a very valuable tool and it’s something I think we all should do, especially when you combine it with the next facet of deal sources that I would recommend.

At the end of 2017, I had our good friend, Alex Goldovsky at ProTitleUSA, jump on the county records or the county clerk website and pull a list of every assignment of mortgage filed in Orange County, Florida. That’s Orlando. The number for all of 2017 was something like 14,500 entities. When they condensed it down, it was 9,000 individual names. Over 17,000 transactions and 9,800 entity names. What can you do with those entity names? A lot of them are going to be different fund names, fund one, fund two, fund three, or fund four. If you search through a list of something like that, you’re going to find plenty of entities, banks, lending institutions that are buying and selling mortgages, buying and selling notes in that county.

One thing you may want to do is do a little bit of research yourself. Jump onto the county that you’re in or one of the counties that you’re interested in buying. If you’ve got the top five cities or top five states across the country you’re looking at, go to the bigger cities in those areas and do a little search. Jump on the county clerk. Go to NETR Online and pull up that county and do a little search for assignment of mortgage or AOMs. Each county is a little bit different on how they search for it, but doing that. Pick up the phone. Call the county, “I’m looking for the assignment of mortgages. What’s the best way for me to track that down?” Some counties are going to want you to pay the logins. Pay the few bucks to log in.

All you need is to get that information in something that you can either pull out, copy or export out. I know Alex Goldovsky and his staff will do that for you if it’s an account that’s available online, but they’re going to charge you depending on the amount and how difficult it is to download. If you can pull 9,800 entity names, what would you do with that? Me, I’m going to take that and take those names and have a VA go over and try to find people on LinkedIn that have that entity name inside of their profile. Just doing search, copy, paste and see if it pops up, if it’s a Condor Capital Fund 1356 or whatever. I’ll do Condor Capital and do a search and see if anybody pops up to give me some names. Those are who I’m going to send direct messages to say, “I see that you guys are buying or selling notes in a couple of counties that I invested in. I love to see what you have in your books.” That would be one of the big things, AOMs, the assignment of mortgages at the county clerk website of the county that you’re interested in.

NCS 397 | Game Plan For New Year

Game Plan For New Year: Keep in mind to have a little bit more different marketing when it comes to raising capital.

 

If you’re buying let’s say in Ohio. I would go to whatever county seat Columbus is in or if you like Cincinnati, if you like here in Texas, look in Travis County or Bexar or Dallas or Harris County. Those are some of the bigger counties that we see. That’s where I would focus on. Bigger metroplexes are going to have rural communities or smaller communities inside of the bigger cities or secondary markets are not bad. You’re just not going to see as much as you would in the in the larger major counties. Don’t get me wrong, most of those assignments are probably going to be mortgage companies that have originated the loan and sold it off to somebody else. That’s okay. You have two sources on every selling mortgage due, who’s on the assignment and who’s on the assignee. They are two sources. The person who has a note and selling it and the person who’s buying. Those are two sources for every assignment of mortgage or assignment filed with the county clerk. That would be the first thing I would look at.

Check Out New Originators

The next spot that I would be looking for deals at is new originators. New originators, I don’t mean specifically somebody who’s out there in owner finance deal. I’m not talking about them. Most owner finance people who are originating can’t take a bit of a discount, plus it’s pretty much-performing paper for the most part. What I’m mean by new originators, I’ll give you an example. What we do here in Texas is I go to the Texas Savings and Loan Department and it gives me a list of people that are doing business in Texas, mortgage bankers. The mortgage bankers are often originating new loans here in Texas. I’m looking not to buy their new stuff and except that they’ve had on their books for a while. You may want to go to ScotsmanGuide.com. You may look at anybody that has warehouse line because you can do that easily at ScotsmanGuide.com. It’s free. Go straight there, just do on the residential, scroll down and see if anybody’s offering warehouse lines. That will give you people who are providing lines of credit for mortgage bankers, credit loans off of.

The thing about those is they’re not going to have 100 every month. They may have one, two, three or four every quarter or maybe once a month. What’s also going to happen is most of that is going to be scratch-and-dent paper. They’re going to sell something at $0.90 to $0.95 on the dollar. It may not be very attractive unless you can get some pretty cheap money on the backend and unless you’ve developed your money contacts or you are looking for 3%, 4%, 6%, or 8%. You can find somebody that’s going to pay somewhere between 12% and 15% on a reperforming note or scratch-and-dent note. That’s still very possible. Our friend, Kristin Gerst, up in Dallas is behind performing paper. She’s getting pretty good deals on some of that stuff. If you work your markets, you may find some owner finance paper that wants to get out of. Maybe they need to get sold. That will be one place to look for assets. I consider a new originator but otherwise working the mortgage bankers to see who’s still got stuff that’s in other books.

Let’s face it, you’re going to start seeing some more defaults across the way and some of it is going to be subprime stuff, especially as tax values get re-acclimated to a new build in different parts of the country. New houses get built up there based on the old tax value just a lot. They don’t include the improvements. April rolls into place and they’ve got a new tax value and now the borrowers are looking at another $2,000 to $5,000 in taxes or lower figured into their payments on an annual basis. They may not be able to afford that. Keep a look out for those places. If you’re seeing originators if you’re driving around in an area and you see $500 down or zero down or 100% financing, you might want to stop and see who the lender is and target that lender. That would be one thing that I would look at and one thing that I would track and see. Go to the county clerk to see where they are selling assets. Look for those names and then see who they’re selling those assets to, see who they’re selling those loans to. I’m willing to bet, in the first three to six months, there’s probably going to be some defaults that you could possibly buy at a discount or hold onto.

Check FDIC Websites

Another big thing is I would spend some time and I would bite the bullet and invest in DistressedPro. That’s going to help you with being able to track down distressed banks with the bigger default rates who have write-offs, who have been putting money into reserves. You can start tracking that stuff. It’s a smart play in 2019 to be using the technology to help you focus a little bit more. That’s a great way to look at it. You may want to check on the FDIC.gov websites as well. Any bank has to submit their quarterly reports once a quarter to FDIC. Any federally insured bank has to do that. I would spend a little time looking through those. You may be able to find some stuff. It will tell you residential and commercial loans in default and other things. That would be another place that I would look at. Another good thing to look at too and you’re going to start seeing an increase in notes defaults, the pre-foreclosure lists that so many of our real estate friends love to look at. That’s one thing I would spend a little time. Here in Texas, we don’t publish the notice of default. “He knows the default list,” like we have in other states. Basically, we have the first Tuesday of the month where we list who is going to foreclosure.

Buy A Foreclosure List

One of the things I used to do to get ahead of the postcard bombardment that a lot of real estate investors do, real estate investors sending out postcards for foreclosures. They’re buying a foreclosure list from a foreclosure listing service or something like Foreclosure.com. Here in Texas, what I would do, since we have such a fast foreclosure timeframe with the list going up. Usually two weeks before the foreclosure auction, you had to work your butt off to get postcards or letters out or go door knocking and so that was always the big thing. What I started doing was taking that foreclosure list and then just start calling the banks and using that address or that borrower as a warm lead into the bank, “I see that you’ve got this one get ready to foreclose on this month or in the next month or two. I’d love to talk about buying that note or buying anything else you have on your books.” That’s going to be a big play in 2019. Spend a little bit time on your foreclosure list in the top three to five markets you’re buying in and work in seeing the banks that are foreclosed and seeing the lenders that are foreclosing and taking that back and doing that working on the list. In Texas, we have an appointment of substitute trustee and that happens all across the country. This is where the bank assigns a new substitute trustee or attorney to start the foreclosure process. That’s what we have considered as our pre-foreclosure list in Texas for years.

NCS 397 | Game Plan For New Year

Game Plan For New Year: Some people out there that are trying to sell stuff above value; that just doesn’t make sense.

 

Pull Out The Notice Of Default

A lot of local investors should know that list and love that list because it’s not the most publicized list. That’s when you start seeing and tracking those that are on that list that starts getting at the foreclosure list in the next 90 days. The big thing I would be doing is pulling the notice of default. If you’ve got a county or state that does that, great. If you’re in a county that doesn’t do that or state that doesn’t do that, look for the appointment of substitute trustees. Pull that list. It will be the pre-foreclosures. It’s basically just going to show a bank transfer to an entity and attorney or something like that. Those are great lists to call on as well. One thing as well that you want to keep in mind is you also probably need to spend a little bit more different marketing when it comes to raising capital this year. Finding sources is all going to be critical. We’ve seen this already happened where people get a little nervous based on what the market is doing. What the stock market is up. Their 401(k) is dropping, their funds are dropping, they are pulling in and put money into cash and things like that.

You look at what happened. Apple dropped their expected earnings by $9 billion this quarter or $9 million something like that, down 78%. Instead of making $93 billion, they made $84 billion or something like that. They missed the mark on some things. You’re going to see that happen with more companies, especially with the terrorists, the layoffs, and things like that. Keep that in mind. People are a little bit nervous about what it is. We’re taking some steps here. We’ve been doing this on a regular basis, sending out postcards to people and giving some offers. “Here’s a free eBook or free book. Download my book if you’re interested in learning more about real estate investing or download this,” and using some of the opt-ins of the 21st century like lead pages or opt-ins or text message service to get people to opt-in to some of the educational points.

Give them a free book, give them a free report, a free checklist. Some of those fun things that will get people started that will get them into your database. We’re doing that. We’re dropping those out. Basically, our goal is to drop 100 to 200 postcards a week. Just one thing we add to the database. It’s a constant thing we’re going to be feeding out to some of the things that we do and seeing people get opted-in and spending the time to nourish those relationships, to spend some time getting to know them and build a rapport. “Here’s your free book. Here’s a webinar. Here’s a podcast. I love to have you come into our tribe.” Using some of those things to help us raise capital. Stuff is going to be cheaper than going out and giving a path at Quest Expo or going out to the local real estate expo or something like that. Everybody there is looking for above average returns. They’re looking for a 12% or 50% of the profit and there’s nothing wrong with those getting started. That’s what you have to do.

Be A Little Creative

Finding sources this year, you will need to be a little creative. It is valuable to go to your local real estate investor clubs and Meetups. The one important thing that you want to do, as we talked about in the previous episode about how to set yourself out from the crowd is making sure you’ve got your things together. Making sure that you’ve got your business cards, your executive summary and some case studies, some of those things ready to rock and roll so that when you go to a meetup group, which is usually in January. It’s the busiest time of the year when most people are going like, “I really want to do something different in 2019.” What’s the best thing to do? Go to your local real estate club. Going, hanging out there but being a social butterfly, don’t be a wallflower. Get up, press some flesh. Take some business cards. If people don’t have business cards, you’d probably want to keep some little blank slips and be able to write their information down, their name, or their email. Maybe you take a selfie.

One thing that I like to do is I’ll take a picture of my business card on my phone and I’ll text it to them and then that way I’ve got their number and name in my phone and I can follow up with them if they’re interesting. If you’re running out of cards, just take a photo and say, “I’ll text you my card, what’s your number?” That way they’re in your book. The next day you can follow up with a text message, “It was great to meet you. Do you want to schedule some time for a call or whatever?” That’s what I would be doing in a real estate meetup groups this year.

Meet With IRA investors

One final thing. IRA investors are still a very valuable aspect of things. Farming those off your local county appraisal district or county clerk is still one of the most valuable things you can do. I think if you can do anything local or trying to maximize your time. I’ve got one investor who sends out postcards to local investors said, “I’d love to meet you for coffee.” He included a Starbucks card. He actually put a copy of the gift card thing onto the postcard saying, “I love to have coffee. Have some coffee on me.” Those are some great things to do. That’s what we’re doing. We’re planning on sending out lumpy mail. “Here’s an actual physical copy of my book. If you’re interested, I’d love to have you. I love to give you a book on learning about real estate investing. I love for you to spend some time. Pick up the phone and give me a phone call.” Those are some of the great things that you can be doing and IRA investors are looking at their portfolio. They’re wanting to do some things.

NCS 397 | Game Plan For New Year

Game Plan For New Year: January is the busiest time of the year as it’s when most people really want to do something different.

 

They might have been less active because they’re busy working, but I guarantee you will see a lot of people that have money sitting in 401(k)s or IRAs or have left companies looking to do something with their money this year. They’re thinking about it a lot right now. Spend the time developing some marketing pieces. Spend a little bit of money, $800 to $1,000 for a bunch of postcards plus postage is going to probably be the most valuable thing. Think about this. You want IRA investors to fund $25,000 or $50,000 with you, then pay for the whole thing. You have to do it and saying nothing less. Spend little time forming it. What else are you going to do? Football season is basically over. You can have your laptop in front of you while watching the playoff games and be pulling this information. You hire a $4 VA, a virtual assistant from over the Philippines or from Upwork to scrub information for you. Those are what I would be doing.

Look At The AOMs

If you’re looking for deal sources in 2019, I would spend time looking at the AOMs filed in the county clerk, Assignment of Mortgages. Those that are originated or those that are buying the notes. I would look at new originators as well. As you’re driving around and seeing things that are going on or talking to mortgage companies and see what they’re doing. I would look into distressed banks through distressedpro. I will spend a big chunk of time with that. I would also go and pull your notice of default and appointment of the trustee lists in your local counties and the counties that you’re investing in. Then I would match that up with a little bit of marketing different for your funding sources. Where are you going to find funding sources? I think the best thing, especially in January and February, is going to local real estate clubs and meetups. Local real estate investing clubs and meetups along with targeting your IRA investors out there. Do a little bit of marketing, drop a postcard out, drop some information out and you’ll be doing a lot better in the long run.

If you’d like to get more information on note investing, you can always text the word Notes to 7200. It will send you a message directly to your cell phone and it will give you an opt-in. It will give you a link to all our videos on Note Night in America along with a pretty easy and simple PowerPoint slide for you to download and walk you through that as well. I have a question, “Is the current strategy going to offer a percentage or equity split?” I would be offering more of a percentage. With you having the deals and you having the opportunities, you’ve got a flat return. Find out what their minds may have, “How’s that working for you? What’s that doing? I was making 3% to 4% in the bank. If I can offer you to double that at 6% to 8%, would it be something you’d be interested in?” Simple conversations just asking, “How has that performed for you?” That’s what I would do. He who holds the gold has the power. In this situation, the person with the gold is the person with the deals, not the person with the funding. You’ve got all the power in the deal because literally there’s a lot of money out there. Just because somebody comes to you and they want to take 50% plus return, I would be saying, “I get cheaper money elsewhere. Thanks, but no thanks,” and move on. We call that the walk away close sales. Actually, you don’t need what you can find it out there.

Thank you as always. You can always follow us online. Follow us on Facebook or Instagram. You can always find me @1ScottCarson. Make sure you follow us. Please leave a review. If you’re watching this on any of the videos on YouTube, Vimeo Channel, feel free to leave a comment. Let us know that you love it. Give a thumbs up. We’re always glad to hear it and hear from you. As always, you guys can reach out to me as well on Facebook Messenger. We’ll glad to communicate. Thanks for all the great comments we’re getting from people out there. We love hearing from you and we look forward to seeing you all at the top. Have a great day.

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