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The Golden Opportunities In Note Investing with Note Mastermind Member Michael Slawin
I’ve got a special guest. We’ve got somebody who’s been learning straight out of the fire hose. I’m talking about my buddy, Michael Slawin, joining us all the way from St. Louis, Missouri. Michael, tell them a little about your background before your note phase.
I studied at Indiana University. I’m a lifelong fan of St. Louis Cardinals. I have always loved business. I’m a fourth-generation entrepreneur, so business was always something that we talked about. I was always around that, talking about business at the dinner table and that’s what we did. My grandparents, my father and my mother were all entrepreneurs. I come from a long line of entrepreneurs. I believe I am the first one that’s this heavily into real estate. I started investing many years ago. In 1996, I bought my first duplex and lived on the top and the bottom paid my mortgage. After the renovation, it paid the entire mortgage. I was basically living there for free and appreciating the duplex, so I got a tax benefit as well. I had been hooked for a long time. I never pulled the trigger until 1996. I own five businesses.
What kind of businesses?
I had a printing company I bought in 1995. That was the first one. I had an SEO company that I started in St. Louis prior to SEO coming to St. Louis. A lot of business owners didn’t understand the importance of being on the first page of Google. People do now. I don’t want to say I was ahead of my time but in St. Louis, things happen on the Coast and then they come into St Louis. I understood the importance of having to resell the service every month to the business owners that I had. I felt it was a successful business but it was just frustrating because of that aspect. I’ve owned an eCommerce business that’s sold Asian martial arts DVDs and Blu-rays. Not that I have an interest that much in that, but I saw that as a good business opportunity.
In 2014, I applied for a permit for a grow farm in Illinois who had legalized medical marijuana. Unfortunately, we did not get that permit but it was a great experience. Another business plan that I wrote, I was able to raise $10 million in funding, put an option on ten acres of land next to a jail in the middle of Illinois. The economic development people in that county were thrilled because they could see how much money would be coming into the area. Especially it was advantageous for that area because the average household income was $40,000 for a family of four. It’s a very poor community and still is, unfortunately.
I imagine you could sell some weed between the lakes a little bit, but that’s probably not what you’re focused on.
That was not part of our business plan. It was something that we had thought.
You’ve been an active real estate investor. You’re a realtor in St. Louis, but primarily for your own investments.
I did try the retail route and I realized that’s a hard gig and there are a lot of people doing it and it’s very cut throat. I imagine all over the country. I just didn’t want to do retail. Nice clients/ customers that I had. I feel like I’ve got more potential than that. That may sound like I’m bragging, but I know who I am and I can achieve more by doing other things.
That totally makes sense. People get into a realtor often liked it as the first thing to learn real estate and real estate investing as a stepping point to get to where you’re at, but you’re using it just as a tool to help you on your own investments.
I also have access to the MLS, the Multi Listing Service, which is incredibly valuable, especially because there are different tools on there that the general public and a general real estate investor does not have access to. We talked about Realist tax, the application, Realist. That gave me an insight into who owns the property, who’s actually on the deed and who owns the note. That’s very valuable.
You’ve bought and flipped and had a variety of different real estate deals. What’s been the primary make those? Are these fix and flips or rentals? You talked about the first one being the duplex. You’re doing house hacking but what’s been the bread and butter?
The rentals have been very profitable for me, especially because of the way the tax code is written. The rehabs had been a lot of fun. I’ve had houses that were $5,000 and $700,000. I’ve done the gamut.
That’s a bit of a range.
If someone has passed away and they have a house across the street that has a dirt floor and they want $5,000 for it and it’s in a neighborhood where the homes are selling for $150,000, I’m buying that house every day of the week. I bought that house. I sold it to a wholesaler. I bid for $25,000.
It’s knowing what you’ve got. You know what the comps are. It’s knowing that I can make $20,000 or I can put a little bit more into the deal, put some flooring in, bring it up to what the rest of the neighborhood standards are and make some money that way too.
There are several houses that I wholesale that I never bought into because I wasn’t sure about the structure itself. There are a ton of ways to make money in real estate. Wholesaling is very good. That’s about getting out and talking to people and all the risks. I had a home across the river in Illinois. It’s was a mother’s home. She passed away. It’s a friend of a friend who has become a very dear friend of mine. I was able to take that house and clean it out. It was a hoarder’s house basically. It was her mother’s house and her sister lived there and it was a great house. After I bought it, I looked around, got some contractors’ bids and it was 45 minutes away from my home. It wasn’t a home that I was willing to go through what I needed to do with the contract to get it done.
In a wholesale, it was a win-win.
Julia and her sister were able to collect some cash. I was able to make a profit. I feel like it was a win-win. Especially emotionally, I think it helps get that out of their hair.
I wonder if families are left with a profit, especially not in the real estate side. It becomes an anchor around there. We don’t know what to do. Many people don’t have the extra money to rehab a property to bring it up, spice up with new fixtures and things, bringing it up to date. Sometimes when you have siblings or family, sometimes a quicker closing helps with the estate being cleaned out and it can avoid fights along the way too.
The sister that I was dealing with, we’d become good friends and she’s a lovely person. Not only did I gain a house and a profit but I also gained a friend.
What’s attracted you to the paper game, Michael?
Note Investing Opportunities: There’s a ton of ways to make money in real estate. Wholesaling is very good.
I’ve rehabbed a number of houses within that range. There are two challenging parts of it. The property values are very high. There are a lot of people in the rehab business, they call themselves rehabbers and they don’t know what they’re doing. They’re overpaying for properties themselves. They’re over their heads. One of the last ones I did was a property. This “developer” had four properties he was foreclosed on and I bought this from another wholesaler who had taken all four. I took one of the properties and rehabbed it. This guy was almost done. It’s a shame. I sold it fairly quickly. The biggest problem is number one, the rehabbers that are overpaying for these properties. Overpaying sounds ridiculous, but they’re inexperienced. Not only are they overpaying and making it harder for those of us that have done a few of these, but they’re hurting themselves and their families.
The second thing that was challenging is quite frankly the contractors. I met some great people that did some good work and I met some other people that did not do some good work and also charged me for it. I had a contractor tell me this one time. I called him on a Tuesday and by Friday he hadn’t called me back so I called him again and I was like, “Give me an update on what’s going on with the checklist that we agreed on.” Three days had gone by. He’s not calling me. He always calls me when he needs a check.
Is that what always happens? “I need to get paid,” for what? You didn’t do anything.
He said to me, “Michael, if you expect me to call you back when you call, we can’t work together.” I was like, “What did he just say?” I had parted ways with him and brought in another GC. He asked me for a recommendation. He’s a nice guy. I didn’t know what to think of this guy. We got the house down, we got it sold and moving on. That’s when I transitioned into notes and start investigating different note gurus and realized very quickly through BiggerPockets that Scott Carson with We Close Notes was who I wanted to go with. Every interaction I’ve had with you has been one of those where I realize that number one, I made the right decision. Number two, you genuinely care about people and you genuinely want them to succeed. We’re all in sales and we all want to market our businesses and be successful and do the things and fulfill our whys, but you’re the real deal as far as I’m concerned.
We try to. I’m a big believer of everybody starts off putting their pants on one leg at a time. We all have a starting point. We all have to begin somewhere. I’m a big believer that there’s plenty of inventory to go around. Not everybody believes that. If you’re bidding on assets, you’re going to get some. I’m going to get some, vice versa. A lot of us work together on getting deals. You were very nice when you first started. You’re like, “I want to get a little bit of learning. Anybody got an asset within 30 minutes of St. Louis I can go take a look at?” I know I reached out to you. Did anybody else reach out to you for that?
Yes, I had. I think I looked at four assets. One of the assets I looked at, the guy who owns the note came back to me and said, “Would you mind going back and knocking on the door?” I looked at the zip code, I looked at the crime and I remember the asset itself. It was a couple of months after I first looked at it. It wasn’t some places that I was willing to do.
There are professionals that do that on a regular basis. I won’t say come packing, but they’re used to doing that. You went out and looked at an asset for me. Let’s talk about that.
That was an interesting experience. I went up to a marginal neighborhood, but the street itself was a good street. I looked at the property. I still look at properties through the rehab reside. I’m calculating as I’m going around, how much it is to tech point and do all these different things. I start taking pictures and start taking pictures of the meter on the side to make sure that’s running and that the HVAC is still there. I go to the back of the house to see what the deck looks like and all the rest. Out comes this guy with this thing in his hands. I wasn’t sure what it was at first. He was using his iPhone to take a video of me.
Was it like a chain link fence or a wooden fence when you’re going around to the back? Were you able to walk down an alleyway or down a driveway?
I was able to walk right into the backyard. I wouldn’t have opened the fence because you don’t know if there are dogs. The guy comes out. I think he was more scared of me. I’m not the most imposing guy in the world. He’s like, “Who are you and what are you doing?” I was like, “I’m just taking pictures and just showing these to the investor,” which I learned later was not the bank. It’s a learning lesson there. He’s like, “You need to get out of my backyard.” I start going around the other side, taking more pictures of more utilities and seeing that those are on. He then follows me with his camera. He runs to the front of the house and he’s still taking pictures. He’s on the phone and taking pictures. I got in my car. I believe he ran out to take a picture of my license plate and went for it. I haven’t broken any laws. I drove away. I think he was more afraid of me than I was of him. I don’t know what that was about, but he did not want me taking pictures very clearly.
I can tell you a little bit about it because I’ve done a little more research on that asset. He hasn’t been paying. Suddenly he’s calling to make payments and he’s caught up to date.
I should call that investing spiff.
You learn from that. It was occupied but you also put your realtor eyes on it to understand, “I’m not going to go in. I like the neighborhood. I like comps going on.” Those are important things that a lot of people miss out on. They look at solely just the numbers. That’s why I’m a big believer. You always need to put eyes on an asset. What are your goals with the note game? What are some of your stuff that you’re focused on?
I’m looking at non-performing assets and looking obviously at first liens. Some people buy second liens. I personally think from what I studied that is harder depending on the situation or at least with my skill set, I would find that hard. Given my skill set, given my finance background, my real estate background, sales and marketing, I believe that owning notes and being the bank is going to be much more profitable for me and my joint venture partners and investors, as well as I feel very strongly about keeping people in their homes. What most people don’t realize is if a bank would actually work with the borrower, it’s more profitable for the bank. In this case, it would be me. Their ROI is going to be higher than evicting someone or foreclosing on someone. It’s just how the numbers work.
I’ve had several friends who had gone through foreclosure. It’s emotionally and financially devastating for these folks. I also feel it’s immoral. Some of the loans that have been done by some of the bigger banks where someone’s earning $50,000 a year and they’re given a loan for $300,000 home. That’s immoral nowadays. That’s the world we’re living in. Not only do you have a homeowner in a $300,000 house that they cannot afford not only the mortgage payment but also giving the utilities. A $300,000 house in many neighborhoods, especially in St. Louis, that’s a big house. It’s expensive to keep up. It sounds like a cliché but it is a win-win situation. I’ve got the knowledge to renegotiate and help through my servicing partners: Madison, Singer Law, several other vendors that I’ve worked with. I’m able to renegotiate some of those bank notes and help people either keep their home. Sometimes people don’t even want to be in the home anymore because the electricity bill is $900 a month. They want to get out from under it. That’s why I’m doing what I’m doing for multiple reasons.
What’s been probably the biggest surprise of learning because you’ve dug your heels in the learning? You came to Austin for the Fast Track. You’re here for the Note Mastermind. What’s been the biggest a-ha moment for you?
As far as notes go, I would say the ease of entry if you have the right skill set was a surprise for me. I had several attorneys that I talked to in St. Louis that talked about getting into this field of real estate. They were like, “There are so many regulations here and you can’t do this in there.” There are some bright people doing this like Scott Carson’s Mastermind.
You also have your vendors. I think that’s what a lot of attorneys are correct. There are a lot of regulations, but if you have your vendors that are helping you out with that, that solves it for most of it, depending on the state of course.
There are certain state and counties that you don’t want to operate in. The other thing that feels very reassuring to me is all the people that are in your Mastermind and you, being able to text you, and all the other people doing what I’m doing at different stages of the game.
It’s that great relationship. We’ve got a good family, #NoteFamily as we like to say and a good network. That’s what it comes down to, especially being from a real estate background or realtor, your riches are in your niches. It’s all about having a network of people you can reach out to. Are there any big goals for you in the next 90 days?
I plan to take down a dozen notes and bid on at least 100. Contacts are calling asset managers on a more regular basis. That’s one of the things that I have not done. I had been emailing on a pretty consistent basis. If you’d like to get on my email address, you can email me at Michael@NotesConnect.com or send Scott a text. I’ll be looking at that and I’d be happy to add you to my email list.
You’ve got your Facebook profile, @NotesConnect, as well.
Note Investing Opportunities: If a bank would actually work with the borrower, it’s more profitable for the bank.
Liking that page also is advantageous to getting on my prospective investor list.
I won’t be calling Michael if he needs me to go out and walk around a property in St. Louis. His days of doing that are over. He’s a little bit more experienced.
I actually enjoy doing that because it takes me into neighborhoods that I may not be as familiar with that I should be familiar with. St. Louis is a great city.
Are you looking to get some notes, some dispensaries or grow houses in that background?
I don’t know.
It depends on what you get from the banks.
My end game is commercial. I think a small apartment complex, as well as some mixed-use commercial, is also nice.
We will expect some big things from you. Thanks for being on. Go check him out, his website and Facebook. Michael, thank you so much.
Thank you, Scott.
It was nice having you and I look forward to what you accomplish in the next several months. I appreciate it. Go out and make something happen. We’ll see you at the top.
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About Michael Slawin
Real Estate Investor with 20+ years of experience.