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Taking A Leap Into Note Investing with Note Mastermind Member Eric Ham
I’m excited to be here with an investor who’s knocking some things out. He’s doing some great stuff and has made a bit of a transition. We got Eric Ham joining us from the City of Angels.
It’s pretty close. I’m in Long Beach, California, south of Los Angeles, a little bit.
Eric, for those that don’t know who you are, talk a little about your background. What were you doing over the last few years before you got into being a note investor?
I was basically in IT for twenty years as a system administrator, doing a lot of the backend. People like their email and their websites to work, so I’m on call and if it’s down, I’ve got to fix it. It comes with the job and it’s fine, but doing it for twenty years, I got tired of it. I’ve been following your courses for a couple of years. You had a couple of events and then I said to my wife, Sarah, “What do you think about if I quit my job?” She’s like, “No, you can’t do that.”
She probably said, “What are you thinking?”
It’s pretty close to that. It took a couple of months in figuring out how are we going to do it? What would the numbers look like? It basically came down. In November, I put in my two-week notice, I figured that I got to come out to Fast Track and go from there.
You did the smart thing. You figured out some numbers. What’s been your focus? Is it performing? Is it nonperforming? What’s been the focus of the assets that you’re going after?
I’m looking at both performing and nonperforming for CFDs to do right now. It’s basically anything that makes the numbers work, then I’m looking at it.
Are you funding these with your own money, using other people’s money or using your own money and then bring in other people’s money to bring your money out? What’s your focus of that?
Obviously, the best would be having private investors to fund the deals. Right now, it’s in my money. In my first deal, I did a JV with my self-directed Roth with another WCN member to do that. That was a nonperforming CFD in North Carolina, which the borrowers come back performing. Hopefully, I’ll exit later this year, of course that’s only in my IRA. It doesn’t help my business and the money coming in. I picked up a performing CFD in Dayton, Ohio to get some off of that and then hopefully get the investor to come back. I funded a nonperforming first in Detroit with my own funds. I’ve had some folks reach out and they are interested. Now it’s closing that and reaching out to more people.
What’s been the biggest surprise coming from years in the IT? I know that when we were sitting through the Fast Track, you’re very even-keeled, unless they throw a barbecue out there. What was probably the biggest a-ha moment or maybe the biggest surprise coming from working in a regular job, what you were doing to what you’re doing it now? What’s been the biggest thing that’s been the biggest hurdle for you?
Initially it was when I was looking into this and found out about notes. It’s like, “Seriously, they’re going to let any person off the street buy note? I didn’t think that’s possible. Who does that?” It’s like, “No, you’re going to have to have some special licensing or something with the bank, some super secret handshake thing that you’d have to do.” The more I look into this, it’s like, “No, you put your work into it and you reach out to asset managers and network with other folks and you can actually do it.” Put the time and the work in and it happens.
Now that you’ve been doing this for a while, because you’re working on some deals to close, you ended up funding another deal from another WCN member to pull the trigger. Has it gotten a little bit easier for you pulling the trigger or find some deals over the last couple of months?
It has. I know it’s not a get rich quick thing. It’s going to take time. We had budgeted and planned out at least the minimum of a year to do this. We’d be fine to do that. Worst case scenario, I go back and get another job in IT. It will only be a year out and I won’t be that far behind. Coming from that, I’m very technical. I’m running the numbers all the time. Initially, I want that perfect deal. I get tapes, I look at bids. I wouldn’t put it in because I don’t think that’s going to work.
You’re talking yourself out of deals basically.
Pretty much. Honestly, I changed that mindset and actually listening to you and other folks, it’s a numbers game. You put out 100 offers or 100 bids, maybe you get ten accepted and out of that, one is for real. It’s realizing that’s what I need to do. I need to play the numbers game and put more stuff out there. That’s what I’ve been doing now. I think that’s the biggest change.
That’s a good thing because I think a lot of people get into it, especially using their own funds, they want the perfect deal. It’s got to be perfect. On the front end of it all, you don’t always know if it’s going to be perfect. The more you dive into it, the more bids you’ve analyzed, the more deals you’ve looked at, you’ve gotten more comfortable. I’m sure Sarah was a little nervous on the front end. Has she got a little more comfortable?
She has. Seeing now that this is for real, this isn’t something I made up and there’s some guy on the internet who does this podcast thing and coming out and seeing other folks. I think what’s helped is I tried to explain that this is what I’m doing, this is what I’m looking at, these are the numbers that I see. It’s one thing to hear it from me I think, than to see other folks in the group. Other folks are doing the same thing or they have the same struggles. This is how they overcame it and there are other folks you can rely on to help you. You’re not by yourself.
That’s the thing. “What are you doing?” is a normal reaction from a spouse, especially you’re leaving. Is Sarah working full-time? What’s her line of work?
She is a children’s social worker.
That’s a little stressful.
I give her amazing credit on how she does that job there. There’s no way I’d be cut out for that. She does amazing while helping out kids.
She’s definitely hiding her angel wings back there doing that. That’s a high-stress thing. Especially I imagine it in Long Beach and southern LA, in that neck of the woods.
It’s sad to say but they will probably never be out of a job.
It gives you some idea. What are your long-term plans on this? With your work, you’ve had a one-year plan to get close to replacing your income, if not beyond that. What are some of your goals as a couple going forward?
We talked about that. We did an exercise of going over three-year goals and it varied from things. For now, we’ll still stay in the same house. We’ve got two young kids, they’re going to be in school. They’ve got their friends. We’re not going to plan on going anywhere anytime soon. Potentially, it takes off. Maybe she would have the option to quit if she wants to, but where she is right now and her department, she loves doing it. At least like that would be an option there. At least for the near term, 20 to 30 notes are what I’m shooting for or this year. It might not equal the salary that I had, but the projections we have right now, it’s close enough and we should be okay.
If you’re getting 20 to 30 notes, you’re going to have some that get re-performing and some that you end up having to take back and foreclose out and get some bigger checks on. What are your favorite states? What are the states that you’ve bought in now? What are your top five states?
My top five states right now are Michigan, Ohio, Indiana. Texas, I see here now and pretty much everything that I’ve heard and seen it’s like, “It’s hot for that.” I’ll definitely look at those. I’d probably add Florida as well.
God’s waiting room. You’re using your own money and you’re starting to raise private capital. How’s the market been for you? Has it been a difficult thing in learning how to market a little bit of different set of skills?
Yes, it’s a completely opposite mindset for me. It’s that creative brain part that is there, but it’s not my strength. I’m very analytical. I’m doing it but I also know that’s my weakness. Seeing and talking to other folks too, it’s like, “If you try this and you do that, and when you put this post and you link it to multiple places, it’s putting your name out there.” People know what you’re doing. They’re getting more information about what’s going on. It’s hitting that broader audience. It’s a numbers game also, like the number game on doing the deals, the more people you can get to. I go to a bunch of local meetups where I’m at, trying to join some other groups that are online and then spread out, “This is what I’m doing.”
What did your coworkers say when you said you were leaving?
The first thing they said was, “What are you going to do?” I’m like, “I’m going to go into real estate notes.” They’re like, “A real estate agent?” “No.” They’re like, “What’s a note?” It’s the same question I had initially. It’s like, “What’s a note?” I don’t even know what a note was the first thing that I went to. I think it was all a shock and maybe half of them were like, “You’re kidding. You’ll be back here in two months.” This isn’t for real. The other half is looking like, “We know Eric doesn’t jump off a ledge for nothing. He’s probably thought about this and I wonder what it really is.” They didn’t come to me and ask the full details. I think it was more the shock of, “He’s really going to do it. Maybe it will work.”
Has anybody reached out to you for more information as you’ve marketed and posted things?
I’ve been getting calls, some previous old coworkers, some even more recent friends that I’ve met at meetups and in the local area, places around me. I guess you’d say it’s like the dating stage or something of getting to know each other and be like, “This is what I do. What do you do? What things do you like to invest in?” It might not even be real estate. That’s cool. It’s like, “What do you do?” For me also, I’m not going to put all my eggs in one basket. This is my business but I still want to be interested in what other people are investing in out there for the longer term?
That brings a good question. What else are you investing in?
I’ve got some stocks and mutual funds, things that are out there. That’s probably the main part right now, but I’m keeping my ear open for other possible opportunities to diversify.
Let’s talk about a couple of the bills that you closed on. You said you closed on one in Michigan?
Yes. The mastermind was going on Friday to Sunday. I was telling the seller, “I’m going to be out of town. I’m flying on Thursday. If we can close this deal Wednesday, awesome. Let’s do it and I’ll wire you the money.” I get the contract late Wednesday night. I sign it Thursday night, sent it back to them. We’re in class on Friday. I’m like, “I want to get this deal done.” Lunch break comes, I go downstairs from the hotel, find one of those little bird scooter things that are taking over, invading everywhere causing traffic issues. I take this little bird scooter down, find the wells Fargo locally down here. I walk in there. I’m like, “I’m from California, but hopefully you can help me here.” “You’re fine. You’re a Wells Fargo customer.” I get the wire done. I get back here, scarf down lunch and continue on in class.
Let’s talk about the numbers on it. Is it a nonperforming note or contract for deed?
Do you know what the unpaid balance was?
It was $113,000.
What’s the value of the property?
The 30-day quick sale is probably around $50,000, $55,000.
What did you pay for the note?
It’s under 50%. It’s roughly in the mid-45. Is it occupied or vacant?
What’s your goal?
My business goal in general is to help out the homeowners. There are folks that have fallen on hard times. Banks are very strict in their rules. They’re not going to be flexible. That’s part of why I like this business, to go in there. You’ve talked about it before with the win-win-win situation. That’s what I want to do. Every deal that I’m going into, I want to work it out with the borrower, see what they want. If they want to stay, great, here are some options. Are you over it and you’re done with the house you want to walk and no foreclosure bankruptcy on your credit report? Sure, we can figure that out as well. Looking through the servicing notes, there was some good information in there. What I find out was a couple of years ago, the previous note holder had accepted a short pay from the borrower. The guy tries to go out, get a refinance and doesn’t qualify. He tries to go get a personal loan and doesn’t qualify. I’m already looking at this like, “What are my chances of that happening? It’s probably pretty slim.”
The main part on this is they haven’t paid in almost ten years, which initially scared me. I’m like, “That sounds like way too long,” because everything else there is one or two years delinquent. I was asking other people like, “Can you get anything off of this? It seems like way too old,” and it’s pretty much like, “Just make sure taxes are current,” which in this case they’re not. He’s behind by two years. His patterns seem to be that he won’t pay for two years, gets the notice saying, “It’s going to go to tax sale next year,” and then he catches up. He’s in that cycle and he hasn’t paid for two years again. I factor that into the price. After all that and the due diligence, I pretty much figured I’m going to go straight to foreclosure. I talked to the attorney, he’s like, “As soon as you get boarded, we’ll get it started for you.” He gave me the timelines because I’m like, “If they filed bankruptcy, I need to factor in some more time.” I ran all the numbers on that and it’s still going to be a good deal for me to do that.
Where was it?
Is it in good condition? Is it a good-looking house?
It’s all right. It’s not the best one on the street. The roof needs a little bit of repair. There are some shutters on the front, but these folks have lived there since 1974. It’s been a long time and it’s going to need some work. After repair value, it’s coming in at probably about $85,000 and as is being $55,000, so there’s some wiggle room in there.
Would you accept the one month if it came to the table and start playing on time again? They made enough payment. You said they owed $100,000-plus. I imagine the P&I payment is quite a bit higher than market rent.
No, their P&I right now is under. Market rents, there’s probably about $800, $850 a month. Their current P&I I believe is around $650 because the loan was from 2001 when they got it. The loan was 2001, 2009, their mortgage company came around and did a loan mod for them. Drop the rate, drop the payment, extended from 30-year to 40-year. They still couldn’t pay on that. That’s part of the due diligence is because I thought it was going off the loan mod numbers and it wasn’t matching what the original was. I found out no since they never paid on the loan mod, it’s basically null and void and it falls back to the original one. They’ve already tried that. I’m probably not going to offer that to them as well.
Now as you’re going to your local meetup groups area in Long Beach in Southern California, are you finding a lot of people that are looking to do notes that are interested in hearing some of your stories?
I think an education thing. Most people are like, “What’s a note?” I spend most of the time trying to explain what it is and what to do. They understand wholesale and flipping and out-of-state rentals but notes, it’s still an education thing at this point.
What’s been one of the biggest things that have helped you with your learning curve the most? Has it been networking like with the WCN Crew or the Mastermind or just spending some time doing research on things?
Probably a combination, but probably my biggest one would be the mastermind. I’m going on that first. We did Fast Track in November and then it was less than a month. We did Mastermind in December, but it was still like drinking out of a fire hose. I’m like, “All this new information and new acronyms that I don’t know about.” I’m writing all these notes down. I think I can do this and try that. Coming to this Mastermind in April has now helped reinforce it. I’m a little more focused. This is what I’m going to look at. Sure, you could do four million different options, but you need to focus in on what you want to start with.
That’s been helpful though. That’s a good thing. Other people were headed out on the same thing. December was their first mastermind. They had the deer in the headlights look like, “What are all these crazy people doing?” I gave Sarah an opportunity to figure out what’s going on with other people too, talk to other spouses and things like that, which is great. I want to know something. You have a couple of kids. Have you thought of putting some notes and any of their stuff, like a self-directed IRA for them or anything like that?
I have toyed with the idea because the returns would be pretty amazing to start it off this early to do it. We have money set aside and we’re saving for them for college. Where it’s at right now, we couldn’t really shift over but it’s definitely on my radar or something maybe to set up in the near future here.
What’s been the biggest a-ha moment for you? How many deals have you funded now?
What’s been the biggest a-ha between getting your first round of bids out and close on your third one? Does it become easier as you’ve closed?
I would say it’s become easier. I think there’s probably a fear factor initially. I know you say put multiple bids in, but in my mind it was still like, “What if they accept them all? I don’t have the money.” I’m trying to get out there, but I’m thinking like, “I’m still going to have to fund this myself.” It’s realizing, “Put up the multiple bids. You’re probably not going to get them all back. You’re going to play this dance of countering back and forth anyways.” Within that time, you’ve got people that you can reach out to and say, “I’ve got this going on. Is someone willing to fund a deal here?”
That’s good to know. What are your goals for the next twelve months?
I’d like to do 20 to 30 deals. I definitely need to get better at marketing, the social media stuff and toying with the idea of maybe getting some help or something, part-time or a small job here and there thing. Even though I was in IT, I understand the tech, I did the back-end side. I’m making sure the systems are up and running. It’s like the Wizard of Oz behind the curtain or something. Everything is working, but how does that work? I’m behind the scenes doing that. Seeing the frontend part of it, social media and Facebook and Instagram, I understand the concept but it’s still a learning curve for me to be able to do that.
Did you have those set up beforehand or did you do much on that beforehand?
No, I just had my basic Facebook profile, the personal one. There was nothing else. There’s no Twitter, no Instagram. I had a LinkedIn as well for ears from other colleagues putting stuff out there but not maximum. I think I had a whopping twenty connections.
I think it was sub 100 when you were in Austin. You’ve grown that though.
Now I’m up to over 1,100 connections.
I would say Sarah got a little more comfortable here recently?
I think so. I’ll admit, maybe the end of February, beginning of March, we got these conversations like, “What’s going on? Nothing’s happening. Nothing’s coming in. No bids are being accepted. Is this not going to work?”
That’s a normal thought process. That’s normal stuff.
Just keeping with it and working out. Now it’s like, “This does work.” There are deals out there to be made. Do it and now we can adjust and try and grow that even faster.
I like that. It’s a really good point there for you. What advice would you give to somebody out there reading right now? What’s the best advice you’d give them? If they’re looking to get into notes, what’s the best thing you can tell?
I would say get whatever education you can. There’s a bunch of information out there. Talk to people about it. I’m an introvert, so I walk into a room of people and I’d be happy to sit in the back and talk to nobody. Doing this is like, “I’m going to take an extra leap here to try this.” Honestly, tell people what you do. There are people that I’ve taught that I’ve been friends with for years and they’re like, “What are you doing again?” I tell them and they’re like, “I wish I could do that. I’ve always wanted to do something in real estate, but I never know what.”
Southern California is very overpriced. It’s a very hard market if you want to do fix and flips there, which there are some people, but people are getting priced out. You’ve got to go for even higher and higher. Folks are in rentals. You’re not getting a lot of return on your money to do a rental. Of course, California is a very tenant-friendly state. If you get a bad tenant in there, you’re losing money off of it. I tell people that there are opportunities outside of California. You don’t have to focus on where you are to do that. There are so many resources online and available that it can be done.
There’s a wealth of information online. Dive into it, get educated. I think it’s one of the most important things to do. Remember, this is not a get rich quick scheme. It’s going to build wealth over time, but it takes time. There’s a learning curve to everything. Eric, you’re doing a great job. Keep up the great work. Two thumbs up, Sarah. What’s the best way for people to get ahold of you if they want to reach out to you?
The best option is my website, VoyagerNotes.com. I have some basic info in there. Part of the weakness is I don’t really do websites, but I know how. I need to update that a little bit. There will be some info, but you can contact me through that or LinkedIn, of course. Look me up, Eric Ham. I’m on there. It should be linked to me with Voyager Notes as well.
Keep up doing the good work. Thanks for being on.
Thank you, Scott, very much.
Check it out, VoyagerNotes.com or check them out on LinkedIn as well. Go out and make something happen. We’ll see you at the top.
About Eric Ham
Eric Ham is a husband, father of two, and full-time note investor as the owner of Voyager Notes. As a graduate of CSULB with a B.S. in Computer Science, Eric spent 20 years with a successful career in IT across industries of higher education, defense, and healthcare. The technical skills and attention to detail acquired doing IT work has made the analysis of deals and transition to full-time note investor possible. The focus of Voyager Notes is on partnering with private investors to achieve their investment goals through notes and help the broad landscape of homeowners with their housing needs.