EP 623 – Real Estate Market Projections For 2020: The Second Half

NCS 623 | 2020 Market Projections

NCS 623 | 2020 Market Projections

 

The year 2020 has not been the easiest for the most part. The real estate industry is not immune to all the negative energy going on with the politics, the pandemic, the unemployment, and all the other challenges. We can’t help but think, is there a silver lining for the second half of the year? A lot of the craziness and chaos actually means opportunities. In this episode of the Note Closers Show, Scott Carson discusses the current state of affairs in the note and real estate markets and what he believes is on task for the second half of 2020 and beyond.

Listen to the podcast here

 

Real Estate Market Projections For 2020: The Second Half

I wanted to apologize to you guys because we have another solo episode. We’ve been busy here with a lot of the craziness going on there, but everywhere. I don’t know about you, but I often feel like I’m in Stanley Kubrick’s space because of the craziness. We’ve had the extended stay at home order here in Austin, Texas. Oftentimes, I feel like I’m an astronaut going outside in a spacewalk if I’m leaving the house, but I’m not leaving the house very much. We are staying here, going to the grocery store, going to Lowe’s.

Steph and I have been doing a lot of great work in our backyard, even though we don’t have a very big one. It has become a great place to chill. I should probably record an episode out there because it was an amazing amount of energy with all the negativity going on with COVID and the politics of crap there, all the defaults and unemployment. Let’s get into this and talk about what’s going on a little bit, and what you can be looking for is opportunities to excel with everything. If you’ve not been on my email list, you have probably seen it through most of July and a big chunk of August. We had our Note Nation Top 40 Tour and I believe it was productive.

We saw quite a few people join us. If you were on one of those webinars or if you have watched a replay on YouTube, thank you. If you have not, we focused on 40 of the biggest markets across the country. I spent roughly about 45 minutes to 1 hour on each market, talking about the foreclosure. What timeframes in that market, what’s going on in that state as far as defaults, what’s going on in the unemployment, foreclosures, opportunities in the residential and commercial markets in each state and in the city out there. There is a lot of great stuff out there. You can always check that out by going to NoteNationTop40.com. If you were living in one of the top 40 markets out there, East Coast to West Coast, you’ll want to take some time.

What’s nice is that we’re getting a lot of people off the Facebook replays, reaching out with questions as they grow. We would love for you to hear your advice on what’s going on in your market if you’re in one of the top 40. If you’re not in one of the top 40, let us know, depending on the size of the city, we’d made you a special episode on markets, which is one of the things that we’re planning to do. As we roll, it’s hard to believe that this is going on for six months now. Maybe this is not such a surprise, but it would go on longer than the 60 days that they talked about. We’ve seen a lot of difficulties out there with people across the country with the eviction moratorium being kicked in place by the White House on the advisement of the CDC. We’re going to see things struggle into 2021.

What does an eviction moratorium mean for real estate investors? Hopefully, your tenants are still paying. If they’re working, we’ve seen a lot of people out there. A lot of people say, “About 85% of people are still paying their rent.” That’s a good thing, but for those that aren’t or those that are continuing to struggle, it’s going to come down to, “Do I keep the power on? Do I keep food on the table? Will I pay my rent or do I pay my mortgage?” There’s still somewhere around 4.1 million or 4.2 million people in forbearance agreements out there on their primary residence. When you look at what the banks filed in Q2, especially the big four with over 151 billion in forbearance agreements or loan deferments in the second quarter, along with a record amount of 32 billion sets aside in reserves. It’s close to a record dating back to 2008 or 2010. It’s not the type of record you want to have as a bank.

It means a lot of this craziness and chaos means opportunities. That’s one of the biggest things that we have looked at with the Note Nation Top 40 Tour is looking where the opportunities lie. You have to plant the seeds. That’s part of the reason we spent so much time on the Note Nation Top 40 Tour was planting seeds, not just for them. There were some webinars, some nights we had a few people on. Others, we had a lot of people watch the replays. It depends because we’re a big believer, “Plant seeds, water your garden, fertilize your garden, and those seeds will grow.” Back then, when you look at our backyard, which was nothing but a desolate wall. Now, it looks like a proper garden. It’s the same thing in the note business. Plant the seeds, make the connections, stay on top of it, and eventually, you’ll nurture that connection that leads into something that makes a lot of sense that continues to feed you on a regular basis.

The big thing that we’ve been doing is planting seeds, spending some time on the marketing side of things. We still had our monthly Note Weekend classes, which has done well. A lot of people coming in and learning more about the note business and our one day dip your toe in the water CliffsNotes version of the training. I encourage you to check that out. Usually, it is on the third Saturday of the month, sometimes the fourth Saturday if there are five weeks in a month. You want to check that out at NoteWeekend.com. It is inexpensive for those out there at $49. As we did back in June 2020, we had a Calling Banks Blitz. It is successful.

We did that again in the last part of August 2020. It was a great day of calling banks for five hours. You can always go to CallingBanks.com to check out the next available one. We’ll be doing this on a monthly basis going into the fourth quarter, and we’ll also do it on a monthly basis moving into the first quarter. We pick one Wednesday and I’m dialing for dollars for 4 to 5 hours. Sometimes we get 20 phone calls or 50 phone calls. It roughly was closer to about 20 to 25 phone calls, but contacts, emails at almost every contact. What was impressive on my part was the fact that I had bankers call me afterward. Here’s what I wanted to share with you with what those conversations look like.

NCS 623 | 2020 Market Projections

2020 Market Projections: A lot of the craziness and chaos means opportunities.

 

I had a couple of phone calls on my hotlist. I pulled the borrower’s financial list and looked at the banks that were 0 to 3.5-star ratings, which was roughly about 99 banks. We re-ranked them by the percentage of default in our portfolio. We started dialing for dollars from 12:00 PM to 5:00 PM Central Time. On that list were four banks from Florida. I’m not going to name names, but I had one bank that’s roughly got at least 20% of their portfolio in default. We had a great conversation. I left a message. The banker called me afterward and we talked for about 45 minutes, not only about where things are at but the future of what they expect. Also, we talked about what happened in the past because that banker had been around at that bank in Florida for over a decade.

We were talking about what the market did beforehand and what it was doing now. He’s got stuff on his books and 20% portfolios are in default. Mostly a lot of SBA loans, which if you’re trying to buy an SBA loan, SBA company has to prove the loan sale before the bank can sell that loan off. Most of you may not know that, but they’ve got to prove that. He was talking about, “I don’t have a lot on my books that I can sell, but keep up with me, contact me back every month. Let’s touch base and see how this all shakes out.” We’re all expecting it to shake out in a negative fashion for banks, for the most part, a positive fashion for note investors.

Residential Versus Commercial

People ask me, “Scott, what does the residential side versus the commercial side look like?” There’s a difference between both sides. The residential side is still a wait and hold phase for a lot of places and a lot of people out there. As we get closer, we’ll start probably seeing banks looking to move some of the residential portfolios because they’ll add almost six-plus months to look at their list of borrowers who have either been paying or haven’t been paying. The ones that aren’t paying that are in forbearance agreements that probably have higher percentages of debt on other things such as their credit cards, their student loans, and their auto debt. If they’ve got a relationship with that bank, that bank can have a great picture. The snapshot at the idea is once this shakes out, is the borrower going to be back on the nice list or are they continue to stay on the naughty list as we roll through December?

The naughty list is if it’s a government-backed loan, they’re probably going to try to keep it unless it’s in a portfolio that they can move off their books. If we start seeing more defaults and more spikes in unemployment and people getting sick, there’s no question the default rate on residential loans is going to go up. It’s at 8.22%, which is up about a half-point where it was on July’s numbers. August isn’t in yet, but as we get here, we’ll have August numbers. I would simply say that the number is probably going to climb from 8.75% and went up half a point. It’s probably going to go closer up to 9%. One of eleven borrowers is at least 90 days default.

That’s no surprise if you look and read the numbers. How do I read the numbers? We look at the borrower’s financial list. We’ve talked about this quite a bit before, the borrower financial. The thing to keep in mind is when you look at the quarterly filed government reports that they’re filling with the FDIC. This is on banks. I’m not talking about credit unions. The banks will show how much in 90-day defaults they have, that’s not even plus greater. They’re also sharing the 30 to 89-day late. In the space of a quarter, a chunk of that portfolio, it’s 30 to 89 days as the borrower continues to not pay. That’s going to roll into that default status.

Let’s face it. Most things haven’t gotten better out there for a lot of borrowers. If a borrower is 60 days behind already, it’s probably going to continue to drag into that 90 days plus. That’s why we expect to see a spike. With the 0.05% to 1%, are we going to hit 10%? I don’t know. I hope we don’t, but if you look at where things are at and you have to take it on a national level, I think we’re going to see that. I see close to a 10% default rate across the country, which is what it was. It got bad as it did back many years ago. The wave of loans that are hitting this is the FHA loans. The FHA loans have skyrocketed into defaults from 1 out of 10, 9.69% back in June to over almost 16% of all FHA loans are in default.

Why is that? We talked a little about this in the previous episode with Merrill Chandler. The reason is that you have borrowers that were getting an FHA loan, they are first time home buyers, and they’re not putting much down 3.5% if they’re having to put anything down. What I mean by if? FHA requires a 3.5% down payment, but the banks, the lenders can donate that percentage. You also have a lot of the bigger banks out there. They’re not only paying the 3.5% down payment. They’re also paying upwards of up to $10,000 in closing costs. That’s a 100% finance loan to somebody who probably doesn’t have the most pristine credit. It’s great for people that want to buy houses and for the real estate industry to get property moving, but what you have though is get somebody who is probably scraped by to get in the house. They’re very budget mindset.

We’re not talking to high-end homes. This is the first time home buyer at $200,000 to $215,000 below, for the most part, depending on the market. When they lose their job, their hour has been reduced, or they can’t work, that’s the level where they don’t have a lot of savings. They don’t have a lot of retirement. Usually, they don’t have a lot of cushions. That’s why you see a big skyrocketing right in the FHA. What also happens is people have been out of work and can’t pay. This has led to why the big four, Bank of America, Chase, Citi, and Wells Fargo have seen a huge high default rate in portfolios.

NCS 623 | 2020 Market Projections

2020 Market Projections: Plant seeds, water your garden, and those seeds will grow. It’s the same thing in the note business – plant the seeds, make the connections, and stay on top of it.

 

Chase came out and stated that 12% of their second liens and the 10% of their first liens, the entire residence portfolio is in deferment because they’re being paid, but they’re at least 90 days behind. It is the same thing when you look at it. That leads to why those big four banks have big losses, especially on the residential side because they finance this stuff. They carry the paper for these people. When you give and nobody has any skin in the game, you’re going to have defaults because they’ve got to pick. As I said before, “That’s $600 a month or that’s $275 a month now unemployment. I’m going to pay for either food on my table and the power versus I pay for the roof because I can drag this out. I can put into a forbearance agreement.”

I can say, “The government is bailing me out.” They’re not bailing out the banks yet. They’re not bailing out investors. That’s the biggest thing. That’s why you see big FHA defaults out there. That number is going to continue to climb. What’s also been the big kicker here going through is these property appraisals or the tax appraisal districts reevaluating new homes because a lot of these people are using FHA loans to get into new homes, new home communities. The taxes have been readjusted from an empty lot to a lot plus improvements. That’s the big kicker.

Where Does The Opportunity Lie For You?

People don’t expect that. They look at their budget but they can afford them. They’re not looking at 6 to 12 months when the taxes go from a few hundred bucks to a few thousand in some cases. That’s your tax defaults and it’s getting an increase. Governments are trying to delay things with the IRS, filing your tax return. That’s good for some people, but some people had already paid their taxes to get that check to cover things to help them stay afloat. A lot of times we see that happening. Where does the opportunity lie for you? Here’s where I would be focused on and where we’re seeing our focus for the next 90 to 120 days as we get to the end of 2020.

Contacting banks on a regular basis is still one of the best things that you can be doing, whether it’s via LinkedIn connections, email blast, or on the phone. Those three things are still probably the most fruitful things that you’d be doing to make money in notes these days. Those three things are the most important things that you can be doing. If you’re not doing all of them, that’s fine. I get it. Some people are working so you don’t have time to make phone calls, but you can still send an email blast out. You still can jump on a MailChimp, pre-write your email, and get it out at a scheduled time. You can also jump on LinkedIn on your phone or your laptop and send out connections at any time, day or night, rain, sunshine. Whether you’re sitting at home bingeing Netflix or you’re at the office, whatever it might be. You can be sending out LinkedIn invites to ask a manager. It is a valuable thing to do.

Banks and the conversations we’re having with the special assets, the secondary marketing, the chief credit risk officers, the whole loan traders, they are looking. They know that they’re going to have to move a big chunk of their portfolio. Whether it’s residential or commercial, they know. They’re not lying. This is something that nobody’s talking about. They’re not blind to the fact that in the fourth quarter, they’re going to be evaluating things to move off their books. The biggest underlying pain, I guess you could say the needle in their nail underneath the skin, whatever it might be, burden in their saddle is the small balance commercial stuff.

You can look at articles on Wall Street and all stuff about the commercial space, the CMBS guys. We talked about it where there was a $50 billion meltdown in the CMBS market. That has not recovered yet because of all the defaults. Your banks have had a bigger piece of the pie when it comes to financing that stuff than they did many years ago. When CMBS guys financed 64% of the previous portfolio years ago, your banks have been responsible for 53% to 54% of what’s in default. That is the small bread and butter, smaller commercial property loan. We’re talking sub $5 million, but predominantly in that $1 million to $2.5 million value, you see small-balance commercial stuff below that.

We see it all the time, depending on the market. That’s the stuff that is cooperative with the bank’s book. What’s being hit hard in that commercial space, obviously lodging, hotels, and motels. You also see the retail space. You see restaurant space, vacancies across the board on that. We’ve talked to some of our multifamily friends who’ve invested a lot in college housing. They were struggling because students aren’t back in school. They’re studying from home. Colleges are going to virtual so people aren’t going to the dorms or they’re refusing to do that. That’s the biggest issue on the banks’ book. Banks aren’t financing like the regular banks are in residential loans at 90%, 95%, 97%, or 100% financing. They’re not financing commercial debt. They’re in the mid-60% usually up to 70%.

As we know, when values drop, rents drop at a commercial space, your LTV increases because that’s how banks evaluate commercial properties off. Also, net operating income cap rates to figure it out. They want to be roughly above 65% to 70%. When your values drop, your loan doesn’t drop. Your loan LTV stands increases. You’re at 75% to 80% and that leads to the banks then go into the borrowers, and they’ve been lenient in our conversations. They’ve been giving the people who are operating the restaurants and these things time. The time to get caught back up. Time to get back to rock and rolling again. Before they’re going to start asking and believe me, it’s going to come this fourth quarter of 2020, you’re going to see a lot of banks going back to their borrowers on a small commercial list.

NCS 623 | 2020 Market Projections

2020 Market Projections: Nurturing connections will lead to something that will continue to feed you on a regular basis.

 

They need you to bring 5%, 10%, or 15% or something cash to pay down your loan to get us at that 64% or 65% of LTV. Most of these commercial borrowers aren’t going to have that. “What’s the opportunity in that, Scott?” I get that question, “Why would I want to buy a loan from a bank where the borrower isn’t performing?” Here’s the kicker. Wall Street loan and hotel debt are roughly $0.20 of the dollar or less. We’ve seen this happen. We’ve seen opportunities there. You have to look at a couple of things at that opportunity. Who wants to open up a hotel? We flew to Charlotte for a day to pick up some stuff out, the hotel that we stayed at nice renaissance had been closed for 2.5 months during all this.

They laid their whole staff off. They’re just getting back up and operating. The opportunity isn’t in the hotel space. The opportunity lies in the pivoting of those assets. Maybe you need to take it from a hotel and turn it into housing apartments. We’ve seen this with a couple of our students doing a good job with that. Maybe you need to take the office space and turn it into self-storage. We’ve seen that a couple of executive offices that were set up, they made a pivot and convert it to a self-storage facility versus an office because nobody’s in their offices. People are moving away from having offices. You’ve got to learn to convert it to something. You know what happens when people leave offices or they go to work from home, we have a lot of office space, whether they lease it in or they’re moving out.

They need a place to store that. Self-storage facilities, we’ll see a boom I believe in occupancy, a reduced vacancy because people are storing stuff away. I have already seen that for years, but that’s an opportunity for you like, “Let’s convert this office space into self-storage if we can.” Also, converting hotels, even some vacant stuff because there are some smaller hotels out there that you can convert into short-term residential. We saw that happen in Austin. The city took over a sleeping off of Interstate 35 and converted from a hotel into apartments for the homeless, people that were sick out, and in quarantine. I’m not saying that you want to do that with a hotel note, but I think it makes more sense to turn it into short-term or temporary housing.

You could always convert it back to a hotel after time for a lot of things. We’ve all been to places. I’ll give an example. One of our favorite places to go in San Diego is the Hard Rock Hotel downtown in the Gaslamp District. They have hotels, but also a big portion is condos. People were living there on site. Having a mix of apartments, you can still have a chunk of rooms. That’s the thing to look at. You’ve got to be flexible on what you can do and adjust this accordingly to do that. You’re going to need to have some onsite management. You’re going to need to have people out there, but it has happened before. We’ve bought condos that were part of Wyndham Resort. People were living there or people were renting it out on a monthly basis.

The short-term rentals, the Airbnb, the people that have used single-family homes and turned those into short-term rentals. If you’re in the rural areas, you’re away from the big cities, I think you’re going to do okay. I think you’re going to be hit hard though if you’re in an area and you’re not doing any marketing. As the President or CEO of Airbnb state, they have lost six years of growth in six weeks. We’ve had Avery Carl on the show released before talking about short-term rentals. Her stuff is booming because they’re in nicer areas with bigger houses so families can get away from the city. People have that separate working space for bedrooms to work in. That’s the thing that will do well. I think a lot of people that got into those downtown Airbnb’s where everything’s at unless you’re close to a hospital, close to other things out there.

We’ve seen a lot of people struggling with that. That also leads into that investor loan, that second home, non-owner occupied loan. People taking out loans 60%, 70%, or sometimes 80% LTV. Those are going to be the first foreclosures that we see in the market. We’re going to see a foreclosure spike, not so much in 2020, but you’ll see it happening in 2021. I should’ve gone back and said, those are going to be the loan stuck types that we see move probably more so here this fourth quarter. On the residential side, the investment loans, but non-government backed loans. You may not be able to evict for a while, but if you could start to process or start buying that debt at a discount and the fact that you can buy the debt at a discount, that can work in your favor now that you’ve got the flexibility on your side.

The other borrower who has a $120,000, maybe they don’t worry about the 6 or 8 months they haven’t paid. “Could you start paying out? Can you pay half now?” As you get back, we will increase it by $100 or $50 a month on a stair-step basis, getting back to closer to what market rent would be or a mortgage trial payment period to get you back on track. That’s the play that you have to look at. If you’re thinking you’re going to foreclose and take the real estate back, honestly, that’s not an effective strategy because things are being delayed and being dropped. A lot of states have started back foreclosures, but when you start looking at the eviction moratoriums, you’re going to have to say, “You can foreclose, but you may not be able to evict.”

The Haves And The Have-Nots

I think the foreclosure moratorium is a few weeks away and then you’re going to have the haves and the have nots. Those who are still paying on time, great. That’s a beautiful thing. If you’re in a forbearance agreement, great. If you’ve not called or you’re the landlord or the property owner who isn’t getting paid rent, but you’ve still got to pay your mortgage, if the bank isn’t willing to give you longer forbearance agreement, that’s where we’re going to see the biggest step for. I’ve been so concerned with investors out there that have rental property. I’ve been saying this for the last couple of years as I’m out speaking. I’m not trying to blow a horn, but you’re going to see property values drop in some cases, especially in that lower value stuff.

NCS 623 | 2020 Market Projections

2020 Market Projections: Taking action is the best thing to get those opportunities.

 

As foreclosures spike up, realtors are right around the end of the world like, “It is a great time to buy a house with great low rates.” I get that, but that’s not the norm. Most people are sheltered at home, trying to stay at home and trying to survive out there. The banks have this building purge coming that’s building pressure. The government is not required them to fully pony up on reserves like they’re required to. You’re starting to see the bigger banks put money away. Bank of America announced $5.1 billion, $7 billion. The top four put away $32.1 billion in the second quarter. You have to realize that it is an opportunity but if you’re a real estate investor, not a note investor and you’re targeting the debt, there’s plenty of opportunity for you. I won’t let anybody sit there and say, “We have to wait.”

You’re not going to be able to buy the government-backed loans from the bigger boys, but there are plenty of smaller institutions out there that have stuff on their books that they’re enjoying the phone calls, they’re reaching out. In some activities, we’re seeing more profile views on our LinkedIn profile for note investors. People are reaching out to us. The biggest thing is reaching out to the banks, finance small balanced commercial asset stuff. That’s an important thing. If it’s an asset that you can pivot, seeing if you’ve got the recent numbers, as far as cashflow operating things, if the borrower has provided that to the bank, which is an important thing in your commercial due diligence, I would be making sure you put eyes on about every asset.

Is that business operating? If you’re buying a commercial, is it a restaurant? Is it still operating? Do they have the financials? What have the conversations been from the bank to the borrower on those properties? Is it vacant? If it is vacant, it’s probably going to be vacant for a while, unless you can convert it into something that’s going to make sense for that market. What’s the biggest name as we talked about with commercial space? Do I need to convert this to a smaller office? Do I need to go to a Regus office and target bigger companies that are looking to move out? Do I need to convert it to self-storage? Do I need to convert it to storage space because there’s a big need for that? If you’re in an area out there looking at retail spaces, we all know retail space, for example, not too far from Pier 1 Imports is going out of business. They’re trying to sell things.

Looking at the other retail stores, do they have a place to store their inventory, whether it’s clothing or whatever it might be? Do they have a place to put their stuff temporarily to help solve that transition? That can be an opportunity by taking some lemons and turning it into lemonade as best as possible. There are a lot of things and it’s all going to vary on a market by market basis. You’re looking at your market, looking at what’s the opportunity there. If it’s not in your market, there are plenty of other markets out there that will be affected. I think the biggest opportunities which have been an oddity would be your commercial space in your bigger markets, your 40 to 50 top cities out there.

The other ones in California, I think are still going to be overpriced because it’s California. I would stay away from the West Coast and be more focused on states, sub-nine months foreclosure. If you can’t look at the assets and some occupancy to work with things, we’re going to see a lot of for rent, for lease signs up there. They’re popping up left and right. Commercial realtors are going to be struggling for a little bit because of that stuff. The commercial debt investors, this is the opportunity to put those connections in place to start reaching out and honing your skills and understanding what’s going on in the market and finding the opportunity. There’s a ton of opportunities out there. Wall Street has been socking money away for years, the bigger guys to take advantage of what’s going on.

They’re going to gobble up a big majority of the bigger asset stuff, but that still leaves plenty of crust crumbs for us to fall through the cracks for investors like you and me that literally can make a Buku returns. If you’re looking properly and you’re taking action. If you’re sitting around and waiting and you’re watching Cobra Kai or Game of Thrones, if you’ve gone through The Sopranos and not done anything, get off your keester and start doing something. If you’re sitting in here waiting and keep delaying, that’s the biggest fallacy I see with note investors or real estate investors is like, “We can’t wait any longer.” You can, but if you want to get out of where you’re at and start making a connection, if you wait another six months or until the end of 2020 and 2021 start taking action. I hate to say it. You’re going to miss out on a majority opportunity.

I can’t tell you how many people I’ve talked to. They’re like, “I’ve got my real estate license for the ROI. It’s going to show up.” I’m like, “You’re going to sit around and wait for 12 to 24 months.” The ROI will come, only if the government does. That’s the residential side. Commercial side, we’re already seeing that stuff. We don’t see a foreclosure because they’ve been delaying that for the most part. The decision time is in the next six months, the fourth quarter and the first quarter as the banks look at and value with the portfolio, look to move stuff as they get that off their end of the year. The fiscal year is either December or March.

The conversations we’re having is that they want phone calls. They want to talk to us, note investors. They’re building lists themselves who to reach out to when things start hitting the fan. I encourage you all to take action. One of the most important things that you can do is start putting things with lists. I get it. It’s not sexy to send out and dial for dollars. It can get exciting but you and I aren’t going to be doing three days a week. For the most part, I pick a day, knock out 2 or 3 hours, and follow up with it. Maybe increase it a little bit of time. It’s the 21st century. I get it. It’s not like it was in 2008. We’ve got a lot more tools with LinkedIn and some other things out there, but start making those connections.

NCS 623 | 2020 Market Projections

2020 Market Projections: The world is on sale. It’s up to you If you want to take advantage and cash in or sit around and wait for something to come.

 

If you’re waiting around for the foreclosure wave to hit and then go to foreclosure auctions, no offense. Those lists are picked over. That’s one of the biggest things I could tell you. Years ago, I was out here in Austin, Texas at a bar one night with some friends. I was sitting there and a girl sat next to me. I got to talk with her and turns out she was the assistant to the vice president of special assets here in Austin, Texas for Chase Bank. I asked her what she did. I said, “Are you in the notes space special assets?” She’s like, “How do you know that?” Of course, we speak the lingo.

I found that out. She was like, “We get a list in the third week of the month for the next month’s foreclosures.” Here in Texas, everything has got to be advertised 21 days prior foreclosing. She goes, “What happens is that the list comes up. It comes out a week later and there’s a lot missing off that list.” I was like, “What do you mean a lot is missing?” “Other entities pick up the stuff. Other things get transferred. It gets sold off. We only have half of what we originally started with because they’ve been sold off or other people have picked them up such as other investors, or the bigwigs company pick up the debt.” That doesn’t surprise me at all.

Wall Street picked it up and stuff like that were you got, “People are taking down things.” That’s why I say, if you’re waiting for the foreclosure auctions, they may not come free at all. If you’re looking for debt, it is like not quite Christmas Eve, but it is damn close. If you take action, especially going into November, December, maybe one of the sweetest Decembers you will have and 2021 can be a complete polar opposite of what 2020 has been. For a lot of people, they’re like, “When is 2020 going to be done?” It is a lemon of a year. It is a shit show. It’s a big shit sandwich and we’ve all got to take a bite out of it. The idea here is, can you take that and turn it into fertilizer to help things sprout for you or you can sit here and be like, “Woe is me. Life is horrible?”

Everybody has ups and downs. I’ve had ups and downs. There have been times I’ve been great. Other days, I’ve been like, “It is the same old.” I made a comparison now that it feels like if this is anything, how the astronauts feel being stuck in a tin can space? Going out for a spacewalk is exciting. Going out here with a mask to go somewhere besides the office or here in the house can be exciting, but it also can be dangerous for a lot of people, so we suffer from things. People take it very seriously. I’m not minimalizing anybody and how they feel about the virus.

We’re not going to get into, is this a conspiracy? There’s some weird shit going on. The best thing I can tell you is cut through the weird shit, cut through the politics and stuff. It doesn’t matter if Biden is elected or Trump gets elected. Neither one is going to affect what I do on a daily basis. For most Americans, what goes on in presidential avenue doesn’t make a big difference in what we do on a daily basis. I would spend time, get off Facebook bingeing, and start those three core activities that you can do as a real estate investor to find notes. Reach on LinkedIn. It is the simplest thing. Everybody can do that with a free account, dropping an email blast out to go through our virtual workshop.

You can learn how to do that and find out how to pull lists and then dial for dollars, the old fashioned, “Let’s start dialing for dollars making 50 to 100 phone calls a day.” Not quite the lying on the phone, but Wolf of Wall Street, Pursuit of Happyness with Will Smith, and The Big Short. Those are some of the biggest movies I think you guys should watch. Start looking at these things if you need the motivation to get things done and make it a game. If you can knock out twenty phone calls twice a week or three times a week, you don’t need to have a lot of bank connections to have a lot of stuff sent to you here in the next 90 days. Take action is the best thing I can tell you. There are opportunities.

If you know where to look that small-balance commercial, that non-owner-occupied mortgages non-government backed loans. Those are some of the biggest opportunities that we’re going to see since 2010, ‘11 and ‘12. If you know where to look, you know how to buy right, and how to get your foot in the door and be ready for when the bank starts putting these notes on the clearance aisles. Attention note investors, the world is on sale and it’s up to you to take advantage of cashing in, or just sit around and waiting for something to come. If you’re waiting for a ship to come in, can you hear it? I can hear the sound of the ship docking for you that are interested in.

I want to hear about the Disney Cruise Lines. Get on the boat, get on the train, whatever your analogy is. Go do something, take some action, start marketing. A little bit goes a long way. Start doing and building those daily habits that you can and you’ll be a whole lot better off once we get through this. I hope everybody stays safe out there. Thanks for reading. I appreciate it so much. Check out our workshop or the next one available at NoteBuyingForDummies.com or CallingBanks.com for us calling the asset managers or our one day Saturday CliffsNotes version at NoteWeekend.com. Be safe and we’ll see you all at the stop.

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