Fired from a corporate job he hated in 2004, Martin Saenz founded a government contracting company from their home with his wife Ruth. Over the next ten years, as they were building a multi-million dollar federal contracting company, Martin and Ruth began using their profits to purchase residential and commercial rental properties in the Washington, DC area. In his first book, Note Investing Made Easier, which debuted at #1 on Amazon, Martin discusses his journey into the note investing arena. Since that time, he has been traveling the country sharing his method of profitably turning non-performing notes into 30-year income streams.

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Note Investing Made Easier with Martin Saenz

I got fired from corporate job in 2004. My wife and I started a museum exhibit company whereby we sold to the federal government on a prime level. We started that in 2005 and sold it in 2013 so my wife could be home with the children. All the while since 2009, I was buying commercial and residential property in the Northern Virginia area and self-managing as a landlord, which I still do. Scott beats me up a little bit about, “Why are you so hands on. You need to remove yourself. Get a property manager.” Yes, that’s correct, but I do like that end-of-month picking up some rent checks still. Maybe it’s nostalgia or what have you.

We sold the company in 2013. I started buying notes in 2013 on a full-time basis, first and second mortgages. I was self-taught so I went down a hard learning curve road. I read ten books. I took a three-day workshop. I tried putting the pieces together. If you go down that road, what you find out is you spend a lot of time and money learning things as you go. That was my path with things. I work primarily out of Starbucks my first four years of note investing. I was there, I had my headset on, I was sourcing notes, due diligence, buying notes. I got a borrower phone call, I’d pop out of Starbucks. That was my thing. I was in hibernation mode for the first four years. Now that I reflect back, I was honing my skills with note investing, building my systems and everything else.

Then in January 2017, I received a spiritual calling to write a book and share my story about some of the successes I was having with note investing and the systems that I put in place. That was published in May of 2017 and it became a bestseller in Amazon. It sells numerous copies a day. I never had any idea that would be the case, but I get people who reach out to me weekly, asking about support, training, advice, etc. That’s when I started realizing that at this point, I want to share some of what I know and give back in the form of training and coaching. As I started doing that in June of last year, I was amazed at how rewarding it was to help other people get off the ground with such a complex industry of note investing where there’re so many landmines and so many ways that you can get caught up. Helping people avoid that costly learning curve has been a big satisfaction to me.

I also wrote a second book, Secrets To Winning Government Contracts, published. It’s on Amazon. It tells about what my wife and I did on a daily basis to start obtaining prime federal contracts to the tune of millions of dollars. I just told my story. The underlining thought on that or the takeaway on that is note investing can give you time because you don’t have four kids and a busy life, and real estate portfolio, etc. You have to have time in your life to write a book. Note investing has given me time. That’s the proof of it.

Why did I choose note investing? I chose note investing because I only invest in assets that I can control and the cash flow for me, so I stick with that. All the cryptocurrency, mining, buying stocks and this, I don’t know anything about that. I couldn’t talk to you about that. I can’t talk to you about what’s on TV. There’s a lot I can’t talk to you about. I can talk to you about starting a company that sells to the federal government to the tune of millions of dollars and I can tell you about how that structured, what you need to do, the systems in place. I can tell you how to source, run due diligence, perform workouts, and manage a note portfolio for yourself. These are the few things I can talk to you about. That’s what was exciting about note investing. I’m not the smartest guy by far so if I can do it and piece all this together, you can do it. You cannot beat that passive income from notes if done correctly.

In note investing as a business, I have four systems that I use: sourcing, due diligence, borrower workouts, and portfolio management. I primarily buy second mortgage notes. However, I have a business note. I have some first mortgages. I will go into that in a moment as to why I’ve gone down the road with second mortgage notes, but I want to first tell you about the learning curve. When I first started, my first purchase in 2013 was ten first mortgage notes in the state of Ohio. It was a tape and I did everything. This sums it up well. You put out your money and then you see where it goes. When I bought the first mortgage notes, I didn’t know what I was doing, and I went and drove across Ohio for ten days. I was going to look at all the properties because I felt that I was such a savvy, sophisticated real estate investor. I had an eagle eye and I would always know better than a realtor that could pull a BPO in a few days for me or put together a BPO.

That was my first mistake, doing half the due diligence that I do today. I only focused on the property when I bought the notes. What’s the value of the property? What’s the price of the note? Factor in some workout cost, and there you go. What’s leftover is the net profit? I didn’t even look at the borrower and their situation which is what I do now as the most important form of due diligence. Then I went on and I paid retail pricing for these ten notes and my first note turned around in two months. It was in Tyrell, Ohio which is Mansfield area, the beautiful rolling hills of Ohio. I was all in for about $11,000, bought the note, property was vacant. I got in touch with the borrower and in one month, I had a deed in lieu. I turned it around, sold it, put it on the market as an REO, got an offer for $36,000 whereby someone put down $18,000, and then I created seller take‑back note for $18,000, paid over seven years at 8% interest. That was the first deal.

That got me excited. That’s where I took that bump up on the learning curve where I put my money. Something immediate happened and I was like, “This can’t be this easy.” I’m going to be rolling hard because everything else, small business ownership, buying commercial properties, there’s all nuances to it, but I’m like, “This note investing is too good to be true.” Then I started getting back property one after another, finding that property with fair market value of $70,000. I got it back stripped out and trying to sell for $30,000 to get out from under it. I just kept getting back property, and then I find I’m paying cleanout, force-placed insurance, getting landscaping done, paying municipal liens. I felt like a punching bag. That’s when I go “up” and then down to “no.” I worked through it and I picked up all the areas that I oversaw. That’s when I started to put my systems together and stay committed.

When you’re at the no phase, that’s when probably a majority of the people leave. They exit the industry and they say, “This was too good to be true. This is not a viable industry to be in. My money is easier placed somewhere else,” and they leave. What I would say is stick to it and continue to build your systems, continue to put in the effort, stick to it. You’ll find that you’ll get to the fifth phase of “thank goodness,” you’re doing and getting loan mods every week, every month, and you’re just adding and building that sandcastle for yourself of cash flow which is where you want to be.

This is how I call it. I’m big into cheese. I like cheesy things. They stick with me. I call this the sourcing cycle of life. I put this together for me. Everything starts to me with building your profile and reputation. Your profile is first and that is picking a name that the borrowers are going to see. It’s going to resonate with them and is going to draw them into wanting to work with you or feeling comfortable with working with you. My LLC is called Second Chance Funding. The name is self explanatory, we’re helping people come to terms, giving them loan modifications with payments they can afford while making a profit for myself, and so on.

First things first, before you start building your profile and reputation, focus back on your why. I’m a big fan of putting together annual goals for yourself and rituals, with rituals being a daily activity that leads you closer to your goals. I have a whole list of things that I do throughout my day that lead towards me achieving my goals at the end of the year. One of them is I plan my day the day prior, so I have this whole day mapped out in full as of yesterday. That’s how I stay ahead of the curve, and then you build commitment. How much time I have to allocate towards each individual task is determined by how valuable that task is to helping me obtain my goals and so forth.

You’re picking your company name. You’re getting a uniform branding image. I’ve heard Scott speak and I know that he pounds this. Build your reputation, put together good marketing because you’re going to be seen by many people, so it’s a very valid thought. I will give you an example. When you go to conferences, people will roll up all the time, we flip houses, business cards, Rehab-R-Us or something like that, and you meet these folks. It’s great they’re enthusiastic about the note space but they’re not showing up with their A game. They’re not showing up as if they’re serious and committed to the industry. Step one is pick a good company name that resonates with borrowers and lenders and people in the industry, i.e., sellers. Then get a uniform branding image, so your website, your business cards, all your marketing collateral looks uniform. That’s very important.

Once you have that in place, then you go out and you have seller outreach whether you are using LinkedIn, calling on local banks, going to institutional sellers, going to peers, whatever it is you’re going to touch for drumming up note inventory. That’s secondary after you’ve built your profile and reputation, and then you’re able to go out and win. When you talk to someone at a bank or you talk to a peer and you’re like, “Do you have any notes that you’ve shelved that you want that I could look at picking up from you?” and then they say, “Send me over your information,” they might peek at your website. If you think about it, everyone in this industry is like a detective. We’re doing TLO searches and credit pulls. Everybody’s naturally curious. Nobody wants to get involved with someone that has bad ethics or looks like they don’t know what they’re going to do and they’re going to violate Fair Debt Collection Act laws. They’re going to tie you in some way for a negative ride.

Something to keep in mind is having a good profile and reputation. Seller outreach is critical. Having a presence on social media is very important. All the notes sellers, vendors, people that you’re team and partners with, if you’re looking for passive money, all that is on social media. You need to spend time being on there, being likable and approachable. Since I started investing, I’ve self-funded myself, so I very rarely have done any JV, maybe twice. I’ve done JD on a small scale, but I’ve self-funded because I like that separation. I also have not grown as a result in some ways because I think it is good to expand your horizon and go big, as they say.

Social media has whatever it is that you desire to meet your goals that you have set in place. Your rituals, what you do on a daily basis, need to involve social media. If you have your tight reputation and profile, if you are doing your daily reach out to sellers and daily activity on social media, you’re going to go to the conferences for note investing and people are going to know you. They’re going to want to connect with you because they have already been warmed up to you.

The last thing you want to do is go to a conference, especially with like “We flip houses are us” or something like that, is say, “I want to meet some new people and collect business cards.” All you’re doing is maybe get some education but you’re wasting a lot of time, several thousand dollars, and you’re not getting the impact. You’re not cliquing within the inner circles where they’re discussing deals in the hallway as presenters are presenting in the conference rooms. You’re not in the in-crowd, so to speak, and I don’t mean it as a popularity contest. I mean it as deal flow and getting deals in the door that will make you money and help you achieve your goals, which leads into deal flow. This is very important. If you get the deals coming in, you have to communicate with the sellers, give feedback. If you run due diligence and problems there’re problems with the tape, then you have to be open and communicate with the sellers.

Primarily, I buy non-performing notes. I buy notes that are two to five years in default. I buy reperformers as well in my IRA. I do a mixture of the two, but primarily I like the non-performing notes because there’s a lot more meat on the bones in terms of profit for myself and I know how to put in the work with the due diligence, so it works out well that way. Stephanie can second this. Transacting on notes is massively critical and this is where a lot of folks fall short. They go and they may pound the pavement, they may dress themselves up well from a marketing perspective, but then when they get tapes in the door, they’re either not responding to the sellers or they’re constantly saying no because they don’t have the money, but yet they were out there fishing for new deals. That turns a seller off and there’s no better way to be blacklisted and cut off than to go and drum up interest and then fall short and not transact on any notes.

On the flipside, if you transact on notes and you become a good buyer, someone that does what they say they’re going to do, someone that reads through the NSA, signs it and sends it back, reads through collateral within a day or two, if it’s a few notes, wires money the next day, knows what they’re talking about, that’s a dream for the seller. That’s how you’re going to enhance your reputation and profile. Hence, the sourcing cycle of life is cheesy, but I love it and it’s simple. I need simple in my world. I hope this is something that resonates with you. I have a three-round due diligence process. I put the filter picture up because that’s what it is, you get 50 notes and you want to weed through and pick. You might have five notes or six notes that you want to pick up along the time at the end of the due diligence process.

Round one is property focus. If it’s a first, you’re pulling the BPO, you’re pulling the O&E report, which is a title report, looking for clean title, any discrepancies. You might do a credit pull. In that regard, you’re going to look at back taxes on county website. You’re becoming like an administrative assistant on a full-time level. That’s what sums up note investing. You’re more like an administrative assistant. You see some people and they’re on boats, and they are like, “You’d be a note investor, you can be on your own yacht all day, collecting passive money,” but then I found being a note investor, I’m in my office with collateral files and O&E reports scattered on the floor. That was more indicative of note investing.

I focus on the property. I’m going to check online sources for fair market values to get an early gauge, match it up against what the seller provided. I’m just seeing how the property is in that regard. I’m not focusing on the borrower at this time until round two. If I find that the seller’s telling me property is worth $100,000 and I’m finding pictures online where it looks dilapidated, the county saying there’s $10,000 of back taxes and there’s all these issues, then I’m not going to move it to round two because round two, I’m going to spend some money. Round two, I’ll start pulling credit. I’ll start pulling background skip trace. I’ll reread over the property information. I might pull an automated value method report or comps. I might get BPO. I’m going to start spending some money and nailing down where this borrower is and if they have an ability to create cash flow for myself because that’s what I’m looking for.

There’s a whole note community that focuses on the property, repositioning the property, creating seller take-back notes, and all these other ways of capital gains or passive income generation. That’s fine for what they want to do. For what I want to do, I want the golden goose and that golden goose to me is loan modifications all day long. That’s what I’m looking for. Can the borrower come to terms with me? Can they come to a table with a payment they can afford that leaves a healthy profit for myself? That’s the name of the game for me.

That’s what round two will tell me. When I’m done with round one, round two, I understand the property story and I understand the borrower story. I merge those two and it gives me a good sense of whether I want to buy that note. If I have 50 notes and it rolls down into the five notes that I feel confident that I want to buy, then I roll it into a return on investment spreadsheet that I built for myself. It tells me what I should expect in terms of monthly cash flow from the opportunity. I usually discount it. In other words, let’s say that these five notes roll up to $1,400 in monthly income if I buy these notes. I might project that I’m going to get 80% of that $1,400 as a target goal for a return. Then I have methodology what I should bid for that based on fair market equity of that note, backing that note on the second side, we’re talking second side, and then some other factor, their first pay or other criteria. That is my system and that has worked well me for years.

We’ve got a comment from an audience that says he’s gotten some small tapes in but they didn’t have any good notes. I definitely can understand if it does and relate with that. What he does say is when you get to that point, how do you handle it? Do you tell the seller nothing fits your model?

I definitely do the get-back-to-the-seller part. What I do is I give them a two to three-sentence response. The seller is not looking for a novel as to why you’re not putting money in their pocket but if you let them know, “Mr. Seller, Mrs. Seller, over 80% of these notes, the fair market value was 70% of what you had indicated in your tape and then the equity is not there for me to make a run at this.” Put it like that then they will at least acknowledge that you have some expertise and that you did take some time in vetting the opportunity. That’s how I do it, simple, but I give them a little insight, more than just “It’s not fitting my parameters. I need to pass at this time.”

It’s always good as a general rule to communicate back and forth with your seller if you decide not to take something. If you’re wanting a little bit more time, if you’re communicative with them and you don’t go dark, they’re usually a lot more readily amenable to working with you. If you go dark and you don’t say anything or you’re dismissive, they probably won’t want to work with you again. That’s something we keep coming back to but with every crop of new folks and new investors and people interested in the note space, that’s something to bear in mind.

There was a good question, Stephanie, at the New Jersey Distressed Mortgage Expo. I know you guys couldn’t make that one yet. There was a good question raised to the panelists. I was on the panel and there were a few other folks. The question was, “Do you go raise the money before you get the opportunity or do you get the opportunity and then raise the money?” I’m not in the raising money business, so I can’t speak to it. It just seems logical that you should have at least some verbal commitments from people so that when you do find an opportunity, even if the bandwidth of it may be too large, you still have avenues to go and put the deal together.

Sellers have a general sense of what they have. They know if it’s a crap tape for the most part. They know if it’s a great tape. If they’re giving you a great tape and then you’re coming back to them with negative feedback then that’s not jiving with them. If it’s a crap tape and they know it and they’re trying to feed it to you because you’re a newbie and you go and call them out on it, then you might get some street cred.

It’s going to be direct to the play, but also sometimes though we’ve gotten tapes where the seller haven’t gone through every asset and that still happens. They may give it the most cursory glance or a quick look at the file and that’s it, but they’re like “It’s turned into a neighborhood that’s a mess now. Thanks for letting us know. We appreciate that. Duly noted.” We’ve had some people that have come back and said, “That’s surprising,” and others are like, “We can wiggle on those. We know they’re not in the greatest spaces.”

I’ve seen it on both sides. It’s probably because I’ve seen so many roll through that for every bad note, there’s always twice as many that are still good. When people come in and say, “I can’t find a product. I can’t find sources,” keep at it, you will.

You should ask them how many people they’ve called that day. How many prospects they call? That’s the better question.

 

We do.

Stephanie, you’re the only one I call to let you know that nobody is sending me a tape.

“I’ve called five people on Tuesday or I’ve called some people on Friday.” “Did you call them back?” “No, I called them back twice.” “Did you email them? Did you reach out again?” Scott likes to point out the statistic that 80% of sales are made after the fifth try. They can buy, so keep trying.

This is a sales business.

An audience says, “I get tips from brokers too who I don’t know and know they’re not direct to seller. How do you handle those guys? How do you leverage over brokers?”

I work with only a few brokers that I know and I have a relationship with. The allure of brokers is that they already have relationships in place. Anyone starting out should pound the pavement with direct sellers and their peers. A lot of peers have notes that they’ve shelved because they’ve been outside their parameters but they could be in your wheelhouse parameter, your sweet spot parameter. That’s what I would say, less on the brokers initially. The brokers will come as they come, but I would say go direct to the source, local banks, credit unions, whatever your source is, capital investment firms. Go to them first and then build those relationships, and then the brokers will come as they come.

Treating each note as its own asset, I’m sure that you have that same mindset, Stephanie. You buy five notes like in our example we talked about, but each note needs to stand on its own leg. It needs to have a certain return that you’re expecting from it. You need to have goals in place for that note, etc., because you shouldn’t ever buy a note unless you have to take down the whole pool. You shouldn’t buy it because you think another note is going to pull the weight for that bad note and your jonesing for five notes. Every note should carry its own weight, especially if you have that filter process and you have 50 notes that you’re looking at. If you have to take down the whole pool, that’s a whole story. You assign weights and all that, to everything.

Assuming in this section you already have the note, you already wired the money, and collateral files are coming in, this is where you’re going to set up this note as if it’s a project that you’re going to be working for that note. What I give for the project timeline is the foreclosure timeline for that state. Then I look at the nuances like is it judicial state or non-judicial? That’s going to tell you money-wise what you should budget for foreclosure. I look at this person is in their 30s, dual income. I can approach them for that loan work out. I’m going to make sure that I make that an emphasis in all my dealings. If you’re buying a first mortgage, let’s say, and the property is vacant, you’re going to be hammering the phone for the borrower so they can sign a deed in lieu over and get you back the property so you can do whatever it is you want to do with that property.

Have your goals set out based on the due diligence you did upfront. That’s critically important. Borrower outreach, combination of staying true to your goals, managing the notes each as their own project, and borrower outreach are going to deliver you success in the note industry. What I find sometimes is people want to hold back on legal. They want to hold back on spending money for door knocking because they already have paid a lot of money for that note. That should have been your step one. It is that self-reflection when you’re putting your goals together and putting your budget together for what you have to spend. You should never buy notes and figure out what you’re going to do for workout expenses on the backend. You should always have that cushion for workout expenses and also some safety funds as well. That’s very important in the note space.

I have bought a lot of notes from note investors that bought notes who didn’t know what they were buying, and they shelved them and they got burned out. They realized the learning curve was too steep and they realized this was not for them. It’s more complex than they thought. I’ll come to them and they’ll sell me their notes. That’s usually when I get good buys especially with reperformers. I’ve been buying re-performers a lot over the past twelve months. Having your exit strategy in place ties into your goals and ties into the outcome of the due diligence that you perform. Loan modification is the golden goose. I never want the property. I want the cash flow. I’ll approach the borrower for early discounted payoff options, whatever it takes to get. I’ll give them various options for loan modifications and have them feel a sense of empowerment in the decision-making process. That’s how I work with borrowers.

With that said with working with borrowers, you also have to know the states and you need certain licensing to contact certain borrowers in certain states. You need to understand the legal requirements and, based on consumer protection, laws you need to know when you can call borrowers and how often. You have to have a sense. This is where the knowledge comes into place because you can get caught up in a very bad place if you don’t. You have to be committed to a lifelong learning with notes because it’s not like real estate where you go and what’s the purchase price, what’s the rehab, what’s the after repair value, what kind of cash flow if I rent it? These numbers are pretty steady and it’s much simpler than note investing where you’re getting into state laws, federal laws, etc.

I’ll do deed in lieu if I have to take back the property especially on the second side. I like to rent out the property until the first forecloses. I do that out. Sometimes you’ll go and pay the first. It depends on how much equity is backing my position on the second side. I’ll make that determination. It’s always a Plan B. Plan A is always loan modifications. I very rarely buy a note for equity. I very rarely buy a note to take back the property. I haven’t done that in several years. I’ll buy it if I feel I can get a loan modification from it.

An audience asks, “How many notes were you able to do in your first year? How many hours were you working to accomplish that?”

I bought ten notes off the bat. I bought maybe twenty within the first year, a year and a few months. The second year is when I went straight up crazy. Once I got over the first ten notes and I started buying some seconds and I started getting loan modifications, like crack in loan modifications one after the other, I was on a high and I was like, “This is where it’s at for me.” It was in line with my goals. I was helping homeowners stay in their homes with payments they can afford while making a profit for myself which is the battle cry for me and my organization, which is me by the way. That’s my battle cry. That’s what I live for. I probably picked up 40 notes maybe which is a lot for me in the second year. I do it by myself with my own money. I don’t have this whole large operation. I’m going to say this respectfully, I’m not having to pander to passive money because that a whole other thing that you have to get into and JVs, and that gets tough.

I was just buying and learning. That’s how I progressed in the note space. I built a note investing forms library. This was very critical. I have an outline for it. It has all my forms that I have paid attorneys money to draft, servicing companies money to draft, the borrower outreach letters that I’ve tweaked over the course of time, handwritten letter templates for borrower outreach. I built a borrower relations management database that I use. When I buy the note, before the collateral file gets to me, I’m like a nut. I want this thing fully set up because when that collateral file comes to me at my P.O. box, I go in and scan it on my phone and then I send it out to Richmond Monroe, unless it goes to Richmond Monroe already.

It’s like hot potato. I don’t want that collateral file. I don’t want those assignments of mortgage with me at all. I want them out. They need to get recorded because it’s show time when they get recorded. Speed is the new competitive advantage as what’s been touted out there. You hear that and it’s so true. That’s return on your investment. You’re putting out money and you’re your own worst enemy if you’re not operating with speed and efficiency. That’s where I spend time. I populate all the information on the borrower relations management database. I’ll put in the names, social, what their occupation is, who the first is at, who the first is with, what’s the fair market value that’s been verified through comps, and then I have comment section.

Every time an activity happens with that note, I’ll go and I’ll dictate what it is. You want to keep a record trail because what happens is you buy one or two notes, and you’re feeling like a cowboy, all cool and cocky, but then when you have 20, 30, or 100 notes, then your mind starts going buggy. You’re like, “Is that the nurse or is that the teacher? Is that self-employed or whatever?” That’s when you have your borrower relations management where everything’s tied and nice and up to date. It’s very critical.

Note investing is truly like you’re an administrative assistant on steroids. You have to be an executive administrative assistant. It’s that level of organization because what happens is the servicer calls, “Send me the collateral digitally,” the attorney calls, “I need the collateral mailed out. I need the note and mortgage mailed to us for filing our complaint.” Everybody wants this, everybody wants that. You need to have things readily available at your fingertips to go and fire off because speed is either your friend or your enemy. If you’re not working with speed, then you’re working against yourself and all your efforts and all your goals, so what’s the point of note investing?

Attorneys list, you need to build attorneys that are good, that do right by you, so that you have that list for yourself. I got burnt $40,000 from a bad attorney. I would never say that person’s name, but every time they had twelve files or something like that of mine and every single one got contested, the borrower came out nasty, bad things were happening. I’m 100% convinced that attorney was drumming up chaos so that they could bill and I get billed. It dawned on me that I need to move.

You don’t want to move attorneys midway because that always sucks because then you can get hammered with a bunch of fees and all of this and that. I moved those files over midway and I bit the bullet, and then those notes just started working out, started to get loan modifications, resolution starts occurring. Attorneys are a critical part of your business. I use attorneys that are à la carte. They charge me as they go through each phase of the foreclosure process. I don’t like this “send me $10,000 and I’ll spend it wisely” thought process.

We have a question, “A newbie here leaning towards reperforming first. What happens between the purchase and the workouts? Do you first call the insurance company and second set up your servicer?” They’re wanting to know what’s your timeline.

When I buy a first mortgage note, what are the first steps I take? When I buy a first mortgage or a second mortgage note, I have a folder system. I go and I plug all the digital files. I have BPO, ABM credit pools, whatever, into that folder system. I go and I organize the digital files and then I input all the data into the borrower relations management database that I created and I go and get prepared for getting that collateral in and I stay on top with the seller. Before I wire the money, I ask them, “Do you have the collateral files in-house? How long until I can get the collateral files?” I work that out. I want to know that before I wire money. They want you to wire money that day, so I want to know when I’m getting my files for wiring the money. It’s a mutual back and forth. You should never be intimidated or feel like you can’t connect to the seller that way you’re giving them money.

That’s why I do my preparation work at the collateral file and I digitize the collateral file. I scan it in. I have a scanner at home or scanner on my phone, and then and then I ship off the assignment of mortgage to Richmond Monroe who I use. Then I take back the file home, organize it, because when you get the collateral files it’s always a big mess and then you’ve got to organize it, and then I file it away. I have a nice new manila folder and label it. I do a label so everything looks like a very professional financial institution in the basement of my home. That’s how I do things. I’m very organized. Then I’ll build a project timeline for how I’m going to see that workout unfold. Those are all processes that I give you in full at the two-day workshop. We go over live deals and we look at collateral files and all that. It’s very hands on. Thank you for that question.

An audience says, “Yes, it’s a waiting game, but it always takes at least a month for loans to transfer servicers. If it’s a decent servicer, you might want to leave it with them. You can’t start loss mitigation until it’s generally boarded.”

That’s a good point especially if you’re buying a re-performing or performing note. You do not want any disconnect or any confusion with the borrower. Don’t give them a reason not to pay or to skip a payment. You go and use the same servicer as long as it’s a decent servicer and licensed. Not all servicers are licensed. I’m set up with a bunch of them. You should try to keep that because deboarding-boarding process is tight. I failed to mention the servicing part. When I first started buying notes, I self-serviced most of my notes. Today, I use a servicer for almost every note that I purchased.

An audience says that ties into what she asked. She says, “It sounds like you’re doing everything yourself including contacting the borrowers. Is that the case? I thought that the standards or legal requirement was to utilize a company to communicate?” He’s got servicing companies.

In certain states, you’re allowed to go and do outreach to the borrower. It’s on you as a note investor to know what your limitations, to understand what you can and cannot do. I use legal as well so I stay in compliance. I’ve never had any issue because I’m very careful about how I connect with the borrower and in what states I can do that.

The key is to make sure that you’re staying in compliance. We’ll get back to that one risk of purchasing seconds. An audience asks, “If you like or want an ROI of 30%, other than default to taxes, are you deducting workout expenses as well from your bid even if your initial ROI is at 30%? Would you then be looking or bidding at a lower number and add higher ROI?

I look for 30% first year and 20% thereafter. I target 30% is because you’re going to get money towards arrears when you do a loan modification. You always need skin in the game. It’s important. It shows commitment. The majority of my loan modifications remain in place and they are sustainable over the course of time. I’m pretty proud of that track record for myself. I hear a lot of stories where people are doing loan modifications and they’re not sticking. There’s a number of reasons why that would be the case.

When I look for that 30% ROI my first year, I factor in the workout expenses for that state for that note. I’m very careful about that. I let the returns that I need to dictate the price that I’m going to offer. I don’t listen to the noise. There’s so much white noise out here in this space, it’s unreal. People listen to “It used to be $0.20 on the dollar, now it’s $0.60 on the dollar. It used to be this cents. This is the cents you need, cents, cents, cents.” No, I look at deals for what works for me. If it doesn’t work, I don’t buy it so I don’t feel pressured. That’s the philosophy I hold.

An audience wanted to know if your workshop will be available online. She’s out of Georgia and would love the information, especially the notes forms and the systems you use.

I do a dedicated one-on-one. However, that can also be purchased on my website. I only do small workshops. I usually do ten people max because I like to talk to everyone individually and work with their goals, what they have money-wise and budgeted, what the rituals are going to be, and what their commitment is going to be to the industry. It helps me understand and customize the systems to what they’re doing, but I can do that on in a virtual setting. What I would suggest is to contact Stephanie or Scott and let them know that you have interest in something done over the internet like we’re doing here, the videoconferencing, for the one-on-one. It’s still the same material over the course of two days. However, it’s not in-person. That’s the only difference.

Martin, what’s your pricing on that?

The two-day in-person workshop is $1995 and the two-day dedicated, which is me and you going over the whole workshop over two days, is $3,500. I mean this when I say this, I wish I had me when I first started because I wouldn’t have done that $40,000 error with that attorney. I wouldn’t have done numerous things I’ve done. Everyone always pumps up value, “You’re getting $1 million value for $2,000.” I’ve spent $10,000 putting together forms, paying money to put together these forms in the forms library. That is a fact. I am one that focuses on the mechanics of note investing. This training is for people that want to truly learn how to be a note investor on a full-time level and everything that entails. If you want to be that that guy or gal that sits at Starbucks and pounds through things, sourcing, due diligence, workout, portfolio management, and build a whole business operation for yourself, that’s what this workshop is about.

For this workshop, I have a note seller that has inventory that I’m connecting people with at this workshop as well. They’ve approached me, someone I have a relationship with that I’ve done deals with, so that’s also going to be provided. Also all the vendors I use for conducting due diligence and workouts will be provided at this workshop, as well as the ROI spreadsheet that I use for pricing the notes and my vendor list. I have a no upsell policy. That’s my honest policy. I’ve done real estate workshops since 2005. You can go to them and they hold back and then they’re getting you for the upsell or what have you. That’s fine. There are a lot of good training outfits out there. I’m sure there’s a lot of training being provided over the course of this weekend because there are awesome speakers at Note CAMP, but I will tell you that it is two days you’ll spend with me. It’s intense. You get all the vendors and forms and everything you need to start note investing.

Contact Stephanie. She’s going to provide a link. I truly mean it. I’m blessed to have Stephanie and Scott, to know them and have them in my life. You are awesome. You are doing great. You’ve trained so many people, it’s unreal. I can’t even imagine. I wouldn’t do it. You see this. I’m doing twelve people. I want to get to know twelve people extremely well. You’re doing this like hundreds or thousands of people. It is like I have to take you back to my four kids. I’m writing books. I got four kids. I’m good, but thank you.

We try to dial it in. That’s an interesting thing. As people train and they start collaborating and they start to share things like that, it changes. Your reach changes. You may decide that you want to focus solely on a small handful of people or you want to have a company for a moment or you want to have a multiple each platform, so it depends.

We do have a question from an audience, “When you purchase a NPN with arrearages, how do you handle that with a loan modification?”

This is where it gets creative. The sooner that I come to the table with the borrower and workout terms, the better term I can give for the borrower. There are times when I send out the demand letter and then I get a phone call and they’re like, “Martin, I got my job back. I’m good to go. I want to get back on track.” “Great.” They’re going to send me something modest to get back on track. They’re going to start making their payments, and then I’m going to work with them in a great way. For every dollar they pay on time, I’m going to reduce the dollar and arrearage. If it’s $20,000 in arrears owed, if they pay me $3,000, I might shave off $10,000 and put $7,000 on the back, not accruing any interest.

There’s a number of things I do but if you take me down the long road and all the way to the end and you’re calling me a day before auction and I’ve spent $6,000 to $7,000 on legal, then it’s going to be a different conversation. You’re going to need to be stroking a pretty hefty check because all the while my attorney has reached out, servicing has reached out. If it’s a state, I can contact the borrower. I’ve reached out with pleas saying, “I’ll work with you. Please call me. I want to help you.” If all those went on deaf ears, then there’s going to be payment required if there was a capital outlay that I need to recoup. I would say that when I get the most creative is working with the borrowers with arrears.

I look at it from the perspective of what can the borrower afford. It’s not what can the borrower afford while they keep their two brand new vehicles in their driveway with car payment and they have a Nordstrom account. I’m not trying to plug into their universe. They might need to call Nordstrom’s and let them know that they’re not getting paid for a while. They may need to do something. They need to take their car back to the car lot. I know someone who had their first mortgage was $800 in Florida, they had $14,500 of car payments. Good lord, it’s unreal and they’re telling me that they don’t have any money to pay. They don’t have any money to pay. They are paying $14,500 to look good.

As a note investor, you have to be a counselor, a financial planner, a psychologist, psychiatrist sometimes, and then detective. You have to wear a number of different hats. If you work a payment plan that they can afford and they appreciate, then they will pay you for years to come and you will get a 30-year loan modification, 20-year loan modification out of it at a rate a return of 20% or whatever your target is. Where else are you going to get that? I don’t know. I don’t buy real estate. I’m not getting that in my real estate holding. I’m getting an annuity that my kids will have a commercial property when I die, but I’m not getting those returns in real estate.

An audience asks, “Where can we find information on states that let you contact borrowers or the rules/laws to do so?”

It’s knowing the states and working with the attorneys. There are states I won’t buy in, so I’m not going to spend my time understanding what I can do from a collection standpoint. I like to buy in North Carolina. I know that you need a debt collections license to buy North Carolina. I’m not going to do any borrower outreach but I’m going to buy notes there and let my servicer and attorney handle all the correspondence. It’s figuring out what your parameters are for buying, and part of those parameters are what states you want to focus on.

Once you have that nailed down, then start understanding the laws, is it judicial or non-judicial and what comes with that, and start honing in. Even if I had an encyclopedia this thick that I gave you that had all the state laws, it’s going to change tomorrow. Save yourself that aggravation. You don’t need to get a PhD in the states. Focus on your parameters, focus on your budget, and then trust me, you will become truly competent within those states that you’re buying in and you’ll grow with your learning.

Go through and build those relationships with multiple servicing companies. There are different servicing companies that are better at particular aspects of notes than others or more streamlined. Develop and maintain attorney relationships. You can find a lot of information from a good attorney in the state that you’re interested in and a great network through that often as well.

I was going to say there are vendors that I’ve gotten note deals from, vendors that people walk by at the conference because they’re paying them no mind because they’re like, “I don’t need that.” Those vendors are talking to note buyers and sellers all day long more than you.

Everyone is a buyer or a seller or both, and usually they’re both, especially if they’ve been around this for a little while.

An audience says, “I’ve a similar background, MBA, PMP. Would you happen to have a project template for note buying with presentation?”

I roll it up with my excel spreadsheet with my database that I have. What I do is I tie it in with the borrower relations management. It’s in an Excel spreadsheet format, so I have another tab where I run the timeline for activity. You need all the tasks associated with working out that note. They are going to vary based on the state, so I incorporate that with my database.

Another question from the audience, “Do you have a recommendation for a borrower relationships management database? You said that you had made your own?”

It’s proprietary. I made my own based on fields of information that I’ve used. I’ve used Alberto’s Note Dashboard in the past. I thought that was pretty decent too. It’s cloud-based and you can find it online. It’s affordable. There are probably more sophisticated ones. If you’re a note investor like me who is working low level, one-man, two-man, ten-woman show, then you don’t want anything too elaborate because the banks have sophisticated software that they use that they’re spending $10,000 plus on. Just look for simple cloud-based platforms that you can you can use. I have my proprietary one that I built and refined over time.

You will you’ll find that for a lot of investors as they go through it, it’s a hot topic question. People love to ask, “What’s your ROI calculator? How did you build it? What’s in it? Can I have it?” That’s different for everybody. I legitimately know note investors that have their ROI calculator locked up in a document that is so tight, you won’t ever see it, and they’re not going to share it with you. People say it’s very specific to our business model and what we’re doing, and they’re not exaggerating. It really is for some people. As you get into those things, you start building your own systems and your policies, your spreadsheets, or things like that, and you’ll get there. These are good places to start to get a baseline of, “I might want to put that in.”

Everything is living.

It always changes.

I can give my ROI calculator, Excel database that I created proprietary. I can give it to the first six people that sign up for my workshop. That’s where it’s being given in addition to the forms library.

If you reference Carson Note CAMP 5, we’ll know that you’re going to be one of those first six people to get that from Martin.

Another audience asks for your contact information.

Email Martin@2CFNow.com. That is Second Chance Funding. That’s the company I’ve operated out of.

Another audience asks, “As new investor, do you have any suggestions for where to find financing or lending?”

I’m not sure if you and Scott have a different philosophy on this but I’ll give you mine. I’d be curious to know what you think about this too because I know that it’s a big part of your model. What I would say is learn to be an expert day to day as note investor and learn how to do it for yourself in a very intricate and intimate way where you are self-sustained and you have gone through all the phases of sourcing, due diligence, workouts, and portfolio management, and you’ve put all your systems in place.

Learn to be an expert because I see a lot of folks on Facebook and they’re getting excited. They’re watching free webinars and they’re engaging on posts, and it’s very exciting because they know something’s there and they want something. That something is passive income. They smell that they’re close to it but they don’t know how to obtain it. They take a rocky road into the business and they’re thinking, “Let me set up to be a broker and carve my way into the niche that way,” or, “Let me set up to marry money to the expert,” or whatever the play is. What I would say is invest your time, resources and energy into training.

Whatever the training you do, get formal training and get it from a respectable source. I’m sure there’s a bunch of them on this whole weekend, and stick to it and build the processes for yourself. From that, only good things can happen when you become an expert for yourself because it shows. It’s like you’re pregnant and you’re glowing. It shows. Let your actions speak for themselves and money will come to you. I have people that want to give me money. I don’t want their money. I’ve just had several people.

They have millions of dollars. They are like, “Can I give you millions of dollars and then you’ll be my fund manager?” I’m thinking like, “So you can call me Saturday night, Sunday morning and bug the heck out of me and expect me to work until 10:00 PM being your servant? No, it’s not for me. I don’t want it.” Become an expert and people will come to you with opportunity on notes, and this and that. It’s what it is. I’m passionate about that. I’d be curious to hear what you guys think because you are creating note investors to and experts and helping them find money and all that.

We appreciate the passion. We always say good deals find money and they do, but you’ve also got to know what your capability is, what your bandwidth is in your note investing company. Some people do this full time, some people do it part time, so to that point of having money thrown at you, eventually, you will have cases where people say, “I want to invest in this,” but they don’t understand it or their expectations aren’t aligned with yours.

A lot of it is setting expectations from the beginning so that everybody is on the same page and then being able to follow through with that. Once you figure out what you’re capable of and what your team is capable of and how much you can accomplish and manage, you’ll find that sweet spot. We’ve turned down money coming in too because it doesn’t fit the wheelhouse for a variety of reasons. Sometimes the best deal is one that you don’t do. It really is.

We’ve had a great session. These have been a lot of great questions. Thank you for being with us. Martin, you have a great weekend.

You as well.

Thank you for coming on with us.

Links mentioned:

• Secrets To Winning Government Contracts
• Second Chance Funding
• New Jersey Distressed Mortgage Expo
• Richmond Monroe
• Note Dashboard
• Martin@2CFNow.com

• Here’s How »

• WeCloseNotes.com
• Scott Carson Facebook
• Scott Carson Twitter
• Scott Carson LinkedIn
• We Close Notes YouTube
• We Close Notes Vimeo
• Scott Carson Instagram
• We Close Notes Pinterest

About Martin Saenz

Martin Saenz holds a Master of Business Administration from Drexel University, and a Master of Science in Project Management for George Washington University.

In 2004 he was fired from a corporate job he hated and, along with his wife Ruth, founded a government contracting company in the basement of their home.

Over the next ten years, as they were building a multi-million dollar federal contracting company, Martin and Ruth began using their profits to purchase residential and commercial rental properties in the Washington, DC area.

In 2013, Martin invested in a live, two-day workshop on note investing, and immediately began applying what he learned to his own investment portfolio.

On May 1, 2017 Martin’s first book, Note Investing Made Easier, debuted at #1 on Amazon. Since that time he has been traveling the country sharing his method of profitably turning non-performing notes into 30-year income streams.