Jack Shea and Gordon Moss Talk Junior Lien and IRA Investing

Hello everybody, this is Gordon Moss. We're welcoming you from beautiful Solano Beach Sunroom studios. I was very fortunate to have my good friend Jack Shea come into town this weekend and we spent today driving around San Diego seeing all the sights. Jack was here on an exchangers meeting and he agreed to do an interview. So we're going to have Jack interview me about the intricacies of the non performing junior lien business and just talk about that for a while. So welcome Jack. Thanks for coming in and we're glad you're here.

Well, Gordon, I've been following your note program. We've been discussing it for years, see it coming together. So spent plenty of time buying notes myself with my real estate investment business. And I looked at it, the notes as being something to balance my portfolio with some bricks and mortar and some notes since I don't know what the economy's going to bring. Is that part of your strategy?

Absolutely, absolutely. You know, my site is realestateandnoteinvesting.com because I've learned from people like you that notes are important. They're not everything, but they're a key piece of the market right now.

I noticed that you've gravitated towards second mortgages, Gordon, and I'd like to hear why that A lot of people would think that's not a good strategy. Why do you focus on second mortgages?

When I looked at the non performing note business the last couple years, I flirted with the firsts. I did a few of them but I found they were too expensive and they really weren't for me. So I have a little saying. I call it why seconds might come first. Because once you understand the seconds, they're actually more powerful than the first. Doesn't seem to make sense that a second position lean would have the power over the first. But if you know what you're doing, it does. So you can buy these at a fraction jack of what you can pay for a non performing first lien. And it seemed like if I was going to hedge my bets, maybe buy 10 of these, maybe have two of them go sideways, but the other eight would do really well, that was a better play for me.

Well, what options do you have, Gordon, if say one that's been gotten back with payments and restructured, whatever you've done, and if it's down the road six months or a year and the fellow loses job gets strength from. What are your remedies? What are your options if a note lapses back into the non performing mode? Tell me about some of the things.

You can do, That's a great question. Biggest people's concern frankly is, you know, these notes were a little shaky at the beginning. They were broken, we fixed them, but they might go broken again. So what do you do? It's pretty much the same thing that we would do when we first got the note. You know, we know this borrower, now, we've got a history with him, we know his wife, we know his job, we know where he lives, we know a lot about him. So we would reach out to him again and say, you know, what happened? Why aren't you paying the bills? Is it your same medical problem you had? Let's say it's a disaster where he's just lost his job and he's going to lose everything. Guess what? Things like bankruptcy, we've learned to work through those. Not a major issue, just take some time, do this. And that's also a short sale. People worry about these short sales, but we're doing a lot of them right now from second position, where we work with the first, work with the second, work it out and we make decent returns. So we've done this before, we've seen the movie before with a broken note. If it breaks again, we just deal with it again. Are all of them gonna work out? No. Do most of them? Yeah.

Well, you have a signed note from the individual remains. You can get judgments, you can get collections.

Absolutely.

They may be unsecured, but there's a remedy. One way or another, you have several options. Sit down with people, they haven't escaped their debt, they signed a note and there's several ways. But typically if you cut a five or six hundred dollar payment down to 250 or 300, something a guy can live with because his first most likely has gotten knocked down, and to bring it into a budget, they that's relative to the value of the home. And so you're not wiped off the map in all cases by having that second and something go along up front.

That's exactly right. And you know, my biggest fear has always been getting wiped out. Have the first foreclose on me and I get wiped out. And frankly, that's happened. And I thought, okay, that was a dog, that's not going to work out. But guess what, he still owes you the money. He has a note now, it's an unsecured note. But his life will change, he'll move on, I'll get a judgment against him, and when his life changes, I'll get paid off. Not all of it, but a Part of it. So.

Well, as we talked a few years ago, and you know, I encouraged you to get a hold of your IRA assets away from the custodian into a checkbook control account.

Yeah.

And everybody in the country can do that. I've been doing it for over 10 years. I got started with that with Jack Miller. We moved our money outside the custodian into the corner bank where I have another person, trustee, sign the check so I can make a deal. Your investors could make a deal on a Saturday or a Tuesday evening, cut a check to you. And I think from a note buyer standpoint, the other guys in the industry have talked about is the other benefit of this checkbook control is all the payments that you receive from these various notes go in your corner bank.

Yep.

And as my wife calls me, said Jack, we've got 12,000 more in this IRA account. We can pick up another note. You don't have to go back through the custodian with the cost or delay of getting the money out. And I'm sure that's made a difference to you for speed and accuracy or activity immediately without paying the payment.

Absolutely. I mean, using the trust, setting up control in front of your ira, there's no question. It's the only way to go. A lot of these deals happen quickly. Gotta move quickly. All the fees you don't incur, it's the only way to go. It's the way I go and I.

Help many hundreds and Hundreds. My website, jackshayrealestate.com is the method and the simple couple hundred dollars not paying big fees and attorney's fees to get a hold of your own money. It's legal, it's proper, and custodians along with it. So I think you've got a good program, Gordon. I think it's profitable and it's on investigation and looking at what doesn't sound like profitable and solid, safe program really is. When you get into it.

The more you learn about it, the easier it gets. So I appreciate that you kind of endorse it, because I think it is. I think it's one of the best things going on right now. Yeah. Good.

Well, nice talking to you, Gordon. Okay.

See you again. All right.