San Diego Note Investment Club - 2014 Non Performing Note Update Part 3

So the state of the union, in my opinion. And these guys vote with their feet. As I say, I could talk about this all day. I can be a talking kid on tv. But if I put my money where my mouth is and I'm stepping into it, that's. That's the game. That's Bill Tan. Does everybody know him? I said earlier, his class is a must with the calculator. It's a 101 for this business. You're going to play in this field. You need that. I think Bill is our speaker next month. Is that right? Bill Ruff. Bill Ruff. Bill Ruff. I'm sorry. Excuse me. All bills look alike. You got to. If you knew how blind I was, you'd forgive me. Okay, so what was the sense that I got from this whole. The distressed debt meeting and everybody that I talked to? I mean, I stayed there for 10 days. I went to. I stayed at one guy's house. Mike Rusica is a great guy there in New Jersey. Been doing this forever. Kevin. They're all my friends. I mean, I know these guys, and they're good people. People are raising money for this, and that's it right there. If they're raising money, they're telling you, we're gonna buy some notes. Raising money is not easy, not that much fun. It's risky. So you've had to say, okay, I look around. Are there notes? In my experience, there are more junior liens in particular and senior liens right now on the market than I've seen in five years. Does that surprise anybody? Okay. And I think. And they think there's two or three more years to this window. You know, is that an exact whatever. No, but that's what they're looking at. It takes, you know, a year to raise some money. So if a guy's going to raise the money now, a year later, you know, notes better be there. So they're optimistic about this business. They see the notes, they're still there. Those big economists that spoke showed you there's X billion dollars of first and seconds. There's some nuances, too, that I'll get into in a second. For example, the. There's a big reset coming in the Junior League market. Anybody have one of those where you've got a junior lien and in 2014, the payment goes from here to here? Guess what that might trigger? Yeah, some more inventory. But so just a general. I'm not going to give you stats. I'm not going to give you any of that. I'm going to Tell you what the people on the street said to me, my friends and you know, I was there with my brother saying, I don't know, I'm going to make Kihoti Ventures 2.0. You know, it's kind of, let's get it going again. Let's go get some more inventory, let's build it up. It's here, we've got it knocked out. We know how to do this game now. It's not a. I was like you, some of you, you know, you're way down the road now. But I didn't know what I didn't know. I know what I know now. But if there's no inventory, it doesn't matter. I think there will be inventory. I think it'll be priced okay. I haven't seen the prices skyrocket and I'll talk about this later, but I'm buying lower and lower quality debt because of my experience. If you showed me two piles of non performing junior liens, one pristine, expensive, call it 30 cents, another one junky and 5 to 10 cents, I would buy the junkie pile. Because my odds, I've shown that if I take this pristine pile and I push them, I show up, I have a notice of default, a lot of them will file bankruptcy or they'll leave the house. Now I've got a non performing first or a bankrupt deal that I could have paid a lot less for in a junk pile. So by looking at it, I'm saying I'd rather buy the junk pile and have 50 notes as opposed to 10 that I got when I first started because I was afraid like most of us are. You don't believe this. So does that make sense? Is this, Am I taking this where everybody is this. I'm getting too off here? Yes, sir. Good. Everybody else agree, okay, because I'm not, I'm not. You guys have seen my normal presentation. I'm not doing that tonight. I'm talking about the world and the marketplace. So just wanted to make sure that everybody's okay with that. I talked about the conference and good debt, bad debt, go to the next one. So once again, here's what I'm going to do. I have a non performing note business and I have a mantra. And here it is. Stay small, keep it all, Stay small, keep it all. Because I judge these funds, these investors, these hedge funds, I say what do they do? What's their main source? Are they getting notes and trading them? Are they raising capital? Or do they have 100 million bucks of their own? They don't need to raise capital. And the collections, do they do it? Are they good at it? The fourth one would be, who are these guys? I interviewed a couple guys, and it wasn't really an interview. It was lunch. But I said, you know what you used to do? Oh, I had a restaurant. Don't ever do that. Don't ever have a restaurant with a bar. Bar makes money. Restaurant doesn't. Lost 80 grand. You know, this is more than just about notes. Yeah, there's a big spread here if you know what you're doing. But it's also about managing your business. How many employees do you have if you got 100 grand a month overhead? I don't care what the business is. And a lot of guys go that way. So these are the things that I looked at when looking at these guys. And why do I care? Well, guess what? I can go back to them and say, how's it going? You know, what can I do for you? Well, we got to get rid of these notes. Why is that? Cabinet payroll. Okay. So you can see there's no opportunity there. And it's a mindset, too, that we all need to have that, you know, I share. I don't go like this. You guys have noticed that. I don't hide what I've got. I say, here it is. You know, please benefit, Please. I'll be happy for you if you go out there. I love to hear stories. I make a lot of money. Good for you. They're making more money than I am. I'm like, that's great. You know, it's a great thing. But by helping these people. My last words at every meeting was, and what can I do for you? Think of something. You know, people take my book, these hedge funds, and they give it to their investment partners or their spouses or different people that don't really want to know the business, but they kind of get an idea of it to feel comfortable about it. So that's one thing that I've done for them. Your book has helped us. Great. So when I call them, they'll take my call. When I go to New York and New Jersey, we have a meeting, I stay at their house. So those are the four ways I'm going to look at the. What's the title of your book? It's called Performance Anxiety on Amazon and Kindle. Very high level. Once again, it's not the Bible. Yeah. Can you elaborate more on why you would prefer to stay small instead of, like, raising funds? And so the question is, can I elaborate more about Why I prefer to stay small as opposed to, you know, and I fight that battle every night. I think about it and go, you know, what, what a loser I am. There's 100 million, you know, deals out there that I'm not going to see. But, but I, I've been in big companies. I had 100 employees I never liked. It sounded good on paper. My ego kind of was good. No, it was terrible. But I still say, wait a minute. I say, wait a minute. If I say, okay, if somebody said, gordon, here's the money on good terms and we're not going to own you, I'm not good at being owned and you go out and buy all these notes, I still might do it. You could talk me into it maybe. But I fight it hard. Because what do I really need? You see, my story about my plan, my precious fragile dream, which is just to do nothing. And what do I need to do nothing? I need about ten grand a month, which is twenty five hundred dollar notes or properties. So what do I need after that? You know, I see these guys that get their Greek lands going and they don't even know what they want. They just want a lot of or more than you. You know, I'm over that. I've got a specific plan. So my lifestyle is very important to me. I want to be free. I want to be able to go travel. And this is what I want. So that's why I haven't done it. So I'm not judging anybody. But I'm going to kind of tell you what I think of them. Does that help at all? Okay, let's go to the next one. This is the way I'm going to talk about these different ones. But so here's some more. I talked about the huge odds on the underdog. I consider us the underdog. The small investor versus the big guys. You know, I have this boxing coach, tough guy, real tough guy. And I said to him, I said, you know, who would win if a professional boxer took on a UFC cage fighter? Without hesitation, he said, the one with more to lose. And I was like, that's cool. I like the way he said that because that's what it's really all about. We have a lot to lose. We have everything to lose. Our freedom. Those big guys, you know, they have, it's just a job to them. They're certain layers or whatever, they don't care. They care, but not like we do. We can win this game. And they don't want to collect. They don't want to collect. To a man they don't want to. And that's where the money is in this business. Okay, I'm going to talk about the players and the profiles. Couple more things before I forget. Current trends and issues. Commercial notes now in my book, and what I talk about all the time is emotional equity. And here's what that means. Somebody's in a home. Did I say house or home? Home. A home is a house with people in it that care about it. They have an emotional attachment to it. In a commercial deal, is there any emotional equity? No. I mean, it could be a fourplex and they might live in a unit, but it's not the same thing as your home that you live in and your roses are planted, that whole thing. So. But there's. I sense these guys, and they confirmed it. There's a lot of this out there and more coming. The commercial notes. I've got a commercial background. I was a commercial real estate broker for seven years. I know the game. So something to think about. We're thinking about it now as another avenue. Commercial notes. There's going to be a lot of them. You can get huge discounts on these things. The question is, what do you do with them then? Yeah, who knows what that stands for? Consumer Finance Protection Bureau. The latest Dodd Frank SAFE act, all this stuff. But this is to be concerned about increased regulations. One of the hedge fund guys said this to me. He said. He said, people always ask me, they say, how do you do this if you're not licensed in every state? It's a state by state rule kind of place kind of deal. If you have a note. In Idaho, they have certain rules to start a foreclosure to deal with the borrower. How do you do that? I say simple. I hire a national servicer. Not too much money, $18 a month, and I'm under their license, covered. So that issue is not an issue. As long as I own the debt, it's my debt. I've got a right to collect. I don't need to be licensed. They're thinking about changing that. Saying that you've got to be licensed in every state, owner or not. Hasn't happened yet. The big guys aren't worried about it. One comment from one guy, but that one needs to be added to the menu of things to be aware of. You know, there's the fdcpa, the Federal Debt Collection Practices Act. Okay, you got to know the rules. Respa, Real Estate Settlement Procedures act. Tilla, Truth and Lending Act. You're dealing in securities now in notes. There's rules. This is the newest one. Put that on your radar. I talked about this reset. They're very focused on that. They think that's going to create an opportunity for us with more loans. And a couple of them had them. They said, oh, I got one myself. I got 100 grants, Junior Lien. And it's going from $800 a month to 1200 in July. Anybody experience that? Anybody have that lined up? Because I didn't know about that, but it's something to be aware of. Okay, so let me go through. I'm not gonna. To protect the guilty and the innocent. I'm not gonna mention any names, but I'm gonna kind of go through a profile of these funds out there, and there aren't that many. Let's talk about one. And I'll have a code name for it. And some of you might know that already. I'll call him Big Gorilla. And they're in Southern. They're in Southern California. And they were one of the ones that. Five years ago, I was blown away by the presentation at this distressed debt conference. I was like, you hear all these appraisers talking about this, and these regulators talking about this and these attorneys talking about this. Boring. This guy, he says, I'm out there buying notes and animal. I said, wow, this guy gets your blood going. This guy's, you know, something else. They had a company, and they got the biggest office building in this certain area, Big name across the top. They. They. I went there a couple times to buy. They would sell you a single note to a new investor. Okay, you go in there, and this is not, not an exaggeration. Mohawks, tattoos down their face, metal all over their face. Tough guys. I mean, I was like, whoa, you know, where's the workout? This is the workout area. Oh, okay. Wow. And they weren't good guys. And they would tell you right up front. They would lie, cheat, and steal right in front of you. And, you know, you'd be offended. They'd say, what's your problem? And you say, you know, you just lied to me. And they're like, yeah, so, you know, get over it. Come back tomorrow. I said, I won't be back tomorrow. I won't be back ever. And they said, well, you're not going to buy any notes. And I said, exactly. But I don't know what it was. But the bottom line is they've imploded. Their strategy, their setup was this. A lot of the key players were subprime guys in what they call subprime west up in IRVINE in the 05060708 era. And they shifted gears and said, hey, we made all these bad loans. Now let's the game's over, so let's get on the other side. We'll get some money from some people, and we'll go back and buy the B of A loans and sell them at a discount to investors like us. You know, I looked at them and said, I'm not going to play if this is a game I don't play. They've imploded. They got rid of the top guy, the guy that gave the exciting speech. No longer there. So you would say, well, is that an indication that the market's cooked or whatever? No, As I said, people are still raising money. There's new firms coming up. There's a lot of optimism.