Ten Amazing Insights into the Non Performing Notes Business

Broker in Orange County, California. He's been an avid student of the masters of all facets of the real estate investing business for over 25 years. He now owns and manages a portfolio of properties and notes full time and today is very passionate and active and what he believes is the best real estate and note investment opportunity we will see in our lifetimes. These 25 years of experience and focus give him a unique perspective. Gordon takes great pride in the fact that he has a unique ability to make money in any real estate market. Over the last several years, he studied, developed, refined and mastered several creative techniques that have allowed him to prosper and grow while avoiding the landmines in a very challenging and risky real estate marketplace. He enjoyed writing, speaking and mentoring serious investors as a way for him to give back as his mentors did for him. He's a published author including the Paper Source. You may know that his first book, Performance Anxiety Creating a Fortune Investing in Non Performing Real Estate Loans was published in March of this year. You haven't read that if you haven't bought a copy of it. Absolutely do. Performance and diet. You can find it on Amazon or go through Gordon's website to find it. It's my pleasure to introduce Gordon Moss.

Good morning. Can you hear me in the back? Can you hear me? All right, thank you. Okay. November 22nd, Saturday. I look forward to this day for a couple reasons. UCLA is playing USC to climb a clock. I'm a football fan, UCLA fan and sorry about that and his presentation. Very much looking forward to this. Guess where I was at 4 o' clock this morning? Right here. I take this very seriously and I say, how can I communicate the best I can communicate? How can I get better at it and better at it? So help me out, give me some feedback, tell me if it did get better or if it is what you're looking for. Because I'm trying to refine this and make it as good as I can make it. Let me tell you a story about 2000. In 2009, I was here at the hotel at the Paper Source event and they have two sections of this hotel. The other one is over there by the Italian restaurant and it's got much smaller rooms. We had the Paper Source event in 2009 in one of the smaller rooms. Guess how many people were at that event? Less than 30. And it was everything. It was, you know, it was non performing actually. It was more seller financing, the whole gamut of notes, non performing, everything else. I counted the seats this morning. There's over 300 seats in this room. So we've got 200 plus people here. There's a market. Would you agree? Yeah. And I wanted to acknowledge Bill and Allison for what they've done here. I'm going to make some quotes later on about somebody that I really admire, John Wooden, another UCLA guy, great basketball coach, best one of all time. Won 10 national championships. He had a great saying. He had five, six great sayings. I'm going to kind of highlight them. But one was, he said, happiness begins when selfishness ends. And I was like, wow. So happiness begins when selfishness ends. He was talking to his basketball players. So you got the hot shot who wants to shoot all the time. And he's saying, you know, hey, I get that you're a good shot, but you want to win. You want the team to win, or are you all about yourself? Happiness is winning, not you scoring 100 points, by the way. But what happened to John Wooden's career was people came back to him. His players said, you know, it's 20 years later, coach, and I realize now that what you were telling me was not just about basketball, but about life. So happiness begins when selfishness ends. In basketball, in life, and in this business. Look at this business. I think Bill and Allison are the most selfless people I know. I don't know why they do this, frankly. They do it to help you guys, and I'm proud to be a part of it. So let me ask you a question. Is there anybody here that's been influenced or has a business plan or a great idea or something in their life has changed because of somebody in this room, maybe me or the other speakers, or what Bill and Alison have done. If there's anybody like that in the room, would you please stand up? That's had any influence, business plan, idea, thought they put them on the right track. So with those people here, you know, I'm proud to be a part of this thing. And I think we should give a standing round of applause to Bill and Allison. They don't have an agenda, Gnor said, You know, they don't sell stuff or they don't have books and tapes or anything like that. I'm amazed, and I love to see it when I see the people, like Shawn Doerr yesterday. Did you watch that guy? I love what he says. He says, my heart's on fire. I'm going. I like that. You're going to sense and you're going to see it in me. I love this business. I love it. And what do I love about it? You know, I've got there a couple times where I made a big chunk of money and it's always kind of anti climatic, whatever it is, where it's the struggle, it's the search for it, it's the quest, as Don Quixote says, to get there. There's some guys in this room and if they don't mind, I'm going to point them out. Terrell Sheen's in the back of the room. Got some other different people here who are very accomplished people. They've got more money than they probably need, but they love the challenge. They love the challenge of this business. It's a new thing. In 2009, I had some goals. I said, you know, these banks have created a fiasco with what they've done with these loans. How can the little guy, how can I benefit? How can I play the game? How can I get in there? So I went to everything, the paper source event, all the meetings, the servicer meetings, the mortgage meetings, any kind of meeting I could find. Distressed, dead. It was kind of new then, but I said, you know, I'm going to do what Jack Miller, who was one of our mentors, did for me. He helped me, he inspired me, he put me on the right path. He kind of slapped me on the side of the head sometimes when I started to complain or whine or say, this doesn't work, Jack. But I said, okay, what am I going to do? I said, I'm going to write a book, I'm going to figure it out, I'm going to do it myself and help people. I'm going to build a website that's a whole different, you know, web marketing is a whole different thing. I said, I'm going to build a website, I'm going to write a book, I'm going to speak and I'm going to help people. When I see the Shondors, there's 10 of the people in this room that have done very well in this little business, this little niche. It just makes me happy. And once again, the whole thing being when the selfishness ends, it ain't about me. When you give it back, I think that's the best thing you can do, which is why I do it. People ask me, they'll go, what are you doing? Why are you doing this? They're like, shut up. You know, this is a secret. There's only so many notes, you know, so be cool. I said, you know, I don't see it that way. I don't see it that way at all. Jack Miller didn't see it that way. Jack Miller also, let me talk about him a little bit. He was, he was a mentor. He passed away five years ago. Amazing guy. I read his autobiography. Jack was an entertainer too. He was in the army and he always wanted to make an extra buck. So he formed a band and he'd play the clarinet and just make some extra money. And he kind of saw himself as a celebrity a little bit. And he used to tell Jack Benny jokes. So he would entertain you. He'd be up here talking for two days straight. It would not stop. The guy was a machine. You guys know what I mean? If you knew him. But he was entertaining too. So I said, you know what? Jack's not here anymore. I miss the guy terribly. I'm gonna be Jack. That was my goal. So people ask me, what the blank are you doing up here? That's what I'm doing up here. All right, let me tell you a quick story about a junior lien because that's what we're here about. And I'm glad that the other people came up earlier, last couple days and they've given you an example. Here's the house, here's the numbers. Da da da. I'm not going to do that. My presentation today is about 10amazing insights. They're amazing to me. Hopefully you think they're amazing too. Not very humble there, is it. But I'm going to talk about some big picture, some philosophy, some strategy about notes, investing and real estate. Because that's what I am. I'm the note and real estate investing guy. I've got a website, it's called realestateandnoteinvesting.com if you haven't seen it. And I wrote a book, it's in the back of the room and on Amazon and Kindle and it's got the seven questions everybody asks me and the nine you should be asking, which I'm not going to cover today, but it's there if you need it. It's a high level book. It's not for the pros. It's for your spouse or your business partner who wants to check your sanity when you go home and say we're going to do junior liens. You're like, really? Yeah. So that's out there. But my website, realestateandnotenvesting.com I've got a lot of information out there. Anybody been there? Yeah. Okay. I was very fortunate. I wasn't around for the last five weeks. I was in Europe with my friends. We went on a trip and I got an email, and frankly, I didn't answer the email that much. I didn't answer the phone at all. It didn't work half the time, and I couldn't get it charged up and whatever. But I tried to design my life so I could do things like that, be with the people I wanted to be with, great people, travel around. That's what Jack Miller did, frankly. But I got an email from one of my borrowers that's called Ed G. Let me kind of frame it for you. Ed G. Lives up in a farming town up in central California. He sells used cars. He's a used car sale. And he has a house, a single family house. Nice one. It's a regular house in a subdivision, normal house. He sent me an email and it said, warden, we got a problem. He says, I sent you my first check and my second check now, and you haven't cashed it. And I was like, oh. So I emailed him back and I said, ed, I said, thank you for doing what we talked about, which is communicating with me. If there's ever an issue with you or me, call me, send me an email. We have a relationship with this borrower. I know all about him. I'll tell you in a minute about him. But I said, you know, we've had a small problem in the email with the PO Box, which I plan to get fixed next week when I return and open it. I said, so don't worry. So I'll be there for you. Don't worry about that. And once again, thank you for just doing what you're doing. Let me tell you the Ed story. $50,000 junior lien that I bought for about $5,000. Once again, single family house, emotional equity. He lives there with his family, has a first that was performing in 2008. The car business, like every other business, went down a little bit. He wasn't selling as many cars as he used to. So I said to him, I said, you know, Ed, it appears that you're proposing $300 a month, which is about an average deal on this $50,000 loan. You can afford that. And he says. He says, well, he says, okay. I said, but I need to check with my higher authority. I need to check with my big boss. Because I'm just the paper guy here. I just work for you. I'm just the manager. And he says to me, he says, no. He says, that's lame. He says, where'd you get that one at? And I said, what do you mean? And he said, I use that Every day. He said, I use that eight times a day. He says, that's a bunch of crap. He says, you're making the decision. I can tell. I said, okay, you know, you're right. I hate being out negotiated by my borrowers. Used car guys are the best. I'm telling you. There's plenty of people out there, other hedge funds that use these guys. You know, when you walk in the car lot, you can always walk off. When I own you, Junior Lean, you can't walk off. I own you. We're going to work something out. So they're great workout guys. Keep that in mind. But Ed pays $300 a month on time, emails me when I don't cash his check. That's a good deal. But I'm going to kind of tell you that story just to kind of give you a general average deal. Let me talk about this conference a little bit and another John Wooden saying that I'm going to finish with right at the end. Don't do for others what they could and should do for themselves. I've spent the last couple weeks with Terrell back there talking about family stuff and stuff and about money and giving it to your kids maybe, and how they're going to get it and it might disincentivize them to do anything, not motivate them. I have people come to me in this conference and they're like, question, question, question. I'm like, you know what? You're right. You have no idea what you've got here in this room. You got the servicers, the right ones. I went through five or six servicers. See a couple gray hair right here wasn't that much fun. Rand Johnson and Matt Kelly, they're the best foreclosure guys on the planet. These are my guys. You got the guys who sell the notes right here. So my point is, brother John Wooden ism. He says, things work out best for those that make the best of the way things work out. Things work out best for those that make the best of the way things work out. It's a basketball thing, It's a life thing. And it works in the note business. I hear people complaining or they're like, oh, it's not perfect. It's never been perfect. Notes are too expensive. Really? Same guys were saying that five years ago. So does that make sense? All right, let me give you a couple other. Let me kind of tell you my John Wooden story. I got a scholarship to a small college up in Thousand Oaks, California. I was 19 years old and there was this Little guy that used to walk around the football field and he kind of drag his one leg and he'd pump his arms and he would cut every corner. He would hit every corner, pump his arms every time. And I said, who is this guy? The guy had big old glasses, a couple hairs left, big nose, you know, the ears were kind of falling down. He was just the strangest guy I ever saw in my life. Had no idea who he was. I was 19, he was 69, and he had his summer basketball training camp there where I was. So I got a chance to meet him a little bit. Not really. It wasn't till much later that I said, that guy who was the most famous basketball coach in history, he won 10 national championships. But here's the real story about John Wooden. It's not about his championships. That was important to him. People would say, coach, how is your team going to do? And he'd say, well, I won't be able to tell you that for 20 years. What do you mean by that? He said, well, you know, basketball is one thing, but I'm really trying to turn these people into men, successful people. And that'll take me 20 years to see how they turned out. Under my tutelage, I've got these basketball things I'm teaching them, but it's about life and the Bill Waltons of the world, they're players, big time players. They were 19, 20, they didn't get it. But when they were 40, they said, you know what? I've lived my life this way. I don't know why I did it, but it's because of him. They had these great, you know, he was a teacher is what he was. But what I tried to do is say, you know what, he's one of my favorite guys. So how can I relate what he was and is to this business? And I already gave you a couple little things of his, but let me give you a few more. He would say this. He would say, basketball is not a game of size and strength, but of skill and positioning. I could say, life is not a game of size and strength, but of skill and positioning. I could say, junior leans are definitely not a game of size and strength, but a game of skill and positioning. The little guy has a chance to play in this market. You've heard a lot of examples about options, lean, little bit of money. I didn't have much money, any money to start with. How do I get to play? I can't go buy first liens for 200 grand for a loan. One loan. I'M either in or out. But does that make sense? Yeah. I'm gonna talk about an option. I'm gonna talk about it a lot because it's a concept that I think is key. That once again, things work out best for those that make the best of the way things work out. No whining, no complaining, no memory. That's a winner. You know, that's what they do. You watch some quarterback throw the ball, bad pass, interception. He's got to forget it right now. Next play, if he's saying, oh, boy, I blew that last one, I'm going to blow the game. And he can't play that way. No whining, no complaining. That's a key part of this business. This is a tough business. I'm going to talk about that in a minute. How about this one? This is a John Wooden ism. Failing to plan is planning to fail. Let me show you something. Failing to plan is planning to fail. I'm going to hold this like this. Does anybody who knows me know what this is? Pardon me? How do you know that? Can you be more specific about it? Yeah. This is my 20 year business plan. I've heard the saying that they say people overestimate what you can do in a year and underestimate what you can do in 10. I wrote this 20 years ago. This is my specific business plan that I got from the Jack Millers of the world. You know what it talks about here? The main thing? No job, no boss. No job, no boss. Now, the reason I hold it like this is it's kind of worn out. It's a fragile thing. This is my dream. People have attacked my dream. I had a beautiful, smart wife. This dream freaked her out. Terrified her. Terrified her. I said, we're gonna buy an investment property at Junior Lean. Her teeth would shatter. She's not here anymore. My dream is. Your dream is fragile. I paid a terrific price for this dream. There's always a price to pay. So what is this dream? What does it say? Here's what I said. I said, you know what? You know what I need? What I need is $10,000 a month. If I had $10,000 a month, that would pay my bills and I could do whatever I wanted to do. No job, no boss, no nothing. Let's break it down. If I had 20 free and clear assets that produced $500 apiece, and I could take a $100,000 house, say here in Vegas, that rented for 900 bucks, and I would net 500 every month, 20 of those would give me my 10 grand a month, would it not? So I said, okay, that's the plan. That's my dream. Financial independence. Let's go after it. And I said, okay, I got to do it with little amounts of money. I don't have much money. I would put little down payments on VA foreclosures and buy houses that way. Guess what came along that fit my criteria to a T? A junior lien on a single family house. A junior lien. It's an option. I didn't have much money. I couldn't put much money down. I could buy a $100,000 note for $10,000. If I get it working for $500 a month, I just knocked one down. Much easier than getting those houses. My point is, junior liens fit my plan. I had that plan 20 years ago. The junior lien came along and I was like, wait a minute here. This is exactly what I'm looking for. Single family houses and an option on them to get my 500 bucks a month times 20. Does that make sense? That's huge. Failing to plan is planning to fail. How about this one? Another one from John Wooden, which I love. Be quick, but don't hurry. Be quick, but don't hurry. For basketball, you know, be quick. Get the ball over there now. Shoot now. Don't delay. Shoot now for life. You know, when you're in a hurry, you're going to do. You're going to forget your coat and you're going to forget your raincoat and your whatever. You're in a hurry, so you're doing. You're rattled for notes. Let's talk about junior lien. Specifically with a junior lien, I had a strategy up front. I was like, okay, I got my first pile of notes. I need to go after them. Go get these guys. And I did. I was very aggressive. And I would go back to the hedge fund. They'd say, you know, we see what you're doing. It's all good. You're making money. I get it. We're not doing that. I said, well, what are you doing? We're not in a hurry. You're not in a hurry? Well, why not? You know, I need the money. I guess you don't. Well, we're going to make more money than you are. Really? How are you going to do that? I said, well, here's the state of the marketplace. First, which are in front of you and are your biggest exposure. Are not foreclosing right now. They were. They're not now. And the market's recovering. It's going up. So they said you're going to settle this hundred thousand dollar note for $30,000 today. We're going to wait, we're going to wait five years. We're going to sit on our rear and do nothing. We're not in a hurry and we're going to settle the note for a full value or $90,000 five years from now. I was like, wow, okay, different strategies. There's an aggressive strategy, not so aggressive strategy. I kind of learned that as I gone down the road. But I turned it into a John Wooden ism just for you.

Thank you.

All right, let me kind of frame, you know, the 10amazing insights which is what I was paid to do. Not really paid, but just here for the non performing junior league. I kind of talked about that already, why it fits in my plan. When I saw that, I said I can buy a first okay for this much, 70, 80 cents or a lot less sometimes, but not in a great area. Or pay this little option price for a junior lien on a single family house, what is the best piece of collateral on the planet? I used to be a commercial real estate guy. I was the top commercial real estate broker in Orange county in the 80s. And I used to think houses were for housewives. That you know, you just look at the drapes and the color of the bathroom. I was like, yeah, that's not me. I want to talk about the power and the parking lot and business deal. $2 million done. Jack Miller talked me out of that. He said when things go down, and they did the last five, six years, right? In this town, about 70% single family houses, people don't get tired of living inside. They'll leave their industrial building, their office building, their retail building, all that property. But their house, they'll stay and live there. So my houses, they went down in value, but guess what? They still rented. I kept them clean. I rented to the right people. I had the right houses. A single family house. So once again when I saw this junior lien opportunity and they talked about it a lot, so I'm not going to it just my eyes went boom. That's it. That's it. I had a plan, I knew what it was and this fit my plan. Okay, does that make sense? Alright, number two people ask me, they say, is the opportunity still there? You started this thing five years ago, Gordon. You were buying notes. Forget that. You kept saying I have that. I don't think we're going to have 300 people in a non performing note seminar in five years. I don't. We didn't five years ago. I don't think we will in five years. This is an opportunity. They're buying bank paper. Will there always be bad notes? Absolutely. But this glut we've got right now gives us a great opportunity. So. But right now, my brother has just joined my team. We went back to New York in the summertime and visited all the hedge funds, a lot of which are here, and said, you know what? Are there still notes? He wanted to join me. I said, well, let's see if there's a business here still. Here's the bottom line. I'll make it quick. There are more notes now than I had ever seen in my whole five years. Right now, just so you can kind of see the window. More notes, more product on the market right now. Now people come back and they say, well, it's expensive or it's this or I can't get the ones I want. It was never easy, guys. It was never easy. But the market is there. The market is there. Does that make sense? Yes. Talking about easiness, this is my favorite part of my presentation, believe it or not. Because I watch these guys that have come, the Shondors, and the different people here that have done this business. Now, there are certain characteristics of people. They're extremely tough, they're focused, they're driven. I tell people, I say, I'm very passionate about this business. So are they. I saw a thing on Steve Jobs, the founder of Apple, and they said, you know, what was the one word to characterize Steve Jobs? Somebody said, passion. The guy lived his deal. Lived it. Another guy, Elon Musk. Anybody heard of him? Oh, yeah. PayPal, Tesla. He has the biggest solar panel company. The guy sending rockets to the moon. This guy's amazing. Total passion. If you have a passion for this business, I urge you, this is a great opportunity. If you don't, though, it's just too hard. This business is too hard. Have a passion for it. Know that you do. You'll see the people that do it. They're there. Like the guys who saw come up here. They got a passion for it. Let me tell you a story about Ernest Shackleton, who in 1900, had an expedition to the South Pole. So in the London Times, he put an ad in the paper. It said. Here's what it said. It said, men wanted for hazardous journey. Small wages, bitter cold, long months of complete darkness, constant danger, Safe return, doubtful. Honor and recognition in case of success. That's the Junior League business. Guys, this ain't easy. I'm gonna tell you a Jack Miller story. He has great stories. Jack had a guy who's 25 years old, say, hey, Jack, you're 75, I'm 25. How do I get started? What would you do if you were me? And Jack said, well, he said, you know, I wouldn't do it. And he goes, he wouldn't do what? He says, I wouldn't even start in this business. He says, why don't you do this? He goes, get a, get a trailer. He says, go down to the river, set up, get a fishing pole, a good bottle of bourbon, some good music. Just enjoy yourself. Just relax. Find some good government program and just relax. He goes, this is too hard. It's just too hard. So people come to me, they say, you know, I missed that part about the too hard part. I remind them every time, this is hard, very hard. The guys you're seeing, the stories you're hearing, it's tough. So I always want to make that point. This is not an easy deal. Does that make sense? Yes. But I always finish with this last one. I say, might it be worth it? From what you've seen today, might it be worth, if you're that kind of guy, if you can look up the drain spout and have rocks fall on your head every day and constantly, persistently go forward like that, like the guys you've seen up here, you need a passion to want to do that. But is it there? Yes. Why seconds is number four. Why seconds? And you've heard a lot of people talk about it. I'm not going to dwell on it. I would say this though, go to my website, realestateandnotenvesting.com I wrote an article, it's called the bulk reo game. It was the best article I've written about my journey. I said, okay, there's first and there's seconds. Most of the first that I see are on C, D and F properties in bad areas of the world. People say, well, you can buy those for 15, 20 cents on the dollar. I'm like, I wouldn't want them even at that price. You couldn't give them to me. So I'm not that guy. I have got, you know, through the experience with these guys, quality single family houses. That's what Gordon invests in quality. I haven't found a decent price on quality first liens on single family houses. I have found it on seconds. So. But read that article. It kind of gives you my story on firsts versus seconds. Another thing, I mean, once again, Better quality product. And the sub2 thing, I can foreclose from second position, which I'll go over in a minute. This might be over some of your head, but that's okay. And own the property subject to somebody else's loan. It's amazing. I tell people, I say, look at your plan. I'll talk about that in a minute. But don't end up in your life with a pile of junk. Don't end up with a pile of junk. You can get quality houses by a junior lien. And I call it jamming your foot in the door. Jamming your foot in the door. They can't walk you out of a deal you don't belong in. For five, $10,000, you've got a second lien on a $500,000 nice house. You don't belong there. For $5,000, you can do it with a junior league. Okay, My best, worst and average deal sound interesting. Anybody want to talk about that? Okay, let's talk about. I call it Sunset Boulevard. How's my time looking? What does that mean? 15 minutes. Okay. Sunset Boulevard is in Hollywood. Anybody been there? Yeah. Yeah. So I'm going up to 405, turn off on the Sunset at the top, down palm trees, driving down the road. Nice. Sunset Boulevard. You got the troubadour, the Whiskey a go go, all these great places. Why was I there and why am I telling you this story? Well, there's a place called the Oasis Fut Spa. And I said, I just bought a note on a house in West Covina and the owner runs the Oasis Football. That's where the cash flow is coming from. On Sunset boulevard. In the heyday, 040506, they had three foot spa places. They only had two. Now, I figured that out by driving by, and I wasn't sure what a foot spa was. I was like, oh, this might be not the greatest place. So I should find out because this is the income source for a note that I was doing. So I go in there, legitimate place, very legitimate. Man out there massaging your feet. You got a big screen, music. It was nice. They just painful the way they did it. Like stabbing knives in your feet. But 30 bucks a shot. Place was full. I said, okay, this. This is a. This is a legitimate business. And lately, what's happened in the last year, store three opened up again. So why am I telling you this? There's a house that has a first on it. Let's say it's worth $400,000. First for 300. That's performing and a second for 100 that I bought for about $12,000. Call up the borrower and say, hey, we need to work this out. Okay? We did $700 a month for 30 years. Okay? I got a little bit of money up front. He calls me back a week later and he says, you know, he says, would like to pay that off earlier. Could we do another 300 on top of that? And I said, well, any check with management, yes, you can. He didn't have any comment about that. He's not a used car guy. He was okay with that. Thousand dollars a month pays me on clockwork for about a year and a half. I went back and had another foot massage just to check things out. Business is good. I can kind of see it. I'm watching it. He doesn't know I'm there. I'm just in the building getting my feet massaged. Okay? But he calls me and he says, gordon, he says, you talked about a relationship when we first talked. I said, you? Yep. And he goes, and I paid you on time every month. I said, yep, you have. And he goes, what can you do for me? Can you lower the interest rate? And I said, let me check. I said, well, I'll tell you what. If you will increase your payment, we'll drop your rate from 5 to 4%. How's that sound? He says, yeah, guess what? He's paying us now every month. My father's right there. Gordon Sr. Stand up, Padre. What's he paying us now? Yeah, so my father's the CFO of our company. Amazing guy. Runs our notesmith. Our T value, runs the books. Amazing individual. So 1600 plus change a month is about 20 grand a year. He's already paid me 40. Okay, 20 grand a year times five. Five years. About 140 grand for my 12 grand investment. That's a good deal. Are they all like that? No, most of them are like the used car guy. About 300 bucks a month. That's my best one. One of my best ones. My worst one. Let's talk about Texas for a minute. We've got some Texas people here. I call it the Texas Two step. I had. Once again, in Texas, they foreclosed very quickly in 45 days, which sounds good if you're going to foreclose, but maybe bad if you're going to be foreclosed upon. So I saw this pool of notes. Paid $100,000 for this pool of 10 notes. One of the notes was on a house in Texas. Nice house. Mansion in Southern California. $500,000 house that was on the market. The whole. The loans were 300 and 100. It was selling for 500. And I was like, wait a minute. The sellers don't even know this is on the market for sale. It's going to sell. I'm going to buy the note for ten grand, the $100,000 note, and get fully paid off. That'll pay for the whole pool. I'm like, rock on. That's the best note in the whole thing. So I go and make one of my vacations. Okay, guess what happened? I got foreclosed on, got wiped out. So what I found, and here's my philosophy in this business is you're paying a little bit of money for these junior liens. Buy a bunch of them. And don't try to analyze. This one's the gold plated one. This one's not. You'll be wrong. Most of the time I'm still wrong to the point where I finally admitted it and said, I'm not that smart. And you can't tell. You do a lot of homework, put your research hat on and say, I think this is good. Read the credit report and you can tell a lie. But I thought my best deal turned out to be my worst deal. And an average deal. I talked about that, about $300 a month. Talk about that guy. Okay, who's that guy? Let's talk about Vegas here in particular, because my parents are here and I work in this market a little bit. It didn't seem fair to me and the current administration said everything should be fair. So I wanted to go on with that, that some people got to live in their house without paying for four or five years. And I was paying my mortgage every month and I didn't get to do that. So I said, how do I get to do that? How would I get to be that guy without ruining my credit? Well, guess what? You do. You buy a junior lien and you foreclose. Now you're that guy. You're not paying the first and it might take three, four, five years for them to foreclose on you. I've done that. So going to the bank and getting a loan. No, become that guy. Go buy a junior lien. Foreclose from second position. You own it. Subject to the first. The first is still there, not being paid. And sometimes they might foreclose on you right away. Sometimes they may not. Let me tell you one where they're not. Where they did actually. So there's a house in San Diego that having some financial trouble she moved out. We foreclosed from second position. The first said, hey, what just happened? Well, we had to protect our position and we foreclosed. We now own the home. What about her? She's gone. She moved on. She's out of the house. It's empty. We're gonna foreclose. The first said that. I said, okay. I said, hold on. I said, we have a right to protect our position. What do you want? You want us to pay you off? You want monthly payments? What do you want? I said, we don't want nothing. We don't want to talk to you. We're foreclosing. We said, no, you don't get to do that. And they said, huh? So they blew us off. So we notified them legally and everything like that. They went ahead and foreclosed. So now we're in a legal dispute with them over that, which they agree they're wrong. They illegally foreclosed on me. Two years has gone by. The house has appreciated from about 250 to 400. I'm gonna end up owning that house. I made him an offer of $25,000. I've only got 12 in it already. How about that? So more to follow on that one. But you can do some amazing stuff subject to with the junior lien if you have a little mockery like that. So I have another one in Sacramento. Let's talk about that for a minute. House had a $70,000 first performing, paid on time every month. A $30,000 junior lien that I bought for about $3,000. At the time, the house was worth about 70. In Sacramento, the house is now worth 170. We contacted her, we sent her all this stuff and all the right stuff. Would not contact us. We foreclosed. Still won't contact us. We tried to evict her. Still will not contact us. So we said, you know what, let's just do nothing. Let's just not hurry and just sit back and do nothing. So the bottom line is the house is now worth 170. We own the house. She still pays her first every month. It's been three years now. Interesting stuff. These are things with this junior lien deal that are out there. So how's my time? Let's talk about good debt and bad debt. I love this topic. Good debt and bad debt. What if you could raise your skill level in bad debt? Would that be a, you know, qualification in your tool belt that might help you even with good notes? What if you didn't fear bankruptcy and foreclosure? They Were something that said, you know what, I've dealt with it. It sounds pretty bad. It ain't that bad. It's actually good sometimes. I have a friend that built up a five million dollar portfolio of seller finance loans where he would basically pay 78 cents on a dollar. Three years later, a third of them, a third of them aren't paying. They're either non performing, sub performing, Some strange thing going on. I'm thinking, you know What? He paid 70, 80 cents for his pool of notes and a third of them aren't performing. I paid 10 cents on the dollar for my junior liens and half of them are performing. I'm successful because I got half mine performing. He's not because two thirds of his are, because I paid a fraction of the amount. But if you could become competent, good at, you know, those nasty things, foreclosure, bankruptcy. I love bankruptcy. I mean, you can sell me all the bankrupt notes all day. I won't pay much, but I'll buy them. I'll take them off your hands if you become a problem solver like that. So let me also put that term in a different way here too. The way I buy notes now, I've migrated from, everybody gets in this business, they're like, this sounds crazy in general. To start with, I'd like a pristine pile of notes, junior liens, non performing, meaning the first is performing. There's equity, good house. Those are hard to find. You will not find many of those. You will not buy many notes and you'll pay a ton. Okay, Once you get beat up a little bit and realize that the bad ones aren't that bad, and all these things we talk about, bankruptcy, foreclosure, it's not the big deal, you know that. Then you'll say, okay, I'll buy the junky stuff. These hedge funds that go to the big banks, they say, hey, we're gonna buy your notes. They say, will you buy them all? We just want to buy the good ones. Banks is out next. You gotta buy the whole stuff. You gotta buy all of it. And they do. The ones that are successful do. So when we go to the hedge fund and say we just want the good ones, they're like, we just got the crap beat out of us by the bank and now you're coming to us saying you just want the top, little top of the pyramid. Guess how that works. But when you get in the business, I would rather pay less for a bad pile of notes, a bad, bad pile, than a good bad pile and pay, you know, does that make sense? If you say, I got no bad notes, I'm like, that's what you were supposed to get. These are bad, bad notes. Oh, okay. As opposed to good bad notes. But if you showed me two piles of debt, 100 notes here and 30 notes here for the same price, guess which pile I would buy. 100 notes. Think about that. All right? The results. Anybody interested in that? Does that sound vinny? Yes. Yeah. People come to me and they say, you know, you sound like a good guy. You seem like you know what you're doing. We'd like to give you some money. Here's what I say. I say, okay, here's the terms. Warren Buffet kind of gave me this idea. Million dollars. If you gave me a million dollars, here's what I could do for you potentially. Here's the terms of our deal. You give me the million dollars, three years, because I'm going to show you the results that I've done. Three years. It took three years. A long time. Most people gag right there. They're done, right? And oh, by the way, don't call me. If you call me, you get a check in the mail, we're done. So I'll split it with you. 50, 50. You give me the money, I'll go out and buy notes at 10 cents on the dollar. I'll buy $10 million worth of notes. I'll get half of them back, re performing, short sales, some type of thing back to me. And so we could split that. So we had $10 million worth of notes that we bought from the million dollars cash. 5 million of it actually got re performed in some form or other. Two and a half. Two and a half after three years. But my terms are, don't bother me. No one's taken me up with that deal yet. But that's exactly what we did in our first fund. We put $300,000 out, just a general number here. We bought 30 non performing junior liens at about $10,000 a piece. After three years, 60% of them settled, meaning they went to short sale. They paid us off. 40% of them did what I really like them to do, which is re performed. We created a new note. I bought your note for 10,000, which is irrelevant. It's $100,000 note. You sign a new note that says, gordon, I owe you $100,000. I'll pay you $400 a month, whatever it is, that's a reaffirmed debt. We've got a million dollars in reaffirmed debt. All of our 300k back and about 5 grand a month. That's the numbers. All right, here's some philosophy I'm going to bore you with a little bit. Stay small, keep it all. Jack Miller used to say. He said, make your gross your net. He's like, really? Okay, I've had employees. I didn't like being one. I don't like having them. I got my family now. I got my brother, my father. They work with me. It's great. We all get great skills. But I don't want, I think about it, go, do I want to build this up? I see people just going to explosion. It's not me and I'm not judging it, but I'm saying that Mike Cantu is a good friend of mine, says, he says he went to business college and got one thing out of it. One business teacher said, he says, when your outgo exceeds your income, your overhead will be your downfall. Think about that one. He also says, he says it'll take five years to make it in this business. But you don't know which five. So can you stay around long enough to be there for that five? So that's my own philosophy on the whole thing. I've got a poster that I made and you think of all the posters I made. Why'd I make this one? Look, it's a flipper. If anybody saw that 60s show, there was that dolphin in the guy's backyard that used to come up all the time. But if you look at him, he doesn't really have a smile on his face and he has a chain attached to his tail there. I say flipper. No happy endings. Meaning that I define flipper. Flipperism as, you know, I was a broker for a long time and I still am. And the longer I did it, the broker I got, you know, it's a highly taxable business. And these people say, well, I'm an investor. I say, really? You're an investor? Okay, do you own anything? Well, no, I buy and sell. I trade, you know, that's not being an investor. I see so many people and I'm not knocking it because I do it too. You know, you have to pay the rent and you have to have income coming in. But make sure that you're keeping some of these deals. I don't sell my notes. I fix them and I keep them in my ira. I get tax free or tax deferred income in my IRA for my notes. I don't sell my notes. They're too hard to get and they might not be here in two Years. Why would I sell them? I'm not going to flip them. I don't flip houses. I buy and hold them. 20 of them at $500 net to me apiece is 10 grand a month, which lets me go to Europe for five, five weeks and not call anybody back. So let's just talk about one more thing here. I think my time is close to being up here, but let's talk about this note that I've got now. I've got this guy's note, and it's a 30 year note. I'm going to make $300 a month. But, you know, not now. Gas has gone down a little bit lately, but it probably will go back up again, as well as food and everything else. Inflation. I'm getting $300 a month now, but 10, 20 years from now, that might not buy me much. And then one day, 30 years later, it goes poof. Terrell Sheen taught me a great. He said, buy a property and buy a note because the property will appreciate. The rents might go up. It's infinite. It always gives you income. The note's great for cash flow. It might, you know, mitigate the loss you get on the house for the first part of the years, but eventually that note will pay off. So be careful of being a flipper and also of the notes. Realestateandnoteinvesting.com is my website. Let me finish with this. Here it comes. I think the best thing you can do in the next three hours. You don't realize it, but this room. Amazing. You've got everybody here. I had to hunt these guys down for five years and deal with the pain. They're all here, the servicers, the guys that sell the notes, the guys do the foreclosures, the guys that sell T value software. I use all that stuff. They're all here. You got three hours. Don't waste it. Build a relationship. I'm done, Sam.