EP: 378 - How to be the bank instead of a landlord

Welcome, ladies, to The Real Estate Investor Show, providing inspiration, strategies, and insight to empower women investors to live balanced and financially free lives. Now, here are your co-hosts, Liz and Andresa Guidelli.

So in today's episode, ladies, we have Lauren Wells. We go into all things note investing, and it's such a niche. But what I loved about today's episode is we actually really diced dissect that niche from everything with why she began note investing to the type of strategy she takes. And one of the biggest things I think you'll get out of today's episode is her, what she talks about due diligence. We all know due diligence is incredibly important in any niche, but this is unique, right? And this is a little bit like, what do you really need to do? Because every state is different. Every township is different. And she goes into tons of neat little details so you can set yourself up for success for this strategy.

Especially in this market. I think that we are all exploring different ways, different opportunities, and I believe that notes are going to be looked at quite different based on what's, what's happening and what the projections look like. And I really like her approach of being the bank instead of the landlord and how she created a fund and how she's managing everything with her investors right now. Full, full of great, great tips if this is a niche that you are looking to get started.

Welcome back, ladies.

This is Liz and this is Andresa Guidelli.

Welcome back to The Real Estate Investor Show, where our mission is to empower women to live a financially free and balanced life. We do that every week, twice a week, Tuesdays and Fridays, our episode's release. Thank you for being on our journey with us. We've been doing this for 5 years, for 300 episodes, and we have another amazing, amazing woman on our show today. Lauren Wells, thank you for being here. Thank you for joining us and excited to jump into notes and all that good stuff that goes along with a very interesting niche that needs to get talked about more. So thank you for being here.

Yeah, thanks for having me, and congrats, over 300 episodes. That is You know, awesome. That's awesome.

Thanks.

And, uh, we, we appreciate when being back on this journey. One thing we like to do when we, we kind of kick things off is we like to share a quick tip, story, something coming up for us, because we always like to say we're, we're on this journey with you. And as we learn and grow, uh, our investing portfolio, our business, ourselves, we're sharing those things with you too. So Andresa, what's going on?

Listen, I've already started laughing about the situation, right? Because for all the parents out there, when I talk about extracurricular activities, seriously though, our intention is very good, right? So they can learn different sports, different skills. But at the end of the day, we're freaking managing emotions. That's what it is, right? So Lorenzo started, uh, taking judo classes, similar to karate, right? Love it. I love it. He was not loving it at the beginning, of course, because they're never done that before. He masters soccer, he's great at it, but not at judo, right? And Sensei Lorenzo is taller compared to the other kids that are in his group. And there is one exercise there The sensei puts two kids against him, and my child had several, not one, two, or three, every time a meltdown. And he says the same thing, not fair, two against one. And I was like, universe, help me out here. What is, what can I say to him? Because I also think it's not fair, but at the same time, not my job. Right? Sensei's there. He's doing it over and over again. And he, my son is like failing over and over again and having a meltdown. And then I, another day he came and he said the same thing. It was not fair. And then I just like spit it out what's coming into my head. I was like, you're not playing a fair game. That's not what you signed up for. And let me tell you something. If Sensei is putting 2 people against you, it's for you to get the skills that you need. So then when you play against one, it's gonna be a piece of cake. At that moment I look at his eyes. He's like, oh no, I got it. Why you didn't tell me this before? I was like, oh, I guess I also didn't know, right? And then he walked away. And then in my head I was like, what a hypocrite I am. For saying that to him. Because many times in my own life, I say the same thing. I say, this is not fair. That is not fair. Indeed, many things that happen to me, and I'm sure to both of you, are unfair, right? But that's not what we are signed up for. It doesn't say it's the Real Estate Investor Show, not the Fair Show. Right? So we're talking about different, different things here. And as I was talking to him, I was like, I should look in the mirror and say the same thing to me. Well, maybe the universe is giving you two people in order for you to gain the skill sets that you need to run your business. So for all the ladies out there that are hypocrites like me, let's, let's get together. Let's get together. But that, that's my story.

I like that for the week. I like that a lot. And it is, it is funny though, right? Your Children are this, like, amazing reflection. I was giving advice to Zach last night, and, and, um, you know, it's just funny, right? Because when you're, you're opening your mouth to that, to him, you're like, this is good advice for me too. Um, and that's maybe what it's about, right? Because they're our teachers, you know.

I love it.

So, Lauren, without further ado, let's jump in. So for you, Lauren, what has been the lesson that's taking you the longest to learn?

I think it's something I'm still learning, and I think having kids has made that even more of a learning lesson that I'm journey than I'm on patience. You know, right now, for example, in my own investing journey, I want to, I'm like, I wanna buy, I wanna buy, I wanna buy. I'm like, no, you need to be patient. Right now is not the time. Like, unless you have some opportunity that comes to you off, you know, market or have those relationships. Right now is not the time to just go, you know. And so I think patience in where you're investing, who you're investing with, in the relationships you're building, and in really looking at your timeline as your own timeline. So I think when I first started out investing and kind of getting more into real estate, it was seeing all these people who are significantly younger than me And like, I'm a millionaire overnight and I invested in these multifamilies or these, you know, I fix and flipped all these homes. And like you said, Andresa, like, well, that's not fair. You know, I'm— I have more experience like I have probably, you know, so. But like you said, life's not fair. You're not playing against them. You're on your own journey. So like, what does that look like for you? What's very different if you're a mom of 2 kids, you have a mortgage and you're just starting out on your investment journey. Versus someone who might not have any of those responsibilities. So I think kind of pushing your ego aside and having patience and setting realistic goals and just kind of like, I think one of someone had mentioned this the other day to me, like, wealth isn't built overnight. You know, it's a journey. We see only the highlight reels of what people post on social media. But really, I mean, I'm sure you guys can attest to this. You know, you didn't wake up one day and say, I'm living off all my passive investments. You know, it's been— it's a journey, and you have to take the baby steps to get there and then build that snowball. So love it.

100%. So during this, this episode, we're going to talk about the power of being the bank instead of being the landlord. And I wanted people to hear your story and how you pivot, how you not like pivot to the, to the sake of the market, but pivot to align to your goals and to your lifestyle where you want to be. Could you share a little bit more with our audience?

Yeah. So I actually have extensive experience in the being a landlord space. That's what I grew up. My parents were landlords. I saw that. And there were a lot of benefits to it. You know, there's that passive income. But there's a lot of 3 AM calls. My toilet broke, you know, this needs to be fixed. Tenants didn't pay rent, you know, whatever it might be. And so being the oldest, I'm the oldest of 3 girls. When I graduated college, I was like, I'm not doing anything real estate. I'm going to forge my own path. I'm going to do things differently. Went into like tech startup world, went that route, realized as I had a family, like, I want more time. I want more time for my family. I want more time. I want to own my time. And how do I do that? Through real estate. But I didn't love the idea of being a landlord and dealing with tons of tenants and issues and having to, if it's not a local property, then having to outsource and build a team. That's just not something that really appealed to me in my phase of life. So I stumbled upon mortgage notes. I have a mentor who, you know, is much older than me and basically had said, hey, I've been looking into mortgage notes. I am too old to start something new. I don't have that energy. But this is a path you should look at. And I think, you know, the first thing is having someone who you can lean on to give you advice, whether that's, you know, someone in the space, someone who's just a mentor outside. Really helped. And I had never heard of mortgage notes. I knew what a mortgage was and a note was because I owned my house, but I didn't really know that you could invest in them and become the bank. That was a very new concept to me, but I liked that appeal as I started digging into it of, oh, this is awesome. I can basically assume the position of the bank and just collect checks. I've read probably When I go into kind of my research and analysis phase, what I like to do is look at everything that can go wrong. Like, give me a reason not to do this. Like, what are the red flags? Talk to as many people in the space as possible. Is it an inventory thing? Is it a barrier to entry as far as like costs? Like, why wouldn't I do this? So about 6 months or so after like reading every book on the world, In every book possible about mortgage notes and investing in debt, and then talking to probably over 20 different people about the space that had been successful, I decided, okay, I'm going to start building my own portfolio. And I really started actually because of the barrier to entry, investing in a first position lien. I started actually investing in second position mortgage notes. I was like, this is great. It's a lower barrier to entry. And we're talking like I could get a mortgage note for less than $10,000 for seconds, just for perspective. And, you know, I built out my systems, my processes, you know, scaled my portfolio of seconds and then eventually added some firsts to about, you know, 30, 40 notes. And what I realized is it was great. I was essentially just collecting that income, but there was a lot more that went into it on the front end as far as like due diligence. Vendors, you really had to have your own systems in place and your own vendors in place. So it wasn't essentially mailbox money as I had thought it would be, but it was much, a much better avenue for me and my family, you know, because it would just ebb and flow. You know, you'd be really busy and then you'd be like not busy for a few months. And so it really worked out well for my family and I to kind of invest in that different way.

Let's break that down even more. So walk us, walk us through the first note that you bought. So you're, you said you were in second position. Was that the first?

Yeah.

Okay. And so are you, you're buying this from whom?

Yeah. So that's like the big secret. It was like, where do I buy these notes? Who do I have to know?

Amazon, right? Anything. I think Amazon. Can you guys believe it? Oh my gosh, how cool that would be. I should call Jeff Bezos and say, come on, we have an idea here.

Get some mortgage Notion.

Yeah, that's right.

So, you know, it's a very niche community. And so I think after attending different, like, webinars and conferences and speaking with people, that was always what I would ask. Because as you know, you need to have the money and the deals. So where am I going to find the notes? I have X amount of cash to work with. I know what I need to have as a buffer. Where am I going to find these notes? And so I got on a few different lists from different brokers. That sold to individual investors in tranches of like, they would put out, say, a tape, which is essentially a list of different mortgage notes, and you would bid on them. Now, kind of the hierarchy to give people an example is you start with a Wells Fargo, for example. They will sell to a huge, another institution like a BlackRock. They will sell to a fund. Who will then sell to maybe another fund, or maybe you'll get— go straight to the broker, which will go to individual investors.

I see.

You're probably like 3 or 4 steps removed. If you're just starting out in note investing, you're getting the hairy notes is what they call, you know, they're not super clean. If they're performing, meaning they're paying on time, you're probably still going to pay a premium for them.

I had a quick question about the performing and non-performing, right? Let's Let's talk about that, that piece a little bit. The one that you bought was performing and non-performing, and why you made that choice.

Yeah, great question. So for people who don't know, performing means it's a borrower, a borrower who's paying on time as expected per the terms of their note. Non-performing means that they have delinquency of 90 days or more. So it could be anywhere from 90 days to a couple of years when you're acquiring this note. I specifically saw more upside in investing in non-performing seconds because, you know, and there's a lot of due diligence that goes into that because that is kind of a risky move if you're not in first position. So that really was where I saw most— a bigger payoff. I could have chosen to invest in performing, but the margins were small.

And how did you mitigate? You still even though it's much riskier, as you were saying.

Yeah.

How did you mitigate that risk going second lien position and non-performing?

Yeah. So when you get a tape from a broker of assets, essentially it's a glorified Excel spreadsheet with all of the information that has to do with the borrower, the asset, the property, their payments, how many they've missed, when their last payment was made, where it is in legal, if it's in the legal process. So you essentially take that tape as kind of word from the broker, and you give them what's called an indicative bid. Now, this is like probably where a lot of the heavy lifting comes into mortgage notes is your due diligence. So that indicative bid, think of it like entering into an agreement if you're putting a bid on a house, you know, you know, you're going to have your escrow period. But in the initial due diligence, I would look for only second position, I would look for— they would have to have equity. So if I looked at the total balance, the first, the second, and what the value of the home was, I wasn't going to go over 70% loan-to-value. And that was with covering the second, you know, I needed to make sure that if they went to foreclosure, I was going to get paid as the second position, you know, so that was probably the number one thing I looked at before I would give an indicative bid. I also would look at specific states, like I would not go near New York or California. I liked Georgia and certain states that where it was easier to work as a borrower in second or as a lender in second position. So it comes down to knowing the value and really the rules of the state you're investing in. And every state is different. So you definitely have to make sure that you have a team of attorneys or vendors, attorneys that you work with to review. But once you give your indicative bid, the seller will come back and say, great, we accept. Then you have like your due diligence period. So your escrow period, that's where you go and say, okay, now I'm going to do my own research and make sure that everything you put on that tape was accurate. I'm going to pull title, I'm going to have the attorney review it and make sure all the allowances and assignments are in order, that I actually am in second position, not third or first. In some cases. You're going to have someone go by and check out the property. Is it in good condition? What is it like? What's your BPO on this property? And then you're going to look at the borrower as well. In second position, it's really important to look at the borrower specifically and any servicing notes from the prior lender. Like, what caused you to be behind? Was it that you lost your job?

So I'm curious too, the ultimate goal with note investing is you're, you know, you're buying this non-performing note, right? Obviously. And to your point, you're doing due diligence on the property and trying to get a sense of what's going on during this due diligence part. But like, what's best case scenario? Like paint the picture of this strategy.

Yeah.

Forgive me if this is a stupid question, but what's like best case scenarios? I know like when it comes to multifamily or a lot of other niches, Okay, what's best case scenario? It probably goes up in value, you're making cash flow, and when you sell, you know, investors and yourself are making a 35% return on investment. Okay, thumbs up. So paint that picture if you don't mind, remote investing. So the due diligence, what's that end goal?

Yeah, so when I evaluate, there's quite a few different exit strategies you can take. Honestly, the end goal is whatever gets your money back like quickest. It's time. So foreclosure, a lot of people think like, oh, I'm going to go into notes, I'm going to take back all these properties and then I'm going to renovate them and rent them because I got them super cheap. That's the probably 90% of investors who go into this think that. I myself, that's how I started out. And what I found is that's actually not the quickest way to make money. The quickest way to make money and turn a profit and reinvest is to get your borrower paying. So you're really looking at that borrower, what happened, and because you're purchasing, and this might be a crucial component I left out, you're purchasing these mortgage notes at anywhere from like 40 to 60 cents on the dollar if they're non-performing, especially seconds. So you're getting a huge discount off of the unpaid balance. So if the balance is $100K, you're getting it for $50K. That gives you a lot of wiggle room to work with the borrower. To get them back on track. Because in my experience, not every borrower that's not paying is a person who's going to say, I'm never going to pay. I haven't paid in 3 years, like, screw you. Typically, there's some sort of life event that happened. They got out of hand, and then it kind of snowballed. They have all these arrears, and they really don't know what to do because a traditional bank would say you need to reinstate 100%. You know, there's nothing we can do. So, or you have to refinance, which in these— today's market doesn't really help anyone. So with— you essentially become a private lender. And so whether that's, hey, you can make your monthly payments that you used to, great, let's start there. And let's add, you know, 4 quarterly payments a year to get you caught up with your arrears, you know, or let's do a 6-month forbearance plan and see how it goes, paying a little bit more. And if you can double your monthly payment, we'll wipe out the arrears. So, you know, you have more flexibility, and then you can season that note, meaning get them to pay for 6 to 12 months, and then sell it as performing. So that, or you can just keep it and they're performing, and then it really is mailbox money. So, you know, I think it really depends on how quickly you can move through that process. For example, I— you can probably work something out with the borrower in 3 to 6 months. Georgia, which has a quick foreclosure, you know, timeline, 6 months, 3 to 6 months. I had a second there in Georgia foreclosed. Family didn't want the property. So, you know, it was an easy foreclose from second position, which a lot of people don't know you can do. But it took me a year to receive a check, a full year later. So yeah, the foreclosure process, process was quick. But because it had to go through the judge to sign off on additional funds to be released, and then to write the check, I probably checked in with my attorney every month. And it took a full year almost to the day to get paid out on that. You know that I would rather the borrower wanted to stay in the property and work something out and been receiving income that whole time.

That makes total sense when you look at the full picture, right? When you look at the full picture, and I think I like this approach. I haven't, I haven't heard this before about you're mixing notes, and then you, you have the flexibility to become a private lender. But I also think there's a social impact there. You're like, you know, also contributing to, especially after COVID, people are going through different things. You know, in the banks, you are a loan number, right? And then in this case here, it has this personal approach that you're looking at the individual as a human being, as it should. And not everybody wants to be in default on purpose. People are going through different things.

And I think this—

there is a social impact that I don't think people talk too much about. Um, and because when people talk about social impact, they think, well, but I am in business, this is not a nonprofit. But then what you're saying makes a lot of sense because the goal here is to continue receiving the money. So whatever that looks like, because during that 12-month period you received zero.

Yeah.

Right. And then the average of all of it.

Yeah.

It's positive if you were receiving at least some something out of it at the end.

100%. And, you know, I'm not— I think people think you either do good by people or you make money, you can't do both. And there are cases where we have had to foreclose because, you know, it just really didn't make sense. So the borrower was actually an investor and it was their second property and they were like, we're not paying a dime. And so yeah, you're kind of forced to go foreclosure, but it can be a win-win for everyone. And I think that that's something that's missed when it comes to investing is like you don't have to go the foreclosure route, just like investing in real estate doesn't have to be specifically like a physical property either.

Makes sense. I'm curious though too, because your original comment was about not wanting to be that landlord, right? You wanting to be the bank. So it sounds like you're the bank and you're doing some negotiation, right? Direct to do that homeowner. So, you know, I'm just curious because you have to do that with tenants. So I'm just— walk me through how it's a little different in a sense, you know, because you're still not dealing with toilets, but you're still dealing with and managing the negotiation process. So what about that makes it a little different? Because sometimes you're negotiating with tenants, quite honestly, to pay their rent. So I don't know, just curious to get your insight into that, how that feels different from the traditional route.

Yeah, so well, there's quite a few things like we— you actually are going through what's called a servicer. So you're not directly talking to the borrower, you— okay, having instances, but typically, you essentially have a licensed servicer, they're the ones actually collecting the payments. Okay, you as the lender, and you know, they're licensed to collect debt in whatever state that your, you know, loan is in, they will do like the outreach to the borrower. And you will be like more of the strategic, like, let's offer them this. They'll collect the paperwork, they'll collect the financials, they'll write it up. You have your attorney draft paperwork, but you're not, you know, back and forth emailing with the borrower. You're more the strategic decision maker behind what, what we can make work.

Makes sense. And you kind of have those options. In all the notes that you personally invested in, how many, how many people were you able to like work things out and start getting paid keep them in their home and get paid before that year or having to foreclose? What percent?

Just out of curiosity, I'd say like 70%.

It's pretty high.

Yeah.

Yeah.

And the other, what, 30% were either deceased borrowers, people who basically were like, there's no way I'm paying you a dime, or it had been, you know, inherited, or it was vacant. So like, those are typically the 3 most common.

And curious too, right now in this economy, right? So people are, you know, there's still a high demand for a lot of homes, right? Foreclosure, I've heard, is low, is at an all-time low in terms of that perspective. So how does that impact, you know, the note investing world? Yeah, just less deals, less opportunity, less inventory, or actually no more inventory?

Yeah, so foreclosures are at an all-time low, but delinquencies are actually up. And in Q4 of last year, we really started seeing more and more inventory come across our desk. And that I feel like we're kind of a little bit— what happens in the market kind of trail, we trail that. So when we see more inventory, that's great, because that means our acquisition price is going to be lower. And that's really where you're going to make the money is like, how— what is the deal I can get on the note? And are they good? So yeah, I mean, everyone talks about, you know, jobs and values of homes, the values of homes we do track, obviously, that's still a number one indicator of how much equity you have. But when you're buying at a discount, you know, you are less concerned about that. Additionally, jobs, that is huge. We do track jobs, because that affects a borrower's ability to repay. And inflation indirectly because again, they're spending more. Do they have enough money to pay their mortgage? But really, I mean, I'm sure what you guys are seeing is what we're seeing. It's pretty siloed to the tech industry right now, and those typically aren't the notes we're going after. I think there's a whole other opportunity there and a different type of real estate investment mindset. But yeah, we're not seeing too much as far as rattling our industry.

So in terms of projections? If you can pull your crystal ball, pull it out. So if you're seeing a high delinquency, is there a projection for that to affect a higher foreclosure rate too? Or—

Yeah, I mean, so COVID really kind of shut down foreclosures because of all the more like moratoriums and whatnot, like you couldn't move through the foreclosure process. Quick enough for it to make sense. I do think that we will start seeing more in the next 18 months. I think these job layoffs, for example, people who moved from, you know, let's say moved to— I'm in Santa Barbara. We had a mass influx of people from New York, San Francisco, moved to Santa Barbara because they're like, I can work remote. I'm with Google, I'm with Facebook, I make a great salary, I can purchase whatever home I want. Well, now they're getting laid off. They have these mortgages at 3% on these huge homes. I do think that we're going to see— I don't know. I think we'll see a lot of foreclosures, maybe again in 18-ish months. I think we're going to start seeing more and more delinquencies. I think we're going to see people who are getting creative and doing subject to because they want to get in to these 3%. I think that—

Have to, right?

Yeah.

So there's a huge opportunity there.

Yeah, that's— I mean, that's where my mindset goes for these next 18 months.

Well, it's all opportunity, right? And I think that's the beautiful thing about our world of real estate investing, regardless of what niche you're in. You know, if you see layoffs, yes, that's not in and of itself— you don't want to see people laid off, obviously. That in and of itself, as a human being, right, you, you feel for those people. As a real estate investor, you do know that's going to impact Motivated sellers go up, and that's when we know we can really create a win-win for people in any niche. And I think people forget that. They see recession, interest rates, and it's very cloudy, but I see opportunity, right? I mean, we're looking at properties in Florida, and these are 10, 11, 12-room properties, million-dollar-plus properties. And in some ways you could say, wow, that's pretty risky in this market. And on the other hand, you could say it's actually not because this could be someone's second home who just got laid off. They can't make the second mortgage and we can get it for, you know, 80% of what it's really worth, right? So we all have to be smart in this market. By no means to, you know, go blindly, but I love what you're saying because whether it's note investing or multifamily or short-term rentals, you have to watch what's happening and say, how can I contribute? How can I obviously create a win-win for these people, not take advantage, but it's a win-win. So I like that a lot.

Yeah. And I think really, like, and I'm sure you guys, you know, talk about this a bit. But I think when I first got into real estate investing, I thought you have to own a single-family home, you have to collect rent. That's the only way to be a real estate investor. And as I've been on this journey for a few years now, I'm like, wow, you can be a private lender. And make monthly income. You can like subject to is its whole own world that I actually would look at. I think it's going to be very interesting in the coming years, but there's just so many different ways to get involved. You can be active, you can be passive. And I think when you limit yourself and think I have to purchase a property to be invested in real estate, it really is kind of disheartening for a lot of people. I think that's where I was when I started. I was like, well, We own our home, but I don't have enough money to buy a whole other property, you know, or maybe I do, but I'm scared because it's out of state. So like, what are some other options? And I think really what you guys do is great, kind of educating people on just that literacy behind investing and kind of growing wealth in all sorts of ways.

And I know it depends, but what would you say if someone's listening saying, you know what, I want to give a go to being, you know, to note investing, I start to do some research. And I also want to make a quick Segway. I love what you said earlier. You said, I read every book, I listen to every podcast. But then you did a third thing that most people don't do. Yeah, you said you talked to like 30 or 40 people in the business. Now I know that's hard for a lot of, a lot of introverts listening to, like, oh, I want to say that I can't make 3. But I think talking to people, it doesn't have to be 30, right? I'm— I, I would love— oh yeah, talk to 30. And just may have probably talked to 3. Regardless of how many That is really honestly the most important part of the 3 pieces. I just want to— I meant to say it earlier. I just want to make that a very quick, like, do that, ladies. Don't forget about— we can all Google things, but if you're not talking to people who are in the business or in the market, you're missing something. You're missing that real-world experience. But I digress. My question was about, in terms of financially, how much money— and I know it depends. People always ask us, how much money do you need to invest? And I hate that question when I'm on podcasts. Yeah, I'm curious from a note investing, just like a ballpark, what would be helpful in terms of how much money do women need, or men listening to, we know, like our podcast, how much they need in general or just get started?

I mean, on the low end, I'd say $30K, but I'd say $50K just in general. Again, you always want to be able to have those vendors you're paying. You have to think about if you have to go legal, there's legal fees. Yes, they're added to what you can collect if you do foreclose, but still money you have to have up front. So I would say like 30, and you'd probably be looking at a second.

And again, upside, what's like the upside? Like, you know, we always say like, what are the general returns of multifamily? What's the general return of notes?

So for a performing, I'd say like you aim for 12 to 15. For a non-performing, you know, definitely over 15%.

Sure.

Yeah.

I would say just like a dilapidated property, you're taking more risk on. You want to— yeah, it makes, it makes a lot of sense. So the bottom line is the fundamentals are very similar to two different niches. Knowing your market, knowing, knowing the strategy.

Laura, I'm curious about like the— of course we are all investors and learning a lot throughout, even though you read books. Podcasts, talk to people. There were things that happened to you that were not anywhere, right? And I, I always say this, everything— it doesn't matter how many rehab projects or constructions I've done before, there's always something that I was like, this is my first.

Yep.

From, from the time that I saw horse hair on the walls and I was like, I thought it was a dead body in South Philly, but it was not, it was a head.

Horsehair.

But I digress. Let's talk about you. What have you learned that were not on the books, podcast, and any other conversation? They were like, I wish I had this before, but now I do.

Yeah, I don't think it was one thing. I think something that I and Liz, you touched on this earlier, really talking to people. So I was at— I was— it was during COVID Maybe someone was presenting online, my current business partner. Was presenting at one of the online conferences about notes, and the topic was like all the ways you're going to lose money in notes. And I had just started diving in and things were going pretty well, and I was like, oh, this guy's awesome. He's going to tell me everything I need to look out for. And he's an engineer by trade, so he thinks very differently from me. So I actually reached out to him on LinkedIn. I emailed him, was introduced finally by a mutual connection. And I, you know, set weekly coffee meetings with him every Friday. And really, it was not— I feel like I didn't really have anything I was shocked by, because we would cover— there's just a lot of minutiae that goes into this industry, because every state is different, and every rule and county can operate differently. So I think really, it's if you're going to invest in notes, know that if you're investing in Florida, it's going to be very different than investing in Alabama. You know, there's redemption periods. I was like, wait, I took back the property. You're telling me they have a year to like redeem after that? After all that? So learn that one. In Alabama, they didn't redeem. But like, you know, I didn't know that that was a possibility. Yes.

Yeah.

I think really kind of, again, attaching yourself to someone who you can learn from and ask those questions about the minutia of whatever asset class or industry you're in proved to be super valuable. And I think, like you said, not everyone is extroverted like me and loves talking to people. So, yeah, I love that.

And now you've segued into creating a fund that actually buys notes. So I'm curious because that's a common path that some women want to take, right? They're buying the multifamilies or they're buying the asset, if you will. Actively, and now they set something up so other people couldn't buy it with them or something larger. So I'm curious, just from a strategic perspective in setting women up for success as they— if they, if, if and they want to scale, if it meets their goals and needs, because we always say it's not about doors or numbers, but if it serves them and serves their path, this is, this is something that a lot of the experienced women in our community want to know about, right? They want to know about how to make that transition. So I'm curious, what, what were some of those steps? And I'm curious, how do What were those steps to make that transition to get into something bigger and be able to buy more? And I'm sure with others. Secondly, I'm curious to get into the— has your strategy for buying notes different now? Are you open to bigger lists, bigger brokers? I mean, or is that just like it's the same when you were doing it by yourself? But I'm just curious to understand those two points.

So, you know, that business partner that I have now, I actually started working, managing all the assets for him, his funds. And it was great learning experience dealing with investors, dealing with managing over 200 assets. What does that look like? And then what we realized and kind of the reason for the fund was there was a lot of, and this is like, I think there's two parts to it. First, I think you need to find someone who's your polar opposite to work with. When it comes to a fund, you need someone who wants to be the front of house, the face, the investor relations, the let's form those relationships with brokers and investors. And then you need someone who is the analytical number cruncher Excel spreadsheet. That's what they love. They could spend all day there. We are perfectly matched in that way. I think having two people like that really sets itself up for success when it comes to a fund. I couldn't personally imagine running this on my own, especially as a mom of two. I don't think it would be possible. But the reason that we decided to partner together to go the fund route was we realized he was working with a lot of non-accredited investors. So a lot of people who wanted to get in had $50K, had $100K, and so we would do joint ventures with them, or we would sell them like a partial of a note where essentially you're investing and getting that principal and interest returned monthly. Well, That was great, but it was a lot of work. It was a lot of individual investors, a lot of K-1s, and really we just realized there was such a market for people who wanted to get in but weren't accredited. And that accreditation for funds is a big barrier to entry. So that's really why we went the fund route and we went not only a fund route, we just went the Regulation A+ route. So that's, you know, for people who don't know what that is, it's basically like crowdfunding in real estate. It's open to accredited, non-accredited, anyone. And as far as like how we acquire notes, well, you have more money, so you can typically take down larger tapes. So I don't think necessarily our acquisition and like due diligence processes or anything like that, they've become more refined. When you're looking at 100+ assets to purchase, you definitely have to have your processes much more kind of like a well-oiled machine. And this is what happens. This is the process they go through. What does that onboarding process look like? How quickly can we work something out with the borrower? All those things really matter when you're held accountable by your investors. And so you do have more money, but you have to have your processes really kind of locked in to do that.

I like that. That's great. Great nuggets there. Lauren, this has been helpful and great. I've taken tons of notes. I'm like, oh, I gotta do some note investing. I always get excited when I talk to people in different niches. But where can the ladies listening learn more about you and follow you along your journey?

Yeah, so you honestly, I, you touched on something earlier, Liz. Not everyone wants to talk to people or reach out, you know, they might not be extroverted, but I found this real estate market niche of women and investors in general are super open to talking to people. So I always say you can email me directly at lauren@7einvestments.com. You can also find me on Instagram @7einvestments, and our website is 7e Investments. But yeah, if I am again, I'm very extroverted. But I also really love more the one-on-one conversations. So I always, you know, again, throw it out there to anyone who wants to connect personally about my journey, about notes, about, you know, other asset classes or just getting started or being a mom and trying to get started. All of that, I love it. So again, Lauren@7eInvestments.com.

Awesome. All this information you guys can find on our show notes. Now we're going to transition to our fabulous 3 questions. The first one, Lauren, is what's the most transformational book you ever read?

Oh, I think I have two. I love the book Relentless by Tim Grover. It is amazing and it's really a mindset book. Um, and then Blue Ocean Strategy. Really, you know, I think something that's huge is look at what people aren't doing and go there. Like, don't do what everyone else is doing, whether you're raising money, starting out investing, you know, whatever it is, you know, be different.

Second question, what's the most powerful routine that you do to create a financially free and balanced life? Whatever balance means to you.

Wake up before my kids get up. Number one, I think people think it's crazy, but I'm like, that's my time. I don't care if it's 4 AM. Wake up, drink my coffee, go for— do an extra, like, some sort of exercise, whether it's a run or a walk. That movement before they get up. And then really financially, like, having a business meeting with my husband about our budget and our finances monthly to make sure, you know, I think budgeting kind of gets a bad rap because people think like, oh, you can't spend any money. The beauty of a budget is you get to create it. And so, but I think just having that monthly check-in of like, okay, are we on the same page? Are we You know, hitting our goals, you know, do we need to adjust in some areas? So I think those two things really like set good foundations for all the other aspects of our life that we want now and 5 years from now.

Awesome. Last question. Which woman, famous or not, has inspired you the most?

Oh, this is one of those questions that I feel like I should be prepared to answer, but I am definitely not. I don't have a particular famous person that stands out to me. I think for me, it's just when I see other women in leadership positions in real estate, whether they're in a fund or whether they're, you know, building their own business, I, and especially moms, you know, again, I think seeing other women who have made it happen for themselves who have taken that initiative, you know, it encourages me. It encourages me, encouraged me when I got started. And I think that there is something to be said about, you know, it's a pretty, still is a male-dominated industry. So for me, when I'm at events and conferences, I love when I see other women on panels and not the panels that are, you know, only women's panels talking about women's things, but on panels that are talking about industry trends and market You know, I'm like, those people, I want to be them. I want to be moderating that panel. That's, you know, that to me is awesome.

Love it.

Lauren, thank you so much for being on our show. Thank you for sharing all your wisdom and good luck with everything you got going on. Very exciting stuff.

Yeah, thank you guys so much for having me.

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