EP 430 – The 3 Fs – Funding Assets

Foreign this is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property for pennies on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now here's your host CEO of We Close Notes Scott Carson Good morning, good afternoon, good evening everybody. Welcome to this episode of the no Closer Show. Scott Carson here. Excited to be with you today. Man, what a gorgeous day here in Austin, Texas. Hopefully everybody else is out there having a wonderful day. Got a lot of great comments and emails from yesterday's episode about flipping and the first F in the 3F part series of Find Fun Flip Non Performing notes. So excited about that. So today is all about really the second F in the 3F model of buying non performing notes. It's the funding side fund aspect of things. Now first start off if you're just listening to this one for the first time, you're able to go back and listen to the first F on any of our iTunes, our YouTube or any of our other channels out there that have the episode. It'd be good to do, but there will be able to kind of stand alone as well. And first and foremost, let me state, I'm not an accountant or attorney, so you always want to check with your legal department about advice before you dive anything. I always think it's great to talk with an attorney to make sure you're set up properly for your funding, especially when it comes to non performing because there's a lot of different moving parts that are involved with it. So I want to say thank you to everybody listening to us on any of our channel radio stations across the country from Tampa to Long Beach. Thank you for taking time out of your busy morning to listen to us. For those who listen to our podcast, thanks again for taking time. Make sure to subscribe and give us a review while you're there as well too. But today's aspect is about funding and funding is really kind of a Everybody has kind of mixed feelings about. Some people don't have a problem reaching out and talking to people. Other people are a little intimidated by reaching out to other people in their tribe, in their circle. What it all comes down to, first and foremost is the funding. That's what it comes down to. Yes, you've got to have deals first. That's what starts this whole thing off. Reaching out to asset managers, reaching out to your tribe and other note investors. We covered a lot of topics in the previous episode about how to find deals. Well, the thing is, while you're looking at assets, while you're looking at deals, funding is a very integral part. Especially if you're not going to be using your own money. Now I know some of you out there, some are extended note family like oh, I've got my own money, I'm going to fund with my own money. That's great, totally fine. Nothing wrong with that at all. Make sure you do me a favor and that you just don't rely solely on your funds. At some point you're probably going to run out of your own funds. Unless you've got millions and millions of dollars. Most of you don't. What I don't want you to do is to fall in the trap. Oh, I've got, I've only got 50 grand. I'm just going to follow the 50 grand I got. Well, that's not enough really to build a business long term as a note investor. So you're going to be using other people's money. You're going to be using funding sources to make things happen. If you've ever listened to one of our previous episodes of Merrill Chandler, Merrill does a great job with credit centers showing you how to build your credit profile to go out and get funding from banks and lines of credit. That's a great aspect but most people, that's a little bit of a process regards to getting started brand new. Now one of the easiest ways to raise capital is to reach out to your warm audience, reach out to your online social media platforms, reach out to to your LinkedIn connections, to reach out to your local self directed IRA companies and network with the investors that are attending those things, whether it's like Quest Trust events they've going on and by the way, they've got their trillion dollar mixer coming up next week on Tuesday night that I'm honored to be a speaker at. But there's all sorts of other great networking events to go to to raise capital. But first and foremost take a little bit of a back step and talk about your deal. Let's talk about the deal that you're marketing to get funding for. First and foremost you want to make sure that you're buying what I like to prefer basically first lien. That's the easiest way to raise capital for is buying a first lien. Note, yes, there are some people doing seconds and there's nothing wrong with seconds, especially non performing second behind a performing first, the smaller usually dollar amount. But the thing I like is if in the first Lien position. Really the only thing that's going to wipe you out is A, either taxes and you can double check those, or B you not taking action. And that's not the case. All of you are action takers out there that I know of, right? So if you're me making money and not using your own, let's talk about some things that you've got to do. First and foremost, you've got to understand kind of what your exit strategies are, which we'll talk a bit more about tomorrow. But if you're picking up a deal, a note deal, you're buying the first lien on a property. And the debt, let's just say the debt is either equal to the value of the property or they owe more on the property than what it's worth. If you're picking the asset up somewhere around 50 cents of the as is value or less, you should not have an issue raising capital. Now a couple of things that will be helpful is you need to know what your focus is. If you're buying $100,000 property and the note is on $100,000 property, you're buying the note on it, you're paying that for 50 grand. There's a lot of options, especially if it's an occupied asset, you've got the option to get it re performing, which can be a good yield for your investors. Or if you're just out talking to people. And a lot of people coming from the ex banking side, as an ex financial advisor, a lot of people have money stocked away in their certificate of disappointments, their CDs, right? Making less than 1%. When I was a banker, JPMorgan Chase people would slice their grandmother's throat or would spend all this time moving their money from bank of America across the street to JPMorgan Chase for 18 difference in their interest rate. Oh, it's four and an eighth. We're going to four and a quarter. I'm going to move it. And I would just kind of find it funny a little bit. I'm like, okay, yes, you're making 4% on the CD at record time, but now, I mean now it's all to make that, you'd have to have a hundred grand or so, if not more. Most people, their CDs, as I say certificate disappointments aren't making anything. Their 401k is taking a hit. Maybe it's a 101k now, but there are people out there and you have to realize this to have that funding mentality of everybody's Either a buyer, a seller, or it's a funding source. Now, I'm a big believer too that everybody in your tribe, everybody that surrounds you is a potential funding source for you. Now, what's that mean? Yes, you're not going to reach out to your grandson, have him fund a deal. What I'm saying is everybody that's in your tribe is probably worth at least 1000 bucks on average in potential private money. What does that mean? Well, say you have a thousand people in your database either through LinkedIn, through Facebook, through your database online, through either your emails. If they're average worth a thousand bucks, that means there you have basically a total of about a million bucks in private capital at your disposal, if not more. Usually it's more, but we'll go on the low end. All right. Now, how are you going to get access to that? Well, I'm a big believer that you have to share what you're doing a regular basis to start to get your tribe start looking at you differently as offering opportunities versus Joe the auto mechanic, Jolene the secretary or whatever it is that you do. You want them to start thinking of you as you've got opportunities that hey, I've got some deals. Hey, I want to talk to Brian. I want to talk to Megan. I want to talk to Aaron. I want to talk to Scott. I want to talk to Stephanie. They've got some deals available based on what they're providing out there because everybody wants to be a real estate investor, okay? Let's just face it, everybody wants to make money, okay? But they don't always know what to do. And the fact that if you're out there sharing what you've got, working on the sharing that you're looking through these different deals, it will often raise some great questions from your tribe. It will also raise some. I have people reaching out to you to say hey to you. All right. Good morning, people. Appreciate all the love. Laura, Stephen and Jay appreciate it. Commenting on people commenting on the Facebook livestream right now. So if you guys are have do have questions and you're watching this live, feel free to post the questions in the comment section. We'll try to get to those as we go through. But anyway, funding is all about really marketing more than anything else. Getting good funding sources is about marketing your deals. And a lot of that comes originally from the previous side of funding. So if you're getting a tape in and it's 100 assets, hey, you should do, you've got to start building that rapport with your audience. You've got to start really kind of letting them know what you're doing so that they can fund with you or they can start talking more with you or start seeing, hey, Scott's doing something different, Lucas is doing something different, Christopher's doing something different. All right, so what I would recommend you do is you get a tape and hey, map it on Batchgeo real fast. That's batchgeo.com. it's a great service that you can drop up to 250 addresses and I'll map it all and show you a nice photo image that you can use. It's also interactive with Google Street Maps. You can hone in down on the addresses and look at what's going on with the Street Views. I think it's a great tool for real estate investors to share what they've got going on. Hey, I'm making offers on these 20 assets or these 200. Asset tape just came to me that I'm working through. That's a great post to send out to your audience to post to your Instagram, your Facebook, your Twitter, your LinkedIn. Hey, here's a deal that I'm working on because that drives, oh, eyes. Eyes are always attached to images that you're gonna get a much better response by posting a photo or doing a video. Now, out of that, if you've eliminated a bunch of those and you're making offers on 10, I would then pull up the Street View photos of those 10 assets and post those as well. Now, I wouldn't share the addresses. What I would just do is take a screenshot of the Street View. But talk about, hey, here's an asset in Columbus, Ohio. It's a semi performing note that we're getting ready to take down. Like to learn more information, feel free to drop me a line, something simple like that. So you get the conversation started with what you're doing, they start seeing what you're doing. So the second or third email, when you get to the point where, hey, we're getting ready to close on these, or we're getting actually got this approved now your audience is already starting to see the momentum that you're building. And that's really what funding comes about, is building momentum. You've got to stay on top of your audience, got to share what's going on, gotta stay in contact with everybody. Not individual basis, but I think that's one of the great things about social media is the ability to be able to connect with a lot of people and share what you've got going on. Now I don't think it's all about farmville or Games with Friends. I think it's a big waste of time. But I think you can raise a lot of capital with your audience by just sharing what you're doing on a daily basis. A day in the life of a real estate investor, Day in the life of the note investor doesn't have to be anything complicated. Hey, what are you working on today? And that's how we kind of started the whole podcast thing was we started doing Facebook Live videos. Hey, here's what we're focused on today. What deals are we working through? What's the events we're going through? Sharing those little things is all about marketing your business. And if you don't have a tape, that's where I would start. Start sharing that stuff. Author. Because ultimately everybody, it leads to helping you raise capital. It helps building rapport. I mean, we've done an earlier episode a few weeks back about, oh, so you want to start a fund. Yeah, putting a fund together is great, but you have nobody to market to. It's a waste of time and waste of fees. So you always want to be good at all the good crowdfunding educators out there will tell you, hey, you have to build your audience online. So building your audience is one of the great things to help you with your capital, whether it's through Facebook, like we're doing as well, or YouTube or LinkedIn or any of the social media platforms. Building your audience is critical to help you raise capital because it goes back to building that tribe. Somebody who has a 500 contacts in LinkedIn is great, but somebody's got 5,000 contacts is gonna have an easier time raising capital as long as they're marketing on a regular basis. Now, let's say you have somebody reach out to you, because I'm gonna believe there's a good habits to do and use when you're talking to potential funding partners. Okay. Good morning, Teresa. There are some great things that you should be doing now. Somebody you meet somebody at a local REIT club when you're walking around. And a real for those that don't know, Real Estate club is a real estate investment association club. There' there's real estate investment clubs all across the country. You can jump on meetup.com to find them, whether they're in your backyard or in areas you're investing or you want to join something in states that you're interested in or state that you visit, or just big groups across the country with great investors. Meetup.com is a great place to go to find those. You got to have something to stand out. And most real estate investment clubs have a wants and needs where they allow their members to get up and talk in front of everybody about what they're looking for. Hey, I've got a deal that I'm looking for capital for or hey, I've got a note. I'm looking to sell to Kristen Gerst. Do you know anybody that's looking to buy notes? Get up and share what you've got going on with your tribe, with the audience there. Because if you're in front of 50 or 100 or 200 real estate investors and you have the opportunity to talk about a deal or two, use that to your benefit. Make sure you are gathered and talking with them and hey, have something that makes sense. Hey, I got a deal that I'm working on. Know the numbers. Know what's sexy about the number. Those are one of the most important things that you can do is share what's excited about this. Hey, it's a deal. It's a 3, 2. In a great market. We're picking up at $0.50 of the dollar or hey, we think it's. We're gonna pick it up at 35, 40 cents a dollar and it's worth 80. We're picking it up cheap at like 25 and would love a funny partner to come in or somebody to partner with me on the deal. Things you have to realize. Yes, I see Kristen Gerst is on there this morning. Good morning. Love you, too, dear. It's a great company for you to do that. Exactly. That's what's so great about Quest. They cannot endorse an investment, but they'll have to go to one of their networking events to get up and talk about some things that you're working on. Right. That's a great thing to do. Now, the whole idea is that once you make connection with somebody, don't get diarrhea of the mouth. Don't get, as I like to say, don't throw up on them. A lot of new investors get so excited like a puppy, they almost piss their pants. Oh, my God. Oh, my God. I'm talking to an investor. Oh, my God. I'm talking to an investor. Oh, my God, I'm talking to investor. You don't want be that obnoxious wine that pushes your investors away. So you want to make sure first and foremost, you probably have some breath mints and gum when you're talking to people because you still want to build rapport with people. Because you're going to be close. No, you're not going to take me. Make it out with your investors. Although some of you may feel like doing that because you're like, oh, my God, I got an investor. Oh, my God, I got an investor. I'm talking. There's still a touch approach to it. Now, touch. I'm not talking about assaulting somebody. What I'm talking is a three touch approach. As you make contact with somebody, they say, hey, let's talk. I'm interested in your deal. I'm a big believer is in spending a little time getting to know that person. Hey, what's your background? What have you done in real estate? Are you brand new? What are you looking? What are your goals? What are your past and present and future goals? What are you trying to do? What are you trying to accomplish? Is one of the funniest things that I like to ask you. You'll hear and funny, sometimes you'll hear people say some great things and other things, they're just way out there. And that's great. There's nothing wrong with having great goals. But let's work in real life here and work to get some things done. Maybe my deal might be a fit for you getting to your goals. It may not. And this is the reason you want to build rapport with people and talk with them and get a chance to know them. Are they going to be great people to work with or they're just going to be pitas? What am I by pitas? P I T A pain in the ass. All right. If somebody's a PETA, you trust me, you don't want to work with them. You just want to walk away and go to the next one. I know that's hard to do sometimes as New Note or real estate investors because you get so excited you've got somebody, you don't lose them. But also some of the best decisions I've ever made is to walk away from an investor or to avoid the penis out there. There's plenty of them out there. It's a beautiful thing. But anyway, it's talking with that potential funding partner, talking with that person. Where's that money coming from? What are your expectations? What are you looking for? Because that's one of the biggest mistakes I think some investors make. It's one of the biggest mistakes I made early on in my funding and raising capital is coming from the bank. I knew a lot of people. I knew what they had in their accounts. I knew those that had money. I reached out with several People and being to be a real estate investor, I'm looking to give you a 12% return. And they're like, oh my gosh, their money was sitting in IRAs, CDs or something like that, making like 4%. They weren't comfortable with that. They thought, well, my advisor has told me that 12% is extremely risky. I don't know, I don't think I'm going to invest with you. And I burnt a lot of British because I didn't ask what they were looking for. So when you're raising capital, it's a good thing to use the ratio of what God gave us. All two ears, one mouth, ask questions, but listen. Because oftentimes people you're talking to will tell you exactly what they're looking for. So I asked them, hey, how's your, what's your money in? Tell me where is it at right now? CD, my 401k, it's in the Solo 401k, it's in a checking account. Okay, how's that done for you? How's that performed for you? They tell you it's in a CD, well then you're probably getting somewhere between 1% these days and that's where it comes out. Okay, if it's in 1%, if I could give you, show you three to four times that in over 12 to 18 months or 12 to 24 months on a short term investment, would that be something that you'd be interested in? Yeah, of course. If you find out it's making like 3% to 4%, hey, if I could show you double that, 6 to 8% in a short period of time, 12 to 24 months, would that be something you're interested in? Okay, now this is all valuable stuff. Whether you're buying real estate, fix and flips or notes or whatever it is. Is this conversation just getting a chance to talk with them out there. Talk with your potential funding sources, everybody. Okay, you want to have some sort of kind of profile sheet. And here's a great thing that you can do. If you ever go to your local bank and say you're looking to invest, we'll have a banker give you a phone call or sit you down for an appointment with a banker. And what are they going to do? They're going to pull out a profile sheet and start taking questions, asking questions as you go down. Tell me about your past. Where's your money at? Where's it located? What kind of returns does it get? What are you looking to accomplish? You know, that kind of stuff. And they do a really great job of bankers being able to brainwash clients. Why do I say that? Because I used to be a banker. 1 to 4% is safe. 5 to 8% is kind of mid level. 8 to 12 is risky. Gotta be careful. We in real estate know that there are higher returns available than 8 to 12% and they're not necessarily the riskiest thing. So you have to talk to people, hey, what have you invested in before? Is one of the most valuable things that you can ask. If they start going down bond stocks, that's great. But finding out what type of real estate deals they've done. And now if they're in an active fix and flipper, they're probably not going to get them on a 6% funding amount. You're probably going to get them on a split of some sort. They're going to want to see a good return. I would never take less than 50% of the deal. For those that want to do the equity, it kind of goes down to one of two things. Either A, there can be a flat return on investment or B, it's gonna be like an equity split where hey, you're doing the heavy lifting or you're consulting back and forth and talking about the deal and where it goes. Now the biggest thing to getting people to getting to the funding table is you have to get a series of yeses along the way. And this is why we talk about the whole profiles and asking these questions. Hey, if I could get you double, triple what you're getting right now for a short term 12 to 24 month investment, would this be something interesting? That's a yes. Okay, well great, let's talk when we meet for coffee, which is a second yes, meeting of some sort. Now the biggest things I would highly recommend is look, don't spend an hour to two hours out of your day. If you're going to be meeting with people, keep it a 30 minutes you can get direct to the point. And there's nothing wrong with building rapport with people, but value your time and value their time as well. So if you're meeting with people and you want to talk with people, have some sort of pitch deck that's available, some sort of pitch deck, whether it talks about your past or you know, what your experience is, where'd you go to school, all that kind of stuff, your experiences as a real estate investor. Now if you're brand new, that's okay. Say hey, I'm relatively new but I've been educating, I've been taking maybe share the Classes you've taken. Share your network. A lot of people say, hey, I'm a member of the Dallas Fort Worth Real Estate Investment Club or I'm part of Austin RIA or Austin Rank or whatever it might be, the Tampa Bay area, whatever it may be. Share that. You're part of this network. Okay? You're part of a mastermind. I think it's valuable to share a picture of the mastermind of people that you're with. That's one of the great things about our note mastermind group. Well, we make sure, certain that we take a great group photo so everybody can use that in their marketing and helping them raise capital as they go forward. Now why do you share that aspect? Well, it just shows that you maybe are not alone because if you're asked, well, how many deals have you done? Oh, I'm still getting rock and rolling, but that's okay because I've done a lot of fix and flips or I've done a lot of short sales. I've done something similar in the real estate field that gives me experience. But what's more importantly than me is in the notes space. As I say, I'm not the person doing it all. I have my vendor, I have my attorney. You know, I've got my servicing company, I have our entity asset protection team, I have our insurance company. I have all these vendors here that are made are here to help support me and I can rely on their 40, 80, 100 years of experience working with a thousand other clients of their service or just that's what I'm trying to get at. Share, focus on your strengths, identify your weaknesses, but then have that gap being filled in on your weaknesses with your vendors and your team. It's a really powerful thing to have in your pitchbook. Getting to the case that hey, if you have not done a lot of deals, hey, here are the types of deals that we do. Talking about the types of deals that you're doing. Talk about, hey, here's some sample case studies. Here's some of the deals that me and my team or my team has done that. These are types of deals that we're targeting. Targeting performing notes or non performing, whatever it is, share those. You want to have a good photo of the property and you don't want to have everything slammed on a piece of paper that they can't read. A confused mind is a no mind. You want to have it be very simple. Hey, here's what happened. Here's a short little paragraph. Here's what we bought it for. Here's what we sold it for, here's what the profits were, here's what our funding partners made. Okay. And here's the time frame. Because what it comes down to more than anything else, it's not what type of returns are going to get. People want to know a couple things. One, a, can they get their principal back? Two, can they like and trust you? And three is the return. Now people will understand things happen along the way. And that's one of the great things that I think I love about note investing more than there's different exit strategies that happen along the way. Things can go anywhere from three months to sometimes two plus years. The idea is having solutions place. Solutions are one of the most valuable things that you can have. Hey, everything's gonna go smoothly. Here's what happens. If this happens. We can go this route. If, hey, if it won't perform, then we move to cash for keys. If that won't work, then we move to foreclosure or we start the foreclosure process. If it doesn't work, then we move. Trying to offer cash for keys or short sales. So that's the thing you have to keep in mind is that when you're talking to people, especially about the note business, talk about the strategies, talk about what could go wrong, talk about sharing your due diligence. Hey, we pulled comps. Here's what the property looks like, here's the rent o meter numbers. Here's why we think it's going to go one of these two or three ways and here's how we're best prepared to do that. Now one of the most important things that you can do also in funding is once you're talking to people and profiling them, talking with them. I like to get a pledge letter. Okay, pledge letter is interesting thing. It's not really difficult. It's very simple and I don't want you to overthink this. For those that are listening to this pledge letter is a pretty simple one page email basically. And what I like to do is if I'm talking with people as I've sat down with them and gone through with them, that's the thing too. You always have to keep in mind how much are you looking to put to work. If they say, well, I've got 100, then I'm also immediately starting to think 50 grand. If they say 200 grand, I'm thinking 100 grand. Those are the numbers that we look at, take, what do they tell you? And then usually divide it in half. Now it doesn't mean you can't go up to that amount. But I always like to say, hey, let's start first with this and work and see, make sure that we get along well. Because you may not like working with me and I may not like working with you. I like you right now, but let's just do a deal or two to get started. Rock and roll. And we'll go from there. It puts people at ease. Another thing with note investing, when they start thinking mortgages, they automatically think 30 years, oh my gosh, I gotta tie my deal up with you for 30 years. No, no, no, this is a short term deal. 12 to 24 months, maybe 36 months in some states, but 12 to 24 months for the most part. And that's one of the most valuable things that you can put them at ease. Like listen, we can either sell this off 12 months, we'll have be knowing where we're going on this exit strategy. Whether a it's performing that we're selling off that point or wrapping up the foreclosures or in worst case, we're going to get your refinance out after 12 months in case you need to move your money. So there's things that you want to share as you're talking with people about the elephants in the group and address them. Hey, what could happen goes wrong. Here's what could happen. Here's this, here's where we're kind of setting those expectations will calm people. But what's the most important thing is if you calm them is then you have to ask this. If you don't ask this, they won't do it. And then the likelihood to fund is very small. What you do then is say once you've built rapport and overcome and answered their question, they still want to proceed. Okay, the first yes is them wanting to talk with you. Second yes is that conversation. The third yes is okay, what I'd like for you to do. I'm going to go back now. You said you want to do some stuff with me. Great. What I need you to do is I need you to go ahead and I have them fill out an investor profile sheets and that includes a lot of questions that we may have talked with the one on one aspect of them. But there are some questions on there that we may not cover. Questions like okay, years of experience in what you've done. An investor profile sheet's a one page sheet, talks about ask their questions or where they live, what they do for a living long they've done that. What Kind of their income has been the last two years. What's their wealth with or without real estate? Reason that. That way you can identify roughly if they're an accreditor and a credit investor. I'm not gonna go ask. Hey, I need you some of your tax returns the last two years. I don't do that. That's a little bit extreme. What we will ask them to do is send that pledge letter. Hey Scott, it was great talking to you. Attached is a spread is a statement for my savings account. For shows 100 grand, I'm willing to pledge 50 grand to you for doing deals. I'm willing to pledge 25 grand, 75 grand, whatever that number is. You want them to send an email with a copy of the proof of funds. Now, it's not a letter of intent, but it is a pledge letter to you. The reason you ask them to do this, besides having them also fill out the investor profile sheet and send it in, is you want to make damn sure that they're saying another yes. Because if they don't fill that stuff out, I can guarantee you they're not going to fund. If they don't send in that profile sheet or a pledge email to you, they're not going to fund. And the only time I would not do this is if I've done so many deals with this person that I know. But if you're dealing with somebody brand new, these are critical steps to help you in your, in your funding for your real estate deals. Talking with them, building rapport, asking send the pledge letter. Hey, I've got pledger. Could be a statement from their 401k, their IRA, their checking savings account, I don't care as long as a statement of some sort. That's relatively recent last 90 days. I'm not going to take a copy of a check. Okay. I'm not going to take a letter from a banker. Now they may say this, I mean I want to provide, hey, I can provide the local bank here. Okay, that's fine. I'll take, maybe take that or a letter from their cpa. But something just shows hey, they've got some funds, they've got the funds to do what we need to do. The most important thing you want to ask this is you want to see where that money's coming from. The money sitting in a Scottrade account or 401, you're going to have to move that into a self directed IRA account, able to use that or if it's in a normal trading account, they're gonna have to sell out of those assets, which can take at least three days to get it into cash so that you can, they can then wire to you or wire to the seller to fund the deal. So keep that in mind. All right. And that's one of the critical things that's asked on that investor profile sheet. Where's the money coming from? 401k. Okay. Savings, self directed IRA, line of credit, credit card. Some of those are no nos. If somebody circles credit card, that's probably a no. You laugh or thinking about this, but I've had people, oh yeah, we're going to fund the deal. I got cash. Well, I didn't know that. They took it out as a line of credit off their credit card or they did a cash advance, which is the stupidest thing you could have done. If I had known that, I never would have proved or put them in a deal because it's a 12 month deal. I had them in and six months in they're like, oh, my zero percent interest has gone away. I'm now having to pay $700 a month and I can't afford it. And I'm like, what? So what you have to realize is that those investor profile sheets need to be filled out completely. There's also a couple questions that we like to include as well. Have you been sued or in a bankruptcy? If you have, can you tell us about it? Especially if they're suit happy. The last thing you want to do is work with somebody who's suit happy. Now some people are asking, what's the paperwork that goes into this? It's a flat interest rate return. I mean you can use it from a self directed ira. They have either a flat loan, notes, private placement or private entity investment. There's a variety of things there for you that you can do with your self directed IRA accounts. What we usually do is we'll use some sort of joint venture agreement and I will not disclose what's in that joint venture agreement. You need to really speak to an attorney to outline that for you. All right. You need to speak with them to talk about kind of set up the things. Now you can have a conversation, an agreement. You need to have some sort of agreement. You don't have an open end, oh, you're just going to wire me 50 grand with no type of agreement. An agreement there is basically to be the cya, cover your assets. What happens when everything hits the fan? What happens when this deal goes south? What happens if the deal goes south? Who's responsible for what steps are we taking? To help us overcome these obstacles. What's plan A? What's plan B? What's plan C? What are you doing to fix it? So you should always, always, always. Like I say, I'm not an attorney or an accountant, so check with your legal advice. But you want to have some agreement in place that they're signing off on and then the funds notarized or not notarized or whatever is. They know that a lot of people will do one or two things for the most part when it comes to securing assets. They may put the person on the assignment of mortgage in a distressed note sale or note sale which transfers ownership from one fund to another or one bank to another. One note investor to another investor is an assignment of mortgage. Investor may want to say, hey, 50% interest to Inverse Asset Fund and 50% interest to Quest Trust for the benefit of Bob's IRA. Some people might want that. Some people may create special entities, special LLCs for a deal, all right, where they're both code named on it on the operating agreement which outlines the duties of things others will do. Like, you know, they'll do a special separate lending agreement or they're buying a piece of property. Really easy. It's them slapping a lien on the property. If it's a property they're buying. That's an easy thing to do. For the most part, just talk with your accountant or attorney how you're structuring that deal and work with them to get it taken care of. Now the things you have to realize is the things that we have talked about so far is getting the. Yes. Yes, I'd like to talk to you about your deal. Yes, let's meet in person. Yes, I'd like to perform. Yes, I'll send you a pledge layer with proof of funds. It all comes down to prepping those people on when you need to get stuff wired. The biggest thing I tell people is if you need a wire on wire on Friday, you better make sure that their funds are available. Go by that Wednesday, a couple days before. Why is that? Because that gives you plenty of flexibility. There is an extra day to close out of the funds. You've got to follow what people tell them. Hey, I've got a deal. I've got these deals we're working. Here's three or four deals that we're working. I'm going to be putting your money to work now. I'm a big proponent of never using somebody's money if it's the last money they have. They've only got 10 grand. Or 20 grand, that's all that they've got. I would highly recommend that you move on and use somebody else's. If you're funding a $30,000 deal and you've got two people that are 15, reach out and find somebody who's got 30. You don't want to be pooling money. That's illegal. Once you've got a private placement memorandum, you know, worked for the sec, got an attorney to do that. That's the only time you want to be pulling money. You don't want to be pulling money. Now, that's not saying that you can't partner with somebody else's money and you split the cost and go in, or you're using, you're partnering with your IRA or somebody else's ira where partnering where it's an equal percentage and the profits are split by that percentage. You can do that. You plus one, that's okay. But the thing you want to keep in mind is don't start pulling people's money. You start bringing in three or four people to fund one asset. That's not a good thing. Now, for those that are buying like 20, 30, 40 assets, you can have separate venture agreements or funding agreements with specific assets. If there's 20 assets, you can have one investor funding five, another one funding four, another one funding three, no one funding five. Depending on what those funding amounts on that loan level pricing is, that's okay. That's not pooling funds. Because you want to basically keep your investors secluded to their specific individual assets they're funding. You're not gonna be pulling money and cross collateralizing. All your money's gonna come in here, be making profits across the board. That's not the smart thing to do. That's a bad thing to do. You get in trouble really fast. So always keep your investors clear and concise and limited to their specific assets. And it's not saying if, hey, an asset sells off and you take a quick loss on an asset to get rid of it, cause of something issue. That doesn't mean you say, hey, I'm going to pay you, Mr. Investor, out of my profits from this other one. That's a different thing. We're going to get rid of this one. We're going to get you back your investment. We didn't make much of this. I'm going to pay you percentage off this other asset. That's one of the beautiful things about note investing is having your risk leveraged across multiple deals or also having other deals that can come in and help out in Case of those issues because not every deal is a home run. You're going to have some things that strike you out in real estate. That's just the obvious. All right? It's going to happen. Are you going to get sued at some point? Yes, you're going to get sued at some point from either borrowers or funding sources. They get tired of deals dragging on longer because you have a long bad tenant or bad borrower. Just happens out there. I mean, it's real estate. You're not going to make money in every deal. And if somebody tells me they've never lost money in real estate, I don't believe them. They haven't been around long enough. That's not saying they can't have a deal that goes and they took care of their investors. That's one of the most important things is that's a good sign of somebody who's taking care of investors. If the deal goes south, hey, we're going to get you taken care of, okay? That's one of the most important things that you can do as a real estate investor is take care of your investors. Take it serious, all right? When it comes to funding, you've got to prep your investors. You've got to see where the money's coming from. You got to see if they're fit for what you're doing. It may not be a fit. Oh, I want my money to flip every 90 days. Okay, that's great. You're not part, oh, I want to make 20% of my money. Okay, you're not a fit. Right. If you realize there's plenty of people out there, $7 trillion in retirement funds sitting on the sideline. Most of your ira, large self directed IRA companies, at least a third usually on average is sitting in cash, making nothing. So don't be tempted to go straight to offering somebody like 12%. Talk about where it's going. Oh, I made 30% on this one deal. Great. How long was your money out for? It was only out for 90 days. Yeah, you may have made 30% in that 90 days, but you didn't invest the money the rest of the year. Okay, so you really only made 7.5% return on your money then? 7 and a half? Well, yeah, you had to divide it by four. You only had it out for a fourth of the year. 30% in 90 days is great, but if you didn't do anything else with it, your money really made you seven and a half percent annualized. So how about we get you in and deal at 8% for 12 months. All right, so this is just guys and gals. The only way you can get better from talking to people, getting to build rapport, is practice. And one of the best things that I did early on as a note investor is I would literally practice profiling. And it was one of the. The great sales tactics I had to give to. Kudos to JPMorgan Chase about when I was a banker there, Bank One and then later became JP Chase Manhattan. Was the training. They taught you to talk to people. They taught you to ask questions and listen. They taught you to ask that extra question to show that you're listening. One of the great things I love about meeting with people is instead of just, hey, can you fund my deal? You just fund it. I find out if they've got kids or grandkids or pets or something that they're excited about. And then I like to introduce them to people. Hey, oh, you get your homeschooling your kids. Why don't you talk to Karen over here? They're thinking about homeschooling their kids. Are you playing a band? Talk to Daryl. He's played the guitar or the drums. One of the great things about networking is bringing people together and that builds rapport that way. Oh, hey, you said you were looking for somebody. Looking for a winery. Hey, check out awesome custom winery down South Austin. They can actually help you customize some labels and some stuff out to their tribe. That's the thing. Knowing what's going on and communicating is a very critical aspect as well, too. Whether you're using something like Basecamp online to communicate, text messages, regular emails, totally up to you what you want to be doing to communicate with people. But hopefully that makes sense for everybody out there. Now. You always want to make sure and set clear expectations under promise and over delivery. If you think the deal will take you six months, say it's going to take 12 to 18. Does it take 12? Bear, say 24. All right. It's a very important aspect of it because you want to set those expectations. And there's also some things you may want to put into your agreements to help protect your assets. You may want to put in there, you've got 90 days to get somebody refinanced out of a deal. They also want to put in there that they need to cancel. They're going to need their money back prior to 12 months or 18, that there's a penalty involved. They're only liable to get them back to 75% of what they invested because it costs you money to go out Find new money. All right. If they were to do a CD or annuity, hey, put that in agreement. You may want to put in a. There's an arbitrage agreement. An arbitrage. So if you don't agree on something, instead of going suit happy, you'll meet with a local arbitrator in the state of your choosing. All right. One of the biggest things I like to share is like, hey, here's who our vendors are. We talked about this beginning. Hey, it's going to be with Madison Manager. Are you going to give your investors access to your online access? Can they provide that? Are you going to use something else to provide updates? All right. Funding just doesn't stop when they wire funding continues aspect of things. It's the relationship after the funding amount of being able to get on the phone, talking, providing messages, updates. That's one of the biggest things I see investors struggle with. Once they try to go beyond that 2030 note barrier, it becomes a lot of moving parts of communicating the funding, communicating what's going on with the different vendors and assets along with your investors and keeping that straight. So keep that in mind. You really want to build your systems. You really want to focus on your systems for the most part, because otherwise your systems and little things can eat you to death and hunt and peck your time and energy and not make it a happy, fun time. Because look, you close on a deal. Hey, awesome, great stuff. That's a great thing. But it's not just about the funding. You've got this whole other F that we'll get to with the next episode of the Note close show. On the flip side of what do you do once you fund and where do you go from there? All right, hey, you've now bought a note. Great. What do you do with it now? Okay. Because I think it's one of the biggest things I like to tell people. Like, it's great to fund a deal. It's great to do the due diligence on the front end and idea. But all that's just the first part. That's why you want to rely heavily on your vendors to help you with the third f getting things done. Now, what happens upon funding? Well, when you wire money in, it's a wire. You're not really closing in a title company. You can use a real estate attorney and have them open up an escrow account and pay 500 bucks for them. Open an escrow account. So you have your funding partners wire the funds into the escrow account and then you're wiring them out to the bank or the seller. And then if you're having a little bit extra spread, if they're funding 45 and you only need 40 to fund, have that three grand spread get wired to you. Then afterwards, the thing to keep in mind is you're having them fund extra. You're going to probably want to outline that on the JV grant. Hey, we're going to spend $42,000 to fund this deal. This other three grand has helped cover servicing costs and attorney fees along the way. I think it's always better to have extra funded because if the number still makes sense for you, say so having them just fund 42, if it's still a good return. If you fund return back 45 plus their profit splits, it's still a great return. Why not? I think it's always better to have a little bit extra funding versus go back in six months or 12 months. Hey, I need another three grand or another four grand to complete this deal. I don't think that's a good thing to do. I mean, some people, it happens. It just. It's going to happen. Might as well fund a little bit extra. But keep that extra in an escrow account. Keep an account that you can tap into for your expenses. Because let's face it, if you're buying five deals or six deals or one deal, I guarantee you did not just do marketing on one asset. You probably broke down 20 assets or 10 assets, or you made offers on 40 to get that one or two 20 to get that one. There's some costs and times associated with that. All right, so keep that in mind. Hey, the deal goes well, they get re performing in the first 90 days. Great. And you got a three grand extra. Awesome. Hold on to it. Great. If it's a good return and you're splitting the profits or splitting the cash flows, great. There's nothing wrong with that. It's a phenomenal thing to do. But I would always fund a little bit extra just to make sure that your butt is covered with different things. Because there's been times when things have happened on one deal where I had to use. We had performing. Now that we end up getting funding extra. Hey, it was performing. We didn't need that slush. I ended up having to use that slush to cover expenses on another deal. It just happens with those things. The beautiful thing about QuickBooks and using that stuff is it will link in. You can help keep track of expenses on specific assets and things like that. But always fund a little bit extra just to make sure you're expect you're covered on stuff like that. Teresa cry says great information, Scott. Thank you for sharing your knowledge, experience. Hey, glad to help out anyone can Teresa over things going well with you as well this morning out there. So let's do a quick little recap here before we wrap up today's episode. Funding is nothing to be scared of. Everybody's a funding source, all right? Just communicate what's going on through marketing. Communicate through your due diligence process to your tribe when you're looking at assets. It's a great way to raise capital and get the momentum moving. If you wait till you have a deal approved before you start marketing for it, you're going to be behind the eight ball. Use your existing due diligence of that asset and marketing what you're focused on. That'll help get your tribe and audience ready to fund things a lot faster. Always, always, always take the three touch approach. As I like to say, you meet somebody, meet a group, great. You meet a second time or a phone call and then a third time, follow up as well, hey, let's get rocking and rolling it. You want to make sure and ask questions, find out what they're looking for, find out their goals. Some people's goals are great, others are not so great. For what you're trying to do, always ask for the pledge letter. Always ask for them to fill out the investor profile sheet. Get those things. The reason that I didn't mention earlier is if you get those things and lo and behold, your investor walks from you or leaves or gets cold feet and decides to hide from you and not fund the deal, you can use that form, that investor profile sheet, the pledge letter, the email they send on that on, you can use that as proof, like, hey, you did your job. Because that's one of the things I tell people. People call me. Oh my God, I had investor walk. Did you get those things? Yes, you got those things. Okay, great. I'll help you. Oh, you didn't get those things. Hmm. You didn't do as I said that you need to do. You've got to follow up with it, trust me. Because you'll have some, even some of your best friends will flake because they'll get cold feet. Alright? It's an important thing to get. Don't over promise returns, you know, talk, find out what they're in, ask questions. It'll save you money. All right? And then, you know, like I said before, prep it. Make sure you're getting everything's rocking on, make sure you're talking with your vendors. Because when you do fund something, then you want to put your vendors to work immediately. Like I said, if you're brand new, don't worry about this. Just work this into your pitchbook. Work it into a simple five or six pages. You don't, like I said, don't want to have diarrhea the mouth. You don't want to throw up in your potential funding partners. You want to talk with them and just have a conversation. And the better you get it to having a conversation, the better you'll get at raising capital and the better you'll get at funding. And eventually what will happen is people start bringing more money to you. Your funding sources are happy, they'll refer people to you. They'll literally walk other investors over to you to help you out with it. That's one of the easiest things, and it's a great thing when your funding partners are directing you to other people to fund deals because they want to share in their audience. And like I said before, everybody's a buyer, a seller, or a funding source. Even people that don't fund your deals that like and trust you, if they find out what you're doing and see what you're doing, hey, you want them. Hey, you want them being a referral source for you? You want them, as they hear people around the water cooler office, hey, I wish I could do something. Well, hey, you should talk to my friend Scott. You should talk to my friend Theresa. Talk to my friend Stephanie. They've got some opportunities that they're working on right now that I think you might be interested in. And that's a great, great thing. Now, one thing, too here. I will tell you this. I get people all the time, hey, I'm gonna send you money. Can I get paid a commission to refer you money? No, you can't do that, right? Nothing. You can't give somebody, like a bottle of wine or something like that. Hey, thank you. But you can't be paying commissions to other people. That's a no. No. All right? That's a big no no out there. And you don't want to be doing no nos, all right? No, no, no, no, no, no, no, no, no, no. Or how that song goes. I don't know. I'm gonna quit my day job. But anyway, everybody, we spent a massive amount of time going through the different funding options in our note, buying Blueprint, the online training course that we offer up. If you guys are interested, go to note blueprint.com. that's noteblueprint.com it's our online with a lot of great modules. We've got a whole module dedicated just to raising capital. Some of the things the sample forms, sample agreements, those kind of things are very valuable for you. Temple pitch deck as well. NoteBlueprint.com we think it's one of the best things in the industry out there to help you really kind of hey get over that hump. And so includes a lot of the stuff there as well for you. You know how to find and then of course the flip of the exit strategy. So but anyway, hopefully this episode has been valuable to you on the different funding. Wanted to make sure that you guys are listening and we're able to provide good content to you all out there to help you in your note and real estate business. Once again, I'm Scott Carson and and this has been another fun episode of the no Closure show. So stay tuned. We'll cover the third F on our next episode, the Flip side of things and how to make money in the no business through the multiple exit strategies that are involved with distressed debt on the neck. Go out, make something happen everybody and we'll see you at the top. Bye Sa.