Session 8 - Advanced Note Sourcing & State-Specific Strategies

Alrighty. Well, good morning, good afternoon, good evening everybody. Hey. Welcome to day two of our virtual note buying workshop. We're glad to have you back. Join us here. Live diving in the world of performing and non performing notes. Always like to start off the day with a quick little recap. If you want to share some of your favorite nuggets from day one, now would be the time to do so. I'd really love to see what you liked, what stuck with you as you walked away from the class yesterday. Obviously we covered a lot about finding notes yesterday, talking about how we leverage LinkedIn to connect with asset managers, how we use services like Bauer Financial to identify banks in distress, how we pull the different foreclosure lists from the counties, how we find asset manager contacts using the county records and searching for assignment of mortgages along with leveraging, you know, Rocket Reach.com to find people, how we use Octopus CRM to connect with asset managers, secondary marketing professionals. All that great stuff there as well for you. Obviously dove into a couple tapes yesterday. I started diving into, okay, this is a performing tape. What can we buy? So if it's non performing, we even, you know, kind of wrapped the day of that small little portfolio that was it. 12 notes in Michigan, you know, that were small balance but could be a good yield if you're buying at the right price. So got a lot to cover today. As always, feel free to type in the chat room what you like the most, love to hear what you took away from it. We always like to review the notes at the very end of the class, see what questions are asking and help tailor the content and make sure and cover those questions a little preemptively. I've got a list of questions here that I keep track of that I get on a pretty regular basis. Obviously we turn a lot of those into podcast episodes. On the note closure show, which we're obviously excited about, we exceeded the thousand podcast episode limit, oh about two, two, three months ago, actually September. It's hard to believe the year's flying by already. You know, we've got, I think we'll be at 10:50. No, we'll be more than that. We'll be close to, yeah, about a thousand sixty by the time 2026 rolls around. So always a great thing in sharing content and answering questions as best we can for those that reach out to it. And we. I do appreciate the questions and the comments that you guys ask, regardless whether it's on the podcast, whether it's on the YouTube video or just an email me and then also I talked about our AI clone yesterday because I do go in and watch and see what questions are being asked on there. And then I always like to tailor and edit those questions. Be more exact, specific AI does a really great job with things. And we'll dive into how we're using AI a little bit more. So today versus just asking questions to go find an email address for somebody. Right. Did not get an email response back from the asset manager. Didn't really expect it on a Friday afternoon before Thanksgiving, you know what I mean? So, but it's still good. We know the email is delivered. I've already added that person to my CRM so that they get our first email next week following Thanksgiving. Not next week, the week after, basically. So the first Tuesday, which will be December 2nd, they're getting, you know, our drip marketing campaign Tuesday afternoon. Hey, what do you have on your books that you're looking to get rid of? And like I said, you know, we talked about that. What's the best time to reach out to folks via email? And I also want to be, I want to go back, I didn't talk about some things you should not say. When you're calling and talking to bank asset managers. There are some definitely things you do not want to mention, things you do not want to say that will shoot yourself in the foot and it'll make you look in a bad light. Now obviously, first and foremost we talked about that you need to have a LinkedIn profile. You need to show something on there that says that you're a note investor. Really take the time on that about you section is what, 2600 characters. Go on there and put exactly what you're looking for. That's great piece of real estate for your LinkedIn profile. AI, when it's doing a scrub, when AI is searching for things, profiles or people are searching, it goes to the about you section. So it helps you, your profile stand out. But when you're emailing bank asset managers or calling them on the phone, talking to people, there's things you do not want to say. Okay. And I know this is going to rub people some the wrong way, but it's just, it's the truth. Don't want to say this. Bank asset managers note sellers don't need brokers, they don't need wholesalers. All right? So don't call and say you're looking to wholesale notes. They don't want to hear that. They're not going to take you seriously. They want to deal with end buyers. Okay. And by end Buyers, I mean they want to deal with people who are going to be buying for their own portfolio. I don't care if you're flipping it intensiveness, you're still going to wholesale. But tell people, hey, I'm buying for my own portfolio. Okay? And be prepared to answer a couple other questions that's going to go off of that, which would be maybe like one of the things when I get people in that I think are trying to be a joker broker to my list, I'll ask them a new thing. All right, who's your servicing company? Who do you use the servicing? And if they stutter with that, that's the first thing. Well, then I know you're a joker broker. If you don't have a servicing company already lined up or somebody that you're using, you don't have to have an account set up already with like Madison or SN or Kobe Financial. But you need to be able, do need to be able to say, rattle off those names. Well, we have a variety of services we work with, currently working with A, B and C. Okay, now another question that gets asked from new note investors that doesn't get asked very often from sellers or sellers, you know, where's your proof of funds? Okay, now you'll get somebody, you might get a small seller asking for proof of funds that you can close if you're buying a one off note. That may be pretty familiar. But if I'm putting in a million and a half in bids with a hedge fund, they're usually not going to ask for proof of funds unless I don't sound like I know what the hell I'm doing. All right, so if you start getting people asking for proof of funds, it's probably because you're over talking, right? And we've seen enough people do that where they over talk the, oh, I got 20 million a month to buy notes with. No, you do not. You sound like a joker broker then. Okay, and if somebody asks you what kind of funds, you know, well, I use private money funds so I can raise. I have, you know, a couple different investors that will fund stuff any given time and we can fund up to a couple million pretty relatively easy. Okay. But we use other people's money. We use our IRA investors and stuff like that. That's pretty normal. That is pretty normal. Okay, Another thing that, like I said, you don't want to go off and write. Why we've got 20 million a month to buy. Don't go and say, oh, I'm a buyer's rep or A buyer's mandate. That is such a, that screams joker broker. Okay? Some guy out Atlanta was teaching that years ago. Tell him you're a seller's rep or a seller's mandate or a buyer's rep or a buyer's mandate. Okay? No, you are not. You're a joker broker. Okay? And I get people that like to talk, oh, we can do this and be all this. But here's another thing. Don't go tell him people we buy anything. And I see this happening on Facebook. It definitely happens in the Facebook groups, more so. And that screams joker broker as well. I buy anything. We buy non performing first performing first. We buy all across the country, first seconds. No, you don't. Okay? You don't buy everything. You, if you are truly a note investor, there's a specific niche or buy box that you're buying, okay? And your normal buy box is buying performing and non performing firsts. That's kind of normal, okay? They may, a seller may ask your yield and say, well, we're looking for a 12% or plus return most of the time. And we're buying in most of the major markets, excluding New York and New Jersey. I always throw that in there because if somebody comes to me, so I just buy in New York and New Jersey. I don't take you seriously. Because buying a note in New York and New Jersey is different from buying a note anywhere else in the country. Why is that? It's because of the long foreclosure process that takes place in New York and New Jersey. New Jersey is a two year foreclosure process. New York's three plus years, okay. You're not going to tie your money up in a non performing note for that period of time. Now, a lot of people come to it from the real estate. Oh, we want to buy the real estate. I get it. But you're buying the note. You're not going to own the real estate unless you go out and send Guido out with a bat to bang some knees, break some legs, get the people to sign over the deal. And that happens where people try to buy the note and then they can try to control it. But I wouldn't buy a note at all in New York City. Not even if I live there. For the most part, I just. Anywhere across the state of New York, you just stay away from it. All right? People talk about licensing requirements and stuff like that for you. And like I said, I think I said this yesterday, I'll reiterate it again. If you've got a licensed servicing company who's licensed to collect debt in the states that you're buying in, then you're covered most of the time. Now, if you're going to buy in Illinois, avoid Chicago and Cook County, I call it crook. Illinois is going to ask for you to get a debt collector's license anyway, which is only going to be. It's like paying the state 750 bucks for their pound of flesh. It's good for two years. You're going to be buying a lot outside of Chicago, which there's plenty of great counties outside of Cook County, DuPage County, Slate county, stuff like that. Okay. Illinois is a little bit longer foreclosure process, but it's not nearly as chaotic and crazy like it is in Chicago. Okay, it's about a year to foreclose in Illinois or less. Indiana is about nine month process to foreclose. Indiana, as long as your servicer is licensed to collect in state, you're fine. Ohio, if you're going to be buying seconds, which I don't waste my time buying seconds. Seconds are way overpriced right now, all right? And there's not nearly the amount of inventory, so I'm not going to even go into seconds. The whole different type of due diligence aspect of having to make sure that the borrower is on time with their first. Because if you're buying a second behind a first and the first becomes non performing, you can get wiped out pretty easily. Another thing too, that happened a few years ago with bankruptcies when the BK court started putting seconds, releasing seconds from being connected to the property. So now you have an unsecured second. Nobody wants to invest in an unsecured lien. There's no recourse to go after your investment. So just stick to first liens. And like I said before, you probably want to pick three to five states when you start off with. Okay, the reason I say three to five states to start off with depends on where you live. Okay. Like our friend Judy lives in Maine. There's not going to be a lot up in Maine for the most part. So I wouldn't count that as her three to five states. What I would say for most folks when you're starting off with is you don't want to do. Also like all non judicial states, people say, I mean, I just want to buy in the fastest foreclosure state. Okay, that's fine, but you're going to pay more for those assets because it's faster foreclosure stuff like Texas and Georgia. Okay. I live in the great Lone Star State here. Right. If I was just trying to buy stuff in Texas, I would not have been successful long ago. I'd had to keep doing something else. Okay, don't be wrong. It's great when I can find something here in Texas. But since it's the fastest foreclosure process in the country, 21 days, you know, things go a little bit more expensive here. I find a bigger bang for my buck most of the time outside of Texas. I like borrowing in Ohio State where it can take nine months to foreclose. I like buying in Michigan which can be a 60 day foreclosure process. I like Indiana, which can be nine months or 14 days to evict. All right, I like, I've bought a lot down in south Florida which can be a year to foreclose. But Florida is becoming the epicenter of the foreclosure market. You also have difficulties with insurance, hoas, coas, stuff like that and stuff like down in Ecuador. So you got to be very careful where you're buying down equity. And then you've also got a lot of old properties, communities that are 55 plus that you can't sell to somebody that's under that. So keep that in mind. We're evaluating a vacant note right now in West Palm Beach, Florida. It's not a bad area. I've almost bought the same cookie cutter property up and down the west coast. Sorry, the, the east coast of Florida before. I like West Palm beach, bought a lot there. Bought some small apartment complexes back in the day there too. But we're kind of shying away from Florida till pricing becomes a little bit more. More normal on what we buy. We'll get more of the pricing stuff today for you a little bit later today, not so much right now. But don't be afraid. You're like, well, Scott, what's the foreclosure time frame in blank state? You know what, use Google. You can use Google to help you find what the foreclosure time frame is every state. It's pretty awesome. And some states, you know, like I said, some states like Ohio wants you to get a separate license to buy second liens. I don't buy second liens in Ohio. So that's one of my. Georgia is probably the trickiest. If you like, you know, Georgia, the Peach state is you're going to need to get a mortgage broker's license to buy there if you're not buying in your self directed ira. Now if you're buying in your self directed IRA that's an exemption. You don't have to worry about going to get any extra license. You just want to make sure your server scenes company's license to carry. I'm sorry to collect debt there in Georgia, but like I said, most of the other states, I mean Maryland just enacted a law where they want you to be a mortgage broker to buy in Maryland. We'll see some stuff there. You know, a lot of that stuff that we see in Maryland is going to be like Baltimore, which can be rougher in some parts. I mean there's been some nice stuff there too. But just keep in mind I just don't buy a lot Maryland, North Carolina has kind of a funky law with the foreclosure law where they allow an upset bid every 30 days so somebody can go bid at an auction and win the auction. And there's a period, a grace period for somebody come in and upset that bid to boost it up. So keep that in mind. It can take upwards of sometimes three to six months for a foreclosure auction to be finalized in North Carolina. South Carolina's a one year foreclosure process, 12 months. So keep that in mind. All right, so I say like pick three to five states where you see Missouri is relatively fast, while Kansas is about a year to foreclose. There's a couple other states that I don't buy mortgages in. I'll buy a contract for deed in. I can give an example, Alabama, contract for deed I can evict. I don't have to worry about foreclosing because on a contract for deed there, it's viewed as a tenant relationship, not a mortgage, you know, borrower aspect. Whereas a 30 year mortgage in Alabama, if I'm foreclosing, there's a one year redemption period. I have to wait before I can sell that property. That's right. I gotta wait a year and give the borrower a year to go, potentially pay me off. Now what are you doing if you end up do buying something like that now? Yes, we've bought stuff there because it's part of portfolio as a way to buy all or nothing. You take the property back, you secure it, or if it's in a pretty good enough condition, if you've already evicted, what you still can evict. The borrowers in that don't wait a year to evict, turn it into a rental for a year, month to month or something like that. Short term, you know, if you're going to rent it, you obviously disclose it's a month to Month lease for because of that. But Minnesota is a one year redemption period. I don't buy up then the neck of the woods for the most part because you do have the redemption period. It's not the, it's about six months foreclosure process. And now if it's a vacant property, you can speed it up a little bit. But still six months redemption period. I don't like those kind of markets for the most part. And there's plenty of other inventory. And the number one thing that you have to start thinking differently about as a note investor, okay, is that you're not doing this all yourself. Now I want to reiterate that because that's very important for today when we're going to dive in more so about raising capital and have that mentality when it comes to raising capital. Okay. You're not doing it all yourself. No. Buying is a team sport, okay. In a team sport, that's your team is going to have exponentially much more experience than you ever have. All right? And that works in your favor, okay. You're going to have servicing companies that are servicing thousands of notes across the country. Another great thing that we did yesterday, helping you find those contacts, they're the ones that are going to be talking to borrowers. They're the ones that are licensed debt collectors or they take in the license to collect debt. You know, education in that specific state that you're buying and where that notice is at, okay. They're handling thousands and thousands of transactions. Okay? That's your team. As part of your team, you want to rely on your team. Your job is buying the deal, making sure it's a deal, raising the capital for that deal. But then you're going to turn over the servicing side where they're going out and collecting. You're not going to go out and knock on doors and try to collect your mortgage rent or your mortgage payment. Doesn't work that way. And then of course, the heavy hitters, all right, the sledgehammers, your foreclosing attorneys, the attorneys work on your behalf now. Yes. Do you need a foreclosure attorney in every state that you're buying in? Yes, you do. Some attorneys are licensed in multiple states. Like we've got a couple attorneys we recommend on a regular basis that are licensed in Illinois, Indiana, Ohio and Michigan. So they're kind of a one stop shop for that area. Hey, you know, you're buying that area, go use Tony up at Neck of the woods, okay? If you don't have an attorney at Neck of Woods, don't worry. Guess what? There's plenty of other investors who have attorneys in those state they can give you a recommendation. Most of the time your servicing company is going to have a, you know, a list of attorneys that are already work they're working with that can easily put that in your file. What you have to realize too is I like to try to, I want to have direct contact my attorneys. I don't want to go through my servicing company to communicate with my attorneys. I want to be able to try to talk to my attorneys directly. Because some servicing companies like fci, which I'm just not a fan of, it takes forever to get a communication back, don't we? Wrong. Every servicing company has its pros and cons, okay? Some are hard to talk to and that's one thing you have to realize when you're talking to them or reaching out. To sign up with a servicing company initially, find out how difficult it is to get somebody on the phone there. If it's difficult on the phone there when you're getting signed up and get somebody to call you back, it's be difficult for you to get any type of fee, you know, correspondence back in a timely fashion from. Every servicing company is going to assign you an asset manager. They're going to have a team of people that are handling your the portfolios for them. If you've got one off, just one off note, guess what, you're kind of low on the totem pole. If you've got start growing your portfolio that you'll communicate a little faster with it. But don't expect them to contact you every week in, week out. You'll probably get a email response back once every week or two weeks depending on what's going on. All right. If you're moving a portfolio over or buying notes and buying notes and they're already with an existing servicer, guess what, you could go and just keep it with a servicer if you want. What you do have to find out is is there a minimum amount that a servicing company is going to charge as a minimum bill? I'll give you an example. We were buying two notes from a hedge fund out in Arizona a couple years back and the notes were already serviced with BSI Financial. Well, BSI charges a minimum $5,000 a month bill for servicing. Doesn't matter. It's not 90. No, 90 bucks a month times two, that's 180. Guess what, it's five grand. They do that because they don't want to deal with one off investors and that's fine. So we had to transfer those over to. I think it was mass management transferred them too, which is fine. We already had a portfolio with them. Transferred it over. If it was brand new notes, we could have moved it anywhere we wanted to. Okay, but keep that in mind. What are the minimums? What the a la carte cost s in servicing. They're pretty good, but they're also a little higher on the fee schedule on the a la carte, what they charge. Okay. You just have to realize it's good to communicate with your servicing company. Find out who your asset manager is and reach out to them. If you find a performing note, guess what? A monkey can collect. There's a lot more servicing companies that collect just on performing. They don't want to deal with a non performing side. We're fans of Kobe Financial in San Antonio. They're one of the cheaper prices services but they provide zero legal. They're not going to do any legal counsel for you. Yes, they can help restructure a mod. They can do that kind of stuff. But when it comes to the legal, the foreclosure, the notice of defaults, you're going to need to hire outside counsel to do that. They don't want any part of it and that's completely fine. Most servicing companies are going to start putting that to an attorney anyway. But I'll save monthly at $15 to $35 a month by boarding my performing notes or my notes that I know I'm going to foreclose that are already in the foreclosure process with another servicing company and transfer. Like I'll give you an example, these reverse mortgages, they're already with Land Home Financial. I might keep it with Land Home. I will maybe. Since they haven't started the legal process, I'll probably move it to a company that I know and currently using with my own attorneys in Texas here to foreclose. I just need a place to board the loans because these are vacant properties. So I just gotta go through the foreclosure process in 90 days and then I don't really have to pay much on the servicing side of things. Okay. So when you start buying your first note, please reach out to me. We're here to help answer any questions, direct you in the right position. If you're buying performing notes and they're with a servicing company, just keep it with that servicing company nine times out of ten. All right? The more changes you make, the more opportunity you give that borrower to default or fall or forget to make a payment, and that's what happens quite a bit of time. People getting used to making payments. They don't get the letter in the mail. What happens when you buy a note? The.