NIME 50 | Growing Your Note Business

 

Growing your note business quickly in less than a year may seem impossible, especially if you have a full-time day job. In this episode, Dan Mitchell, the owner of New Start Notes LLC, proves that it is possible to scale your note business if you have the excitement to reach the top. Sharing the keys towards his early success, Dan also talks about the importance of research, education, networks, conferences, and routines. He also talks about how he balances his career and his note business, as well as his future plans in making it a full-time job. With the mission of keeping his energy focused on what drives his business, Dan is definitely on his way to becoming big.

Listen to the podcast here:

Growing Your Note Business: Keeping Your Eye On The Goal with Dan Mitchell

I have Dan Mitchell from New Start Note. Dan, welcome to the program.

Thank you, Martin. It’s good to be here.

With knowing your story and your journey, I thought it would be helpful to have you on to speak in terms of your first six months, having added with note investing and what you’ve learned to do, what you’ve learned not to do. I think that will be very helpful for a lot of the folks that are in the group and from an educational standpoint. I appreciate you coming on.

I’m glad you invited me. I’m excited to have a chance to talk about this.

Let’s first start off with before you started hitting note investing as hard as you have been. You’ve reached the point in your career where you said, “I got to start thinking about retirement. What’s beyond where I’m at right now for in terms of earning multiple streams of income?” How did you go from having that thought into taking action to find that solution from multiple streams of income?

I’ve got a military background. I was eleven years in the Air Force. I knew I wasn’t going to get to my financial goals in the Air Force so it was a great journey in the Air Force, but I knew I wanted to get into real estate. After eleven years, I started buying my first home and then I knew I wanted to continue with that. Some years later, the real estate in the Vancouver, Washington and Portland, Oregon area was out of my reach so I started buying out real estate through a turnkey provider. I got to a point where I had eleven properties in Jacksonville, Indianapolis. I bought some in Washington area. I had eleven properties but that wasn’t a smooth journey. I took some lumps out of that one. There was some learning opportunity.

How did you find that person to connect with on the JV deal?

NIME 50 | Growing Your Note Business

Growing Your Note Business: If you’re doing everything right from the identity and community standpoint, the mechanics will work itself out.

 

It was through some webinar, through some podcast. I’m not going to mention any names but he was a true turnkey opportunity, sourcing the property, had a property management group, the whole rehab. I took some things out of my financials, my integrity and my ego out of that one. The rehabs were in fact not done on these eleven properties and I have to go back and redo the rehab. It thinned out, that passive income stream from eleven down to six at this point with fresh rehabs. I was still using the property management groups to manage my properties. I knew that wasn’t the long-term vehicle that I would need for financial freedom. That’s my real estate. I always knew I wanted to be in real estate. I thought it would be in the asset itself. I thought that would be the direction I would want to go and I still will stay into that because there are definite advantages to passive income through real estate. That started me to dig into other avenues and that’s where you and I met.

Long end of it is that you connected with someone off of who is the thought leader. They have a podcast, they present themselves as experts, you locked in. They didn’t do rehabs as they were supposed to do rehabs on the property. The FMVs, Fair Market Values, of the properties were much lower than what you had initially understood. You found yourself jammed up and having to take control of the situation and make lemonade out of what you have. Therein, you find note investing. How did you find note investing?

I knew through research that I wanted to get into investing from a note standpoint. I did not know the vehicles available. I read and I self-educated. I probably read half dozen or more books. I bought various courses online for learning and or teaching. I reached out to several groups or individuals and asked what their programs were because I knew I need to hone my skills before I can take the leap. I’m not afraid to take a chance but I’m going to be a little conservative. I want to make sure it’s a good avenue and it has all its foundations and good footing.

I know you and I first connected and we started our dialogue. I don’t know if you want to go into how you got started with note investing.

I read multiple books, two of which were your note investment books. I know you have a third and I do own your third book. For me, this one here has some good meat and potatoes. It gets into the details and how-tos. What was lacking in my self-education was everything was philosophical, high level. “If you do this, this will happen,” and it all lead you to the rainbow of riches and so forth. I wasn’t looking for that. I didn’t need the hype. I was looking for the mechanics of it. You put your contact information so I reached out to you. You and I chatted for some time for our first introduction. As of which, you and I had a two-day one-on-one coaching session which was the beginning of my note journey. It opened my eyes. At that point, I wasn’t sure if I wanted to focus on performing or non-performing, I was wide open and not knowing where I wanted to go but after talking and meeting with you for two days, I had a clarity of mind where I wanted to go. My direction at that point was to focus exclusively on seconds with focus on non-performing. That started to hone my vision as to where I wanted to go.

I’ve been accused of helping desaturate the market with note investors that are looking for seconds. I think you understand this too. There are a lot of rocks to be unturned in this business. There’s a lot of activity that is well beyond some of the well-known players that are transacting out there. We started a six-month mentorship program. How long before you’ve picked up some notes?

You and I became colleagues. More importantly, you became my mentor for that six months. For me, it’s, “Hang on to your socks because it’s going to be a ride.” I think it was eleven days after you and I started the mentorship program that I had the opportunity to come across the small pool and I made a purchase of about thirteen notes within my first eleven days.

Good connections and conferences through platforms like LinkedIn can accelerate your growth opportunity in note investing. Click To Tweet

That was good because you got out of the gate. You understand that we focused on three pillars every week and the first pillar being identity. The second pillar being the mechanics, the actual note investing portion of the business and the third pillar is community, building a community around yourself that you can grow up with. If you’re doing everything right from the identity and the community standpoint, then the second pillar being the mechanics will work itself out. You’ll have notes that will run through your system as you’re building your systems. That was great because we were able to dual track the program. You had notes to work out along with growing your business model.

You did a wonderful job of helping me to establish my identity as far as who started notes is, who Dan Mitchell is. I’ve spent a lot of time especially upfront but even probably more so at the latter part of my six months with you going to conferences, reaching out to people in the industry. I’ve met some wonderful people in the note space and have made good connections at the conferences and through LinkedIn and other platforms. Having the ability to have notes that early in my journey accelerated my growth opportunity. I’m a doer. I learn best by visualizing and being able to put my hands on it. This gave me a chance to scoff my knuckles in my knee up a little bit and reach to vendors, the whole nine yards. From the soups to the nuts, for the note process has been a wonderful learning experience.

Thank you, some of the things that you’ve done well out of the gate because we’re only talking of six-month period. I know people in my group in the social media universe, they’ve been added for a few years and they only have a few notes. You come out of the gate, you have thirteen notes, you start the workup process but beyond that, in terms of establishing your identity, in terms of building your business model, what would you say the importance was on the research portion and on having the daily rituals of doing certain activities XYZ over the course of time?

The identity is a big part of it but as far as the mechanics of the research get embedded with all the vendors, I can’t over express the importance of having that and having the ability to be vetted through skip trace, credit reporting and all the processes necessary to determine if the note is a good note or it’s a bad note. It’s hyper important. Otherwise, the opportunity for loss of money is too high for me. Before you and I started our protégé program, I had already established all my resourcing, all my due diligence groups, my team. Before we even started our protégé, I was able to launch into these thirteen notes within the first eleven days, as part of that, do fair amount of due diligence right out of the gate. I was a month ahead of our protégé, given me that foundation but I can’t express how important it is to have that. For me, in understanding where to get those resources is a big part of it. That’s the mentorship program.

A lot of people come into the space, they’re more on the motivational side, drowning up the emotions. You feel revved up. You want to go out and buy notes. What it should come down to is you should be setting up all your vendors. You should be putting time into your business model. You should be figuring out what it is you want to target, what you have a budget for, doing the research, who you need to connect with, etc. That should be the time, buying a note should be secondary after you’ve established that foundation. I think that’s what you’re touching on. Have you found that to be the case?

The foundation, meeting all the vendors, their contacts are necessary to support the acquisition phase was already done and is 100% necessary. Otherwise, the risk is too high. Setting the foundation and having a good foundation is key. If you don’t have the right guidance and the right resources, they could take, I would venture to say years before you stumble onto all the right building blocks to setup a good foundation. For me, I had the map ahead of time.

With the resources you had in place and the knowledge you picked up, that helped you reposition some of the properties that you had picked up before you started note investing. You want to give an example of that one where you converted from a property to a note?

NIME 50 | Growing Your Note Business

Growing Your Note Business: There are still opportunities in notes. It’s just a matter of pounding the pavement and making the connections.

 

I learned the most by doing. I’ve read about seller financing and I’m learning the note business. I’ve had some properties that I had opportunities to either sell or turn them into notes. I went through one of my notes, I’m working on the second, one of my properties I should say and I seller financed and turned that into a note. It’s overwhelmingly wonderful. My other properties, I get calls weekly for this or that. I’m not doing anything as far as property taxes, insurance, maintenance. I’m not worried about vacancies. Midway through my six months, I pushed myself to convert my first property into a note and I have zero regrets at this point.

Couple that with the good will that you built, that was your tenant, right?

Yeah, I get a personal note where she’s thanking me for giving her the opportunity. I made it extremely easy for her but what she doesn’t know is it’s a mutually beneficial situation. I expect to have a long-term person that owns that property paying on a consistent basis because for me, as a property owner and a note owner, I think I did a good job of creating goodwill with that fire.

You converted someone who is probably a life-long renter into someone who could own a home because the credit was a little spotty and with things that you could overlook.

I did have the ability to vet her and her husband out 100% from my background check, the whole nine yards. I was able to mitigate the risk on my part. They did have other than perfect credit, but at the same time, there are a lot of other factors for her rental history with me as the owner. It was spot on for years. It was wonderful.

You come in and you go to the DME, the Distressed Mortgage Expo with me and Mark Gold. They’re too good individuals and solid. I’m looking forward to hearing when the next DME is going to be put out. You went there and you met with some folks. What was the energy in the room?

It was high. I was impressed with the level of experience based with them, the DMEs. There was a fair number of new folks, but I met Cody Cox at the DME. We found out he is right up the street from me. Cody is a good man. He is one of those guys that I look to doing a deal down the road with because he’s got a lot of good experience. On top of that, he’s just a good individual. The level of positivity was high. I love the experience base of Mark Gold and Cody Cox, and I met Dan Bikowsky there. It’s a wonderful experience but what I love too was there was a bunch of new folks that I felt that I can help guide even four months into my journey.

If you do the right things as far as connecting with good people, the deals make themselves available. Click To Tweet

We have Milena Lopez. She has a question, “I think one of the most impressive parts of Dan’s story is that he also had a career going” or you do have a career going as you’re getting your note business setup, “How do you balance the two?”

One thing I’m not lacking is on work ethic. I’m an LTO kind of guy, Limited Time Offer. I’m willing to do anything for a period of time. I’ve got a wonderful support structure in my wife. I’ve brought my wife into the business. She is now trained to record through SimplyFile all my mortgages and she helps the due diligence. I’ve got a wonderful support structure in my wife but I’m going to get to a point where I’m going to have to start outsourcing some of this.

You’re looking into strategic partners. They can help you with certain back office functions. They’re competent individuals that you’re connecting with on that. It touches back on those three pillars where you’re focused on your identity but as you’re growing your own portfolio which you have a healthy one at this time, you’ve also spent that time and energy building your community. You have resources, individuals that you can give work to and they’re more than happy to take on the work because it gives them activity that they’re needing on their side.

It works out to be opportunities for growth for the folks that are willing to help support my business. I know my limitations. I’m working a full-time job like Cody Cox and others but I’m also smart enough to know what my limitations are.

That is a good job so I don’t know if that still qualifies.

That’s below the belt. I know my limitations and I’m willing to work two full-time jobs but not forever. I’m into my 24th note and I’ve got four of them performing. I’m starting to further reach out working with attorneys on demand letters. I’m into that phase, the progression through these notes. To be honest with you, if I’m going to continue the business, and I will make this business successful, I need to think about where my time needs to be spent which is in sourcing and establishing key connections in the community and spend less of my time on logistics and those kinds of activities.

With our mentorship group, we double as a buyers group. Every month we’ve had a pool that we’ve been digesting and running due diligence on. That also ties into the need for sourcing because everyone at the table is expected to source. You don’t have a business if you’re not sourcing those. Maybe there’s something I don’t know but that’s all I know. My mind’s always on sourcing.

NIME 50 | Growing Your Note Business

Growing Your Note Business: Even if you have the financial means to completely outsource, you’ve got to learn by doing.

 

It’ll dry up. The DME and I also went to the IMN in Dana Point which was absolutely wonderful conference. After you and I and several others in the various groups went there, that’s just it. If you do the right things as far as connecting with good people, the deals make themselves available. With the foundation that I have with you at this point, I’m able in a short period of time to determine, “Is this a good deal? Is it a not so good deal? Is it one I need to push on to get better pricing or do I pass all together?” I get small tapes and other sizes on a regular basis through my desk and then you and I with the buyers group, the deal flow hasn’t seemed to be a problem. Pricing on the other hand turns out to be requested on occasion but there are still opportunities but it’s a matter of pounding the pavement and making the connections.

Having your structure in place to be able to vet notes, we’ve had in our buyers group the pools of several hundred notes. You’ve individually looked at onesie-twosie notes. I think what’s interesting with you is that you are the first protégé that went out and bought some notes and didn’t even tell me about it. After you bought the notes, everyone’s running everything by me.

I did a lot of self-study and before our mentorship program, I got what I felt was good foundation. I felt comfortable, had the opportunities come across my desk and practicing all the due diligence. I purchased the New York note which I know people will say no but the LTB on that thing was too optimistic and same with the Pennsylvania notes. I bought a couple of them. Then I went to you and I was sorry. I almost felt bad.

You were looking at a statute of limitation question.

I’m working through attorneys, especially some of the thirteen right out the gate. There were some questions out of Ohio and New Jersey on statute of limitations. I found out through an attorney, the one I contacted, that I’m okay on all of my notes.

You’re just crediting payments?

It’s different in New Jersey. It was a bill change. Its notes originated after some date in April of 2019. It starts at six years statute of limitations in New Jersey as an example. There are differences in multiple states as far as what the rules are. It’s not easy. I’ve got a whole lot of learning to do. I got a lot of different information that I can share but I’m trying to tabularize these different states that have registration requirements. There’s a lot of learning that you need to know when your purchasing, so you make sure you’re purchasing with the right amount of information.

Education can lead you to rainbows and riches. Click To Tweet

For those reading and formulating what their aspirations are or what their buying parameters are, how are they going to carve themselves into this space? Where are you off to? Where are you taking the spaceship?

You mentioned earlier that W2 job and now my note business. I’m not in a hurry to leave a job that I’m successful at and everything is good. I do want to grow my note business to a point where that can be 100% my single focus and I want to be 100% exclusively focused on my note business. I think that’s doable with the pace that I’m accelerating. I think that’s more than doable. Where I’m at is I’m still in the acquisition phase, thus buyers group where we’re betting out of pool. I’m also taking my business in a different direction. I’ve got to outsource. I’ve got to start bringing in some help on the due diligence front and on the on-boarding front. I’m going to be still actively engaged at key conferences where one of the contents that is super important at the conferences but equally as important is the level of quality of people going to these conferences. I’ve got to put the due diligence into that, the effort and time. I want to continue to grow my business. I want to new historic notes to be a player in the industry. I’m fully well intend in making that happen.

I made so many mistakes just going throughout the years of note investing and I didn’t pool my gain to gather my systems together until years down the road. When I did, it transformed everything. What’s fascinating is that you’ve been doing it six months and you’re already talking about putting in support structures. You’re already talking about using some strategic partners to help you with the back office so you can go out and focus all your attention on the sourcing. As you’re learning and growing, it’s not like you’re removing yourself from the workout process or from the due diligence process. You’re involved in that, but you realize where it’s at is in the sourcing. That takes some years to figure out what you have figured out.

Martin, even if you have financial means to typically outsource, my recommendation upfront is you’ve got to learn by doing. You got to whether use SimplyFile or Richmond Monroe or whoever is going to help you with the recording. You got to do it. I had to put my hands on it and understand the mechanics of it so I can then have other people help me with it. Come up with systems so that I can train them to do it. Same with the due diligence, I am so active in the due diligence as all of the buyers but one huge advantage of that is that we can take a pool. I think we had 280 notes in one pool and we had ten people and we’re able to vet that out to line level bids within less than a week and make a legitimate offer and had some level of security that we’re making a good offer, that we’re not just buying junk notes. Learning through doing is huge upfront but you do need to move through that as quickly as possible to focus on where you’re going to drive your business.

Thank you for that, Dan. This has been a typical show because we never cover this subject. I normally have veterans on and we rattle off back and forth with each other. Milena, she has her eyes set on you Dan. I can see that she’s going to be tapping you. She says, “From first thirteen you bought, how many are performing and what exactly are you doing with the others?”

I’ve got four reperforming at this point and one of the four, the first was foreclosure. As it turned out, this is an interesting one so I won’t take too much time. First is in foreclosure. I had a hectic time making contact with the borrower, finally able to make contact but what was cool is I gave him the analogy of David and Goliath. I said, “You are David and I’m here to help you with Goliath. I’m a small bank. I own a note, but I can help you.” I got third party authorization with this borrower reaching out to the bank and coaching him on how to get through this so I’m able to turn a low level note into a very profitable note more than 5x return on investment with 150-month payments for five years at X amount of percent. What I like about this is as I’m reaching out, I’m not the bad guy. I’m not trying to take the property. I’m here to help. That’s my business. That’s where I’m at. The first X amount of months was in acquisition and onboarding and vetting, and now my focus businesswise is to reach out on some of my notes working with attorney on demand letters and so forth. I’m on the second journey of these notes. I’m starting to see progress and I’m hoping to wake up some of them better or not responding to my reach out opportunities with the demand letters and get their attention, then hopefully we can turn them into performing notes at that point.

As long as you’ve done everything you can with each note, you should be setting your focus back on sourcing. Milena asked, “What outsourcing are you looking to do?”

NIME 50 | Growing Your Note Business

Growing Your Note Business: Keep stretching yourself and take the opportunities when they become available.

 

I signed up for this Junior Lane Podio format, but it takes a lot of effort and time to go through and input all the data and you go in through a second round of 100% due diligence as you’re on-boarding. I’m working with somebody to input a data into Podio format and then I’m negotiating. We’ll see how this turns out, but I want to utilize this person’s time and expertise to do the borrower reach out. My last thing I want to do is go into foreclosure if I can avoid it. I will, but I would rather be able to make the reach out. I’m negotiating an opportunity and we’ll see how that’ll look from a business partner standpoint, but somebody to help me with the reach out before I go to the foreclosure route and then my focus is 100% on sourcing.

Nick writes, “It’s great to hear that you got a good response from the person in foreclosure.” Dan did a great job of keeping strong communication with the borrower. The borrower was emotional about the situation. He was a little lost, needed the hand-holding, needed the support and Dan was the only one in his world who was willing to help him bring this resolution. Dan, is that a fair statement to use?

This guy, similar to Codey Cox, he’s a public servant, a teacher, a good man and he just got in a bad situation. He couldn’t figure out how to get out and he didn’t know what he wanted to do. He couldn’t pay off the first and then have enough to pay off the second. His thoughts were to do nothing and just let everything go into foreclosure. I helped him to put everything into reality and for him to see there is a solution. It could be an equitable solution where you and your wife come out okay. I just helped remove all the fog and showed him a path and gave him clarity on where he needed to go. He saw me as somebody that was helping him versus trying to take his money.

He realizes that you’re to benefit with bringing this into fruition, but everybody wins. Why can’t everyone win? He’s able to start getting past his past which is great. He’s probably up at night. He’s probably worrying, probably has kids, a great stress on him and his wife as well. You have the business models setup. You know what types of notes you want to buy. You know what your focus is, helping homeowners stay in their homes. That’s your primary passion, building a portfolio for yourself of cashflow in notes that will take you into the years. Do you see it? Do you feel convinced knowing what you know that you will hit where you need to hit in the next years?

I do, it’s time and money. For me in my work experience, it always boiled down to time and money. Either you don’t have enough for both or one or the other. With the note business, there are huge opportunities for joint venturing. You can figure out the money piece, whether you’re financially independent or you join venture. That’s why I have to do things different. I can’t commit to do the same things six months beyond. I have a clear vision of where I need to go, 100% confident I’m going to help deal sources because I’m doing the right things, meeting the right people, opportunities are available. My mission, my focus is outsourcing where I can and keeping my energy focused on what’s going to drive my business.

Do you have any interest in any performing since you are getting limited in time?

I don’t want to get lost in this shiny object syndrome that’s why I stayed away from the first upfront. I stayed exclusively in the second line performance. A good deal is a good deal so if I find the first performing, that just makes sense. Where I’m at right now is I’ve got the foundation. I’m still learning. There’s still a ton for me to learn but if I get first non-performance or first performance across my desk, I’m vetting these out. Some of my contacts, these folks are looking at just firsts. I’m sharing opportunities with people on the first side because I exclusively focus on the second. I’m still singularly focused to a degree but I’m starting to open up to a degree as well looking at other opportunities. If it financially makes sense, I’ll look at it.

As you gained confidence in the one you’re focusing on, which is the Junior Lien Space, now that you feel comfortable with that then you feel like you can spread your wings into other areas of the industry.

I still think the right thing to do is the singularly focus. Setup the foundation, get your vendors all setup, the whole nine yards. Now, I have a good foundation. I’m starting to see good deal flow and the next step for me is to broaden my view and look at other opportunities.

What have you found from transacting with the sellers? Are they coming back to you, the second, the third time?

The deal with the seller is where you make your contacts is you buy from a seller. Even if you buy one or two but pretty soon you learn it’s from the chain of assignment of mortgages. You buy one and they find out, “This guy is for real. He makes his payment. His wire transfer’s on time. He’s a real deal.” I go further, I reach out. I bought a note from an individual and found out he also had the book. The first thing I did is I read his book. I want to know who this guy was. I reached out to him and he and I chatted. I feel like now, we made a connection and he’s a player in the industry. You got to keep stretching yourself and take the opportunities when they become available. The sources are repeat. I get names of notes from this one seller fairly often. You got to be high degree of integrity and honesty and do what you say.

I always end with asking what some of your daily rituals are that make you successful. What would you say they are for yourself?

I’m up every morning early. I have a passion for learning and still I read all the time. I’m reading your book. I’m reading another book, The 7 Habits of Highly Effective People. You got to take care of yourself. I’m still hitting the gym but I’m up every morning at 5:30 AM. I’m betting notes, I’m reaching out, I’m making contacts to folks on the East Coast. I treat myself and I go to the gym. I’m back at it afterwards. You have to have a mission of where you want to end up. It’s clear in my mind where I want to be and I need to figure out all the steps that get me to the end state that I’m working for. You need to be very methodically. You do need to have habits but you also need to take care of yourself so that you can do this for the long haul.

Dan Mitchell, I appreciate your time. Thank you for coming on.

Thanks, Martin.

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About Dan Mitchell

NIME 50 | Growing Your Note BusinessI am the owner of New Start Notes, LLC. The mission of the company is to source distressed notes on the secondary market. The goal of the company is to help homeowners to get their loans back on track and to resell the notes while obtaining double-digit returns.

Manufacturing Manager with excellent experience in many levels of management. Started a career in US Air Force spending 11 years growing and developing leadership and technical skills. Have many years in Semiconductor management with a proven record for improving/turning around companies. Heavy focus on Continuous Improvements efforts working with teams to improved Safety, Quality, and Cost.