NIME 40 | Note Investing Success

 

The notes investment industry can be tricky especially when you are still starting out. Alira Morstadt of AM Squared Investment Group talks about her first year as a full-time note investor and how she has progressed through the years. Creating strong relationships in the note industry is the key to success, and it’s the team that you build that can make or break you. The important thing to do is to add value wherever you can and connect with people to create valuable relationships. Alira also answers questions from listeners and shares her opinion about buying parameters, foreclosure as a strategy, and many other topics concerning efficient note investment.

Listen to the podcast here:

The Keys To Note Investing Success with Alira Morstadt

Without further ado, I’d like to introduce Alira Morstadt with AM Squared Investment Group. Ali, welcome. 

Thank you, Martin. I’m happy to be here. It took some arm twisting, but I’m here. 

I have a new office that’s getting put together now. Ali, what the whole theme is on talking about your first year as a fulltime note investor. Before we even get to that first year, how you got into the note space prior to coming on after your first year. 

We fell into the note industry. My husband Alex, he loves reading on BiggerPockets and he subscribes to all the investment podcastsnewsletters and everything like that. He’s always been dreaming of investingWe’ve tried out a number of investments and my background is in real estate, so I always bought houses and sold houses, not so much flipping, but just but bought eventually. We were living in Hong Kong and he saw a performing note oPPR through Dave Van Horn and he was like, “What do you think? Should we do it? We jumped in and we had no idea how it was going to work out, but every month we would get a notification from FCI saying that $132.10 was put into our account. After a few months we were like, “This is a thing. We can do this. We definitely started to research more about it especially towards the nonperforming side. 

Our first introduction into the note industry was buying a performing note warrantied by PPR, which was amazing and it’s still performing every month beautifully. We realized that we didn’t know a lot. We didn’t have a lot of time. We were a little disconnected because we were back living in Hawaii. We decided to do some joint ventures first to get our feet wet, get a little bit more knowledge about the process and have someone else driving the professional side while we were providing the capital. That was definitely our introduction. The more and more we learned about the industry, the more it excited both of us at the opportunity. Also, the opportunity is not just monetary, but also the human side of the opportunity is to be able to help people in the processThat appealed to both of us. We decided to make a go of it and put our energy and our focus into it. It suits us well because we have a three-year-old son who’s in daycare, preschool part-time, which frees up time for me to work on this full-time and then I have Henry basically. It is a flexible industry, which appealed. That’s how we are where we are now. 

I know the backstory with all the joint ventures that you started out doing and you and I connected first. Can you talk about that?  

Over those couple of years where we were doing joint ventures, we had read books, we had done online courses and we thought we’re not going to learn this as much as we willas much as we wanted to unless we go ahead and buy a note. We went ahead and bought a note and we ended up googling the seller who happened to be the Martin SaenzWe had bought notes previously and hadn’t gotten any information during the transaction. When we bought the note from Martin, you emailed and said, I have some information that’s going to help you connect with this borrower,” and you cared about the borrower and the interests of the borrower. That appealed to us. We could see that you’d written a book. We read the book and then through back and forth, we were like, “This is someone who we want to connect with more. That’s always my thing, is find someone who’s doing what you want to do and try and mimic them. Hang out with them as much as possible. You’ve been stuck with us ever since. 

Let’s go back to one of those notes. Just so everyone can understand the roller coaster ride that can occur, one of those notes was for me partially performing and then tell us about how that progressed over the year and where it’s ended up now. 

This industry is very humbling and you think that you know something and then you get slammed looking in the other direction. You learn lessons with everything and that’s the best part of this. When you believe at first at someone who’s performing on their second mortgage, and they are, it doesn’t necessarily mean that they are paying their first mortgage. During that time, their first mortgage may be in foreclosure. Our lesson was because someone is paying their second mortgage religiously does not mean that they are paying their first mortgage, which is important because when the first mortgage goes into foreclosure, it does not matter if they’ve been paying you. It’s definitely a roller coaster. She ended up going into bankruptcy, so we will be getting paid through the trustees. That’s worked out well. Change is inevitable. Everything is changing. You can’t just rest on your laurels. You need to keep track of everything. 

NIME 40 | Note Investing Success

Note Investing Success: Find a role model who’s doing what you want to do, and try to mimic them and hang out with them as much as possible.

 

Just so everyone understands a little bit more about that progression with this note. They were supposed to pay a few hundred dollars and then they disappeared because they stopped paying on the first. Everything was in default. You’re at a frustrating point about what to do. “Do I need to bring this back into foreclosure?” All of a sudden, they file bankruptcy. On the proof of claim, you go in and get through it and what is it they’re trying to do and how does that benefit you above what you were expecting at $200 monthly. 

Her payment was originally $220 a month. Through the bankruptcy plan, they’ve requested to pay that amount, the loan amount in full over the five years or 60 months of the plan. Instead of the $220 payment, they’re going to be paying $830 a month. 

You sent that to me just because you wanted to maybe get a second pair of eyes on that. 

I didn’t quite believe it when I first read through the plan. I needed to double-check or triple-checkin fact. 

Also to the other point, you had another note and it didn’t go nearly as good. That went through foreclosure. 

We have a number of different outcomes on our notes. We’ve had great successes and then we’ve had loans that have been stripped in bankruptcy before we even knew how to do the due diligence correctly to prevent that from happening. That was through a joint venture. We are in a foreclosure at the moment. We’ve got a couple by our legal teams. Originallywe wanted to make direct contact with the borrowers and it’s definitely been a transition. We wanted to do a lot more hands-on work with the borrowers and now we’ve learned that it’s best to rely on your legal team. It’s important to make good contacts with your legal teams around the country, anywhere that you’re investing in. People that you trust, people that you know have your interests at heart, and also people that know this industry well because you can’t just use any attorney in that state. They need to specialize. good way to do that is to ask on Facebook pages and people will guide you, but also make sure that you have a personal connection with that attorney as well. 

From what I’ve seen from your progression, it’s almost been a three-track process where it’s like one track is acquiring more notes and learning the ins and outs of getting those notes to perform. Another track has been your systems and your reporting and honing those skills. Third has been relationship building. Whether it’s helped you source more notes or it’s helped you on the back end of legal in finding good lawyersCan you speak to that? Was that your plan going? Did you just have that evolve? 

It is a very tightknit community. You want to be true to your word. You want to create good and strong relationships because it’s your team that you build that will either make you or break you in this industry basically. It was important for us to make contacts, good contacts and people who share the same values as you. That’s where our relationship with you had great foundation. I feel we shared the same values. We used courses and conferences to network and to create those and build those relationships and then regular contact with people as well really helps. 

How many notes do you have now including the ones where you’re helping them out? 

We definitely try not to focus on and I feel a lot of people in this industry focus on that too much because I know it is not a note. It’s not another noteThey’re so different. I would rather have 40 great notes with equity coverage, than 150 junk notes. We have just under 50. 

I’ve got to say this because you need to talk to your husband because he put a post on the group page about the dollar, the UPB dollar amount that he hits. 

That’s at least something more valid, I feel, that how many notes that you have, it doesn’t matter if the fee is $5,000, the house is worth $25,000 and the first is $75,000. We don’t keep track of how many notes. It’s not something that’s important to us. It’s more that we have the quality or that everybody’s taken care of, that we’ve got the right team in place more than how many notes we have. 

You didn’t have to put the number out there, but I know for a fact that you’re in the process of another buy. The one thing that impresses me the most about what you guys are doing is in the short period of time, you’ve amassed good amount of notes and you have a healthy portfolio. They’re not a portfolio of junk notes. You know how to work the math and how to build relationshipsMore importantly with that is you are starting to get back to other note investors because some other note investors are giving you their notes to work out and help them with because they don’t have the time or whatever the case. I think that it’s so awesome and so incredible because that’s the give back. 

Everything is changing. You can't rest on your laurels. You need to keep track of everything. Click To Tweet

It’s been very humbling. I love doing work. I love what I do. I would be in my office all the time if I could. I’m usually up early or at my desk late at night because I enjoy what I do. I love due diligence. Alex and I are in bed with our laptops and both are working on due diligence together. It is something that we enjoy doing together as a team. To be able to manage files for other people as well, that people trust me to take care of their notes like I would my own. I’d probably take care of other people’s better than my own. My biggest consideration is always the human element in this. It’s great to make money. It’s great to have an investment strategy.  

It’s great to have a business that you can work and have a child, but on the other end of these notes are real people. I try to never lose sight of the connection between the collateral files that I have and the people living in those homes who may have fallen on hard times. That’s probably the biggest blessing I see in this industry, is that the power that it gives you to be able to help people, not just colleagues we’re helping, but you have the discernment to be able to help people if they need a break. That’s my favorite part. 

It’s truly something how many people are affected in the note industry. Let’s call out five different parties that are helping me buy the note from a note seller. You help the note seller, you go get it set up for servicing, you’re helping that company set up with legal, you’re helping legal, you get in touch with the borrower, work out a loan modification and help get them back on track. That makes the community they live in healthier community. You’ve enhanced your portfolios. You get on Facebook and then you contribute with other people and then now other people are starting to bring notes to you for help with. Now you’re in the hundreds, people that you’re helping if you look at families behind the people you’re helping. 

I love what we do. It’s a great industry. There are many industries with people as generous with their time as well. That’s something that we’ve benefited from so greatly is that you’re very generous with your time, Cathie Jeffs. I know that I can call her. I did her course and I highly recommend it. I can call her and she will spend however long on the phone helping me to brainstorm what I can do. There’s just so many peopleI know Matt Kelley. I’ve spoken with him for hours on the phone. People are willing to help you. Even the Facebook pages that are dedicated to note investing. If you have any issues or you need some help with something, ten different people will jump in and help. It’s a great industry to be a part of. 

NIME 40 | Note Investing Success

Note Investing Success: Never make full closure an exit strategy.

 

I think for anybody that is not feeling that love or feel like they’re getting support, they want to think about how they’re portraying themselves to the groups. How they’re presenting themselves to other peers because they’re probably doing something wrong. You’ve got to call things like they are. You should measure your level of success based on how people are willing to help to bring you into the mix on opportunities. 

My recommendation to people who call me and ask me for advice is to do as many courses as you can. I don’t feel like you can ever be overeducated in this industryTake every course, read every book, ask everyone you can, but also try and bring value wherever you can. If you want someone to review a pool for you, maybe you can say, “Can I do some of your due diligence for you? I’ve gotten good at reviewing taxes or doing paper searches,” or something like thatSee how you can add value to the professionals who have already been doing it for a while. I think people appreciate that. 

Alsoadditional resources that you may know. You and I were on a conference call and one of the other individuals, they brought out that this company that has title searches and everything was good because they were excited about bringing something to the community that could help everyone else. The more you do that, the more you put yourself out and you definitely don’t want to be the person and you’ve seen this person. You don’t want to be the person that you send something someone’s way and you think that they’re obligated to go and help you and because it’s spent time and there’s no relationship behind it. 

This is definitely a relationship industry. Go to conferences, meet people and step out of your comfort zone. Try to connect with people, see how you can add value to them. I love the inperson courses like the course that you’ve got. It’s not only a learning opportunity, but it’s a networking opportunity. These are peers who may be more experienced or maybe as new as you to connect with. Who knows, you might have a lot of capital and they might be interested or excited about due diligence and you can see how you can form partnerships to enhance your position. 

About once a weekI get a lot of emails with the book and the books that are out there. I always get this email every week like, “Should I take your workshop or take this workshop? I always usually answer, “Take both.” “What’s the price for education? It’s going to help you avoid a learning curve. She does training. God bless her, she’s great. She’s got this awesome training there. If I could do it all over, I would have taken a little bit more training. 

That’s what we started off. Martin is my mentor and Cathie Jeffs put out a course and I was like, “Should I do this course?” He said, “Please.” Even though I was under a mentorship, I’m still taking courses to learn because Martin and Cathie have a different way of doing things and where I stand is probably a little bit in between. 

She’s a lot smarter than me. 

NIME 40 | Note Investing Success

Note Investing Success: It is important to make good contacts and people who share the same values as you.

 

Learn as much as you can and then pave your own way as well. That’s also what I would recommend because people have a professional way of doing things or personal way of doing things and you’ve got to also find what works for you. lot of times, I’ll take advice or I’ll pull different people and see how they do things and then I might settle somewhere in between or I might just choose my own path. As long as you have your legal team behind you and you run things past them like I’m connecting with our attorney basically on a daily basis in the different state. It’s a strong team that you want. 

Let me say one more thing since you did mention mentorship. I think people should look for mentors out there in various fashions. Especially people that are a few steps ahead of where you’re at in the type of industry that you’re looking for. You always have to look at what value you bring to them. By myself, have a mentor, Marty GranoffHe’s been doing this for 30 years. It’s not like he just said, “This guy Martin is a good dude. Let me go and mentor him. I brought four deals with him that he’s made offI brought value, performance and deal flow and in exchange we’ve built that friendship. Everyone should always be looking to connect with your peers, but also looking for mentorships together in this fashion. Let’s talk about the buyers group. You’ve been making your way through the industry, you keep your word, you have that reputation in the industry. You do what you say you’re going to and you always take down the buy and commit yourself. That has landed you more opportunities in the form of grouping up with other people for trade buys and everything else. Do you want to touch on that a little bit? 

Very early on we were told if you say that you’re going to fund something, you fund it. If you can’t do it earlier than you say, you better do it on time. A lot of deals rely on that money coming in to fulfill the deals. You’ve got to make sure that you’re doing what you say and saying what you do because sometimes you won’t get a second chance. Probably more often than not, you won’t get a second chance. There are a lot of people in this industry who want to be buying in these buyers groups and stuff like that. You do want to have the team spirit. You do want to do what you said you are going to do. I couldn’t recommend that highly enoughIf you don’t have the money or if you’re not 100% committed, then you need to make sure that your team is aware of that. 

How about if you’re difficult person? That box has a lot of opportunities. 

It definitely does. In a lot of our conversations with a buyer’s group that I’m in, I’ll be like, “Whatever the group decides I’m in on that,” because I’ll say my piece or say whatever, but then the consensus of the group, that’s important. That’s what’s important at the end of the day. 

One should never be limited with just one buyer’s group, a group of peers that you do trades withYou should have that flexibility. Normally when someone comes into the note space and they set goals for themselves. They say, “I’m going to purchase twenty notes. I’m going to start getting passive investors and then this would be the progressionYou seem to be doing it more organically at the speed at which it’s naturally progressing. Talk about that a little bit. 

We’ve never been focused on the number of notes. Even though we have our goals, it’s generally more workout based or having our systems set up so that we can handle more notes. I want to have 30 notes by the end of the year. Just because no deals come in and sometimes they’re not there either, wdon’t ever want to set ourselves up for failure in that respect. I think it’s more having our systems and our processes down to be able to handle any deal that comes through so that we can be there for that opportunity. 

We’ve got a question here from Nicholas and it is, “What UPB and PV are the notes you’ve been dealing with?” UPB and property value. 

I guess that comes into our buying parameters. Sometimes when you’re at buying a pool, you don’t have a choice so you get what you get. Our ideal buying parametersI’ll start with that, is we’d probably want the UPB to be over $15,000 and probably over $20,000. like to say under $100,000 for the top range of the UPB. That’s not always the case. We have funds with $200,000 UPB and we have a $9,000. That’s our general buying terms. Property value, we love to say over $80,000 but it also depends. $80,000 in Ohio is different from $80,000 in New York. We’re a bit flexible in that. We have properties that are under $80,000 and we also have properties that are at $1.3 million. It depends on the way that we buy. Our general buying parameters are UPB over $15,000, under $100,000. Property value over $80,000. 

Three things that I’ve picked up on your discussion is number one, you mentioned gaining consensus within the group is important. Number two, you mentioned having the flexibility and then number three, having general parameters. All of that signals that you have to have some flexibility swaying like a tree. It’s great to have those parameters, but at the end of the day, when you’re taking down market buys, tell us how you need to be flexible with parameters. 

The note business is definitely a relationship industry. Click To Tweet

We definitely do. We’ve done bulk buys in a number of different ways, but no matter what, you don’t get to pick and choose. You do get allocated even if it’s your choice of the allocation. You don’t get to choose, especially the tail end. You need to take the good with the bad. That’s going to happen in any deal like that. Trying to minimize the bad is awesome, but the thing in the note industry is you can think that it is bad and you get a payoff. A house can be underwater and yet these people want to pay. You would think that the note is a home run and it’s not. There are many variables. It’s very humbling. You cannot judge a note by the cover, that’s for sure. Even after you’ve done as much due diligence, you can minimize the risk. 

What about a $1.5 million or $1.7 million home in Malibu that looks good up until the time you pull the title search? Thank you, Matt Kelley. 

You can be ready to pull the trigger on a deal or on a note thinking that it’s a dream come true and then you find why it’s been on the market for a while. There’s definitely a buyer beware in here. If anything, you just want to learn how to do that due diligence. You cannot do enough courses. Once you’ve done the courses, I do recommend going out and buying a note. That’s my biggest recommendation, is do it with your own capital. If you don’t have a lot of capital, start small. Start on those $7,000 UPB notes where legal costs are going to be lower and then work your way up. There’s no better education than buying a note and making contact with the borrower or an attorney to be able to do that work out for you. 

Coming in with less capital in the industry, you’ve got to pick up the slack somewhere. You’re going to have to put in more sweat. You’re going to have to help other people do due diligence. You’re going to have to go help with bird-dogging or do something to pick up the slack. 

It’s not an easy industry to enter into without capital. I’m not saying that it can’t be done because there are always exceptions, but it is difficult. I know now, being given the responsibility to manage other people and the financial responsibility that comes with that, I know that I wouldn’t have wanted to do that any earlier than now. Even still, I will still be using my legal team, my mentor to make sure that I am being responsible in that way. 

It’s almost interesting because you look at a large corporation, Fortune 500 and they always have a board of directors, but they have a board of advisors too. You almost have that, whether it’s informal or not, with me, with the people in our group, the people in the Facebook group, etcAt the end of the day, it has to be someone highly respected in order to get those relationships. 

NIME 40 | Note Investing Success

Note Investing Success: Some states have more licensing requirements than others.

 

The awesome thing about joining buyer groups as well is that so many people bring so many different things to the table. In the buyer’s group, we have an attorney who will scrutinize every contract to the very letter. We have people who are capital intensive. They have a lot of capital to bring to the table. We have others who are willing to do the work. It’s great to surround yourself with complementary people that together, with your powers combined, you can accomplish something. 

We have a comment/question from Matt“More than one buyer’s group from the seller’s perspective, trust issues of multiple groups bidding against each other, taking the information from one bidding strategy to the other group.” Let’s hear you out. 

I’ve been involved in two buyers groups and they were never involved in the same. I haven’t come across that situation. I completely understand. I wouldn’t be in two buyer’s groups on the one deal at the same time.  

Alex has already put out a response to Matt Kelley. He’s stepping up. I’ve never seen this bravado. 

It’s our anniversary. He’s trying to win points. What did he say?  

He’s proud of that milliondollar number. This is Alex. “We haven’t run across that problem yet. It’s about ethics and taking inside information to another group is wrong. We’re open to how to do business and I know how to keep secret. I would say hands down without a doubt, Ali and Alex, I trust them like family and they’re in my group. I’m not in their other group therein. I never had issues with them. 

If the opportunity got presented to both groups, we would align with whatever group we had committed to first and not be involved in that. In both buyers’ groups, you can be a part the deal and not a part of a deal. We would excuse ourselves from any conflict before it even became a problem. 

What states do you avoid? 

I get asked this question quite a bit. We will look at any states, but some states have more licensing requirements than others. Some states have a limited amount. You can have, for example, five notes in one state. We’re very guided by what’s already in our portfolio. We don’t technically avoid states that are common to avoid like New Jersey, Cook County. At that point it comes down to price and whether it makes sense. You’ve got to factor in your legal costs in those states. That time it’s just a matter of if it makes sense. 

We were just talking about Massachusetts. You were telling me about what you found out about with the new attorney on foreclosure.  

Massachusetts has quite a decent foreclosure timeframe. When you’re looking at buying a note in Massachusetts, you wouldn’t want to buy a note with a $7,000 UPB in a house in Massachusetts. If you have a $200,000 UPB in Massachusetts, that’s because it’s going to be more feasible to spend the higher legal fees that are involved in that process to get a resolution, whether it be exiting and doing a workout or through foreclosure. That’s definitely a guide. With New York, New Jersey, Cook County, we would look for a healthier, higher UPB to be able to back the additional expenses in that area. 

We have a question, As a new note investor, do you suggest to maybe purchase a few notes before people working at finding a buyer’s group? 

Yes, that’s exactly what we did. We started small and even though we’ve been in the note industry as full-time, we had experienced prior. We probably had ten notes by that time through either joint ventures or on our own. I absolutely recommend buying one-offs with smaller capital expenditure so that you can learn the process. You can see a physical collateral file involved and snowball from there. 

I would add to that. Even if you pay a little higher price, you’re buying a oneoff note from an institution or seller that’s out there. You’re going to pay a higher price than you pay in the buyer’s group. You’re still not having all that exposure within a buyer’s group. You can still go and take down a low UPB note, like what Alex said. 

Also, you want that experience to be able to bring to a buyers group. Every note that you buy, every tape that you look at, you’re going to be doing due diligence and it’s something that you get better at the more that you do it. For title searches, I’ll go to the individual county and I will create my own title search. That’s something you learn in a course. Cathie Jeffs is the queen of title searchesEvery tape that you get, even if you think that there’s nothing good on it, do the due diligenceGo through that as a process because the next one might be better. All that experience is what you can bring to a buyer’s group when that opportunity comes up. 

Can I put you on the spot with a question? It’s not a bad one, but if you don’t have any money, you’re just down and out, but you want to get into note investing, what would you tell that individual? 

I would tell people that there’s probably an easier way to make money in note investing. We probably differ in this, you and I. Even due diligence costs money. Nothing is free. Education costs money. Everything does cost money. If you’re coming with no capital, it might not be something that you want to look at right now. It might be more focused on getting a second job building your capital reserve to be able to put your all into this. It is something that does require capitalIf you’re just looking at tapes or anything, you don’t want to be spending money that you don’t have on due diligence for a note that you can’t buy. 

NIME 40 | Note Investing Success

Note Investing Success: Try and bring value wherever you can.

 

No, I think we’re on the same page. One needs to have their financial statements updated for themselves personally with all their dealings. They should know you should have more money coming in at this point out. If they’re not fiscally responsible or they‘ve had a setback in their life, then they should get themselves in order financially first. 

Also, align yourself with a note investor and see what you can do for free for them by their time while they’re teaching you how to do something. Maybe you’ll offer to do title searches or PACER searches or something like thatSee what value you can bring to someone in exchange for learning the process. Once you do have some capital, then you can get involved. 

I get this question every week in email and people are like, “I don’t have money but I’d like to get involved.” I always say, “Read more books. Get your financial house in order.” Even if they’re bringing in a lot of income and they’re bad with money, then none of this is going to matter. Their habit is always to spend more than they can. Note investing will snowball the negative effects for them. I think it’s like that cliché that’s always out there. Banks are not known for spending more than they bring in. 

Another important lesson is that you will lose in this industry. You have to be prepared to lose as well as win. Sometimes you lose big and sometimes you win big but there’s always a chance. That’s why I like it when people use their own capital to start because you can lose. Things happen. There’s human involvement in this. There are no guarantees. People are so generous with their time. I see Bill McCafferty commenting on numerous Facebook posts, offering free advice or free information. That’s the type of people who are in this industry. I know that Bill will sit down with you and go through what he can offer you as well. He manages people’s notes for them and just awesome people who are willing to help.  

He’s done it professionally for living. I think that’s always the key indicator, if it’s someone doing this for a living. That says a lot if you are a full-time note investor. Bill has worked out hundreds of notes for people that post in here. 

I joke and say that I married and I have a child, but getting a note workout is great. It’s like the best day of your life when you get that loan modification through and you helped the borrower and they’re going to stay in their home. That threat of foreclosure that they’ve been under for seven years has now been lifted. It’s good to be able to help people and create a win-win situation as well. Foreclosure happens for us, but it’s never our initial exit strategy. We try to bring to the table as much as we can to help people, but at the end of the day, some people can’t help themselves or choose not to help themselves and that’s when we proceed through foreclosure. 

Sometimes to help is in foreclosure. They can’t afford to be in the home or they just don’t know that they can’t afford to be in the home. They’re better off renting and not having to deal with taxes and everything. They signed the property over deed in lieu and then they realize it. I’ve been thanked profusely for helping people out. 

A huge upside of this industry is to be able to do that for people. 

That goes back to where I know that it’s a priority for me. I believe its priority to get fair market value so you’re not less likely to take it backYou do have issues. I had a place in Las Vegas I took back. The market value is at $240,000 but then the house was stripped out, and they took the fridge, the water heater and everything. It was a disaster. 

People rely on Google images and they see from 2014 or less than thatFor $10 you can pay someone on Craigslist to go take a photo of a house. Utilize different resources and be creative. You can call a real estate agent and get them to go and have a look at the house as well. The more information that you can gather during the due diligence process, the better off you’re going to be. That’s where you save your money or you make your money in the buy, in the due diligence part. 

I would say also, the front end part, the sourcing and the due diligence because if you’re not sourcing correctly, you’re not going to have anything to run due diligence. Emphasize both those marks. We have a question, “We’re also wondering if you suggest buying performing as our first note or a nonperforming. Our parameters are not on seconds, but we are the first note for me to get our feet wet. What do you think?” 

It’s what we did, more so because we didn’t understand the industry when we bought that first performing note. That was a performing first mortgage that we bought, I think. If the opportunity bends and you can buy it from a reputable seller. Like our first note through Dave Van Horn, they warrantied that note. We have that protection that if that note stopped performing, they would take it back, get it reperforming and then give it back to you. That was a lot of protection and gave us a lot of peace of mind. Alsoif you do want to do nonperforming, go through someone like Bill McCafferty who can manage it for you to make sure that you’re going through the right thing and also share that process with you. Is that considered a joint venture? 

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No, it’s not. It’s 1099, that’s what I’m thinking. You’re working as consultant. 

I definitely understand. It’s very overwhelming. When we first bought, we bought four. We had done all the courses and read all the books and then we bought these notes and we were like, “We have no idea what to do next. That led us to the mentorship. There are other options that you can take or other avenues. We had done joint ventures previously and learned some stuff through our joint venture partners to get our feet a little bit wetter. We just went out and we did buy those four notes, but we did have that, “We have no idea what we’re doing,” moment. We sought out a mentor to help us to limit our mistakes. 

I hope I helped you avoid some mistakes. I’ve only been taken on three protégé’s every six months because I want to make sure that time is there for them. I think that’s the other thing. Whoever is there to help mentor you, make sure that it’s not like a cattleherding approach where you’re in this large setting. Make sure that it’s someone that has some time. Also, you’re going to have to bring some value to them. 

Feel free to PM me as well. I can recommend some courses for you to do that’s maybe a little more handson. Maybe prepare you a little better for note investing over others. Feel free to PM me on those. 

Linda says, “That’s awesome. I look forward to that part of the game, to help others as well as making a good deal for us. Melana and Joe took the workshop that I had out. I know that they’re getting prep in that. That was the one thing that stood out for them. They want to help people. 

I receive quite a few emails a week asking for advice. I try to be as helpful as possible, but sometimes I’m a little bit swamped in collateral files, which is a great problem to have. Sometimes I won’t be able to give this full of an answer, but I will try where I can to help peopleThat’s because people were so generous with their time as well. 

I think that goes back to some advice for individuals that are maybe on the newer side mostly. If you’re going to go and reach out to someone who is already in the game active, why don’t you start the conversation with how you can bring value to them. “Ali, I want to let you know I’ve been to this conference. What kind of notes are you looking for? Maybe we can team up for a trade buy? I’ll keep my eye out or if you ever need help with due diligence, I’m pretty good at PACER.” Whatever the case is, that’s always a better way to break into a conversation. You’ve got emails where like, I don’t know you but here’s a tape. Will you review this for me and get back to me?” 

What do you think about this tape? I’m like, I don’t know. Due diligence is a timeconsuming process and I don’t represent myself as someone who can do due diligence for someone else just off of limited information. I don’t like representing something that I don’t know enough about. If you’re providing an analysis of what you found, I might have time to look over what you’ve done. In some respects, sometimes I didn’t have enough time, enough hours in a day. I do have to spend some time with my child and my husband as well.  

Tell us about your daily rituals that help you stay focused and be successful. 

You don't get to choose, especially the tail end. You need to take the good with the bad. Click To Tweet

I think I’m probably not as rigid as I should be, but every morning I wake up and I have a coffee. That’s how I start my day. I go through and I mentally prepare. I’m a bit of a thinker at night. I’m not a great sleeper, so I generally will have a note pad and pen beside my bed to get things out of my mind. I don’t have these set rituals like everybody else or like I should because this industry is so complex that one day is completely different from the next. It has so many different stages. We’ve received a bunch of collateral files. I’m in the zone of getting that through the setup procedures and stuff like that. That’s where my focus is. Every morning I will sit down or every morning I dedicate it as a workday. I’m in my office, bright and early. We’ll be texting at 6:00 AM. I like to get up before my son.  

Sometimes that’s more likely than others, but I spend that time to focus on what I’m doing, what I want to achieve for the day and then go from there because my day changes every single day. It’s to nail down those steps. We might be focusing on due diligence because that might’ve just come in. In this industry as well, you’ve got to be prepared for change because something can drop in your lap and you need to get ready to goYou need to clear your books. Something that may have been important that week before is not going to register because something else has come up. It’s not compatible with collateral files or important documents or anything like that. The bar gets locked on those days. 

Merging family and notes is very interesting. There’s a reason I asked about the daily rituals. I know some people may think like, “It’s a silly thing, but here’s the thing. In one year’s time, Ali and Alex have amassed a very healthy portfolio of notes and now they’re at a point where they have other people bringing their notes to them to help them out. They’re well on their way for a lot. That doesn’t come by accident, especially if you’re on the newer side or even if you’re on the veteran side and you haven’t seen a deal flowEverything is out there. Alex is a needy person. I just threw that out thereIs there anything you’d like to say in closing? 

I thank everyone for reading. If you have any questions, please feel free to reach out. This is an industry that can be exciting and it can present some amazing opportunities to help people stay in their homes. I highly recommend education. 

I’ll second that. 

 

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