NIME 8 | Seller Financed Notes


Note investing can be an excellent source of cashflow for your investing business. Wanting to buy notes for herself and enjoy the flexibility of time that note investing affords, Tracy Rewey left her job at a securities company and started her own business where she is buying notes out of a self-directed retirement account as well as through her company called Noted Direct. In this episode, Tracy talks about her 30 plus years of experience as a note investor as well as what investors can look for at Notes Direct. She also gives some key points to investors looking to buy or sell a seller-financed note.

Listen to the podcast here:

The Real Deal On Seller-Financed Notes with Tracy Rewey

I am very fortunate to have Tracy Rewey here with me. Tracy, welcome to the program.

Thank you. I appreciate being here. We got the chance to meet in person in South Florida.

It was nice because you were one of the top people I was looking forward to meet.

Thank you.

The reason being is over the course of time, I’ve read your BiggerPockets post and complimented you. You’re extremely articulate, always insightful with what you’re coming out with. It was a real privilege and you’re seasoned. Throw in the seasoning on top of that.

I’m experienced.

I got to hear you speak with Deepta and everyone at IMN so that was very pleasurable. Let’s jump right into it. Tell me about the young Tracy. In 1988, you started out in the note investing field. Tell us about your entrance into the industry.

I came to this industry a little bit different. My very first introduction was working for an attorney that had a title company and a very small extra servicing company. There used to be somebody that would come in and pay us to go through the records and to find all of the seller finance deals where the person getting payments was an individual and not a bank. I’m like, “Why are they doing that?” It was because they were trying to find leads for seller finance deals to go to the seller and say, “Are you tired of getting those payments? We can buy all or part of your note for cash.” That was my first introduction. That was before 1988 and I was like, “That’s interesting.” Flash forward, I moved from the small city to the big city in Spokane, Washington.

I ended up going to work for a securities company that bought and sold seller finance real estate notes. I used my title background to do closings for them and that’s how I started there. Somebody introduced me to a financial calculator, I was like fireworks. I started to understand the investing side of it. I worked with them for ten years and that was ’88 to ’97 and worked my way up into production and the underwriting team. I was the liaison for all the regulators because they were an insurance company and their money was regulated as far as it was audited. We turned these seller finance notes into mortgage-backed securities and we did all kinds of amazing things that would be very hard for me to have done as an individual.

I got to learn in this big capacity. In ’97, I decided I wanted to work for myself for a lot of different reasons. One, I couldn’t invest in notes while I worked there. I could find real estate, I could find some real estate with owner financing, but I couldn’t buy a note without it being a conflict of interest. I understood the reasons for that. I wanted to buy these notes in my retirement account so that was one of the reasons. I wanted to buy notes for myself. Secondly, I needed more freedom of time because I was a mom. I wanted to be there when my daughter got home from school. I wanted to be able to take her to whatever she needed to go to. She was getting where she was entering school. I wanted more flexibility in time. She does work with us. She’s 26 so we fast forward a few years. I started my own business in ’97. I am buying notes out of a self-directed retirement account. I’m not too proud to say I still refer some deals to make a referral fee and buy every note I see. I don’t have the funds to buy every note I see and some of them I don’t want to buy, but somebody else does.

Know your maximum investment value. Don't get lured away because somebody promises you a devil yield. Click To Tweet

Feel free to always post any opportunities on our website too. You’re definitely a friend of the group. You’re taking the time to talk to me now and knowing you and the caliber of person you are, you’re free to go ahead and post opportunities. We encourage that. What I have to understand though is you don’t jump from the job into being self-employed. What did you do right when you were moving up the chain in the due diligence department?

I learned this on someone else’s money and then I learned it when I was investing my own money. I thought I had it all figured out. When it is your own dollar and you don’t have a giant portfolio, just having a small portfolio, every deal counts. When you’re a big company, you get a lot of averages. I would say I’m a detail-oriented person. Having checklists, forms and documents, and this is the not-so-sexy part of the business, but also a very important part of getting deals done. I understood a plan of action and having checklists, running ratios and verifying everything that was ever told to you because some people lie on purpose. Some people lie by omission and some people don’t tell you because they don’t know any better.

It’s not anybody’s up to get you. I definitely had an abundance mentality, not a scarcity. I believe in the better part of people. However, when it comes to investing in notes, you’ve got to check and verify. That’s probably one of the biggest parts. It’s so much easier now. We can go online and check things out. We can order a title report, we can order a BPO all from the convenience of our computer. We can check tax records. It’s much easier now than it used to be. We used to do all that by an old fax machine and snail-mail. It is a lot easier to perform your due diligence now.

You helped put systems to place or you worked with the existing systems and you understood the value of proper due diligence, of proper verification and so it clicked with you and that’s how you progress through due diligence and gain your confidence as you alluded to.

When I worked for the private investment company, for seller finance notes, we were buying over $20 million a month. I’ve had my hands at some point in time on the file, either as the closing manager or as the underwriter so I saw a lot of deals. When I started my own investing company in ’97, I reused all those processes. Some of them I thought, “Now that I’m investing for myself, I don’t need those anymore.” They were this institution and I don’t need to do that. There were times where I would, with good reason, waive something and it would work out fine and then there were times I would waive something and it wouldn’t work out fine.

You’re like, “That’s why that’s there.” You’d want it to be more of a sure thing than a law of averages. That was one of my mistakes that I had to learn when I was investing my own money is that because you can say yes doesn’t mean that you should bend your rules. I’m not saying rules are meant in our business to get created to find a solution. Still, if you know your maximum investment to value is this, don’t get lured away because somebody promises you a double yield if you’ll go up a little bit more. Somebody else had said on your group, “Your return of capital is more important than your return on capital.”

You took everything that you learned in the systems and then it helped you build the confidence to go out for your own business. Did you also leverage the connections that you made in the space?

Absolutely. Fortunately, I knew a lot of people in the business and we’ve done deals together over the years. I’m definitely a big collaborator. Sometimes other investors would come to me at the beginning and they’d want me to close a deal for them because I knew how to do that. I’d be like, “Sure, I would do anything.” Now, I don’t do so much of that. I have other people that I refer people out to if they need help with that because I’m so busy, definitely collaborations. I work a lot with NotesDirect, a note listing platform and that’s in collaboration. I’m working with the people that built that platform because I know that I can help bring it to other sellers and investors. If you’re honest and fair and you develop those relationships that you never know how they’re going to serve you and the purpose and you don’t start out developing them for that reason, but it naturally happens.

Tell us about NotesDirect.

I’m still buying notes for myself out of my retirement account and also through our company depending on where you want, immediate income or right retirement income. I’m also a project manager over at NotesDirect and it’s an online trading platform where it brings buyers and sellers together. Third-party sellers can list assets and buyers can go in like an MLS style for real estate. They can go in and browse the assets. One of the things that’s unique is that we have a full collateral file there. Before anybody can put a note on there, it has to be a recent BPO, a title report, a note, a mortgage, an allonge and payment history. It has to be a third party service. It’s an opportunity for one investor to buy one note. It’s not like a joint venture place. It’s just one investor, one note. It’s a great platform. It gets better all the time. As anything in the beginning, you’ve got to work through the development programming bugs but it’s a very strong, solid platform and we see a lot of activity on there.

NIME 8 | Seller Financed Notes

Seller Financed Notes: When investing your own money, just because you can say “yes” doesn’t mean that you should bend your rules.


Anya Sagee is a committed note investor. I’m sure that she’s going to get set up on NotesDirect. Do you require the seller to provide a comprehensive collateral file or I assume you scrub through the files that are sent to you before posting them on sale?

On NotesDirect, we have a checklist and we have someone that goes through them and makes sure those minimum number of documents are there. Copies of the collateral documents, any assignments and allonges if there’s been a transfer of interest, payment histories, third party servicing titles and BPOs. All of those items and then they’re available for download. The person that’s reviewing the note can download and look at all of that before they even say they’re interested in buying it. That’s helpful.

Take me to 1997. What was your mindset at the time you ventured out on your own? How big did you think it was going to get?

I went through a phase where I wanted to be big and then I went through a phase where I had not enough time and I wanted to be small again. I like being a smaller enterprise, I do, but we were big. We wanted to win contests because back then they had all these contests if you send them enough notes, you can win cars and trips. One year we won the car and we had about eight employees at that time. I had a partner as well and I enjoyed that. It was fun. You start out wanting to be big and then I’m like, ” I’m working as much and as hard as I was when I was at a job, so I need to do this smarter.”

I thought there are other ways to do this. With the internet and with being able to outsource things and network with people and other providers, you don’t have to have the closing person in your office. We know people now that on a per-file basis will do your closings for you. They only charge you when the deal closes. That’s great. That’s a no brainer. There are all kinds of ways now that you can be a smaller operator. I like not having office space and overhead of office space. I like having the freedom of lifestyle. We ran our business from Guatemala last year for seven months, in a third world country. Now here back in Florida in the States where we have a primary residence. I like that side of it now. I’m in my 50s so I want to be sure I’m enjoying life.

You start out with monetary goals with big visions and awards and then you filter it down to the quality of life.

It takes you a few years to learn that, don’t you think?

I’ve only been doing this, the note investing group, the book, all this since May of last year so a couple of months.

You’re doing great.

Thank you. Before that I was off the grid, you wouldn’t even know me. You wouldn’t have known me and I’ve said this story a million times. I was working in a Starbucks for four years buying notes and working them out with my own money. Just building my systems and I didn’t have a large enterprise to leverage off of our context. I’m not saying it was any easier for you, not at all.

Know where your niche is and what you’re good at, and continually stay focused on that. Click To Tweet

I understand people’s challenge starting from scratch. I do.

The challenge for a lot of solopreneurs that are doing this out of their home, nowadays it’s the number of distractions out there, is which way to go with it.

It’s interesting that you mentioned that because my husband and I were talking because he’s in the business as well. That’s how we met was through the note business and it used to be there was hardly anybody out there promoting the note business. Now everywhere you look you see it and it’s what they call shiny object syndrome. I can see where that would be easy to do. I personally have always been an advocate and enjoyed the seller finance notes. They were there at the beginning and they are still out there being created. I understand the allure and I applaud people for going after the nonperforming notes because it’s a certain cycle in the market where they’re plentiful and values are going up and there’s an opportunity there. I applaud people doing that. I always joked that I had enough nonperforming notes that I didn’t mean to own. I bought a note and it turned out that way that I wasn’t going to go looking for them. A good friend of mine said, “Tracy, wouldn’t you read much of the bottom at the rates of the nonperforming note?” I’m like, “That’s true.” I understand both sides of it. For me, I know where my niche is and what I’m good at. That’s where I continued to stay focused.

The seller finance it’s not institutionally originated. There’s more creativity. Do you find though that there are more loopholes or more items you have to pay attention to because the contracts may be written on napkins?

That’s true. We’ve helped many people find a good attorney to get the transaction documented to a level that would be suitable for an investor. You have to be willing to work through a lot of solutions. That’s the same reason we don’t put the seller finance notes on NotesDirect unless somebody has already boarded them and put them with the service or already cleaned that all up. We’re not looking for that individual seller that did one seller finance notes. We are looking for people who’ve already bought them and cleaned them up because at that level they need a lot of cleaning and scrubbing. A lot of times, you do have to help get them with a title company or attorney to get the documents cleaned up.

The treasure is in that.

There is treasurer in that, absolutely.

I remember reading a scenario, you worked with a commercial property in Florida on a note rework. I think it was Tampa. Does that ring a bell?

Yeah, it does.

You have a time value of money. You do financial calculator training. She does call in on banks, various aspects of note investing. It’s geared more towards a contract for deeds as well as institutional paper or what.

NIME 8 | Seller Financed Notes

Calculator Power! Profits in Discounted Notes

There used to be this awesome book out there called Calculator Power! and it was by Jon Richards. He was one of the pioneers of the note business. He was the mentor that got my husband involved in the business long before he and I had met. He wrote a great book on how to use a financial calculator to buy discounted notes. When he passed away, it went out of publication. We’ve taught people in person how to use the financial calculator to buy and sell notes, how to calculate yield and payment and interest, and how to double a payment in half the interest rate and still make more money on the deal and all these great creative strategies.

We found that it was hard for people to learn that and then along comes the computer where you can screen flow everything. Learning is earning. I look over my shoulder like, “This is how you settle payments. Get out your calculator and follow along. This is how you calculate yield, follow along.” It’s about 60 videos of the most common calculations we use in the note investing world. A lot of people buy and sell notes and never touch a calculator. I’m not saying you have to know it, but you leave money on the table if you don’t know it.

You’ll get robbed. When you’re new to note investing, everything is cents on the dollar but then when you get seasoned and you’re working with your calculator, it’s about the yield. People that say, “I want to get $0.70 on the dollar.” Meanwhile, you’re giving the buyer 20% return for X amount of years.

You left money on the table is what happened.

I have to know this. You’re building momentum, you’re building your portfolio, your IRA and your company. At what point do you say, “I need to give this to somebody?”

It’s about the point that people are asking me so many questions I couldn’t keep up anymore. I’m a helpful person. If somebody calls and has a question, I want to give them an answer and then pretty soon Tracy has this much time to work on her own business. I’m like, “There’s got to be a better way.” It started with the Note Investor blog. There are 300 free articles on there and that’s where it started. Now, when somebody asks me, I can say, “I got that answer. It’s right over here. You can go read it. It’s free. I’m not charging you.” People wanted more in-depth training and that’s where I started. We put in some trainings. I’ve always kept them very affordable. People will see that. It’s super affordable. I don’t want it to be out of reach of anyone. It’s not the primary way we make money. At some point, you’re like, “I can share this. I can teach this.” A lot of people have come along now and are teaching it too as well, like yourself. There are lots of room for people to teach it. That’s great. I commend to everybody who does it. Find somebody who works with you that is vested in your success.

If I didn’t train, I’d still be fine. My quality of life would still be the same because I would be buying more notes. I also can’t train a thousand people, so I only look to train five, six people that are very serious, committed and have resources to buy. That’s who I’m looking for.

We have a similar philosophy on that. We’re very vested in people’s success. That is how that calculator class came up. My husband, when I went to do it, he’s like, “You’re crazy. Nobody’s going to learn this stuff. It’s boring.” I’m like, “They need to know it and the people who want to know it will stick with it.” I’ve had lots of people say, “That was great. I’m not a math person, but you made it very simple.” That’s one of the things I try to pride myself on is I don’t have a college degree. I learned this by hard work and people showing me so I’m doing the same thing for other people.

The whole give back and I know your daughter works with you.

Sadly, my mom passed, but I love my mom and she worked for us too until she passed in October.

Persistence, willingness to learn, and treating people fairly are all very important to be successful in any business. Click To Tweet

You got to spend quality time with your mom, I assume if she was close to you that way?

We talked every day, but she still lives in Washington State where I’m from originally. I went out in Florida or down in Guatemala, but we see each other online all the time and I go out and visit her.

Thank you for sharing that and that’s wonderful your daughter is with you. My little ones are five years old, four, two and newborn. I’m trying to keep them to work away from me. I’m trying to keep them away from me, but at some point, I would love that. That would be a goal of mine in my life to have that.

Honestly, my daughter used to put stamps on my direct mailings for me when she was young, so that’s how you start them out. She went off and did exciting things like work for a ski hill and be an outdoor raft guide. She still does some of that stuff but now she’s ready to do something like this and she’s our online guru because everything tech is what Millennials do. We’re fortunate to have one.

I’m a big advocate for good training. Especially in the note space, there’s always a need for it because it is a complex, convoluted space. People can go there and I know the quality of the training because I know you. They can get additional information, how to use a calculator, how to do the outreach for sellers, for finding new deals, do due diligence and those important facets of the business.

I have all my deals from that posting pulled up. You remind me which one it is now. You can ask me.

It was Tampa and it was a commercial property and you did a few things with it.

What did I do with it?

You bought it. Did you buy the paper in a nonperforming state and then you got it performing or you evicted? It was a land contract or something. You evicted the tenant and then you back filled it with a new tenant?

This is my Tampa 1,400-square-foot commercial building? Does that sound like it was? I must not have found the right one. It was a 1,400-square-foot commercial building in Tampa. The sellers sold it for $125,000. The buyer put down $50,000. There was a $75,000 note at 7%. The payment was under $500 and it had a balloon on it in eight years. On that deal, we paid 90% of UPB. The investor was happy with a 9% yield and on that one, we made a fee on it. We referred it. I don’t buy every note. I would not have paid up that much for that particular note but another investor was happy to earn that and this was an institutional investor. It wasn’t somebody like I’m giving this note to some investor who doesn’t know better. This was an institutional investor that had cheaper costs of funds than me and we referred that deal. We’ve done more than one deal in Tampa.

NIME 8 | Seller Financed Notes

Seller Financed Notes: The note businesses is a great business for people who can be persistent and are willing to learn.


One thing I wanted to ask you is there’s something that you had put out on BiggerPockets. You had mentioned that it’s important for someone coming into the note investing space in having a willingness to learn, be persistent, be tenacious and have a solutions-based attitude. They are key traits for a note investor. Can you speak to what you think the characteristics are that are needed to be a successful note investor?

Persistence is very true because people will get discouraged if they don’t find a deal right away or don’t close a deal right away. Persistence in that because somebody says no on a deal. You can find sometimes in other solutions. I’ve had institutional investors say, “I don’t want to invest more than 70% ITV.” Everybody else cuts down their offer to 70% ITV to the full. If you understand partials, which is part of the calculator and the time value of money, you can figure it out. That was one of the examples I had posted in BiggerPockets. You can figure out how to use that 70% to buy the note but keep the backend for yourself. That would be the tail end or the remainder payments. Those were great in a retirement account as well. When you’re creative like that both for the seller and yourself, you may not always make them big money now, but you can build yourself in on the backend doing certain transactions. That’s being creative, solutions-oriented. That’s a learning process. Persistence and the willingness to learn and to treat people fairly are all very important to be successful in any business, but especially the note business.

Treat people fairly. Do what you say you’re going to do. Be persistent. That’s a great advice. I started in 2013. I’m only several years into this and I was a landlord before so I have that real estate background. That was the main thing is to be persistent. Overcome the learning curve because there is a big hump. It’s not like real estate where you go buy a property, here’s the purchase price, rehab, ARV, After-Repair Value, and then this is your cashflow or this is your return if you resell. It’s more complex. What’s your favorite part of note investing?

Definitely buying the deals. That’s the fun part. Enforcing them is not my favorite part. I’ve learned over the years to get a little bit of help on that. Buying them, structuring them, figuring out a way to make something work when other people don’t. My favorite deal to buy is where you can keep the backend of the note and not have to put much in on the front end yourself. You’re leveraging money so you hope to know the pace but if you don’t have a lot of money invested in it, if you don’t keep your backend, you understand that. If you do, then it’s like winning the lottery when you go to the mailbox but now it’s not the mailbox anymore. It’s deposited to your account, but you see an early payoff or something like that.

Definitely structuring those partials are one of my favorite parts. Seeing other people learn, there are plenty of notes out there so seeing other people discover the note business and understand what the calculator can do. If I could have my wish for everybody is everybody could be their own boss. They could all do what they wanted to do, set their schedule and have freedom of time. Even if it wasn’t an old business with some other business, for me that’s the note business but there are lots of other entrepreneurs out there living that dream in their chosen area. Ultimately, I would love for everybody in the world to get to do that.

It sucks your soul sometimes working in a job for someone else if you don’t truly love it. There are people who do it for nonprofits and I understand they love that. The note businesses is a great business for people who can be persistent and are willing to learn. As we talked about on your Facebook group, it’s adding value. People say, “How do I get started?” That’s the main thing. How are you adding value? If somebody finds a deal and they want to bring it to me, people say, “Don’t I have to do your training?” I’d love if you did my training, but if you’re out there finding deals and you bring me one, I’m going to look at it. I’m not going to say, “No, I’m not going to look at it.” There’s an opportunity out there if you bring something to the table to add to the situation.

Whether it’s money in a passive perspective or you’re putting in the sweat equity to go out bird-dogging to call the banks or whatever the case is, you’re bringing value to the table. That’s very good advice. It’s how my philosophy is. Before starting the note business, my wife and I started a government contracting company in the basement of our home and selling to the federal government on a prime level. You and I had talked, whereas you diversified your business approach when the economic downturn occurred in 2008. On my side, I’m like, “How can I sell to the federal government because they’re not going anywhere?”

That’s my thought on that. What I did to start that company was very similar to what I did to start note investing and that is to hibernate myself and learn the insides and outs and take all the hits with my own money and be persistent. Before I put myself out there in any way. That’s beneficial to a lot of folks. We’re talking the real high-level talk. You’re not going to be able to take from this and then go out and start building a note investing career. It’s the tools or the training that certain folks like me and you who do that will help you avoid a heavy learning curve.

It’s like when you start anything new. You read about it, you watch videos, maybe you hire someone to help you. I’m trying to learn Spanish now because we spend so much time in Guatemala. I don’t think I’m going to wake up one day and speak Spanish. I read books and do training and I have coaches down there in Guatemala. We get on Zoom or Skype and practice. It’s anything that you learn that’s true. You can figure it out yourself. The internet is a great place, but you can jumpstart your learning curve definitely with getting some good information. There are people out there that are passive investors. I talked to a lot of doctors, lawyers and stuff and they’re like, “We don’t want to be pounding on the streets to find these notes. We have our own full-time businesses.”

That’s where you can connect with them. If you understand working with private investors or those private investor types can also get on a site like NotesDirect and there are ready-to-buy notes there. Wherever your interest is in this business, there’s a place for you. People have to start with, “What is it I want?” “Do I want to buy a note? Yeah. Do I have money in a retirement account to do that? No. I’m going to have to learn how to refer deals and make some money for a while, and then maybe I can get a tail end of a note on a partial. Maybe I can make enough contribution to my retirement accounts so I can buy a little note or I can pair up with somebody to buy part of a note or something like that.” You have to be careful there and you don’t want to hear about the SEC thing. You should be careful about pairing up there. There are opportunities out there if you bring value.

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All that sounds like a slow build.

Somebody said something about marketing. They said, “This would be a lot sexier if you said you could earn $10,000 in one week.” I’m like, “Yeah, but that wouldn’t be true so I’m not going to say that.” I know it’s not as sexy to say. “You’re going have to work hard, find leads and grind through deals,” and you close one out of twenty.

I’ll tell you what, the shine. When you refer to shine, the shine for me was this morning when I get the ACH payment from my loan servicer and I have to tell my IRA company what money goes to which notes. I do this every month. I could systematize it probably in one of your training tools, but I like doing it. I’m like, “For this bar, this goes to principal. This goes to interest,” and I divide it all up and I’m like, “That is sexy.”

That part is sexy. You are working from home, being there when your kids need something.

It’s definitely there. What’s critical though is people don’t jump the gun and try to get to those benefits or get to that quality of life first without putting in the foundation for themselves. Like you said, the self-reflection to understand what their goals are. How do they want to carve themselves into the industry?

Their long-term goal may not be that they can do it now, but they can work towards it and if somebody who starts with a capital, it’s a faster road for them. There’s no doubt about it. They have to be careful that they don’t rely on everybody else for their due diligence. They have to learn some level of due diligence for themselves.

What do you say to someone that’s new and is looking to call on banks? How should they present themselves?

I’m biased here. It’s a lot easier to be new and start in seller finance notes than it is to be new and call on banks.

Tell me the difference in calling on seller finance deals.

Seller finance is people who have maybe done one or two deals. They’re not as sophisticated, so they are much more forgiving if you don’t know exactly what you’re talking about when you’re starting out. Those asset managers at banks get a lot of calls and they have a shortage of time and if you’re not going to buy their whole portfolio, they’re not going to unnecessarily talk to you if you tell them you’re your broker. There’s a reason that these listing sites are out there for people because it’s hard for people to go call on banks and get individual NPNs. They have to do portfolios most of the time or they’ve got to be brokering to a source that these banks don’t already know about. That might be easier with a small private bank or savings and loan. It’s a little easier when people are starting out on the seller finance side but that’s not to say people can’t do the nonperforming too. I know you teach people a lot of strategies. What would you tell somebody to say to a bank asset manager?

NIME 8 | Seller Financed Notes

Seller Financed Notes: The Dodd-Frank Act changed the due diligence procedures but it didn’t ruin the business.


First, start with a small local bank that has one or two branches and talk to the VP. You call and ask for loss mitigation or if it’s a small enough branch, you’ll talk to the VP of lending and let them know that you’re a note investor. You sell the fund and do they have any nonperforming notes that you can look at and not put restrictions on them in terms of these are my parameters. Don’t be difficult. Nobody likes difficult people and see where it comes to. Most of my portfolio is made up of peer relationships and seller relationships whether they’re institutional sellers or they’re people that wanted to offload and get out of the business. I look for those hungry people that are looking to exit or they shelved some notes that you need to remind them, “Do you have any notes you shelved that I can look at?”

You never know because they could have a gold mine that fits your parameters but for them, it’s the worst note because it’s not full equity or something like that. I like partial equities. I buy notes with no equity on the back in the second. It doesn’t matter to me because I pay less. When it has full equity, I pay much more so I’m looking for a little hair on the deal. I’ve only bought institutional paper. However, I have created land contracts through foreclosure and all that. I’ve done seller financing after I had to take back the property, but once I started buying seconds, then I started loan modifying everybody and 70% of the assets I bought. That’s when everything started building for me at that point. The last thing I ever want is a property.

You want the cashflow.

I self-managed properties, but they’re ten minutes from my house. They’re commercial spaces, industrial spaces and residential. I’m big on that. Mark Pantak asks, “Why I prefer a performing first lien, is that seller finance note was faster and easier for me?”

It sounds like he’s on team seller finance to me.

He does call on a lot of banks. That’s probably what the biggest takeaway is. It’s that when you’re buying the seller finance notes that you haven’t looked over by an attorney, I assume, to make sure it’s in compliance within the state.

Everybody always asks about Dodd-Frank. I’m not an attorney, but the Dodd-Frank Act came along and it definitely changed things for us. First, you’ve got to look to see if a transaction is exempt because certain seller finance transactions are exempt. There’s an exemption for them. It’s on one to three a year, depending on how it was originated. You have to make sure that it meets the terms so there are certain terms it has to meet the exemption. If it’s not exempt, then you’ve got to go into the realm of, “Did they have an MLO handle the documentation?” Everybody says, “Didn’t that kill your business?” No, it changed your business. It changed our due diligence procedures. It didn’t ruin our business. Do I like it better without the regulation? Absolutely. Does it kill your business? No. You change how you do business.

Do you think it exited some players? There’s been such a large influx into the industry that it awashed.

I think both. I see most of the influx on the nonperforming side. People are going after the institutional paper. I see more influx there and I understand that. I understand it because it’s an opportunity that’s there right now.

Will you still sell on the seller financing side?

Competition is always good. It makes us all better. Click To Tweet

We still do those deals. They come into us off our website and we don’t do as many direct mailings anymore, but we get a lot of business off our websites and referrals from other people. We do a lot of seller financing and some we buy for ourselves and some we refer over to another investor and earn our fee. We still do both. I’ve never been afraid of saying that. Some people say, “I only buy,” and that’s great but there’s room for everybody at the table.

It sounds like you further your relationships by helping broker deal and where they know your one-stop shop. They can come to you. It’s not about what you have an appetite for.

If I see somebody who has a portfolio and they have all their ducks in a row then I say, “They might be a good candidate to list their notes on NotesDirect to match them up direct with other investors.” One thing we’re avoiding on the NotesDirect platform is the brokering side. We’re trying to get the sellers direct with the investors.

Do you find there’s a lot of competition in the note exchange space now?

It’s interesting there were none and now you’ve got others. We know our competition like Paperstac, FCI, Watermark and MLS Notes. I tell everybody about our competition, that’s fine. Anybody will find them with an easy Google search. We think what’s unique about us is we’re not auctioning format. You get to see all the documents before you say you’re interested. When you say you want to buy it, to get ten days to reform your side of the due diligence if you want to order a new BPO or title report it’s encouraged that you want your own version. What’s different is you know when you say, “I’m going to buy this,” that it’s your note so you can invest the time and energy to do your final due diligence and everything’s there to do your preliminary. We think that’s what sets us apart. Competition is always good. It makes us all better.

It sounds like the ease of use is your competitive advantage.

We have unique assets. The full due diligence package is there and it’s not auction format. We think that’s what our benefits are.

I would think too that having ample inventory is another advantage. What would you say on outside NotesDirect with your own personal business, what is your competitive advantage?

I know how to talk to people, I know how to solve a problem and I don’t give up. I’m working with a seller right now. It’s a seller finance deal. It’s in a condo. It’s here in Florida and it’s got delinquent real estate taxes. I’m like, “That’s simple. We’ll take them out at closing and pay him.” He’s like, “No, I want the money. Once I do that, I’ll never see it again.” The buyer hasn’t been paying their taxes and the seller didn’t know that so it comes to light. We go, “I understand that, Mr. Seller.” He’s working with this attorney to collect those taxes and when he’s done that, then he’s going to sell us the note. I feel confident he will. I know he’s got other people out there, but I didn’t hold him over a barrel. I’m like, “Here’s a way you could fix it. If you don’t need the money right now then you can fix it this way. Here’s how you fix it.” I do a lot of helping sellers fix their problems. Maybe they didn’t know that they needed to check on insurance, things like that. It comes back around, you don’t always close the deal at that moment, but you will down the road.

It goes back to reputation.

NIME 8 | Seller Financed Notes

Seller Financed Notes: You don’t always close the deal out in a moment, but you will down the road.


Persistence, reputation and helping people to find a solution.

Tracy, thank you so much. I know that you speak at a whole number of these conferences. You went to Guatemala. You went there for how long?

Seven months.

That right there is a statement. That says a lot. It says you have control over what you’re doing in life and over your destiny and what you’re doing for fun. Thank you everyone for joining us. On our next episode, we’ll have Dan Zitofsky on. He’s going to come on. I don’t know if you know, he’s running for office in Delaware.

I didn’t know that.

He’s one of those guys that when you ask him, “What are you up to, Dan?” he would probably have to start with what he’s not doing. That’s how much the guy is doing.

You have a good group of people you’ve been interviewing.

Thank you. I’m with you though. I am quality of life. I’m starting my third book and that’s what’s important to me is quality of life and spending time with my four kids and everything else. Until next time, God bless.

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About Tracy Rewey

NIME 8 | Seller Financed NotesTracy Z Rewey, a well-known industry expert, has handled millions of dollars in owner financed real estate notes and alternative cash flow purchases since 1988. Tracy began her career in real estate closings and title searches leading to a position with Metropolitan Mortgage & Securities.

During her ten years with Metropolitan, she mastered a variety of positions including note broker relations, investment analysis, closing management, underwriting, BrokerNet™ software development, and Vice President of Note Buying Operations.

Loving the note business but wanting to work for herself, Tracy left the institutional investor side in 1997 to start Diversified Investment Services, Inc., a Florida note buying company and, an online newsletter. The author of How To Calculate Cash Flows and co-author of Finding Cash Flow Notes, Tracy specializes in the use of tax-advantaged retirement funds to purchase real estate notes.

She has received numerous industry awards including NoteWorthy Industry Achievement Award, Discount Buyer Associations Lifetime Achievement Award, American Cash Flow Association Million Dollar Club Award and Metropolitan Top Producing Broker Award (Jeep Grand Cherokee) through National Contract Buyers.

Excited about innovation, Tracy joined the NotesDirect team in the spring of 2017 after test-driving the online note trading platform. She handles new business development, client relations, and product enhancements.