NIME 13 | Asset Management

 

Bill McCafferty built his portfolio by working in different parts of the real estate industry until he realized his preference for note-investing and asset management. In this show, Bill explains how an asset management service helps his clients to move forward with their investments. He reveals why he’s partial to notes and why money might not be the most important takeaway in closing deals. Sounds crazy? Listen as Bill shares a few nuggets of wisdom – from the significance of giving other investors a leg up and using social media, not for self-promotion, but as a tool to educate people about real estate.

Listen to the podcast here:

The Role Of Asset Management In Note Investing with Bill McCafferty

Bill McCafferty, how are you? Welcome. 

Martin, how are you doing? 

I’m good. Allie told me you should title the book Note Investing Made Easier But It’s Really Hard. I got a chuckle out of that. 

It’s just like any business, there’s nothing easy about it. It’s all about putting your time in and getting it in and to put yourself around the right people. 

Speaking of getting your time in, how much time have you put in? How much time have you been in the industry? 

I met the guys from Partners for Payment Relief and Dave Van Horn back in 2008. I met them in a local real estate investment group in Delaware County. Right away I saw what they were up to. They had one of their mentors speak one night in 2008. It was the night that it all started clicking in my head that is where I was going and that is what I wanted to do. I invested in their fund early on when they were dealing with just regular investors. You didn’t have to be an accredited investor to invest with them. I did that for a couple of years. 2009 I bought my first re-performer, bought my first nonperformer, took their education class with Robert Shemin. I left my 9 to 5 in 2011 and it’s been my full concentration from 2010 until now. It’s my full-time job. It’s my full commitment and it’s what gets most of my time. 

I think we’re going to come back to the theme of full-time because that’s significantYou also had a background in landlording for a while. You had some properties. I remember you telling me that in 2013 when we met.  

I worked at a school for fifteenandahalf years. Back in 2005, I started brainstorming that if this was the end of it for me, I got ripped off in life. I had a good job, good security. The writing was on the wall of how much I would make in several years. I always felt like I had a lot more than what I accepted after college. 2006, I started seeing the info commercials on TV. Robert Allen, all those buy real estate with no money down. 2006, I bought my first rental property, so from ‘06 to about 2009, 2010 it was mostly property stuff. I did some rehabs. Some were successful, some weren’t. I bought some properties down in Texas on the Gulf Coast. did some subdivisions, I did some rentals. I got involved in everything. I definitely got caught up in the market. As a new investor, I had no idea what the market was and how to ride to the market. When the market collapsed, I had no idea what just happened or what was going on. I dove into real estate. Once I started discovering the notes, I stopped buying properties and eventually liquidated almost everything I have in my primary and I have one rental now. little bit of everything in real estate. 

You came to the paper side and you understood the good, bad and the ugly on the landlording side or the rehabbing side. You said, “The note side is more my speed. 

When I bought the property down in Texas on the Gulf Coast, I got hit by Hurricane Ike in 2008, 2009. Two properties got completely wiped out. I dealt with insurance companies and dealt with lenders and got a good firsthand reality check of the business and truly nobody cares about you, meaning insurance companies and lenders, and just saw the whole big pictureAs I started seeing what was going on, I started meeting a lot more sophisticated investors and realized that the note was the end of the line for every aspect of real estate, residential, commercial, a single-family home, multi-units. I started seeing people carrying paper and realized the power of institutional delinquent paper. 

You have Dave Van Horn and PPR and they were instrumental in mentorship with you. Anybody else in particular? We have Matt Kelley, that’s why. 

Matt is batch number two with Dave Van Horn and PPR. They laid it down for meThey’re more of just that voice for me behind the scenes, like I am for them. I don’t do much business with them. I do see Dave. He runs an investor alliance. I see him and his partners thereMatt Kelley is a huge part of this for me. It’s a perfect example of how you add value to somebody and you get that mentorship back. It wasn’t like Matt was like, I’ll mentor you. I didn’t even realize who Matt was until I was in the business and I hired his company to manage a lot of my legal files and that’s when I realized who Matt was and the knowledge that he had. By bringing value to his company with assets to work, he started helping me out when I got stuck and stuff and I formed a friendship with him 

What’s interesting about this business and mentorship, sometimes you don’t even talk to these people a lot. It’s more of the confidence they give you. That’s what’s been powerful about MattDave, as I maneuver through everything, I always know that if and when I get stuck, I always have somebody to fall back on. It always has given me that swagger to never back down from everything, to always figure it out and to always move forwardYou’ve got a guy like Dan Zitofsky. Dan is a huge national investor. He only hired me to work a few of his assets. I got a good deal done for him. I’m deep in another deal for himguy like that, he’s always given me my props out on all the social media. It’s things like that. If you can add value to bigger investors, it just circles back around so many times for you. 

NIME 13 | Asset Management

Asset Management: If you can add value to bigger investors, it circles back around so many times for you.

 

I never heard it put that way. With the deep connections you’re making with folks in the industry, that can give you a sense of confidence. I always think of it from having good relationships in place, to be able to leverage that if you need help and assistance. For the simple fact that you know they’re there in the back of your mind and it gives you confidence. It says a lot. 

Another factor is a lot of this stuff, when PPR started rolling there was a lot of us that were heading in that direction. We’re all on different scales, but I call them my original note group. Deepta is in my group, Fred Moskowitz. There’s a handful of them out there that are still in this business and are they my mentors? No, but we talk all the time. We run stuff with each otherIt’s what you’re talking about on your group right now. It’s that mastermind. I didn’t form it. It just happened for us and there are a lot of my good friends right now and they are a mastermind for us. 

I consider myself a second cousin to you guys. I was never under the Dave Van Horn umbrella, but I’ve been around you guys long enough, so I have things rubbing off. Cody Cox also gives a lot of props to you and others in the industry that they give encouragement out there. Let’s jump right into it because knowing you, Bill, and knowing asset management and what you do, I know what you do firsthand and I know it well. However, I don’t believe the marketplace, the note investor community truly understands what it is you do and how you’re differentiated from expert JV folks that are out in the space. I use that term loosely because it’s used a great deal. Tell us about what you do with asset management and how it differs from a lot of other folks. 

I have two companies. One company is my own company that buys distressed second mortgage notes. The goal, like everybody, is to get paid either through a loan mod or a discounted pay offI bring both avenues. My other company, I get hired. I have an eight-page contract. I’m a hired 1099 asset manager. I’ve worked for about 100 different investors in this space. They hire me based on my contract. I don’t do joint ventures. My eight-page contract spells out how I get paid. It’s a commission-based serviceWhen I say service, I’m not a licensed servicer. I’m an investor that offers an asset management service. I manage the whole deal from the collateral file to the borrower to the attorney to the trustee to a servicer to getting it done and getting paid. My eight-page contract spells it out. I get a $500 upfront fee and I get a percentage of what I can collect in the arrearage or through a discounted pay off. There’s a couple of different clauses in there, bankruptcy, short sales. As you know in this space, not all deals work out 

The power of that business is that I’ve been in about 600 deals with none of my own moneyYou guys know as investors, your capital in deals is your biggest liabilityI’ve been very blessed and take a lot of pride in that people hire me to work their asset and they spend the money on the legal. They spend the money on the servicer and the reality is I have no money in the dealPeople wouldn’t continue to hire me if I did not get stuff done. I treat these deals like they’re my own. I treat their money like it’s my own. The way my contract’s structured is I don’t stay in business unless I can get stuff done. I like to get deals done where I put the client in a good spot moving forward.  

Note investing is all about putting your time in and putting yourself around the right people. Click To Tweet

I want to walk folks from A to Z. I’m a person that just picked up four notes. I picked up ten notes and I may not truly know what I have. I didn’t do full due diligence. I’m hopeful that I can get a reinstatement, but I’m not sure what to do. The notes are shelved right now. I get in touch with you and you tell me that there’s a fee to get set up. That fee, explain what you’re doing through the boarding process. 

It’s a $500 fee. What my boarding process is I want to touch the collateral file. I need to see the collateral file. The collateral file is the most important part of this business. lot of people start going after the homeowners, start calling, trying to figure out everything. It’s all about the collateral file. I need to make sure all the collateral is good. Everything is recorded. All the allonges are in there, both the mortgage and the note. All the assignments. I have a simple system. I use Dropbox and Excelgive everybody a little tour of my workstation hereThis is it. It’s simpleThis is my workstation. I board everything into my system. I run off Excel spreadsheets, I run all the folders. For that $500, I call it wget grounded. We get everything into my system. Even if it’s with a servicer, it needs to be into my system so I can operate out of it. That’s what the $500 upfront is. We’ll get that file situated.  

From my end and a lot of my clients, we like to send out that demand letter right away. I am reaching out to an attorney or a trustee in the first week or two. Not only do I want to send that demand letter out, but I also want to get their eyes on the collateral to make sure everything is good. I’m always asked like, “How do you figure out the first mortgage status when you can find it and how do you figure out the bankruptcy status? We all know how to look off credit reports and go into pay serviceOne thing I learned early on when I wasn’t educated in this business is I would work that file and everything will come out as you work the file, figure out what the first is doing. When you hire an attorney or a trustee and you’re not sure what’s going on with the bankruptcy, they’ll figure it out. Everything will come out as you start moving forward, working a file with legal involved. 

From what I’m gathering from you, and this is a transition I made over time with myself, is I used to be in that reaction mode where you get the collateral file and you weren’t sure what to do if there was missing link in the chain. Can you get in the lost affidavit? Can you not within the state? You go from being in a reactionary mode to upfront putting the file together, making sure that there’s completeness. That way you’re providing the attorney. With confidence, you’re providing them what they need to get started on the NOD and to get started moving forward with the workout.  

Not everything is perfect when I get it and when I send it over. They help me figure it out. We start piecing it together. We all use different document companies in Richmond, Monroe and Orion. It’s a business where you have to be going in all directions at once. You need to know what your directions are, but I can’t just sit around. I have to move forward. We may get to a point in legal where I can’t move forward until I get a specific document or I get something corrected, but I’m at least moving forward at all times until I have to stopThe majority of the trustees and attorneys that we use will let me know what I can do and what I can’t do. If we’re at a point where they’re not comfortable, they may share that with me, but I also may be comfortable still to move forward as long as we are allowed. 

Not only is there a lot of efficiencies, there’s a lot of learning involved as you correspond with legal, but it helps you be in overall.  

It’s definitely my top skill is being detail-oriented and organized. 

Touching on the topic, that’s different than a traditional joint venture structure where you have someone that can JV as an expert and then they bring on passive money to go and do the deal takedown. Why is it you’re not in the arena that you’re in? 

Real estate is a very funny thing. You need a lot of capital to move forward and a lot of the reasons the joint ventures are trying to do what they do is they either need capital and majority of the time that’s what it is. They need a money partner. I’m very lucky with my contract and I’ve always kept it about thatI can always cut ties on my contract and it’s pretty simple when I’m working a deal. There are clauses in there that you may owe me money when we cut ties, but it’s the investors asset. They’re spending the money on it. They hire me to work. At any time that they’re not happy with the service, it’s a real clean cut. They can take their file back and I’m done. There’s no us being partners, our money is tied up. There are plenty of times that I just get a small fee for getting a great deal done, but that’s okay with me. It was always about the knowledge, gaining the experience and moving on to the next deal. In order for me to bring clients back in, I’ve got to keep them happy.  

That’s what I’ve always liked about my contract, whereas the joint ventures, I always say it’s like getting into bed with somebody. I don’t want to be getting into bed with everybody. I like it this way. It’s always been that way. I’ve been asked to do joint ventures. Clearly, the asset management contract and service allows me to do this fulltime and to be able to make a good amount of money to bring back into my own portfolio that I truly don’t raise a lot of capital for. It’s more leveraged-based and it was more about bringing my profits from the asset management company into my own portfolio. Once again, working between 100 and 150 files for about a few years there, I could not imagine being in that many joint ventures and all the pressure. Joint ventures, people don’t sometimes know what their roles are. They think they know what their roles are, but they don’t. It’s clear what my role is when I’m working a file. My contract is very spelled out. I can’t express it enough that if somebody wants to cut ties, they can pull their files out. 

NIME 13 | Asset Management

Asset Management: Don’t overanalyze where you cannot make a decision over anything.

 

The flexibility is there with your relationship. Joint venture locks it in more. They can’t just back out at any given timeThere’s sometimes role confusion. I think that it‘s not to say this is an anti-joint venture discussion because it’s almost as if someone who’s joint venturing should look at this and say, “These are some points maybe I want to address in my contract that may help entice a money partner,” or something like that. Everything is there for a learning purpose. We have a question here. What advice can you give a former flipper looking to get into the space? 

Two main reasons whyI’m going to start off with why. I love notes. Let’s be clear. When I’m talking, all my experience and skills with seconds. When you’re dealing with seconds, 80% of the time you’re exiting through the homeowner, not the property. Whereas a lot of times with the first mortgage guys, they’re still dealing with that property 80% of the time. The other 20%, it’s through the homeowner. One of the things I love about, at least my second space, is I don’t deal with contractors. I don’t deal with houses. I’m able to manage all these files from my house wherever I’m at. I’m able to do it on my phone. At least with the second, it’s a whole new mindset that you have to take on. You’re so used to ARV and the numbers making sense. Some of my best paydays in this space are deals that have no equityThat’s a tough concept for a flipper or a house guy to get involved with and realize that what do they mean by emotional equity? What do they truly mean by exiting through the homeowner?  

The best tip is education and meeting the right people and here, like in any business, the people that have been successful that are truly making money, what are they saying? I’m telling folks all the time that are just getting into this, “Don’t get fixated on equity deals,” because number one, equity is awesome. It’s going to protect you. If you have to liquidate the house, it’s going to put your performer in a better position. We’re watching the market over several years here, stuff that had no equity a few years ago and that you got worked out and you were able to buy cheap. Now the equity is up in the market. I got a payoff in Texas. Years ago, that thing was not covered in equity. Now it’s fully covered in equity. We got full pay off. lot of the deals in the second space are no equity deals. I think the advice is learning the terminology and learning how different that paper business is than the actual house business. 

I would add on to that I wouldn’t recommend starting with no equity deals. I think on the second side, there should be at least partial equity back in that note when you get started. Maybe as you grow with the expertise, you might say go all in or have a great asset manager perhaps.  

Everybody’s differentI know when you started, you did well before you came into this space and you had your own capital to invest. When I started doing this, I wasn’t sitting on a bunch of capital. It was the no equity deals that allowed me to be in a few deals early on to get the experience and everything. I know that you’re paying for equity in this space. When push comes to shove, you still have to get possession of that house to cash in on that equity. I can’t express enough that we get fixated on thinking that equity means the borrower has a lot of money or the borrowers in a good position. That isn’t true. There are borrowers in this space that I have no equity in their property that is sitting on tons of money where their friends and family have moneyI definitely agree, but I also disagree. I think when you’re in this space and you’re working a real portfolio, you want a combination of everything. You want no equity, you want a little bit equity, you want a lot of equity, you want judicial states, you want non-judicial states. You want everything because you don’t know where good paydays come in this space. 

I‘m open to buying first as well, especially if I feel like I can get a loan mod. I’ll be open. I’m opening my parameters to business notes. I’m looking to cast a larger net. I think whoever comes in should hone in on one particular tight buying parameter and learn to work with that. 

One great point also is don’t get fixated on what you buy and how much you’re owed. Remember what you bought it for and remember that there are other deals out there. To build a good portfolio, you need to turn deals, not just get stuck on one deal and try to collect as much as you possibly can off one dealI think that’s where people get stuck a little bit too. They’re owed $80,000. That’s all they want is that $80,000 where maybe you’re in the deal at $20,000 and a homeowner has access to $40,000 and you can double your money and move on. That’s okay that you help the homeowner out. 

When you get established in the business, you’re hitting transactions at every phase. At any given point, you’re sourcing notes and you’re drumming up new inventory and then you’re running notes through due diligence. At the same time, you’re working out notes on the back end. At the very exact same time, you’re logging into the servicer site, seeing who made paymentsEverything is cyclical. When you first start, it looks more static. You see one particular activity and one particular phase of the processI’m curious with you, Bill, is that I knew you in 2013 when you could be the lovable guy that you are. You could be out there providing education, talking to people, giving good consultation and then they would bring their notes to you. That was a business model for yourself. How has that changed or has it changed? 

No, I pretty much have stayed on par with what I do and where I started. Clearly in 2018, Bill McCafferty owned a lot more assets on my end than I did when I started this thing. The decline portfolios in between 100 and 150, probably for a few years there, I’m probably in between 70 and 80 right now, so it is dwindling down. 2018 is a period here for me to figure out what else I want to do and where else I want to go. I’m not leaving this space. I’m always going to have my asset management service. I know my true cookie cutter with the seconds. It’s what my LLC does. It’s what both IRAdo. I opened up another two self-directed IRAs. 

Do you use both? 

NIME 13 | Asset Management

Asset Management: There are times when you’ll only get a small fee for getting a great deal done, and that’s okay. Accept the knowledge and the experience and move on to the next deal.

 

I have two with CamaPlan that I just opened up with QuestA little bit as something different, always to try new things out, always stay diversified. I don’t want to get too thin with all my buckets, but I want to keep as many buckets as I can in everything and anything that happens in this spaceAs I get more skilled and more experienced and as I’m getting older here, I’m concentrating a lot more with my IRA stuff and what I’m doing in there. I’m trying to keep what I got and keep moving forward, doing some more partials over the last year, yearandahalf than I’ve ever done before. I usually used to do a lot of collateral assignments when I first started. veered away from them and have about three or four partials of going off existing assets. I do that to snowball some more money to buy more assets. It’s never about doing a collateral assignment or a partial because I need spending money. It’s to leverage it to get another asset because it’s always about the cashflow. 

We did talk before and I think the gist of the conversation is that the days where the inventory was flying looser and you could pick up a few every month and snowball it for yourself. That’s not the case at our given point. For yourself in the way that you’re restructuring your business model or you’re ramping up your business model is that you’re looking to connect with players on larger inventory deals. 

I’ve got a little bit of everything. I’m a great component for a hedge fund or a bigger investor group that even is knowing the second fulltime or doing another avenue and they want to jump into the second space. I think I could be a good component there. As the product gets more limited, you need more money and more capital to take stuff downI’ve built a good network of clients, of business associates, to mentors. My goal this whole time was to put myself around the hedge funds and the educators because they’re always going to end up getting a product and they’re always going to need to move it to people. I don’t think that’s much different. The network and pounding the phones and being in a good network is so key right now. When product does come available, you’re right there to be able to take advantage of itIt’s absolutely true. A lot of people that are getting into the space now, it’s always, “How can I get the product?” It’s not like it used to be.  

It’s not like people are trying to be secretive or hold their resources back. It’s with compliance and the new marketplace, people are trying to hold their network and their connections dear and put themselves in a great position so they don’t get burned and not be trusted. Note sellers don’t want to deal with them. That’s another advice I can give the rehab guys. It is about that networkI’ve said it a few times on your page, people will jump on and say, “Who has notes?” You’ve got to add value. You can’t just say, “Give me.” This is not the house business. lot of people are starting to ask me about getting in and brokering notes and stuff and I’m like, I don’t know if that’s what you could do right now. Maybe a few years ago you might be able to not broker, but buying notes and then mark them up and sell them, and now I don’t know if you can do that much. Everybody knows everybody in this space and people isn’t looking to deal with a wholesaler or somebody of that natureThat’s what the house people think when they come into this space. It’s not that. 

I think a lot of that holds true with a lot of institutional players, but I still think there are a lot of untapped markets in different regions of the countries. If you’re making bank calls to small credit unions or you’re uncovering note investors that may have shelved note inventory or something like that. You have to dig a lot harder. There’s no point to outside thatIf you do that digging, you’re going to set yourself up so well for when there is inventory replenished into the marketplace. 

You have to be ready to execute. There are no spinning people’s wheels anymore. You’re going to get kicked off to the sides. No matter who you’re reaching out to, when you eventually get it right there, you have to be able to execute. People don’t want to waste their time. 

I’m going to bring up Dan Zitofsky’s point here, but you have to be able to execute on the workout of phase two because I do see that being an obstacle for some. Dan mentions that he’s been burnt by a guru in the second space who refused to hire legal because they were hoping and praying for a payoff to come in. How could that be a guru? Seconds and hiring legal is a handinhand processI don’t know what your thought is on that. 

Everybody’s different on how they handle things. I learned very early on and long ago that it was always about legal. I was in a partnership for a couple of years. I’m still very good friends with my ex-partners. For the longest time, my one partner for a two-year period was always like, “Let’s figure out another way to get paid without legal. It took him a while to realize it just doesn’t happen. Legal is the main factor of why I get paid in my space. If you took legal away from me, I wouldn’t be in an interview with you now. I’d be at my 9 to 5 job working for somebody else. I always say to new investors like, “If you’re going to buy, I’d rather see you buy five files and be prepared with legal than to buy ten files with no legal. This whole space is about patience and legal expense and you better understand what patience and legal expense mean or you’re going to be spinning your wheels. 

I look at patience in a different way than most. I look at patience as your window of opportunity to go and shift your focus to another portion of the life cycle. If you buy notes and everything’s in legal running its course, then that’s the time you need to shift back to sourcing where you’re bringing up, bringing in new deals you can run through your pipeline. There should always be plenty of activity to be done. 

There’s always something to be doing and moving your business forward. Being a very detailed-oriented guy, my wife used to laugh at me. “How many hours can you work on a spreadsheet? It’s so many little things that you can be doing that don’t seem important to people but to build a true, successful business, that’s what needs to be done. 

I’ve seen all your reporting that you do and I’ve never seen anything like it. It’s mind-blowing how many levels of minute details you put together. It gives you a whole picture of that portfolio for the investorsIt’s definitely an amazing job that you’ve done with it.  

I try to help everybody out in this business if they reach out and put some time in. I want to see people succeed. A lot of things that I have in place I don’t mind sharing. It’s all good. 

Let’s talk Facebook because we’re on Facebook. Years back, Facebook used to be very different. I used to post a lot of things on my personal page. If I did, there was one week I did two loan modifications the same day and I did a modification on Valentine’s Day and I put out something goofy on that. Now it’s very different what you should put out on Facebook. Can you talk about that? 

When you deal with institutional debt, you’ve got to be careful. There are opposing attorneys out there and there are borrowersThe first thing they’re going to do is Google your name and go to your Facebook and your LinkedIn. Like a lot of people in real estate early on, I thought it was cool to put all the information out there and let everybody know that I was big and this is what I was doing. Even though I was very small and wasn’t doing a lot, we want to portray ourselves. As we become successful, we pulled back on it. That’s the weirdest thing about the institutional space. We’re in an age where social media is so powerful to advertise and put yourself out there, but you need to be careful. Litigation and lawsuits are real. I can’t give opposing attorneys any ammunition. 

A note is the end of the line for every aspect of real estate. There is power in an institutional delinquent paper. Click To Tweet

The game that I play is if they go on my LinkedIn page, they see the professional asset manager, Bill McCafferty. If they come onto my Facebook page, they see the guy that works for that asset management company. He’s a regular guy. He goes to sporting events, he goes to concerts, he’s got a family. He likes to talk about this. I try to keep a lot of the real estate stuff off my page. Even after the Distressed Mortgage Expo up in Jersey, I was tagged on 50 posts and when I got home, there are 50 real estate pictures on my Facebook. I got rid of all of them. I don’t want them all on my Facebook page. That’s why these groups are so powerful, like your group, because you can openly discuss stuff. You’ve still got to be careful and make sure nobody gets in that’s not supposed to be 

I have to look at every single person that requests to come in because they want to infiltrate. 

I’ve had more Facebook friend requests in one month than I’ve had the whole time I’ve been on Facebook. I don’t know where they’re coming from, but they’re coming from somebody and they’re all real estatelinked.  

Be careful with Facebook. There are two reasons I started the group. One is when the book came out, I started getting a lot of people reaching out to me, which I feel very blessed about having that. I don’t want to be the center point to everything. I like doing my own thing and then having balance in my life. I said, “Let me create the group and everyone can just commingle and do whatever they’ve got to do. That was the first thing. The second thing is all the grandstanding, hotdogging that goes out on Facebook, it makes me sick sometimes to my stomach, the self-promotion and everything. Those two things were at the heart of it. 

It’s definitely powerful social media. You’ve got to be careful with what you’re doing and how you’re going about it. Dean came to my rescue on Facebook.  

He did, with the NFL talk 

You can’t even have a normal conversation out on Facebook because everybody wants to cut your throat. How do I get called a moron for having an opinion on something? 

It’s horrible. You got called a moron. It’s like I put out what my viewpoint is on the NFL penalty policy and the kneelingI don’t mind. There are a few people with very civil conversation. They had compelling arguments, and the rest were cursing. I’m like, “What’s up with the rudeness?  

It’s tough. It’s a tough subject. There are people that view it differently and what’s going on with it. I don’t want to get sidetracked on that. It’s tough to listen to certain types of people when they just have no clue what’s going on. Everybody can have enough opinion, but when you start name-calling. 

I know a bunch of the people and I think if they only knew you, to know you are to love you. You’re the nicest guy. People do that because they don’t have to see you in person. It’s just everyone’s all big and tough. Dean is big and tough in person too. We have a question, I received a tape from someone who was selling his own property and all the properties are nonperforming first. The due diligence has led me to offer no more than $0.30 on the dollar because all the notes are self-serviced and none have payday payments since 2018. Is there any standard discount that should be a guideline?” 

Of all the nonperforming notes I’ve ever bought, we get a loan balance, we get the last payment date and we get the next payment date. There’s never a payment history with nonperforming assets.  

NIME 13 | Asset Management

Asset Management: Don’t get fixated on what you buy and how much you’re owed. Remember what you bought it for that there are other deals out there.

 

Even if it’s serviced somewhere else and then you get it transferred over to your servicing company, you’re going to get the last payment paid. If you ask for payment history, you’ll probably get a Word document drafted. Let me rephrase this question if I can. Would you discount a note if it was self-service versus if it was currently being serviced? 

All I can do is talk for the second space. When I bought notes from 2009 to 2014, none of them were with servicers. Once they complied and started going and nobody wanted to get sued, all of a sudden all the notes sellers made you think that you couldn’t buy anything unless it was coming from a service or to a servicer. Everyone’s got to do what they’ve got to do and how they go about the business. Some of the best deals I’ve gotten done, people haven’t paid in a few years, but that’s the second space. The first space is definitely different. I have my pricing criteria in how I go about buying into second space. I know the first base is different.  

One thing that’s made me very successful in this space is I figured out as I go along, if somebody needs a payment history, I’m creating a payment history. If there’s a document problem, we’re getting a document fixed. Early on, to get the seconds real cheap, you are getting files that were banged up. You had to call the county and get a clerk-certified copy of the mortgageThe assignment changes weren’t recorded. Sometimes there were no assignments in them. Sometimes all the allonges were missing. That stems back to you always want to make sure you’re doing business with a legitimate note seller and that’s why I’m not a big broker guy. I don’t like to do a lot of business with people I don’t know. 

Let me switch gears a little bit, Bill. I know asset management and you work the back end of the transaction. Do you have openness, willingness to work with an investor on the due diligence side? 

Yes. What I try to do in my business model, an investor is looking to get into this space or invest in seconds or they want to investigate my contract and my service. We’re going to have an hour phone call before I even mention my contract, but you may start asking me about my contract. We’re not even going there. I’m going to educate you on the second mortgage phase no matter how much you’ve already done or how much you think you know about the second space. If you’re inquiring about my service, I’m going to give you the real numbers, the real data and what truly goes on, and then we can talk about my contract. During that hour of education, it’s a lot of what I look for, what goes on. For the longest time, it was about the client buying the asset and bringing it to me. I have been trying to help people out, educate them a little bit, tell them a little more about bankruptcy, explain to them a little more about what unknown on the first mortgage means.  

At the end of the day, if you give me a spreadsheet, a credit report, and Google and pay serve, I can tell you in fifteen minutes what I would pay for a second mortgage. Two things that make me very successful in this space is I don’t overanalyze and I don’t smother. There are two things that investors will do in this business. Not overanalyze, not make a decision on buying something. The smothering thing is I didn’t even realize it until years later when I was working everything. When you buy four or five assets, you’re trying to figure everything out, doing everything. The reality is with so many seconds, once you’re moving forward with legal and everything’s in your system, sometimes there’s not a lot to do.  

That’s when you should shift focus to what you can do. This is a big part of my ritual. That time period from when you wire funds for the note purchase and you received the collateral file. Whether that’s a twoweek period, three weeks in some cases and you’re waitingthat’s when I’m doing all my project management set up. The CRM systems getting updated, I’m creating a folder system for myselfYou use Google Drive, etc. There should never be downtime. There may not be activity as it relates to the workout process. There should always be something to do so that when you get the physical file, you’re off to the races ready to go. 

Everyone has different criteria in how they want to go about stuff and what they’re comfortable with and what they want to do. At the end of the day, there are so many things that truly don’t matter to get a homeowner to pay you when push comes to shove. All the due diligence in the world can’t tell you if that neighbor has a best friend next door who got a good life insurance policy or their friend next door was in an accident and got a big insurance check and they’d been best friends for 25 years. I absolutely will give him money for a payoff. Don’t get me wrongDue diligence could spell a lot out for you and give you a lot of comfortability factors and make good decisions for you. Sometimes when push comes to shove, we think we can determine everything and there’s nothing like learning by doing and truly working a file. 

Money gives you the financial freedom to do what you want to do, but it’s not everything. Click To Tweet

I always end with this question and it’s something that I’m going to put in the third book that I’m writing now. It’s called The GRRRR, like Brandon Turner’s BRRRR strategy, but it’s goals and then the rituals that are real, realized and realistic as well. Tell us what the daily rituals you have in place are?  

First thing I do is I get up and take a lot of pride in getting my kids up and getting them to school. I’ve been blessed enough to have my wife leave her job in 2015, so she takes my daughter to school, I take my son to school. It’s never about the money, but the money gives you the financial freedom to do what you want to do. I did not do it this morning, but I will do it when I’m done here. I walk between three to five miles a day. I’ve been doing that for a few yearsDuring my walk, I listen to music. Maybe I’ll listen to a podcast. I’m a big live music guy. I listen to probably five to six hours of live music a day. I need that in my life. It settles me downEven on the calls, I have everything set up from my computer to my phone. I can access everything on my phone so I’m able to answer some emails maybeThere are some things that are sitting in my inbox. We as a family, eat dinner every day together. We end up together at the end of the night. I pick my son up at school. I have a little workstation here. I need to be at this workstation 20 to 25 hours a week to make things move the way they need to move. That’s so much more towards the client portfolio than my own portfolioThere are some of the rituals I do. 

What’s interesting is rituals say a lot about someone’s quality of lifeI know to you, you view that as, “This is my own little world. I’m going about it. I’m doing things that I like and that pleases me during the day spending time with the family. I think that you probably don’t have an understanding of how impactful or the high-level quality of your life is. It’s unreal, Bill. The walks, the music, a lot of tranquility throughout your day, a lot of harmonies, and so many people don’t have that. I didn’t hear, “It takes me an hour to drive into work and then I’ve got to park for $30. I have to go sit and hang out with people I can’t stand.”  

My office, I never take it for granted. I’m very thankful and will never take that for granted.  

few people want to know how to find you, but it’s fascinating that someone can’t find you in this day and age. You’re all over Facebook helping people 

That’s why business cards are obsoleteEven when you use business cards, I’ve got a whole stack of them up hereI don’t know if I ever picked up that card and called somebody. You can access so many people so quick with social media and everybody knows everybody. 

NIME 13 | Asset Management

Asset Management: Lawsuits and litigations are real. In buying notes, don’t forget to consider the legal expenses.

 

Here’s what I’m going to say. I’m going to leave this with a sales pitch, if you will. I don’t do too many of these, but here’s where it’s at. Bill, you’re one of the first people I met in 2013 when I came into the note space. You came across as genuine, knowledgeable, competent and extremely helpful. You do something that a lot of folks aren’t doing in the space, which is having that focus on asset management. A lot of people, however they’re navigating their way through the space and they’re coming into the space and finding their way, what’s the best way they can break-in, so to speak. A lot of times the strategy is, “Let me learn enough so I can go out, raise money, knockdown deals and then I’ll figure it out as I go along.”  

What I want to suggest to everyone is that you think about it a little differently. It should be, “How can I build a strong team with an asset manager, with a player like Bill McCafferty that will ensure that I’m doing things in the correct fashion, in the most profitable fashion? Once I have a team in place, then let me go out and raise capital legally the correct way, and put this altogether in a strong fashion and then hit the pavement sourcing. I want to leave it at that. I do think that should be the way that people should be looking at this. They should connect with you not to go and pick your brain, because you are willing with the knowledge, but people need to come to you with the intention of saying, “Let me get to know Bill so I can use Bill and I can make them a partner to me.” That was a sales pitch.  

I love it. I agree, it’s huge. I think I’m a big component and when you find out who I have worked assets for, it’s not just new people. It’s seasoned people that are doing other aspects of real estate and like what I offer and the component that I offer. Let’s make some money together. 

I hope everyone enjoyed this. This was awesome. I had a great time. I look forward to meeting everyone at the next live event, physical event. Bill always makes his way to all the expos too. I always see him. Connect with him, find out how he can be part of your team. Thank you and God bless. 

Thank you, Martin.  

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About Bill McCafferty 

NIME 13 | Asset ManagementBill found the inspiration, as an Asset Manager for other Note Investors, to help Homeowners across the nation. He assists Homeowners through a process to help them stay in their house and afford payments that fit their budget. Through this effort he has allowed many residents across the United States to keep their home. Bill is consistently looking to expand his relationships with Note Buyers and Note Sellers from all around the country.

Bill’s true skill is in building & managing Portfolios of Performing & Non-Performing Assets. He’s always looking to grow and expand his Network. He really enjoys assisting other Note Investors in the business, in whatever way possible.