Hey what is up everybody ad investors Thrive nation this is the Payneless Wholesaling podcast where our goal is to make real estate investing painless for you. I know that’s that’s difficult to say because you got to go through some pain to learn but we’re gonna do our best to bring on top talent top people in the industry to let us know what you can expect what you can avoid in your journey to invest. So right now we got Nathan Turner, the Canadian note guy. All right, what’s up, Nathan? Very good. Very good. How are you doing? Love I’m doing great Nathan. That’s a great name. Did you go by Nate Nathan is in the manual. A lot of people
She was. She lived most of her life in Scarborough.
Okay, I’m not familiar with Scarborough, but my wife grew up in Lindsay, if you know where that is like Peterborough area, I think Scarborough that’s probably not even that far from there. Is that like North Toronto or west?
Yeah, look at that small world. Yeah, cool. Well, you tell me you do notes. I know a little bit about notes. But I haven’t dove into them yet. Tell me what’s the appeal of buying notes versus, you know, I guess flipping a house,
I got started by flipping houses. And then I really enjoyed doing that it was a lot of fun. But it’s a lot of work. And you got to it’s blood, sweat and tears kind of thing. I went from that I ended up being a landlord for a little bit. And I really did not enjoy that at all. I really liked the cash flow. But everything else about it was terrible.
What do you have? Did you have some bad experiences? Well, it was on the other side of the country.
There was one guy in that town that was my property manager. And he was awful. Like, every single month, I had to call them up and be like, Hey, did we get paid this month? Like what’s going on, you know, mid month? And he’s like, oh, yeah, for sure. For sure. I just got to do some paperwork, I’ll send you out your payment. So I’d get it like third week of the month, every month. And I’m like, This is ridiculous. And then they people would move out, it was more economical for me to actually fly out there on the other side of the country with a suitcase full of tools. I guess it was just it was a ton of work. And I was like why do people do this? Why don’t? I didn’t like,
wow. all makes sense. I wouldn’t do it. If I had to do that either. I’d be out in a second.
But that’s that’s what I love about No, it’s is it’s that the piece that I did like about being a landlord was that monthly income. So I get all the benefits of the monthly income without any of the headaches. That’s when you’re talking about Payneless real estate investing. Now, that is really the best the best case scenario. I never actually own the real estate. Yeah. Which sounds crazy, but I own the paper that’s attached to the real estate.
Right? Yeah, you’re the bank. Right? Yep.
Yeah. And in an imperfect world, I’m never gonna own that property.
And you don’t have to worry about the repairs, the people calling you, oh, my gosh, that sounds, trash.
None of that’s my problem on the bank banks grooves as know what we do.
Now someone doesn’t make that payment or has a very bad property, you you basically can foreclose on that, right? If they’re not making their payments.
That’s it. So every loan that I buy, every note is backed by the real estate. So if something goes haywire, and the person stops paying, that’s always kind of my ultimate, my ultimate recourse is to take back that property
and the payments you’re getting is the interest on the note Correct? Or the principal and the interest or how does that work?
Yeah, principal and interest. So it’s a regular monthly payment. And then just like your own mortgage, you pay a little bit more principal, a little less interest every month, but it’s that same payment, this payment says the same, but the split changes every month with the because it’s a percentage over time, so that that’s what I’m collecting. So it’s principal and interest over time, you know, amortize usually somewhere between 20 and 30 years, typically, and then I can just collect on that for as long as I hold that loan.
Do you create the notes yourself? Are you buying ones that are already created?
Usually I’m buying ones that are already created. The cases where I’m creating a note is if I took back a property and then I’m selling it, I’ll usually sell it on terms I’ll do some kind of seller finance, creative finance, whatever you want to call it, and sell it on terms and then hang on to a brand new note,
man, I’d like the sound of that so so you’re buying these who’s selling these notes, who sell them all these things.
So I most of the time I’m buying like indirectly from a bank. Typically the bank will have Have these loans, and they’ll sell for all kinds of reasons. Sometimes it’s because people are not making payments. Sometimes it’s just because they’re selling them just to move things around and to generate cash and you know, recapitalized go out and do other things, but they’ll sell them to like larger hedge funds. I’m a smaller hedge fund. So I don’t have enough money to do those 100 million dollar purchases. So I’ll let the big guys do that. And then the big guys will sell it to somebody like me where I can buy, you know, one at a time if I want to.
So for someone like me, or any of my listeners that are brand new to investing, well, I’m not brand new. But for them, would they be able to just buy a note right now? Or do you have to go through some red tape? Do you have to be a hedge fund? Do you have to like show that you can perform? How does that work?
So structure wise, no, you don’t need anything special. You don’t even need to live in the country. I live in Canada, and I do this in the US. But structure wise now you don’t need anything special, what you do need is some education. Because this is not real estate. It’s real estate related. So it’s, it’s got elements of real estate, but it’s not real estate. So you got to make sure you understand the finance part of it. And then the finance world and the rules and regulations to go along with that kind of thing.
Tell me some things that they got to understand. I know you said you got you got education, I know you have a seminar coming up, but what would you say like, Hey, you got to watch out for this.
Even things like just for example, let’s say in the state of Georgia, they’re they’re notoriously bad for this, where if you buy a loan that’s already existing, you have to instead of Georgia, you have to register as a debt collector, even though that doesn’t exactly apply, but that’s how they see it. And so you need to have that license, one loan can get you in trouble. So it’s not just like, Oh, it’s just a one off. And that’s just Georgia, every state is a little bit different. About half of the states require licensing some don’t. There’s no if you’re creating notes, there’s ways to do that. There’s a bill that came into effect in 2013, called Dodd Frank, you got to know your ins and outs of that and what you’re allowed to do and what you’re not allowed to do things like that. It’s a learning curve. For sure. It’s none of it’s rocket science, but it’s a learning curve. So you just got to make sure you know, the rules,
how many people are buying and doing this notes with no not like messing things up.
It’s the worst offenders are the people that are creating notes, we run into a whole bunch of those guys, and they’re doing a great job. And I love what they’re doing. I love the hustle. But so many of them are just not going through the proper channels. They’re not doing it exactly the way you’re supposed to do it. And it’s all fixable. It can be dealt with and it can be corrected, but it’s just a lot easier if it’s done correctly the first way,
or Yeah, I was talking to someone about notes the other on one of my other podcasts. And he was saying that, you know, there’s so many issues that arise if you do you if you create notes the wrong way. And a lot of people use like a title company or attorney friend they think knows what he’s doing. And they just do it wrong.
So there’s resources for all of that stuff. Like It all exists. And it’s it’s like I say it’s not rocket science. You just got to learn it.
So tell us about your seminar. Why would someone like me or anybody the audience like what why would they? Where’s it by the way?
This is a Nashville, Tennessee? Yeah.
So tell tell me a little bit about you know, what, what would cause someone to, you know, be like, Yeah, let’s, let’s check out the seminar. What What can we expect to learn.
So this is, first of all, it’s a it’s a total, it’s no selling no pitching, nobody on stage is allowed to sell anything, which Wow, my conference my rules. And that’s my rule. So all education, people are coming speakers from all over the country talking about different aspects of notes. So anything from creating notes, raising money to be able to create notes, or buy notes, how to buy them, how to price them, what you’re looking for, you know, the goods and Bad’s attorneys. If and when you do need an attorney to do a foreclosure, we’ve even got a special one where how to choose the correct attorney to do whatever it is you’re specifically looking to do. So it’s it’s anything and everything that you would need to know about notes just to get started, it’s probably not comprehensive enough for you to become an expert in today’s. But it’ll give you some great information and an indication of where you want to go. Because in notes, you can do so many different things. There are so many different avenues and preferences that people have. And so it’s it’s a lot of fun.
So if someone was wanting to start working with notes, do you recommend just skipping? Well, I wouldn’t say skipping but you know, let’s say most people think they need to start fixing, flipping or rentals or wholesaling or that right? Do would you say hey, you can just go straight into notes. Forget all that.
Absolutely. It’s interesting. When I talk to people, most people that get into notes come from a real estate background. But if you come from a finance background, it that’s a plus. Or we’ve got a lot of engineers, a lot of engineers get into notes, I think just because it’s you know, rules and steps and engineers love that kind of thing. So a bunch of us get into this as well.
What’s the downside of owning all these notes? Is there a downside like the economy crashes, like what is it the same downside is like a flipper that can’t sell his house like yeah, what’s the downside?
So here’s the cool thing. So when the economy is doing well, I do well. Any economy’s doing poorly, I actually do better. And the reason being is I got started in 2008. By 2010, I was buying all non performing notes. So nobody was making a payment in that property, they just a lot of the times they were vacant people took off. In that case, I can actually get a bigger discount when I’m purchasing. So my upside is actually a lot bigger. So that’s, that’s really cool. Now the downside?
Do you have to make the payments though? I’m assuming no,
I don’t know, the bank. So once I buy it, I bought it outright from Oh, you bought it outright, okay. Then now I’m now the bank. So no extra payments been made it or anything like that. Downside on this is, it’s a trade off, because like I said, I do like being a landlord. But I get the appreciation of that property. So as long as I’m holding that, over time, generally real estate appreciates with a note, it’s a depreciating asset. So I don’t have any of the headaches that I need to worry about with owning a property. But I don’t get any of the appreciation either because I don’t own that property.
Has that been tough for you on some of these where you’ve just seen you bought in 2008 2010, or whatever, and it’s gone up, and it’s probably worth double. Now.
There’s times where I look at that, and they go, Oh, shoot. But all in all, you know what I would way rather not deal with any of the headaches. And it’s so hands off on a performing note on a nonperforming, there’s work involved. And there’s a very good chance to own that property. When I first got into notes, that was my strategy is buying notes to get to the property. And then the further I went along, I’m like, why am I trying to get the property? This is so much easier just to handle the paper? So that’s been my progression. But you know, everyone’s got the preference.
Yeah. So with the notes, are you buying these with your own cash or using hard money or using private money? How does that work in with your when you’re raising money? As you said, you’re a hedge fund? So I’m assuming you’re raising money to do it?
Yeah, yeah, I actually put together a fund or just recently here, I can’t think of what it was. But anyway, recently, anyway, and yeah, we’re going out raising money from anybody who’s looking for just a passive investment where they can throw it in there, not think about it, I pay an 8% Return annual quarterly distributions. So it’s a fantastic way for people who are interested in real estate and investing to get in on you know, we’ll call it safe. That’s one of the words I’m not supposed to use. But but it’s safer investment, because it’s backed by real estate.
So for the people that invest in that you give them a percent and quarterly, is there a limit to what they’re able to invest with your hedge fund?
Minimum 50,000? Maximum a million?
Let’s say, if I were to give you 50,000, whatever, 100 million? Would you be paying me immediately when that money was sent to you? Or is it only when you deploy it into like a property or a node or you use it?
You actually, as soon as the money is put into put in with me, then you start accruing? That 8% Right away nodes is not get rich, quick, it takes time. There’s a process to everything. So once that money is invested, you start accruing right away payments would probably only start the second or even third quarter, and then we’ll catch you up and get you paid up of what we’re what you’re owed. And then we’ll continue on with that. 8%.
Interesting, okay. Do you get a lot of money from people self directed IRAs?
Yeah, this is an awesome IRA investment where people can just set it and forget it, and just makes so much sense.
Do people usually ask for their money back within, you know, a month or something? Or like three months? Are they even allowed to? Are you saying, Hey, if you invest with us, you need to keep it in there for a certain amount of time?
Yeah, minimum, for me is a year, the term of the fund itself is five years, if you want to take it out sometime, let’s say two years down the road, I’ll pay that out to you over time. So I’ll take a year to pay it back to you just to protect everybody else in that fund. So that there’s not like a sudden withdrawal. And yeah, it’s not that liquid,
is that something that worries you with the fun like that, like if people all of a sudden want all their money back and you’re like, Well, I can’t give you all your money back. It’s, we use it.
That is a component, but I’m not really worried about it. Because this is because it’s such a safe investment. Like I say it’s one where you just put it in there and forget about it. And it’s backed by real estate. So it’s very nicely secured by the real estate. So I don’t get a lot of issues with that.
So what’s what would be the benefit in investing in a hedge fund that buys notes versus a hedge fund that buys properties?
I’ve got so many different options I love getting when I first got into notes, you know, like I say I was always after the real estate. And then as I kind of progressed, I went okay, but if I hold on to the note, I not only have all the all of the exits associated with the real estate, if I need to, but then I’ve got all these other exits that exist with the note as well. And so it just it opens up a whole whole world of additional exit strategies and just ways that I can make money without just being stuck with just the property.
Wow. So So for example, because I got a buddy, he’s a syndicate I I’m sure he does the syndication with apartment complexes and all that stuff. So you’re like one level deeper, where you’re like, hey, I own the note on that apartment complex, right? So if that apartment complex dude can’t make the payments, I can, I can do, you know, foreclose or whatever and own that actual real estate right instead of interesting,
it’s another level, it’s another layer of security that’s built into it, and then it just diversifies over the whole portfolio. So it’s, it’s not just one apartment complex that I bought, I bought residential notes I for myself, I’m just residential, so I bought notes on you know, 50 different residential properties in different cities in different states. So if that one city in that one state drops off, for some reason, Detroit, you know, loses more steel, but something goes wrong in that one city, one state, it doesn’t have a major effect on the rest of the portfolio.
Do you underwrite the properties that you buy notes for the same that you would underwrite like a flip that you would want to take on yourself
I kind of I when I’m looking at it, I’m looking at as is value. So ARV is nice. But that means I’ve got to put more money into it. And that may be a strategy that we look at, but typically not usually, I’m just looking at today’s as his value warts and all, you know, broken windows shutters, whatever might have happened to it, but today’s condition, so I’m not too worried about what it could be worth at some point in the future, I’m looking at today’s value.
So if you own the note on a house that’s in as is condition that’s not very good, the owner moves out or the person is making the payments and you get the house, what would be the move there
either depends a little bit on the situation, if I’ve got a ton of equity in it, I might just wholesale it out, I’ll sell it, I’ll you know, call up a local realtor and put it on the market and sell it or more likely, I will just sell it to a new owner and create a new note and just get back to that income stream they like so much.
So if you create if you have a note that you purchased, or you create one and the person that you had given that note to defaults, and they’re gone that pretty does that mean that no, it’s pretty much gone? And you can just do a brand new one to someone else, because they didn’t fulfill on that note. Yeah, exactly.
So it’s a there’s two ways that I can take back, well, we’ll stick with two ways they’re more but those stick with two ways. So number one is a foreclosure Most people are pretty familiar with that the really the purpose of foreclosure is to transfer title, okay, so means the bank, I’m saying, okay, you’ve defaulted on your obligation, I’m going to take that property as part of our agreement, and then title changes from the borrower over to me, the other way that we can do that is, is sort of like a Cash for Keys where I can get a deed in lieu of foreclosure. So you know, the borrower says, Well, I’m stuck, you know, this isn’t gonna work. I say, okay, that’s fine. Rather than going through the whole foreclosure process, I’ll give you whatever, 1000 2000 bucks, whatever, and you just sign the property over to me, and we’ll wipe out the mortgage as as the mortgage holder, I have the ability to just release the mortgage and cancel it. So it doesn’t exist anymore.
You’re a nice guy, if you’re gonna give them money to deed and loot to you.
It’s worth my time and my money, because if I have to go through the foreclosure, that’s time and money that I need to deal with. If I can just have them sign it over, it’s totally worth my while to pay them the same as if I would have paid the attorney to go through that foreclosure. And then just to have it done today,
unless they’re like, I would assume unless they’re like super, super, super behind, right? Where you’d be like, well, I need that I need to get that money, right? Or you probably wouldn’t let these last forever. Since you’re probably on top of it. You probably wouldn’t let someone just be in there for like, a year and a half or a year, would you?
No, no. When they come to me that’s the case. A lot of the times if it’s if I’m buying a nonperforming, though that’s very common, were they a payment for two years, but yeah, if it’s been paying, and then all of a sudden the default I have to wait by law, I have to wait three months before it can start foreclosure.
Right? Dang, that’s wild. Have you got into doing hard money? Like any hard money notes for I think that’s notes right, like lending and then note on that. Have you done any of that?
I haven’t on the lending side. I am looking at buying some hard money loans. Okay, but still looking at
those technically are those notes as well, hard money loans, and then you’re buying that? Okay, there you go. That Wow, there’s so many notes you can buy.
So many commercial notes, hotel notes. I brokered a note once a few years back on a bowling alley. I mean, there’s there’s notes on anything and everything.
Is there something at the moment right now for you that’s appealing, that you’re like, Man, I really want to get into buying those kinds of notes.
What I’m looking at mainly right now is is seller finance notes, people that are creating notes. There’s a lot there’s a growing movement actually, I would say of people doing rap notes where they’re buying a property subject to and then creating a rap right, I’ll buy the rap note pay off the outstanding first and if you know that’s a brand new concept, don’t worry about it.
I know what it is but for Anybody that care but
but for those that are are newer, you might not know what that means. But but if you do, it’s that’s a fantastic thing to do. And you can do another webinar on that in a different time.
Let’s do it. All right. Well, hey, Nate, that’s been awesome. I think I’ll these questions I’ve asked them interested about because I think the world of real estate, there’s so many different ways to go into I focus on wholesaling, and, you know, finding deals for investors, which is, you know, it’s a good way to go. But there’s also notes, you know, there’s also there’s so many different avenues. So what would be one recommendation that you have for, for people that are getting into real estate right now that just heard what you had to say, you know,
I’m biased, I know, but come to the conference, come to the conference out in Nashville, June 2, and third, and meet some people learn some stuff, you know, start chatting with people that that have been around them and doing this for years. That is a huge key. Like I say, you need some education, because it’s not real estate. It’s real estate related.
So how do they go if they want to go, you can go to the website,
diversified mortgage expo.com Tickets are there and come and join us. It’s gonna be a lot of fun. We’ve got all kinds of really fun networking activities, we’ve got Axe Throwing, we’ve got ice cream, we’ve got head shots, all kinds of stuff. So come and join us.
So why Nashville, though, out of your can from Canada, why Nashville, everybody everywhere?
You know what, when I took over the conference, at the end of the conference, we asked did a poll I was looking at either Houston or Nashville and said, How many people want Houston and nobody raised their hand said how about Nashville? Everybody’s Yeah. Everybody loves Nashville.
So sure. That must have been easy, then. You want to go cool. Cool. All right. Well, Nathan, it’s been a pleasure having you on here. I’ve learned a lot today and I know our listeners or viewers learned a lot. So everybody that’s listening. Please reach out to Nathan go to his conference. I guarantee you’ll learn a lot. I’ve learned a lot right now. So thank you, Nathan. Chad next time. All right. You bet. Thanks.