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Creative Problem-Solving As A Note Investor

GDNI 93 | Dealing With Problems


In note investing, there are good days, bad days, and amazing days where borrowers are able to pay off their loans and your investment was worth it. Dealing with problems, whether yours or the borrower’s, is something that’s very much ingrained in the work of a note investor. Gail Anthony Greenberg and Chris Seveney run through some of their most-encountered issues as note investors. Simply put, a lot of problem-solving comes down to communication. Make sure you get a head start on the problems you’re going to have to deal with!

Listen to the podcast here:

Creative Problem-Solving As A Note Investor

We are back from a long work hiatus. We have been working like little beavers to do all kinds of things and we had all kinds of stuff going on, and it’s a great time. I’m thrilled to be back with you, Chris, and I am dying to know what happened.

I’ve been enjoying the passive side of this business and doing nothing. There’s not enough time. I think Podetize wouldn’t be happy if we went off on what’s happened the last couple of months in one episode because they would be losing a lot of money on that.

A story should have a beginning, middle and an end. I don’t think we have an end, just a lot of middle.

There’s a lot going on. I would say the biggest challenge that I’ve had, without getting into specific details on things, is starting to pay a lot more focus and attention on managing your vendors. I know I’m not the only one out there, but a lot of people have had a hell of a time managing people and getting responses. I was having a conversation with somebody, and even myself, it may take me a day or two to get back to people and sometimes. Sometimes I may miss an email here and there, but when somebody constantly doesn’t even reply. I have one where somebody I spoke with them on Monday. They said, “I’ll get back down Tuesday. I’m heading out of town on Friday.”

I don’t hear from him on Tuesday. I give them Wednesday afternoon. I call, no answer, send an email. I’m like, “Before you go, what’s going on?” Nothing. Common courtesy of replying saying, “I don’t have an answer. I’m still working on it,” would go a long way in some instances. That to me is what sticks that knife and twists it a little bit. That’s been my challenge or things that I’ve had. It seems many of them have completely fallen flat on their face, granted I’m not perfect and I screw up all the time. I screw up, let me know if there’s a better way to do things. It comes down to sometimes common respect to respond. I can’t even get people to reply.

The editor in me wants to organize our content here a little bit. I’m going to say our topic, should we get around to it, is how passive is passive investing. That’s going to be our main topic. At the end of 2019 to me has been a period of great upheaval. One of the things that we saw that’s something all of our note investor friends are contending with is that the servicers are suddenly like a dog that didn’t do much but was placid and slept a lot. They’re up now and growling and refusing to obey. Am I right? They’re crazy. Suddenly everyone’s favorite servicer notified everyone that they are no longer servicing loans in a whole bunch of states, eighteen states. You can’t board anything anymore. We have a friend who’s trying to board loans. It’s not with this servicer, but another servicer is telling them, “We won’t board them because the paperwork is messed up.” We’ve got all these servicers suddenly being all that about what they’re expecting from us.

It’s one thing and part of it is typically towards the end of the year is audit season. Some may have gotten audited and so forth. If you’re going to change something within your business or your expectations from people, one recommendation I give them is you got to tell them. You can’t be like, “By the way, we’re not doing this anymore. By the way, you’ve got to do this now.” You’ve got to notify people of some of this stuff. It goes back to rewind a little bit about communication. Communicate. People will understand. I’ve had a servicer who said, “This company doesn’t appear to be licensed in those states and so forth, so we have to send them back to you.”

This is a new thing. You get sick of your servicer, you want a new servicer, so you tell your current servicer, “Please send these to this new servicer.” Your current servicer doesn’t do it anymore. They check their credentials to see if they’re licensed in all the states. If not, they’re like, “We’re not sending your loans there. We’re not going to do them, but we’re not going to send it to them.”

You could have ten rentals where you never hear from the tenants, but they're still good tenants. Click To Tweet

It comes to different states that have different requirements and it’s up to the servicer that you’re using. It’s their liability that they got to follow the rules. It’s an attorney. You hire an attorney you’re not doing checking to make sure he has every single license. You may check to make sure he’s not fraudulent or something like that, but if somebody’s practicing without a license, it’s difficult to know. From that instance, I ran to that and that’s going to be my Note and Bolts. If people run into that, the way to work through that.

It’s not a workaround, but it’s the simple way to transfer it from one to the other if it’s going to go through your entity. What they do is they transfer it back to you and then you insert the servicer. Based on what we’re talking about, it’s a passive business. That’s one of the things I’ll roll into. I’ve got pent-up discussions so I’m going to probably jump through the internet and not let Gail get a word in. I apologize in advance. The one thing in this business that a lot of people will try and sell you to is the passive side.

There are no tenants, no toilets, no work, nothing to be done. Collect those checks.

There are situations where there are different options with that. If you were doing private money lending, I would probably say it’s more passive. Most people who enter this business get into nonperforming notes or CFDs and they want the sexy nonperformers, which two things. One is if you think it’s going to be passive and you’re going to get high returns, turn your car around and go back home, from that standpoint. I’ll let you add to that because I know you’ve got something to say.

There are nonperformers that hold out a lot of potentials if all the planets aligned to give you an unbelievable return, so that’s true. That has certainly happened to you and me and everybody we know who’s been doing this for more than a few months. In general, for that to happen, there is a tremendous amount of work involved. I’m not going to say it’s always proportional to the amount of work you put in equals the reward because we both also experienced putting a tremendous amount of work in order to lose money on something. There is no straight ratio. I’m working with someone now who is new to investing and I’m mentoring him, which has been a fun experience. I could tell through various situations that we’ve been through that he is yearning for an orderly world with easy to understand rules about what’s going to happen. What will happen if he bids a certain amount? He wants law and order and that is the last thing that you’ve got. If you want to be a note investor, embrace the unexpected.

When people talk about the passive side of things and that component, most people think it depends on how many notes is your business size. That’s far from the truth. I’ve got a large portfolio under management. I’m going to have a lot more borrowers who have a lot more hair on to their files and so forth. I was talking to an investor who’s got a situation that is going to be a challenge to work through on an asset. He already told me I was on the phone with him earlier and he’s like, “I spent way too much time on this. The last few days, it’s been full-time trying to deal with this issue.” That’s on one note and I had that issue with one of my favorite assets in Ohio. It’s probably the first one I lost money on. It consumes you because you’re dealing with all these issues and you’re trying to work through them all. It only takes one note. It has a rental where it’s no different than having a rental where they trashed a place or something and you’re trying to get it cleaned up and stuff.

You could have ten rentals that you never even hear from the tenants and they’re good tenants. That’s like having the good borrowers. If you are strictly in performing notes, you’d probably be a little more passive by I still think you’re going to be running into things. This one was performing for the most part when this individual bought it. Since that time, it’s completely gone upside down and sideways and in seven other directions. With that, portfolio size doesn’t have as much in effect on things because somebody could have 20 assets and maybe 1 or 2 non-performers. They could be doing less work than somebody with 3 assets and has 1 note that’s a complete disaster. No matter where you are, it’s difficult if you’re a true note investor for it to be passive.

It’s funny that we’re talking about this because I thought earlier bulldogs were trained to work with bulls. Bulldogs are small, bulls are large. The way bulldogs get the upper hand on is they grab onto them and their jaws clamp shut and they stay shut. The bull walks around with a bulldog hanging off of it. Somehow the bulldogs got to get what they want out of the situation. I thought for my whole life I have been such a bulldog, I have the hardest time letting go of some things. I am tenacious. The harder and crazier gets, the harder I clampdown. My whole life before real estate and earlier in real estate, there was never an obvious advantage in being like this. Now that I’m in notes, I realize this is why I feel like I’m home.

The tenacity, persistence and the ability to keep grinding on are maybe one of the biggest predictors of whether you’ll have long-term success and satisfaction in this business. It’s crazy. For me, what happens is that I was told I had a bad house that I took back and it was in bad condition and not in a great neighborhood. I was delighted when someone came along and wanted to buy it. Because I had gone through a forfeiture on this thing, I was not in a big hurry. I didn’t know the potential person well, but the house was a mess. My hope was like, “Let me give it to her in some way and hope that she fixes it up a little. If she’s going to crash and burn, maybe at least the house will be in better shape when that happens.”

GDNI 93 | Dealing With Problems
Dealing With Problems: If you’re going to change something about your business or your expectations from the people working with you, make sure you communicate it properly.


Instead of giving her a land contract and going through that whole process, I gave her a lease option and I thought I had a good contract. I do have a good contract. It was written for me by an attorney. I tweaked a little bit. I may have, in my tweaking, made it may not be valid anymore for the state where it is, I don’t know. In any case, the first time the lease option, they haven’t paid for three months. I start the eviction process. I was told that my lease option agreement is a land contract pretending to be a lease option agreement. He thinks if he tries to evict, the judge is going to go and throw it out, it’s going to be a big problem.

We should foreclose instead, which is a lot more expensive, a lot longer. Like everyone else, when an attorney or some person with authority tells me something, I immediately believe them, given five minutes. I have a much quicker recovery time now. I used to believe them for a long time. Now, I only believe in them for ten minutes. My next thought is, “That’s one attorney. Let me ask another attorney.” I am in the process. I’ve got my teeth into it. This guy might be right and I might eventually have to cave to what he’s saying, but I’m way away from that. I am going to keep working on it. It’s inevitable I have to foreclose.

You’re taking the passive approach and do nothing.

It’s passive-aggressive real estate.

It’s interesting you mentioned that because now on the passive side of things, trying to stick with that theme, sometimes you have to take a property back and then find an agent and list it and so forth. I’ve got two properties, so I have more than two. I’ve got three, but I’ll talk about two. One, the agent started it at $50,000. The other one, the agent started at $45,000. Both of them had complete interior access before listing them. The agents went in and everything. The one that list of $45,000, he goes, “You should get a quick offer. This is easily a $40,000 house,” and so forth. We’re down into the $30,000 now.

We got an offer of $25,000 where he said, “I probably should take it.” I said, “Why don’t you give me $40,000 since that’s what you said the house was worth?” because the agent does invest a little bit. He’s like, “It’s not worth $40,000.” I’m like, “Why did you have me list it at $45,000?” At $25,000, I probably could have taken it but out of spite almost, I was like, “No.” I almost want to wait until the listing expires and give it to somebody else. In this other one at $50,000, the woman’s like, “I’ll probably get $30,000 for it.” I’m like, “I base my business based on what you tell me. Maybe I don’t expect to get that number but something in that vicinity.” I told that agent, “I’m going to cut your commission by basically 50%.” She was like, “You can’t do that.” I’m like, “You’ve frauded me by giving me a number that’s not even close.” She goes, “That’s not fraud.” I’m like, “Whatever.”

Call it whatever you want. It’s back to a little bit of some of the trials and tribulations that you run through within this business. Back to people that think it’s passive, once you get an REO, you spend a lot of time between finding an agent and trying to deal with it and making sure to re-check back with them. I had the one agent on the property. I got another one that’s in the $30,000s. The guy went dark on me for two weeks and finally then sends an email and he’s like, “We had one showing.” Besides being on a servicer, attorney, collateral storage and preservation kick, which I’ll go to my preservation story later on, this is about what happened passive investing. I’m getting ready to torment all of them.

Suffice it to say, Chris is at war with everyone at the moment. Everybody, get under your rock for the moment until the storm passes.

I do have to tell you this story with the preservation company and I like this preservation company. They go out to a house and they change the locks, do everything and they’re supposed to winterize it. I have a program with them. Any house you go out to, you change the locks, you winterize it. No ifs, ands or buts. That’s what you’re doing. I was in the process of selling the property to somebody and they’re like, “You got to deal with the frozen pipes.” I’m like, “There are no frozen pipes. I winterized it.” He goes, “That property is not winterized. Your toilet bowl is completely frozen and cracked in half.” He sent me a picture. I call the preservation company and said, “Why wasn’t this winterized?” The person that went out there said they spoke to the lender and the lender met them out there.

When something goes wrong, people aren't going to go berserk. You let them know. Click To Tweet

This is somewhere in Missouri. It’s remote, I don’t even know if you know where it is. He said the lender was out there and told him, “Don’t bother with winterizing.” I said, “That’s interesting because I am in Washington DC and last time I checked, nobody else has access to my account. As the 4,000 pages of documents you made me sign, I am the only authorized user.” He’s like, “That’s correct.” I’m like, “I didn’t make a trip out to Missouri to meet this guy to winterize this property. I hope you can believe that.” Basically, I said to them like, “What are you going to do about the broken toilet and so forth and if there are any pipes. I’m sure you’ve got insurance and so forth for this.” He’s like, “We’ll have to review the contract and figure that out.” I’m like, “Go ahead and review that contract and let me know how that turns out. Because if it’s anything besides the fact that you’re going to fix it, replace it or take care of it, then we can have a few more words.” That’s my preservation story to add salt to the wound.

It’s interesting. As an aside, all our vendors have insurance against business mistakes, but try to get anything from them, even an acknowledgment that they might have done something, they drop the ball.

To get somebody to admit they make a mistake nowadays, help us. I’ll be the first to say, “I messed that one up. Let’s move on how we fix it.” Clearly, in this instance they screwed up and didn’t winterize a property in the middle of flipping winter and like, “You’re not going to take care of it? Are you truly serious about that?” I’ve got 100 properties that they’re running around doing things, taking pictures for me. I’ll gladly switch to somebody else and take all the business way.

You’re the 800-pound gorilla at this point. You’ve got a lot of stuff going on, lots of buying power and a genuine need for vendors who embrace your problems as their own. Where are these people? They cannot be found.

We all make mistakes and so forth. A perfect example, I had sent somebody a check and I went in and said, “I didn’t send it.” I sent the person a message and said, “I screwed up and your checks going out now. My apologies.” They replied, “No problem. Thank you for letting me know.” That’s it. People aren’t going to go berserk over things. You let them know. We’re all human.

I don’t know what it is. People don’t like to admit. Maybe they’re afraid of getting yelled at, so they don’t. This is a necessary transition, everyone. You go from a small child who’s afraid of getting yelled at, then you become a big person and you still don’t like being yelled at, but you shouldn’t be avoiding your issues because someone might yell at you. It’s going to happen. You’re going to survive it. It’ll be cool. Everything is much worse if you hide and don’t address things that are going on. I have to tell you something funny. I have a borrower calling me. This is the other thing. I’ve been getting borrowers calling. It’s freak out day. I don’t know what is going on. Everyone is freaking out about something and my phones are ringing off the hook, but I don’t even have as many things going on as you do. I completely forgot what I was going to say.

You said you’ve got somebody calling you and so forth. Mercury retrograde starting in a week or two, I think. I forget when it starts. That could be part of it.

It’s time for a bit of light humor in this otherwise desolate landscape of complaints about everybody in the note business. One of my projects is I’m about to do my renovation down south. We’re about to do a big outdoor building project. We have a giant fence we have to do. It’s long. It’s not high. It’s something you would see in Game of Thrones and we have to build a deck. This is my house to keep and not to sell. It’s a system that is expensive. It is aluminum poles and then they have channels. You slide wood horizontally down into them and both the wood and the poles are super expensive. There are tons of other stuff that’s going to get built. It turned out to be a rather big bill.

On this particular job site, before we were working on this project, when they were doing other things inside the house, there were a fair number of building materials that were stolen. I figure the people who drove past and saw the material and stole it, I’ve got them and the randos who go by with trucks and steal stuff and anything that’s unguarded. I have a neighbor who has been stealing things. I’ve got all this stuff ready to be delivered and it dawned on me I’m going to hire somebody to camp on that lot until the perimeter fence can be built and the premises secured.

GDNI 93 | Dealing With Problems
Dealing With Problems: There’s not a problem in the world that gets better from being ignored, and most borrowers don’t realize that.


I put up a Craigslist ad for someone to camp out on a lot and it has been hilarious because I have gotten a combination of people who have been routinely sleeping in their cars and thinks it would be cool to earn money to do it in a particular spot, whereas they’ve been doing it for free. I have people who are armed to the teeth and would love to be parked somewhere in a vacant lot where God forbid somebody walked by walking their dog, these people would probably shoot at them.

I thought, “This is crazy,” and I asked myself like, “Am I crazy to even be hiring someone to do this or is this reasonable?” People have stolen before. They may come back. The neighbor steals. It’s like, “I need somebody to camp in this lot.” It’s a red state, so lots of guns and some are both sleeping in their car with guns. I thought, “Be careful about tapping on anyone’s window if you see them sleeping.” I don’t know that there is any benefit to anyone in hearing this story, but I thought you would be amused by my further adventures down south.

Did you hear the New Orleans project? It’s something had crossed my mind too that it slipped out that I was going to comment on. I can’t recall now, but you are talking about the end of the month. Here’s one for you too, speaking on borrowers calling you. I had sent borrower paperwork for converting a CFD to a note. I sent it to him on November 2nd. I spoke to the guy three times. Every time he kept saying, “I’ll send it.” I basically told him in December, I said, “If I don’t have it by December 20th,” or whatever day it is, I said, “Forget it because I’m selling the loan. It’s done. It’s gone. Forget it.” The guy never sent anything. The guy has called me three times and he called again. I spoke to him once and he’s asking questions. I said, “There’s nothing to ask. I can’t help you. I don’t own the loan anymore.” He’s like, “What do you mean?” I’m like, “What part of the last five conversations that we have in the email I sent you and the goodbye letter and hello letter of I don’t own the loan, don’t you understand?” He’s like, “I want to get this converted.”

You weren’t just playing hardball. You had something.

I had a buyer. The buyer was like, “I’ll give you a few weeks to try and convert it.” It was in his best interest. This person was buying ten loans and this one loan was holding up all ten and I wasn’t going to do a whole new agreement and everything else to cater to this one guy who can’t get his shiznit together. I gave the guy one last chance and turned around and sold it. Now, the guy’s upset and I’m like, “I’m sorry. You had the opportunity. I gave you a deadline and you didn’t meet it. That’s ramifications.” I think the purchaser would convert them, at the time, I was knocking $1,000 off the UPB and stuff like that to round off numbers and stuff like that. Speaking of the passive side, another borrower called me. They’re 52 payments behind. They’re a little behind but only one member was on the loan. Technically, the other individual, because a person may have gotten married since they had it and I don’t think they were telling their significant other what was going on.

The UPB or the loan originally was $30,000. The UPB on the loan is down to $19,000. There’s $10,000 in unpaid interest. By the way, there’s also $20,000 in taxes because it’s in one of those high tax states that are owed on this thing. The payoff is $50,000-something and now they’re all of a sudden like, “How did it go from $20,000 to $50,000?” I’m like, “Because you haven’t paid anything. Your taxes are $2,900 per year. There was legal involved in this thing. The tax hasn’t been paid in six years. There’s $18,000 there.” The prior service was paying them. They were advancing them. The payoff is almost three times what the UPB is on this thing. I told him, “I’ll work something out. If you make six payments in a row, I’ll mod the loan or do whatever and stuff.” All of a sudden, they’re finally realizing like, “It’s not $20,000 we owe. It’s $60,000.”

This is circling back to what you’re saying about saying something if there’s something going on. There is not a problem in the world that gets better from being ignored. I don’t think that borrowers think about that. Particularly if they start defaulting and nothing bad happens right away, it definitely builds their confidence and their feelings of well-being to the point where when you finally arrive with someone who’s going to now hold them accountable, it is going to require performance. They’re shocked and a little indignant, a little outraged. Who are you to tell me I need to pay for this?

I had a conversation with a borrower and the servicer hasn’t been able to get in touch with them. I got in touch with them on the first call, so that had me scratching my head a little bit. The guy said, “I had this lost my job, but I’m working again,” so forth and so on. He said, “I’ll make a payment for today’s check.” Essentially I told the guy, “I’ll work with you, but if you go dark again as you did, I am going to go dark on you. The attorney can take it from there and you’ll deal with the attorney. The only thing the attorney can do is accept the full reinstatement. If you can’t make a payment, give me the courtesy to pick up the phone and call.”

I’m in the middle of a sad situation where I have a contract for deed with a single mom of a child who has a disability. She’s waiting, they’ve applied for disability. This mom thought that disability was something you go down, you fill out a paper and they hand you money, whereas it’s probably minimally a three-year process. Assuming they deny you initially, which they do the vast majority of people, then you get an attorney. You fight and then two-thirds of people who fight with an attorney get it in the end. It takes years because you have to wait a year to get a hearing and stuff like that. In the meantime, all this is going on, this child who was young at the time when the mom first started defaulting, she’s in school now.

Everyone's building a dream in real estate. Click To Tweet

I heard disability’s quite mild. It’s not a situation where she’s at home and needs full-time care. It’s nothing like that. In an attempt to understand the situation, I gave the borrower a financial application and I got it back. The parts where it asks about income and everything, the mom said she had an income of $150-some a month and also listed expenses of $3,500, $3,800 something like that. Only a tiny portion of which was for house payments, whether it was a big cable bill and there are a big car payment and a rather large cell phone bill too. Where is everyone who takes advantage of this $25 a month prepaid cellphone?

It was such a glaring example, looking at this financial application. Such a complete lack of problem-solving ability evident in these numbers, no effort. “I can’t work because of my daughter’s disabled.” Meanwhile her daughter’s 7 or 8 in school all day. I sent follow-ups. I was like, “Can you please tell me what effort have you made to find employment during the hours that you are able to work?” She didn’t answer me. Even as crazy and outrageous as that is, not even defending, explaining or anything, I still feel bad about that now. Unfortunately, I have sent a demand letter to them. There’s such a lack of reality-based thinking with a lot of people, it’s shocking.

It’s shocking for people like us who are go-getters. We’re problem-solving our own lives by going into real estate investing alongside having other careers. Everyone’s building a dream in real estate. We swim in this sea of people who are understanding the reality and the world is different. We’re always scratching our heads because you can’t even predict what people are going to do. You don’t think the same way that they do. You always think about what you would do in their position and that’s not even a relevant consideration. That’s crazy. Our business is crazy. It is full of difficult, challenging things, dealing with people different from you, who think differently. That is, in a way, the secret to why it’s not passive.

You are bringing full circle the passive side, based on our conversations, sharing some of our things that have occurred. For the most part, this isn’t a passive business, especially when you’re dealing on the nonperforming side. If you’re dealing with performing assets, things might be a little better in some senses. I’ve got a good amount of performing assets, but it only takes that one to go that route. The thing people got to realize is when you’re dealing with performing, you’re looking at 8% to 12% returns. People who always want to see the sexy, “I want 20%,” or whatever that magic number is, it comes to the point of risking an amount of work.

You’re not going to get typically 20% for doing absolutely nothing by buying it and collecting payments. There might be some loans that you’re lucky to get like that. For example, I was bidding on some assets that they gave me the tape and basically everything was current and so forth. Selling them at a nice price that provides a nice return. All of a sudden I get the collateral and so forth and going through these things and I’m realizing, “These were all modded in October, November. The seller collected $3,000 at the mod, but the people have made one payment since then and the mod brought them current.” Prior to that, they hadn’t paid in three years. All of a sudden I’m like, “I don’t consider those performing. They reinstated, but they have a history of nonperforming. I’m not going to pay performing or slightly less than performing for these things.”

I got to have that conversation with the seller on that because I saw a message on it that he said to call him. It goes back to even performing assets. Those still can take some effort. The interesting thing that’s a little different with notes in real estate as you go for a full circle, because a lot of real estate investors are tired of dealing with tenants and so forth. I would think sometimes, having a property might be more passive if you have a property manager. We can have a servicer dealing with these things, but at the end of the day, you still have to do a lot of work even though there’s still the servicer and probably a lot more vendors. Whereas if you’ve got a decent property with a property management company, it could be, but also I know there are also those types of houses that are problem houses as well.

Let’s look at some key metrics though. In a rental, the property manager is probably local. Those little drop-ins where you can work things out with people or at least have them look you in the eye. They can’t hide from you or run away. That is better than a distant servicer trying to get somebody on the phone, so they can maybe talk them into making some payments. Also, with a property manager, their income is dependent on them getting the money from the tenant. You’re on the same team.

With a servicer, they get paid whether they’re effective or not, which is never a good situation, never motivational. To some respect, I am a landlord but I only own things far away from me. I don’t want to deal with anything. I want to see the rents show up in my bank account and I’m willing to pay people. I’m fine with that. The numbers work. I’m a happy camper. The more people who are like, “I’ve got to get out of landlording so that I can make notes and be passive.” I’m like, “Bring it on. Where are your properties? I’ll take a look at them.”

Don’t get me wrong, I love notes. I love investing in notes. I like notes because I can do them in the evening to look at properties and stuff. It’s difficult based on my lifestyle and things. Notes you can bid on at night and manage things at night and it’s a much easier business to scale remotely than rentals are for the most part. You can scale rentals remotely if you have good property managers. Personally, I think notes are easier and can do it with less cash from that perspective. There’s a big benefit there for notes. I try and let people know when people think of it being passive and so forth. It isn’t, for the most part.

GDNI 93 | Dealing With Problems
Dealing With Problems: In note investing, there’s good days, there’s bad days, and days where the borrower is able to pay off their loans.


You and I have become the wizened old people in the note business who see the newcomers come and go. I do feel a fair number of people get discouraged and they give up because it’s not exactly what they think it’s going to be. Let’s offer this in that spirit. We’re not trying to make anybody discouraged. On the contrary, we’re trying to set realistic expectations so that you can appreciate it and not feel things are horribly wrong if it’s more worth than you expected. That’s normal. That’s what it is.

I don’t want to have it be gloom and doom. I like to try and let people know what they’re getting themselves into in that sense. There are good days, there are bad days, and there are days where you get a borrower that pays off a loan you bought for $4,000 and there’s $14,000 left and they pay it off. You’ll like it when those happen and there are days where you get a borrower hand you the deed back because they’re saying, “The foundation is caved in and the house is worthless.”

That wasn’t my house, by the way. You were talking about someone that you talked to who’s got a crazy situation going on. You and I were discussing tactics and what would we do next then? Because we got to team up a little bit to work on it. He’s not super new. He’s got experience under his belt but he’s not run into anything this before. He said to me like, “This is what it’s like. You never know what’s going to happen.” I love that part. Some of the time, the thing you didn’t think was going to happen is not a good thing in general. The fact it’s varied and interesting, you never know what’s going to happen. I personally like that. It’s not for everybody, but it keeps things interesting. Don’t you wake up in the morning like, “I wonder what today will bring?”

I wonder that every day. Gail, do you have a Note and Bolt?

My Note and Bolt is a quote from my husband. My husband always say, “Never say, ‘What else can happen?’ Because you will be answered.”

My son is sometimes like, “We’ll try that.” He’s been watching a lot of Star Wars. Every time he hears the word, try, he’s like, “Daddy, there is no try. It’s either do or not do.” Yoda has a quote like that and he quotes Yoda all the time. I’ve got an eight-year-old running around the house quoting Yoda and I’m like, “That’s true.” For people out there, if you’re running into sometimes the servicing component because I know somebody who asked it on Notes And Bolts group as well. Typically, the servicer will send out the goodbye letter. If it’s transferred to you, they’ll put your name on it.

When I found out, instead of you sending out a hello letter, you can send out an election of servicer letter, which basically noted that it’s getting transferred to you, but you’ve elected to use a servicer. It’s probably the same thing as if you started a new loan that you’re not going to collect the money. You’re going to use a servicer. It’s an election of servicer that says, “We’ve elected to use this servicer and here’s their contact information.” You send that to the borrower or you send it to the servicer. When they bought it, they will send a hello letter.

The servicer still has to send off hello letter even though you sent that though.

You’re not sending the hello letter. You’re sending a letter telling them you have elected to use a servicer. After many years of Word, I’ve figured out how to use Excel with Word and the mail merge. I got my VA putting it in a spreadsheet, all the information and it’ll probably take about two hours. He’ll email back to me, I’ll click the button and then have all the letters, hit print, bring them to the post office. There we go.

I have two final observations. First of all, there’s a guy in New Orleans named Pimento who is willing to camp out on my vacant lot. That was great. I think it’s cool that your eight-year-old son has elected to receive his life wisdom from Yoda instead of you, Chris. All in all, we can agree that’s a reasonable choice. Sorry, bud. I’m sure you’ll be able to show him how to fish.

I’ve been teaching him basketball. A family story here, he has never played basketball. We signed him up and stuff, so he’s literally never dribbled a basketball in that sense. He’s going and he’s playing with kids who had already played. At that age, they pick it up quickly and stuff. He’s trying to dribble and he’s kicking in, he’s going all over the place. Every night, I spend a half-hour with him working on dribbling and we’ve got a hoop now outside, which I’m glad he did because I want to put a hoop outside. It’s easier to blame it on the kid than tell the wife you want a basketball because you’re going to get hurt and end up in the hospital thing. The eight-year-old needs it. I finally figured out a way to get through to him. It’s like in soccer. They run around closest to the ball. I finally convinced him, “You’re a shark.” In basketball, it’s the block down near the basket, the two blocks on each side.

I’m like, “Go back and forth on each block, depending if the ball is on that side. You’re a shark. You’re waiting for the ball. You’re waiting for that fish. Go back and forth and somebody will eventually pass it to you and then you turn and shoot.” In his second game, he’s out there. I’m like, “Richard, be the shark.” He runs. One of the kids was inbounding the ball. He was the only kid close to the basket. He throws it to him. The first thing I thought is, “I hope he catches it.” He caught it, turned around and shot it. It went in. It was a proud parent moment and he had this big smile on his face and all the kids on the team were happy for him and stuff. We are kicking back off our Thursday evening sessions again. Continue to start joining us and we’ve got some great speakers lined up coming up on Thursday evenings as well.

How do they sign up for that? Go to Notes And Bolts on the Facebook group to see the link.

Thank you all. It’s good to be back and refreshed and a little bit fired up. Gail, any final thoughts?

No. We’ll have more rants. We’ve gotten started. You’ve got a lot of pent-up things to say.

Thank you all. Have a good one.

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