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Dumb Things People Do In The Note Industry

GDNI 56 | Dumb Note Industry Things

 

Not everyone is perfect in real estate industry, but there are just some things that could and should have been avoided. Keeping it real, hosts Gail Anthony Greenberg and Chris Seveney break down the dumb things people do in the industry. They discuss the tendencies of people in this day and age to believe whatever is on Facebook, all the while talking about an article floating around that circles on a lawsuit. Going over the necessity of due diligence, they also share stories about assessing deals that seem too good to be true. Furthermore, Gail and Chris tap into the amount of risk one should take, how far should one go, and when is enough. No one can escape doing dumb things in this industry but knowing how to do something right could save you a whole lot of time and money.

Listen to the podcast here:

Dumb Things People Do In The Note Industry

Gail, how are you doing?

I’m doing very well. Thank you, Chris.

Our topic is going to be dumb things we see people do. Typically, Gail and I don’t beat around the bush with a lot of things. We share our worst stories, dumb things that we’ve done and things that we may have seen in the industry. We don’t sugarcoat it. It is what it is.

You could be one of the dumb people that I comment on. Nothing comes to mind but I’ll think of something.

I’ve done dumb things.

I expect you to list mine as well. There’s nothing more inspiring than people doing dumb things. It makes you feel like a genius.

Before we get into that topic, why don’t we run through what happened? What do you have going on?

In my quest to build a duplex on a lot that isn’t quite big enough, I don’t have the required 1,700 square feet of lot per dwelling unit. I want to build two single-family. I’m getting some bad signals. I was going to buy some of the backyard next door to add to the size of my lot. As you predicted, it’s looking a little negative. I’m not getting good feedback about that idea, except for my friends who thought it was hilarious.

What if you combine the two lots in addition off of the existing property you have and turn that from a duplex to a quad?

They don’t allow more than two in this neighborhood. There are normal city planning and zoning, but this is a historic neighborhood. They’re pretty determined to keep the housing stock all of a certain size and flavor. You gave me some good advice. The hardest part is when you have a complicated problem and there are multiple solutions, all of which would require applying, paying application fees and stuff. How do you figure out what is the best one to try, the one with the highest chance of success so you don’t waste a lot of time and money, running down alleys that are never going to take you anywhere?

The other thing you could do is to try and get a variance and see if they get the variance. You could put that unit but have a restriction on it. It would be below market rent, not an Airbnb but a rental below market rate. 

I noticed that is the reason why they give variances for affordable housing. Is that a universal thing that if you want to build something a little too big for the space, they’ll let you do it if it’s affordable housing?

It depends because there’s usually, in most metropolitan areas, a shortage of affordable housing. Sometimes if it’s close, like in this instance, you’re only off by a few hundred square feet or something like that from total lot area. Putting something there isn’t going to make it look out of character on the property. It’s not like you’re trying to put six units and take the entire lot line. Nobody will probably ever notice. In that instance, they’d probably be a little forgiving to say, “We’d give the variance. You have this unit but you’d have a deed restriction on it that it would be for affordable housing.” That’s the only component to it. Sometimes it’s not a bad thing if you can make the numbers work.

I don’t want to comply with that restraint. You suggested that instead of talking to the planning commission and everything, which I have been doing. They don’t comment until they get your application. They tell you the answer. You suggested talking to a surveyor who has experience with people applying for these things and getting the surveys done. I do have a call into one of those people. If they call back, I’m hanging up on you. The other thing is alternatively to find an attorney who’s been down this road before. In urban areas, there are a lot of people who try a lot of things because there are a lot of restrictions. We real estate investors don’t like to be told, “No,” about our plans. That’s what happened to me. What about you?

I had a call as well. I spoke with a woman at the Pennsylvania Department of Banking and Securities. I posted on Facebook. There has been article floating around about how a company had its debt deemed nonrecoverable because a company bought an existing debt that was delinquent and tried to enforce it. The courts ruled that it was unenforceable.

That was a car loan, but are we inferring that is also going to be applicable to home loans?

That’s what was being inferred. I went online and started reading the lawsuit. It references Section 12 of the Pennsylvania Code. I’m like, “What is this code about?” The code is about automobile loans. The license application for this collective repossessor does talk about installment sale contracts. You think of mortgages. It’s an installment sale contract, so it’s similar. This code is specifically for automobiles. I call the state. I’m trying to get an understanding. I see this case and it’s about auto debt. You need a servicing license or a lender license if you’re a certain size within the state. If somebody has a mortgage, do they need this debt collector licensing? I was referring to this lawsuit. If I want to do things, I want to make sure I’m doing those correctly. Their response was that it’s strictly related to automobile debt. That one specific code is only regarding automobiles. The whole mortgage thing is a different division. They said the NMLS has information on there. Also, they give you the contact information for someone else to talk to about servicing and lender licensing. This debt collector repossessor license that is part of this court case told me it’s apples and oranges when it comes to mortgages.

Are you now going to take no for an answer or are you going to keep banging on doors about this?

There’s nothing more inspiring than people doing dumb things. It makes you feel like a genius. Click To Tweet

That’s a completely separate thing and I don’t do automobile debt, so I’m done with that. As I had the woman, I’m going to speak to her about the servicing and lender licensing to get an understanding from them on their thoughts to see if it is contradictory to anything any attorney tells you. Sometimes people take these articles and post them like on Ohio. There are some things going on in Ohio in Maryland about licensing, the Supreme Court rulings and stuff like that. Sometimes you get to read what is being published because a lot of it is irrelevant. If you start making business decisions off of what you read on Facebook, it’s one of the dumb things that you can do.

I want to take a moment and appreciate Chris. The minute you said that you read the statute, I thought, “Who else in the world would go and read the statute?” You do. You called the people and discussed it with them. You win Facebook. You’re the guy who finds out. It’s not just posting the clickbait-y scary headlines about everything. I hope you understand how unique you are in this respect. You’re the real deal. Congratulations.

There’s another investor that I know. He may be an attorney as well. He’s not one who likes his name being thrown out there so I don’t mention it, but he also posts some pretty good stuff. He provides his interpretation within. He gets to the bottom of it as well. In some sense, I’m very similar to that person because he also speaks his mind in many ways. Sometimes it may upset people. Some of the things I’ve said on the podcast or things that I’ve done have upset people. If it has, I apologize. I’m not here to offend or upset anybody. I’ve been accused of many things for having a podcast, which some will find comical in some sense. I’m not in this business to get into battles with somebody. I’ve got my business and I run it. You can go have your business. You can have a billion-dollar business. All the power to you. You could have one note. For me, there’s no difference between the two. We’re all in this thing to try and succeed. 

If that’s your way of graciously accepting my compliments, good for you. You could have just said, “Thank you.”

I should have, but I just don’t say thank you. I’ve got to keep going. We’re going to talk about dumb things people do. I’m going to start offending you and contradict everything I said.

You are the chattiest engineer in existence also. While we’re amassing titles for you, you have that one as well.

I have the degree, but I never practiced as an engineer.

I was relieved when you told me that you failed some courses in school too. We’re getting into the deep, dark secrets.

In my school, you don’t fail them. They show up as NR, no record. You call it snowflaking because you took your classes by quarter, not by semester. If you got that white piece of paper and there was nothing on it, it was like, “That’s not good.”

If you don’t pass the course, you’re dead to them. There’s nothing on the paper. It’s like you don’t exist.

This was when college was expensive. It was $25,000 a year.

I’m not even going to tell you what it was when I went. It’s a pretty big number.

The average income coming out when I graduated was right around that number as well. When I went to engineering, the average salary that people are getting out was around $30,000. It was almost a one-for-one. People talk about college now and how expensive it is. Based on the yearly salary, it’s outrageously expensive and shouldn’t be that high.

We shouldn’t keep talking about this, but college is like healthcare. They charge an extremely high number because the people who can pay are covering people who can’t pay. Rather than work out something equitable that everyone can afford, they have this ridiculous lopsided system. Onto the next topic, dumb things that we’ve seen people do. Because of our somewhat public profile, people share with us the things that they do and the prices that they pay. You and I did a great podcast where we show people the formula for how to figure out how many payments are left on a loan based on the interest rate, the unpaid balance and the PI payment. This turns out to be a crucial little formula to know. It’s not super hard. You should make a column and plug this formula into that. Run it for every asset on the tape. I don’t remember being so aware of this before but I’ve been seeing tapes where the number of payments left is way off, sometimes by over a hundred payments. This can result in people overpaying.

You look at the PI payment and it’s a nice big juicy one. You’re thinking, “My return is X. Maybe it’s 20% or even higher.” They don’t realize there are only three years of payments left. With a performer, particularly with the form, you have to be careful because you’re paying top-dollar for it. If the return is 20% but there are only three years left, you’re not even going to get all your money back in that period. Even if you had no expenses at all, if something is paying 20%, you need five years to get your money back. This is not so much a dumb thing but an unaware thing. People are not looking at the total amount of money that they will be making a loan. They’re bidding off of a percentage of UPB and thinking, “I’m getting a smoking deal here,” and then realize they’re not getting the money back.

Always double-check the numbers. 

You always talk about people who buy at a 10% yield. They don’t realize it’s going to be ten years until they get all their money back, but more since they’ll have expenses.

When you look at the time value of money, inflation is 3% every year. Your tax rate as well. You realize that you could invest in a certain type of municipal bond. In some municipal bonds, you don’t pay federal taxes on. It’s a little hint there that you might not know. You might be able to get 2% to 3% there, which is what you’re getting on the note after you cover for everything. I may know somebody who has done this before. He’s buying an asset without running a title report. I will be the first to admit that I have done that on one occasion.

Even nice properties can have trees fall on them and fires, tornadoes, and other hazards. Click To Tweet

Was it when we both did it on one occasion?

It’s when we both did it. I’m putting down the list because we did the research on it where we called the taxes and got that information. I’ll put this in the category because if you’re going to do it, there are a lot of things you need to protect yourself in. We also did have a buy-back clause with the seller. They would buy it back if the lien wasn’t recoverable. Something that I want to throw out there is that and not putting eyes on a property. A lot of people don’t put eyes on the property, or they take the BPO from the seller and run with that. Even if the property only has a $10,000 balance and they say it’s a $100,000 property and the person is paying, I still recommend that you put eyes on that property no matter what.

Even nice properties can have trees fall on them and fires, tornadoes, other hazards. Someone’s telling a story that they bought a note, not realizing that the house had been destroyed by a hurricane. You want to find these things out. In our own defense, you and I were offered an incredible deal on a small pool of notes if we could close in four days. I don’t even think we had four days. I had two days. It wasn’t enough time to get a title report even on an expedited basis. It was six assets. I called the taxes. They were mostly a small town. The people in the recorder’s office were willing to look up the liens. We pretty much knew what we were getting into. I’m trying to think if there were any horrible surprises.

The average cost of these was under $5,000 per acquisition.

We felt like, “I have a couple of them. If I throw it away, we’ll probably still be okay.” That was your thinking. My thinking was, “I’m going to squeeze every drop of juice out of every one of these, no matter what it takes. I don’t care what I have to do. I don’t care what Chris has to do.”

We pretty much have.

We’re doing it. We have unloaded the last one.

What’s funny is you look on Facebook and you see the article about the guy in Florida or whatever that bought that strip of land between the two townhouses. That’s a perfect example. The guy paid $10,000, thinking he was getting this townhouse. If the deal seems too good to be true, typically it is. In this instance, that person did not do the proper due diligence and look at the property. They may have run a title report but must have not looked at the land records or at a GIS to see, “Is this the actual lot with the house?” We clearly didn’t. That’s an example.

I feel for him. It’s a ridiculous situation. How does it happen that that little strip has even its own parcel of land?

GDNI 56 | Dumb Note Industry Things
Dumb Note Industry Things: If you start making business decisions off of what you read on Facebook, then you are doing one of the dumb things that you can ever do.

 

I bought some tax liens in the past in Florida. There was one there that I noticed was very similar. It was the first three feet of a street from the road to the property that went 150 feet for two houses and that was it. It had a value of $100. The taxes on it were $8. If somebody went and looked at it, they’re like, “This is this house on the street.” It was a three-foot by 150-foot strip in front. A lot of times, especially in these planned communities, sometimes it also falls under who has ownership or responsibility. The homeowner might be responsible for a certain parcel of land. Other areas might be considered a common area. What they may do in some of those instances is if they’ve got utilities running under the ground there, they may use that as a common area versus giving it to the property. They never have to deal with issues of accessing it or try and get an easement or access. There are reasons why they do it. It’s more a legal complex thing and there are reasons.

If you look in the tax records and the annual tax is $10, would it be one giveaway?

Yes.

I have this funny image in my head of someone having to come over every week and mow his one-foot-wide strip of ground.

That’s the thing I was thinking too.

You would think that those would be owned by the HOA. How does something where the taxes are so low even end up in a tax sale? It seems incredible. The other thing was long ago before I met you, we did notes and had a wonderful time together. I bought a real estate training product that turned out not to be particularly valuable. It was about buying these weird little pieces of ground that would go up for tax sale. The whole idea about this was that you would go on a GIS map and look for certain things like, “Is there a cell phone tower on it? Is there a billboard on it?” In which case, a little piece of ground in the middle of nowhere could be ridiculously lucrative.

Somebody in California bought something very similar but ended up being parking spaces at this exclusive neighborhood parked in. They bought it because the HOA or somebody never paid it, or they switched HOAs and something happened. This person geniusly went and bought it. He turned around and was going to look back to the people and say, “I’m going to sell it to you if you like. I bought it for $5,000. I’ll sell it back to you guys for $250,000.” It was among $10 million-homes and it was parking for their guests. Now they have no place to park because it’s on a hill or somewhere. He’s holding them ransom.

Did he have to sit there like he got to fence it or he has to sit there full-time in a chair with a gun?

I don’t know what he did. He could have put some bollard in the ground so somebody wouldn’t park there.

About anything that involves using the internet is there forever. Click To Tweet

That’s dumb but it turned out not to be dumb.

I’ve got one. People typically don’t get caught doing this, but it’s posting deals that you want to raise money for on social media, “I have these JVs. Who wants to give me $50,000 a JV?” That is a securities violation. 

I’ve been talking to a lot of people who have various securities violations that they would like action taken on. They can’t seem to get anybody to do anything. I’m starting to wonder how dangerous is it. Malcolm Gladwell, who people may know from his first famous book, The Tipping Point, talked about something called the Broken Window syndrome. It’s a psychological thing. If a window in a well-traveled place is broken, stays broken and doesn’t get fixed, it usually sets off a chain reaction of other bad behavior, vandalism, graffiti or other things because the message to everyone is, “No one’s paying attention.” I know all these people who have different legitimate grievances that they’re trying to get addressed by either the national SEC or their state SEC. That’s such a red flag. That’s the broken window. Everybody is like, “It doesn’t matter what I do.” How dumb is it?

It only comes down to it when somebody complains. I hear people say, “The SEC is watching Facebook.” Even if you were an investment adviser, say you have your own Charles Schwab firm because you can buy those to run an investment firm, you don’t register with the SEC until you’ve got $100 million under management. Under $100 million, you’re dealing with the state. The SEC typically deals with the big guys. I’ve seen where they’ve stepped in on some of these smaller things and so forth, but it would usually be the state. That’s where it starts. The other component is that there is the Consumer Financial Protection Bureau, which was created out of Dodd-Frank and stuff. They have a consumer complaint database as well if somebody were to ever complain about it. If I did a deal with you, you post on Facebook, I’m like, “You shouldn’t be doing it.” If we did a deal and it went bad and you’re advertising more deals on Facebook like that, I’d be like, “This person is starting to tick me off a little bit.” Would I still complain? Probably not, especially because I’m in the business and you could file a complaint against me. Regarding the complaints, you do have to give your name so you know who the complaint comes from. 

It would be great if you could anonymously complain. It’s not trolling people online. You have to give some details.

It’s no different than when somebody finds vacant houses, breaks into them and steals a copper out of all of them. That’s dumb. They’re probably not going to get caught doing it, but it’s still something that’s dumb in my mind to do.

We’re not condoning this behavior, but I consider it a moderate risk, not as an extreme risk.

I don’t think it’s an extreme risk. It’s a minor risk. The risk versus what could happen is significant. It’s a minor risk but there is a big penalty.

About anything that involves using the internet is there forever. You may not have any issues for years, but if you get into a situation where someone is not happy with the way you handled the joint venture, their money in a fund or whatever, all of that would be grist for the mill. A vigorous attorney representing you could easily find a lot of examples of things that could be used against you.

GDNI 56 | Dumb Note Industry Things
The Tipping Point: How Little Things Can Make a Big Difference

If you see somebody post a deal like that and you partner with people that shouldn’t be doing what they were doing, would you invest with them?

I’m like most people. When it comes to my money, I want to know that the person I’m dealing with is competent and knows the rules in every respect, like the rules about how they have to handle my money and how they have to interact with me. I don’t want to work with someone who’s dumb or who takes big risks if they’ve got my money. That’s the deal.

Here’s why I asked that question. I’ve been doing this for a few years. When I see that, my first thought is, “I wouldn’t invest with them.” The reasons why are, first, they don’t have a pool of people already that they are associated with that would fund this deal. It’s either going to be a bad deal. Second, if they’re taking this risk, they either don’t know what they’re doing is illegal, which means they’re not very experienced or they do and they’re taking that risk. That is not somebody I would want to be risking my money. If they’re taking that risk, what else are they doing?

When someone does something dumb, I’m like, “What else don’t they know?” That’s a big one. If they don’t know that, what else don’t they know? I want competence and someone who’s prudent. That’s an excellent point. A dumb thing that I see people do too is they don’t have proper reserves for their deals. They spend pretty much all the money they have or all the money that an investor is prepared to give them buying the note. They don’t hold anything out for even the routine expenses that crop up even before you have to do something big, like a legal process or renovating a house.

I never carry enough that would carry a renovation.

I don’t either. I wouldn’t ask anyone, particularly if they have something else that their IRA could be earning in in the meantime that’s fairly liquid. I ask people to give me a chunk of money to, first of all, pay me back for the due diligence expenses and to be the reserves for utility bills. It’s anything that has to be paid upfront. Insurance and servicing are the main ongoing things. They’re not huge. You can spend a fair amount of time trying to get somebody reperforming on a note. There could be many months of them trying to sporadically reperforming. I don’t know about you, but insurance is my biggest problem with borrowers. You can get borrowers to pay you. We can do that because we have remedies if they don’t. Insurance is the hardest part. I have a new investor who said to me, “Can we get the insurance money back?” Yes, in theory. If someone goes all the way to the end with their maturity date on a loan, they have extra several months to pay because of the fees that have accumulated in the meantime. I have never gotten to that point. No one has ever paid me back their insurance money for any reason so far.

Do you have your servicer hold escrow?

You’re very familiar with my issues with a servicer, FCI, who won’t escrow unless a loan is current, so it’s no, not on those. If a loan arrived and has escrow, they will keep an escrow account open for a short period of time. If that person doesn’t start making every monthly payment, they will close escrow quickly and then you don’t have it anymore.

I’ll use Madison as an example of this. They will collect the escrow, but if there are past due taxes, they will not use that escrow to fund it. You would have to fund it. With Madison, what I do is I’ll get a policy from JB Lloyd. Say it’s $600 a year, $50 a month. I send that to Madison. They put it in and run a new escrow analysis to include the tax bill and that insurance. They add it to the borrower’s payment. When it gets reperforming, now the borrower is paying out $400 principal in interest plus the $100 taxes insurance. They cut the check for $500. Every few months, I get the check from Madison that covers that insurance.

Nobody wins in a lawsuit. That’s why you don’t put it in your name. Click To Tweet

Do they readjust the escrow to get you paid back in essence?

Yes.

FCI does that too in situations where I end up paying the taxes because of insufficient escrow or no escrow. It causes so much confusion with borrowers. It’s difficult. They’re always like, “Why did my payment go up?” They’re already struggling to pay the original payment. Now it’s up to $50 or $75. That is a problem.

What’s another thing that you see?

I see people being unprepared to take ownership of notes. I have a couple of new people who I’m working with who are learning the business. You do forget pretty quickly how much you know about stuff. You need to have your vendors in place and your accounts open with them, like your servicer. Some people are brand new and they’re like, “I’m going to buy this note.” “Who’s your servicer?” “I don’t have one yet.” Things are going to happen pretty fast once you fund that thing.

I’ve sold a note. I’ve got to send Madison something on this because the deed was just recorded. The buyer still hasn’t filled out all the paperwork for Madison. It’s an online form that takes two minutes to fill out. I just need to say to them, “Take it off servicing.” From a liability standpoint, if I don’t own it, why am I servicing it? 

You wouldn’t even be allowed to keep servicing it. Some people don’t even have their LLCs or EIN. That’s the first thing that they’re going to ask you, is to fill out a W-9. It’s not just Madison but anybody. “Give us your EIN. Who do you send the 1099 to at the end of the year with your income statements?” People are there all out of order. This is very complicated. Someone said that to me. “This is so complicated. I’m so confused.” It’s common sense. If you’re going to buy something not in your own name but in an entity, you’re going to have your entity set up. You can buy it yourself.

That’s dumb. Don’t do it. People are like, “Why wouldn’t you do that?” Let me say why. I’m working at a note where the servicer accidentally changed the interest rate on the loan. They fixed it. The borrower has been in default for four years. They filed the foreclosure. The borrower says, “I’m fighting this. I’m also suing the servicer and the note holder because I did not know how much to pay. They changed my interest rate on the loan.” You haven’t paid for four years. That shouldn’t be an excuse. I asked the attorney about that lawsuit. They’re like, “You’re going to spend $20,000 defending this.” In an LLC, you could be, “I’m going to wipe the note or foreclose the company,” whatever you may do if you’re new starting out. If it’s in your personal name and you got other assets, you have to come. Even if you have an umbrella insurance policy, it doesn’t cover that. You need errors and omissions insurance, which you’re probably not going to have or get or maybe you could get. They’re coming for you. It’s very cognizant of that. I would strongly recommend not putting anything in your personal name. 

I was going to say temporarily while your LLC is being set up, but you’re right. It’s much better nodding and taking the chance. If that situation were to happen and your LLC is getting sued, would transferring things out of your LLC and then developing it get you out of that lawsuit, or would you still have to deal with it in some way?

GDNI 56 | Dumb Note Industry Things
Dumb Note Industry Things: If you’re going to buy something not in your own name but in an entity, you’re going to have your entity set up.

 

If you tried to move assets out of it, if they had an attorney, they’d be smart enough to say, “I can’t do that.” Your best bet is to try and resolve it. What’s the buyer want at the end of the day? They probably want something adjusted with the debt. It’s coming to some agreement like that. You have to look hard at the servicer. It’s their culpability now where they’re indemnifying you. You’d have to sue the servicer. Nobody wins in a lawsuit. That’s why you don’t put it in your name.

Don’t have anything in your name. Put it in a trust. We are not attorneys. Do not listen to us.

We’re not attorneys or accountants. I’m just trying to share some things.

We’re plain folks, swapping stories about stuff we’ve heard of. I told you that I had lunch with a normal person who doesn’t do this stuff. She didn’t even know what the advantages are of having a Roth IRA, which I understand. If you’re a regular person, you’re probably asking yourself, “What is the point of paying taxes that I’m going to put into retirement?” The whole point of her retirement account is, “I don’t have to pay the taxes to put the money in there.” It’s very interesting. There are a lot of wrinkles in everything. There’s a lot to know. In general, real estate people get exposed to a lot of information about great ways to handle all sorts of things like their taxes, IRAs and clever strategies, mostly because there are a lot of people out there selling or training products or services in all these topic areas. As much as I don’t like the fact that I’ve probably spent too much money on training over the years, it is nice to feel like you get how things optimally should work, what is the best way to set things up and protect your assets. Have you seen any dumb things?

Here’s the last one. You get more flies with honey. I saw somebody post on Facebook, “I’ve pissed off my attorney, my servicer and this person.” Excuse my language but that’s not going to get you anywhere. We talked about this. It’s setting the expectations. You’re paying an attorney $100 to do a collateral review. That is them looking at it for a half hour. That’s them getting into it on their time that will probably take sometimes three to five days. It’s expecting it to come that day or the next day. If it comes, I’m doing backflips. It’s the same thing with your servicer. With a performing note with escrow, you’re paying $35 a month using Madison. I’ll use her as an example. Others are $35, $40. With nonperforming, you’re paying $75 to $90. You’re paying an extra $30 to $60 a month for something nonperforming. For $30 to $60 a month, maybe you’re getting one or two phone calls a week or some reach out. They’re not at your back and call, expecting every single day that they’re calling, chasing down and driving to a person’s house. Set the expectation. When you kick them off, do you think they’re going to try and go out of their way and help you later on down the line? No.

It’s like people who yell at their waitresses particularly about things that can’t be helped in a restaurant that aren’t even their fault. People need to be more positive in general. Try to elevate the world a little.

We all complain about our preservation company, our servicer or our attorneys because nobody is perfect. I’m not perfect. I get all fired up sometimes. Sometimes I feel like I’m spending two hours a day trying to clean up someone else’s mistake. Sometimes you get so frustrated. At the end of the day, it’s like, “Take a chill pill,” because I have high anxiety, “and relax.” I get the hair on the back of my neck standing. Sometimes I get really ticked off but it’s like, “Calm down. Sometimes mistakes happen. You’ve got to move on and adjust to the mistake.” You can’t beat that person into the ground because they’re not going to do you any favors. That’s what I did.

Part of your problem is you don’t do enough things yourself. You would have only yourself to be annoyed if they didn’t get done properly. That’s the nature of the beast for you. You’ve got a big job. Let’s roll into Notes and Bolts and try to get something of little value to our wonderful readers who have been with us through 50 some odd episodes. Thanks, guys.

Thank you.

Sometimes mistakes happen. You got to move on and adjust to the mistake. Click To Tweet

One of the hard things about our business is keeping track of everything. A lot of people use very sophisticated CRMs, things like Pipedrive that keep you up to date on exactly what needs to be done. If you’re not prepared to jump into a very robust system that’s going to remind you of all the things to do, a baby step and tiny measure towards getting something like that going, a reminder system. I use my phone. I put reminders on it. Maybe you have an iPhone. Even if you don’t, Android users have reminder apps available to them as well. It’s great to put reminders on your phone. It works for me and reminds me even when I’m not at my computer. Things will pop up and I’ll be like, “I’m on top of it.”

I filled out a batch template for my preservation company to go do my bi-annual inspections on properties. I’m sending for properties where they’ve been a little delinquent or spotty on the payment history. I send out by annual. I do a yearly check on every single property. Most preservation companies might charge $20 to $30. They’ll go out and do a detailed report on the property. It’s pretty impressive. If I could use them instead of a BPO, they’re a lot cheaper. You could do your own costs and more detailed information on what needs to be fixed. The challenge is it takes two to three weeks to get. Unfortunately, during the buying process, you don’t have that time. It’s something I recommend people. Not only when you buy the asset that you put eyes on it, but constantly do. I’ll use an example where I made a little mistake, a dumb thing. I got one property that’s been spotty. I hadn’t sent anyone out there. I sent somebody out there to take a look at it. The back of the house has a particleboard on it. It’s cheap crap. I was like, “Do I bulldoze this thing?”

Sell it on Facebook for $500.

No, because the land has a decent value to it. It’s probably worth $10,000 to $20,000. It’s a half-acre lot. That’s a beautiful lot in a decent area. It’s cheap, but in a decent area. The lot would get me money. I wouldn’t put it on Facebook for $500. I may have somebody already looking to buy it for $25,000. I’ll give you an idea. If fixed up, it would go for over $100,000. It probably needs $30,000 to $40,000 put into it based on the conversation I had. If somebody did that and be in it for $55,000, $65,000 and I have $100,000 property, and take on the risk of renovating and let me get out of the deal and I’d still do well on a deal, it would still be good to me.

You hit a nerve for me with the idea of eyes on the property. I was reflecting. I’ve lost money on two properties in my real estate investing career, which is probably pretty good. I’ve been doing real estate since 2011. I hate to lose. It weighs heavily on me. In both instances, the problem was that I got bad information about the condition of the house because I had friends or a realtor look at it. They missed obvious things. I don’t blame them. They’re not professionals and not in a home inspecting capacity. It would be so great if some preservation company or some service would put together a SWAT team. When you’re about to buy an asset, they run over there at very short notice and eyeball the outside at least and look for foundation problems or other problems that would tell us not to buy the thing.

You could probably do it to fit within a time period if you’re going to do it at a bid. You could get a detailed report, but you shouldn’t spend money when you bid because you don’t know if it’s going to be accepted or whatnot. That’s challenging. If you were taking down a pool of assets, where you have twenty assets, it would take a month to close. That would probably buy the time to do that. On the one-offs, you don’t have the time typically.

I’m thinking you have an accepted bid and you send somebody over to look. Maybe we should try to find home inspectors who could do super light versions to look at the outside.

That’s good but a home inspection is usually $300 to $400. Even to have them drive by, they’ll want $100, which is the price of a BPO. Preservation is $25, $30, which is mind-blowing.

For these two, I lost a total of $11,000. The problem is you never know which ones are the bad ones. When I think about it, I could have known at least one of these. Live and learn, onward and upward. Thank you, Chris, for another fun hour-plus with you.

Thank you, Gail.

Thanks to everybody for joining us. Keep coming back. We’re going for our second 50. We’re very determined to keep talking until you all shut off the lights and go home. Chris, do you want to tell everyone about Stitcher and iTunes?

If you could, please subscribe to our podcast. Leave us a review at iTunes and Stitcher. Join us on Facebook at the Notes and Bolts Good Deeds Note Investing Podcast Facebook group. As always, go out and do some good deeds. Thank you all.

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