- May 19, 2020
- Posted by: august19
- Category: Podcast
Knowledge and personal experience are crucial in all aspects of life. In note investing, the right education and field lessons are what make any investor successful. Today, Chris Seveney interviews Joe Kennedy from The Flying Moose, LLC. From flying planes to investing in notes and real estate, Joe talks about the excitement and challenges he went through to get to where he is right now. He shares some stories about borrower encounters and how he managed them and their issues. He explains his learning curve of how much he gained from education versus the actual physical buying. Listen to Chris and Joe in this fascinating exchange of real estate stories and note investment ideas.
Listen to the podcast here:
Getting The Right Education And Field Lessons In Note Investing With Joe Kennedy
We have a special guest, Joe Kennedy from The Flying Moose investments. Joe, how are you doing?
I’m doing great, Chris. Thanks for having me.
I asked several other investors out there if they want to be on the show to share their stories. We’ve done over 100 episodes and have had numerous guests, but we also wanted to bring in some other individuals to talk about their experiences because you can always learn from hearing short stories. You’re going to be hearing some stories from some other investors and I’ve got Joe on. Joe, why don’t you introduce yourself?
Thanks, Chris. My company is called The Flying Moose. I always get the question, “Where did you come up with that name? It’s a unique, weird name.” When I was looking to set it up, I wanted something unusual and memorable. There’s a lot of ABC Capital or those typical type stuff. I wanted something that, “I’ve heard of that one before.” “Where’d you get the name?” It’s simple. My wife is a petite lady. When I’m in the kitchen with her and I happen to be in her way while she’s trying to cook or whatever, she always calls me a moose, “Get out of my way, Moose.” One of my hobbies is flying. I’m a private pilot It seemed logical to be the flying moose. That’s what I ended up making the company.
I hate flying. What type of planes do you fly? How often do you fly?
Not a lot lately with the Coronavirus going on, but I’m a private pilot for single-engine planes. I fly the little ones, we call them the guys that go bust holes and clouds and that kind of stuff. I fly locally. It’s not like I fly all across the United States all the time. I fly pretty much local to the area, but I enjoy getting up and being able to go and see different things from the air and having the freedom to do that. There’s a number of different planes that I fly. Cessna 172 is a common one. It’s a small single-engine and some Piper. The one big thing I had was I happened to have an opportunity to be a copilot in a Russian jet fighter. They had an opportunity when I was in Russia to be able to go fly a MiG. The accomplishment there was I was able to break the sound barrier flying around in this Russian MiG.
Did you do the Tom Cruise where you inverted and got right above another one?
We were close to another one, but I didn’t do an inversion. I did do loops. We had a stall where you go straight up to the thing stalls. It then falls back and then you recover and fly on. That was a lot of fun, but breaking the sound barrier was a non-event. All you do is you look at the airspeed indicator and it says, “You’re going faster than the speed of sound.” It was cool. It was a nice experience but that’s not something I fly every day.
You mentioned flying locally. For all the readers, what is local for you? Where are you located?
I’m based in Houston, so my local is Texas, Louisiana. The small state. Once we get out of Texas, it’s quick to get anywhere else. That’s what I do for fun. A little bit about me, what I’ve done, and how it got to where I am, I spent many years in a corporate finance job. In the last years of my career in corporate finance, I was a CFO for a joint venture in Russia with a major oil company. During that time, I was doing personal investments. I did a lot of investments, like a lot of people in stocks and bonds. Over time, I started moving out of those because I didn’t have a magic crystal ball. I was like anybody else looking at all the stuff. The returns weren’t great. They were okay and sometimes you’ll lose money. It was completely unpredictable. I started moving at an out of that into real estate. I’d gotten into some rentals, which wasn’t bad, but I heard about notes. I started investigating about notes and how they worked and all that stuff. I went to some pieces of training. We even attended some different events together. I got interested in them so I started investing personally in notes. I’m a little guy in the note world.
A lot of the people teach you, “If you want to make notes, you need to get other people’s money in there and get it, put it to work, and you can make some money.” I don’t deny that. A lot of people have done that and they’ve done it well. For me, because I’m a little older and I am at that point where if I take anybody else’s money, I want to be confident with my knowledge and understanding of investing before I put anybody else’s money at risk. I’ve started out doing the stuff based on my investments to get that experience of learning so that then I’m comfortable with bringing somebody else in. That’s the way I’ve started, where I am and where I’m going.
That is critical. I’m glad you mentioned that you’re using your own funds to buy and to educate yourself. As we go through this, one of the questions I was going to ask you at the end is from your education to buying a note. The learning curve of how much you learn from education versus the actual physical buying. For us who have done it know the answer, but I will let you answer that later on. One of the things is making sure you know what you’re doing before you take someone else’s money. Even if you think you know what you’re doing, a lot of times you may not. I’m glad you brought that up.
You said you wanted to talk a little bit about my first note and my experience. I put together a little information. As I’ve gone down this path, the three biggest challenges that I’ve found is that finding good assets to purchase. I’ve seen a lot of garbage out there that people are selling. Sometimes it gets tiring in going through all of these things. It takes a lot of work and you need to work to try to find people who have some good stuff, build relationships with different people, make it beneficial to move forward, and understand how much you should pay for it. That’s the key. You pay too much and you’re not going to make much. There are all kinds of things around the corner that you’re not expecting that can happen. The last part is you find the right service providers because there are some that are good and some that aren’t good. Some that are expensive and some that are more reasonably priced. Some can deliver and some don’t deliver well. That’s a learning experience that you don’t get go into some of these seminars and different stuff. You either hear it from other investors or you learn it yourself that you’re not getting what you’re hoping to get a particular service provider.
I tell people, I’ve been doing this for a short time, but it’s still been years and those are constant problems.
To tell you about my first deal, it was in Escanaba, Michigan. Escanaba is on the Upper Peninsula of Michigan. It’s a city of about 12,000. It’s not a big place. I’ve got a tape. I have listed the details on the tape. They said the origination date of the note was April 15th, 2015. The original note was $32,300. The UPB was $31,736, 9.9% interest rate, P&I was $281,000. They had last paid in September of 2017. It was a single-family. It was owner-occupied and built in the 1900s. The Zillow fair market value was $72,809.
Looking at it, at the time in May of 2018, there were only eight months behind. That’s not too bad.
I first started out focusing on nonperforming because my intention was to try to work with people to try to get them to reperform. If you could get it at a decent price, you get it reperforming, and it’s a win-win for the homeowner because everybody knows life happens. People lose jobs. They have medical issues, whatever. If you can get them through that and back on track, you can turn around and sell the note as a performer. If you’ve got seasoned and you get a decent return and everybody’s happy. I started my due diligence and found out it’s not owner-occupied. The property was vacant. The fair market value was somewhere between $26,000 to $31,000, not the $72,000 that was shown on the tape. There was a contract for deed, but it was unrecorded and the taxes were current. That was the good news.
It was a CFD in Michigan. The borrower is eight months behind, but the borrower left the property. When you did your due diligence, you ordered a title report and you all put eyes on the property, which are two important things everybody should do.
I ended up purchasing the note for $12,200. We had a UPB of about $32,000 and I got it for $12,200. I got it for 38% of UPB. I was happy. I thought that was good.
At that price point, you’re usually at anywhere from 30% to 40%. When you look at the difference between 30% and 38% on something like that, you’re talking probably less than $1,000.
I estimated that the market price was probably around $26,800 or somewhere in there. I had cranked into my model of a foreclosure expense of $6,000 to $6,300.
That was heavy when I think of that on top of my head, but you’re always better to be heavy than you are light.
A lot of people are closer anywhere from $3,000 to $5,000. I tend to be more on the heavy side. I’m trying to build a worst-case scenario rather than it’s all roses. I looked at the exit options. Foreclosure and deed in lieu were exit options. Reperforming is an option and it’s vacant. They hadn’t been able to contact the borrower. I went through the profits that I came up with a foreclosure. It’s about $2,900, 16% ROI, deed in lieu, $7,300. That was a good one. If I could get that to happen, that’s 51% or reperforming. That’s the best one of them all. That’s what I was looking at is I was going into this to see, “How’s it going to play out?” I got connected with a good realtor. I was fortunate and it was luck more than anything.
That’s good being out in the middle of nowhere in Michigan.
This lady, she was fantastic to work with. She was on top of it. I got the loan boarded with a servicer. I hired a loss mitigation service to start looking for the borrower. We need to find out what’s going on.
When you use the service, you use a third-party.Note investment learning experiences can come from yourself and other investors. Click To Tweet
I used a third-party. Since it was vacant, unoccupied, we had the locks changed and I put force-placed insurance on the property.
That’s a smart move there.
The realtor then sent pictures and there was a whole lot of stuff still in the house. It was weird and needed to be cleaned out. That’s something we had to work with. There were two names of co-borrowers on the note. They found one. The co-borrower turned out was a mother and a son. The son was the one had lived in the house and he had passed away. He was single and didn’t have any family. The mother was in a senior living facility. It was gone. We were able to get in contact with a mom and she said, “I don’t want the house. I’ve been trying to get in touch with somebody. Get rid of it.” She didn’t have any need for it and she was getting stuff. We said, “How about a deed in lieu?” I said, “We’ll give you $1,500 if you send somebody in to clean it out and sign all the paperwork that you release all your claims on it, etc.” She said, “That sounds great.”
We’re getting close to a little before October, so we had to winterize the house. That’s not something we think a lot about here in Texas. We had it winterized and then I get a call from the realtor and said, “Joe, I’m sorry, but there’s a leak in the house. We need to get it looked at. I know a roofer. I can have him come over and put a tarp over it to protect it so we see what you want to do.” I said, “Yes.” He came over. He took a look at it. He put a tarp on it. We replaced part of the roof that was affected, which we did. We got that taken care of. Finally, at the end of September, we got it listed for $29,500 and I was offering all the financing as an option.
That was four months. That’s quick. When I look at getting from buying a loan, getting it boarded, trying to hunt somebody down, getting the deed in lieu, and getting on a market in four months. I’d call that a win.
The problem is timing because this is early October in a small town in Northern Michigan. The snow hits and nothing much is going on from November until the following February. Winters there and nothing happens. I get to pay taxes for the prior year. Finally, I ended up selling it to an investor in $21,500.
Did you sell it cash or did you finance it to the investor?
At that price, I sold it cash. What are the numbers? I purchased it on May 15th, 2018. The purchase price was $12,200. We changed the locks, did the skip tracing, force-placed insurance, the legal fees for the deed in lieu, the actual deed in lieu payments, servicer fees, winterizing, property management, roof repair, and city fees and taxes. All totaled to $5,300. My all-in investment in this property was $17,500.
It’s interesting because, in a note, some people will be like, “Deed in lieu is going to be cheaper than foreclosure, which usually is.” Even with a deed in lieu, with these properties and what needs to be done typically. A lot of people will plug in $5,000 to $10,000 in costs that you’re going to spend and look at the numbers here and take out the deed in lieu, you still spent close to $4,000 on the property and you wouldn’t do anything. That’s something a lot of people, especially on these low valued assets. On a $100,000 property, you have a lot more wiggle room, but on some of these $20,000 to $30,000 properties, some people think when they do these calculations, “I’m going to have a servicer for six months, $500 in servicing, and the properties, the BPO came back at $30,000. I’m going to sell it for $30,000.” It’s like, “You’re probably going to sell it for $20,000 to $25,000 plus you’re going to put $5,000 into it. This is a perfect example of what you showed here.
What’s the final economics on? I had $17,510 invested. I sold it for $21,500 but then I had to pay taxes, the legal fees or the closing title, insurance, and the commission. My net proceeds from the sale were $18,475, which means I made $965 on the note, which is a return of 6%.
This was a deed in lieu that you got $0.38 on the dollar. I sometimes see people or sellers wanting $0.50, $0.55 on the dollar in some of these things, which in this instance, that would have been in for about $17,000 for the acquisition. You did lose about $3,000 to $4,000 on that deal.
It was good. I didn’t lose money.
In my first go-around, I bought 3 or 4 notes at once, where I bought a performing or nonperforming and one on BK. My whole goal was between all of them. If I broke even, I’d be happy. I was doing it more for education honestly. Some people will pay tens of thousands of dollars for these educations, whereas, I’d rather drop $20,000, $30,000 on a few low balance notes and get the education on it from a perspective.
That’s how the first one went. I felt pretty good about it, other than the return. What did I learn? Do your due diligence and make sure you understand the market. I didn’t quite get this one right. I think that I overpriced it, even though it was a lot lower than what it said on the original tape. You need to get a good value of it and that’s going to be key. Know your service providers and their strengths. I learned a lot about some of the service providers because I hired a loss mitigation firm, I spent two months with them, and they never found the co-borrower.
You can say who it is if you want. It’s up to you. You can reframe.
What was funny was that the loan servicer found them.
It’s usually the opposite.
They found them. I lost two months looking for the borrower, which was this mom in a senior living facility. Once we found them and she agreed to do the deed in lieu, I talked to the service, or I said, “Can you do the deed in lieu?” It was a mistake because they’re going to charge me $350 or something to do it. Three weeks after I’d asked him to do it, they came back and asked me for more information and I said, “Excuse me?”
I have nothing against servicers, but anytime it comes to loan modifications or deed in lieu, it’s difficult because the process takes longer. You’re better off dealing directly with them because sometimes the borrower gets the deed in lieu and they don’t understand it and ask a question. The servicer takes a week to send you and say, “This is a question, are you okay with me answering it? It’s like, “I could have picked up my phone,” and in five minutes, got it resolved where you lost two weeks right then and there.
I got frustrated. I picked up the phone and I called Sottile & Barile. They said, “Send me the stuff. If it’s all there, I’ll have it to you.” I was like, “What?” They go, “Yes.” It was a third of the price. I have a lot of good things to say to those people. They’ve been good for all of my interactions. I learned time is money. Part of my problem was it was quick. Relatively speaking, it was, but if I could have had maybe two of those months back, I might’ve been able to sell it that year, but because of the location of where it was in Upper Michigan and we were starting to go into winter, my opportunity to sell it diminished significantly. If I could have gotten it on the market in August, I might’ve had a better chance to get it sold. You need to keep things going. As it takes longer, you’re paying the taxes on it so you finally get it sold.
You’re paying the taxes. If you’re in certain places, you may have to be mowing the lawn.
I had city fees for that.
On these lower values, you paid $12,000, and $1,200 in expenses is 10% of your time. Your returns can fluctuate significantly. That’s why on some of these lower dollar ones, you’re better off looking at. It’s not as much to return because the difference between 10% and 15% is only $500 to $600, which you’re better off I think looking at the number of, “I made this.” It is something that’s more relatable.
You have to realize or appreciate that if you’re dealing with a property in a small town, the time it may take you to sell is going to be longer than if you’re in a bigger metropolitan area because of the number of buyers that there are. Those were some good learnings. A lot of it goes back to number one, which is to do your due diligence, in general. I can’t overemphasize that enough because if you don’t get that, you’re going to have a lot of problems later.
A few questions I had is when you bought the loan, did you keep it with the same servicer that was servicing it originally?
No, when I bought it, I moved it to Madison so that I had that window of time transferring it from one to the other.Always know the strengths and weaknesses of your team. Click To Tweet
That process itself is your first note and stuff. Was there anything as part of that process that you learned? For me, when I was trying to buy my first notes, I found a lot of education in understanding what goes on.
I had talked to a bunch of people before about it. It was a little frustrating the time that it takes to get it set up and get it moving. Other than the time, it was relatively painless, to be honest.
How long did it take roughly?
I want to say it was about 45 days.
I bought and sold notes and people sometimes are like, “Is it worth the service?” I’m like, “No. It’s going to take 3, 4 to 5 weeks. It’s not going to happen overnight.
The one thing I didn’t appreciate was that this is a nonperforming note that I’m putting with the servicer. I’m not collecting anything but yet, it costs me $90 a month for that note for them to hold a nonperforming note.
I know you could move it over to client service.
I wasn’t aware of that at the time, to be honest, but that’s one of the learnings that there is that option to go to client service.
Understanding the servicers, the strengths, and weaknesses of the different servicers. I’ve got a portfolio and I know you’ve got other notes. I’m sure you balance between different servicers on certain ones because certain assets might be performing, especially ones that are on like ACH and escrow. One service is of $35 a month and other one is at $18.50. They’re half the price and it’s like, the borrowers on ACH. The check comes out every month, “Why am I paying this extra $250 a year almost in cost?” All of a sudden, you’ve got ten notes, that’s $2,500. You can add up some real money. That’s one thing that is part of a difference that we’re going to be talking about is the difference between being a note investor and having a note business. There is a big difference in that where you got a note business because you’ve expanded. How many assets do you have under your management, Joe?
I’ve got the 24.
Are they all performing?
I have mixed. I pivoted towards the end of 2019 from nonperforming to performing. I want to say I probably got twenty performing and four nonperforming,
If you could get that seller to get you all that collateral, you’d be all set. We’re laughing about it, but I’ll tell you, I had a hell of a time because I use a third-party company in getting all the documents to him. It was at a time, last October, November 2019, where this company fell flat on their face and couldn’t get all the documents and stuff. It’s funny because it popped in my head. The one asset, which we converted from a CFD to a note. One of the companies sent me an email saying they’re going to record it. They just needed one more document from me. I’ll take care of one of them and the other one, I got to check on the status of getting documents. That’s probably been a good lesson learned for both of us in that sense because that was the largest sale I’ve done of assets. I’ve sold 2 to 3 assets at a time but bought more than a handful from me. Getting that documentation was painful. It was frustrating on my end as I know it was on yours because I’m trying to get you this stuff and all of a sudden, stuff would show up and it was wrong or you’d get half of it. It’s like Mary and Joseph type things.
I learned a lot too because it helped me put some systems in place. Before, if I was buying 1 or 2 notes, it’s easy to keep track of it. When you buy 5 or 10 notes, all of a sudden you get a collateral file for seven of them, “Which ones didn’t I get those on?” I had to set up a check sheet of all the steps that needed to be done. I needed to track each one to make sure that I got the collateral files. I got him set up with the servicer. I’ve checked the collateral files to see, “Was the last deed recorded properly from the seller?” If all that looks good, “Do we have a new one from the individual, like from you to me? We’ve got that. Has it been recorded?” “No.” I use the servicer to do the recording. I have to send them to the servicer and I need to track with those people to make sure that it gets recorded and they get it back. It’s a whole process that I learned that I need to set up and structure to make sure I end up with all the right files and stuff done.
One of my biggest challenges going from investing in notes, once you get through, “It’s nonperforming” or whatever your process is, managing the note becomes second nature and your easiest task. It’s all the ancillary stuff of force-placed insurance, making sure it’s that or if the borrower gets insurance, canceling the documentation, the recording, and stuff. I was on a call with the company I use going through all the assets because I still have probably ten assets from 2019 that I bought that still don’t have all the proper documentation recorded. It’s been challenging. One of the things I’ve done to change a little bit is I signed up for Simplifile and got an account there. I’ve been recording a lot of stuff I can do so that way, I can control it. If something comes back rejected, I can go back to the seller and say, “Fix this,” versus using a third-party who then sends it to me, who I send it to them. It’s like that example of having your servicer do the deed in lieu. They’re like the middleman. Sometimes, using these collateral companies can be more headache, but in that certain instances where it’s going to be walk-ins and stuff, I do have them handle it because I have no clue how much the check is going to be.
I’ve tried recording one directly. I went back and forth three times with the county because the check was $2 off because the page count was wrong. I had added another page with the stuff documents that were sent back. They needed different checks with the right amounts. All kinds of little annoying things that had to be done, which is why I started using the servicer to do that recording. You’ve got to know your servicers.
That’s one of the things that’s part of the business. It’s knowing the strengths and weaknesses of your team. It can create a lot more work for you. It’s the difference sometimes of, “Can I do this alone? Do I need to bring on additional staff?” For you, yourself, you’ve got 24 assets. Do you do it all yourself or do you have help? I know you’ve got somebody. You got your servicers who record collateral, but managing the notes itself, is that just you?
It’s just me. I’ve heard people say it before and they’re probably right. If you start to get above 25 notes or something like that, you’re going to need some help. I have a little bit of help from some people doing some marketing for me. As far as actual work on the notes, I do that all myself. All the due diligence, all the economics, and all the details, which you get more. You’re going to get buried. Do you have someone that helps you, Chris?
I don’t know, in the sense of I managed the business. From the flip side, I have a bookkeeper who does all my books. I’ve got attorneys that handle everything I need to handle. I rely on my servicers, but from a marketing and managing the day-to-day for the notes, that is me. The twenty-note rule, I’m out there on my little island because I’ve got about 200.
I don’t know how you do it.
Part of it is I use a system called The Mortgage Office, which is the same system that Madison uses and Lake City Servicing and some of these other servicers. I can put all the loans in there and I keep everything updated. It is organized from my background from my old-time career. From that perspective, I spent all-in on software for that system, between the funds and everything $20,000. The reality is, with a fund, you can hire companies that charge you $1,000 or $1,500 a month to manage a lot of funds. For me, I’d rather pay for the software because at the end of the day, after a year, it pays for itself. That’s one example where I say I do it myself, but I rely on what’s in my books. My bookkeeper is Debbie and I love her to death. I know a lot of people who do their own books. They’ll spend 2 to 3 days a month doing all their books. For me, it’s cheaper to pay her a few $1,000 per year per entity to get that done because it allows me more time to focus on what needs to be focused on.
I have a bookkeeper. I have an accountant that does my books as well. Her name is Eunie Min. She’s with Century Financial. She does a great job. She’s good to work with. The nice thing is I got introduced to her from some other note investors. Not all accountants have a good sense of notes and how to record them and all that stuff. She’s not expensive, to be honest. She takes care of it and she knows all about notes and some of the slang that we use or unique to note investing. She knows what deed in lieu is. She knows all the stuff. It makes it easy when she starts recording all this stuff. I’ve been happy with her.
You mentioned marketing. I have seen a lot more marketing from you coming out. Is your goal to try and expand the business to bring in some investors to participate in some of your deals? What’s your long-term?
My goal is to do that. I have a number of mostly performing notes. I’m looking at selling partials a strategy perspective because I do have those. What I would like to do is to sell the partials and then with those funds, in a position to invest in other notes. I think the market is going to deteriorate further, unfortunately. It may be an opportunity to help some people out. If you can get some notes of a decent price, you can try to turn them around and work. That’s what I’m looking at going forward and hoping to do and I would be able to do that if I sell the partials. With the partials, people will get a decent return. However, I don’t want to put anybody’s investment in jeopardy because of where we are. I decided to delay selling those partials because I want to make sure that the people that are making those payments are able to make those for a couple of more months because of what’s going on. A lot of people are out of jobs, etc. I’ve only had one borrower contact me regarding some help with their note.
I’ve told my servicers that if we’re contacted, the people that have lost their job or whatever that wants some help, the policy I’ve put in place is that, first, I want to see something that indicates that they have lost their job or they are out of work. It doesn’t have to be a formal notice of dismissal or whatever, but something to indicate it. If so, I’m willing to defer up to three months. I know a lot of people were only doing two, but I said I’ll defer up to three months. Not make it all due at the end of three months like some people are doing that. I’m going to move those three months to the end of the note. I’ve told my two servicers, “If you get contacted, that’s the plan.” I’ve only had one so far. What I want to do is I want to see those that demonstrate that they’re still able to pay their notes through this time. That’s going to be a strong indicator that that would be a good partial. If it was me and I saw that, I’d say, “I’ll buy that because they made it through these tough times.” It doesn’t guarantee you 100%, but it looks good. That’s my strategy and what I’m doing going forward with those.
It’s going to be interesting to see how Mae plays out because I’ve had two borrowers. One of them was in bankruptcy, which I reach out to the bankruptcy courts. I had to provide the bankruptcy courts all the information which they provided which they got a deferment on, which I’m perfectly fine with. The other one I’ve got was a borrower who had not paid since 2014. I bought the loan last fall. The borrower hadn’t paid in several years. We’ve been trying to work with the borrower in some sense because we wanted to keep the property. We also kicked off the leg on and with what’s going on, it’s slowed that down. She had been completely nonresponsive and then made a phone call to the servicer asking for what type of forbearance we would be providing for this.Before putting anybody’s money at risk, the right knowledge and understanding is essential. Click To Tweet
I joked at a servicer, “She should go play the lottery because, for the last several years, she must’ve seen this coming or something.” On that one, unfortunately, we didn’t provide any type of forbearance. We still have offers on the table with the borrower for providing some type of reinstatement to keep the property. The borrower keeps saying, “I’ll do it,” but the way of saying you’ll do it versus physically cutting a check are two different things. I’m curious to see how Mae will shake out back and forth a little bit because with the stimulus package, people getting $1,200 plus. A lot of these loans or lower payments that I have of $300, $400, $500 a month. This might be beneficial for them but on the flip side, there are lots of people, who have lost their jobs.
Some of them are getting unemployment, which helps. That’ll help carry them for a little while too. It is going to be interesting. I wish the best for everybody. I don’t want anybody to struggle, but unfortunately, it’s going to happen or it already is happening. I did put together one of the slides and it’s got some of the things I’ve seen. I was looking at a house in Memphis, Tennessee. I had gotten a bid accepted and I was doing my due diligence, BPO, all that kind of stuff. I had the realtor to do a drive-by. I get a phone call and I didn’t get it. There was a message and it was a realtor saying, “Joe, whatever you do, don’t do the deal. Call me back.” I called him back and he said, “Joe, I went by. There’s no house there. It’s a vacant lot.” I said, “Really? If you look at it on Google and Zillow, there’s a house there and it’s the same house.” He went by and there was nothing.
Two things I’ll come on that is always to take the satellite view over the street view because the satellite view is up-to-date. The second thing I’ll mention is I’ve also got the opposite. I’ve gotten BPOs that say, “House needs no work, great condition, and it’s worth 100,000,” and the house isn’t even there. It’s one in Houston, Texas. It was on Cornelia Street in Houston, where they said, “Three bedrooms and one bath.” It’s funny because there was a launcher sitting in the yard and you can see where the house was. I googled the BPO and I laughed. I’ve got it. Always check. Don’t look at the number on the BPO, make sure you accurately look at some of the photos.
That’s what the servicer said, “As soon as I get back to the office, I’ll send you the pictures.” Sure enough, it was a vacant lot. Another one that I had gotten an accepted offer on was in Louisiana. I said, “I want to see the servicer notes.” I have something I learned that is helpful. They showed that the servicer had contacted the note owner and that the city had condemned her property and required it to be demolished. The servicers sent the note to the note holder saying, “Do you approve of having the city demolish it?” The notes there said, “Yes, we approve.” It’s like, “What is going on here? I’m fixing to demolish the house and you’re trying to sell the note.”
There’s somebody out there that bought that without asking for the servicer notes. I saw an asset that had a BPO of $80,000 on it. I know an investor bought it. I had somebody buy the property and the property in the servicing notes, it noted that the property had major water damage. There was mold everywhere. The property was condemned. I had somebody drive-by. The place was a disaster. They said, “It’s worth probably about $5,000 because you have to have some stuff.” Lo and behold, somebody bought it. I was like, “Somebody’s going to take a bath on that because they didn’t do their homework.” The reason I know they bought it was it was on a tape and then a tape came out a few months later and it wasn’t on there. I was like, “Did someone buy that?” I googled it and looked, and there was a deed recorded into another entity. I knew who the person was.
The third one was I put an offer on this property and it was accepted. I started doing my due diligence. I had to hire an appraiser because I couldn’t get a BPO done. I sent an appraiser to do it and he did that. I started pulling the O&E stuff and I start looking. The person that’s selling the note doesn’t own the note. They’re not on the CFD. I went back to them and I said, “There’s a problem here. You’re not on the CFD. You’re not on the note. On the quitclaim deed, it shows this other fund. They said, “We’re buying it from them and we’re going to turn around and sell it to you.” I said, “Why don’t you send me the quitclaim deed, even if it’s not recorded, showing that it’s been sold to you with the signatures. I can understand that recording takes time.” They sent me a quitclaim deed from them to me that’s not recorded. I said, “I need to make sure you are.”
Now, they’re starting to press me to close on this and wire the funds to a title company. I tried to call the title company. Most respectable title companies you’re going to at least get an operator or receptionist or somebody and you can ask for some information. I couldn’t even get somebody to answer the phone. I said, “I’m not sending a dime until you’re the owner. I think it might have been some kind of a deal where they were going to pass it through a whole bunch of them at once. It didn’t sound right to me so I ended up passing on it even after I spent all the money on the due diligence.
Sometimes, that’s the best thing you could do. Those are some good and we’ve all been through those. Joe, if people want to reach out to you, what’s the best way for them to get in contact with you?
Are there any final thoughts you’d want to add before we wrap up?
The only other final thought is that if you’re interested in getting into note investing, I can’t reiterate how important it is to try to get connected with other note investors. Technically, we were all competed against each other, but everybody is helpful. If there’s issues or problems that you’re encountering, other note investors have probably already encountered it and they can help you get through some of those things. I’ve found it invaluable, the connections and contacts I’ve made with you and people like Cody Cox, Dan Deppen, Paul Cooper and some different people like that’s good to have and work with.
I agree 100% where if you need help with something, feel free to ask. The one thing that I’ll caution people on because I see it a lot on BiggerPockets where somebody says, “I want to get into notes. I want to make $20,000 a month. How do I get there?” Let’s be real. Another question is, “What are some of the things I should focus on in my business plan because I want to get to $20,000 in the next five years? What are some of the things I should be looking at?” If you ask the intelligent questions and phrase it that term, you get a lot further than saying, “I want to buy this note. What do you think?” If you said, “I’m looking at this CFD in Ohio. I know there are some quirky rules with CFDs. I’ve talked to somebody. What are some of the things that you’ve mentioned in the past or something? You have to show us effort first before doing that. That’s where I caution people, but if you do it in that way, people are there to help.
It’s a good community. People are helpful. I’ve learned a lot by asking questions and stuff. Thanks a lot to you, Chris, you’ve helped me as well. Going through buying these notes for me has been a great learning experience.
Hopefully, they stay performing for you.
I hope so. I’m encouraged so far and it seems to be doing well. We’ll see. Things happen, but I think it’s going to turn out all right. A big shout out to you and all the help from you. It’s been good.
Joe, thanks for joining us. For people, make sure to check us out on YouTube at 7E Investments. Our Facebook Group is Notes And Bolts From The Good Deeds Note Investing Podcast. Thank you for reading. Have a good day.
Thanks for having me, Chris. Take care.
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