The first step of the notes journey
As with every new venture I had my doubts and fears. On my previous experience, every new construction project was a new business, new product, new market, new market condition. I have been thru this road several times in my life and I figured the best way to learn how to swim is getting the basics and jumping into a shallow pool, start moving my arms and legs until I start moving forward.
I took a training online with the educator that seemed the best option. A month later I place a bid for five assets and ended up buying four out of the five.
Eaguered and without polished systems one bad asset slipped thru the cracks. The issue? the broker looked and valued the wrong property and I didn’t look close enough at the pictures. I ripped that band-aid really quick. That mishap cost a couple of thousand dollars.
My mentor’s advice was to start with others people’s money and several other seasoned investors agreed. For me, asking for somebody to fund deals didn’t compute at the early stages, I had to try with my funds first before I venture to risk other peoples money.
When I developed real estate I worked with a few investors that I would sell properties cash on the initial phase of construction with a hefty discount, I limited those deals to one or two and I didn’t always accept them. That was about as close as I got to use other people’s money.
Let things happen or make things happen
A few months after the initial purchase I decided to stop waiting for things to happen and make them happen. I began to push my servicer, the seller and everyone that had a block on my progress. I began acquiring more assets and have been buying almost every month ever since.
The advice from my mentor finally kicked in. Inventory can become scarce from time to time, but when it becomes available I am offered millions of dollars of distressed assets, there are lots of opportunities to help distressed homeowners, and self-directed IRA investors with unproductive accounts.
This doesn’t mean that every distressed loan is a business opportunity, several criteria have to be met to improve the chances of making a profit on a distressed asset, but when I filter thru hundreds of notes I always find opportunities.
When inventory is low, or of low quality, I simply don’t buy, and joint venture partners might think I don’t want to work with them. When I am not willing to work with a potential partner I tell them outright. It might not be the most comfortable of situations, but it is a professional way to manage expectations.
On more than one occasion I have told potential partners “You will not accomplish your goals dealing with me” if I truly and honestly think that they won’t. Why make a deal to disappoint you? If it can’t be win-win I rather fly solo.
4-18 month relationship
A joint venture deal is a 4-18 months relationship. We have to make sure we can communicate, have similar goals, can make decisions together and get along before we join a venture. I have a straightforward system to determine compatibility, it all starts with a phone call, followed by a questionnaire and finally the result. If you want to learn how to become an insider contact us through our online form or email me.
It is so fulfilling to help people but that doesn’t mean I am Barney. If a borrower is willing to work and make an effort to keep his house I will do everything possible to help him, but if he doesn’t want to help himself why should I help?
So far I have learned several lessons, and I keep recording and including them in my processes, these are the main ones:
- Double check pictures from brokers
- Double check broker price opinions
- Make things happen
- Follow up
- Set and manage expectations from day one
- Follow the process, don’t cut corners
- If the numbers add up, buy, if they don’t add up, don’t buy,
- Always give the borrower a reasonable chance to keep the property.
- Mentors provide a blueprint for investing, tailor that blueprint to your style of investing.
- Volume is the key.
My biggest takeaways from notes investing is that volume is the key, I have to be flexible and adapt to every situation, and I should help as many borrowers and joint venture partners as I have the capacity to do so, that is why this year I plan to help 100 borrowers and twenty partners.