121 Deeper Dive Into Real Estate Mortgage Notes With Fred Rewey

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121 Deeper Dive Into Real Estate Mortgage Notes With Fred Rewey

Bill, Wendy, and Jonathan are now live with Fred Rewey, the Owner of Diversified Investment Services.

He is also a Co-founder of Exposure One and the author of “Be The Lime: The World Has Enough Lemons”

Fred is widely recognized for his negotiation, teaching, and deal structuring skills. His extensive background gives him a unique perspective on all aspects of the cash flow industry.

He has been in the note industry for over 20 years.

Currently, Fred shares his unique insights and experience through a variety of online cash-flow efforts including NoteInvestor.com, ExposureOne.com, and BeTheLime.com.

Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the “Small Builder” borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and “Ground-up Construction Loans” for investors only in NC, SC, GA, VA, and TN (some areas of FL, as well).

As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.

Bill Fairman (00:02):

Hi, everyone. If you were paying attention to our last show, we were talking about what may come down the pipe and we were talking about notes, right? So we’re going to take a deeper dive into notes with Fred Rory right after this. Okay. Once again, we’re debating behind the scenes when our mikes are supposedly muted, but we never really know.

Wendy Sweet (00:36):

Did Bill say pipe or pike and jump his response was.

Jonathan Davis (00:39):

Well, if it was pipe, the answer is definitely not crude oil.

Bill Fairman (00:45):

Thank you guys for joining us on our Active Income, Passive Wealth show. I am Bill Fairman. This is Wendy Sweet and this is Jonathan Davis who loves crude oil. We are Carolina Capital Management. We are lenders in the Southeast. If you’re a borrower and you’re looking to get some information on borrowing in the South East CarolinaHardMoney.com. Click on the apply now button. If you’re an investor looking for passive returns, click on the button that says a credited investors, don’t forget to subscribe, share, like, hit the bell, all that good stuff, by the way, on every show where you have a comment section that either to the right of the screen or underneath, depending on the platform that you are viewing from, we always try to make these interactive. So don’t hesitate to put your comments in there. If we like what you’re saying, and we’ll bring it up, if not, we’re going to ignore it.

Wendy Sweet (01:46):

That’s not true.

Jonathan Davis (01:48):

Normally.

Bill Fairman (01:49):

So we have been advertising the cashflow expo coming up and we’re excited about it. And we’ve been doing it for the past two weeks, I believe. And guess who we have on the show. The master himself, the host of the cashflow expo, Fred Rewey. How are ya?

Fred Rewey (02:12):

I’m good. Thanks for having me here. I’ve seen your show by the way, which is interesting because I almost think Wendy has to start because Bill, you never start without her laughing about something you said in the, before the whole commercial thing runs. It’s great. There’s always controversy right out of the gate.

Wendy Sweet (02:31):

We like to keep people on the edge of their seats.

Bill Fairman (02:32):

Well, by the way, I’m impressed that you’ve seen our shows and you’re still willing to come on.

Wendy Sweet (02:39):

To be on. Thank you for that.

Fred Rewey (02:41):

I was told there’d be snacks, so I’m not here, actually

Wendy Sweet (02:45):

There are, but they’re here.

Wendy Sweet (02:48):

Okay. Yeah. I don’t have a very good rider for appearances anymore. So yeah.

Bill Fairman (02:53):

Yeah. Unfortunately our green room is virtual and it’s hard to stock it. Alright My apologies. So, again, thanks for coming on.

Fred Rewey (03:03):

Yeah. You bet.

Bill Fairman (03:05):

How are things going with the cashflow expo coming up?

Fred Rewey (03:10):

Good. So this is the third year. It was the event that everybody told us not to do that we really thought we were crazy for doing it. So we, so we started two years ago and that was really before, like, we all were purposely shut in on zoom. You know, so I’d like to say that it was a foreshadowing or ahead of my time, but it was just that, you know, the idea of a lot of people, even then when we were getting on planes, I’m like, you know, could we create an event that people could go and see sessions and would it look enough like a convention? And the only thing you really can’t get out of is the networking. But you know, when you go to conventions, you guys go to conventions. We’ve seen each other at conventions and we’ve seen a lot of the same speakers over and over again and I watch them anyway. And usually even if I’ve seen him a lot, I still have takeaways. I’m like, Oh, I forgot about that. That’s a really good strategy. Or, or that reminds me of something else. So when you go to these events, even if you’ve been like Tracy and I were combined 50 plus years of doing notes, so we’ve done this a long time, but you always get some sort of idea. So the idea was, is could we do this online? Could we actually get people to present online, create an event? And then we got, everybody said, well, that’s crazy. No, one’s going to watch educational stuff on you know, online, which hello, 2020, 2021 but basically, you know, speakers, aren’t going to want to do it. You’re crazy for not charging for it because we made the entire event free. So the way we did it was, as we said, that you could come to all three days. So the first year we had 20 speakers, 21 speakers, and it went over three days. Each speaker gets about an hour. They usually come in 45 to 55 minutes. It’s free to watch that speaker. It is for 48 hours. That’s live. And then if you want, and you don’t want to sit through all three days, you can actually register for VIP, which right now is still under a hundred bucks, gives you copies of all the recordings, all the slides. We hire a note taker to take notes for you and timestamp the notes create, you know, it’s like paying $3 a session if you want to do that, but you don’t have to, you can watch the whole thing free. And the other stipulation that everybody said, we were kind of crazy about was that we were adamant to the speakers, that we didn’t want this to be a pitch Fest. And we’ve all been to conventions. I don’t care your background. We’ve all been to conventions where you get 15 minutes of really good content from the speaker. And then you get another 45 minutes of them trying to sell you something where you think they’re putting, you know, for 2995, and then they all, well, you’re not going to pay that. And here’s all these bullets and stuff like that. And we didn’t want anybody to sell. We didn’t want anybody to sell. We think that we’re dealing with people that are sophisticated enough, that if you just tell me what it is, tell me about your industry. I can self-identify, whether that’s something I want to pursue or not. And it worked, we had the first year we had over 1500 people, 21 speakers. Last year had over 2,500, attendees. And about, we had about the same number of speakers. We had a few extra speakers, this year was a little different. So we’re tracking for over 3000 attendees, which I expected but we had more sessions to where I literally had to turn down speakers and it was kind of nice getting into the third year because the reputation was out. So some people that had been on the sidelines, so I’d say of the 25 speakers. I think 11 of them are new. And I would say about five or six of them are pretty heavy hitters that have stayed on the sideline. Like you guys were right out of the gate embracing it, which was great. And I appreciate that. But some of these people are just, I mean, they’re either in demand or their ego is not going to take a chance on something new. And now they’re like, Hey, wait a minute we want in, you know, I’m like, well, you know, I mean, you should’ve been there helping me make the bread but there’s, we’ve got some really, really good names. And we had Jeff Woods from the one thing that he actually did a whole session and he’s impossible to get and then we have another one or announcing next week that I’m supposed to record tomorrow and I’m not going to jinx myself until I get the recording in the bag tomorrow, but you guys know who it is. And that’s another thing. Yeah, I’m super excited about this one. So it’s kind of a neat event to do that people can see and learn and although it’s heavy real estate related, cause that’s kind of, that’s our wheelhouses notes and we can talk about that and your wheelhouse lending and, and, you know, everybody’s kind of got that. It’s heavy, that there’s a lot of other things we have Laura does options and she’s a great stock and options trader and how to do it safely and smartly. There’s other people, Mark Rudo is doing one on business notes. Maybe you want to get into business notes are definitely, him and his father are definitely the experts in that. So there’s, there’s other different fields to look at so if you’re looking for something specific, you’re going to find great information and just gravitate towards those speakers. If you’re just taking a broad stroke and go, Hey, I don’t even know what I’m interested in or what I want to gravitate towards. You get to do that. And it’s all free. Like I said, the live sessions are all free for 48 hours to watch them. It’s kind of a trailing 48 hours. So you know, you and you watch them. And then, like I said, for 97 bucks, right now, you can go and get the P and then you have a membership forum for life. So whatever you want to do, but it was an event. Like I said, everybody said, don’t do it. It’s crazy. It’s too many people. And we’ve been thrilled cause it’s kind of a labor of love. It’s crazy chasing down all the speakers for a, Hey, I didn’t get your PowerPoints or a picture or whatever but it’s been fun. It’s been fun. And we’re almost there we’re two weeks away. I mean, we’re getting close.

Wendy Sweet (08:24):

That’s what I’ve loved so much about this event that you’re doing. It’s that you have such a wide variety of people, that are going to be on here and it’s, you know, if you’re even a little bit interested in investing your money, whether you want it to be active or passive or whatever, you’ve got so many options to choose from. It’s just amazing. There’s no way that somebody can get on this and not learn something from every single person they watch.

Fred Rewey (08:57):

Yeah, absolutely. Even if it’s an area, you don’t think that you’re interested in, you come up with a takeaway to how to modify I’m sure for you guys at the same way on lending, same thing as I started to notice is I’ll watch somebody on lending. I don’t lend money. I buy payments. So when I’m looking at that, but I’m like, well, that’s a pretty good strategy. I could twist that into my side and do something with it. So we do a lot of that, but yeah, and then we have just neutral ones that are like, if you don’t have a self-directed IRA or you’re not aware about self-directed IRAs, there’s two different sessions on that. We have two different attorneys on some other stuff. These, everybody, I don’t care what you’re working on. Everybody should be watching those sessions as well.

Wendy Sweet (09:34):

Well, yeah, I agree. I agree. A hundred percent, a hundred percent,

Bill Fairman (09:38):

You know, there’s a lot of people that do not realize that you can do options in real estate as well. And maybe in another event next year, we can have a real estate options specialist. Talk about that.

Fred Rewey (09:57):

And there is so many.

Wendy Sweet (09:57):

[Inaudible] IRA.

Bill Fairman (10:00):

Yeah. That’s a great use for your IRA if, especially if you have a small dollar IRA

Fred Rewey (10:06):

Well, yeah, or a self-directed HSA, which, you know, becomes the no money going in and no tax consequence going in and no tax counts comes coming out. It’s probably the biggest, the big one there, but yeah, there’s so much you can do. And I think so many people don’t realize how much is available to them, even if you’re a conservative investor, like Lori talks about options right now, options are scary things to most people and they, and they can be dangerous. I mean, it’s definitely a strategy that’s very dangerous if you don’t know what you’re doing, but there are some ways that you will, you could be a conservative investor with a portfolio and go, wait a minute. I’m going to, she goes renting out her stocks, which is great. She sells options against stocks she owns. And it’s a great strategy and I’ve done it. And it’s also the only thing you can do out of an IRA, a self-directed IRA when it comes to selling options. Plus, it’s a great way to boost up that even if you’re a conservative investor and same thing with lending, same thing with buying notes, you know, you don’t have to be, it doesn’t have to be all high risk. It’s not, you know, not everything is you know, non-performing seconds on an oil field somewhere. I mean, you know, I mean you can be conservative. And right now, I mean, in our side of notes right now. So like, if I want my money in a note, and I was just ultra conservative, like I wanted to sleep at night. I didn’t worry about a thing. As a background buying notes, for those that maybe aren’t familiar with it is I’m looking for an existing loan on a property already. It’s typically been a seller carryback financing financing. So if you ever see a sign and there’s this owner will carry, or owner will finance, typically that’s a situation where they avoided the bank and the buyer’s making payments directly to the seller and what happens usually at some point is that seller instead of getting $800 a month or whatever they getting they’d to sell their whole note. And that’s where I come in and I try to buy that note and I buy it at a discount. So if I was to buy something like that, and I was super, super conservative. It feels like, Oh, I would, I wouldn’t want to own that. Well, let me ask you this. If you’re owed $50,000 and they’re paying you monthly and they owe you 50,000, and if they don’t pay you, what you get is $150,000 property, how comfortable do you, how good are you sleeping now tonight? And you’re like, wow. Yeah, I’d be sleeping. Great. Well, what if I told you we’re going to get like 8% on that now 8% is not a high return by some of our standards of what we look for, but I’m talking about a, you know, really concerned sleep well at night. It’s a buyer it’s plenty of equity, uh, 8%, I don’t know, you know, you decide how much you want to make, but I know if I walked down to the bank right now, I’m pretty sure they’re not giving me 8%, you know, not happening.

Bill Fairman (12:44):

Yeah. We preach about that all the time is that you can chase yield if you like. Uh, but you tend to lose more than you think you do. If you’re chasing yield, how much extra work do you have to do if you’re chasing yield. Are there gaps between those short-term deals that you’re doing when you’re chasing yield and in the long run, your annual as returns is actually eight to 9% anyway,

Jonathan Davis (13:11):

And that’s the assumed risk, higher risk level for the chasing a yield.

Bill Fairman (13:15):

Well there’s nothing wrong with being risky. You just have to do it with a smaller percentage of your portfolio. And then as you get older, that percentage gets smaller and smaller too. Right?

Fred Rewey (13:29):

I think that’s two really good points. Walt poser and taught me, you know, the yield or return, you know, getting a better yield of return doesn’t make the deal better. Like if you didn’t like the deal at 15%, just because someone bumps it up to 20, doesn’t make it a better deal. I mean, cause you know, the return on not getting paid is still zero. I think that, you know, and that’s, and then you made a really good point though. And I want to know if this is where you’re going, because I’ve been preaching this all along. And if it’s worried, if it wasn’t where you’re going, then just say it was. But I see a lot, a lot of people that have money to invest and let’s just say in their mind, they want 14%. I’m just making up a number off the top of my head. And they will literally pass over deals over and over and over that are like 12% or 11%. It’s like, Nope, 14% is my number. It’s not mark my time unless I invested at 14%. meanwhile, they’ve left all this money sitting in the bank doing absolutely nothing because they were so yield obsessed as opposed to, you know, look, the money has to be working. And that’s one of the things that we talk about when we calculate is that look, you know, you can buy a payment stream, but the second that that payments come in, the clock has stopped. That’s why we have to reinvest our money. I mean, we got paid on the, you know, if you buy 360 payments, it’s like 360 mini loans, if you will. And every time when you collect that one loan, you’ve been paid in full on your 14%, but now you’re going to get the money back out there. But I don’t know if that’s where you’re going, but I see people not invest because they’re so glued on, on a number that when they don’t hit it, they’ll just ignore all the other stuff on the way there.

Wendy Sweet (15:01):

Well, that was where you were going. So good job.

Bill Fairman (15:04):

So, you know, in our particular business, we’ll have individual notes that pay them a much higher rate than say our fund does, but you know, they pay off, there’s a gap between the time you get it paid off and you get it reinvested. And then when you average it all back in, you’re really, basically better off in a fund of some sort or a longer term note, uh, where you don’t have to continuously work to get it reinvested. And then when you do have those gaps, you’re, you know, your annualized return is actually a lot lower, just like you said you’re missing out and you’re doing it a heck of a lot more work and you’re kinda nervous because you got this money not working and you need to get it placed. And if it, if you start getting too nervous, are you going to place it in something that you’re putting it in, that you wouldn’t have made that decision? Otherwise you take more risks.

Wendy Sweet (16:00):

I met Walter poser on financial friends, Cruz, Goodhart,

Fred Rewey (16:06):

Okay. really good guy.

Wendy Sweet (16:08):

He really is. So, tell us, I mean, I’m curious, how did have you and Tracy always been in the note business? How did you even get started in this?

Fred Rewey (16:17):

Yeah. So for myself, I was living in California. I was, had worked in restaurants and stuff and I was taking night classes and I was actually, I just stumbled on a night class where I was trying to learn to buy real estate. And I was living in the San Francisco Bay area and real estate is crazy now, but it was also crazy then too, as well, just not as high number, but it was all equally unaffordable. And so I took this class at night and a gentleman by the name of John Richards, who a lot of people in the note industry now, um, was teaching this class at the college. I, and so I learned about notes and we, it was predominantly a real estate class. And then one week he taught us the CA the financial calculator and I was hooked. I thought this was the coolest thing ever not understand that I don’t like math, but I do like money. So there was the cheer to me, understanding, you know, math. So I followed him around like a puppy dog for like a week, you know, he says, well, I’m going over here to teach something and going over here. So I was following around and he ended up teaching me the industry and said, you know, look, I’m really busy. Can you handle these deals? And I did that for a while. And then I ended up working for the largest broker in the country for a while. And then I thought, well, you know, okay, I’ve done it for my 500 square foot apartment. I’ve done it been the lead buyer for a brokerage. That was the number one brokerage in the company in the country. And so I don’t know the investor side. So literally at one point, these people came through our offices and they were the largest buyer, the country. And I just kind of gave the guy my card and said, Hey, we’re looking for somebody, you know, on the institutional side, let me know. And they called me up about two weeks later and said, well, here’s what we’d like. So I went up there, that’s where I met Tracy. Tracy has been doing it for, since she was in a small town, working for attorneys, doing that were in doing that kind of thing. So we’ve done it ever since. So we, from a very early age, early for me, it would have been 26, I think 27 when I started Tracy was even earlier so we’ve done it for a long time, you know, so we’re, like I said we’re actually close to 60 years combined and stuff like that. So this is what we’ve done. We’ve created, you know, eventually we created trainings and to help people out along the way. And we created a, you know, our membership would be open twice a year, but, um, we created note investing, noteinvestor.com, which was a place to just put free articles out there. I don’t like selling, you know, like, so we have a membership, we only opened it up twice a year. If you want to join the membership grade, if you don’t, I don’t care. I’m not going to convince you of anything, you know, when people contact us and they want to learn the note industry, we send them to note investment, go look, there’s over 300 articles we’ve already written for free. Go read all those. And then tell me if you’re interested in the industry and we could talk about there. So we just love it though. I mean, the idea that it’s very creative, um, it’s, and I don’t think people realize, and it’s the same thing on your side. I don’t think people realize how creative you can be. It’s not, it’s not just like you’re punching, it’s like you work for a bank and everything was kind of fitness box and you push it through. I mean, we get very creative. I mean, I’ve had notes where, you know, I’m trying to solve their problem. They you know, no one sells a note because they just feel like selling a note. They sell a note because they’re trying to fill some sort of need, they have a need or a want, or you know, something. And so you’re what, how you structured that note, whether I buy the whole note or I only buy a piece of that note really is dictated by their needs. And I’ve had notes where, um, you know, someone was just trying to get their kid in college every year. So I would buy 12 payments every time in the fall, I would, the next 12 payments, give them a lump sum of money that could pay their kid’s tuition. Then a year went by and I collected the payments. They got the note back, so it’ll be another 12. And then when all four years we’re done, it’s actually five years in this case because the kid was accelerated but then they got the note back. My favorite one was to do an early payoff back. When, you know, you mentioned earlier about, you know, that, that time between when you get money back, I used to want to get the notes to pay off cause that was like a, you know, and I had all these creative ways to do it, and there are ways to do it in buck your yield. So my favorite time would be literally about two weeks ago would be, Hey, tell you what you know. So let’s say about a $50,000 note, and let’s just say I bought it for $40,000 and let’s say I bought it yesterday. I would call the payer and say, tell you what, if any time between now and Superbowl, you can pay me off in full. I will call it a call cause you’re paying it off. I’ll buy a big screen TV. Now that was going to cost me at the time was about $2,500 for big screen TV. But if they pay off $50,000 minus the 2,500 that I had to kick in the big screen TV, but I turned 40,000 into this, you know, 47, five or whatever it is overnight, that’s a big return. So my point being is that it’s as creative as it could as you want to be. So

Bill Fairman (21:10):

Yeah, that’s why we love the note space. You know, granted, we don’t buy a lot of notes because we create new ones, but if you’re going to be a real estate investor at any point, you need to understand notes because it opens up a whole new world of just what you’re saying of being able to be creative with buying property selling property. Not to mention once you’ve picked up the notes and being able to sell a stream of payments. Getting someone to partner with you on a deal, there’s all kinds of different ways. You can,

Wendy Sweet (21:47):

We sell this all the time . We constantly have notes for sale, but,

Bill Fairman (21:51):

Randy has a question for you. He is signed up for, the expo and he was curious when you’re going to have a schedule ready to release. I’m assuming about a week before?

Fred Rewey (22:02):

It’s about a week before. Yeah. We just make sure that we’ve got everything lined up. Sometimes we make very few changes due to someone’s session, length time or something like that. So it’s usually about a week in advance, but everybody registered will get it well in advance. And then every day, the night before we send them a, Hey, here’s going to be the links for the next day. Here’s the lineup. Here’s everything else like that that’s going to be on there. So we do that too. You know, you mentioned about creating notes. I mean, that’s one of the last trainings we had created was talked about creating notes. How, you know, if you have a property or you’re flipping properties or like that, you know, you can sell them outright for cash, but you can also sell them and carry back paper or sell off part of that paper, take your profit back out of it. Keep a nice residual nest egg for yourself and move on to your next property. So just as lending, as you’re creating audio on paper, we’ve gravitated towards more of creating that and we’ve used notes to buy property. We’ve used the idea of a note. We’ve purchased a property in Idaho a long time ago, or it was on a Lake. And we used the idea said, Hey, here’s where we want to buy this property. You’re going to carry back a note, but we’re going to turn around and buy that note back at closing. And so, you know, there’s a lot of creativity you can do in there. It’s just a fun industry as far as concern. And it’s one of those ones that, I want to say that, I mean, anybody can do it, I mean if I can do it, anybody can do it. Or now I should say, as, as I was younger, if I could do it, I mean, I’m older and I hope smarter now, but, there’s no barrier of entry in this. You just gotta learn what to do and it’s not like you’re reinventing the wheel. Wendy, I saw when you were talking in one of the panels when you did wise web, and I thought it was really interesting, cause I was curious how you guys were going to handle the question of, you know, being a woman in and any barriers associated with that. And like bottom line is if you’re the one on one with money, they’re going to talk to anybody. I mean, it’s like I make the rules and that’s true. That’s very true. Someone asks in the chat or the notes long-term or short-term, it’s up to you. You can create or purchase whichever one you want. So we see notes that are 30 years long. We see notes that are, you know, maybe, maybe they were 30 years long and 20 years have already been paid on them. Or it was a 15 year note and seven years have already gone by. Usually we’re not involved just by nature of luck. We’re not there on day one. So usually some time has gone by and we call it seasoning. How long have they been making payments?

Bill Fairman (24:27):

Yeah. And all the note creation side of things, it brings into play these smaller towns where the dollar values of the homes are much less. Most people don’t want to mess with them because the prices are too low. But if you purchase a really inexpensive house and turn around and sell it to somebody for more money, you get profit on that. But then if you’re carrying back the paper, you get even more profit from that. So in a situation where you may only have a $15,000 profit on the sale of a house, you get another $15,000 profit over the term of the note or,

Wendy Sweet (25:09):

Or bigger than that. So when you’re looking at buying notes, I’m curious as to what your answer is on. Do you care whether it’s an owner occupied versus non-owner occupied? Do you care if it’s been underwritten by an RML low? What are your thoughts on that?

Fred Rewey (25:28):

Well, right now the RML has become more important. It wasn’t, but because of Dodd-Frank and thing that has definitely become more of an issue and if you don’t, then you kind of run numbers to see if they would qualify at this point or how much seasoning has gone. You know, we look at a lot of the same parameters when we’re looking, buying a note, but what’s nice. And what I think is, again, that creative side is how they can offset each other. I know that I probably don’t have the best credit buyer. The purchaser of the home is probably the one paying on the note probably doesn’t have the best credit. So now what am I offsets? Are, have they been living there for a while? And they’re, you know, the property value has gone up or have they been living there for awhile that they’ve established payments and now they’ve been paying for 24 months. So I feel like their best didn’t want to be in that property. If there’s low, poor credit, did they have a big down payment or if there was a small down payment, was there more seasoning? So we have all these little offsets. Interestingly enough, historically I prefer owner occupied, but I can tell you historically, the numbers are not as much different from a default rate for either one as much as you would think. Certainly different by areas and you bring up a really good point when you start talking about dollar properties. Lonnie Scruggs wrote an entire book on mobile homes. I don’t like mobile homes cause I don’t like things that move. But Tracy does cause she understands the cashflow benefit of it. But when you start to get to the really inexpensive properties that a lot of us start to discount as investors going, wow, that’s, it’s too small. There’s not enough in it. You have to realize that people at that level are purchasing based on a budget issue, not a value issue. It’s why you can buy a mobile home or, you know, for, for $8,000, fix it up a little bit and sell it for $500 a month for 20, which ends up being, you know, $30,000 or whatever it is. It’s like, well, is it worth 30,000? No, but people are buying based on budget. I’m on a fixed income. I’m on social security. I can afford to, I want to live where it’s warm. I can afford $500 a month. That’s fine. I’ll pay it $500 a month. And they really don’t care about, so you don’t need to have, you need to have a wild interest rate or anything on there that wouldn’t get past the RMO. You can still have a very decent rate. They don’t care about the value as much, cause it’s a budget issue. So that’s where you can get creative on the lower ones. And like you said, you could turn around and flip a home, you know, buy it, sell it for 20, you know, take some money out note wise to make an investor be at 50%. Now you’ve got your 10 back out of it. So you made two right up front, but then you got the back end of a note or a split of a note and I’m talking way too fast about it. But you know, there’s this lots of directions you can go on that. Um, you know, and I think the last thing I would say at least about that last thing, but the one thing I want to mention is that, you know, there’s a lot more notes out there than people realize so we run a trailing two years. It’s about how far, you know, get data. And we use, advanced tellers, data services create stuff and he pulls all this stuff and we’re able to put it together and change it into a report. But basically, so if you take 2019, which is our last full year that we’ve had, there was 23.9 billion. That’s what the B and seller carryback notes. So think of it this way. Roughly 6% of all real estate transactions are seller carryback notes. So you think, Oh, it’s a small industry. Well, 6% of the real estate, industry’s huge 23.9 billion and 39% of that is resident. So we’re, you know, maybe you’re type of investor though, like residential 39% of that 23.9 billion is residential, 25% of it is raw land. Another 18% of it is correct Marshall. So if you like, you know, you want to own, you know, loans or buy into knowns on commercial property, bachelor wheelhouse, that’s a good chunk. And there’s about 18%. Is that a completely unknown? We don’t know because the way it’s filed and stuff, we just don’t know what category it is. It would probably be fair to say the breakdown would be mostly residential, then land, then commercial, that it would continue with that trend. But we really don’t know. But if you take just a trailing five years, if you take 2015 through 2019, that’s $113.8 billion and notes out there at any one time. Now, obviously some are being bought, some are being created, some are being sold, you know, that kind of thing, but it’s, it’s, it’s a bigger industry than I think everybody realized. So you know, it’s not about little niche,

Wendy Sweet (30:03):

Really. That’s for sure.

Bill Fairman (30:04):

On the residential side of things, if you’re concerned about a licensed loan officer originating, the original note is that because it’s less salable, if you’re wanting to sell it later or does it have to do with, if you have to foreclose on it and it’s likely to be held up in the courts because it wasn’t originated by a licensed loan officer because it’s the person that buys a note after the fact you’re not really responsible for the origination or the parties that originated it. Right?

Fred Rewey (30:41):

That’s true. That’s true. And I will preface everything going forward that I’m not an attorney and everything is very for state and, don’t eat yellow, snow and all that other stuff. So my understanding of it is, is it’s not so much that, you know, if everything was set up, the problem really comes from the buyer’s perspective. If they feel they were slided, it doesn’t matter that you’re the end-user and you are part of that creation. You took assignment of that creation. So that’s why we’re starting to look at them going, Hey, did they have an RMO involved if they didn’t? Would that person pass that test right now? So there were things created that wouldn’t pass that test as far as debt to income ratio. So that’s where everybody’s going to being a little bit more cautious. It’s not that we’re going to do anything. I mean, you know, I’m not too worried about the documents as far as that. I mean, the business operated for hundreds of years doing just fine without worrying about that but I think everybody definitely from a resale standpoint, it’s also why you’re seeing a lot of conversions from like a land contract to an actual deed of trust mortgage because of who who’s actually the holder of that, even though it’s just different semantics, either way, you still owe me money, but either I never deeded it over to you like a land track contract, or I’m going to deed it to you at the very end or I needed it to you up front, but now I carried it back a mortgage on it. There are different foreclosure rules depending on the States and some are more common in some States, but we did see some one organization that did a lot of land contracts or contract for deeds being converted now and actually being solicited by attorney firms and things like that saying, Hey, we’re gonna do this for you and help you convert and it’s better for you so that kind of makes everybody a little bit more nervous from a resale standpoint. You know, if you do a buyer interview and they’re happy and they’ve got value and they’ve got equity, it’s most likely not going to be a problem, but from a resale standpoint, yeah. If you’re, if you’re trying to securitize put things together in a portfolio itself and yeah, that could be a hot button for somebody else.

Bill Fairman (32:43):

Yeah. But bottom line, if you’re a seller and you’re going to carry back the paper, just go ahead and get a licensed loan officer to underwrite it because I would and, originate it because their costs, the borrower’s paying anyway. So it’s not costing you anything as the seller, so just do it right.

Fred Rewey (33:03):

And it’s not expensive.

Wendy Sweet (33:04):

Yeah. It’s worth it for sure. Tell us about your book.

Wendy Sweet (33:11):

Wait, I want to see this because Wendy what do we think about mobile homes? They wanted to know what you thought about mobile homes.

Wendy Sweet (33:17):

Well, I am a huge fan of mobile homes. In fact, I have two now that are seller finance and both of them, the prices were the same. I was all in at with the rehab at 40 grand sold both of them in the eighties. And I got 20,000 down on each one and I have them sell or finance. Both of them have, one’s two years old. One’s probably three and it’s at 6%. It’s not huge, but you know, it doesn’t suck either. So, so I’m happy about that. And then just today, Billy and I, in fact at 12 o’clock today, Billy and I just bought two mobile homes that we’re getting ready to new ones, brand new ones that we’re getting ready to put on some land. And, um, and as we’re sitting here having this conversation, we’re thinking about selling them, but I thought, huh, we should probably sell or finance these.

Fred Rewey (34:15):

Oh, absolutely. Absolutely.

Bill Fairman (34:18):

You don’t like them because they’re mobile. We actually get a discount on insurance because our buyers or renters can meet the fire department halfway.

Fred Rewey (34:31):

I don’t like mobile homes now, you know, mobile home of land lease. I know I have the land. I don’t like anything that I have to go looking for. I literally had a guy try to sell me a note on a boat in Miami. And he was bragging to me how fast the boat was and how it came and how it could outrun the coast guard. And I’m like, I’m not even the helicopters? And we didn’t think of that. And I’m like, I mean, so, you know, well, it’s funny because we’re actually looking at mobile homes are going to come up with Tracy in a real hurry here because we’re actually, we made an offer on a place on a Lake. That’s a little more rural from here. And after we get done talking about the house and what we want to remodel on the house, and then maybe some offices nearby that could we get some office space, you know, the next thing I was just like, you know, it’s a lot more rural. I could probably do some really good mobile home deals out here. I’m like, Oh really? But she’s not wrong. She’s not wrong when you get them and tell you so funny, cause we’ve talked about renting an office space out there and she just brought up a really good point this morning. She says like, well, why don’t we just buy one? And her point being, is that look, yeah, you guys know. I mean, you know, we’ve been around enough awhile to realize that when you talk about money right now, I mean, like, I don’t want a mortgage on a house. I don’t have one, but I’m like, it’s like 2.2% money. I mean, where I’m yeah. I mean, we’re literally, if you’re talking about buying even commercial properties that much more. We’re literally at the only time in my life, I remember ever remember looking at deals like where we’re buying this Lake house or buying a commercial buildings for, to put offices in the interest rate is not even part of my factor of deciding whether it’s a good deal anymore. You’re like, Oh, I’m paying this much interest. Is it better for me to do this? Because here’s my interest payment. Here’s how much I’m going to get. And it’s not enough sense of the dollar deduction. Even everybody thinks it is, but it’s just like, you were literally at the point now, it’s just, I don’t even do the calculation, but there’s a point it’s low. Whatever the number is, it’s really low. I will probably spend more on coffee and for my office and an espresso machine than I will for, for, you know, whatever the interest rate. So it really thinks your mentality right now. And I’ve said, we’ve been talking about this in our, in our masterminds, as far as saying, you know, what you do in the next 12 months will very much position you for your next 10 to 20 years because we’re in a window right now that with low interest rate and deals to be had and coming out of code and everything else like that, we get one of these windows, every, you know, whatever number of years. And this is, this’ll be interesting.

Bill Fairman (37:04):

I hate to do this to your friend. You’re going to have to quickly talk about your book because I forgotten to replace the battery in my camera

Fred Rewey (37:13):

Bill is talking about a marketing book, which was is Be The Lime. I did this in 2015 is the second book I think I wrote anyway, if you want, you can still pick it up on Amazon. It’s called Be The Lime. It’s really just about social media, email marketing, things like that, finding your own voice. There’s been a lot of people it’s helped as far as that’s concerned. If that’s kind of your thing, promote yourself. If you’re just sitting back and wanting to just have everybody come to you, or if you’ve got contacts, then definitely not a big deal. The only other thing I’d say to go check out NoteIinvestor.com. If you want to check out some things about the note industry and stuff that would Tracy and I do, but cashflow xpo.com go register. It’s free. Uh, you’ve got sessions here. You can see Bill and Wendy in a session. You can see myself to a very mid small session warm-up session. Tracy’s doing a session. We’ve got Jeff Woods from one thing. If you go into it, you’ll see all the speakers. Plus you’ll see a new one next week that I’m really excited about.

Wendy Sweet (38:05):

There is women’s panel on there too. That’s going to be great.

Fred Rewey (38:08):

There is a women’s panel. Thank you for the plug. Yes. There’s a women panel that is on day one at the end of the day that I do know on the schedule. So I can at least say that one. Yeah. And I actually heard the panel because I actually got to hear it when it was being done. And it’s actually a really good panel. That’s what I like about this back to though, is that so many of these events and Tracy did wives, women expo earlier last year at the end of the year, but so many of these advanced I’m sorry, they just like bypass women as speakers and bottom line is, is that they’re just, they’re actually more smart than we are. I mean, I actually re put my Alexa into a male voice, so it wouldn’t listen to me. So there’s a lot of valuable information and yes, the women’s panel is no exception was, I was actually gonna crack it up in the other room, listening to it is good.

Wendy Sweet (38:52):

Awesome. Awesome.

Bill Fairman (38:54):

Well, listen, thank you so much Fred. And I didn’t mean for you to rush through because you’re just going to lose the picture of us and that’s okay.

Fred Rewey (39:04):

This is my show now.

Bill Fairman (39:09):

You won’t be able to see us. And by the way,

Wendy Sweet (39:10):

We’re always prepared.

Bill Fairman (39:10):

I think Randy was asking about the schedule so he could sleep in during our session, cause you’ve heard us enough. So we’ve got a link to the cashflow expo over in the chat and we’ve got all of Fred’s contact information over there as well.

Wendy Sweet (39:33):

And there we go.

Fred Rewey (39:33):

There goes the camera.

Bill Fairman (39:33):

I liked my multicolored looking light.

Wendy Sweet (39:34):

that’s right, we’re in mixed color.

Bill Fairman (39:34):

that you so much. Have we come back? Thanks so much for joining us Fred. As you can tell, we’re always professional as usual. We are Carolina Capital Management. If you are a borrower looking to borrow money in the South East Carolina, HardMoney.com click on the apply now button. If you are a investor looking for passive returns, here we go again, click on the accredited investor tab. Don’t forget to like share, subscribe, all that good stuff. And I guess our show is just about done.

New Speaker (40:15):

Yeah. We’ll see you soon.

New Speaker (40:15):

We’ll see you next week. Thanks.

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