169 The Current Note Market with Joe Varnadore on Passive Accredited Investor Show

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169 The Current Note Market with Joe Varnadore on Passive Accredited Investor Show

Every Thursday at 1:00 PM Eastern, join Bill & Wendy LIVE for the Passive Accredited Investor Show!

Today, Joe Varnadore of NoteSchool joins the Carolina Capital Management team to discuss the current state of the Note Market!

Investing in his first property at the age of 19, Joe Varnadore learned the importance of using creative financing to make the deal work. Since then, he has created and brokered more than $30MM in note transactions on residential and commercial properties.

As an author, speaker, and trainer for the past 25 years, he believes that there has never been a greater opportunity for real estate investors to use non-performing notes to acquire properties and seller financing to cash out.


0:01 – Introduction: “How the note business is affected during the pandemic”


2:32 – Wednesday with Wendy: https://calendly.com/wendysweet/wednesdays-with-wendy

4:23 – Today’s guest: Joe Varnadore of NoteSchool

5:08 – How Joe Varnadore gets started in the note business.

6:29 – NoteSchool’s Industry Update for the month of July 2021

8:17 – to request for a copy of the slides email: info@NoteSchool.com, Subject Line: Market Update July 28, 2021

8:33 – Mortgage rates continue a downward spiral

9:08 – Mortgage Credit Availability Index Drops 8.5% in June

10:47 – Purchases of luxury homes surge.

12:25 – Investors snap up more single-family homes during the pandemic.

13:06 – Landlords brace for impact as more tenants can’t pay rent.

13:29 – CDC issues new eviction ban effective Oct 3rd

14:02 – Facts about the current real estate market

16:30 – CDC has no authority to put a ban on evictions

19:44 – When people are not paying their mortgages it becomes an opportunity for other people.

22:36 – There are a lot of burnt-out landlords out there that want to sell.

24:02 – How to connect with Joe Varnadore – https://www.NoteSchool.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.

Listen to our Podcast: https://thealternativeinvestor.libsyn.com/

Visit our website: https://carolinahardmoney.com

YouTube Channel: https://www.youtube.com/channel/UCYzCFOvEt2n9TchgECLwpww

Facebook: https://www.facebook.com/CarolinaHardMoney/

Bill Fairman (00:01):

Hello everyone. We’ve been doing this show for a year and a half, and this is the first time we ever knew there was a countdown clock. Welcome to the Passive Investor Show. I am Bill Fairman, Wendy Sweet and Jonathan Davis. Good Lord. I’m tripping over my tongue this morning, this afternoon. They’re waiting in the wings. If you guys have been wondering what how the note business has been affected, during COVID and with the lower interest rates that are being offered, we have a special guest, Joe Varnadore with Note School coming right up after this.

Bill Fairman (01:01):

So today is all about notes. If you were on an earlier show, we had Jay Connor on talking about how to find capital and actually kind of training people to be private lenders. And in this show, we have Joe Varnadore. We’ve known him for years and years. He works with Eddie speed and Note School. And this is a different part of lending. This is the best part of lending, actually, in my opinion, this is lending where you don’t have to do anything, but buy an existing note. You know, all your work is already done. You just have to do the due diligence on what’s left, right? So we are Carolina Capital Management. We are lenders in the Southeast for real estate investors. If, are you guys hearing me okay?

Jonathan Davis (01:58):


Wendy Sweet (01:58):

Keep it rolling.

Jonathan Davis (01:58):

You’re doing great, Bill!

New Speaker (01:58):

Well, I was looking at you and you guys were kinda doing the robot thing over here. It was kind of freaking me out. Aanyway. If you are a borrower and looking to borrow money in the Southeast, and you are a real estate investor, go to CarolinaHardMoney.com and click on the apply now tab, if you are a passive investor looking for passive returns, click on the accredited investor tab. Don’t forget to like share, subscribe and hit the bell also, which is very important. Wendy gives up her time every Wednesday and we call that Wednesday with Wendy.

Bill Fairman (02:55):

Okay. So Wendy gives up her Wednesdays, but she’s booked out a few months in advance. Go ahead and get on her calendar and she will speak to you for 30 minutes.

Wendy Sweet (03:10):

September 29th is my next open day that I’m getting bookings for now.

Bill Fairman (03:16):


Wendy Sweet (03:21):

Sorry, folks. We have a delay going on here and they can’t hear us stuck and we can’t hear him. Go ahead, bill.

Bill Fairman (03:32):

So I’ll make this transition nice and easy. We also have a comment section on the side. That’s where you can find Wendy’s linked to her calendar. As well as if you have any questions, it’s on the right side of your screen or underneath, depending on the platform that you’re viewing us from. Did you guys have any information on any breaking news? Because I don’t have any breaking news. Sorry. We have a really nice graphics that come up and say breaking news, but I don’t have any.

Jonathan Davis (04:06):

Our breaking news.

Wendy Sweet (04:07):

They saw it on the first show, we did it already.

Jonathan Davis (04:10):

And Joe our guest here is,

Wendy Sweet (04:13):

Broken news.

Jonathan Davis (04:15):

He has some really good news for people.

Wendy Sweet (04:18):

That’s right.

Bill Fairman (04:19):

All right. Perfect. Well, without further ado, let me introduce Joe Varnadore from Note School. Thank you so much for joining us, Joe.

Joe Varnadore (04:29):

Well, hope you guys are well. Wendy, Bill, Jonathan, thanks so much for having me today. Have you guys heard that real estate is on fire?

Bill Fairman (04:42):

I haven’t, I’m getting some hint.

Joe Varnadore (04:48):

Oh my goodness. It’s amazing times, right? And what is it the old Chinese philosopher said, may you live in interesting times and folks, it is certainly interesting time, right?

Bill Fairman (05:04):


Jonathan Davis (05:04):


Bill Fairman (05:06):

So kind of give us, if you don’t mind, just give us a couple of minutes on your background, how you got involved in the note business, and then kind of give us a, an update on what’s going on with notes, because we know there’s been a moratorium on foreclosures and that type of thing and how that’s affected.

Joe Varnadore (05:26):

Yeah, well, you know, I was born at a very early age, haha right? Not you, Bill. Shoot, I got into real estate and I was 19 years old and it was 1970, late, 1978. So that kind of dates me. And I started, you know, did my first fix and flip and did all of that and found the note business in 1990. And certainly, it changed the way that I looked at everything. Like you said, we could go out and buy a note and you know, we could just be the bank instead of being the, instead of having to be the landlord or to go out and do a fix and flip and all of that, we could still make money now and money later and cashflow and all that good stuff. So I’ve been doing it 30 plus years now in the Note Space and then Eddie and I have known each other a long time, Eddie speed, founder of Notes School. And, we got together in 2013 and as they say, the rest is history. Right?

Bill Fairman (06:26):


Joe Varnadore (06:28):

So every the end of every month we do a kind of an industry update as far as what we know is going on in the real estate. And then the note in the, in the note and mortgage, right? I mean, if you didn’t know that people didn’t know that, you know right now is a great time to be in the business, if you know the right strategies, right? With creative financing and Hey, guess what’s back ladies and gentlemen, non-performing loans.

Bill Fairman (07:01):

There’s a shocker.

Joe Varnadore (07:03):

Update that we did last week with our, you know, with some slides and so on. So if you want me to show those that’s great or we can just talk through everything.

Bill Fairman (07:10):

Yeah. Listen, I love to see the graphics, cause I know you guys work hard on those things.

Joe Varnadore (07:17):

So whenever you’re ready, Cherub brings it up. I will be ready to rock guys.

Bill Fairman (07:25):

Excellent. Cherub, do you have that or do you need me to help you with anything?

Cherub Santelices (07:30):

Yeah, I need you to share your screen again.

Joe Varnadore (07:31):

Did I un-share my screen, Cherub? Oh my gosh.

Cherub Santelices (07:39):


Jonathan Davis (07:39):

You think this is the first time any of us ever did this. Right. Okay. So we’re going to go here and we’re going to go here and we’re going to go here. I have no idea what I’m talking about, right?

Bill Fairman (07:54):

Well, well I do, but it’s the first time for me every time.

Joe Varnadore (07:58):

Right. So there you go. All right. So can you, let me see here. So what do we have? We’ve got slideshow. We’ve got from the beginning. How about now? Can you see this?

Cherub Santelices (08:10):

Yep, you’re ready.

Wendy Sweet (08:12):


Joe Varnadore (08:13):

Very good. So guys we’ll make this and again, I’ll send these slides to you guys, if any of your folks want them. So as we now.

Jonathan Davis (08:25):

Yes, please.

Joe Varnadore (08:25):

Well, pardon me?

Jonathan Davis (08:29):

I said, yes, please do send it to us.

Joe Varnadore (08:33):

Okay, I will. So mortgage rates, right? Continue to continue a downward spiral, right?I haven’t checked this week, but they are down a bit. We see that the 30 year fixed and I’m going to get my pen here so I can be really fancy guys. The 30 year fixed rate over here is a 2.78. Here’s the arm, the adjustable, right? But look at the 15 year rate, right? So it is, never been a lower interest rates guys. So again, we said real estate’s on fire. So we go to the next slide here. And guys, Wendy, Bill, Jonathan, mortgage credit availability index, this is how easy that it is or how difficult it is for folks to go out there and get a new, get a new mortgage, right? So rates are way down. And so we look over here in this column here, right?

Joe Varnadore (09:30):

This is kind of when the pandemic started. So credit of mortgage credit, and this was put out by the mortgage bankers association, right? We’re just not making this stuff up with somewhere in the mid one eighties, right? So pretty, pretty simple to get alone, right? So we see that, boom, it just drops off a cliff, you know, and in July, in June of last year, and then it kind of, and then boom, look in the first part of this year starts to come back up. But, and this is the latest stuff right now. It has dropped down to one 18.8. What does that mean? Well, if you wanted to go out and get one of those 2.7, 8% rates are 2.1, 2%, right? It’s going to be a little more difficult for you, right? The average profile of someone that’s going to get that low rate now is you’re going to have to have a credit score of north of seven 50.

Joe Varnadore (10:28):

You’re going to have to put at least 20% down. And you’re going to have to have a debt to income ratio of a overall of no more than about 35%. So yeah, they’re, the rates are like that, but Hey, rates are low, but it’s harder to get them. And then we look at this right, two days ago, purchase of luxury homes, surge luxury home, 1.25 million, a 1.025 million. It’s gone up 25% year over year. I’m sorry. Median sales look at that. 88.2%. Those have gone up and it’s not, they’ve gone up across the board, right? Expensive here, mid priced here, um, here in the affordable and then the most affordable. So guys, we know that real estate is on fire. You know, it just everything those indicators are there, days on market are down. All of those crazy things are happening out there in the market.

Joe Varnadore (11:36):

You know, the opportunity for, for folks like us, for you guys and for us in the notes space is that those folks, those 30 or 35% of the folks that could get a loan last year that have money to put down, they good credit. They just don’t have stability of income. Can’t get a regular loan. So what does that mean? Well, that means they come, they, you know, we show them how to do a creative finance deal. You guys loan the money to go out and do that. And we know that the interest rates on non-qualified mortgages, right? Those are qualified mortgages as low rate or in the what? Six to nine, six to 10% rate, um, at a commercial bank. So, you know, opportunities. Yes. So we see that side of the business and we see that according to Redfin investors snap up more single family homes during the pandemic, right?

Joe Varnadore (12:34):

So investors are just out there and they’re looking 16.1% on the multifamily or the multifamily is up here, but this just continues to tick up, right? So investors, typically investors that are buying, you know, less than 10 houses a year can houses are less well they’re jumping in from multifamily into single family again, because well, everybody thinks that’s the way to go, right? So then we see that side of the business. And then we see the other side of the business, right? And this was from what, 10 days ago or so when wall street journal reported that wow, you know, indiv eviction moratorium coming up 8 million landlords own one to 10 properties. And we know that, well, most of those haven’t received rents for quite a while. So what happens on last Friday? No. Yes, no. Monday. CDC issues, new eviction ban effective through October 3rd guys, look at this 11 million Americans are behind on their rents and as the Delta variant surges.

Joe Varnadore (13:55):

So we’ve got real estate on fire up top here. And then on the other side of that we’ve got things like this happening. So here’s what we know. Here’s the kind of the underbelly of all of that landlords are own 55 to 60 or owed 55 to $65 billion in unpaid rents. The states have received 47 billion, right? Wendy, you go, hmmm. 3 billion of that has been distributed, right? And this has been out there for a little while. 1.7, 4 million loans are still in forbearance right? Now, they’re not, all of those will end up going into foreclosure, but a pretty good percentage, right? 2 million homes are somewhere in some state of default. And so that’s, you know, we’re bumping up there around four and guys think about it like this at any given time in the US, 53, there are 53 million single family first mortgages.

Joe Varnadore (15:00):

So, you know, that’s, that’s a pretty high percentage of that, right? That’s about almost eight, 9%. Now here’s the crazy thing, right? People thought that that everything was going really well prior to the pandemic and talk to Chaz, Chaz, Gwen from Revolve Capital yesterday. And there are 5.5 million legacy non-performing loans in the system, which means they predated the endemic. Can you believe, that’s crazy? Isn’t it. So when I say non-performing loans or out there, you know, they’re there and this is, you know, this sounds good on one side, right? 91.8% of borrowers made their monthly payments last year or last month. But that means almost what 8.2% didn’t. And that represents millions and millions and millions of non-performing loans. So, you know, it is, it is an amazing time out there in that, um, you know, what, what is it that’s, you know, what can we say about that? Right? There is an opportunity in creative financing. There’s an opportunity for all of us bill in this non-performing space, it’s popping up as well.

Jonathan Davis (16:19):

You’re muted.

Wendy Sweet (16:19):

You’re muted, Bill

Bill Fairman (16:26):

I just like moving my lips. This is what really gets to me is that the CDC does not have any authority to put a ban on evictions.

Joe Varnadore (16:40):

Right. I didn’t get into the political part of it. I was going to let you do that.

Bill Fairman (16:45):

The president himself stood right up on a podium. And when do you need to put a battery in that camera? Cause it’s getting ready to go away

Joe Varnadore (16:53):

Best there’s that big red light blinking between the two of them, right?

Bill Fairman (16:58):

Anyway, the president stood right up at the podium and said, yes, it’s probably not legal, but by the time you go through your judiciary to fight it, it’s going to end anyway. But the way things are going, you might as well go ahead and fight it because they’ll try to extend it again.

Joe Varnadore (17:20):

I said it and you know, so I was thinking Monday rolls around. We were getting ready to do a podcast and by God it came through, right? 4:30, Monday afternoon.

Bill Fairman (17:31):

See, and here’s the thing. And I get why government wants to protect consumers, but no one cares about businesses, small businesses. Small businesses get killed in these circumstances because you’re bigger businesses. The lobby, they have plenty of capital. It’s the small mom and pops, landlord and businesses that get, get smashed in these things. Nobody cares about those folks. Most people that own rental property have a little bit of leverage on it. If they’re smart, their leverage was fairly low but you know, the way things are with interest rates being so low, a lot of people took cash out to buy new properties with, you know, I get that. And that’s one of the things I try to tell people all the time that are owning single family, get as many of these really low cost mortgages as possible, but please, whatever you do, don’t go above 70% in your leverage because you never know what happens. You need to keep some equity in there. Now the good folks that I understand that are renting out properties and had good communications with their tenants, most of those people are all paying, but I do really feel sorry for the landlords who are, they’re going to end up losing their properties and there’s nothing they can do about it. And it’s all government mandated.

Wendy Sweet (19:05):


Joe Varnadore (19:06):

Well, imagine, well, imagine that 47 billion that’s been sent to the states and 3 billion has been distributed and this just didn’t happen yesterday. The states have had it for awhile.

Bill Fairman (19:17):

Yeah. And you’re wondering, you know, what the deal is, do they not have the personnel to put it out there? They just hanging on to it for themselves because legally, they can’t spend it on anything other than rent assistance. Right. So why are they holding on to it? But if you also look at the court system, everybody’s backed up, they just don’t have enough people to handle a lot of this stuff. So the problem is, um, people not paying is also an opportunity for others.

Joe Varnadore (19:55):


Bill Fairman (19:55):

And if you kept your powder dry, so to speak,

Joe Varnadore (20:01):

Oh, that’s an Eddy isn’t right.

Bill Fairman (20:04):

I’m trying to work a few of them in there, but

Joe Varnadore (20:08):

You be allowed to school is the backside of your pillow.

Bill Fairman (20:15):

I just don’t have the proper Twain when I was saying. Wendy, Jonathan, do you have any questions for Joe?

Jonathan Davis (20:25):

No questions. I was going to make a comment. Now on the CDC extending that, I think if I understand it correctly, the way they have, you know, some what circumvented the prior ruling is that they’re only in the moratorium in quote, hotspot areas and what does that mean? That’s really up to their discretion, I suppose, but, yeah, that’s how they’re skirting it right now. Take that, whatever it is, but yeah, we have people, we have institutions overstepping bounds to do certain things and when I say that, I don’t mean that polit quickly. I just mean like, yeah. As how our government is structured, it’s an overstep for sure but we have all these people doing this. And when you have to wonder why, and for what reasons, I think it’s easy to say, like we want to help those who need assistance but when you help those at the expense of others, it’s, you know, it is that help. So, you know, my personal opinion, you know, we’re kinda doing a little backwards

Wendy Sweet (21:39):

Yeah. I think the biggest problem to why that $47 million is sitting there or billion, sorry.

Jonathan Davis (21:46):

Yeah, billion.

Wendy Sweet (21:46):

It’s because they, haven’t done a very good job of telling landlords how they can get that money. So what are they? Do you know?

Joe Varnadore (21:59):

Well, there’s audited financials, you know, as to what they’re really doing. And you know, when the typical landlord owns, you know, one to four single family homes, they’re just trying to stay flooded. They’re not professionals. What does it cost to get an audited financial guys? Yeah.

Jonathan Davis (22:19):

Yeah. I mean, most of the guys that we deal with that have one to four homes that are rentals. I mean, if I ask them to produce a P and L they would say what’s a P and L? You know, so like, maybe they don’t have that sophistication. You’re right. You’re a hundred percent right there.

Joe Varnadore (22:36):

And, you know, the opportunity that we see, you know, Eddie coined it guys burnout landlords, right? There are a lot of burnout landlords out there right now that want to sell. And what you guys, you know, this show is all about, and that is passive income, right? Why did people buy a rent property? They wanted passive income, but they had, they ever get passive income. No, but boy, if they can sell it to us and we can resell it on a wrap note or subject to, or whatever, there’s an opportunity there.

Bill Fairman (23:12):

Yeah, You can still get Passive Income,

Jonathan Davis (23:20):

You heard it here.

Bill Fairman (23:20):


Wendy Sweet (23:26):

You see Jonathan with his hand right here? That means he’s trying to talk. So zip it.

Jonathan Davis (23:35):

Just say, you know, sell your property to Joe or your notes, let them work with it and put your money in our fund.

Joe Varnadore (23:52):

Well, Passive Income is beautiful, baby, right? It’s better to be the bank.

Wendy Sweet (23:56):

That’s right, that’s exactly right.

Bill Fairman (24:02):

I was going to say, Joe, give the audience information on how they can get involved in Note School. You guys have, was it two day, three day classes?

Joe Varnadore (24:13):

We have one day classes and we have, did we follow that up with a three-day class? And you can certainly go to NoteSchool.com. There you go. And check us out. And certainly we would like to have you on our show, you know, watch our show. It’s School TV, and we have our own YouTube channel as well. So it’s not School TV. There. On YouTube. So check us out there. But yeah, we would love to talk to you and share what we do with you as well. So, yeah. So thanks for that plug guys.

Bill Fairman (24:51):

Well, listen, Wendy and I have been in the mortgage business for over 20 years and the time we spent at note school ourselves blew our own minds. There’s all the stuff that we should have known that we didn’t and we thought we knew it all, but we don’t. That’s why we’re always in masterminds.

Joe Varnadore (25:12):

There you go. Well, that’s right. You certainly are.

Wendy Sweet (25:17):

In fact, I think going to no school three times before it finally jelled, listening to all the things that you do, and it really took me three times to go and it was, it’s it’s just so I, it teaches you the craft of putting notes together, whether it’s a first position, second position, whether you’re selling a note, doing partials, the different ways you can set up parcels, it’s crazy. It’s truly teaching you how to craft the deal to be an architect of that deal

Joe Varnadore (25:54):

And you know, now of course, part of what we’re teaching is how to borrow money against a loan, right? Hypothecate, Bill. That’s that $20 word, right? Pledge the loan collateral and borrow money, right?

Bill Fairman (26:09):

If I use it now, do I get it for 15?

Wendy Sweet (26:17):

That’s right.

Bill Fairman (26:18):

There’s the one thing I can say about learning from Note Shool is that there are very few deals that you can’t make work. When you understand the note business, it’s not the constantly having to put the round peg into the round hole. You can find other ways to make things fit. If you understand the note side of things. So, Joe, I appreciate you coming on the show. It was great seeing you again and yes, we would love to be on your show.

Joe Varnadore (26:55):

Okay. We’d love to have you. We will make that happen. We’re doing non-performing notes this month, but let’s talk about next month. I’ll get with you guys.

Bill Fairman (27:05):


Joe Varnadore (27:06):

September, right? It’s going to be Christmas before long.

Bill Fairman (27:10):

I hope so. Cause I’m tired of this heat. All right, folks. Thank you so much for joining us on the Passive Investor Show. I am bill Fairman. This is Wendy sweet and Jonathan Davis. Oh, I’m sorry. It’s the Passive Accredited investors Show. Good Lord. Yep, we’ve been doing this a long time. I can’t even get the name straight. We are Carolina Capital Management. We are lenders in the Southeast. If you are looking to borrow money in your real estate, investor CarolinaHardMoney.com click on the apply. Now tab. If you’re a passive investor looking for passive returns, click on the accredited investor tab. Don’t forget to like, share, subscribe, hit the bell. And again, Wendy gives up 30 minutes of her time. Well, she’s not 30 minutes per person. Well, Wednesdays with Wendy, you don’t forget that there’s the link to get on her calendar. She’s out til end the September books. So get on the schedule now. Folks, thank you so much for joining us. Have a wonderful week and we’ll see you next time.

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