Top two things you wish you knew

Bay Village, OH · Member since 2016 · 155 posts · 55 votes

Hello, pocket growers: What are two things you wish you knew when getting into note purchasing that you didn't know when you first dove in? Thanks in advance!

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Patrick Desjardins

Real Estate Investor · Amherst, VA · Member since 2015 · 386 posts · 400 votes

That the 80/20 rule is a real thing. We are surrounded by absolute incompetence. Most of the companies we deal with have high turnover and most of the people we deal with are mediocre at best at their job. Most of them couldn't care less about your success, either.

It sounds harsh and kind of gloomy but it's what I've observed in the past few years.

Never trust that paperwork will be transferred correctly, never trust that your servicer will make the call, never trust that your attorney will have your foreclosure published, never trust that your contractor is going to do their job, never trust that the county is going to account for your payment right. You have to micro-manage every little details in every step of the process and it is extremely frustrating and annoying.

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Patrick Desjardins
Real Estate Investor · Amherst, VA · Member since 2015 · 386 posts · 400 votes
9y
That the 80/20 rule is a real thing. We are surrounded by absolute incompetence. Most of the companies we deal with have high turnover and most of the people we deal with are mediocre at best at their job. Most of them couldn't care less about your success, either.
It sounds harsh and kind of gloomy but it's what I've observed in the past few years.
Never trust that paperwork will be transferred correctly, never trust that your servicer will make the call, never trust that your attorney will have your foreclosure published, never trust that your contractor is going to do their job, never trust that the county is going to account for your payment right. You have to micro-manage every little details in every step of the process and it is extremely frustrating and annoying.
13 Reply
Bob Malecki
Investor · Kingston, WA · Member since 2008 · 1k+ posts · 1k+ votes
9y
That I should have discovered note investing 20 years earlier in my career.
That I should have had a stronger interest in math during my formative years.
10 Reply
Alexander Zurn
Lender · PA · Member since 2016 · 214 posts · 140 votes
9y
Simply that I knew about real estate earlier and could have started saving earlier.
5 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Bob Malecki PVM on the calculator enough said.. its shocking
Podcast Guest on Show #222
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4 Reply
Wayne SnellPro Member
Londonderry NH & Miami, FL · Member since 2014 · 174 posts · 238 votes
9y
That there are so many details like @Patrick Desjardins mentioned that no one teaches you, but it is manageable once you put the processes and systems in place. That I had started buying them 10 years ago when pricing as better and there was a lot more low-hanging fruit. That there are detractors against note investing who either have an axe to grind or an ulterior motive for railing on them...That borrowers will do the logical, best for them solution. :)
4 Reply
Bernard Braithwaite
Investor · Waterford, CT · Member since 2016 · 85 posts · 21 votes
9y
@Patrick Desjardins yes can be frustrating but def manageable, once you get a system for yourself... So two things.. 1) when working out loans try to set interestrate rate where it will be attractive investor in case you'd like to sell down the road.
2) Build a good team, make great contacts
2 Reply
Paul Vincent
OP
Bay Village, OH · Member since 2016 · 155 posts · 55 votes
9y
All great stuff. I know notes from the litigation side (how bad foreclosure lawyers can be), but still getting my arms around all the small details. Wayne Snell and Patrick Desjardins - are there systems out there to help recognize the small details? Or are you best served tailoring a system to your own particular portfolio? I think I (and my JVs) will stick to the Ohio market since it's my backyard and the easiest way to build strong relationships.
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Wayne SnellPro Member
Londonderry NH & Miami, FL · Member since 2014 · 174 posts · 238 votes
9y
@Paul Vincent There are some systems out there but we found them to be cumbersome or lacking. We use a cloud software called Pipedrive that we were able to tailor to our specific needs. Our freind and NoteMBA podcast host @Robert Woods is using Salesforce.com, still others use their own things. If you define you process well then even Excel or a project management tool such as MSProject can help.
Paul, I think staying in your own backyard in the notes world is bad advice. It is the buy and hold rehab mentality. You will miss out on most of the good note deals with that approach. You should only care if you are trying to get the property back and want to manage a portfolio locally. Otherwise the teams/processes you have in place are exactly what allows you to invest across the entire county. Do problems come up? Of course they do. Contractors do not perform as advertised, the city puts a lien on the property because the borrower stopped mowing, taxes become due, the servicer adds an loss mitigation extra step that no one else does because they interpret RESPA differently and want to triple-cover their asses. You work through them, you build it into you process and you move on. It's no different then rehabbing that first house and finding the black mold mess once you pull that first strip of paneling off the wall.
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Patrick Desjardins
Real Estate Investor · Amherst, VA · Member since 2015 · 386 posts · 400 votes
9y
Honestly I'm not sure what systems you can put in place for some of this stuff. When a servicer auto-dials the wrong number for 30 days, when you email them / call them multiple times to make sure the demand letter is on its way and then they say "oops we forgot, sorry!", when an attorney doesn't publish your FC in the newspaper so it has to be delayed 2 months, when the attorney hands the keys to a cash for keys deal before you had it inspected and the homeowner stole the AC unit/water heater and ripped out the HVAC (all true stories from the past year)..
The only thing you can really do is constantly look over their shoulder and monitor it, and things will still fall through the cracks. You can minimize the problems but not fully remove them. Just imo.
3 Reply
Joshua Andrews
Lender · Austin, TX · Member since 2012 · 211 posts · 166 votes
9y
Some great comments here and good thread.
Outside of buying just one or two notes, it's a business, and all businesses have problems and obstacles to overcome. Notes by themselves, regardless of your particular business model are an awesome opportunity. You can quite literally create money from nothing in some cases.
Two things I wish I knew years ago:
1. About how to buy, negotiate, structure and sell notes - years ago. The earlier the better.
2. Working knowledge of partials. These are incredibly powerful, and when structured correctly you build an incredible backlog of future profits, while freeing up chunks of cash to buy more notes, while building an incredible backlog of... well you get the idea.
- Josh
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Paul Vincent
OP
Bay Village, OH · Member since 2016 · 155 posts · 55 votes
9y
Thanks, Wayne Snell and Patrick Desjardins I've been a big NoteMBA learner and reading about the stuff, but until you dive in, there's no education good enough. I'll be bothering you guys when the time comes and maybe see if you'd want to JV or discuss options. I have some pretty sizable local banks that I have some nice looking leads that I hope to get access to purchase. Also looking at second liens as those cash flows seem good for their low capital outlay.
3 Reply
Wayne SnellPro Member
Londonderry NH & Miami, FL · Member since 2014 · 174 posts · 238 votes
9y
Hi @Patrick Desjardins yes I completely agree with you. What we do is document all of those activities in our pipe drive system so it notifies us with reminders to follow up. Totally agree people are the biggest problem in the process but at least we try and get ahead of them. Of course somethings always fall through the cracks as you identified. We just try and mitigate those whenever possible and like Joshua mentioned since its a business we just plan for some bumps in the road ahead of time.
1 Reply
Bob Malecki
Investor · Kingston, WA · Member since 2008 · 1k+ posts · 1k+ votes
9y
I agree with @Wayne Snell's comments. We started using Pipedrive in January to manage our notes through all of the phases from review>loss mitigation>performing and also use Basecamp to post info and discuss among out management team, mainly because Pipedrive does not have a "discussion board" tool. But between those 2 platforms, and using Googledrive for document storage, we have a pretty good system in place.
1 Reply
Chase Thompson
Real Estate Investor · Plano, TX · Member since 2014 · 38 posts · 21 votes
9y
Thanks for listening to the show Paul! Education in the space can be hard to come by without decent sized coaching price tags sometimes. It makes JV'ing, diving in on your own deals, listening to the podcast, etc. that best ways to learn.
2 Reply
Chase Thompson
Real Estate Investor · Plano, TX · Member since 2014 · 38 posts · 21 votes
9y
Originally posted by @Bob Malecki:

I agree with @Wayne Snell's comments. We started using Pipedrive in January to manage our notes through all of the phases from review>loss mitigation>performing and also use Basecamp to post info and discuss among out management team, mainly because Pipedrive does not have a "discussion board" tool. But between those 2 platforms, and using Googledrive for document storage, we have a pretty good system in place.
Hey Bob,
Other than general preference, is there a reason y'all use Google Drive instead of Dropbox?
1 Reply
Bob Malecki
Investor · Kingston, WA · Member since 2008 · 1k+ posts · 1k+ votes
9y
Well both myself and my 2 partners are users of most of the Google apps so it integrates easily. For instance, we use Google Sheets for tracking our assets, investor capital and event for a tape analysis, and those are available on any device that I have my Google account set up.
Also, both Pipedrive and Basecamp have integrations with GoogleDrive. We actually did recently create a Dropbox business account mainly to back up our Googledrive folders since those have all of the soft collateral files on all of our loans, as well as our corporate docs, agreements, etc. I doubt that Google will ever have a worldwide cloud crash, but we sleep better at night knowing that we have some redundancy between two disparate platforms.
Oh yeah the Google platform tools are also free for our relatively small footprint of usage.
2 Reply
Paul Vincent
OP
Bay Village, OH · Member since 2016 · 155 posts · 55 votes
9y
Thanks Chase Thompson ! I like Google Drive for a lot of reasons. I get like Dropbox was clunky and didn't help with editing docs like Frive. This post covers mostly all of why I like it better: https://www.process.st/dropbox-vs-google-drive/
0 Reply
Paul Vincent
OP
Bay Village, OH · Member since 2016 · 155 posts · 55 votes
9y
Wayne Snell Patrick Desjardins I totally agree on shoulder looking and "subtle" reminders. My firm handles several hundred tax lien foreclosures and if you're not cracking the whip every day, some bum is letting whatever it may be sit on his desk for several weeks.
0 Reply
Patrick Civello
Alameda, CA · Member since 2017 · 10 posts · 0 votes
9y
Hi, I am a newbie on BP. I keep hearing about note investing? Is this something that requires a lot of capital or experience to get into?
0 Reply
Account Closed
Real Estate Investor · Fort Lauderdale, FL · Member since 2016 · 49 posts · 6 votes
9y
Bob Malecki I am new to investing but heard your recent podcast on Bigger Pockets when you explained Note Investing. You said that a big part of getting into this niche market is networking. Were you able to network in your local area first, or was it mainly through the conferences across the country that you mentioned on the podcast? Is the type of market that you would advise a newbie to get started in? Thanks for any advice an insight you have?
0 Reply
Bob Malecki
Investor · Kingston, WA · Member since 2008 · 1k+ posts · 1k+ votes
9y
Hi @Account Closed, conferences are the key for sure and yes its a great niche for newbies as long as you are adept with math and can stand reading piles of real estate contracts and agreements.
1 Reply
Account Closed
Real Estate Investor · Fort Lauderdale, FL · Member since 2016 · 49 posts · 6 votes
9y
Thanks Bob Malecki . Any suggestions for upcoming conferences? Any advice on ones to avoid?
0 Reply
Bob Malecki
Investor · Kingston, WA · Member since 2008 · 1k+ posts · 1k+ votes
9y
A great one to network and start learning is http://papersourceseminars.com/ Lots of good networking and informative presentations.
Moderator: This is not a promotion, I'm not affiliated with the event sponsors, only recommended for the benefit of this forum's readers.
3 Reply
Andrey Y.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
9y
For someone in their 20s 30s 40s with average to high risk tolerance, does note investing make sense? Seems like there is little to no tax benefits, no appreciation, etc. So you are giving up several profit centers of owning real estate.
0 Reply
Dan Allen
Specialist · Las Vegas, NV · Member since 2017 · 2 posts · 0 votes
9y
to Patrick Desjardins , ALL you said is true and you are in Virginia , can you imagine how it is in New York City simply hell on earth for the small or even the mid size investor , flipper etc ...
i say take what Patrick say word by word and do the best plan you can
and if things do not work for you and you can just move to a different market / state
real estate is local and being at you back yard is very important - so make a new back yard
move

Patrick Desjardins
Patrick Desjardins
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