GDNI Podcast Ep1:Building Wealth & Helping People In The Note Business

This is our inaugural episode of our podcast which you can listen to HERE , Chris. This is the one that when we’re celebrating our 100th episode and I know you’re going to insist on a big party, we’ll play this one and we’ll go, “We were so bad at this.”

“Look how far we have come.”

Hopefully, people will join us and they’ll still be with us at that point but we can’t just assume that, we’ve got to earn it. For this podcast, we thought we would tell you a little bit about ourselves, tell you what we’ll be talking about on a regular basis and also talk about you, all of you listeners out there and what it is that we hope to impart to you. I’d like to jump off in that right away. When we thought about doing this podcast, we asked ourselves, “Who is this podcast for?” What was your answer when you asked yourself that, Chris?

Mine were for two components. One is for those interested in understanding more about notes and getting into the business. The second component is for people who are looking for alternative ways for investments. Most people don’t know that notes are out there. I’ve spent twenty-plus years in real estate and it wasn’t until a random BiggerPockets article where I was able to figure out even what notes were. Those were the two key components for me. What about yourself?

I didn’t know your origin story as they say in the Marvel franchise. When I asked myself that, I pictured myself as a woman wondering if it would be great to get into real estate way back when watching the flipping shows and thinking that looks interesting. Like everybody else in the world, I knew in my mind that real estate was a way that people who had made a poor choice of profession from an earning standpoint to catch up and finish rich hopefully. That was the dream that pulled me in, then of course the rocky shoals where all boats die.

There are many things in real estate. My goal because I did have like most people, a lot of false starts and I spent money on things that didn’t prove to be worthwhile. I learned techniques that weren’t relevant anymore but were things that people wanted to make money teaching. I would say fair warning, I would like us to be honest about the pros and cons of different kinds of real estate. Someone who’s out there thinking they would love to either be in real estate because they love the idea of doing deals or they want to be in real estate to grow their wealth. You will all be very well-prepared once you get to know us for a while.

As you know me and others that know me, I’m the type of guy that doesn’t beat around the bush a lot. I will tell people honest feedback and opinions and whether it’s in regards to training, software, strategies, whatever it may be. Like most of us out there, we all started real estate or if we invested previously in real estate. We started with either buy or hold or fix and flip. Many of us have had struggles along the way and we will share our stories and other people’s stories along the way to educate everybody who is interested in understanding more about note investing.

I have tried so many kinds of real estate and it’s pretty unavoidable when you wander into this world as someone who doesn’t know yet what you want to do or what makes the most sense. I’m a marketer by trade and I have never seen as much great marketing as I do by people selling real estate training. Without somebody to clarify what are the strategies that actually work and which ones you should run away from, you’re a lamb ready to be fleeced. The interesting thing about Chris and me is we both did a lot of different things and we both arrived at note investing. It’s like reaching heaven compared to a lot of the things that we’ll do. I want to help people who are still on the periphery of real estate understand if they want to be active participants in doing deals, if they want to be passive investors with other people who are active or whether they want to jump in with both feet and take their lumps along with everybody else.

Hopefully, we will help you avoid a lot of that misery that we went through. We’re focused on helping you grow your wealth too. I’m a Baby Boomer, Chris is not. I’m running out of time to have enough money to retire and I know I’m not alone in that. I’ve read some pretty scary statistics. We’ll be doing at least one podcast, probably more than one on the subject of using IRAs. The point is you need one and you need to grow it as big as you can, as fast as you can and that’s going to be a big focus of ours.

Gail, you have a good point about trying to help people into real estate investing. The other component to it is we also looked to help the borrowers and that’s how we came about getting the name, Good Deeds Note Investing, was two aspects of that. To help others grow and build wealth throughout their career in this avenue of real estate, but also with the borrowers and the notes, contracts that we acquire from banks or hedge funds. The biggest thing you typically hear from people is they can never get somebody on the phone. There’s too much red tape and people will lose their house. I know there was an article about a large national bank who had a computer glitch that basically foreclosed on thousands of people.

Notes Business: One of the most gratifying things about note investing versus other kinds of real estate investing is that you have that opportunity to get involved with people and help them out.

They caught it on time or not caught in time? Did they actually lose their houses?

It was not caught in time is my understanding. Part of being in this investing world is bringing it down to the human level and understanding who the borrowers are and the people that want to stay in their house and finding ways to work with them to keep them in their properties. When you’re able to acquire some of these notes at a discount, it gives you so much more flexibility to work with borrowers in that relationship. I know one of the questions is, “Why would you buy an asset that isn’t performing?” Which is question number one or two after, “What is a note and why would you buy one that’s not performing?”

I had an investor who was with me when I was a flipper and when I wanted to transition him to notes, I started to tell him about it. He is the nicest guy and he listened very politely and then he said to me, “One thing I don’t understand, why would you buy a mortgage that nobody is paying on?” I thought that is genius, that is the question. Before getting into too much detail about that, I want to say that yes, that is to me one of the most gratifying parts of note investing versus other kinds of real estate investing. You have that opportunity to get involved with people and help them out. It’s true, there are some people who cannot be helped and you can’t get overly involved and feel more like a social worker than an investor.

There are so many people who are very decent people who just need a chance and they hit bumps in the road like we all do and they need a second chance. That’s what we’re able to do and it is the most gratifying thing in the world when someone says to you, “You really helped me, thank you so much.” I get those calls and notes and things from people. That’s going to be an important part. Both Chris and I agreed that that was an aspect of note investing that was very important to us and that we wanted to talk to people specifically for whom that idea resonates, who want to make a good return but are also very interested in helping people at the same time. They like the philanthropy of it.

As always, we do have a fiduciary responsibility to our investors. When I work with individuals and investors, that’s one of the first things I bring up is I talked to them about my strategy. I have an example of that as we start telling stories later on in the show, things like when you have a retired military, disabled veterans or other types of individuals. You’re definitely trying to make sure that you assist those people as much as you possibly can because the service that they’ve done for our country, you can’t put a price tag on that.

To me, anyone disabled. When I review a note, I do try to find out a little bit about the borrower although it’s limited. I tell anyone who invests with me, “We’re not throwing any elderly or sick person out of their home. If that bothers you, if that doesn’t fit your strategy, then you need to go work for somebody else.” We’re not going to do that. I’m in this to make money and make the world better. If you want to come along, you’re welcome.

I think the term that gets tossed around now is what people would refer to as impact investing. Investing for the greater good while building wealth but also having a social impact, a positive impact socially.

Anybody who likes stories of human drama, you have come to the right place. We have the most unbelievable stories of things that happen all the time in this business. Some will break your heart. They’re so sweet and beautiful and others are jaw-droppingly befuddling.

Everybody has a family member who knows a family that is whether it’s dysfunctional or the stories are so outrageous that the person should write a book and they are stories that you couldn’t make up. That’s pretty much note investing. You will have stories that you will be scratching your head on. There will be ones that you will be in complete disbelief on. Some of the decisions that you will hear will have you twitching a little bit, but you will enjoy stories. Some will be heart wrenching, some will be thrilling and some will be like, “Oh my God.”

Even if we weren’t making money, we would get a great perk out of this business.

Notes Business: You never really use your education the way you think you’re doing.

As we continue with the show, some of the structure that we’ll be discussing, we will be definitely sharing stories for everybody. We’ll also be discussing things like industry news. We’ll be having interviews with other investors and people who we think are very educated in the industry and we’ll also have some breakdown assets and some Q and A. We’ll try and cover various depths of note investing. For those who are interested in possibly pursuing this or those who are extremely passive and wondering more about what the industry and hearing some of the stories on how it works. We’ll be breaking those down in future shows.

I want to say to people who don’t know anything about real estate, you are in the right place. If you are already a note investor and trying to figure things out, you’re also in the right place. All are welcome to our big tent. Chris, why don’t we tell people how we came to this amazing career that we find ourselves in.

I was born and raised up in Massachusetts. I’m a die-hard Boston sports fan and now located in the mid-Atlantic region outside of Washington, DC, where I’ve been for the last ten years. I grew up from a family where my father was an educator and he was always helping people. He started out as a school teacher, then a principal, then a superintendent. As I’ve grown through my career, which I’ve been in real estate now for over twenty-plus years, after getting a degree in civil engineering, I went through the same path a lot of other people do. We bought a few buy and hold, my wife and I and built our primary residence, which I call our fix and holds, not really flip and hold.

At that point in time, trying to scale that type of business was very difficult. One day on BiggerPockets, I got caught up with a post by a gentleman by the name of Scott Carson, who I know you know very well as well. Scott has trained both Gail and I and he’s taught me pretty much everything I’ve learned or know about notes. As I started to get involved in the note side of things, I did lose my father. That’s when the whole social side of the notes started to hit me a little more in regards to looking back at his life and seeing how much he’s helped people in so many ways. People would come to me and say, “I’ve learned so much from your father. He helped me in this way,” or in another way. Having that been bred in me throughout my life, I’m now at a stage where I’m also looking to provide that assistance to others. I find real estate to be the best avenue seeing I do work full-time. I do note investing typically from about 9:30 PM until midnight to 1:00 in the morning. Having the experience in the real estate side of things and commercial buildings, apartment buildings, office buildings, retail buildings, has allowed me to take what I’ve wanted to do now and start to share it as part of real estate through notes. That’s my story. Gail, what about yourself?

I grew up in a little town in Pennsylvania just outside of Philadelphia. I went to college in Boston. I went to Boston University Journalism School. I was going to be a journalist. It was not long after the Watergate, Bernstein and Woodward, everyone. I think all the journalism schools were overflowing at that point and I had lots of fun in that business. My claim to fame in college was that I ran a magazine when I was in college and we got to interview the family and ghost hunters from the Amityville Horror. I was looking for a Halloween story for the magazine and I end up finding these ghosts hunters and they’re like, “If you want to come over, we’re going to talk to these people who had the worst haunting we’ve ever been involved with.” It turned out to be those people. That was super fun. My school, the most famous alumnus from my school, Boston University Journalism School, is Bill O’Reilly and Howard Stern. I always felt like no matter how famous or successful I get, I’m never going to be on that wall of fame and maybe I don’t even want to be. I’m not sure.

Impact investing is investing for the greater good while building wealth and having a positive social impact.

I didn’t realize Howard Stern went to BU.

You never use your education the way you think you’re going to. I had a fun career first in journalism and then in marketing, advertising and PR for a lot of years. I freelanced when my kids were little. That was super fun. I got to go on every trip. It drove them insane, but I loved every minute of it and now that they’re grown and out on their own, I think about those days a lot. After 9/11 happened, my husband and I who are both freelancers in the marketing world, we fell on hard times because after 9/11, everyone stopped doing advertising. There was a long lean period and we were lucky that during our peak earning years, we saved a lot of money and invested it wisely. That was the only way we got through it.

As things were starting to go a little better and our son was in college, that’s when the real estate crash happened. It was double whammies and it was difficult. I started to think about the fact that neither my husband nor I had a regular income and how scary and insecure that felt all of a sudden. It was a little after that in 2011 that my dad died and he had been living in a house in Pottstown, PA that he had designed and built for him when we kids were in high school, which is pretty insane. I grew up in the tiniest little house my parents owned the lot next door.

I’m the youngest, I was the last kid. When I was in high school, when I was about to leave, they build this huge house, a cool mid-century house. It was huge and had a very strange layout. It was one bedroom and one bath on the main floor and there are two beds and a bath in the basement. The house was in a very difficult real estate market. This is one of the first facts to know if you’re just getting started. The worst possible combination you could have is a house in a high tax area that has terrible schools and that’s exactly what this is. The particulars of that house and its location on a busy street and the way it was set and laid out and everything created such massive challenges as a first flipping project. Yet I took everything I had learned from watching flipping shows and I applied it.

How did that work out for you?

Notes Business: Real estate is a lifestyle business, and you have to pick what lifestyle you want to have.

It was amazing. We sold it. There was not even a sold comparable property to base the appraisal on. There was not a sold comp within a month, within a year but our house sold in less than nine weeks for just under asking price. Unfortunately for me, it was such a heady experience and it gave me a completely false idea of how easy real estate is. I was like, “That was fun. Let’s do it again.” Then I took some actual training and I learned to flip remotely. I was living in Philadelphia and I was flipping in Chattanooga, Tennessee. That was before Amazon opened there, so it was cute little town back then. Then I didn’t know what I didn’t know because the circumstances, the market was okay. I was able to do it. I didn’t have any major disasters with contractors but I started to do the math.

My initial plan was let me do a couple flips and take the proceeds and buy a hold property and I was looking at the Atlanta to do that. We’d need basically like $50,000 to get a single-family house that would rent for $900. I did the math for how long it would take me to reach my income goals and it was completely unacceptable. Around that time, someone approached me and said, “You should learn multifamily investing,” buying apartments. I learned that and I pursued it. I was an investor in a property in Fort Worth, Texas that had 140 units. It was a great property. We were turning it around, getting the rents up, getting the value up and everything was going great.

Then the management team, which had been handpicked by my partner, one of them embezzled a lot of money. I kept wondering why things aren’t going so well with this apartment building, “Why is there no money? Why are there no payouts to the partners, to the investors?” We found out and looking at the books, we saw that they created a bunch of shell companies that were selling services to them when really they were just siphoning off money. That was horrible. These are the kinds of experiences that tell you whether you’re in the right kind of real estate or not. You have to know who you are and what kind of misery you can tolerate and what kind you don’t want to go anywhere near.

If I get this right, if I understand your story, Gail, you flipped property from watching HDTV then you started flipping remote properties and then you jumped right into multifamily in that order.

This is the problem with having too much confidence. The wheels come off pretty easily as it turned out. I did do some more flipping after that thinking I may hate working with contractors, but at least I can keep an eye on them so they cannot steal all the money. What I did also was there’s a big public university in Philadelphia called Temple University where there are a lot of properties, duplexes and triplexes in the immediate area. I started buying rental student housing properties for investors based in California, then I would manage the properties. That was interesting. It’s nightmare-ish to be the property manager of a student housing property.

To know whether you’re in the right kind of real estate or not, you have to know who you are and what kind of misery you can tolerate.

I don’t wish to be a property manager of anybody knowing that I work for a commercial developer who we have property management division. When I meet with them, we always joke about who’s got it worse being on the construction development side. Honestly, I see the property management side. I feel for them.

They’re pale, they have nervous conditions. They’re losing weight. For me too, I kept finding stray cats and I’m a huge animal person so I could not leave a kitten under my car ever. I have spent an hour trying to lure them out of a gated courtyard throwing wet cat food at them. It’s ridiculous. Anyway, the big problem was that the school was full of entrepreneurs. I have to say these kids, it’s not a private university. There’s a lot of up-from-nothing kids there who are planning to be wealthy and they start in college. We routinely would find marijuana growing kits in kid’s closets. We would find the bins of mushrooms being grown under desks. A lot of the kids had guns. That part was quite scary. I’m a tiny soccer mom. For me, knocking on people’s doors knowing that they are armed to the teeth so I could demand rents, that never felt like a good plan.

The thing that drove me into notes was we bought a triplex for one of our investors. If you’ve ever bought properties, you know that any owner who knows he’s going to put something up for sale will lease it up. When he leases it up, he doesn’t care who’s in there as long as they have a pulse and he can tell you it’s fully leased. He’s happy. We had a triplex that had on the middle floor, four lovely farm boys from Lancaster, Pennsylvania, which is Amish country. They’re delightful people. In the basement were the kids with the Glocks who were growing the weed in their closets and the fragrance was wafting through the building all the time. On the top floor was a five-bedroom apartment that appeared to have regular kids in it. The weird thing was in the first two months that we own the property, that apartment and that one alone was home invaded twice in two months.

We thought this is ridiculous that even in a bad neighborhood, the same people don’t get hit twice unless there’s a reason. They broke their lease and moved out yelling at us that it was not safe and we weren’t keeping them safe. After they left, we found all their drug dealing paraphernalia, their scales and their blunts. The second home invasion had unfortunately gunfire. I was literally on my knees in a hallway cutting a bullet out of the wall to give to the police who couldn’t care less. They’re going to throw it into a drawer and that would be it. It came to me like, “What am I doing?” This is not what I thought when I said to myself, “Real estate, that’s the thing to go.” I’d heard about notes and it came into my mind about notes. There were no contractors, no tenants, there’s no nothing. It’s beautiful.

You get to sit wherever you want that has internet access, hire a third-party servicer, have an attorney and have maybe a preservation company, a realtor and several others that you can manage remotely versus pulling bullets out of walls. My intro into notes, similar to yours, was like I stated with the real estate and trying to expand it. Also the amount of hands-on work that’s required to watch contractors is overwhelming. With notes, especially on the performing ones, it’s like anybody out there that owns a home right now. You pay your mortgage bill once a month and you don’t have your banker or your lender calling you. It’s more or less the money just comes in the door. Then you have a third party to pick up the phone and make that phone call.

We always say that real estate is a lifestyle business and you have to pick what lifestyle you want to. I want a lifestyle where I am getting phone calls in the middle of the night because someone’s toilet is backed up because they put paper towels down it, because they ran out of toilet paper after you told specifically not to do something like that. Do you want a lifestyle where you have to watch a bunch of contractors who were stealing thing? Not just the normal garden variety, not doing the job well but doing a side hustle where they were putting stuff on my tab at Home Depot and thinking I wasn’t going to find out about it. Notes feel like the most hands off. We’ll get into all that in future episodes. It’s been a great first outing. I don’t know how you feel. We had fun and we’ll do it again soon. Take care.

Thank you. Take care.

This is Gail and Chris saying goodbye. Go out there and do some good deeds.