← Real Estate Investing School Podcast
Real Estate Investing School Podcast
243. How to Profit from Mortgage Notes with Nathan Turner
00:59:55
In this episode of the Real Estate Investing School podcast, host Joe Jensen sits down with Nathan Turner, widely known as The Canadian Note Guy. Nathan has carved out a unique niche in real estate by focusing on mortgage notes, an often-overlooked...
Loading summary
Transcript216 lines
- [00:00]
Nathan Turner
Here's your amortization chart at 9% where you are right now. Here's what the Bank's offering at 4 or 5%. Look how much money you could save just by doing that. And the reason I do that is because if I get paid off early, my return skyrockets.
- [00:16]
Joe Jensen
Welcome to the Real Estate Investing School podcast. I'm your host, Joe Jensen. Our guest today is Nathan Turner. He is known across the US as the Canadian Note Guy, having run several businesses including Fix and Flip Real Estate. He discovered mortgage notes in the US in 2009 and since became a leader in the industry in the private investment sector. He's the president of Earnest Inc. And manager of the US based Earnest Investing LP Note Fund where he actively manages assets for accredited past investors. He's also the owner and host of the Diversified Mortgage Expo, which is. Which is a leading annual note conference. This conference has a history of being an educational note pitching event where those who want to learn, network and grow come together. Nathan is passionate about his unique approach to real estate with its multiple exit strategies and win win situations. He's excited to take the roller coaster out of investing for his passive investors and allow them to just sit back and enjoy the ride. Well, welcome to the show, Nathan.
- [01:23]
Nathan Turner
Hey. Pleasure. Thank you.
- [01:24]
Joe Jensen
Glad to have you here. So the notes is interesting. My dad, who's kind of the one who first got me onto real estate, actually got quite a bit into note buying for a while, so I know a little bit about it. I've owned a couple notes, but it's definitely more niche. It's not. You know, most of the guests we have on here, most of the podcasts you list to, people don't talk about notes. I would, I would guess half the people listening probably don't even know what we're really talking about when we, as I say that. Yeah, and the other half know there's. Yeah, there's a mortgage out there, but. But they don't really know how do you invest in mortgages. So anyway, welcome to the show, man. Glad to have you here.
- [02:02]
Nathan Turner
Hey, thank you. It's good to be here.
- [02:04]
Joe Jensen
That's cool. So you, where are. You're based up in Canada then, right?
- [02:07]
Nathan Turner
I am just outside of Calgary, Alberta. And so I'm just. If you know where Banff is, if you've ever heard of it, we're about a little over an hour away from that.
- [02:15]
Joe Jensen
Okay, awesome. Beautiful area from what I've seen online. I mean, gorgeous.
- [02:19]
Nathan Turner
We love it.
- [02:19]
Joe Jensen
Yeah, get up to Banff. It looks on my bucket. List for sure.
- [02:23]
Nathan Turner
Yeah.
- [02:25]
Joe Jensen
Well, sweet. So how did you get started in all this, then? It sounds like you didn't start with notes, but that's where you've ended up. What's kind of the origin story of Nathan Turner?
- [02:35]
Nathan Turner
Oh, man. So I came from a real estate background, like a lot of people that get into notes. I was doing fix and flip up in Canada, and it was a Fun time. I was 05.06 when everything was going really well. Every. I think everybody was flipping houses back then just because it was. It was easy and, you know, markets were going up and it would just look really good. So I did the same thing. I was doing some flipping, and as the market turned, I got stuck with one property, and I ended up renting it out because I figured that's what you're supposed to do, right? And so I rented it out. I figured out pretty quick. I liked the monthly income, but there was very little else that I liked about being a landlord. I just. I didn't see the appeal. I wasn't sure why people talked about this and. And, you know, had classes and all these other things. I was like, man, that's. This is not where it's at. There's a lot of work. And I was on the other side of the country from it, so that made it even more difficult. But. So that was kind of my intro to real estate. And then it was a couple years later, a friend of mine had moved down to California. He met up with some investors who had bought a portfolio of properties mostly centered in the Midwest. And they had bought this portfolio April 2007. So if you think back in time, like, that was like, the very top of the market, right when everything was right at its height. So as a result, you know, in hindsight, they. They way overpaid for this portfolio. It was supposed to be just a deal where they bought it and sold it back out to another company, but that deal went sideways. By the fall of 2008, they were like, oh, shoot, what do we do? And that's where I came in, me and my old partner, and they said, you know, we've got all these properties. We don't know what to do with them. We don't even know what we have. You guys make some lemonade out of these lemons and figure it out. So that was kind of our purview. Like, our mandate was just go and just do something with these properties with no operating budget, just a power of attorney. So it ended up we figured out that selling them on terms and Creating notes was really the best approach to what we had. So that was my introduction. I'd never heard of notes before. We kind of actually thought we'd invented solar financing and that's how we got started. And then just the more I got into it, the more I met people and went to conferences and it just became a thing. And I started buying up non performing and getting them re performing if we could. And it just took off from there. It's been great.
- [05:03]
Joe Jensen
That's awesome. So this firm that bought a big bundle, how many are we talking? 12, 100? Like how big was this bundle?
- [05:09]
Nathan Turner
60.
- [05:10]
Joe Jensen
So 60 units. They buy 60 units, plan on just moving it, selling it to this other company, go sideways, the market shifts. They're stuck with 60 units that, that they don't even know much about. And they bring you and your partner and say, hey, figure out how to make money with this so we don't lose more than we have to. They're probably not even really looking to make money, just save their butts a little bit.
- [05:33]
Nathan Turner
Yeah.
- [05:34]
Joe Jensen
And you guys figure out, hey, if we piecemeal these apart, separate the package, sell each one as a seller finance deal to someone that may not be able to get a buy at home, traditionally, then you can actually charge a premium, or at least, you know, premium to the market at that time, which was way below what they bought them for. But you're able to sell or finance them, create your own terms and, and become the bank. You gave them a mortgage, you know, for signing the deal. And, and you're like, how did, how did your investors, the guys that gave you the deal, were they pretty stoked on this or were they kind of hesitant at first or how'd that go down?
- [06:14]
Nathan Turner
Well, I think they realized like, these were our houses, not in good shape. They were, you know, bottom market to begin with. So they knew that they had a bunch of just junk that was going to be very difficult to resell in the first place. So what we presented them with was this is the way going to happen, like to put it just up on the market. You know, we're talking maybe $10,000 a door at that time. So we were going in and saying, we'll sell them for $20,000 a door on monthly payments. And then it was in the process of doing my research and like, okay, and then how do we cash out of these things? That's when I kind of stumbled into this note world because I, I ran into a guy out of Texas talking about buying what we were creating. I'm like, oh, that's it. This is the ticket. So I went down, took his class, and pitched him my notes, and we ended up. I ended up selling them to somebody else, but somebody that I had met through connections that I'd made at this note conference. And again, it just kind of opened up that whole world that this existed, that people were buying and selling notes. I was like, this is awesome. This is cool. One of the. Kind of the light bulb moment for me was, okay, so we got somebody living in the house. They're making monthly payments. They're the ones who are taking care of the property. So me, with my headaches that I was dealing with as a landlord, almost all go away. Not to say there's no work. Not to say there's no headaches involved. But, you know, I don't have to pay for the roof when it needs fixing. I don't have to replace the toilet. I don't have to pay property taxes. None of those things are my responsibility as the note holder. So that, for me was a big ding moment. I'm like, man, this is really where it's at. Because I like that monthly income. I just didn't like having to take care of the property.
- [07:53]
Joe Jensen
It's funny, as we're talking, I'm thinking of a property I'm literally just got escrow node today that I'm selling because it was just a huge headache. I ended up. I have never even read it out. I traded a mobile home for this little house, and then I just trying to get it ready to rent, but it's just been a, like, just a money pit headache. And I'm like, I'm just gonna get out of this. And I sold it, and I'm sick and sitting here going, dang it. Like, I'm literally closing this week. I'm like, I should be seller financing this. I even had people asking originally if they. If I would. And I'm like, no, no, I don't do that. Like, I long hold. I want to hold the asset.
- [08:28]
Nathan Turner
Yeah.
- [08:29]
Joe Jensen
But then last minute I was like, okay, just sell the thing. And I was just becoming such a headache. But I'm like, I should be seller financing this because then I don't have to do any of the repairs. I don't have to deal with any of it. I could be making cash flow. Long hold. I don't mean to interrupt you, but I want to ask, do you have a metric where you're going? I'm trying to make myself feel better here. And. But do you have a metric? Where you go, hey, if I could make this much off of just straight up selling it, I'd rather just have the cash today because that's valuable versus I'll take payments. Like, how do you decide to just sell it? Because maybe 10, you said, okay, well, we could sell it for 10,000 even though they're worth 20 or whatever, you know, they weren't expensive, but yeah. Is 10,000 a day worth more than those payments? Or how do you decide which way to roll with that?
- [09:20]
Nathan Turner
That's a great question, because the situation is different every time. Like for example, let's say I've got, you know, a property, maybe I have an investor on this one. And the investor is like, look, let's just get out of it. I just want my money back. I don't want to deal with anything long term. Let's just get the money out and go, well, in that case, I'm probably going to sell it for a little bit less. Just because that's the preference. That's kind of the, the direction we want to be going. Yeah, but again, my preference, I would rather sell it on terms and create a note and then just start collecting on those payments over the long term. You know, you think on your own mortgage for easy numbers, let's say your mortgage is $100,000 at, at today's rate, six and a half, 7% over the life of that loan. Thirty years later, you're paying well over $200,000 for the, for the use of that property, for the interest on that loan. So it's worth a lot more when you're hanging onto it long term because you've got that interest rate built in there.
- [10:20]
Joe Jensen
Yeah. Do you have a set rule for your personal deals or, you know, because obviously if you're working with investor, you just kind of do what they want, make them happy. If you, if it was your money and your deal, and again, it obviously depends on your goals at the time, I guess, but do you have any numbers? You were like, yeah, if it's this, I'd sell it. But if I'm making this, I'd rather.
- [10:40]
Nathan Turner
Note like, you know, not really. No hard and fast rule. Sometimes it's like, you know what, this is a headache property. I just don't want to deal with it. Let's just be done. There's value in that, you know, like there sometimes the dollars and cents is not the bottom line. Sometimes it's like this property has just been absolute nightmare. Let's just sell it and be done and move on to the Next thing. Whereas other times it's like, you know what, there's long term potential here. We can sell it and carry this note. That'd be great. So there's no hard and fast. It's very much a feel it out.
- [11:16]
Joe Jensen
So just for clarification, when we're talking about notes for people, we're talking about like a mortgage note. Basically, that's what the. Whenever you have a mortgage, the bank has the note on the property. We're talking about seller financing. So you have the note on the property. Now there's two ways to do it though. There's the actual official seller financing, where you are in the place of the bank and the bank does not own the home. Right. Like the title's in my name, I pay a mortgage, but the home's mine. And you can do that as a seller finance. But you can also do more of like a lease option where it technically it is mine until they fully paid off the note and then they get the title in their name, which gives me a lot more control. You want to speak to that and why you do it one way one, why you do it another way and how you personally do it.
- [12:00]
Nathan Turner
Yeah, that's a great point and interesting talking to somebody that's a little more experienced because most people don't know that there's, you know, we kind of the umbrella term is notes, but within that you've got mortgages, you've got deeds of trust which are different. And then you've got contracts for deed. That includes land contracts and includes agreements for deed. Kind of different states call it different things is really what it boils down to. But yeah, it really makes a difference on which one. So with a mortgage or a deed of trust, I'm going to lump those two together just because it's easier with those. What it really means is the borrower, the person living in the house, they're the one on title.
- [12:41]
Joe Jensen
Yeah.
- [12:41]
Nathan Turner
So they own the property. I'm just the lender in that case with that contract for deed situation, I actually remain on title the whole time. So I've agreed to have this person buying this property on terms, meaning they're making whatever it is, a thousand bucks a month payment. Part of that is going to be principal, part of that is going to be interesting. And same with a regular mortgage. It's an amortization chart. So at the beginning you're paying mostly interest and then over time you're paying less interest and more principal. And that's just the nature of the amortization that's just how it works. But like you say, the advantage I think is if you can stay on title, that can be an advantage. It can be a disadvantage. It depends on how you look at it and what your goals are. I like those kinds of contracts because I am on title. So if there's a case where the person defaults and they're not making payment, it's much easier for me to turn that back around and get possession of the property again so I can turn it back out and do something else with it.
- [13:45]
Joe Jensen
Yeah. So those listening what he's saying, if they don't make their payments, he doesn't have to foreclose. Right. Like you're not gonna have to go through the whole foreclosure process because they never owned the property. It's still in your name. You can basically just evict them and move on with your life. And you sell on the property and turn around and sell it. Yeah. And what's cool with these is like let's say it was a more beat up property. You know, somebody comes in, they're buying it, they don't own it yet, they're buying it with, you know, so they spend, they spend five years fixing it up, getting it better and then they default. You give them a chance, we're not crooks. You give them a chance to catch up, Give them a chance, whatever. You know, you're not like stepping in the moment, they're one minute late or anything like that. But let's say they truly are, are not going to make the payments. You evict them, your home's probably in better shape now than when you first leased it out. Because these aren't a class beautiful homes that a tenant is going to come in and trash. Typically when you do these, like say they're, they're already beat up and that you'd have a hard time selling and that's why you do the lease. And then you end up back with the property in better shape than before and you can start the whole process over again. I don't know if you've ever experienced that, but I've seen that happen.
- [14:51]
Nathan Turner
Oh, definitely. Yeah, we've definitely had that. And, and it, as much as I actually don't want the property back. So if there is a default, I am working with them and saying, look, what else can we do if that, if a thousand bucks a month is not good, could you do 800? And then we'll adjust if we need, if that means we need to raise the interest rate by half a point that means we've got to stretch out. Maybe it was a 20 year loan initially. Now we've stretched out to 30 years, something like that, to help make that, that monthly payment manageable. I am more than willing to do that because I don't actually want the house. It is so much easier just dealing with the paper. So I would rather have that be the outcome.
- [15:30]
Joe Jensen
That, that's cool. So. So those are some of the pros of, of doing a con. Yeah. In Utah, we don't have contract for deeds, so I don't know what we'd call it here. I just call it a lease option. It's like you're leasing it with the option to buy and you legally can be the first to buy. And here's the time frame. But you know when you're. When they don't actually put the title in their name yet, where you're not just the bank, but you're financing, but you still own it, you have that control, like you said, where you don't have to foreclose, the home's in your name. What are the, what are there other pros besides that and what are some of the cons?
- [16:04]
Nathan Turner
That's the biggest one really is just getting that back. Some of the cons is it kind of depends on the state. So for example, like a state, like Florida, for example, um, if you, you can go ahead and sell a property on a land contract or contract for deed or whatever you want to call it, the reality is if it there's a default and you end up going to foreclosure, it is going to be a full foreclosure. The court is going to treat it as if it was a mortgage. So there's no advantage in that. Oh, interesting scenario where it's like because you already own the property, you don't have to do the full foreclosure. In Florida, for example, there's a few states like that. Florida, Texas is another. Anywhere in the Northeast, basically North New York, New Jersey, any of those places, they all treat it the same way. So it's a state by state law and you have to make sure you're aware of how that works for that state. In Utah, I'm not sure. I don't know that I've ever bought any.
- [17:02]
Joe Jensen
We don't have contracts for deeds. So if you did, you're not filing anything like that. You know, you're just signing a rental agreement. At least this is the way I've done it. Again, like I know what I know and I don't know what, I don't. But you know, you virtually just sign a rental agreement and they have another, a lease option note that you sign as well, but you're not filing that at the county. They don't have any ownership. There's no contract for deed that I know exists the way we do it. But yeah, in those other states, you know, you, I guess. What, what states do you mostly work in?
- [17:32]
Nathan Turner
A lot of Texas, you know, it kind of tends to be sort of the eastern half of the country. So like Michigan and down to Texas and everything else in between.
- [17:40]
Joe Jensen
That's most you not just do like a, a rent, a lease option agreement and not actually do a full on contract for deed so you don't have to deal with that kind of foreclosure.
- [17:51]
Nathan Turner
I think you could, but, but in Texas, the interesting thing is foreclosure in Texas is very fast. In theory you could get one done in two months. I, I've never been able to do that fast. The fastest I've ever had one done is four. But still like that's, that's pretty fast. So in Texas for example, there's actually no advantage either way to doing that contract for deed. And actually the courts don't like them, so you probably get hung up. So Texas is a deed of trust state. So you just write it as a deed of trust to start with.
- [18:22]
Joe Jensen
Interesting. Okay, so what are the downsides and that's the upside of keeping it in your name and then taking payments until it's paid off before it goes in their name, whatever we call that. And what, what are the downsides of doing it that way as opposed to doing like what an actual traditional bank does where the home's in the set the person's name and they just give them, you know, the loan.
- [18:45]
Nathan Turner
Well, there's a couple of downsides. So one, you are on title. So if there's any kind of title issues that actually comes back to you because you own the property. So there's potential title issues which may or may not be there. So that's a potential downside. The other one really is property taxes. And the property taxes in this case, because you are on title, they are in your name. So with a mortgage, the taxes, I'm not directly responsible. Whoever's living in the house, they're the one on title. So they are directly responsible. If they default, it can become my problem because they come before me as the first lien holder, so it can indirectly affect me, but I'm not directly responsible for that. And to me that's an important enough distinction that I'm not the one actually.
- [19:32]
Joe Jensen
Throwing to that, though. So if you own the note and the property's in your name, then it is in your name. You said there's somebody else that is in their name. I. That lost me.
- [19:42]
Nathan Turner
Right. So if it's a mortgage situation, then the person living in the home, they're the one on title.
- [19:47]
Joe Jensen
Yeah, yeah, yeah, yeah.
- [19:48]
Nathan Turner
They're their deal.
- [19:49]
Joe Jensen
Right. If you're just the. If you literally just own the note, but the title is in your name.
- [19:55]
Nathan Turner
Right. But if it's at least in your.
- [19:56]
Joe Jensen
Name, it's a downside because you kind of have some liability there. The taxes are in your name. Maybe potential litigation because you own the property.
- [20:06]
Nathan Turner
Yeah, potentially. And so, you know, potential. So how much of a risk is that? Probably not very high, quite honestly. But it's there. And so it's just something to be aware of, if nothing else.
- [20:19]
Joe Jensen
Yeah, it's funny. So I just experienced this with a vehicle. I was like, cool, I'm gonna lease option my vehicle out. Like, it wasn't worth very much. And, dude, if I do a rent to own, like, some people give me way more over time. So I was like, cool, I'm going to do it, you know. And so I did it. Wrote up the contract, we put the. The vehicle in their name so they could go register it, insure it and everything like that. I didn't want it in my name. And so I was straight up just the note holder. I was the bank, you know, the lender on it. Yep. He made one payment and then disappeared and has never made another payment. I'm like, oh, crap. And so I called the cops. I'm like, dude, someone stole my car. Blah, blah, blah. They're like, cool, we'll help you out. And they're like, no, it's in his name. Yeah, yeah, we switched the title to his name. I didn't do a lease option. I didn't do the option to buy down the road. I sold it to him.
- [21:12]
Nathan Turner
Yeah. So if you can find them, maybe you could get something done. But, yeah. Yeah.
- [21:17]
Joe Jensen
So I don't know. They're like, you're gonna have to go file a civil case and, like, file, like, compound. Like. Yeah. And it was just this whole mess. I'm like, I don't even know if it's worth it. I mean, the car is worth, like three, two grand or something, you know? I'm like, I don't know if any of this is worth it. And I did get a Thousand upfront and then one payment. So I almost got what it was worth off that. But it was just kind of eye opening to me. I mean, houses are harder to run away with, which is why I like. And they go up in value, but it was just kind of like, oh, you think you're so smart, Joe. And then I kind of got kicked in the teeth. He pays and then runs away. And, and I. And it's hard. But my point was one, to just like make myself look an idiot. But no, my point was it's hard to get it back if you don't own it. You know, it's harder to just say, hey, you owe me money, as opposed to you're in my house or you're driving my car. You have more leverage, especially in Utah or certain states. Yeah. Than if you actually put the asset in their name. That gives them a lot of power because it's theirs, you know, which is, that's the cool thing about owning real estate guys is like, you own it, you know. Yeah, that's cool. So do you, do you own real estate as well or you like 100. Just note guy, like fully converted.
- [22:33]
Nathan Turner
Just notes after, you know, the further I've gone along, the more I'm like, you know what? Why am I trying to get to the property? That initially, that was my, that was my whole approach. I was buying these non performing notes with the intent of getting the property. And that was my whole approach in the beginning. And then as it kind of went on, I'm like, so why am I trying to get this property? It's just a lot more work. Then I got to do something to it. Then I got to pay taxes. Like there's, there's things involved and I don't want to do that if I don't have to. So, so. And it's an interesting trade off. And, and my wife and I debated over this for a while and then it, you know, again, same thing. The more we went on, the more she's like, no, I'm with you notes all the way. Forget it. We don't need the property. They're just, they're more work than it needs to be. We don't get the appreciation of the property, which is the downside. But we don't have any of the headaches that go along with. I mean, again, not, not to say there's nothing there. There's. Everything's all roses and perfect all the time. Of course not. But, but it's far less because we're dealing with homeowners not renters.
- [23:37]
Joe Jensen
But you're not like me, where I just had to replace three water heaters this month. You know, 500 bucks a hit, you know, just 1500 dollars was gone. Bye, bye. You know?
- [23:45]
Nathan Turner
Yeah.
- [23:45]
Joe Jensen
Not to mention paying for the, the time, the labor and the coordination. You don't replace water heaters.
- [23:50]
Nathan Turner
No. Yeah, your water heater's broken. You don't call the bank unless you want a loan. That's why you call the bank.
- [23:59]
Joe Jensen
Yeah. No, I love that. I think that's, that's super interesting. The, yeah, the, the passivity. I always say when I was trying to get someone to give me a seller finance, like, hey, you know, will you sell a finance property so I can buy it? The pitch, the line. And for those listening, it's like, hey, there's only one true passive player in real estate and that's the lender. So I'm going to upgrade you from landlord to lender. Let me buy your house. You carry the note and that's kind of the way I explain it to get a seller to sell me on seller financing to sell me their property. Right, but that's really it. Like you're like, I don't want to be a landlord. Like it's not just a line as a sales pitch to convince some people, somebody who doesn't understand what they're doing, to give me their house. I mean that's your whole philosophy is like, upgrade myself from landlord to lender and just own the notes. Like it's powerful.
- [24:56]
Nathan Turner
And then so that you, you convince somebody to sell you a note on terms and you say, I don't know. And then by the way, I know a guy who will actually buy the note from you if you decide after a year. You know what, I don't really want to continue making like receiving payments like this. I'd rather have a lump sum. Great, I'll buy that. Then I step in and I cash him out. And then he's now out of the picture, he's got his lump sum. I step into the role as the lender.
- [25:19]
Joe Jensen
That's really interesting. Okay, so this is cool because I don't know a lot of people that do what you do. But yeah, because a lot of these notes, most, not the ones I buy, I like long term notes, but a lot of them will have a five year balloon, three year balloon, seven or ten if you're lucky. So you're saying at a five year, you might be able to go in, you buy the note and we don't have to go get a DSCR loan or some traditional financing, we can just go to you and you virtually become a long term private lender.
- [25:51]
Nathan Turner
Yeah. And at any time, if literally if the seller, yeah. If they've created that note and like one, two months in, they're like, ah, actually I'd rather have that lump sum right now. Great. There's buyers for that note and they would buy that right away. There's, you don't have to wait for the balloon, you don't have to wait for any kind of a trigger. It's just I want my money now.
- [26:10]
Joe Jensen
And so you obviously offer a discount on it. Let's say, you know, you owe 200,000 on the note. Right. And so the seller, you know, is carrying this $200,000 note and you come in, you're going to offer them what, 150, 180, 100. Like how big of a discount do you normally offer on these notes to make it worth your while?
- [26:30]
Nathan Turner
Well, the biggest determining factor is what the interest rate is. So it's, it's, there's two things really. What's the interest rate and what's the term? If it's a 30 year term and it's a 3% interest rate, we're not going to get a deal done. My discount is going to be massive and you're not going to like it. And you'll think I'm trying to mess you over somehow, but it's just kind of how it is because I, so I run a fund and I need for that fund, I'm searching for a specific yield target. So if we're looking at a really low interest note that it's just not going to work. Your number, My number's never going to be good enough for you.
- [27:04]
Joe Jensen
Yeah. The only people that can afford to lend it 3% for 30 years are the banks that get it for free because they can do fractional lending. Go read the Creature from Jekyll island if anybody's listening and go understand fractional lending. The banks can lend nine times. I don't know if it's like this in Canada, but in America banks can lend nine times the amount of money they have in their storehouse. Yeah. So if a bank has $100,000 in their, in their, you know, safe, they can lend out 900,000. I can take a pretty low interest rate when I'm lending out money that doesn't exist.
- [27:38]
Nathan Turner
Yeah, exactly.
- [27:40]
Joe Jensen
You and me and your investors, it's real money that actually needs a real return because it's actually exists and People have worked hard for it.
- [27:47]
Nathan Turner
Yeah, exactly. They get a warehouse line of credit and at ridiculously low rates, you know, half percent maybe, something like that. And then they're able to go out and lend it and re. Lend it and relend it again.
- [27:57]
Joe Jensen
Yeah, so. So you guys. Yeah, so if it's a high interest rate, though, that's where you'll be able to. You might not even have to discount it as much as I was saying. But I'm sure you never offer face value, do you? I mean, I guess you might. No. Okay.
- [28:13]
Nathan Turner
No. You know, because even. Even if the interest rate is so my target yield for the fund is 12%. So if somebody's offering a loan where the interest rate on that's 12, I'm actually probably going to buy that at 12 and a half to myself. So I'm going to offer in just a little bit of a discount because there's always the risk that I'm taking on, first of all, just owning the note in the first place. There's also another risk where if I buy that note today, what if they pay off tomorrow or next month? Then if I've just paid for it and I got paid off, that was all for nothing. I got. I got nothing in this whole deal.
- [28:48]
Joe Jensen
So I have the transaction cost because it does cost money to do all the transactions. Even if you buy a $20,000 note for $20,000 and they pay it off, not like you have $20,000 in your pocket, you got 15, 18, maybe, minus.
- [29:02]
Nathan Turner
All the costs that went up front.
- [29:04]
Joe Jensen
Yeah.
- [29:04]
Nathan Turner
So there's always going to be some discount in there, a higher interest rate. For sure. The discount's going to be smaller, but. But there's going to be something.
- [29:11]
Joe Jensen
But if you had a Note for like 15 or 19%, you. You maybe wouldn't discount it too much. You'd just be happy to take that note.
- [29:18]
Nathan Turner
I'd probably be pretty happy just to take that as is. Yeah.
- [29:21]
Joe Jensen
Cool. That's interesting, Matt. So. So I'm. And feel free to tell me to shut up if you have things you want to share. Love in this conversation. So you, you started out and you started being doing the seller financing to get rid of that bundle. Let's pivot it to when you started buying notes and the difference between like, hey, I own this property, I'll sell or finance it to I'm gonna go buy notes. I think that's the gap. A lot of listeners are like, wait a second. Like most people understand seller financing now in the real estate world, because it's, you know, creative time. That's like, the whole world is like, oh, creative financing. So cool. Now you know. But what about buying notes? How does that work? And then the other question, I'll just say it and we'll forget it maybe, but we can address it, is you're like, you can go find someone to buy. No, like, where do we find guys like you, these note buyers? Like, if I wanted to sell the note. But anyway, let's just first start with the first question, though. Like, how did you get into buying the notes? And let's talk about the difference between that than just seller financing as the owner.
- [30:27]
Nathan Turner
Yeah. You know, when I got started, I went to that very first conference, 2009, and I was like, man, this is awesome. This is so cool. I love this idea. But it was really still all about creative finance and seller finance. Like, that was really kind of what was being taught at the time.
- [30:42]
Joe Jensen
Right.
- [30:42]
Nathan Turner
And then it was during one of the classes that I took. Literally, it was. Must have been 2009 or 10, where they did like an hour or two hours on bad debt about buying up debt where people were not making payments. And I was like, that sounds so crazy. That sounds super risky. Why on earth would you do that? But then I started looking at it more, and. And you gotta understand, back then, pricing was ridiculous. Like, you could. You could get, you know, 15, 20 cents on the dollar was not uncommon. Like, that was pretty standard. And so.
- [31:15]
Joe Jensen
Meaning if someone has a note for a hundred grand, you could go pay $20,000.
- [31:20]
Nathan Turner
Yeah.
- [31:21]
Joe Jensen
And the sellers being like, well, yeah, and they're not making payments on it. Like, it's not worth anything if they don't make payments. So that's why they're willing to just sell it to you at such a large discount.
- [31:30]
Nathan Turner
Right. But then I look at that and I say, okay, so I can buy this for $20,000. But the house used to be worth 150. Now it's only worth 75. But I'm like, still, that's a ton of room in there. So if I do end up taking back the property, that's fine. I'm not worried about that. So that was, again, that was that beginning where I'm like, oh, I want the house, I want the house. It was a cheap, easy way to get houses. And then as it kind of progressed on pricing, kind of over time started getting a little bit more competitive, where instead of 20 cents on the dollar, now it's 30, and now it's 40. Now it's 50. And to the point where today actually it's hard to find them. First of all, there's just much less non performers out there, which is kind of a good thing. That means the economy is in a pretty good spot. And at the very least it means that nobody's selling off the non performers that they have.
- [32:21]
Joe Jensen
Do you only buy non performing notes? And by guys, listen, when he says non performing, it means the person's not making payments on their mortgage or whatever. So do you only buy non performing or do you ever buy like fully performing ones?
- [32:34]
Nathan Turner
I actually switched. So this was about a year, year and a half ago we decided to open up this fund that we're running and now we're only buying performing cool in the fund. It's just, it's so much easier to manage when I'm, you know, looking at it and I have to make payments to my investors every quarter. Then a non performer, they're extremely unpredictable. They're a lot of fun and they're really cool to work with, but they're very unpredictable. So the performing just makes way more sense.
- [33:04]
Joe Jensen
And the longer the term, the better for you. Then I'm guessing if you're getting a 12, let's say you'd like to. 12% is what you want for your guys. So 12, 13%, so there's room for you or whatever. If that's rolling out for 20 years, like good, right? Like, or need it. So hold on, in my brain I'm thinking, wait, wait, so you're gonna, you're a private lender virtually, where you'll take a 12% or 13% for like a 30 year loan?
- [33:35]
Nathan Turner
Yes. So let's flip it around. So let's say somebody has done a seller finance deal and they put in their interest rate of, call it 9%. Then I would come in and let's, for easy numbers, it's a 30 or a hundred thousand dollars balance. I'll come in there and I'll say, okay, I'll give you. And you know, different factors play into it. But let's again, just for conversation, I'll pay $75,000 for that. So now I have the right to collect $100,000 principal balance over the next 27 years because they've made a couple years of payments and now I'm the one that's stepping in. So because I bought that $100,000 9% interest rate balance at 75, that automatically boosts up my return. So now I'm sitting at a 12 rather than the 9 because I bought.
- [34:28]
Joe Jensen
It on sale Gotcha. So even though the interest rate didn't change the, on the paperwork, your yield is, is a 12% because you didn't pay 100 grand for it.
- [34:41]
Nathan Turner
Exactly. Yeah.
- [34:42]
Joe Jensen
As opposed to if I came to you and said, hey Nathan, I've got this hundred thousand dollar property, can you just give me a hundred grand at 12% interest for 30 years and just be my private long term lender? That doesn't really. Would you do that for a long.
- [34:58]
Nathan Turner
I would have to really look at it. I would prefer to buy a note that has been created by somebody else. It's easier for me. I don't have to go through the process. In that case, I'm not the one actually qualifying the borrower where I step in as something that's already created. They've already gone through all that, so it's the laziest way to invest because somebody else already did all the hard work out front, created the note. I'm just now looking at the numbers that you created and say, yeah, that looks good, I'll give you this much. As long as I'm hitting my yield numbers, then that's what I'm looking for.
- [35:36]
Joe Jensen
Well, and then the protection side, like say it's different than that, is you, you've got this margin of 20, 30%, 50%, 20, you know, it's 80% back in the day, whatever. If things go south, you're not, your only benefit isn't just, hey, I'm getting a 12% return. You're like, I've got this margin between what it's worth and what I owe, which just gives you so much safety. And you know what I read in your bio, the multiple exits option, you know, because if you lend me 100 grand at 12% for 100 grand property. Yeah. You're getting a good return. I'm stoked. I got a long term private lender. That's what I'm looking for. Sure, but you don't have any equity margin, you know, that puts you in a riskier spot, which is probably another reason why people don't do it that way.
- [36:22]
Nathan Turner
Right? Yeah. And can you get short term loans like that? Yeah, definitely. You know, if you're looking for a 12 month loan and at 12% and 3 points up front or something like that all day long, you can find that all over the place. But for a 30 year note, that's gonna be tough.
- [36:37]
Joe Jensen
But I'm interested though, in this. I mean, so. But what if you did have the discount? What if I came to you, Nathan, and it Was like, hey, I've got this $100,000 property, it's worth 100 grand. Will you give me 80 grand on it at 12% interest for 30 years? You hit metrics, right?
- [36:56]
Nathan Turner
I want at least a 25% equity spread in there.
- [37:00]
Joe Jensen
Would you give me 75,000 for, for 30 years at 12%?
- [37:06]
Nathan Turner
Nobody's actually ever approached me on that. But yeah, I'd certainly look at that.
- [37:10]
Joe Jensen
I mean I'm not like, I'm just on one today, I don't know. But I'm like, dude, there's so many people, it's hard to find long term debt. You know what I mean? That's any good. And some people, in some situations I would rather pay you maybe 12% if the numbers work to go be on a balloon at 8 or 9 or 10% that could balloon to who knows what down the road and just know I'm solid for the next 30 years. Especially I might get a better amortization because some of these DSCR loans are only amortizing for 15 or 20 years. If I could go get a 30 year AM and it's locked, I'd rather give you 12 than the DSCR Note 9.
- [37:49]
Nathan Turner
That's a good point. And as long as you're doing it in an entity, any kind of a company entity, then yeah, then that's definitely doable. And I say that because if it's in, if it's in a personal name, somebody's regular name, there's way more laws surrounding that. Lending to natural people versus lending to corporations, companies, that's a different set of guidelines.
- [38:14]
Joe Jensen
Who are these laws protecting? Because I've heard that a lot of it. Because for me I'm like, great, I'd rather have the loan being an LLC's name instead of my name because now I don't have debt against my personal name. That's awesome for me. So I like that they do that, but why do the lenders do that? What is the logic behind that?
- [38:28]
Nathan Turner
So it goes back to, back to the crash, 2008, 2009 and in 2010, 11, they started creating these, whatever legislation trying to protect consumers. The argument was that during the run up before the crash, either predatory lending or just irresponsible lending, I don't know, depending on what side of the coin you're on.
- [38:51]
Joe Jensen
That one definitely both was happening.
- [38:53]
Nathan Turner
Yeah. But they were giving out loans like it was candy. And so there was an effort to stop that. So the law that was passed is called Dodd Frank and part of Dodd Frank's Created the cfpb, the Consumer Finance Protection Bureau. I probably didn't come out of that, but they're a big part of that today. But they go through. And for example, as really at the base of it, it's just making sure that the borrower has the ability to repay. And so you're not going after somebody and saying, hey, I'll give you all this money. Their debt to income ratio is like 60% or some stupid thing like that. There's no way they can actually afford that loan, but they'll take it because they're desperate. So it's a, it's, that's the reasoning behind it and behind all the laws.
- [39:38]
Joe Jensen
Gotcha.
- [39:38]
Nathan Turner
In my opinion, I think they went a little bit overboard and that's, we're in process of trying to scale that back a little bit and, and make it a little bit more feasible for people to lend to natural people. But that's, that's in process.
- [39:53]
Joe Jensen
That's interesting. Is there any states you, you don't lend in? Do you lend in New York?
- [39:58]
Nathan Turner
I don't.
- [39:59]
Joe Jensen
Yeah. No one lives in New York.
- [40:01]
Nathan Turner
That whole New England area. Because I, I have, I bought two notes in New York years ago as kind of an experiment. They were already in foreclosure. So I'm like, that's fine. They'll, you know, I'll just finish out the foreclosure, we'll sell the property. You'll be great.
- [40:18]
Joe Jensen
Two years later, I'm gonna say two years.
- [40:22]
Nathan Turner
Unbelievable. Then it's still going on. I'm like, okay, that's why we don't buy in New York. Mental note. Check. Don't do that again.
- [40:28]
Joe Jensen
That's awesome, dude. This is super cool. So you start going and buying notes. You buy them at discount. You've got equity in there. Because you bought a discount, your yield, you know, goes up way more than the actual interest rate on the note because you bought it for less.
- [40:43]
Nathan Turner
Right.
- [40:45]
Joe Jensen
And, and then you're in this really good position now. You're using investor money for a lot of this. It sounds like now you just kind of run an investment firm that, that just, hey, go buy me stuff and get me an extra turn. Nathan. They give you your money?
- [40:59]
Nathan Turner
Give them, yeah, it's a 506C fund. It's for accredited investors. They put their money in. A lot of IRA money goes in there. And then it's. Just grow it without having to think about it. You get your, your quarterly distribution. You can reinvest that if you want. Have it compound. It's the easiest way that you're going to invest, in my opinion.
- [41:21]
Joe Jensen
So where are you making money on that then? So they bring in money, say, hey, Nathan, I've got 100 grand in this IRA. Will you go invest it and give me a blank return? Where do you make money running your firm up?
- [41:32]
Nathan Turner
So I get the spread? So we pay our investors 8%, and then we're. It sounds like a 4% spread. It's not actually, when you do the math, we're buying at a 12% yield. So it sounds like 4%. It's actually closer to 2. But we're making that spread. That's our. Our payment.
- [41:49]
Joe Jensen
Who pays for transaction costs?
- [41:52]
Nathan Turner
No transaction costs. We don't do that.
- [41:55]
Joe Jensen
No. So, but like, I mean, when you're buying, though, there is. Right. When you go buy a note, you got to pay to, like, do due diligence. You got to pay to, like, close it, or you just close it. I mean, I guess.
- [42:06]
Nathan Turner
This is where it gets interesting comparing to real estate. So there's due diligence up front. It costs a few hundred dollars. I'm checking title. I'm checking the actual property, making sure the value is there. That's really as far as expenses go on the. On the buy side. That's it. There's no title company. We're not exchanging title in most cases, unless we're doing like, a lease option contract or something. But in most cases, we're not exchanging titles. So it doesn't go through a title company. So there's no cost there.
- [42:36]
Joe Jensen
So we just. So how. What is the process of exchanging the note then? Like, who does that go through to make sure it's vetted and correct?
- [42:44]
Nathan Turner
That's where it gets interesting. Yeah. That. My very first transaction, it's like I'm biting my nails thinking, this better work, because this is what I was told, how it goes. So this better work. This business, more than anything I know, is so much about relationships. So you got a note for sale. I say, yes, I'll buy it. We have a sales agreement. I send you money, and then you send me all the documents, all the collateral documents to the loan. That's it. So the transfer itself is an assignment of mortgage and then a launch. And like, it's those two documents along with the whole stack of docs documenting the mortgage itself and the note and the terms and all those things.
- [43:23]
Joe Jensen
You file that with the county, then.
- [43:25]
Nathan Turner
You file that assignment of mortgage. That gets recorded the county. And then as of record now, I am the one collecting on that Mortgage.
- [43:32]
Joe Jensen
So that's it. You just do an assignment of mortgage, file it at the county for 50 bucks or 10 bucks or whatever.
- [43:37]
Nathan Turner
That's it.
- [43:38]
Joe Jensen
And that's your transaction cost.
- [43:39]
Nathan Turner
That's it. So that's for us, that's built in. We don't charge extra to investor because there's no point.
- [43:47]
Joe Jensen
Right. So there's virtually no transaction cost. Yeah. It's not like you're paying an agent and a lender and a title company.
- [43:56]
Nathan Turner
No, but that's where the relationship comes in. You better know who your seller is, you better know who your buyer is and know them well enough that you're willing to just send money. I'm going to send you money. You're going to send me the stuff. Right? Right.
- [44:09]
Joe Jensen
You don't even use an escrow company or anything in between.
- [44:12]
Nathan Turner
You can sometimes. I mean, if you're doing like a really big deal, maybe that's something you want to do, but for the most part, no, there's no escrow. There's no anything. You send the money, I'll send you the docs.
- [44:22]
Joe Jensen
Do they sign first or who pay? Like, do you pay before they sign or do they sign before you pay?
- [44:28]
Nathan Turner
Well, we have a, We've got a purchase and sale agreement. That's the signing and then. Okay, great. Sounds good. Here's the stuff.
- [44:38]
Joe Jensen
So you don't have a seller saying, hey, you promise you'll sell me this? Yep, These are the terms. I'll sell it to you. You pay them the, the full 75% of the note or whatever and then they sign the form. Actually signing the note over.
- [44:52]
Nathan Turner
They might send. I would. The way that I do it is I have them sign the paper and then send me a copy of it, but they can't actually send me the original document because then what if I go ahead and just record that and not give you the money? So it's, it's very much a trust business. And that's. I kind of like that. This, It's a small enough group of people. We know each other and if you do something stupid, everybody's going to know about it in a minute.
- [45:18]
Joe Jensen
So you're buying from institutions and other holders. Not as much as going to random one off like me. Let's say I'm just some Joe Schmo that has a seller finance note and I'm like, hey, will you buy this? Nathan, you're not really doing that because you don't know me from Adam. You're buying from other people that hold a bunch of notes.
- [45:36]
Nathan Turner
Mostly, yes, I do get approached with some of those single deals and we'll talk and I'll see, we'll see if hopefully we can come together and I can decide whether or not I trust you. And we're going to be able to make a deal, but it's done all the time. So it's, it's an interesting.
- [45:53]
Joe Jensen
But to do it cleaner for listeners. Like you could just do it through an escrow company where you give all the docs to the escrow company. The money goes to the escrow company, just like a normal closing and pay them, you know, a thousand bucks or whatever, 500 bucks and then call it. Good. Yeah, you could, I wanted to be careful, like if you didn't know the seller, if you were just like more concerned about the seller.
- [46:12]
Nathan Turner
But I'll tell you, like, if it's, if it's a hedge fund or something and you say, well, let's do this through escrow. They're going to be like, what? Why?
- [46:20]
Joe Jensen
Yeah, yeah. But I'm just saying if some listeners like a one off person finds a one off note and they just want to go buy, you know, try this stuff low key, you know, they can still do it safely without having to know or trust the seller. If they're just buying these random one off.
- [46:34]
Nathan Turner
Yeah, definitely. You can, you can for sure. But there and again there's making sure the escrow company understands what you're doing. And no, there's no exchange of titles. So don't run title everything that you normally do. Because we're not doing that. We're just exchanging the right to receive on this mortgage.
- [46:52]
Joe Jensen
Yeah. And talking about transaction costs. I'll just throw this out there because I was just going through it. I'm buying this one house subject to right now.
- [46:58]
Nathan Turner
Okay.
- [46:59]
Joe Jensen
And it's super clean. It's a person. I know, it's like the easiest thing in the world. I have all the docs I send over the title company. I'm like, let's just, you know, have you guys file the paperwork to put title in my name. We'll get some title insurance on it.
- [47:09]
Nathan Turner
Yeah.
- [47:10]
Joe Jensen
And then we're doing closing and they had like an $800 paperwork fee, a $2,000 escrow fee because it was a creative finance and they always just charge extra 2,000 for that. And then they charge us two or two notary fees because we both were signing with the notary. I'm like, wait a second. Like, first of all, I can get a notary for free. I don't need to pay $250 in notary fees. I, I don't pay your 800. And this is on top of the actual title insurance amount which was like $1200 for the title insurance. It is what it is. You know, it's pretty typical. But this other $2,000 fee plus an $800 fee plus a 250, I, I would, I told them to kick rocks and I'm like, I'm just going to do it myself. I don't even need title insurance because the home was just bought in like an FHA loan. Like they already did all that. I know it's clean title.
- [47:58]
Nathan Turner
Right.
- [47:58]
Joe Jensen
I'm just going to go pilot myself and get it to a quick claim deed or a warranty deed deed on my own and just kick the whole title company out. Like I couldn't believe how many fees they threw into that transaction when I provided all the paperwork. The seller is the cleanest, easiest thing in the world for them and they refused to drop the fees and they, they just, they fired me and I fired them and I was just like done.
- [48:20]
Nathan Turner
No, you don't need that. That's unnecessary.
- [48:24]
Joe Jensen
Yeah, I mean, and that was on top of the normal, you know, you know, title insurance fees and paperwork fees. Like this was all excess of that. I just couldn't believe it. I was, I'm not paying $2,000 for, for absolutely nothing.
- [48:37]
Nathan Turner
No, exactly. Yeah, there's no point.
- [48:40]
Joe Jensen
So that's super cool, man. So you guys do these, man, this, I, we might need to do a part two, man. I feel like I could talk to you forever about this stuff. If people do want to learn more or they want to like sell you a note or get you to start doing long term financing like I want you to do for me, I, where I'm like, hey, you give me, just lend me 75% of the value of the home at 12% interest but amortize it for 30 or 40 years. I'm stoked. So these 15 year amortizations the DSCR lenders are doing anyway, people want to go to you and follow you, do business with you. Where is that? How do they do that?
- [49:16]
Nathan Turner
Best thing to do is go to the website earnest investing.com and so we didn't really talk about this, but I'll just mention it. So on there you'll learn a little bit more about notes. There's my contact information, all that. There's a link on there also. I run an annual conference in the intro and that's, that's actually coming up, May 2nd and 3rd. So it's all about notes. No pitching. There's nobody's going to say run to the back of the room. It's not an allowed thing to say.
- [49:45]
Joe Jensen
Yeah.
- [49:45]
Nathan Turner
Just a place to come and network and learn more about notes and how it works.
- [49:49]
Joe Jensen
Where's that at?
- [49:50]
Nathan Turner
It's in Nashville.
- [49:52]
Joe Jensen
Cool. Which is in Nashville in May.
- [49:54]
Nathan Turner
Super fun. Yeah. May 2nd and 3rd in Nashville.
- [49:57]
Joe Jensen
That's cool. And so if people go to Earnest, what was the website?
- [50:02]
Nathan Turner
Earnest Investing.
- [50:03]
Joe Jensen
Earnest Investing.com.
- [50:06]
Nathan Turner
Yeah. And then they conference.
- [50:09]
Joe Jensen
Go on.
- [50:10]
Nathan Turner
Sorry. And then the conference is Diversified Mortgage Expo. And there's a link there on that website. But if you want to just go to the Diversified Mortgage Expo site, you can do that as well.
- [50:19]
Joe Jensen
Cool. Diversified Mortgage Expo. Yeah, you can go to that website. You can check that out. EarnestInvesting.com. check that out. And do you do any of this in Canada or just in the us?
- [50:30]
Nathan Turner
All us.
- [50:31]
Joe Jensen
All us. Gotcha. Cool. And it sounds like mostly like say those southern eastern states, not really New England area, but not a ton of California or Utah or Idaho or any of that.
- [50:44]
Nathan Turner
I've had notes in Arizona and New Mexico and Colorado, Nevada. Never in Utah. I almost bought one in Montana. Somebody outbid me on that one. But the vast majority, eastern half of the country.
- [50:59]
Joe Jensen
Cool, man. I feel like we barely scratched the surface of this. But thanks for letting me just jab you with all my questions and thoughts.
- [51:06]
Nathan Turner
Anytime.
- [51:07]
Joe Jensen
I think note buying is really interesting. I'm going to give you a little bit of a blast though here to kind of push back a little bit. Right. Because yeah, it's like cool. It's, it's passive. There's no head, there's less headaches. Different kind of headaches. You know, you can have all this leverage, but you don't own the asset. And at the end of the day, the note dries up and you're back at square one. You're not getting the tax write offs, you're not getting the appreciation. You own nothing at the end of the 10, 15, 20, 30 years. And so you're still in the hamster wheel. Okay, that's my like hard push.
- [51:40]
Nathan Turner
No, for sure.
- [51:41]
Joe Jensen
What's your thoughts on that?
- [51:43]
Nathan Turner
No, I, you're not wrong. That's exactly how it is. And so one of the interesting things when you're buying a note, a lot of the time it's kind of the standard term is 30 years. So if I'm looking at buying a 30 year term note, the chances of that going all 30 years are very slim. Most people, they're going to move, they're going to refinance because they're at 9% with me. And all of a sudden the bank's down, back at 4 or 5%, and I actually push them to go back and refinance. So I'll say, look, here's your amortization chart at 9% where you are right now. Here's what the Bank's offering at 4 or 5%. Look how much money you could save just by doing that. And the reason I do that is because if I get paid off early, my return skyrockets. The faster I get paid off.
- [52:26]
Joe Jensen
They're paying off $100,000 note that you only owed 75,000 on.
- [52:30]
Nathan Turner
Right, right.
- [52:31]
Joe Jensen
So you're getting 100,000 that you paid 75,000 for. You're like, great.
- [52:36]
Nathan Turner
So the faster I can get paid off, the better. So again, that the chances of them going all three years are pretty slim. As that money comes back out. You're right. Then I got to go back out and deploy it somewhere else. But that's for me, and everybody's different. But I've decided that's worth it for me. I don't want to have to deal with the property. I would rather use my time buying more notes as they pay off.
- [53:00]
Joe Jensen
And it makes me just think of that term, the velocity of money. You're like, yeah, I'm not sitting there building a slow empire over 45 years. I'm moving fast. Money, you know, it's moving and you've got the system in place to do it in the context. So it's like, it's not like a struggle for you to do. And then you can really take advantage of the velocity of money.
- [53:21]
Nathan Turner
Yeah, I've got more deals than I can handle that. My, my bottleneck is available capital. So that's why we put together this fund so we can. As money comes in, it's just going straight back out the door, which is great. That's fantastic. But we can always use more money.
- [53:36]
Joe Jensen
Cool. So if people want to invest, if you. They want to sell a note, they can hit you up earnestinvesting.com check out the expo. Diversified Mortgage Expo. That sounds super cool, man. Yeah, I wish I didn't have a hard stop in five minutes, but I do got to go. So I'm going to bust through our last four questions real quick, but let's have you back on. I would love to pick your brain some more. This is super exciting.
- [53:59]
Nathan Turner
Yeah, that'd be great.
- [54:01]
Joe Jensen
Okay, question number one of our final four is if you could send a text message to the whole world. Everybody gets your text message from Nathan Turner. What's it gonna say?
- [54:13]
Nathan Turner
Just keep going. Whatever it is you're dealing with, just keep going.
- [54:18]
Joe Jensen
Just keep going. All right, book or podcast recommendation? Besides anything we're associated with.
- [54:26]
Nathan Turner
Oh, one that I listen to. A podcast that I listen to that I find very valuable is called the Art of Manliness. And it's. He used to have a bunch of website with videos and things, and now he does it as a podcast. I find that one extremely valuable. I really like it.
- [54:42]
Joe Jensen
Yeah, that's cool. I haven't heard that one on here before, but I'm familiar with the. With the podcast. Yeah, I think it used to be a blog back in the day.
- [54:48]
Nathan Turner
I think it was a blog. Yeah. And then it's become a podcast. But it's, it's, it's a good one.
- [54:54]
Joe Jensen
The Art of Manliness. All right, question number three. What's the most expensive or interesting mistake that you've made in real estate investing?
- [55:04]
Nathan Turner
Um, gosh, I've made a bunch of mistakes. I think I'll, I'll, I'll share a near mistake where I've made a lot of mistakes, but this one kind of sticks out in my brain for whatever reason, so we'll go with this one. So years ago, I was looking at buying a note on a property, and from what I could tell online, I was looking at, you know, property value online. There was a giant spread in there. So there's tons of equity. It was underwater. So they owed way more than the house was even worth. But the price that they were offering was so low that I was like, oh, this is a no brainer, perfect. This would be a great deal. And I almost skipped a step. I almost didn't have somebody go out and look at the property, which is a normal part of what I do, just to give me their opinion of the value. But because there's such a big spread, I'm like, there's no point. There's such a giant spread in here. It could be worth $20,000 less, and it's still fine. But I was like, nah, I'll do it just so I have it in the file, just so I can get it in there and just say that I did it. And so I did. I sent somebody out there to go to look at the property. They came back and it was land and the house had been demolished. And I'm like, oh, my gosh, I'm So glad I did that because now all of a sudden, it was worth about what I was going to pay for that note. So. Saved my butt on that one. But that was a close one.
- [56:29]
Joe Jensen
You know, it's wild with that. I had the opposite happen.
- [56:32]
Nathan Turner
Oh, yeah.
- [56:32]
Joe Jensen
I'm buying from a wholesaler. I'm thinking I'm buying just some land and I'm like, cool. I'm going to rent the land out. Someone's going to put an RV or mobile home on it. All good. I buy it. There's a house on it. It's a mobile home, but there's already a property there.
- [56:50]
Nathan Turner
Yeah.
- [56:50]
Joe Jensen
That this. The wholesaler didn't even know because they were just wholesale and burning and churning. Like no one's doing due diligence. Honestly, no one checked the tax IDs of what lots they were selling. So the seller didn't even know what he was selling. It was just too huge mess. I knew what I was buying as far as the tax IDs, the locations. I knew I wasn't getting this one part of it for some reason, but it was kind of weird. But I ended up with this house on a mobile home. But it was a house on the property, and so I was able to rent it out for three times. You know what I. And there's this whole lawsuit there. They're like, the seller is like the person who thought they had bought that property three years ago, but they had actually just bought the driveway. They hadn't bought the whole parcel. They just bought the driveway. I bought everything except the driveway. And I knew I wasn't getting a driveway. I was like, I'll add a new driveway in the back. That's weird. I don't know. But it was out of state and I didn't have anybody to put eyes on it, so I ended up with this whole thing. And. And we'll see what happens with it. I. I don't know. But that's funny.
- [57:53]
Nathan Turner
They.
- [57:53]
Joe Jensen
The court said if no one does anything over like two years, then it. The lawsuit will drop. And it's coming up like this in the next month or two. It should be two years. And no one's actually filed. They don't have any ground to stand on because they. The person who bought it screwed up when they. Because they bought just the driveway instead of the whole parcel. So that's just one piece. That's at. Sadie, you know, similar to. You go put physical eyes on it, but go to the actual tax map and see if you're actually buying what you think you're buying?
- [58:22]
Nathan Turner
Yeah.
- [58:23]
Joe Jensen
And because I had to make them during closing, I had to have them throw in two or three more tax IDs because they were. This whole lot was split up into like five units for something.
- [58:31]
Nathan Turner
Okay. Yeah. Yeah.
- [58:33]
Joe Jensen
And no one knew what was going on, but it. But luckily I just. That was part of my process, like you said. Or I just. Hey, I'm going to check the tax ID and make sure the parcel is correct. And it's like, oh, they're missing a piece. Okay, we'll throw those in and.
- [58:44]
Nathan Turner
Yeah.
- [58:45]
Joe Jensen
And. Saved my butt. If they had done that, they would have been fine. But anyway, total crazy situation. You can end up without a house or end up with an extra one. So.
- [58:53]
Nathan Turner
Yeah.
- [58:54]
Joe Jensen
Be careful out there, guys.
- [58:55]
Nathan Turner
Yeah.
- [58:56]
Joe Jensen
Cool. Okay, last one, man. What's a one word or short phrase to encapsulate why you love real estate investing or note buying?
- [59:07]
Nathan Turner
Passive income.
- [59:09]
Joe Jensen
Passive income, baby.
- [59:10]
Nathan Turner
That's what it's all about.
- [59:12]
Joe Jensen
Nathan, this was a treat. I. I don't know. You brought me the energy today. You got me excited. I loved this. I. I definitely want to have you back on for more because I feel like we just scrapped the surface of what you're doing. But I'm excited to go check out your website and learn more about the note buying because I think it actually is the solution, the answer to what a lot of people are looking for with investing, and they just don't know it exists. So. Yeah.
- [59:35]
Nathan Turner
Yeah.
- [59:36]
Joe Jensen
Thanks, man. Appreciate it. Thanks for being on the show. I'm excited to have you back sometime.
- [59:41]
Nathan Turner
Yeah, pleasure. You bet. Anytime.
- [59:43]
Joe Jensen
Awesome. This is Joe Jensen signing off for the Real Estate Investing School podcast, reminding you to go make it happen.