BiggerPockets Real Estate Podcast - 211: Investing in Out-of-State Rentals and Notes with Bob Malecki

Episode Date: January 26, 2017

What’s the best way to invest in real estate when the numbers don’t make sense in your backyard? Today on the BiggerPockets Podcast, we sit down with Bob Malecki, a real estate investor who started by purchasing local rental properties but quickly shifted gears into two other niches: out of state rentals and mortgage notes. In this episode, Bob explains why he chose to make the switch and walks listeners through the step-by-step process for getting started investing outside your backyard! In This Episode We Cover: How Bob got started in real estate What a ROTH IRA is What to do when you’ve got a chunk of money to invest How to choose the right turnkey company Thoughts on using leverage to acquire properties Why he decided to transition to notes What exactly non-performing notes are A discussion on notes vs. rentals The risks of investing in notes What you should know about due diligence Where to find notes to invest in The value of building relationships What the future looks like for Bob And SO much more! Links from the Show BiggerPockets Forums Sunwest Trust Inc. Notes funds for individual investors. What are the best players? (Forum Post) Tax, Legal Issues, Contracts, Self-Directed IRA (Forum Category) MemphiesInvest RealtyTrac WeGoLook Books Mentioned in this Show Rich Dad Poor Dad by Robert T. Kiyosaki Equity Happens by by Robert Helms & Russell Gray The Magic of Thinking Big by David J. Schwartz Secrets of the Millionaire Mind by T. Harv Eker Tweetable Topics: “Nothing in the world is guaranteed.” (Tweet This!) “Assume nothing and document everything.” (Tweet This!) “If you don’t take actions, you can’t take a risk and you won’t make mistakes. Mistakes are necessary.” (Tweet This!) Connect with Bob Bob’s BiggerPockets Profile Bob’s Website Email Bob Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 211. About 32, well, with the profit on the sale, we ended up, our net income was 32,360 on a $29,000 purchase. So we made 111% profit on our investment over 12-month period. That's awesome. And I never even had to go look at the house. So for me, notes, that example is a small home run. It basically portrays how you can invest in. in an asset without having to deal with all the liability in that asset like you would as a homeowner

or as a landlord. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. What's going on, everybody? This is Josh Storkin. host to the Bigger Pockets podcast here with my co-host, Mr. Brandon Turner.

What's up, man? Hey, you know, I'm super excited. You know why? Why? Because I am going snowboarding tomorrow. And I haven't done that since I was like in high school where I broke my arm. So I've got a good record. Everybody on the slopes.

Yeah, it's going to be crazy. And, you know, I'm just going to do like the thing that noise everybody on the slopes. I'm going to go down like, you know, like when you go down sideways, just go on a snowboard and just wreck all the snow. That's me. It's like nine foot two inches tall. Right. First of all. Is that your mom?

Is that your mom calling? You should totally answer that. For two inches tall. That's going to hurt when you fall on your behind. It is going to hurt. Spend a lot of time on you're behind. You know, I'm okay with that. Yeah.

Anyway, I can see you're wearing the same red plaid shirt you were last week on the Intrara. Actually, this isn't my shirt. I'm actually shirtless right now. This is tattooed. Not. You have not shaved the beard. I do.

I will not shave the beard. Here's a deal. I'm not going to shave the beard until I get a thousand units. I will shave my beard at a thousand units. Wow. It's just 940. Really. Really.

Your daughter. Yeah, you know, whatever. That's all right. No, she needs a new swing set, so now she could hang from your chin. Rosie loves the beard. She grabs on and gets really excited and tries to yank it out. I don't know. She's like going to get some new pets for the house and some of the fleas are there.

I can see it. Yeah. It's a great thing. You really ought to try it. You know, go a little stash. I can see you with a good, like, you know, what do they call those porn stashes? Is that what they call them? I want to see that.

Yeah, I don't think so. Anyway, hey, man. So, good luck on your ski trip. Thanks. I'm sure. I'm sure it'll be a blast. It will be amazing. So anyway, let's get on with the show.

People are tired hearing about my fleas and your porn stash. Yeah, let's get on with it. All right. Well, before we do, why don't we get to today's quick tip? All right, quick tip. Brandon, take it away. All right. So, quick tip today is this.

We've said this a long time ago, but in case you're brand new and you don't know this. In the Bigger Pockets forums, you can do what is called an at mention. You know the little A with the circle around it, like Brandon, at bigger pockets, that kind of thing? So you can do it at and then somebody's name in the forums and it'll actually call them into the conversation. So let's say you're talking about Airbnb vacation rentals and you're like, hey, my buddy Josh, you know, has. 400 Airbnb B vacation rentals, he could probably answer this question. So you can be like at, you know, at sign Josh Dorkin, and then it'll pull up him. Now, keep in mind, you do have to be colleagues with somebody to do that, or they have to be in the threat already. But there's your

quick tip today. Call people into conversations and if you think they can help. Awesome. I love it. I love it. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time consuming, and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Funrise Flagship Fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 a single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The

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So with that, let's get to today's guest, Bob Malecki. Bob started out buying a couple of rentals in cash, then started flipping houses. He's flipped more than 25 homes. Then he got into note investing. And then, and then, and then Bob is. Yeah, Bob's on it. But today, like, I'm pumped. Like, Bob's great.

You know, he's been investor for nearly a decade. He's done everything. Rental houses flipping his primary business, though, is node investing today. We've talked about it a few times on the show. And it's a topic that, I don't know, I'm. I'm always interested in it. I think it's fascinating. Yeah. He also shows how he's purchased properties out of state through turnkey companies.

He dives into the idea of IRA investing in investing in your IRA for tax savings. And we dive in really deep on a lot of topics. So it's great. Make sure to take notes. If you're driving, stop if you're in the shower. You know, I don't want to know about it. But with that, let's bring in Bob. All right, Bob, welcome to the show, man.

It's good to have you here. It's wonderful to be here. Thanks for having me. I appreciate it. Yeah, this should be a lot of fun. So, Bob, you are, I believe, located in my area, right? Up near Seattle, right? Right. I'm located in Kingston, Washington, which is about 30 miles northwest of Seattle across Puget Sound on the Olympic or on the Kitsap Peninsula. Very cool. Beautiful area. I view the Atlantic. You're like Canadian or something. Sorry? You Canadian then?

Almost. Not quite, but, you know, it's up there. Well, very cool. Well, Bob, how? Let's go back to your story. I mean, like, how did you get started with real estate? How did that come about? When was that? Yeah, it was about late 2007.

My wife and I inherited some money from our parents. They passed away, and I was at the time reading some rich dad books from Kiyosaki, and I read a book called Equity Happens, which made a lot of sense. So I decided to invest that money into real estate. We ended up buying a first property was a fourplex and Silverdale, about 20 miles south of us, and the other one was a duplex in Bremerton. We took the money and used it as our down payment and leveraged each property about 80%.

Now, remember, this was at the peak of the market. So we bought them at top dollar. We still owned them. Ask me why. We ended up, you know, buying, drinking the Kool-Aid from the mortgage broker, oh, everything's going up in value. You can refinance out next year, take that cash, buy another property, blah, blah, blah.

So we bought into that through our naivity and newness into the business. Fortunately, the properties have appreciated in income. We've been able to get our rents up over the past 10 years or so, and we're probably netting between the two properties a little over $200 a door. So that worked out pretty well. And of course, getting the tax breaks and so forth. So that got us into real estate. I had already run a business, an ISP on Bainbridge Island. I came from basically technology. I was working for Adobe in Seattle prior to that. So I already knew how to run a business.

I basically had to apply that to real estate. So in 2008, I started buying homes and kits up and flipping. I read up on flipping, studied all my, did all my studying. And we ended up, well, to date, I've flipped probably over 25 homes here, which isn't a ton, but it's, you know, it's a business. We still love our rentals. We ended up buying some turnkey rentals. Memphis through a turnkey provider. What we did was actually, rather than by them directly, we opened up, my wife and I each opened up a Roth IRA about five years ago. And we pooled our

IRA funds with another family member's funds, created an LLC, and that LLC bought those turnkey rentals in Memphis. I also did some flips in Memphis as well through the same provider that bought our help to buy our turnkey properties and rehab them. Okay. So before we go on further, I want to unpack a lot of what we just talked about. Josh, did you want to go first? I know you had. Yeah, yeah. I was just going to jump on the Roth thing. You know, for those people who don't really know what that is or why you did, what you did, what is a Roth IRA and why would you buy property in the IRA? Okay. Great questions. I hate it when people say great questions. So I'm sorry, I just said that. But anyway. Great comment, Bob.

Thank you. So basically, a Roth IRA is a tax-sheltered IRA that your income, when you contribute to it, you pay tax on that income, but that contribution is then tax-free when you take it out when you retire. And you can grow that IRA through real estate, pretty much other than six asset classes, you can buy oil and gas, you can buy land, you can so forth and so on. So for us, it looked like a great way to build up a our retirement income and our retirement nest egg tax-free rather than a traditional IRA, which is basically you put the money in tax-free, but when you take the money out at retirement, you're going to pay whatever the tax rate is on that income. So Roth is really a great vehicle for building tax-free retirement income. So why would somebody want to go Roth and not regular IRA? What's the benefit of, and you said, one, you pay taxes before we put it in the money, and when you pay it at the end? Right. So the regular IRA, if we were to just keep a regular IRA and build this up to, let's say, a million dollars and withdraw that money

at, you know, in 30 years, then we're going to pay tax on that million dollars at whatever the tax rate is in 30 years. Whereas with a Roth, we've already paid our tax on that money when we put it in in today's tax rates and we're taking it out tax free in 30 years. And you assume that your tax will be lower today than in the future? Is that your assumption? Yeah. You're going to make money. You're going to be richer when you get older to, you'll probably be in a higher tax bracket potentially. Exactly. Exactly. So it's a great vehicle for saving for retirement and any of your listeners who are, you know, into having money for their retirement, I highly encourage them to open up a Roth, just $500 getting an account started,

open one for your kids. You know, it's not that expensive to maintain a Roth, and then you can build up the equity in it over time. Cool. What company do you have your Roth through, just out of curiosity? I use a company called SunWest Trust. They're in Albuquerque, New Mexico. There's probably, you know, 20 or 30 custodians and administrators out there. Some of them are good. Some of them aren't so good. I've worked with various investors who have their retirement accounts with different companies,

and I've gotten to know the good, bad, and the ugly, so to speak. Okay. Good then. Yeah, I kind of want to start asking more like specific questions like that on the podcast, like, not necessarily recommendations, but just, you know, what are people using them? Cool. Yeah. So let me go back a second to go to the beginning of your journey here.

You mentioned you about those properties because you got an inheritance. Now, you know, that doesn't happen to everybody, but it does happen to a fair amount of people where they come across a chunk of money, like whether it's, hey, I just got this big windfall from work, I got a bonus, I got an inheritance from a grandpa or grandma or mom or dad. And now I want to go invest. Now, I see a lot of people, they end up just blowing that money and some people end up using it wisely in real estate. So I'm wondering if you can kind of talk to that for a minute about how should people

when they get that chunk of money, what should they do? I mean, like, just go out and buy a piece of property? I mean, what did you do right? What did you do wrong? Can you speak to that? Yeah, one mistake I made was I also inherited my mother's retirement account, so it's called an inherited IRA. And I talked to an attorney about it. And basically, I think she had 60,000 in the account. So I inherited 60,000. Because it's inherited, I could withdraw the money whenever I wanted to and not pay a 10% pre-retirement withdrawal penalty, but I would still have to pay income tax on it. So I left the money in that IRA, but I went out and flipped the house with it. Now, I leveraged the flip.

So I put down, you know, 20% and borrowed the remaining money. And what I found out from my tax professional later on, which I should have checked first, is that because I leveraged the money in the IRA, there is a rule called UFDI, which is unreallified, financed debt income. And if you're doing it in an IRA, then you have to pay a tax on any of the leverage portion. So essentially, my profit from that flip was taxed. 80% of my profit was taxed because I leveraged 80%. I had to pay 39% tax on that profit before I even took it out as income. Then I had, if I took it out as income, I had to pay whatever my standard tax rate was. So I shot myself in two feet at the same time with that. So my recommendation is if you're going to take inherited money or if you're going to

take money from an IRA like that, make sure you talk to a tax professional before you buy the property to make sure that you don't get a double taxed in circumstance like that. You know, I think that inheriting money and buying assets, I mean, it could be anything that you're good at. We went into real estate. We went into rentals and I started doing flips with it. Okay. Interesting. Interesting. that's crazy i never heard of the ufdi i mean yeah and it's fascinating that they can screw you and and the double pretty much double tax you on that that money it's uh unbelievable unbelievable yeah well there's a rationale for that but it's it's a long story i'm not going to get into it so

no for sure for sure all right so and i know you had more story that you wanted to get into i think brandon i still have a few more houses you got the fourplex you got the twoplex you've done these 25 homes. I've got this Roth IRA that we're talking about. You said you had picked up some turnkey properties down in Memphis. How did you go about finding, why a turnkey company? Right. How did you end up finding a company because there's a lot of them that you wanted to work with? And what can people do to vet companies like that? That'd be helpful start. Sure. Well, the way I got turned down to turnkey was I attend. I was at the time my IRA was with equity trust and they were doing webinars with different vendors and so forth for their for their clients.

So I got on a turnkey webinar on Memphis and it was Memphis Invest was doing conducting the webinar with the equity trust person. And they just basically discussed the market and how it's a great rental market and all this great stuff. And so I then went on and being a research guy because I'm pretty good at research, my job back in tech was doing product planning and research. So I I was able to kind of confirm what their claims were on the market. And at the time, I was assembling the LLC with the other family member consolidating our IRA money. So I called my, and it was my cousin who lives in Ohio, and I called my cousin. I said, look, we should check into Memphis.

He was going to go buy some Florida properties at the time, and he didn't know quite what he was doing, per se. So I said, why don't we look at Memphis? So I flew to Memphis. He flew down. We met there. I got a hold of the folks over at Memphis Invest. They took us on a tour, showed us the properties, showed us the neighborhoods and so forth. And then we also met with another turnkey, a much smaller turnkey provider, two guys who were basically buying homes at the auction, fixing them up and then reselling them to out-of-town investors like myself. So we ended up hooking up with the smaller company because they had lower margins, better price, and so forth. We looked at one house there and also basically on the due diligence side. Well, let me just finish that thought. So we ended up buying that, this one house they showed us. And then I worked remotely with them on the rehab. They'd send photos and walk through videos as they made progress. And we ended up, I ended up hooking up with a very good property manager in Memphis, Lubin Property Management. they have experience with Section 8, heavy experience with Section 8, and the Memphis Housing Authority.

They've been around for 10 years, so I knew they had a lot of experience. And what I ended up doing over the course of about six months is we bought three more properties remotely. I would just be sent photos in the video by the same company. And then I would have Ryan Lubin or one of his staff go out and just cross-check the reality of the situation. You know, you always want to when you're working remotely like that. if you're not going to fly out there every month, which gets expensive and it's not needed, is having a third party there to validate whatever your turnkey provider is telling you and so forth. So because, you know, there's, I've heard stories from other investors where they've invested in a turnkey property and it ended up,

the videos and the photos they got were not of their property. So there's could be some deception. So can I ask a quick question on this? So I know a lot of turnkey companies provide, you know, I have different ways of operating. And for those people are not familiar with turnkey, just the third. basically there's these companies that buy properties or that do everything for you in a way. You buy them, but they fix them up, they manage them, they put a tenant in there, they do all that stuff.

But anyway, I know some companies will actually buy the property themselves, fix it up, and then sell it almost like they're flipping it. And other ones, like it sounds like the one you're working with here, you actually buy the property in the bad condition and then you work with them to fix it up. Is that correct? No, they actually bought it. And then I bought it from them after it was done. But I would sign a contract that I intend to buy.

it for this price after it's finished. Oh, okay. That's cool. I've not actually heard that exact model, but I'm sorry. I'm wrong. I would buy it. They would take title, but I would buy it as is and then pay them their fee to do the flipping, to do the rehab work. So I owned it at the time in bad condition, but I had a contract that they would complete the work to certain specifications. Okay, okay. Cool. All right. So overall, I mean, how has the turnkey thing been for you? I mean, do you recommend other people try that if they live in an area maybe that's too expensive to invest in? Or would, you know, was that a good experience? Or more hands off, right? They, you know, they just don't have the time to find it. Right. I strongly recommend it, obviously, with,

with caution and doing your due diligence, but I live in the Seattle market. And now it's crazy here, of course, but even back then, it was hard to find properties that would cash flow very well. Or, you know, I mean, you could find them, but Memphis offered so much more margin on cash flow and such a good market in terms of the demographics there and the rentability of properties, that to me it was a no-brainer. A lot of investors, especially newbies, kind of get in that my backyard attitude. If I can't drive to it, I don't want to buy it. And I understand that.

It's an emotional issue. But if you get comfortable, especially with the internet and cell phones, I mean, there's so much communication now that you can remotely manage things so easily if you pick the right vendors remotely and do your due diligence and research. Very cool. Very cool. And one last tip that they're in there that I recommend people do. And you kind of touched quickly on this is, you know, do your own due diligence.

And that means even the numbers. Like I always recommend turnkey can be fine, but I never trust, even though I have some turnkey companies I love. But I would never trust anybody to do my numbers, even if they were my best friend in the world. Do your own math. Do your own numbers. Don't rely on somebody else's. Do your own due diligence. And, you know, again, don't let somebody else, you know, tell you what's a good deal.

Good advice. Exactly. Exactly. All right, cool. So I know that there's more that you wanted to get into. So, you know, we usually will dive in on the first deals, but, you know, you had talked about the fourplex or twoplex. But I know there's more interesting stuff that we haven't covered that Brandon and I both want to get into more details about. So what happened there?

So you've got these turnkeys. You've started flipping. And then where did the career path take you? Okay. So we own these four cash flowing rentals in Memphis in our IRA. So we're getting the money in tax-free, essentially. And the other beauty of that was we leverage all of those, okay, which would maybe incur UDFI. So the way we leveraged it, when you buy properties in your IRA, they have to be non-recourse loans.

And only really two banks in the country do non-recourse lending. They're basically asset-based lending, almost like hard money, but at a lower rate. And I could have gone with the non-recourse lenders, but we ended up tapping into another family member and his IRA loaned our IRA LLC, the 70% financing at, I think, 7% interest. So we only put down 30% of our money on those four properties, so we're able to spend our down payments across those properties. So he made income in his IRA. We made income in IRA. So everybody's making tax-free income across the board, which was just, to me, just beautiful, you know. And because these were rentals, my cousin who was also the vice president of a fairly large company,

chief financial officer, he took care of the book. So he was able to basically use depreciation within the IRA to offset the UDFI tax we might have to pay. So it really worked out well. So we ended up buying those. We bought a turnkey townhome in San Antonio, Texas. A builder had built a duplex and fourplex modules in northwest San Antonio. And at the time, he couldn't sell them fast enough to keep up his debt service on all the loans he had. So a realtor, I got on another webinar and a realtor was basically helping this guy sell these properties to investors.

And the deal was, which was great, is the builder would be the. the property manager for two years, charge no property management fee, take care of all the, you know, property management work and guarantee us an $1,100 a month income on that. We just bought one town home in a duplex building. So that worked out great. What we found out, though, is at the end of two years, again, a turnkey story. He'd be a little late once in a while with his rents, and we didn't ask him for leases or anything. We just, if we got rent from him, we assumed he had a tenant in there. Well, at the end of two years, we decided to go with a professional property management company

because our contract with this builder was over. And we found out that when we hired Boardwalk Property Management, they went over to take pictures and meet the tenant. Well, they called me and said there is no tenant in the property. And they took a picture through the missing deadbolt into the living room, And there was office furniture, construction equipment. Basically, this builder had used the property as storage for two years and paid us $1,100 a month rent, which was crazy. Yeah.

But there was no water meter installed. There was no electric meter. I mean, it was, and the kitchen was unfinished. There was cabinets, I think. So, I mean, we were like, oh, my God, this guy, if this guy backs out on us, we're going to have to spend $10,000, $20,000 to me to get this. this property in rentable shape. So I contacted an attorney and basically started working with the builder via email mostly and also went back to the broker who hooked us up and said, hey, you promised us in your literature that we would have a turnkey property. So I put his feet to the fire as well.

And fortunately, he was able to work with the builder, convince him to finish the rehab. And within two months. They had it, they had the buildout completed and it was rent ready and we've owned it now for, I don't know, four years after that. And it's cash flow great. So that's one of those really kind of, oh my God, what did we do? Stories and it through using the right resources, illegal resources, and also keeping all the literature that I had from the beginning and making sure all my documentation and ducks were in a row, I was able to facilitate. cooperation. It's great tips.

First off, it's funny, as you were saying it, I wrote a note to Brandon. I'm like, sounds shady to me when you're talking about the guaranteed $1,100 a month income. You know, nothing is, nothing in the world is guaranteed. So is a red flag for me when you hear guaranteed. It happens. But, you know, always always be aware, I would say, to anyone listening of situations like that, particularly when you're buying something sight unseen and you don't have the

capacity to do your own diligence on it, right? I mean, you had no idea. You're getting all this money. It sounds great. But you had no clue because, you know, you weren't there. You weren't saying it. So it's just something, especially for somebody who's new to kind of keep an eye and an ear out for, just be careful. Do you have any advice beyond that that you might want to give people to avoid situations like that? Well, obviously, make sure there's a very good contract in place. And that's one thing we did make sure that we at least had an enforceable document with the builder to if we if worse came you know if it got to worse and the stuff really hit the fan then we we would at least have a contract that's enforceable that our attorney could use but at that point you would be into a lot

of deep pocket expenses for legal fees and it would become a lose lose situation so but yeah having a good a good solid contract and making sure you keep all those contracts available for future reference assume nothing. My father used to say, assume nothing and document everything is basically the way I, you know, live my life, so to speak. That's great. Yeah. And in the Memphis market, you know, and again, having a third party in that Memphis market, having the property manager there to validate and check on the progress of those turnkey renovations was definitely something I would recommend. You don't want to just trust that one person, you know, even if it's your brother, so to speak. Yeah, I love that tip about it. If you're buying at a distance, like get a third party, I think that it's super, super, super.

A trusted third party. A trusted third party. So you got to vet the third party, which is oftentimes the challenge. Well, so, Bob, I know that you began to get into notes at some point. I'd love to hear that transition and get some more details on that part of your story. Okay. Well, about four years ago, I belonged to the Seattle Rea Group Reeps. And about six years ago, they brought in Eddie Speed, who runs Note School.

And Eddie was talking about notes and buying notes. And I was knee deep in the flips and buying properties and rentals. And I scratched my head and said, this note stuff doesn't make sense. And I left early, went home. You know, this is too weird. It's a black box. So about two years after that, which would have been about four years ago, I started looking at notes at paper. I actually ended up one of my real estate agents in Gig Harbor, which is near Seattle,

she buys mobile homes and she buys land and then puts the mobile on there and rents it out and has a good little business model going. And she found a note for sale on a mobile home in an area called Sammamish, which is east of Seattle in a good area. And the couple had bought their mobile home for cash. They wanted to retire to Arizona, so they sold it on a note. to another couple. And then they got some financial issues going, basically a bankruptcy. So they wanted to sell the note before they filed bankruptcy. And the note's value was about 14,500. I was able

to negotiate it to a $7,000 purchase. It had a low rate, only 4% interest. But bottom line, the cash flow on it provided us, and this is in our IRA again, we bought it, and the same IRA that owns the Memphis properties, the LLC. It ended up yielding us about a 40% a year, cash on cash ROI. And I went, wow, this is amazing. So I started really digging deep into notes, went to a few conferences, got on bigger pockets where I learned a lot in the tax lien and note forum. I went in with all the stupid questions and they were more advanced note buyers there,

giving me advice and information and so forth. So it was really, really a great process for me to go through and learn, quickly. I ended up buying, we ended up long, long story short, we ended up selling our Memphis rentals. Two of them we sold for cash and two we took notes back on to other investors. So we owned two notes in Memphis on the houses from the investors and one investor used their self-directed IRA to buy the house and we put a note out to them and so forth and so on. And then we took the cash from the sale of those other two properties and started buying distressed debt. I ended up buying nine notes in our LLC of the stressed debt.

And mostly in the southeast in Charlotte, Oklahoma, Memphis, and South Carolina. And these were, now, this was the stress debt. Yeah, what does that mean? Yeah, yeah, exactly. So, these are non-performing notes. So you can buy, I mean, there's a lot of ways to buy notes. You can buy a performing loan where it's somebody maybe did a seller carryback and they want to sell that debt to somebody else and cash it out.

Kind of like that first deal you did. That was a performing, I'm assuming. Yeah. Yeah, exactly. And performing means they're being paid, right? That means the, that means they're paying. You're just basically buying future payments, a cash flow stream. Okay.

Yep. Non-performing notes, that's usually institutional debt like B of A or Chase provided a loan to a buyer, a borrower 10 years ago and the borrower defaulted at some point. And the bank has been sitting on that debt, not collecting any money. It's called an extremely delinquent loan over 90 days past due. And because of the 2008 housing bubble, there was this mountain of unpaid debt, basically those toxic assets that we've all heard about. And in a presentation, I do, if you've seen the movie The Big Short or read the book,

that's exactly the source of where all this inventory comes from. So basically, I can buy a debt on a house, let's say in Charlotte, North Carolina, where the borrower stopped paying two years ago. The bank will sell that debt. I don't actually buy it from the bank. I buy it through kind of a waterfall of hedge funds. But essentially, I can buy that debt for 30 to 50 cents on the dollar of the BPO value of the house. So my equity is covered.

So if I have to foreclose at some point, I'm going to get my money back and probably make a pretty good profit. Can you give us quick just like a scenario or an example of like what, because you said a lot of stuff that people might not know, like BPO value of the house, 30 cents on the dollar. So give us an example of what that might look like on a property. Okay. So we bought a note last year in Charlotte, North Carolina. It was a three-bedroom house, nice, decent neighborhood, you know, older ranch style home. The value, the broker price opinion, BPO value of the house, was about $60, $65,000, as is, not improved. It was occupied by a single mother who drives a bus for the Charlotte School system.

She's been employed for 11 years. She's been in the house 11 years. So the value of the house was about $60,000, $65,000. The debt on that house, the note, the Machi owed, which is called the unpaid principal balance, was also. about $62,000. So the debt was par with the value of the house. Most of the notes we buy, the debt is much higher, the house is underwater, that kind of thing. So that's okay. As long as we buy it for par or higher balance, we're safe. Anyway, long story short, we contact. She stopped paying on it two years ago. She had some financial issues. Her daughter moved out who was

helping her pay her debt service on the note and so forth. But she was fully in employed, which is great. And that's part of our due diligence on a note. We look for the ability for them to start repayment on their debt. So we reached out to her. One thing that we found in doing this is that, you know, these borrowers are typically working with their bank or an old bank or maybe another bank bought it. And banks aren't exactly the warmest and fuzziest people to talk to. So when we contact them and we say, hey, we're not a bank. We're here to help you. We'd like to keep you in your house. They kind of go, wow, okay, I'm down for. this. So long story short, she ended up, we had her fill out a financial statement so we could

gauge how much she could afford because we want to make sure she's successfully staying in that house and paying us a mortgage payment. So we got her to complete a financial statement, looked at all of her debt and income, and pretty much figured out she could afford about $350 a month on a new payment. So we're able, because we're buying paper, buying a note, we're able to change the balance of the note. We're able to change the term, the length of the mortgage debt as well as the APR. I think she took out a high interest loan. It might have been 11% or so at the beginning. And her payments for like $500 a month, which is what she defaulted on. So we ended up saying, okay, listen, we can do a loan mod for you. We can modify

your current loan. We'll reamortize that $62,000 over a new 30-year period. We'll set it down to 6% interest, which will get your basically your P&I payment, your principal and interest payment down to 3. I think it was, I wrote some notes here, 360 a month or so. So that made it affordable for her. Now, she also owed almost $11,000 in arrears. And arrears are basically, when she stopped paying her mortgage, those, that's the unpaid interest as well as penalties per the mortgage that the note that she signed when she bought the house. So she had these arrearages. And we have the as the bank, so to speak, or as the lender now, to either forgive those arrearages, add them to her note balance or ask her to pay that arrearages.

And what I found out is if you don't ask the borrower to pay a chunk in the front end, they're probably going to re-defaults later on because they don't have any skin in the game, so to speak. Okay. So we said, look, if you pay the $11,000 arrearages, we'll do your loan mod and reduce your payment, keep you in your house, all that good stuff. Now, we bought that note for $29,000 cash. Wow.

Okay, so we bought a $62,000 debt for $29,000. We had her pay $11,000 in arrearages, so that brought our cost basis down to $18,000. And on that $360-some a month payment, which mostly is interest because it's at the front end of a new amortization, we were getting about a 22% return on our money for that. note, which is great. Oh, that's awesome. And you don't have to deal with repairs and maintenance and stuff because it's her property. Yeah.

You're just a bank. I mean, yeah, my standing joke is I, as a landlord, I have a fantasy that my tenants would just leave me alone and send me money. And I realized those are called borrowers, right? Yeah. You want to be a bank. You don't want to be a landlord? Exactly.

Yeah. So we can own the paper on it and have access to the property through foreclosure or a deed in lieu where they would sign over the deed. But we don't have to deal with the insurance, the maintenance, the vacancies, all the things that owning a rental require of you, you know. So to me, it was like I was in Hogg Heaven. So on that note, we collected principal and interest payments for 12 months. That's called seasoning. You want to season the node with consistent payments.

Now I can sell that loan as a seasoned loan, a cash flowing loan to another investor who wants to buy those future payments for a specific sum of money. I ended up selling it last month for 46,000 and some change. So bottom line, we collected, I just made some notes here. We collected about 32, well, with the profit on the sale, we ended up, our net income was 32,360 on a $29,000 purchase. So we made 111% profit on our investment over 12-month period. That's awesome. And I never even had to go look at the house. I mean, so for me, notes, that example is a small home run.

It basically portrays how you can invest in an asset without having to deal with all the liability in that asset like you would as a homeowner or as a landlord. Wow. Wow. That's fascinating. I hope anybody listening, I don't think I've heard distressed notes explained as well as you just did. That was a fantastic example. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive.

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Speed up your hiring right now with Indeed. And listeners of the show will get a $75 sponsor. sponsor job credit to get your jobs more visibility at Indeed.com slash rookie. Just go to Indeed.com slash rookie right now and support our show by saying you heard about Indeed on this podcast. That's indeed.com slash rookie. Terms and conditions apply. Hiring Indeed is all you need. So what is what is the risk with notes? And then how would somebody go about finding opportunities like this. Okay. The risks are relatively low compared to property ownership, for instance, but when you buy a note, you're doing your due diligence in kind of three sectors. I look at it.

Basically, you're doing your due diligence on the property itself. So is the home in a stable market? Will it appreciate over time? You know, what's the crime rate? The usual stuff you would do when you're buying a flip or buying a rental, you do that due diligence. Then you need to do your due diligence on the borrower. And when you're looking to buy the note, that can be limited because you're not the lender. You can't just call the borrower and say, hey, are you working now? So you need to go through the servicing notes, talk to the current owner of the note, if possible, and find out what the, first of all, is the property occupied by the borrower?

Did they vacate it and is it a zombie property now? And we don't buy zombies. We buy borrower occupied properties. Our business model is to keep them in their homes. Some note investors buy vacant properties. They foreclosed and they rent them out or they flip them. There's all different models. But ours is to keep borrowers in their homes.

So we have to do diligence on the borrower, try to find out what their employment status is and so forth before we buy the note. And then after we buy the note, of course, as the lender, we can now start working directly with them. And then the main thing, though, is doing the due diligence on the paper itself, what we call the collateral files. And that's the deed of trust or mortgage. That's the note. That's the lender's insurance policy was generated, looking at the payment history on the note or lack thereof. So they're going through that.

And chain of title is the most important part. And what happens when a note is sold, there has to be a clear chain of title. From the time it went from the originator, let's say Bank of America generates, creates a note. They originate a loan to, Joe Schmoe down the street. They've got that paper now. Now, they're going to sell that note maybe to another bank, and they have to do what's called an assignment. And the assignment is a one-page

legal language, and that assignment says, I'm assigning your rights to collect on this note to you, Bank of Anytown USA. And that assignment is then recorded, and that basically is any town U.S.A.'s, any town banks, right to collect, and it's recorded publicly. Anytime, I'm a loan is sold and assignment is done and those have to be recorded and there has to be a clear chain and you have to make sure you have the original assignments sent to you once you buy the loan. If you don't have those assignments, the liability is that the borrower can challenge the loan, take you to court and their attorney can say, hey, there's a missing assignment. So, Judge, we'd like that, this lender to forgive this loan and go away.

And that's happened. So, you know, doing your due diligence in the front end on a loan is really the most important part to make sure all the eyes are dotted and T's are crossed, so to speak. And that takes due diligence, takes reading, boring, boring documents and going through mortgage statements and doing research. Because of the banking industry, there's a lot of third-party services available. So I can order a title report, what's called an ownership and encumbrances report, which basically gives me the borrower's name, any debt that's on it, any subordinate debt, any lien.

so I can kind of get a picture before I buy the note of what the subordinate liens are. Did they take a he lock out? Do they have a lien from a car company where they defaulted on the loan? So we look at the liens. Even though we're in first position when we buy the note, we want to know what our liability is if we have to foreclose. We order a BPO, a broker price opinion, so we can get a current value on it. If there's already a BPO, maybe it's six months old from the seller of the note,

I might still go out and hire WeGoLook.com. and for I think 60 or 70 bucks, they'll send somebody out to walk around, take pictures, make comments on the property. So there's all these third-party services available for me sitting in my home office in Kingston, Washington to validate the integrity of the asset, the borrower, and the note. Once we go through that process, so when you look at that, that's the high part of the belt curve of buying it. Then you do your loan mod, your workout, you start collecting your cash flow.

In theory, once the borrower starts paying, then you've got to. cash flow coming in. We hire a servicing company to collect the payments, do all the statements, do all the tax statements and all that. So the servicing company takes out $15 a month for their fees. They send us the net via ACH. I get an email saying, you know, your payment of $364 has come in. And every month I get those emails, those are the greatest things to me. The risks down the road are that the borrower may read defaults either, you know, intentionally or through they lose their job, they get sick. And so you have to then restart that process with the borrower. Okay, what's going on? What can we do to get you back on track? So it's a bit of social engineering

and negotiations at that point. I just had a borrower on another house in Charlotte who started missing his payments last year. He got six months behind. And that note was a huge home run. We already got our capital back in the first year. So this was pure cash flow. But he stopped missing his payments. And so I had the service to reach out. He got laid off. He's reemployed. But he started, he got to the point where he owed us in missed interest and arrearages about $4,000. At the beginning of that, when we bought that loan, we had the borrower pay off $10,000 towards his rearages. So he had, he has skin in the game. And the fact that he started losing, started missing his payments was a surprise. But, you know, that happens. So what we ended up doing is we filed four. foreclosure. We filed a notice of default. And so he got in a letter from an attorney saying, we're going to foreclose on you unless you get current. And that shook him up enough to contact our servicer. We were negotiating a paydown now. He just, he just wired in $2,600 towards what he owes. He's going to wire in two more payments in February and March to get back on track. So, you know,

it's not smooth sailing guaranteed down the road, but we try to ensure as much as possible that we do get the debt service payments, and we can do a compassionate workout with those borrowers if they do run into trouble again. Cool. Hey, Bob, so how do I find these notes? You know, I decide, hey, I want to do this. This sounds great. What do I need to do to get out there and find stuff like this?

Well, and also, I want to preface that by saying what we buy are mainly institutional notes. So this is paper generated by the Big Five Bank of America, Chase, Deutsche Bank, those kinds of guys. You can buy seller carryback notes where somebody owns their house outright and they just want to sell it. They can take back a note. Now they want to sell that note. We don't buy those mainly because we don't know who wrote the note, what legal service did it, how much integrity it has. So we want to buy institutional paper that was written by a team of lawyers, has a lot of teeth in it.

And it's also that's very standard. All the notes are very standardized. All the mortgages are very standardized based on the lending laws. So to find them, you can't just call Bank of America and say, I'd like to buy a note or two from you. They don't do that. They sell their notes in pools of $100, $200 million to big hedge funds. There's basically a waterfall that happens. So a hedge fund will buy a big pool.

They're going to take what they want out of that pool and start reworking it. And those are going to probably be the higher equity notes, maybe in Seattle and L.A. and New York and Miami. And they're going to sell whatever they don't feel is worthwhile chasing down. to a smaller hedge fund. And that smaller hedge fund will do the same thing. They'll pick what they want and then sell it off to people like my company or me directly. And what we get are basically, I call them table scraps. Okay.

We're not getting the waterfront Miami property. We're getting the house in Charlotte that's got a value under $100,000. And so there's a niche there that the sub $120,000 valued houses are too low of value for banks and even larger hedge funds to process because the foreclosure costs for like a bank is $25,000 to $30,000 for them to foreclose, hold it as an REO and liquidate it. So on these lower balanced loans, it's just not worth it. They'd rather sell it off, take the loss on their books and so forth. So we specialize basically in sub-120,000 homes.

And so what we do is I create relationships with these small hedge fund managers. I go to conferences. I get on bigger pockets. I get on FCI Exchange. FCI is our servicer, but they have an online, like an eBay for notes kind of thing, so I get on there and buy notes

from other sellers. A lot of the stuff there is real bottom of the barrel. You have to do a lot of preliminary due diligence. So basically, it's creating relationships with other people who are on the note business. It's a very, very small industry, less than probably 2,000 note buyers in the U.S.

So, you know, people help each other out. There's a lot of camaraderie. There's not that competition because there's a lot of notes. There's, I went to a conference last summer and some of the larger fund managers were there and the panel discussion. They asked them, what is the landscape of the extremely delinquent note inventory right now? And everybody pretty much agreed it's over $300 billion of notes are still waiting to be sold off into the secondary market. That's a lot of notes. Okay. The consensus was probably a five to seven year period window of those. So basically what happened is those toxic assets, the bulk of those have been sold off already, but just the tail is still $300 billion, which fascinates me. So basically developing relationships.

Which is both good and bad, right? It means that like not every way can just go do it. Like, you know, anybody can go buy an REO that's for sale, you know, by the local real estate agent. You know, but if you're somebody who wants to get into this, I mean, build relationships, go to those conferences, meet people, talk. I mean, I just think that's cool at the same time because that means there's less competition. So those willing to work, get it. Cool. Yeah. And the fact that we're working with paper and not the house to me is just such a higher reward. And we're helping somebody stay in their house too. You know, we haven't had to foreclose on any property yet.

We've been able to do loan modifications. The only local property that we bought a note on this past year was down in Puellup, Washington, south of Seattle. And we ended up, it was a privately generated note. And the person who owned the note and loaned the money, her husband passed away, and she just wanted to get out from under it and move on with her life. And during the term that she held that note, the borrowers defaulted three times. And her husband had renegotiated the note, lowered their interest rate, added their arrearages to the back end. A $190,000 note went up to $210,000 after the third mod.

We bought the note for 100. Well, we had all in, we had about 136,000. We bought it for 126, and we had about 10,000 in legal fees. We immediately filed foreclosure last year because we did not want to modify, again, those borrowers, three strikes in your out. Yeah. We ended up, they ended up putting it up for sale last summer at a very high price. The property was worth about 210 to 240, so we knew our equity is covered in that.

They put it up for sale for two. 75, I got on my redfin subscription, tagged it as a favorite, watched it drop every month. They finally got an offer of 240 in late August and submitted that to us as a short sale. And we, you know, when you're, when you're dealing with debt, you want to make sure that it's not a straw man buyer, that their cousin Vinny isn't putting a contract in. And they're just trying to stall the foreclosure. Because the foreclosure was due like in September. So anyway, we validated the borrower. We talked to the mortgage broker that the buyer was going to be. using and validated. Everything was above board in arm's length. And so we postponed the foreclosure until January of this year, just in case the deal didn't go through. We still had the foreclosure there. But we didn't want to foreclose. I mean, we don't want to kick people out of their houses. So long story short, they ended up selling the property on a short sale. They closed on December like 23rd. And we got to check for, we settled for it. We agreed to waive the rear ridges, which would have been about a total of 237,000.

We took a check for $211,000. And so we had $136,000 investment. We got a $211,000 check. And I basically invested maybe nine hours into phone calls and meeting with attorneys. Wow. That's awesome. Sounds awesome. Yeah, that's great.

That's really cool. Yeah. I think notes are fascinating. Because I, too, like, I've worried about notes in the past than that. I don't want to kick people out of the house. I don't want to buy a bunch of notes from people that are, you know, dead beats and then end up just kicking them all out and feeling bad that I had to kick out these people at Christmas time, you know, take their Thanksgiving dinner off the table, right? You know, like all the fear that comes up with that. So I like that you're, you know, you approach it from this.

I want to help people. I want to go in here and I want to buy good, you know, good paper. That shouldn't have to happen. And I'm going to do everything I can to make sure that doesn't. I think it's very, very cool, very admirable. So cool. Last question before we move on to the fire round. I'm wondering, like, where do you see yourself?

Where are you moving in the future? What's the next five, 10 years look like for you? Actually, I have that question. Then I do have one more question as well, but let's go with that one first. Okay. For me, it's notes, obviously. I'm at some point, whenever my rentals reach the point where they're not underwater anymore, I'll probably sell them.

Right now they're cash flowing nicely, and I have property management running them for me, so they're minimal as far as my time. But I really want to stay in notes and build up a note portfolio that will provide my wife and I passive income to where we can move, you know, maybe spend six months a year in Europe or travel and not have to be hands on here in my local area working on a flip, for instance. So that's really our goal. And I've partnered with two other note investors and we created a company resolution capital. And what we've done is we've, it's a reg D 506 equity fund.

We're raising larger amounts of capital to buy larger pools of notes so that our investors will get a good return on their money and then we'll make, we do a profit split with them to get a return. And I'm looking at building up that business model to create passive income from that operation as well. That sounds awesome. I love it. All right. So last question I had, I was going to bring it up a long time ago, but just so this is definitely not going to fit in the flow of our conversation. But I'm curious. So when you talk about investing in the IRA, whether it's notes or whether it's rentals or whatever. And let's say you're doing the Roth IRA where you pay the tax up front, but you don't have to pay it later on when you retire.

Does that mean both the cash flow and like any profit you make from the property equity? I mean, you don't get anything until retirement. Is that right? Exactly. Yeah. I mean, you can withdraw it early, but you're going to pay a 10% fee on that money, even though it's tax free coming out, you're still going to pay a penalty for early withdrawal. Okay.

Okay. Cool. I'm just curious about how that goes. All right, let's shift over to the world famous fire round. It's time for the first. Fire round. All right, let's get to this thing. Fire on question number one.

And these come out of the bigger pockets forums, which I know, Bob, you are, you know, you're familiar with the forums. So let's see if you've come across these questions. Number one, in three words, this is kind of just a fun question. I like this. Probably the most popular forum post of the month.

In three words, well, in three words, perfectly three words. Describe your 2017 real estate goals in three words. Cash flow. Cash flow and cash flow. That's six words, but it's all good. Cash flow could be one word, depending on how you, you know, whether you hyphenate it, whether you make it one word or two. They got the conjunctions.

Yeah. All right. Cool. All right. Next question. I'm considering becoming a financial partner for house flipping. I'll be investing at a distance. So vetting someone's extremely important.

How should I go about finding a good flipper to partner with? Wow. I would look for track record references who have they done business with before. and possibly also talk to some of their lenders that they've dealt with on their ability to repay on the flip. And then obviously look at a portfolio of properties that they've done work on, possibly speak to the real estate agent or whoever helped facilitate the sale of their properties. Awesome. Perfect. Perfect. It's actually something I've been meeting. I spend on a list of blog post to write about how to become a private lender, but someday I'll write that. All right. Number three, I may, well, I am not, but I am a great question. I'm a 23-year-old female investor.

You are. I am. And I just bought my first duplex. So first of all, congratulations to whoever wrote this question in the forums. You rock. But I just bought my first duplex. However, I inherited a terrible tenant who smokes on the property, doesn't pay rent, and I don't know what to do.

Any advice? Wow. Well, first of all, that stresses the importance of screening your tenants prior to getting them in the rental, which I've had my share of bad tenants. regret that. So while they haven't done anything to violate their lease or do anything illegal, it's difficult to do much about that other than to try to negotiate with them to be a better tenant, I think. And they also didn't pay rent, so, you know, if they don't pay.

Obviously, you can eventually evict them. Sure. That's going to, depending on the state that your property is located, it could take a few months or a few years. Who knows? But yeah, I think eviction, really, other than negotiating with them, eviction is probably your only recourse. All right. Excellent. Excellent. And yeah, no, that's fine. All right. Last question of the fire round. Any tips on identifying and appreciating markets? Tough one. Yeah, it's, I think reading reports, there's quite a few, like Realty Track puts out a monthly

newsletter. There's a couple of other reports and annual reports that you can get for free online that talk about the different markets, the MSA's out there, where they're headed. So that's, that's a that's a real estate report oriented research. But again, looking at where, you know, getting on a Google news feed on, let's say you want to look at a certain market and getting that Google newsfeed so you get information in your inbox every morning as to what's going on. Is that market, do they have new employment? Or, you know, for instance, Oklahoma, they're suffering from the energy crisis because of the oil prices. So, you know, looking at the macroeconomics of an area and soliciting information through various feeds and getting on your internet research really is the

way to kind of figure that out, I guess. Cool. All right. Cool. All right. Let's head over the last section of the show, which we lovingly refer to as our Famous Four. All right.

Question number one of the Famous Four. And these are the same questions we ask every guest every week. Number one, what is your favorite real estate related book? My favorite book was Equity Happens by Robert Helms and Russell Gray. I think it's out of print, but it was. just a really good basic book that painted a picture. It was a parable about one guy who was a blue-collar worker and one guy who was a big executive and how they dealt with their rental properties. And obviously, the blue-collar worker ended up making the most money and being the

most conservative. And it's just a very good eye-opener. My other books would be Bridge Dad, Poor Dad, the whole Kiyosaki set of books are just very enlightening. I think Robert, even though he's got an interesting personality. He's got a lot to say that makes a lot of sense. Yeah. Excellent. Excellent. What about business books? Business books, one is the magic of thinking big by David Schwartz. And the other one is, I've just read it for the second time. It's an older book, but it's called The Secrets of the Millionaire Mind by T. Hav Ecker. And Ecker basically talks about your mindset for being an investor versus being an employee being a poor, how poor people think versus how rich people think. And it's a really nice

and he doesn't try to upsell you too much to his programs, which is even nicer. That's always a good thing. Excellent. Excellent. Excellent. What do you do for fun? Outside of buying notes and building this little empire of yours? You know, being self-employed, it's a 50-hour work week, so to speak. But my wife and I like to go to movies. We love to travel. We love to go to Europe. And I love to listen to music. I'm a reformed audio file. So I like just listening to stereo music and downloading music. That's pretty much it. We love pets. Our dog just passed away, but we'll probably get another one. And so basically travel music and, you know, movies, media. All right. Excellent. All right. What's your favorite European city? Paris. Well, my wife likes Paris. I'm more into Barcelona and

Madrid myself. Very cool. Very cool. All right. My last question of the day. What do you believe sets apart successful investors from those who give up, fail, or never get started? Well, I think willingness to take action. If you don't take action, you can't take a risk and you won't make mistakes. A lot of people are afraid to make mistakes. And as I'm sure a lot of interviewees have said, you learn from your mistakes. I've made my share of mistakes. Fortunately, I've been, have the ingenuity to get myself out of them. You know, I've gotten close to the edge of the cliff and I've been able to get a parachute out and jump off with ease. But I think if, if you're you don't learn from your mistakes and grow from your actions and take action of so many investors,

especially newbies I see, are sitting there and the paralysis of analysis and they're afraid to, they just don't have self-confidence to move forward. And you've just got to, I mean, when we went to invest our money, we bought a fourplex. You know, we didn't start out with a single family home. I just dove in and said, I'm going to figure this out, you know. And same thing with notes. I just put myself in a situation. I learned as I went and I used enough cautionary procedures is to not totally lose my ass on a deal. Excellent. I love it.

I love it. It's fantastic. All right, Bob, before we let you go, where can people find out more about you? Where can they connect with you? I'm on Bigger Pockets. You can find me there. Or if you go to my website, which is rcm.compan. www. www.rcm.compan, which stands for Resolution Capital Management,

or Bob at rcm.comany, if you want to email me, be happy to give you my religion on notes or help you out or whatever. Excellent. Cool. Well, Bob, thank you so much for sharing. This has been great. Fantastic. Fantastic.

You're really good at explaining things. So thank you for the time. We really do appreciate it. And we'll see you around on the site. Okay. Thanks for interviewing me and for letting me share what I have to say to your audience. It's been great. And I love bigger pockets.

Another promo there. But I really, really do love bigger pockets. Well, thank you. I love putting that together, you guys, and running it. I appreciate it. Thanks, Bob. All right. Bob Malecki here on the Bigger Pockets podcast. Wow, that guy has done a lot.

He has. And a lot of his story is something like I want to kind of follow his similar path. You know, I have flip houses, bought rentals, but I love getting into notes. And I like I just did my first note recently. It's kind of fun. I really like it in that. Yeah, I like it in that passive income. It's kind of cool. And I think I might, you know, end up doing more of that in my life. But, you know, anyway, very cool stuff. So yeah, keep going, Bob. Yeah, it's great. You know, finding, finding answers, finding solution to problems is, is what he does. I think what a lot of real estate investors do. So it's great.

Again, I learn a lot from every show, even if it's stuff that I already know, just figuring out different ways that people are going about doing things is really cool. So, yeah, Bob was great. Lots of success to him going forward. And yeah, I mean, your note investment you were telling me about yesterday is great. I mean, I love it. Sounds awesome. It is a lot of fun.

I think my thinking with notes is this, though. As much as I want to do them, I want to, like, Like, it's more of a passive investment in that. And somebody's going to yell at me for saying this because it's not entirely true. But for the most part, I'm not going to go get in a note investing if I have no money, right? That's something I figure I do when I have a lot of extra money. And it's a good way to turn my money that I have into passive income, right? But when you're just starting out, you have nothing.

It's a lot. I like to say it's a lot more difficult to just be a note investor with no money, right? That's why most people don't start with that, but they end up there. A lot of investors end up there. It's just kind of the end game for a lot of investors. is it's probably the most passive way to invest in real estate, or at least one of the more passive ways. Yeah.

That's all good, man. That's all good. Cool. Well, yeah, that was great. Awesome, awesome. How was your snowboard trip? Oh my gosh, it was so good. I broke three arms, actually.

Oh, my goodness. That's amazing. In fact, you have not yet left on your snowboard. No, we are recording this outro the same time, a little early, the same time we recorded the last one. But whatever, you know, it's going to be fun. So I'll tell everyone about it when I get back. Yes.

Yes, indeed. Well, Brandon. I will miss you. You will. I know. You'll call me every night. Q violence. Okay.

Let's get out of here. Have a great time. No, have good. What's cracking? No, life, you know,

it's all good, man. We, you know, you got rain. We got 50 degrees in sunshine. Welcome to Denver. Welcome to Denver.

It'll be raining in like 12 degrees tomorrow there. And then it'll be 100 degrees on Friday. And then it might be 75 on Friday. But yeah, that's pretty much how we do this. Awesome. Well, let's get out of here.

You guys, thanks again for listening. This is show 11 of the two, Show 11 of the Bigger Pockets podcast. Thank you so much for listening in, and we will see you next week. I'm Josh Dorkin. Signing off.

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