BiggerPockets Real Estate Podcast - 273: An Introduction to Passive Income Through Real Estate Note Investing with Dave Van Horn

Episode Date: April 5, 2018

Most people understand the world of rental properties, house flips, and other common real estate investments. But there is one little-known niche that could provide massive cash flow and profits without the headaches: note investing. In this episode of the BiggerPockets Podcast, we sit down with Dave Van Horn, author of Real Estate Note Investing, to talk about how anyone can get started with real estate note investing—even as a first investor. In addition to a great conversation about notes, you’ll also hear some of Dave’s powerful strategies for getting his real estate offers accepted, how he started his investments using the BRRRR strategy (with credit cards!) and much, much more. In This Episode We Cover: What is a note? The types of notes available Ways to start investing in notes How much cash one needs to have a note Dave’s backstory as a real estate investor Dave’s shift to note investing What hard money is Three things you need to put together a deal Getting bank financing Performing vs. non-performing notes Shadowing and how to do it Making multiple offers What happens when a performing note becomes a non-performing note? About the book And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Calculators Veggie Tales: Song of the Cebu BiggerPockets Podcast 028: Note Investing and Raising Private Money with Dave Van Horn Prosper Books Mentioned in this Show Multiple Streams of Income by Robert Allen Real Estate Note Investing by Dave Van Horn The First Entrepreneur by Edward G. Lengel Abundance by Peter H. Diamandis Fire Round Questions Is it possible to purchase your own Non Performing Note? If I want to be an individual NOTE investor, how much money do you need to have to play? Would it be a smart strategy to buy NPN or defaulted mortgages just to foreclose on them for profit? Tweetable Topics: “It’s not only about what you’re paying, it’s about how you’re paying it.” (Tweet This!) “You don’t need any money, you just need a deal.” (Tweet This!) Connect with Dave Dave’s BiggerPockets Profile Dave’s Website Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 273. You know, my 85-year-old mother invest in performing notes. She's like a little note-clean. Because it's that simple. It's the payments are ACHed into her bank account every month from the servicer. 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, everyone? This is Brandon Turner. Today's host of the Bigger Pockets podcast here with my incredibly awesome co-host, Mr. World Traveler himself, David Meyer. How you doing? Good, man. That was like the nicest introduction I think I've ever gotten. Good.

That's good. You know, it's been a while since you've been on the show because you've been traversing, is that the word, all over the world, it sounds like, the continents? Yeah. Where'd you go? Tell us where you gone. I was in Chile. I was there for three weeks.

It was awesome. Thank you, Bigger Pockets for giving me three weeks. Three weeks. Yeah, it was awesome. What are you doing, is it Chile? Is it my saying that right? Chice. Yeah, exactly.

I would just say chili, but is it not chilly? It's Chile. I think you could say it either way. Okay. I'm like a horrible American. talking about either way. Yeah, that's true. What you do this?

We went, I went with my girlfriend and we did a five-day track hike around Torres del Pined, which is a really cool area. We did some rock climbing, a lot of eating, as you know, I just love eating. We went to the mountains, went to the desert, did some stargazing tours. It was amazing. It's a really cool country. It's not really one of those places a lot of people visit yet, but I think it's going to be a really popular destination soon.

It's really easy to get around. People are super nice. It was great, man. that's awesome how are you how are you doing i mean it's like good how early is it for you like what are you doing right now it is early it is eight a m for me right now because we're on what a four hour time difference i think so yeah yeah well anyway it's it's early but you know i i do what i do yeah i could not be chipper or engaging at all at eight in the morning so kudos to you for doing an interview and talking this early well well thank you and we just got done with the we just got

I'm recording. So we always do our introduction right after we finish recordings. We just finished talking with Dave Van Horn, who is our guest today. So speaking of remote locations like Chile, today's topic is something that's very remote to a lot of people, and that is note investing. And a lot of people are like, oh, I don't want to listen to that. But listening, you guys, there's so much gold in this episode, even if you don't care anything about note investing. But the reason I think it's valuable to make sure you guys listen and take some notes is because, like, notes, get it, take notes. And today's note. It's because, like, like this stuff applies to almost all aspects of real estate.

The stuff we talk about, we talk about Burr investing. We talk about how to get people to accept your offer more likely. But also, note investing really, like I say this in the show, is I think one of the best, if not the best forms of real estate investing that people should eventually get into. Now, most people don't start there, but even Dave explains today how a person could actually start there, which is cool.

So make sure you guys stick around for that. But before we get any further into the show, let's get today's quick. All right. Today's quick tip is, yeah, I'm going to throw this one in there. I want to encourage you guys to practice speed when you're looking for deals. So here's what I mean by that. So many people come to me and they, like, I talk to them and they say, yeah, you know, this deal came on the market a couple weeks ago and I'm looking at it and I'm, I'm analyzing it.

And, you know, I'm thinking it might be kind of a good deal. And every time I'm like, it's already gone. If it was a good deal, it's already gone, right? Like, you just can't wait in this game in this market. You got to practice speed. So, like, yeah, don't let fear just hold you back. Because in reality, like, how long does it really take to analyze a deal or to run the numbers? It's usually like 10 minutes, right?

So why do we wait weeks? That's only one thing. It's fear, right? So, yeah. That's a good tip. I mean, basically, practice analyzing deals before you're ready to buy. And then when you're ready to buy, you have to be able to do it. I mean, today's day and age, what, 24 hours, 48 hours, if you're lucky from the time you see it,

it's probably going to be under contract. So great tip. I like that a lot. Thanks. Yeah. So for decades, real estate has been a cornerstone. own 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

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No more talk about Chile and, I don't know, early mornings. Yeah, you know, well, not that. Let's get to it. I actually feel like we could do a whole show just on your trip to Chile, but we're not going to do it. I could do like a slide show for everyone. It's like old old fashioned like projectors, you know, like the little slides. You press the button. Yeah, exactly.

It'll be, we'll have no one listen to it or what. There you go. There you go. Do you remember, do you ever, did you ever watch the kids videos that veggie Tales. This is totally not real estate related. Do you ever remember Veggie tails at all? I've heard of it. Kind of. Yeah. Veggels were like a kid's video series back in the day. But there was one episode. People in YouTube, it called the Song of the Sebu, C-E-B-U. Look up YouTube later. The Song of the Sebu, The Seboo. It's like a video. It's like the video. And it's one of those, this guy sitting pressing buttons and going through a slide deck of his trip to, I don't know, Chile or something like that. Anyway, it's funny. Song of the Sebu, Veggie Tales, check it out. But anyway, that was totally random. Let's get into the show. Let's bring in. Dave Van Horn and introduce you guys to somebody who's one of the smartest people I've ever met. With that, let's get to it. All right, Mr. Dave Van Horn, welcome back to the Bigger Pockets podcast after five long years in the desert.

How you doing? He's back. He's back. Welcome, welcome, welcome. I'll be Bach. You are, you are back. You're back. You're here.

It was what episode number like 28, was that right? That's correct, yes. Wow, all right. Way back in the day when I didn't even know. what I was doing. I still don't know what I'm doing with podcasting, but back then it was, we were really rusty. I do not listen to those old shows. I'm like embarrassed by them. But I don't know. Hopefully we can do a better job today than we did back then. No, it was good. It was good. Well, good. Well, you know, today we're talking about note investing.

Obviously, you wrote a book on note investing. We'll probably talk about it later in today's show and we mentioned it in the introduction. But before we even like dive into the intricacies of how to buy a note and all that fancy stuff, like I just want to start, what the heck is. a note. Can you just explain to people who just have no idea? What are we talking about? It's a promise to pay. It's that simple. And, you know, a lot of times I'll start out asking people, you know, either who in here is in the note business or, you know, what was your first note? So if I said to Dave, what was your first note, Dave? Or I said to Brandon, what was your first note? What would you say? I would say I don't invest in notes. But there was a note somewhere along the way. So

my first note was my student loan and that was my first promise to pay right and my student loan believe it or not i've been out of school a while it was $5,800 at 6.12% and it was $65 a month payment for 10 years how many people would like to have that payment yeah i'll take it i'll trade you and a lot of times i go on to tell a story about how my younger son went to college and we paid for college with a fraction of the money, probably about 30 to 40% of what college costs. So it's not always what you're paying. It's how you're paying it. And we utilize notes to pay a fraction of the money to pay for college.

So I'll be sure to talk about that. Yeah, please do. So you're saying we're all in the note business. We're all in the note business. You all have student loans, medical debt, auto debt, mortgages. So I'm just trying to get people to step across the line to the concept of receiving payments instead of writing a check. Okay, yeah, that sounds much better.

So, okay, so from a tango standpoint with note investing, like, because this is a little bit of a complicated topic, but we want to make it really simple for our listeners. How is that actually done? Like, note investing, how do people make money with notes? So how do people make money with notes and how do you make a high return, that type of thing? Yeah, yeah.

Just think of the hard money lenders, for example, right? A hard money lender or transactional funding short term, it's a short term note, right? But what the hard money lender is doing is he's lending money out at 13 or 15% with points, and obviously it's expensive. But he's also doing it trying to do that twice in a year, say. Say he tries to flip the money more than one time. And also they're probably getting their capital that's from a business line of credit on their portfolio

or they're raise in private equity. So there's probably an arbitrage play there. By that, I mean they have cheaper capital than what they lend out at and they make the difference. So that's one way people make money. Then there's like two other ways to come to mind, right? There's like three ways typical real estate investor makes money in this business. The second way is seller financing, right? So a lot of people will originate a note to sell a property.

So your grandmother sells you a house, Brandon, and she says, I'll hold the mortgage for $100,000 and I'll create this mortgage. It's 8%, it's 30 years, whatever that is. But grandmom doesn't want to wait that long. She's like, no, I'm going to party now. I'm going to Vegas. I want the money. So what I could do is I can sell my note after it's originated, especially if it's got like

12 months of payments on it. Well, I could take that to a note broker, a seller finance note broker and sell that note for like 80 cents on the dollar, that type of thing. So grandma could get $80,000 for a $100,000 note and start partying now, right? Because grandmom says, I don't have much time left, so I want to party. Sure. The third way is the institutional notes, right? And that's what we, the space that I play in.

So we'll go, these are bank originated loans. And they, most of what we buy is considered an NPL, a non-performing lien, right? So why would someone, what would possess someone to buy a loan that's not paying, Brandon, right? Yeah, exactly. You got to be crazy. But what happens is now we're in an up market. So there's different price points when you buy in an up market versus a down market.

But a lot of first mortgages today are probably anywhere from 55 to 75 to 75. $0.5.80 cents on the dollar, the higher up in value you go, the more expensive they are. And the lower you go in value of the property, the cheaper they get. So I hope that makes sense to you. So you went through the three ways, right? So like there's private money. Like obviously, I've used private money a lot and hard money. Like there's that side, you could be a private money lender or hard money lender, right? Like there's also a seller finance in that like you just sell a house. Like I, you know, I might sell a property and then carry the contract on it. Just like if I was selling a car and I was going to have somebody make payments to me.

Like for some reason, like, I've always thought this. People have a hard time wrapping their head around seller financing, but everyone gets the idea of, oh, if I'm going to sell my car to somebody, they're going to make payments because I feel like most people have done that or somebody to ask them, hey, can you just make payments? So I think of it that way when people are confused, I think, think of selling a car and the person who's buying your car is going to make payments to you. It's the same concept with a house, right?

And then like the third way you said is you can buy institutional notes, which is what you do. So the institutional note thing is fascinating to me because you know, you and I did this video together a couple weeks ago that were included in the bonus content for your book. And I learned that you can get like really good returns off of this, like really good returns. Like yes. Can you explain how that is? Like how do people get such like awesome returns off, especially a note that somebody's not paying on?

Well, right. So let's take a $100,000 first mortgage, right? And you might buy that for $60,000. And if the property is only worth 110 or 100, you're okay. Okay. The worst case scenario there is they would start paying again at their 7 or 8% coupon rate. And but you bought, you paid less for that loan. So your, your return is actually higher.

It might be 11 or 12%. I don't, I'm not a calculator. You mean calculator, but you get the idea. Yeah. The other side of that is, well, what if the house was worth 150 or 170 fixed up and it was vacant? Well, now I have strong. to getting that property. And I did due diligence before I bought the property, right? I sent

somebody out. I had a broker price opinion. I, you know, checked out the property in detail. And it's vacant. I'll probably get the property back. Well, if it's worth $150,000, $170,000 fixed up, it might be a really good deal. Even if I paid 80 cents on the dollar, would I pay $80,000 for this $100,000 mortgage if the house was worth $170? And it only needed $20,000 in work or something. So that's how people are making money. And sometimes it's another way to get a deal that, you know, real estate investors will use the note to get the deal that they're trying to get the property in those cases. Sometimes you're just trying to get a passive return on the yield. The other thing that people, there's other ways we make money.

So, you know, we get a homeowner reperforming even. And you might go, well, that's kind of boring. They're paying their payments. You're making a 10 or 12% return or whatever that is. But what happens if the homeowner pays me off early? Well, now my yield will go through the roof, right? So if I invested 60 grand in this scenario for two years, say, and they paid me back, the $100 grand, well, now my yield really went really high on that, right?

Yeah, that makes sense. So like the three, you got the three options then. If they start paying you, you make a good return. Like you're just making a really good stable above average return, probably better than you're going to get in the stock market. If they don't pay you and you have to foreclose, well, hopefully you bought a good enough, you bought a property with good enough equity in it that you can now foreclose and take it and go and flip it or sell it to another investor or whatever or they pay you back and you know like it's it just

kind of feels like you're i don't want to say win-win but like there's there's good options presented you know to you this is the option i like the best because it's secured by real estate right think about there's companies that buy credit card debt or auto debt or student loan debt right well credit card debt has no collateral. Yeah. Right? This has collateral. So as crazy as you might think I am, Brandon.

It's the beauty of the business. It does have collateral. I love it. So if everybody's a known investor, today we're going to talk about how people can cross over that line, right? How do they get from not, you know, from paying people to getting paid for things, right? And actually just did my first note last year. I did a seller finance, well, not seller finance.

say, but basically I was a private lender to a buddy of mine who was flipping a house and he didn't have the money. I had it. So I lent him the money and it was the, it was hands down the best money I ever made in real estate. Like I will say that. Like it's like I never had to lift a hammer. I never even showed up to the job site other than just say hi to my friend. Like I did nothing. And every month I'd get this automatic check that he set up with his bank to my house. Like it showed him in my mailbox. It was like true mailbox money. And I was, I was sad when he paid it off. I was like, that was just so easy.

Like I get, well, I get it. Well, I guess that's, that's a good question because you saying that sort of furthers this idea that you already have to have money and some sort of real estate success to begin investing in notes. Is that the truth, Dave? No, because there's multiple ways to, I'm a firm believer in utilizing the financing system to your advantage, whether. that's paying down debt, accelerate it, you know, using sweep accounts and things like that,

or whether it's just leverage you're using or arbitrage or all these different terms I'm thrown out there. But instead of letting financing happen to us, like most people just go through life and they're not paying attention to financing. But once you get a handle on finance, you can really tweak your real estate business and accelerate your wealth building, you know, exponentially. So it's like how much cash would somebody have to have to actually go into a note. You can invest in peer to peer lending, which is a note for 20 bucks. So you can go to lending club, prosper.com. So a lot of the young folks in my office do that, because they run all kinds of analytics, because we analyze, you know, pools of mortgages. Well, they'll put those same

analytics on like a lending club or prosper. And, you know, the analytical guys are not going to out of the park with like a lending club because they'll day trade in those, you know, they'll do all kinds of things. Oh, well. Okay. So, so the point you're making here is like, anybody, can invest in notes, right? It doesn't have to be the end result. But would you also, would you agree, like it's a little more, like it's different than most investing? Like when we think of, I'm going to go buy a single family house rented out, like this is a whole different game. And so we have to learn how to do that. Well, it's in a way, it's no different. I mean, there's, sure, there's different risks involved. And I'm not saying go do note investing without knowing what you're doing.

Yeah. How many people come up to you, Brandon, and say, oh, I can never do real estate investing. Sure. Yeah. People in your family or friends. They're like, yeah, so it's the same idea. It's just, you know, it's just a little different, but it's an asset-backed investment for us. We specialize in mortgages, which are, you know, anytime you can buy it a discount with a high yield backed by collateral, I think it beats the stock market pretty regularly. And I used to trade options. So, yeah, that's cool.

Okay. So let's, well, I have about, I have a ton of questions about all the terms you just dropped because I don't understand anything about this. But let's just start at the beginning. Let's just figure out. I'm curious, how did you get into real estate investing? Give us like a little backstory about your evolution as a real estate investor and how it wound up resulting in you being the master of node investing. Oh, boy.

Well, I went to college to be an accountant and I got out of, I switched in my senior year to management. I got out of school. I couldn't get a job. So I was working in construction and living at my moms with my wife and son. And yeah, that is. That's fun. And mom said, you know, why don't you try real estate?

I got my license at like age 26. And I was taking a class to get my broker's license. And I took a class on investing. And the teacher said how many people in here have credit cards? We all raised their hand. And then the teacher said how many are buying houses with them. And we all our hands went down. And he literally went over, took our textbook, threw it in the trash and said,

we won't be needing that tonight. And I went home that night. And I remember telling my wife that I was going to buy houses with credit. cards and I bought my first probably 10 or 12 houses with credit cards. I'd write myself a credit card check, pay cash for the house, fix up the house with another credit card. And then I'd refinance the house, pay the credit cards off and get the house for free and make a couple hundred a month and walk away with some cash as well. And then property values jumped up and I had a lot of equity. And at one point, you know, I had 40 units at one point and had a couple million in equity.

And next thing, you know, I had about 11 lines of credit on my apartment buildings and houses and started becoming a lender, like a hard private money lender. And I was a property manager at the same time at a remax. And then I had all this lending going on. And it was, the lending seemed easier. I wasn't in court. I wasn't a full-time inspector. You know, and then later on, I got into institutional notes by accident. I was running a real estate investing group and interview, I used to interview the speakers. And we had a speaker that was raising capital for pulls of mortgages. And right before the crash, me and my partner, who was a lender, a loan officer, said, hey, why don't we try this node investing business? And we reached out to the person in New York

and said, show us how to collect the delinquent debt and we'll buy product from you. And then the rest is kind of history. But we started out with four loans. I mean, it was not that much money. And two loans flopped and one was a grand slam and one was a home run. And if we had only bought two loans, we wouldn't be talking, right? We'd be. Yeah. That's cool. All right.

So I want to unpack that and get in the notes. But before we do, I wanted to kind of bring to light something you mentioned. So you did a strategy where you were buying houses with credit cards, fixing them up, and then going to a bank and refinancing them. So what's funny is like before. I would not do that today. I would not do that. No, no.

Yeah. Houses are, you know, maybe the credit card thing might be a silly way to do that. But the strategy itself is the exact strategy that I've done almost all my real estate deals. We call it the burr strategy, right? It's where we buy a property with short-term money, usually from a private or hard-money lender. And then we fix it up. We rehab it. Then we rent it out.

And then we refinance it. Get the money back to pay off the short-term money and then repeat the process again. And so, like, I've done this for almost every property I've ever bought. I just do it over and over and over because I can typically get my money back. So I just want to pull that out there that, like just because Dave said he'd used credit card and you're saying, well, I can never buy a $200,000 property with a credit card. Yeah, you don't. but the same principle could apply to people today. And it does.

I mean, people constantly tell me that they're, they're successfully doing bird deals and I'm successfully doing bird deals. And like, I see it all the time here on the podcast. So anyway, just wanted to pull that point out there. Anything you want to like share Dave on like what works with that strategy and what doesn't

or anything, advice that you realized back then that was important? Well, credit cards back then didn't have cash advance fees like they do today. So you're much better off using private money or hard money. today. One of my regrets was that I didn't use more hard money to get started. And it's because I realized later that investors were making money on the draw schedule. I never knew that. Like I always thought the interest rate was high. There was no reason to use, you know, I didn't want to use hard

money, right? So when I found out later why, it's because if the next draw was $10,000 and I came in under that, I did the next phase of the project for $6,000, I could keep that $4,000. A lot of times people don't realize that. But I was a realtor and a contractor. I just didn't have any money. And what the lesson is, you don't need any money. You just need a deal. Yeah, that's so true. That is a great lesson. So you alluded to this earlier a bit about hard money and just mentioned it again. Could you explain to everyone what exactly hard money is and why you recommend using it? Well, hard money is there because banks won't lend on short term renovation deals from unless you're getting a construction loan and you're a big developer or something. So they don't banks don't want to lend

on, you know, renovating a little house. So a hard money lender is a private lender who comes in and does a commercial first mortgage short term high interest rate and points usually, you know, higher than a traditional bank. But it's short term financing. And usually you renovate the project and you'd, you know, flip it out or you'd refinance it and keep it as a rental. Yeah. So you're buying it. Like a handyman special, a bank doesn't want to finance a handyman special, basically. Yeah. I think a lot of people don't understand that. They always ask, well, why would you do the birth strategy? Why not just go to a bank and get a loan on the fixed Rupper?

And that's exactly why. Banks don't want to lend on nasty houses. So you use short-term money to fix the nasty house into a pretty house. And then you go get long-term money. And if you got a really good deal, then, you know, you can make it happen. And you mentioned something else, too. I'll just pull out here because I think it's just gold. It's like you don't need to have a lot of money to invest in real estate.

Like we all know that you don't need to have a lot of money, but you do need to have a deal. And today's economy especially, like money is everywhere. Lots of people have got money today. I like to call this thing. I call it, I think we're going to name it the deal delta. I'm coming up with a branding all the time because I'm trying to change how we call it. But anyway, we're going to call the deal delta, right? So there's like three things you need to put together a deal.

You need money. You need hustle and you need knowledge, right? But you only need two of those, really, to put together a deal. So if you've got some knowledge and hustle, you can go find good deals and somebody else can bring the money. Or if you are just somebody who has money, you could get somebody else to go do the hustle and the knowledge party if you really want to. Now I'd recommend everybody get the knowledge. But, you know, at least like, if you want to get involved in real estate, yeah, just build your knowledge base, get your hustle on and you're going to do just fine.

So, yes. There you go. Before we get into the actual loan investing and note investing, could you just sort of give us a primer on mortgages for people who are thinking about the first deal, haven't been through the process and don't know so the ins and outs of getting possible bank financing? Well, the banks want to lend a certain percentage of what the house is worth, right? So I like to tell investors when they're starting out, well, one is what type of investor are you, are you active or passive? And then a lot of times I think investors, some are reluctant to utilize the loans

they can get in their own name. Me, I'm not saying what I did was right, but I kept that as a separate bucket. So whatever loans I got in my own name, whether that's 10 mortgages or, or whatever it is today, hurry up and do that, and then go off and do your commercial bucket and get your commercial loans. And then I would keep multiple buckets for me. And I would utilize debt as asset protection,

or I would have a lot of insurance. So I would have different strategies. So I have my IRA bucket. I have my insurance bucket, you know, that type of thing. And then I have multiple commercial buckets. I have a business bucket, which is my company, right? So I have all these, you know, revenue streams, so to speak.

and I segregate them somewhat, you know, multiple streams of income. I actually talk about that in the book with Robert Allen wrote a book, multiple streams of income. And it was one of the things that got me started when I was a realtor. You know, for 15 years as an agent, I just made the brokerage money. I didn't think about, you know, later on, I became a partner in a title company. I did property management. I had a construction business.

And so I would sell brand in a house and then make money in all these other ways. So I would get paid five, six times on a particular deal, right? So that's what I mean by multiple streams of income. But you can do that with your investing as well. Well, and that's one reason that makes me excited about getting into note investing because I am getting into it. And especially the more I talked to you here, you know, you and I did a bonus video together that we launched with the book. For people who buy the book, they get like an interview that you and I did with, what was his name, Bob? Is that? Yeah, Bob from my office, Bob Paulus.

Yeah, he's bright. So we did this video and I just like, basically you guys walked me through how to buy my first note. it was unbelievable, but like, I'm excited because of the idea of multiple streams of income. Like, I'm not getting out of real estate investing. I'm not getting out of rental properties, right? Yeah, but like if I can diversify my portfolio within the real estate space, I'm not going to go buy stocks because I don't like stocks. That's not my thing. And I'm not going to go buy bonds or whatever. But if I can get multiple streams of income within the real estate niche, like I get that. I understand that. And that's what makes me excited. So I love the fact

that you brought up the multiple streams of income. And I did read that book when I was younger, two, Robert Allen's, I think it was multiple streams of income, I think is what it was called. And yeah, a huge fan of that. So I'm curious. Like if, if me, Dave Meyer was interested in getting my first note investment, where do I start? So a lot of people get started in different places. And that's why I was asking the question earlier, what type of investor are you? Are you active, passive?

What's your experience level? But a lot of times people start in performing notes because they're easier. They're already paying. and they're typically already placed with a servicer who's collecting the payments for you. They just give you statements every month. So there's very little. Can you just dig into that quickly? Because I think a lot of our audience probably is not familiar with performing versus nonperforming and benefits of each.

Well, performing means the notes paying. And a lot of times in our case, it was a note that once defaulted it and became reperforming. And now it's paying, especially if they're paying for more than 12 months, they're considered performing again. again. And, you know, my 85-year-old mother invest in performing notes. She's like a little note queen because it's that simple. It's the payments are ACH to into her bank account every month from the servicer. The only challenge would be if the note were to re-default, and if that were the case, most servicers have default servicing. So they would pursue the property or whatever. So you have collateral behind your investment. So just like you would

if you invested in a house, right? Okay. So you're saying you're 85-year-old. old mom. So she has a note that it has a servicers. So there's a company that deals with the note, right? So she's got this money coming in every month because, you know, for whatever the amount. Let's say, hypothetically, she had a $100,000 note and they're paying 8% interest on it, let's just say for simple math. And they're getting, what is that, like $8,000 a year in. Right. If you buy it at a discount, it'd be a higher payment. So she might get a 10 or 12% return on Okay, so that's another thing we should talk about then. You can buy notes at discounts just like I can go buy a real estate deal at discount.

Okay, so let me like, so I want to buy a note. And so somebody is making a payment every month to you, let's say, right? So you have a note. They're paying you, Dave. Every month they're paying you $1,000 a month. And the note is for $100,000, we'll say, right? So if I could buy that note from you for a discount you're saying, just like a real estate deal, I can go buy that for 90 grand from you.

Right. So a lot of, especially real estate investors, they don't understand the ability to recapitalize on a note you own. They think you buy a note and you're stuck in the note for 20 or 30 years, right? But what you don't know is you can sell the note. You can sell a piece of the note. I can sell Brandon five years of payments to his IRA account. Or I can actually borrow against my note.

It's called a collateral assignment and note mortgage. So Dave could lend me 10 grand and I could back his, loan with my performing mortgage. And I could do a recording in the county courthouse behind what the notes located. So, you know, I could do a collateral assignment of note mortgage is what it's called. It's two documents. So I do a promissory note with Dave and then do a recording to protect Dave. And if I didn't pay, Dave could take my note, just like you could take a house, right? So the only difference when you're buying a note is it's a, you know, a note sale agreement and you record the assignment of mortgage. When you buy a house, it's an agreement of sale and you record

to D. It's kind of that's that simple. Yeah, very, very simple. Okay. Cool. So I'm a new investor. Like I let's say I want to do a performing note. That seems easier. So I just want to own the mortgage of someone who is actively paying their mortgage every month. What do I do? Like I have absolutely no idea where I go about that. Like I know how to find a real estate deal, but I have no idea how to find a note that is going to make me money. Well, you know, there's a lot of places where you can buy notes. It could be on, you know, exchanges like FCI Exchange. They sell notes there all the time, auction.com, loan MLS.

There's all kinds of website. Our website sells notes. We sell notes every week. So you can, and there's multiple funds that sell notes. You know, Gemini sells notes, granite mortgage sells notes. There's all kinds of funds out there to sell notes. There's also other trade desk, colonial fundings. trade desk in Texas. So you can, you're just not familiar with it. That's all that it really is.

It's a familiarity thing. But there's plenty of places. There's no brokers that sell notes on a regular basis. So there's note exchanges, no brokers. There's funds that sell notes. So there's plenty of places to buy notes once you're familiar with the business. But it's like anything. You got to get educated in this space. You got to network with people doing it. You might want to JV or mirror someone else at first until you get the handle of what's going on, right? So it would be like if I let Brandon watch a deal that I would go out and look at, look at the due diligence, he would shadow me, just like you could do in a real estate deal, right? Somebody could tag along and watch all the numbers and watch what Brandon did and watch how Brandon rehabbed it. It's the same idea, really.

Okay. And I think that's like super valuable, a valuable advice for anybody whether or not they're trying to buy notes or not, right? Like you just said like, shadow something. somebody. Like your first deal, you don't have to do yourself. And if you're like brand new to any kind of real estate, figure out what you want to do and then go find somebody who's doing it and be like, hey, can I just follow you around? Can I just learn from you? Um, I mean, don't be annoying about it. Yeah, isn't that great? I feel like so many people are like, oh, how do I make this much money on your first deal? It's like, even if you come out of a wash on your first deal, if you don't make any money, you're going to learn so much that is going to make you money over the rest of your life.

It does not matter if you're going to make a huge swath of cash in that first deal. So there's other ways to get started, too. One is note funds, right? A lot of times you might have to be a high net worth individual to invest in a note fund, but sometimes you don't. But a note fund spreads the risk around. So if instead of, if one note went bad and you're in a fund of 100 notes or 1,000 notes, there's less risk because also you can't be sued.

You're just like a limited liability partner. So you have some liability protections there. And believe it or not, a lot of people utilize qualified plans to invest in notes because it's so passive. And there's less, you know, maintenance and things like that. So there is a place for them. You can also invest in non-performing notes, which is, you know, how Brandon rehabs a house. We rehab the paper, basically. There's also seller finance deals is a great way to get started as well.

And that's where, you know, you do owner financing. One of the strategies I used to do when I was buying property, I would make like four and five offers on a house, on the same house. So I would do an offer of owner financing. I do an offer if they held a second. I'd do an offer if I went with a traditional bank. And then I would do an offer if I had to use a hard money, cash offer. So, you know, it's, and all offers worked good for me, right?

It didn't matter which one the seller picked, but it's a neat way to get a property and get some interesting financing going. So here's why I love that. I love that. And I teach people this a lot. And it's something that I've been doing for years is when you make people multi. And again, this is not just note investing. It's all investing. When you make multiple offers, people don't, they're more likely to choose between the options presented than a yes or no. Right. So instead of saying like, like, I actually, this morning, I'm submitting an offer on a property. Yeah. Yeah, right. So I'm submitting an offer today on a property. It's nine, they're asking $929,000. I'm offering them today. It's a big property.

I'm offering them $800,000, it's been on the market forever. I'm offering $800,000 and I'll come with a loan. Or I'm going to offer them like $8.50 if they'll carry a second mortgage for $100,000. Because if they can carry that second mortgage, I can come with way less money out of pocket. Therefore, I'm willing to pay way more. So when I submit this offer today, I'm going to give them two options. It's the same reason that Starbucks sells, you know, tall, Vinty, Grande, right? It's like, you don't think about the 7-11, 99 cents a cup of coffee when you're like, oh, which one do I want?

you know, $9, $30 or $100 for that cup of coffee, right? Like you choose between the options presented rather than an outside thing. So that's just a quick tip for anybody out there. Yeah, I love that, Dave. So make, make multiple offers. Make multiple offers. And those could turn into a, and if you ask for seller financing, you never know. You might, you might get that.

So, okay, so that's, that's cool. So let me go, I want to go through a little story here, an example. Okay. So like Dave said, he's a new, Dave Meyer here is a new investor, wants to get started with real estate and doesn't want to change toilets and deal with crappy tenants that want to like do all this stuff right he just wants to pass that sounds great right doesn't it sounds amazing let's do that what would you do in your weekends you know yeah come on you that's a problem that's a problem i would love to have i will figure out what to do instead of dealing with tenants that

would be great all right good you'll miss standing in line at home divo all right so you Dave wants to buy his first note. Now, he's decided that he wants a, we'll say, performing note at this point. He wants to, and it's going to, I'm assuming Dave Van Horn here, that a performing note is probably going to be more expensive than a non-performing because it's kind of like a fixed-up house is better than a nasty house, right? Okay. And maybe it's going to be a little bit less return, but maybe a little more stable and a little less risk.

Am I correct on that? Yes. Okay. So now he goes to a site like FCI Exchange, which I think is a cool site just for digging around because they give you a lot of numbers. That's what's cool about that site. But you know, like you said, they go to your site. They can buy a note from you guys. They can buy a note from a lot of people out there. But let's just say he goes out and he starts researching and somebody says, yes, Dave Meyer, I will sell you this note. It is a performing first mortgage. And the, you know,

the person owes 100 grand or a little bit more. The person owns, I don't know, 50 grand on it. Right. It's a little house in like Detroit or something. So they owe 50 grand on it. The house is worth $70,000 though. But they only 0.50. So I'm going to sell you this note for, I don't know, what's reasonable, 45, 50, 55, I don't know. Well, if it's non-performing, it might be 50, 60 cents on the dollar. Okay, it's not performing, it might be waiting. If it's performing, it might be 70 cents or 80 cents.

It depends on the, you know, the quality of the borrower or the collateral behind the property. Usually the higher, the mortgage amount and the better quality of the collateral, the more you'll pay on the dollar, especially with first mortgages. Okay. So let's see. There's a $50,000 note that Dave Meyer here wants to buy. And he can buy it for $40,000.

We'll say 80 cents on the dollar, right? So he can buy it for $40,000. But here's the cool thing, right? He's not getting, even if the note, the interest, right? The interest that the borrower is paying. Even if the interest was 8%, Dave's not getting 8% on his money, right? Because it's 8% on whatever the original balance was of that note. On the 50.

Yeah. on the 50. So like he's actually probably making closer to, I don't know, 10% we'll say. Yeah. And then what happens if they pay the property off? Like they refinance or they sell it? Well, you would collect even more in payments, right? Because you'd be, or you could, you know, say they default it.

You have plenty of collateral behind you as well. So it's just a nice. It's another way to invest. You know, a lot of times think about real estate rentals, right? I used to be a property manager. if you're making more than a 30% return on your rental on the cash flow, it's a pretty good number. And if you go much higher than that, you tend to be in maybe less desirable areas or something. So, but when you factor in maintenance and property management, are you down closer to 20 or 15 or you see how it starts to shrink?

So note investing is not as crazy as people think when you factor in, you're not dealing with the property, with the property management and the maintenance. Now, a lot of folks do that themselves. I get it. because I used to do all those things. And, you know, but that's just kind of the tradeoff there, right? So it's really, especially if you get into nicer property, the returns are even lower, right? And then if you paid a property management fee, you're either paying a property manager or you're paying yourself. You know, if you want to work for $20, $25 an hour, that's fine. But, I mean, you get the idea.

There's nothing wrong with it. I used to be a property manager. So, but I used to do some crazy things, too, in volume. All right, cool. So I have two questions about this. First, if this property is so great and I can make all this money, why are people even selling these mortgages? Why wouldn't the bank or the original service,

whoever's owning the loan right now? Why would they sell it to me at a discount? So they can go back and buy more or they're making their money on their rehab. So if I bought that example that Brandon was using, it's a $50,000 mortgage and it was non-performing. And I bought it for $25 grand. And it's six to 12 months. I get it reperforming and I sell it to you Dave for 3540 grand.

I'm a happy camper. I'm okay with. Right, right. If I make 10 and 15 grand on my 25 grand investment in less than a year, am I okay with that? Yeah, of course. That would be great. So it's kind of like saying,

it's not as bad as it sounds. Yeah. Yeah, it's kind of like saying like flip, why would you, why would you ever sell a house when you flip it when I just hold on to the rental? Well, because some people are just in the business of flipping houses. They like that quick.

making a chunk and then moving on. I think that's, yeah, there's so many analogies between like rental and flipping versus note investing. Well, even if I took 40 grand, I went back and bought two more notes, right? And then I did it again and did it again, you know. So let's answer the question that's certainly foremost on my mind, which is what happens when it goes badly? I know with my rentals, I know how to evict someone at this point.

But what happens when a performing note becomes a non-performing note? Well, you have to either reach out to your servicer and they'll start, you know, foreclosure action or whatever, or they'll try to get it back on track for you. We actually do have a warranty at our company. So if we sell you a note, our warranty is investment principle minus payments received. So we would actually give you an option to buy the, sell the note back to us. So and we don't really want you to lose money. So because you would keep buying more notes, right? But, you know, different companies have different reps and warrants when they sell you a note. So you want to be with somebody reputable, you know. So what's cool about note investing that I've kind of discovered a little bit and talking with you a lot, especially, Dave, is that like, it's, I don't want to say you can't lose. You definitely can lose. But like you can lose. But there's so many like protections, right? Like in other words, like if they pay you off, like you have so many exit strategies, if they pay you off, you likely make all your money back and then a big chunk at the end. Don't you like a kicker or something like that, I think is what you said. Sure. Yeah. I mean, you can have infinite returns too, right? So. How would you do that? Well, like say you bought a note for a small amount and they paid you arrears and you took your risk off the table and then they made payments for a year and you got all your money back. Well, now your return was infinite after that year because they paid, you know, they were behind and say they were behind three years in payments and they got you caught up or they, you know, you might have discounted the arrears. So they paid you a chunk of money.

They started paying again. And then at a certain point, your risk is off the table. and now it's just all gravy coming in at the remaining part of that note. Or you could have sold a piece of the note and now you got all your capital back. And now it's all an infinite rate of return. So you can cash flow off notes. You know, you can do some neat things. That's cool.

Like, yeah. So if we were to like go back to, I guess the original example here, Dave bought this property for 50 grand and, or he bought it for 40 grand. He bought that note for 40 grand. It was worth 50. If they went refinanced or they sold the house eventually or whatever, then he can now, he gets all his money back, plus that extra $10,000 that he didn't put in. That's awesome.

If they don't do it, he may have to foreclose in them. Now, some states I know are hell to have to foreclose, and some states are a lot easier. But let's just say he's in a state that, you know, whatever, he forecloses on them. Six months later, they're out. Go to the process. And now he's got a house that's worth 50 grand, and he only owes out of 40. Now he can maybe flip that house. And I know some investors use notes as a way to actually, like, generate potential leads.

There's really like just a lot of like or they just keep paying on it forever and he makes a good return for as long as he holds on the note or he sells a note. Like there's just so many exit strategies, which is one thing that I love about note investing. Right. So it depends what your goal is. Like if you're a real estate investor and you venture into the note space and your goals to get more properties, then maybe you want to buy vacant first mortgages, for example. If you're somebody that wants payments, you might go after occupied to get modified or that are already performing. If I want to get yield, I might go into junior liens because there's more yield. It's a higher risk, so a higher return.

So it's what kind of investor are you? Are you somebody looking for something safe? Are you somebody looking for a high yield? You know, it varies, right? Just like anything else, you know? Yeah, that makes a lot of sense. So if there's like one message I can kind of get across here to people like from what I've just like learned, you know, reading through your book, talking to you is that like

note investing is not like a one. Like it's not like, it's big. right? There's so many avenues who, kind of like somebody said, well, I don't want to invest in real estate because I don't want to have to fix toilets. Well, I don't fix toilets and I invest in real estate, right? Like, oh, I don't want to do notes because I don't want to deal with people in foreclosure. Okay, well, do something else then. Like, there's, I do a different type of note investing. There's so many different types of note investing, which is again, why I love your book, because it gives a just broad overview. So I guess now is probably as good a time as any time to just mention you wrote a book on note investing. Can you give us like a 30 second kind of description of what? Yeah, there it is. The real estate note investing by Dave Van Horn. Tell us what. What is the book about just in like a quick summary? The book, it's awesome. It's got the best cover I've ever seen. It is a pretty darn cool cover. It is a cool cover.

But anyhow, what I liked about the book is, you know, even before I wrote the book, there wasn't that many notebooks that talked about the whole node industry as a whole, right? It's a huge industry, trillion-dollar industry. And I don't think there was a comprehensive book done to date. You know, and it was one of the things I wanted to try to explain all the different aspects of the note business, just like real estate, right? You can invest in real estate in a million different ways. And I think with notes, people get confused. They don't know, well, how do I get started?

How big is it? And I think that was one of the things first initially that brought me to writing the book about it. But I also wanted to point out that we also go into how you can find notes. How do you do due diligence on notes? How do you do it safely? How do you make money on notes? Yeah. All these things.

how do I use notes to increase my wealth and incorporate it into my real estate business and even into my everyday life? And I actually go into a whole thing about how you can pay down debt quicker, how you can buy houses better, how you can sell houses better, how you can cash flow after you no longer own the house, how you can invest better, how you can pay down debt really fast, how you can build your wealth twice as fast, right? You can use all these different finance tax. And I think, you know, a lot of real estate investors just tend to go out and do their part of the business, whether it's, you know, finding deals and rehab them or whatever that is. They don't necessarily look at it's a finance driven business. Sometimes the deal is in the financing, right?

There's no, my partner says this all the time. There's no bad houses. There's just bad prices, right? There's no bad notes. There's just bad prices on the notes. And that's really, or bad terms. So I think what I'm hoping that this book, does is it introduces the concept of we can make our businesses that much better by utilizing notes in our business, that type of thing, whether it's scaling more. So I don't care if you're a wholesaler, rehabber, turnkey person. You're going to make more money. You're going to do it a little bit easier. You're going to cut out some of the nonsense in your life by utilizing notes more in your business. And sometimes it's even a great way to exit. It's one of the things I'm doing

personally, Brandon, I'm a little older than you. But I have had. houses that I've owned for years and I'm starting to pay some of them off right and I'm paying them off and I'm moving them into a family trust you know doing a little state planning but I'm hoping interest rates go up right now how many real estate investors do you know are hoping interest rates go up right and you might be going like you're something wrong with you you're hoping they go up well I'm hoping they go up because I want to sell some of these houses with owner financing to a gentleman like yourself where I hold the paper you know we don't have to pay the realtor fees I transfer it to you It's almost like a cash deal.

And I'm giving you financing. And maybe I do a fixed rate of 8% for 30 years, interest only, for example, to your entity. And you're not living there. You're renting it out. You grab the keys. You walk in. It's turnkey. And you're going, hey, I just added another gem to my portfolio.

I don't have to really do anything. And I'm paying Dave instead of paying the bank, right? It's not such a bad concept, right? And here I am cash flowing. off property I no longer own. And my family likes that. So sometimes it's a great way for a real estate investor to exit, you know. Yeah, that's awesome.

And you know, some people think of notes as being a very advanced strategy, which it is something that usually comes later in an investor's life. But when reading through this book and like, I talking to you, I realize like this is so important for newbies as well. Like if you're an advanced investor, you're going to love this book. But if you're a brand newbie, let me tell you why I think like every single newbie needs to read this book because like by understanding both sides of the financing thing, like if you understand how private money works and how seller financing works and how raising,

you know, hard money works, all that. Like this book explains both sides of it, which will help you put together more deals. Like a few years ago, I bought a 24 unit apartment complex and I had no money. I mean, I was like 23 at the time, I think 24 at the time. And this property came up. And I, if I didn't know about how seller financing worked, I would have never thought to even ask the seller to do seller financing. I just bought a million dollar mobile home park here a few months ago. And if I had not known about how seller financing works, we wouldn't have even thought to negotiate that into the deal.

And so we ended up getting seller financing on the whole thing. And so it's like because I understood that, I was able to put together more deals. So especially if you're new, if you don't have a lot of money to start investing, seller financing is one of the greatest ways to do it. So definitely pick up a copy of this book because it's going to shed a ton of light on how to do that.

You'll become an expert at it. So then you can suggest that. to people like old guys like Dave Van Horn here. Old guys like me. Who want to retire. Brandon, you hit on the head. This is autobiographical book in a way, right? I started out when I was a newbie.

And then when I started learning about notes, you don't need a lot of money to start in a note business. You can literally do it with $20, $25 on Lending Club and Prosper.com. You don't need a lot of resources to get into the note business today. But one of my favorite things in the book is how your assets can pay back your liabilities, how a note can pay your student loan back at a fraction of the cost, how your note can pay for a brand new car instead of buying a used car, how a note can put a free addition on your house by utilizing a home equity loan and a note. You know, these techniques of how we pay back our

debts with our investments is just a unique concept that I like, and it's just another strategy to build wealth quicker. And hopefully I can share some of this with everybody through the book and somebody can take, you know, just about anybody can take a little something away from it. That's awesome. All right. Well, like I said, guys, I think everybody should pick up a copy of this book, whether you're a newbie or an advanced investor. It doesn't matter. Pick it up. It's cheap. It starts at 1999. You can get it only right now, only on biggerpockets.com. So you're not going to find this over on Amazon or audible or anything else. Right now, it's only on biggerpockets.com. And again, prices start at 1999 for it. Go to biggerpockets.coms forward slash note investing. Biggerpockes.com

slash note investing. And we are doing a big launch as we always do when we launch a book at bigger pockets. We want to encourage people to jump in and take action. So we're providing massive, massive benefit right up front, massive bonuses. We want the bonuses alone to be worth 10 times the cost of the book. So what we're including today, if you guys buy in this first, I think it's 10 days, but I can't remember exactly, but buy right away because I don't remember if it's 10 or 12 days or 14 days. But anyway, if you buy in the first couple of weeks here, you're going to get some bonus kind, including an e-book called Stay Safe, Note Investing. pitfalls to avoid. You're going to get something, a video interview that me and Dave and Bob,

your partner in crime there, did. That was, that was mind-blowing to me. Like, we just walked, like, like Dave and Bob actually shook screen shared. Like, we looked at some notes. We analyzed them together. We looked at the numbers. Like, how does it all work? Like, that was unbelievably helpful for me. And then third, there's also an audio interview and a transcript you did with Mary Hart about asset mistakes. Can you explain what, what is that? Well, Mary Hart's at asset protection attorney and we went into a lot of things investors don't think about when they're building their portfolio to protect themselves, whether it's, you know, from lawsuits and things like that and how you can utilize notes and as a form of asset protection. So a lot of people don't know that

you can use notes as asset protection, those types of things. But she goes into a bunch of other strategies that a typical real estate investor should incorporate, you know, to avoid some trouble, you know. That's awesome. That's awesome. Well, cool. Well, everyone, go pick it up, Biggerpockets.com forward slash note investing. Or if you can't remember that, just go to biggerpockets.com slash store. You'll find it there as well. But again, this is for everybody. Pick it up right now during the launch period.

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which is much cheaper than learning the hard way. All right, so let's move on. I have one more question before we move on because we've touched on a couple times today and we never really dove in what it was, but I want people to understand because it's a pretty common phrase with note investing. What does it mean when you say first lien, second lien or junior lien, senior lien? What are you talking about? And then we'll move on. Well, first mortgage is what someone typically takes out when they buy their house, right?

That's the main mortgage on their house. A second mortgage or junior lien are the same thing. A junior lien could be third position or fourth position as well, though. But usually junior liens are usually a second mortgage in most cases where someone were to take out an additional home equity loan on their house or a home equity line of credit on their house, that would be a junior lien or a second lien. People do it for improvement or something like that, you know, where they're borrowing out of the equity of their house. Okay. Yeah, that makes sense. Well, is there anything else you want to leave us with before we move on to the fire round and the famous four? Anything like final piece of advice for people

who want to get started with note investing? Utilize leverage. Leverage your resources. You know, if I were to ask you, what point of leverage will make a dramatic impact on you in the next year? You know, is it leveraging people, money, time, technology? What is that leverage?

Think of ways to leverage your resources and your financing. Awesome. It's great advice. Yeah, very cool. All right, well, let's move on and get today's famous. No, fire round.

It's time for the fire round. All right. First fire round question. Is it possible to purchase your own non-performing note? Yes. You could purchase a non-performing note in several locations. No websites, no brokers, note exchanges, yes. Excellent.

Very, very quick and fire roundish. Yeah, that was very quick. All right, next question. The title of the forum thread was other avenues of note investing. a question from Dustin. Granted, I'm aware that the main discussion in this forum is on notes investing in real estate, but I'm curious to hear other feedback. Does anyone invest in other types of notes outside of real estate? I studied note investing a few years ago, notes as other avenues like annuities and other things. Just wondering if we'd love to hear who invests in notes outside

of real estate and any advice they can give. Any thoughts to give Dustin on that? Like, can you invest in outside of real estate? Well, just to give you a perspective, notes are a trillion dollars. industry, right? So they're all over the place. And I have friends that invest in student loan debt. I have friends that invest in credit card debt. I personally invest in commercial notes because I can't invest my IRA in my own company. So I invest in commercial notes that are tied to receivables. So I have a friend that has a company that does commercial notes to businesses for short-term loans for retail establishments. And interest rates are very similar to hard money rates. So I I invest from my retirement account into commercial notes, for example.

So yes, it happens all the time. All the time. All right. Cool. All right. Question number three. If I want to be an individual note investor, how much money do you need to have to play? Is it possible to buy some notes in the 5 to 10K range? Real estate specifically, right? It is possible, but it tends to get riskier the lower it gets.

So most performing loans, if you're buying a second mortgage are probably between 20 and 40 grand. Most first mortgages could be 20 or 30 to 60, 70 grand and up. They can go higher, much higher. But most of them tend to sell in that range because the real big mortgages go to the big funds. They grab the largest mortgages, if that makes sense. So the lower end of the spectrum is where typical investors hang out.

And yes. So you, but when you get into that $5,000 range, you start getting into more risk. So I bought loans, for example, in Detroit for 80 bucks, right? Now you might go, well, you know, that's risky. Yeah, but it was 80 bucks. So, you know, put it in perspective. That's funny. That's hilarious.

All right. So on that note, question number four, on that note, no pun intended. That's fun. Very nice spot. Yeah, thanks. Thanks. Would it be a smart strategy to buy a non-performing note or a default mortgage. So somebody who's not paying just to foreclose on them and get leads for your,

ladies like they're saying to get leads for your flipping business. Is that a strategy I should be pursuing? Some investors do that and they typically do it with vacant property because if the property is already vacant, you could determine that prior to buying usually if it's occupied or not. You usually have a BPO or broker price opinion. Somebody goes out to the property and they can kind of tell you if it's vacant or not. So if it's vacant, you have better odds of getting the property and not having to deal with, you know, with, you know, evicting a family or something like that. Yeah, you know, one thing to dive in a little deeper on that, I know this is fire around, but when we did that video interview, you and I and Bob, part of the bonus content,

like, what I really learned or got out of it or really respected from what you guys do is, like, you're not in the business. I had this wrong opinion of no investing. Like, I honestly thought, like, the goal was to do this is to buy, like, to deal with people who are in foreclosure and try to kick them out of their house and like, like, I was kind of the view I had, but I realized what you guys are actually doing is like in every way possible trying to help people. So you're going to people who've got like, you know, hey, to go back to the example we used earlier, they owe $50,000 on their mortgage, let's say, and Dave buys it for 40 grand, but, you know, they haven't made a payment in two years. And now they've got $20,000 in late fees and charges. And now they owe $70,000.

They're upside down. They're loose. They can't get ahead. They're just drowning in debt, right? And you go to them and say, hey, listen, let's just, let's just negotiate something. Can you put a little bit down on your debt? Can we knock off all those payments and fees and whatever, right? Like that's what I really got out of it was like, you look at this as an ethical business, which I really respected a lot and made me excited to get into this and say, because you're helping people, you're not just taking advantage of them in a hard situation. You're trying to do what a bank could never do.

A bank is cold and hard. You guys have a heart. So, kudos to you. So socially conscious investing. So you're trying to share your digital. discount with the homeowner to hopefully keep them in their home if you can. And that's our primary focus. Yeah, I love that. Yeah, again, you guys got to listen to that video. That's really cool. So yeah, super cool stuff. All right, well, that was the fire round. Now, before we do the famous four,

let's hear a quick word from Mindy on what's going on this week on the Bigger Pockets Money podcast. Hi, Brandon. I'm super excited for this week's episode of the Bigger Pockets Money podcast. Last week, we released part one of the Choose FI interview with Brad and Jonathan. This week, we're releasing the second half of their interview. There was just too much excellent information to cut this interview down. Thanks for asking. And now back to the famous for. All righty.

Make sure you guys check that out. Again, you can get you up by going to biggerpockets.com forward slash money show. Okay, money show. Money show. Yeah. Make sure you guys, don't check that out because it's fantastic. Yeah, good stuff. All right.

Well, let's get to the world famous. Famous for. Famous for. Famous. Was that an English accent? I always do an English accent. I like I turned into an old British lady. Whatever, whatever it happens.

I don't know. I don't know. It's weird magic. All right. We'll do it. Some questions for you. First one. What is your favorite real estate book?

My favorite real estate book I'm reading now besides my book. Besides my book. Besides your own. Is later or not, it's a weird book. It's called the first entrepreneur, and it's about George Washington. And I'm a history buff a little bit. I read a lot of books, but this book I like a lot because I didn't realize George Washington was this big land barren business owner.

And he had to do some things that we didn't have to do, like go fight the French and Indians or something to protect his turf and stuff like that. But he had thousands of acreage. And when he got married, he got even more acreage and all this. it's an interesting story. I didn't realize how much of a real estate tycoon he was. It's called The First Entrepreneur. It's a good book on George Washington.

Yeah, cool. What about business books? What's your favorite business book or current favorite? I guess my current favorite book was a book I just finished called Abundance. I think who wrote that Peter Diamandis or somebody. But it's called Abundance. And it's probably the most optimistic book I've read in a long time about just the possibilities of all the stuff that's going on.

in the world right now. And all the solutions to most of our major problems are already here. We just haven't connected all the dots yet, you know. And it's a great book. Yeah, abundance. All right. What about your hobbies? What do you do for fun?

Play with my grandkids. I do a little fishing. I go to, I have a mountain house. I go away. I like to travel a little bit. But history, and I read a lot.

That's probably my biggest, you know, I like anything history related, like sightseeing stuff. you know, anytime in a different city. Cool. All right. And what sets apart successful investors from those who give up, fail, or never even get started?

Wow. What sets them apart? I guess they're persistent. They don't give up. They don't listen to the herd. We were talking about the herd earlier. You go against the herd. If you do the opposite of what everybody else is doing, you'll be super successful.

There you go. Good advice. I love that. All right. Last question of the day. Dave, where can people find out more about you? Where can they connect with you?

Go to your website, stuff like that. You could go to PPR noteco.com. PPR noteco.com. Or you can catch me on bigger pockets. I'm always into forums. Always writing articles. Yep.

Perfect. Awesome. All right, dude. Well, this was awesome. And I know we only barely scratch the surface. Yeah, this has been cool. So if people want to know more, about note investing. I would highly encourage them to all pick up a copy of real estate note investing.

It is fantastic. Dave, you're a very good writer and I enjoy reading your stuff. So I think people are going to love this. Thank you guys. Thank you very much. We'll see you around. Thanks a lot, man. Congratulations on the book. Thank you guys. Take care. Bye. Bye. All right. And that was our show with Mr. Dave Van Horn. Every time I talk to that guy, my mind is blown. What about you? Yeah, absolutely. My mind is spinning. I am absolutely going to read the book now. I can tell you that much. Yeah. I started reading it before this interview and his writing is really good. You know, you think like a lot of our books in bigger pockets, you think, oh, tax book or notebook. It's not going to be that interesting.

But they're really good writers. And it's really interesting. And I think it's going to be, I'm eager to read the rest of it. That's for sure. Yeah, it is super, super awesome. I've skimmed through and read most of it. I want to actually go through in more detail with a highlighter because I only have a digital version. Like I really want to get the, now I got to get the physical one. I got to get, yeah, I go get Katie to send me that. Katie's our head of publishing at bigger pockets. And she's awesome. And I'm going to make her send me a free copy. I'm going to throw my weight around a little bit. One of the perks. One of the perks of being the podcast guy is I'm going to have her send me the only perk. All right. So before we go, what's what's one like, what was the coolest thing you did in

Chile? So I'd highly recommend it. We went to this place called Torres del Pina. It's all the way in Southern Patagonia. Basically at the end of the world. And there's this amazing trek and you can do it. It's like 70 miles for five days. And in between every day, you can stay at like a hostel. And so you don't have to bring a tent or anything. You hike all day and you can drink beer and everyone's hanging out and playing cards and games. And you're just great camaraderie is a whole lot of fun. So check it out, Torres del Pinet, Southern Chile.

That's my recommendation. That's awesome. Did you do the Machu Picchu there? Is that, that's in? I have. No, that's Peru. I have done that. That's Peru.

That's Peru. But you've done that though, right? I took that right before. That was awesome too. Very similar kind of experience. Super fun. I love South America. So those are my recommendations.

What about you? What are you doing in Hawaii? What's your top Hawaii experience recently? Oh, man. I don't know. I mean, surfing is like it. I just love surfing. I do a lot of that.

But actually, here's one recommendation. If you guys ever go to Oahu, go over to Kailua, the town of Kailua, which is where we're staying right now, and go to Island Snow and get their shave ice. They got, you can get shave ice with, it's like natural flavors. there's snow cap on top, which is like condensed milk on top, and ice cream in the bottom of the cup.

It's unbelievable. Like, it's unbelievable. That sounds good. Yeah, maybe we have 10 of them. What's it called? It's called Island Snow, but it's a shave ice,

like what the product is. I think we're going to have to get Island Snow to sponsor the next podcast. I think we should make a free advertising right now. I know. I know. It's so good. So, yeah,

if you guys are on Oahu, go to Island Snow, it's pretty fantastic. So, and, yeah, well, Well, I think that's it.

All right. I will catch you next time, Mr. David Meyer. And for BiggerPockets.com, this is Brandon and David. We'll see you next time. Thanks, everyone. Adios. 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.

Be sure to join the millions of others who have benefited from BiggerPockets. Your home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico content.

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