The Chris Voss Show - The Chris Voss Show Podcast – Discover Mortgage Note Investing with Nathan Turner

Episode Date: September 17, 2024

Discover Mortgage Note Investing with Nathan Turner EarnestInvesting.com DiversifiedMortgageExpo.com About the Guest(s): Nathan Turner is the founder of Earnest Investing and the host of the Diversified Mortgage Expo. Nathan is widely recognized as the Canadian Note Guy, having made a significant mark in the private investment sector since 2009. He leads Earnest Inc as President and manages the Earnest Investing LP Note Fund, focusing on purchasing performing and non-performing first lien mortgages in the US. With a background in fix-and-flip real estate and a knack for creative financing, Nathan provides accredited investors with lucrative opportunities in mortgage notes and collaborates with them to maximize their investment returns. Episode Summary: In this insightful episode of The Chris Voss Show, host Chris Voss engages with Nathan Turner, also known as the Canadian Note Guy, who delves into the intriguing world of mortgage note investing. Turner shares his journey from running fix-and-flip businesses to discovering mortgage notes in 2009—a shift that allowed him to enjoy the benefits of real estate investing without the associated headaches of property management. He provides valuable details on how Earnest Investing helps accredited investors secure consistent returns by investing in performing and non-performing first lien mortgages. Nathan illustrates the advantages of mortgage note investing, including flexibility and risk mitigation, contrasted against traditional real estate and landlord operations. He explains how Earnest Investing ensures profitable investment opportunities by purchasing mortgage notes at significant discounts and onboarding investors through detailed personal consultations. The discussion also touches on the Diversified Mortgage Expo, a significant event for those interested in the mortgage note industry, providing education and networking opportunities. This episode is a must-listen for investors looking to explore mortgage notes as a flexible and stable investment avenue. Key Takeaways: Flexibility in Investment: Mortgage note investing allows for significant flexibility in handling payments and negotiating with homeowners, unlike banks constrained by stricter regulations. Risk Management: By purchasing mortgage notes at a discount, Earnest Investing ensures a safer investment even in fluctuating markets. Accredited Investors: Earnest Investing focuses on accredited investors, providing them with stable returns from real estate-backed assets without the hassle of property management. Passive Income: Mortgage notes provide a steady cash flow without the common problems associated with being a landlord, such as property maintenance and tenant issues. Educational Expo: The Diversified Mortgage Expo offers a platform for learning and networking, crucial for both novice and experienced investors interested in mortgage notes. Notable Quotes: "I can get all the cash flow without any of the headaches that go along with being a landlord." – Nathan Turner "One of the cool things about notes is whatever's happening in the economy doesn't really affect my note." – Nathan Turner "We can negotiate and decide what works, and we can work out something that's far more beneficial for both sides." – Nathan Turner "I'm not a bank. I'm just a regular guy. So when I talk to the borrower, I am far more flexible than a bank." – Nathan Turner "It's a fantastic, IRA investment if people have money in the IRA. Absolutely love to have them on board for that." – Nathan Turner

You wanted the best. You've got the best podcast. The hottest podcast in the world. The Chris Voss Show. The preeminent podcast with guests so smart you may experience serious brain bleed. The CEOs, authors, thought leaders, visionaries, and motivators. Get ready. Get ready. Strap yourself in. Keep your hands, arms, and legs inside the vehicle at all times, because you're about to go on a monster education rollercoaster with your brain. Now, here's your host, Chris Voss. Hi, folks. It's Voss here from thechrisvossshow.com. There you go, ladies and gentlemen. There Iron Lady sings and that makes it official. Welcome to the show.

We certainly appreciate you guys. As always, for 16 years and over 2,000 episodes, we've been bringing you the Chris Voss Show. And it just keeps getting better and better. We have some of the brightest people on the show. None of them are me, of course. I'm just the idiot with the mic. In fact, that's what we were going to call the original podcast, I think. The Idiot with the Mic.

But then it just sounded really bad on our guests So this doesn't sound like it's gonna work out well for the guests the guests are like what show is it called? Idiot with a mic I'm doing that Anyway guys go to good reason The stuff I make up LinkedIn calm for test Chris was Christmas one the tick tockety and Chris Voss laughs his own jokes We have an amazing young man on the show with us today. We're going to be talking to him about his work and how he can give you some advice that can make your life better.

That's what we do on the Chris Voss Show. It's all how to make your life better. You ever notice we don't have guests that tell you how to make your life worse? Maybe we should do that instead. I don't know. Nathan Turner joins us on the show with us today. He's the founder of Earnest Investing and the host of the Diversified Mortgage Expo. We're going to get into his life, his journey, how he became an entrepreneur, so you're going

to learn some stuff from him. If you don't learn anything, well, or else, don't make me come out like they're kids. Nathan Turner is known across the U.S. as the Canadian note guy, eh? Having run several businesses, including Fix and flip real estate, he discovered mortgage notes and the opportunity they provide in the U.S. in 2009 and has since become a leader in the industry in the private investment sector. He is the president of Earnest Incorporated and manager of the U.S.-based Earnest Investing LP Note Fund, where he actively manages assets for

accredited passive investors with a focus on purchasing, performing, and non-performing first lien mortgages in the U.S. He's also the owner and host of the Diversified Mortgage Expo, a leading annual note conference, and has a history of being educational, note pitching events where those who want to learn, network, grow, come together. Welcome to the show. How are you, Nathan? Absolute pleasure to be here. Thank you so much for having me. It's an absolute pleasure to have you as well. Give us your dot coms.

Where do you want people to find you on the interwebs? Best place would be earnestinvesting.com. That would be the best one. There's a link over there to Diversified Mortgage Expo if you're looking at that one. But everything can be found on Earnest Investing. There you go. It sounds very earnest, the investing that's going over there. See what I did there? The cheap jokes.

Absolutely. The cheap jokes. So Nathan, give us the 30,000 overview, what you do there at the company. So we raise capital. That's our first and foremost. Raising capital from investors. We are a 506C fund, which means we can take on accredited investors. So that's people that make at least $200,000 a

year, $300,000 with a spouse, or they have a net worth of over a million dollars outside of the primary residence. They invest in this fund and then I go out and I buy mortgages. Instead of buying property, I just buy mortgages that are attached to property so that the property itself is the collateral. That's our backup plan if in case we need it. There you go. And then you also have your expo that you have. Give us a blurb on that from your words.

That is a total side gig-ish, but it's a once a year conference. I took it over a couple of years ago. So this 2025 will be our 10th annual, actually. Congratulations. For me running it. And you guys survived COVID, so there you go. Yeah, yeah. A couple of expos, I wasn't sure we were going to survive COVID.

I know, I know. It was touch and go. But I took it over after COVID, so that's my life. Now, I used to own a mortgage company for 20 years, and then 2008 came. That was one of our crown jewels until then. And so when you say you're buying mortgage notes, are these the, this is the note themselves of the, the note themselves of the mortgage or is it part of the, what they used to have these things called? I think there were strips or debentures or they would be strips of the interest in the, in the, in the principle. Is that,

is those different from what you're doing? That's different. We're just buying the actual note itself and then, and then I buy it and the note is assigned over to my company. So the only thing that changes for the bor is assigned over to my company so the only thing that changes for the borrower the person living in the house is instead of sending the money to you now they're sending it to me cool can we get them to send it to me no i'm just kidding no i'm just kidding don't do that now why why why are you doing that over say doing real estate investing or i don't know what what were the strips called? Where they would strip off the interest and package it on mortgages,

and they would strip off the principal and package it? What was that? You can do all that stuff. It's a lot of work. It is a lot of work, and it helped collapse the economy because they sold it over and over 20,000 times around the world. It's quite the Ponzi scheme going on there. But it's a good thing

the government bailed them out because rich people can't be poor. Anyway, I know what that means. But so how did you get into this business? Tell us about your journey. How did you grow up? What got you into being an entrepreneur and into this particular sort of niche really kind of? So I'm Canadian, first of all i think we just that explains everything yeah but it was i if you go back so 2005-06 i was doing fix and flip real estate and i really like that but honestly at that time i bought the house i did some light rehab on it and i could resell it for a really handsome profit after that. And so it was relatively easy to do, but you need to have the right market conditions for that.

As the market changed 07, 08, I got stuck with one property and it ended up being a landlord for a little while. And the thing that I learned was I really liked the cash flow and I didn't like anything else. I could not understand why people become landlords. That's hard work. There's a lot involved. It was just a pain. And overall, the return on investment is really not that great because then you end up having to put money collected back into repairs and whatever. That just didn't make a lot of sense to me.

Fast forward a couple of years, I was introduced to this note investing thing. I went to my first conference in 2009. And what I recognized pretty quickly is I can get all the cashflow, the thing that I liked, without any of the headaches that go along with it. I'm not the owner of the property. Yeah, I don't own the property. The person living in the house, they do. So they take care of the house. Your bank doesn't fix your roof. The bank doesn't fix the toilet. That's the person living in the house. That's their job. I just collect the checks. Ah, so that's brilliant because I have a bunch of friends that they do the rentals. We've had a ton of investors in Airbnb and mobile home parks. Mobile home parks seem to be really big.

In fact, we just had somebody on last week who invests in RV parks. They're doing all that gambit, but yeah, there's all that work, the cleanup. There's nothing worse than when they call you and they go, hey, I've done this to people I've rented with over the years. Or it's, hey, the water heater went out, eh? And they're like, oh, damn, that's a lot of money. And I'm like, yeah, it's your problem water heater went out eh yeah like oh yeah there's a lot of money and i'm like yeah it's your problem not mine yeah i kind of like that owning a home's getting really out of control expensive for people and not just nothing to do there's still work

involved don't get me wrong but yeah but i don't have to deal with tenants toilets trash none of that's my problem i've got so this sounds like So this sounds like a, so is this, in your opinion, and you, of course, market your fund to everyone, or is it only credited, or is it both? For my fund, just accredited. Okay. You need to be somebody who makes some money, first of all. You got to make some money, or you don't get no funny.

Yeah. That's what my last 10 wives said. Anyway, I don't know what that means but so tell us about mortgage notes and buying them and it what the is there an roi difference to this where it's where it's just really you know it it pays better or maybe from an roi aspect of the work that you have to do you know like all my friends who are landlords they have to go out and you know do that you know hammer so hammer stuff basically yeah there's a hammering going on yeah you start hammering nails no like i said there's excuse me there's definitely work involved and i don't want to give the impression that it's just like a total brainless type of

operation it's not there there is work involved and there's regulations so let's back up it's not real estate what we're talking about is buying the financing so this is much more of a finance game than it is a real estate game the real estate just happens to be the collateral so we're definitely interested in that collateral we want to make sure that the value of the property is there all those kinds of things so we there's interest there but we're not actually buying the house. We're just buying the financing that goes with it. Now, if the people don't pay their bills, are you the one that repos on it? If I have to, but the reality is most of the time I don't. And part of the beauty is I'm not a bank. I'm just, I'm a regular guy. So when I talk to the borrower, if for some reason in the non-performing category where they're not making payments, if they've fallen into something, something happened and they're not able to make payments, I am far more flexible have a box. We can negotiate and we can say, okay, what's going to work for you?

What's going to work for me? How can we come together on a good deal for both sides? And almost never do we have to foreclose on a person. Most of the time, if it's a foreclosure, it's on an empty house. Wow. So like they've abandoned the house or something. Maybe it's a, do you focus? Abandoned the house.

Maybe they passed away. Something like that. There you go. They abandoned the the house there was a lot of that going on i remember during 2008 there was the i remember being at one of the banks i was consulting with for mortgages and in was it san diego no santa monica and i was up in there upstairs in the back office, and they go, yeah, we just got another bag of Jingle Mail. And I was like, what the fuck is Jingle Mail? They go, oh, you haven't heard about Jingle Mail yet? And I go, no, it's Jingle Mail.

And they go, there's so many owners that are abandoning their second homes and their primary homes, they just throw their keys in the mail with some nasty FU probably to the bank. And there's so many keys that get mailed in, the postman can jingle the bag and it's jingle mail. I'm like, this is not right. This is scary. That was a big thing back in the day.

Not so much now. But yeah, there's a big... Maybe there's a... Is there a way that... I mean, people go through ups and downs, but sometimes there's people that are just shit renters. Maybe shit renters are different than shit owners. Typically, yeah.

Shaming owners at this point. Most of the time, I mean, you know, there's some ownership pride there going on where, you know, they're taking care of their house. They're painting the fence, whatever. Sometimes they don't. There's certainly those out there where they don't really take care of the house. So that happens. But part of our research before we buy that note is actually I'll send somebody out. So I live in Canada.

They're out there. So I'm sending somebody local, a local realtor. Typically, they go out and look at the house. They're telling me, you know, as is value. So I'm not necessarily concerned about what it could be worth at some point at a future date if we did some work on it. I want to know today's value. So I'm not necessarily concerned about what it could be worth at some point at a future date. If we did some work on it, I want to know today's value.

So that if it defaults and if nobody pays on that, I want to know that I've got protection built in. You're making sure they don't have tires and washing machines on the lawn or something. Yeah. Unless you're buying Kentucky, then that's a standard procedure. Yes.

That actually adds value to the home by 25 if you have tires in a thing why am I being mean to Kentucky today what did Kentucky do wrong so now are you are you when you buy these for the fund are you able to negotiate a discount or uh premium or how does it work yeah Yeah, I'm pretty much always buying at a discount. I typically buy notes at, there's a difference between yield and ROI and we may or may not get into that, but I'm typically buying at about a 12% yield and then I pay my investors 8% ROI. Oh, wow. So you're keeping the 4% for the fund? Yeah. It doesn't turn out to be quite that high, but that would be nice. Oh, there's fees.

There's the fees of the fund and management. Lawyers, all that fun stuff. Oh, lawyers. Yeah, that's probably, that's 5% right there. Yeah. Even though it's only four. See how that math works, kids? That's what we call American math, not Canadian math.

Stay in school. Yeah, stay in school., not Canadian math. Stay in school. Yeah, stay in school. Go to Canadian school. It's all about that. Is there anything more you want to touch on in earnest investing? I was going to have you tell us more about the expo. I want to make sure we cover both for you. No, I think that's pretty good there.

Like I say, bringing on investors if people are interested in the business and just want to know more about it. So here's the thing. There's plenty of people out there that will teach the business. I'm not one of them. If it sounds interesting and it sounds like a cool investment to you, awesome. Let's have another conversation.

If you want to learn the business, I can refer you to some friends. Is there a max holdings that you can have in the fund before you're going to start a new one? Or what's your vision for what you guys are trying to achieve there? Yeah, the current fund is just set up for $5 million, which is actually a relatively small number. I know that's a lot of money, but it's actually a relatively small number. It's like one home in today's market. Yeah, yeah.

I typically buy loans on properties with values under 250 000 so that we can spread that out and have you know a little bit more diversity inside the fund yeah that's got to be hard to find these days i imagine there's pockets of america kind of eastern half of the country it tends to be like texas to michigan everything between that everything in the south has been going really well because the yeah rates are cheap I know yeah Texas I was looking at some houses in Texas and my mom's 30 year old home next door neighbor sold for half a million dollars Wow and they're old homes yeah and I was looking at for the same price half a million dollars in Texas it's like these mansions I was

like yeah yeah the Texas I guess like, I'm going to Texas, I guess. Although, watch out for that real estate tax in Texas. That's out of control. But you don't pay normal taxes. Not normal taxes, personal taxes for state or something. That's the benefit. Plus, you don't get electricity when the snowstorm goes out. That's a bonus.

You're not paying for it if you're not using it. I mean, why get on the United States grid? How do people onboard with you? How do they find out more about what you guys do there, get involved, talk to you directly? Yeah, it's going to be a one-to-one conversation. So on my website, there's a place there where you can book an appointment with me. I want to make sure it's a good fit, make sure that I can help you achieve whatever goals you've got. I'll say that it's a fantastic IRA investment.

If people have money in their IRA that's doing worse. So they can divert that? Yes, absolutely. I'd love to have them on board for that. So you can utilize your IRA and put it towards this. It sounds really interesting because we're starting to see I think some changes in the housing market finally. And I think

part of it, it's the interest rates and the inflation stuff. But some of it's like with Florida, and I think Texas are starting to have some issues. I know Florida's, they've had these skyrocketing condo fees because of, that was that

collapse of a year or two ago of a yeah condo and so now all the condos are having to upgrade and fix themselves because i guess they were just phoning it in and you know there's there's some legislative things the republican congress did there that i guess upset the insurers or something. And so they've left large insurance. Yeah. Insurance. Yeah. Insurance. And,

and so it's just, you know, it's too costly with the damage. So evidently a lot of the condos are exploding in coming online, Texas a little bit. What do you, what do you see as the future of real estate and where real estate is going? I real estate itself.

I think we're, i think we're looking at another downturn i don't think it's going to be 2008 type magnitude but i do think we're looking at a downturn but i'll plug notes again just as an asset class one of the cool things about notes i mean there's a lot but one of the things i love about it is whatever's happening in the economy doesn't really affect my note. Because I've bought an established set of terms. So whatever the borrower has agreed to, that still holds true. Whether the economy's up, down, interest rates down, up, whatever, it doesn't matter. They're locked into whatever terms they signed in the beginning.

So that's one of those things I like. I wouldn't say recession proof because obviously there gets a point, a breaking point where they're not making payments. It certainly helps. Orsky's scenario, if rates go down, they just refinance and then you're paid off and you make whatever your portion is, but then that

frees up money to go into other things. So you can ride down the market if rates go down. You just keep resetting or people may have to stay at higher frees up money to go into other things so you can ride down the market if rates go down. Yeah. You just keep resetting or people may have to stay at higher interest rates. But I think it's really interesting how you don't have to do foreclosures. Maybe banks are really missing something here. Maybe this isn't a niche.

Maybe this is a new way you're hacking of disrupting the system. Because there's a lot of waste, I think. Yeah. I don't know if somebody's ever measured it, but there's got to be a lot of waste and foreclosure. There just has to be. Absolutely. Waste all over the place.

And without slamming the banks too much, honestly, I'm better at it. And part of it is, is because I can be so much more flexible. The bank is going to have whatever, you know, parameters they have set up and somebody decided in the board meeting that that's how it should be. Me and the borrower, I can take your book and we can negotiate until the cows come home and just decide what works. And we can work out something that's far more beneficial for both sides because we have that flexibility.

You know, I heard, I think one of the problems from what I remember in the mortgage business was one of the legal problems that holders have of notes is that if you accept any payment that's less than the set payment, and you do that for one or two times, that it technically reestablishes a new contract. Is that true? But that would be an interesting play. I think that's what banks were telling me back in the day. Because I think I asked people, like, why don't you do what you do now? I didn't know I'd ever meet you, but I guess I did. But I'm like, why don't you do what, you know, you do now? Yeah. I didn't know I'd ever meet you, but I guess I did.

But I'm like, why don't you do that? Why don't you just work it out with them? And they're like, if we accept payments, you know, at least, especially with a pattern where they're like, we'll take 500 bucks from you for the next five months. Okay. It becomes a reestablishment of a new contract that supersedes the prior contract. Yeah. I can see that argument, yeah. a reestablishment of a new contract that supersedes the prior contract. I can see that argument, yeah.

And I imagine that might be like, you know, lawyer paranoia sort of speak, but I think that's what a bank told me once. I think it was Crossroads Bank, Crossroads. But I think that's what they told me once. And that was kind of the operational standard of the mortgage business back in 2008. But we see how that turned out. But if that's the case, I would look at that and go, okay, so you've been making this payment the last four months. It looks like that's what you can afford.

So let's make it official. And that might mean that we then stretch out the payments again. So 20, let's put it back up to 30 so that that payment makes sense. So do you change interest rates on them or just sometimes I've done interest rates up or down. We've done both directions. We've had payments go up or down. You can lower them.

Oh yeah. We can do whatever. Buy a home and have you take over the note on it. Just in case I ever, you know, hit the skids that 2008 was kind of hard, but it was, I got over it,

but I don't want that to happen again. But then again, I don't know how to mortgage. hit the skids. That 2008 was kind of hard. It was. I got over it. But I don't want that to happen again. And again, I don't own a mortgage. We own a lot of companies and everything just came to a standstill. You couldn't make anything work. I mean, I was working the corner and no one would hire me. And I look good in a mini dress. No, I don't.

Stop, people. Don't look for that in OnlyFans. It's non-existent. So anything more you want to plug that we haven't taken and discussed here, Nathan? I think that's good for the fun. I think we covered that. But yeah, it's an awesome asset class. Love to have people on board. There you go.

I'm now getting floods of comments. Where's the OnlyFans of Chris in a miniscule? So you can use this to build your retirement account. You can use your IRA, old 401k is there a minimum investment amount for me it's 50 000 okay uh you can find other places that may be more or less than that but my fund is 50 do you take a check no i'm just kidding that's a joke that's a good call by joke i like this this I like this because I know so many people that are landlords. And, you know, whether it's Airbnb or Normal or Section 8, you know, I mean, I see some of the stuff they have to do. Like, they always talk about how great it is.

And it does seem pretty great on paper. But they're like, oh, man, I got to go out to the house. And, oh, look at this mess the renter left when we evicted them and yeah and i'm up on the roof now with a hammer and i'm just like oh man that that is not me man i do not do that i don't want to you know i think i think what was it my mother-in-law when she married my father they she had a house from her prior and the people quit paying because it was in a completely different state i think they got away with it they thought they could get away with it and when they evicted them they poured cement down all the pipes oh yeah that was oh i'm good i've never actually had that. That's always kind of been on my radar, but it's never happened yet.

I think in your case, it's much better than that renter investment because an owner has kind of a different mindset. It's still their property in their mind. Usually, yes. Usually. And so their attitude towards their property is they still kind of own it. They care for it. You know, when you're a renter, you know, you're just kind of, it's kind of like when I rent rental cars. I'm just like, let's go four-wheeling with this thing.

Who cares? Who buys used rental cars? You're insane. Let's just put it that way. There's things I've done in rental cars that probably should be illegal. I'm not sure what that means. Anyway, I don't know. But yeah, that's exactly it.

We keep an open communication. Even if we are looking at a foreclosure, that's after we've exhausted all other possibilities and we can both tell that that's going to be the best course of action. And even in that case, we'll do something where we'll pay them to leave rather than have to go through the whole foreclosure process. Maybe they should legislate this.

I mean, we need to protect home ownership better. And maybe they should legislate that banks need to, you know. But then that would take out your niche market. That's the thing. So maybe not. I like this way better than investing in real estate directly. Yeah. It just seems more safer.

I think so, yeah. You got a better person in the home. I'm shaming renters now. Good job, Chris. Way to go. You know, renters are good people. But, you know, there's honestly, you know, you care more about the home if you think you own it or have a portion of it. I certainly meet a lot of people like, I'm a homeowner.

I'm like, you bought it last month. And probably one penny goes towards the principal. Stop it. You don't own it. Well, give people your final pitch out, Nathan, to onboard with you guys, how to reach out to you, get in touch,

maybe how they can learn more. I see you have some media also on your website, speaking engagements, and different things people can see what you're up to. Give us that final pitch as we go out. Yeah, absolutely. So that website again,

earnestinvesting.com, that's E-A-R, not Ernst, but we are Ernest website again earnest investing.com that's e-a-r not uh ernst but we are earnest earnestly investing so earnest.com and then have a look see what you think of the website i i it's not the fanciest most glorious but it'll give you some information and look at website there's a there's a booking link there so it's better than mine damn good looking website i'd love to have more of a conversation there you go then nathan thank you very much for coming to the show we really appreciate it hey pleasure thank you there you go thanks for tuning in go to goodreads.com fortunes

chris voss linkedin.com fortunes chris voss chris voss one of the tick tockety and all those crazy places on the internet thanks for tuning in be good to each other stay safe we'll see you next time thank you