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  • Eric Scharaga

Interview With Seth Williams on Land Note Investing

Updated: May 4, 2023

Transcript Intro0:00 hey everybody how's it going this is Seth Williams and you're listening to the re tipster podcast so today I'm0:06 talking with my new friend Eric charaga and Eric is the founder of Damon Capital0:13 fund a purchaser of residential and vacant land notes and a little bit about Eric's background0:19 so before he started focusing full-time on notes and land Eric worked for 23 years as a high school teacher and in0:27 2001 he started investing in rental properties purchasing and rehabbing single-family homes with the dream of0:32 becoming a full-time investor and after 13 years of dealing with the constant stresses of landlording he came to the0:40 realization as many of us do that he just wasn't going to achieve his goal of0:45 Financial Freedom through rental properties and uh in 2016 while still working0:50 full-time Eric transitioned to the more stable and passive cash flow of notes0:56 and since 2016 he's purchased over 500 notes including residential performing1:02 non-performing active bankruptcy and vacant land so Eric is also an author of the book1:09 leanlord an introduction to the power of note investing I'm going to include a link to that in the show notes for this1:16 episode by the way if you want to check it out and Eric is passionate about personal finance and Financial Freedom1:21 and he enjoys introducing land investors to the importance of seller financing1:26 and uh before we get into this conversation I'll just do a quick disclaimer neither Eric or me our1:32 attorneys CPAs or financial advisors we don't provide legal tax or financial1:37 advice and in this conversation we're just sharing Eric's experiences as an1:42 investor and we encourage you to seek out professional advice before you make any of your own investment decisions so1:48 Eric welcome to the show how are you doing thanks Seth I'm doing really well thanks for having me I'm excited to join1:55 you today yeah me too so other than what I just said there maybe you can tell us a little bit moreHow did you get into the land investing business, and what made you focus on investing in notes?2:01 about your story to kind of flesh out the details so you know we mentioned that you were a teacher2:06 um anything else notable about your career background and like when and how did you get into land and how did you2:13 get into this sub niche of land I know there's a lot of people out there listening that maybe land flippers but2:19 they're not all that comfortable or even familiar with this idea of investing in2:24 notes so how did that come to fruition well I love the note space and I found the notespace after 13 years as a2:31 frustrated landlord which I know is very common for landlords and you know it2:37 just got to the point that it was just so stressful for me and so many holidays that were interrupted with issues with2:43 rental properties and I love notes because it really truly is a passive real estate investment and I came across2:51 the land space and I thought what an awesome opportunity to create Stellar2:57 Finance notes and it really is I love the land space but I really love the3:02 opportunity in the land space to seller finance and I realized that not all land3:08 investors are interested in holding seller finance notes3:13 um and I originally got involved because I wanted to purchase the notes but a lot of what I was looking at really wasn't3:18 scalable it just they just had too many issues and so I decided to create a3:25 program in which I purchased loans uh seller finance land notes at closing for3:32 80 of the purchase price and in addition to that I provide a lot of kind of3:38 guidance to investors who want to offer seller financing but not might not want3:45 to hold a 400 a month note when they can cash out and have an extra twenty3:54 thousand dollars that they could put into their business yeah yeah so it sounds like there's a lot of land4:00 investors who have gotten involved with seller financing and this kind of thing could appeal to them because they4:06 basically just want the money faster right they don't want to wait for years to collect all the payments and move on they want to keep their cash working and4:12 those are kind of the people that would be an ideal fit for what you're you're talking about right yeah absolutely4:19 um so the land business land investors do really well and the land Vis but the4:24 land business is very cash intensive and these two types of Investments are very4:30 complementary it's a great idea to offer seller financing even if you don't want to keep the notes and then to work with4:36 a note buyer who would like that cash payment who isn't involved in the4:42 day-to-day marketing and negotiations of a land business so I there are some4:48 really important features though if you are going to originate your own closing that you should be in uh keep in mind4:57 before you before you go through the process yeah I was going to ask you about that because earlier just a minuteWhat makes a seller note problematic, and how do you determine the right one?5:02 ago you mentioned that you started looking at notes that weren't salable that there were issues with them so what5:07 kinds of issues were there like what makes a note problematic and what is it5:13 that you are looking for to say yes this is a slam dunk let's do it yeah so um a5:19 lot of them were stealth serviced which is an issue because if the if I purchase the loan and the5:28 buyer down the road disputes the balance I'm going to have a major issue there and it just wasn't worth the headaches5:34 when you say I highly recommend sorry when you say self-service so you mean the person who originated that note they5:40 are actually collecting the payments themselves like the person sends checks or something directly to them exactly5:46 exactly the other issue is that a lot of them were lab contracts and I just was5:53 not comfortable with the language of the land contract so really what I have is5:58 kind of an overview of what I think that anyone who's interested in selling land6:03 with financing should should keep in mind and really what it comes down to is there's issues regarding the specific6:09 property issues with the borrower specific loan terms that you should6:15 adhere to and then the process that I recommend that you follow yeah yeah and and uh we're totally gonna get into that6:21 because that sounds super interesting I'm curious though on that issue of um you know somebody who is servicing6:28 loans themselves so it sounds like the problem inherent is in that is that when a person6:34 Services their own loans could that be okay if they were able to provide very thorough documentation of every payment6:41 received and when it was received and you know a paper trail of everything like would that resolve the issue or is6:47 there some other problem about servicing your own loans that makes that an issue well one of the issues and I suspect6:54 that people don't uh frequently charge interest because at the end of the year6:59 they have to provide a 1099 to the borrower a statement of of the interest paid for the year7:05 um but I always recommend the use of a servicer because you have really a third party that's professional that's going7:11 to have advanced software that they're using that's also licensed in the different states to service loans and7:19 it's just just a much cleaner um way to handle the payments I do I do7:25 suppose though if you had very thorough records that it would be fine okay but7:31 you know there are steps that you can take in selling your loan to confirm the balance of the loan uh prior to the sale7:39 okay and uh when you say a Loan Servicing Company so7:44 you do not mean software correct like say if somebody was using simple money7:50 or geek pay or something like that is that not good enough or could that work you know it'll work it's okay but I'm a7:57 big fan of using loan services just because they're going to interface with the borrower they're going to collect8:03 the payments they're going to main retain the records they're going to send out the interest statements to both you8:08 and the borrower at the end of the year they're also licensed in the states that8:14 they operate it's just uh in my opinion it's the best twenty dollars a month8:19 that you're going to spend it's a very low margin business for them and it's a lot of responsibility for8:25 them and ultimately if you structure it the right way the buyer is going to end8:30 up paying that monthly Loan Servicing fee so it's well worth in my opinion using a servicer yeah yeah and I wouldThe benefits of using loan servicing companies and which one would you recommend8:37 agree I mean in my experience with Loan Servicing companies like it is kind of a surprising value when you consider just8:43 the job that you know human involvement is there and they they just kind of like uh tie up every loose end it feels like8:50 and maybe there are certain Loan Servicing companies that are good and certain ones that are bad or something8:56 like that but I'm curious in your experience it sounds like you've worked with one or two of them is there any9:02 particular one or two or three that you're like yeah this is a good one go here yeah so the ones that I use the9:07 most are buy five Loan Servicing and Madison uh management I've used most of9:14 them uh they they all have their pros and cons and FCI is great9:21 um the only thing that I like more about Madison or bifi is that you can get someone on the phone and that's a little9:29 harder at FCI that's more of an email based um structure so9:35 um for the beginning investor it's really nice just be able to call in and speak to someone yeah and I believe9:40 Madison is uh licensed everywhere right and all most of the 50 states is that9:46 true yeah they're licensed in most States you know for servicers it's expensive to get the license so they9:53 just have to kind of look at it from a cost benefit perspective that they don't have very many loans in that state it's9:59 probably not worth them getting licensed because the licensure process is just extremely arduous and painful10:07 um yeah so yeah but in most States they are licensed so why do you think10:14 because I mean I agree with you like I kind of think it's the way to go as well but it feels like a lot of land10:19 investors don't do this like they're either self-servicing or they're using some kind of software10:25 and even the software I guess it's been a while since I've looked at the pricing and all the options out there but I don't think it's that far off from what10:32 a Loan Servicing Company would be why don't people just default to always using a loan servicer especially if you10:37 can put a servicing fee on your borrower to pay for that cost anyway yeah I'm not sure it's probably just the knowledge10:43 issue they don't know that it's an option and I think that you know if they knew about it if they knew how great it10:50 was they would probably move more in that direction and it really improves the salability of the loan uh when you10:57 have it professionally serviced because the servicer is going to keep track of all payments including the date and the11:03 amount from the very first payment and you're going to have that to be able to show a prospective buyer yeah if anybody11:10 out there is curious about uh some potential options for loan servicing companies aside from the ones that uh11:16 that Eric just mentioned I've got a blog post listing out a number of them around the country and uh I'll be sure to11:24 include a link to that in the show know it's for this episode again forward slash 14911:31 um and some like some of them are licensed in a single state and they may be the best one for that one state but11:36 others are licensed in most places around the country um so yeah uh so it's a good uh good11:43 thing to be aware of for sure good oh I was just going to say once you get to about 10 or 15 notes it becomes11:50 overwhelming to do it yourself or to just use a software and you know11:55 considering the notes that I have in my portfolio I really do very little when12:00 it comes to I mean I have to do my own bookkeeping I don't do it I Outsource that but in terms of the day-to-day12:06 payments and Collections and oversight for the individual loan I just check a portal that's the other great thing12:12 about a servicer is that they're gonna have a portal that you're gonna be able to look at on a daily basis see the12:18 payments come in you can download reports it's just really awesome do you know can those loan servicers12:25 can they accept credit cards as payments or is it like ACH you're mailing in a check so I don't believe that they do12:33 um there may be some type of um I'm thinking that like what if the12:40 payment was recalled um or there may be some law that regulates credit card payments for that12:47 the ones that I work with I don't think that they do uh it's just ACH or you can12:53 mail in a check or they can take a payment on their through their website sure um the really nice thing is if a12:59 borrower sets up ACH and it's just done every month automatically yep yeah that13:04 makes sense I just I was curious I don't know if any of those loan services do that so one other really cool thing13:10 about servicing is that some Services actually report to the credit bureaus13:15 they're online with them and if a borrower misses payments that's going to be sent to the credit bureaus as well as13:22 the flip side if they're making regular payments that's going to be reported as well cool do you know which ones do that13:28 off the top of your head I know Madison does that I'm not sure about the other ones okay coolWhat is your average deal size?13:35 um so what is like a typical deal size that you work with in terms of like the13:41 value of the property the amount of the balance owing the amount that you ultimately pay like what's a average or13:47 a normal size deal for you so I look for uh sales prices between twenty five13:53 thousand and a hundred and fifty thousand if I'm purchasing it at closing if it's already been originated I'm14:00 buying it like a year or two years down the line you know I'm pretty open in terms of balance14:07 um in terms of value I typically don't go below like 20 or 25 000.14:15 okay and what what portion of or what percentage of the deals that you do are14:21 ones that like you helped originate and you bought it at closing versus maybe it's been out there for a couple years14:26 and then you're taking over uh so for land deals I would say right now about 65 of the notes that I buy I'm actually14:35 buying it closing whereas 35 I purchased them14:41 um once they've been originated maybe a year two years later but those actually typically are more involved deals just14:49 because I'm required to look at and process so many different um Parts yeah just the underwriting is14:56 more involved and the process is more involved especially if you're dealing with land contracts because in a land15:02 contract you're not just transferring the loan you're also required to transfer the property so you're15:08 assigning the land contract and you're also deeding the property it just is a little more complicated so for thoseHow do you spot the difference between good and bad deals?15:13 ones that do exist what do you have to look at is it is it actually more stuff15:18 you have to do in underwriting or is it just um you know if you actually help originate the thing you can sort of form15:25 it from day one whereas if it's already established like you may have to pay for the sins of that person who sold the15:32 property if they did something wrong um so like what exactly are you looking at in terms of this is a good deal or15:38 it's not a good deal yeah so the first thing I'm looking at is the property I want to make sure that it it meets my15:44 parameters because I look at each deal through the lens of the worst case scenario so if this borrower defaults do15:51 I want to take this property back is this something that I'm confident that I can resell is it in a state that I15:57 operate in I look at the investment to Value that's very important to me so16:02 what am I purchasing the loan for versus what is the property worth and I don't like to exceed 70 percent investment to16:11 Value um I look at the borrower um what what is a borrower using the16:16 property for is there a credit report what's the borrower's credit score uh16:22 what was the down payment involved was there any down payment I tend to shy away just like categorically from16:31 the no money down no credit check loans just because those have such a High16:37 default rate um you know I would rather rather be in the lending business I don't really want16:43 to be in the um default business and having to resell properties so I tend to shy away from16:50 those I look at the pay history I'm looking at the terms and how uh I'm I'm16:56 doing a yield calculation to kind of see where I want to be at in terms of my annual return I'm looking at the17:03 paperwork carefully if is it a note mortgage versus a land contract if it's17:09 a land contract how are they dealing with default is it just very generally worded is it in a state that regulates17:16 land contracts and is that not addressed in the actual paperwork so17:23 there's a lot of potential problems there that could make a deal a lot more17:29 complicated regarding land contracts more and more states are kind of cracking down on them17:35 and like Florida for example whether you17:40 have a land contract or a note mortgage you have to foreclose either way so17:46 um you know there's just that knowledge of how States individually deal with land contracts when you say cracking17:52 down on them what does that mean like are they changing the laws to make it harder or there was a lot of a predatory17:59 abuse of land contracts after 2008 in which investors were buying pools of REO18:05 properties and selling them with land contracts but these land contracts were18:10 just very predatory in nature there was a lot of complaining State's Attorney General18:17 started cracking down they went over they went after some of the worst offenders but then they started changing18:23 the laws so I know that some states changed the laws so that if the land18:28 contract runs for more than five years or if a buyer puts down more than 20 percent you have to foreclose18:36 um so I think that in my opinion I'm not the biggest Standalone contracts I actually prefer notes and mortgages just18:44 because it's a much cleaner process the property is not in your name so you18:49 don't have that liability and in a lot of the states in which we work the process for foreclosure is not that18:56 difficult it's non-judicial it doesn't have to go through the court system and it might just be like three to four19:02 months to take the property back and you know the other issue with a land contract is if you are recording a19:10 memorandum of agreement or if you have like you know an angry buyer who decides19:18 to put a lien on the property after you take it back from them you know that's going to be a major issue that's going19:23 to require litigation to clear that title yeah so if you see that a deal hasBenefits and Risks of a Land Contract19:28 a land contract is that like an automatic no for you or is it uh like what would need to be true for you to19:35 say yes to a land contract so I still buy them I just look at them more carefully and I'm going to discount them19:41 more heavily just because of the potential for problems but honestly a lot of the times after I purchase them19:48 I'll just go to the buyer and say would you be interested in actually converting19:53 this right now to a note mortgage because you know buyers really would19:59 prefer to have the property in their name versus um having the prop the property deeded20:06 to them after they make the last payment um what about like a note with a deed of20:11 trust I only asked just because I haven't heard you mention that yet but is that a No-No or is that okay or what20:17 are your thoughts on that so I say mortgage but um mortgage and Dean of trusts are used20:22 synonymously they're just different instruments in different states so the deed of trust is typically not always20:29 used in states that don't require a Judicial foreclosure process20:34 yeah in the deed of trust Define a standard right is that the foreclosure process is more of an20:40 auction process right the trustee needs to sell that thing to somebody else like you don't necessarily get the property20:46 back but it's auctioned off and then you collect the money from that is that accurate or am I misunderstanding that yes the foreclosure process that's true20:53 in all states so going through a foreclosure does not entitle you to the20:59 property it entitles you to have an auction to publicly sell the property for what you are owed plus your expenses21:07 so if no one bids on the property your minimum bid what you're owed then it21:13 becomes an REO and then it returns to you and you get the deed you take it back okay but um in a lot of cases if21:21 you have a low balance someone will purchase the property at the Foreclosure21:27 sale yeah the issue with land contracts um because I think the reason a lot of21:33 people use them whether this is valid reasoning or not is this idea that oh yeah the deed is stand in my name as the21:39 seller but even if that's true the minute you sign21:45 the land contract and the borrower pays you anything they now have an equitable interest in that property you have to go21:51 through the proper channels to get them out of there if they stop paying like it doesn't actually make it any easier like21:56 it may technically still be yours but like the same wrinkles kind of need to22:02 be ironed out either way would you agree yes absolutely the other thing that really scares me about land contracts is22:09 that since you own the property if someone is injured on the property or if there's like City fines22:15 that is your responsibility if somebody's out there riding a motorcycle and falls off and breaks their leg22:22 you're going to get sued I think the people typically believe that since22:27 they've sold it on land contract they're no longer responsible but an attorney is22:33 going to look at who is on the deed who's the owner and that's who's going to be sued in that lawsuit so you22:41 absolutely have to have liability insurance that covers you as the owner that the22:49 buyer pays for and I use a company called nreg yeah yeah and they have they have a22:58 specific policy liability policy for land investors and it's about 20 to 2523:04 dollars a month yeah actually uh I discovered them this past year and did a little video on how to do that I'll23:11 include that in the show Notes too but um I mean I haven't researched this to death but like it seemed like kind of a23:18 no-brainer like just the easiest process and I mean it's set up specifically especially land flippers who are like23:24 their inventory is always changing they make it super easy to like take it off you know you don't have to pay for a23:30 year at a time and that kind of thing so yeah yeah I highly recommend them I use23:35 them in my business but you are 100 correct23:40 um I think that people assume that with a land contract since they own it that23:47 they're just going to send a letter to the buyer stating you know you've defaulted I'm keeping your money you're23:53 done I mean you can do that but that could open up a huge can of worms for23:59 you uh title wise down the line the thing that I prefer about the note24:05 mortgage or deed of trust is that it's a well-established process in every state24:10 with very clear state laws and you know everybody knows what to do everybody knows how to handle a foreclosure which24:17 is with a land contract unless you're in the state of Michigan24:22 in most cases the process is less clear Michigan is the state that I know of24:29 that has a pretty clear well-established procedure for land contracts yeah yeah24:35 the interesting thing about Michigan is that uh like you're right there is a pretty24:41 clear process to go through and it works if that defaulting borrower is24:48 responsive and actually responds to you and does stuff but if they just ghost you and pretend that they didn't hear24:53 from you like you still got to go through all these motions to get them off anyway and I've got firsthand experience with that so like25:00 there's still holes in it um so it's interesting it's a and you're mentioning with the mortgage in uh note so if25:08 you're in a non-judicial foreclosure state are you saying there's a way to foreclose or clear it all up with a25:15 mortgage uh if it's a non-judicial foreclosure State like you wouldn't have to go to court for that correct so that25:20 usually what they do the first step is that they you send the through an attorney you send the borrower a notice25:28 of default a demand letter and then they record a25:33 notice of default and then a certain amount of time goes by and then they record a notice of sale25:40 which sets the date where the property will be sold if the default is not cured25:48 and then on that date they're going to depending on the state and the state's25:53 procedures and the county procedures they're going to hold a public sale so are there like and then the nice25:59 thing I'm sorry go ahead I was going to say the nice thing about the Foreclosure is that26:06 um if there are other liens on the property and you're in first position those will be cleared off at the sale26:14 with some exceptions like um I know it doesn't clear off stun26:19 liens property taxes that are owed IRS liens although that's a that's not26:26 really that scary of an issue in most cases and we tend not to see that in the26:31 land industry yeah with IRS liens those fall off is it 120 days after it changesWhen does an IRS tax lien expire?26:38 title or something like that you know anything about that so yeah typically26:43 um I believe that you need to file something with the IRS and then they26:49 will um they will look into it and I think that they have a certain amount of time26:55 to establish their interest in the property if they choose to do so okay soThe process of taking over an existing note and what are the costs involved27:01 let's say you're trying to take over an existing note that maybe was originated a couple years ago27:07 are there like closing costs involved with this like does it need to go through title or anything like that or27:13 is this like an under the table transaction how does that work and what kind of costs are involved with taking27:18 over one of these existing nodes it depends on whether it's a note and mortgage or land contract with a land27:25 contract it's going to be more complicated because you really should pull title and it raises the issue of27:32 the owner's policy when it was provided by the title insurance company so most27:39 people are just transferring these via quick claim deed and when that happens you're essentially waiving your right to27:46 that title insurance policy because you're transferring the property so you27:52 should always pull title before on a property before you transfer it before you you know transfer the note to see27:59 what's on the title if you're transferring a note and mortgage it's very inexpensive it's maybe28:07 I don't know a hundred dollars because all you really need is the assignment of mortgage or28:13 deed of trust and in a lunge which transfers the notes and the assignment28:18 will be recorded and it's just a public statement that there's a new owner for this loan and it establishes you as the28:26 new owner and the alliance transfers the notes um and then you really only have the28:33 cost for transferring servicing and a title report if you choose to do that so28:39 it's a very easy simple process with the land contracts that's a little more difficult just because you have to28:45 generate a d transfer of a property you should put title you need to decide whether you want an additional title28:52 insurance policy which most people choose not to get what I usually do is and be very careful29:00 with this the norm in the industry is to wire the money directly to the seller some people feel29:08 uncomfortable with that and there are companies or attorneys that you can use to Escrow the transaction who will29:15 basically take the documents from the seller the money from the buyer make29:20 sure everything's there and then and then handle the transaction um29:25 so in just going back to where you're saying so if you're using a mortgage it's about a hundred bucks in terms of29:31 closing costs and that's assuming you're just wiring the money directly to the seller and not using one of these uh29:36 intermediary companies all right correct correct it's very fast and easy29:42 and the reason you wouldn't want to look at title because like what what if something came up in the past couple29:47 years and that affects your collateral and you wouldn't know unless you did a title search29:52 is it so I always pull title I have you find all kinds of things on title you29:59 know the scariest thing that you might find was that the mortgage was never recorded or it wasn't recorded correctly30:06 and there is no lien on the property so in that situation you have an unsecured30:12 uh note and it's just really a safeguard to make sure that30:18 um you know there's nothing there that could interfere with your rights to the property uh as collateral if the buyer30:26 does default yeah I know if you're buying from one of these notes that was originated a couple years ago say it'sDo you buy notes only from well-established land investors?30:33 say it's a vacant lot um are these like really well established land investors that you're30:39 buying them from or because I know a lot of land flippers out there do not know how to do this right like they're not30:45 going to the right motions so like who are these people like are they I assume30:51 they know what they're doing right because they must have done it good enough to justify you buying it so of these like big Nationwide outfits or30:57 what kind of uh person would you buy from so no I just buy from all individual investors some people know31:04 the procedures better than others if it's a complete um kind of a nightmare or if it's really31:10 messy I'll just say you know I think you should just hang on to this one um uh no I would say that people do31:17 their best on these but there's definitely things that they miss just because it's not their first business31:23 their first business is land investment and um seller financing is really a31:29 different type of business with different requirements yeah that's interesting I'm glad you pointed that out because you're right like it kind of31:35 is a different business you know you're in the business of lending essentially which is not not necessarily the same31:41 thing as finding land deals and selling land deals I mean it's just a it's a new type of specialty that you're entering31:47 into I don't think a lot of people look at it that way but that that is the reality I think31:52 um and I think the result is a lot of people since they don't treat it like a whole new business they kind of screw it up and they don't31:58 really make sure that they're dotting all their eyes and crosses and they're crossing their T's and doing it accurately and completely so it alsoWhat type of land investor or real estate investor should or shouldn't even be dabbling in seller financing?32:05 makes you wonder like what type of land investor or real estate investor in general32:11 should or shouldn't even be dabbling in seller financing like there's probably people out there who are doing this and32:16 they shouldn't be because I don't know what they're doing and they're not willing to figure it out and do it right32:21 um and I think the thing is like you can go for a while screwing it up without realizing that you're doing it wrong32:28 without getting stung so um no it's kind of a broad open-ended32:33 question but is there anything a person could do to ask themselves to figure out should I be doing this or not like how32:41 would a person self-evaluate that any ideas so I would encourage everyone to32:47 do it um I think it especially in this market it's a great idea the caveat is you need32:54 the right people advising you on how to do it so if you are going to do it don't try to do it on your own with like a33:02 template that you found online engage an attorney who specifically specializes in33:08 lending so um I think the people tend to go towards real estate attorneys but they are not33:15 necessarily experts in lending so um I would find a lending attorney and33:21 they're not really known as lending attorneys I think that they're known more as uh creditors rights and33:28 foreclosure attorneys um those are the people that you want because they're absolute experts in The33:34 Lending laws in your state and they will guide you on whether you want to use the33:41 land contract no mortgage or deed of trust the terms whether you're violating33:46 any Usery laws Dodd-Frank considerations I mean they33:52 are absolute experts so it's it's well worth it in my opinion to engage in33:57 expert attorney in your state and have them walk you through the process have34:02 you have you uh guide you through the paperwork provide you with the necessary paperwork those are really the people34:09 that you need don't do it on your own yeah that's kind of a golden nugget I don't even think I knew that after all these years I mean usually in my brain34:16 I'm thinking of real estate attorney but you're right I mean I've talked to plenty of them and they'll disagree with each other and they give conflicting34:22 advice and probably because they don't really do that it's sort of a different specialty that isn't really captured in34:29 that real estate attorney title so so if you're going to try to Google the right attorney you would Google something like34:35 creditors right and foreclosure attorney like is that kind of a keyword you would34:40 use for that yeah there's actually a website called legal league 100.34:46 and it is a list of uh creditors rights and foreclosure attorneys in all 5034:53 states nice the problem is that these tens these tend to be very large firms34:59 that work for banks so it might be a little more difficult to like speak to someone because these35:06 are these these used to be foreclosure Mills they're not they're a lot less busy now35:12 um it kind of depends on the individual State um some of the states are much more35:18 complicated than others but um you know the reason that I like the35:24 foreclosure attorneys is that if anything goes wrong with the loan these35:30 other people who are experts at handling the default because that's that's theirAre you doing business in multiple states, and are there specific states where you don’t want to operate?35:35 business so I'm curious how many different states do you do this in in are there are there specific ones where35:42 it's like no I will never do it in that state because it's a huge hassle yeah that's a great question so I work in35:49 Most states there are some states that I'm not wild about um I've worked in almost all of all 5035:56 states um the only ones that I do not work in are New York and New Jersey Pennsylvania36:03 and Georgia I don't work in Pennsylvania and Georgia just because they have a lot of36:12 um kind of very anti-lender Tendencies they don't like lenders who purchase36:18 loans operating in the state or owning loans without being licensed and the36:24 licensure is just very difficult to get it's more designed for banks and New36:29 York it's just they have a lot of just a lot of laws there regarding lending that36:35 I don't really want to have to adhere to New Jersey's civil or not as bad but it's just a very small state36:42 typically if you look at the map of non-judicial foreclosure versus judicial36:50 foreclosure in the west you have mainly non-judicial States and in the Midwest36:57 and East you have mainly judicial states with some exceptions soWhat percentage of your deals end up being land versus buildings?37:02 what percentage of your deals end up being Land versus buildings like are you37:07 intentionally trying to go after one or the other or I don't know what's the breakdown on that so I do both37:13 traditionally I've done owner occupied you know single family and condo37:20 traditional residential loans and I was buying all kinds of stuff37:25 non-performing Junior liens uh performing loans uh loans and act of37:31 bankruptcy um I moved into land just because I saw it as a really great opportunity for37:37 another source of notes I do both right now I would say I'm probably 80 percent37:43 Land part of that is because37:48 um during covid the um the interest rates got so low that when those loans37:55 entered the secondary Market there really wasn't much yield to get out of them that's going to change though yeah38:02 because now rates are climbing again when those uh loans enter the secondary Market there will be better yields so38:10 you think you go back to houses more in the future um you know I don't know I I love doing38:16 uh land deals so I will probably do both now these uh situations where you'reIf somebody wants to buy existing notes, how do they find these deals?38:22 buying an existing note so like where are you finding these people is there some Community or something or is this38:28 just a massive networking effort to always be on the lookout or if somebody wanted to start buying some of these38:34 season notes like where should they go to start doing that um it depends on whether you wanna38:40 um buy uh residential or land uh residential I purchased mainly from38:46 contacts that I've developed with larger funds uh you know I met people at38:52 conferences I met people through word of mouth I kind of saw their name you know38:59 on in paperwork that I received and reached out to them it's a lot of networking39:05 um with land it's almost entirely based on my kind of reaching out to people and39:12 asking them if they are interested in in a seller finance no buyer or if they39:17 have loans that they'd like to sell there is one exchange that's I know that's popular with both land investors39:26 and residential note Sellers and that's paper stack39:31 S I have never I've never purchased nor sold a loan39:37 um on paper stack I I just um use my existing relationships on both39:42 the buy side and the sell side although I don't really sell that often gotcha soHow to tell if an investment property is a good buy?39:48 I know we talked a little bit earlier about um you know how you break down a deal to look at it in terms of like the property39:55 it's a loan to value you know as the property itself good enough and then like the borrower looking at their40:00 credit score and their down payment and looking at the terms like what kind of loan document was used and the annual40:07 return so like dive in more specifically into that I mean maybe we start at the property itself so the 70 loan to value40:15 thing that's easy enough to understand uh well in terms of like what makes a property good enough or what it's used40:22 for like what makes yeah what what does make it good enough like is there certain zoning or like40:28 um I don't know how would you evaluate yes I would be okay repossessing this property because it's useful for X and Y40:35 and Z how do you make that decision so I'm looking at the same things that every other land investor is looking at40:42 I'm looking for legal access I'm looking at the topography I'm looking uh at the40:49 water or Wetlands I'm looking at what is it zoned for versus what is the likely40:55 use for it um through the lens of if I had to take this property back could I resell it41:01 could I resell it with terms um I don't nor if if it's I don't41:07 normally call the county or get involved in kind of the secondary level due41:14 diligence I kind of rely on the owner or the seller for that to provide that41:19 information to me I may reach out to some realtors for valuation if I can if41:26 it's a market where there just isn't much on either on the market or that has41:31 has sold recently so um ultimately it comes down to what's41:37 what's the likely price and if I had to take it back could I41:42 resell it at a certain price yeah and looking at the borrower like say if youWhat characteristics do you look for in a good and responsible borrower?41:48 were working directly with a land investor to originate a deal so like you really don't have any history to look at41:53 uh with regard to that single note so what does make a good borrower and41:59 this is kind of like you know underwriting 101 kind of stuff but just out of curiosity like what kind of credit score are you looking for what's42:05 the minimum down payment you want to see um any thoughts on that yes so my42:11 program I do not require what's called a full doc loan42:17 um uh origination so I am not looking at their income versus their liabilities it42:25 is simply credit score and down payment actually it's pretty similar to buying a42:30 car and actually the price ranges are in that similar realm so I have kind of a42:37 matrix that I use the minimum score for 20 down is a 660 which is kind of like a42:44 c rating and then from there it goes to 25 down 30 percent down and it keeps42:52 increasing as the credit score decreases um that is more risky not including a43:00 full underwriting of the borrower and their assets and liabilities it's also easier43:07 and faster though to get the deals done yeah so um my biggest concerns with the borrower43:13 credit score down payment I do require a larger down payment um43:19 and that's part of the reason why I don't recommend that anyone does a deal43:26 with a zero down payment down payment is extremely important to43:31 preventing default in my opinion interesting you know a credit score you know there are there are massive43:39 industries that are based entirely around that credit score I know people will say that it is important43:48 um but in my opinion you know that's what I'm basing the decision on I think it's also important to look at what's on43:55 the credit report unfortunately people will have typically44:00 pretty good credit but then you know it's sad they'll get sick they'll uh have all kinds of44:07 medical bills that they don't pay and that really destroys their credit score44:12 I heard a statistic that the number one reason for bankruptcy in the united states is medical debt so I I think it's44:20 important to look at the report itself more than just the credit score on that44:27 uh the thing you were mentioning about the lower the credit score goes the higher the down payment you require so44:32 is there any cutoff point at which you're just like nope sorry it's too low the answer is no or could it be like I44:39 don't even know what the lowest is but it could be down to zero or whatever that bottom out is and so yeah that's44:44 fine just make a 80 down payment or I'm just I'm trying to ask a ridiculous44:49 question just to understand like what is the actual limit for that yeah so I never say no44:55 um I will take any credit score but you'd be looking at a 50 down payment which you know is really high and most45:03 people are not willing to do um and the reason you're okay with that is because say if they just never even45:10 make the first payment it's okay because you have full access to this piece of collateral that you've already collected45:16 or you know that you're only in for a lower amount of money so that the value is there for you to cash in on if you45:23 have to is that right correct that's correct so in that situation I mean I45:28 doubt that that would happen just because somebody's put down such a massive down payment I don't think that45:34 they would immediately default but a year down the line if they default you know I feel like45:40 um my investment in that property would be low enough that I would feel comfortable handling the default45:48 so if you were dealing with an Amish person who doesn't have a credit score you just lost a huge portion of what you45:55 would look at to make that decision um would that be a deal killer or or no46:01 no so there's there's a thing called I-10 are you familiar with I-10 loans oh46:08 is that ITIL like without a social security number yeah okay I got you yes46:13 so there are people in the United States who do not have social security numbers46:19 who use itins to purchase property and the big banks allow this46:26 um I have never seen it but I would not say no to it I would allow an I-1046:31 purchase it would just require a higher down payment okay I'm liking how it seems like there's46:38 always a way as long as something comes into this is always a way and that's cool there's always a way it just it's a46:45 matter of will the buyer or the borrower be willing to46:51 based on what we've talked about so far so it sounds like the person's sources of income you don't even look at that46:57 right that doesn't matter to you I don't now if someone let me say that regarding47:04 Dodd-Frank if someone even though land is Exempted from Dodd-Frank if someone is going to47:12 be living on the property day one47:17 you know first I would say consult an attorney about whether or not this is required but I think it's probably a47:25 good idea for you to run that scenario through a full underwriting if somebody47:31 is buying the property as wreck land or hunting land we're just going to go there on the weekends that's an47:37 investment and I'm comfortable in that situation not doing a full47:42 um the full documentation a full underwriting but again if somebody is saying I'm gonna I'm I'm gonna live47:49 there that's going to be my primary residence you're probably smart to a consultant or an attorney and47:56 B to call the underwriter so Eric when you talked about this annual return aIs there a range of what you're looking to get out of a note investment?48:02 little bit earlier about you know what you're hoping to get out of endnote investment is there like a range of what48:08 you're looking to get out of this like how do you know when it's worth your time and money to invest it in a note48:13 like this so I use a financial calculator to calculate yield48:19 and the technical term is yield to maturity so it's a measure of what your48:25 investment is returning to you each year that you hold it so typically most of I48:32 base my yield based on the risk of that loan so I would say that the vast majority of my purchases yield anywhere48:40 from 14 percent up to 20 percent okayWhat are the payment terms that you prefer to see?48:45 cool it's helpful what I mean what kind of payment terms do you want to see like how long should the amortization48:52 schedule be are we talking like 1 3 5 10 30 years like how long how long is48:59 normal I guess and then for for the instances where you kind of jump into an existing one like how much more is there49:06 left to go before the thing matures and is paid off yeah that's a great question so my advice for that is to always go49:13 with as short a term as possible because that will really improve or reduce the49:21 discount required when you sell your loan the other thing that I recommend is to go with about a 9.9 to 10 percent49:29 interest rate because interest rate and term are the two most important parts to49:36 the discount when you go to sell the loan so if you have like a three percent49:43 um interest rate it's called a coupon rate and you want to sell it at a 12 yield you can see that you're going to49:50 take a huge reduction in the loan balance to get that up to 12 percent49:55 so um you know I recommend I the other thing that I like to see is the two50:01 percent rule I don't always see this but it's nice so um my purchase price50:06 whatever my purchase price is I like to see the payment uh as two percent per month of that50:14 purchase price But ultimately what I'm doing is I'm just crunching the numbers in a50:19 financial calculator based on my kind of risk assessment and what I would like to50:25 achieve and it's going to spit out a purchase price that is my offer gotcha50:31 yeah it's interesting I just thinking as I hear you talking so a while back I50:38 created this spreadsheet where you could um basically plug in the value of a50:43 property and it would it would spit out like five different scenarios for how you could make an offer to a seller one50:50 of them would be like just a super discounted cash offer and then the other four would be different combinations of50:56 seller financing where that seller is financing it to you as the buyer and the51:02 beauty of it is that um yeah you can ultimately pay anything for a property if the person is just willing51:08 to finance it for terms that are favorable enough to you um and it kind of sounds like a similar51:13 concept to this where you know like we mentioned earlier the credit score can be terrible as long as you're willing to51:18 have a big enough down payment it'd be interesting to create some kind of a similar spreadsheet maybe you even have one where you can plug in any scenario51:26 and it would just tell you this is what has to give you know if this problem exists this is how you fill51:32 it in by asking for this concession um do you think it's possible to create that kind of thing it seems like it51:37 could so I have that for I have a credit Matrix that is a combination of credit51:43 score and down payment required but uh absolutely I mean that's how I did the51:50 loans it's just based on what do I think the risk is and what do I think is an51:55 appropriate yield and then what purchase price will uh translate into that mealCan you change the loan servicer if you take over an existing note?52:01 yeah this question is kind of going back in time but what we were talking about earlier regarding the loan servicing and52:06 collection of payments so if you take over an existing node and say they're52:12 using software or something can you like switch over to your loan52:18 servicer of choice at that point or is it kind of like nope sorry this is the track it's on this is how you got to finish it that's what I always do I have52:25 it um transferred you need to send out a servicing transfer letter to the52:30 borrower informing them that moving forward their payments will be collected by the servicer and it's just a matter52:37 of transferring they need a copy of all the loan documents they need to know the balance the monthly payment late fee all52:43 that information and uh it it it's a little more complicated52:49 than just the servicer to servicer transfer but I highly recommend that52:54 gotcha okay um and I guess going back to what we're talking about in terms ofDo you come across borrowers who default on their payments after you take over the loan and what do you do if that becomes a problem?53:00 you know Finding ways to remedy uh what would otherwise be you know bad lending53:06 decisions just by asking for a higher down payment or whatnot so in those scenarios where this borrower clearly53:13 has some problems like there's reason to be concerned and that's why you fill in the gaps by asking for these additional53:19 things so I have to assume if you're doing that you come across borrowers who default on53:25 their payments after you take over the loan right like how common would that be after you're doing all this uh proper53:32 groundwork to make sure it's a good credit and something that's going to actually pay over time so in my53:37 experience it's relatively low I don't think I have had a borrower yet ever who53:45 just well okay I take that back maybe a couple who just stopped paying and just walked away that's extremely rare53:52 immediately no I've never had that okay I had that53:57 actually in one situation but it was complicated because it involved a bankruptcy and the individual decided54:04 that they didn't want to continue in their bankruptcy plan but it's exceedingly rare and I I do believe that54:10 that is really tied to down payment when somebody hands over fifteen thousand54:15 dollars the likelihood that they're just going to walk away with a decent credit54:21 score of 660 or above is low to the point that I am comfortable purchasing54:28 those loans um because if it does happen I'm comfortable with54:33 um the default process but it's rare true and like I have to assume like you're ready for it if somebody defaults54:40 like you know exactly what to do you're not scared of that you just follow you know the appropriate uh process to get54:47 that done so um but so I guess you said it's relatively uncommon like I don't know if you're54:54 doing I don't know how many deals a year like this you're doing but if you're doing just for round numbers 100 of these per year so is it like maybe five55:01 of those you have to worry about that or ten or one or none I don't know what would you say under 10 okay55:08 probably more along the lines of five percent okay and does that ever become a55:14 problem where like you hit a snag and you can't resolve it or it takes way longer than you expect or it's more55:21 expensive than you thought it would be or do you pretty much have your process ironed out so that like there's no surprises in that process so yes you55:28 never know what a borrower is going to do during the foreclosure process most55:33 of the time with land they're just probably going to walk away a lot of times that you can convince55:40 them to do what's called a deed in lieu of foreclosure and just say hey you know I'll give you some money if you just55:46 need the property back to me if it has clear title that's an option but if a55:52 borrower really wants to keep the property uh you know they might hire an attorney they might fight the55:58 Foreclosure they might file bankruptcy there's a lot of things that could happen in the land it's relatively rare56:04 because most of the time you know they're not living on the land so they're proud probably more likely to56:10 either just give it back or do a deed and leave a foreclosure yeah isn't that kind of the same thing giving it back in56:16 indeed and lieu of foreclosure yes um just want to make sure I wasn't missing anything but56:21 um because I agree I mean that sounds like by far the easiest you know56:26 wrinkle-free way to do it just to clearly you know mop it up and you're done56:32 um so when you try to pursue that I'm assuming that's probably your first uh default way that you try to resolve this56:39 right like the first step is to say hey can you just did it back to me and assuming that's true what percentage of56:45 the time did they actually do that like they don't ghost you they're willing to do it56:51 um and like what do you have to pay them to get them to do that for you so I would say about 500 but you know the56:56 other the other issue here is that um these a borrower is personally57:03 guaranteeing this loan and if they default you can obtain what's called a deficiency judgment57:10 against the borrower which is a judgment that they did not fulfill their terms of57:15 the loan and that deficiency judgment could attach to their primary residence57:21 now or it could attach to real estate that they own in the future interesting so that that tends to be a very powerful57:30 motivator in these situations in order to get the borrower to57:36 cooperate so sounds like 500 bucks would you say like does that usually work on57:42 the face level I would say no uh people tend not to respond but I57:48 think that the that the encouragement of the issue of a deficiency judgment nobody wants that yeah so that makes the57:56 situation much more um it makes the borrower much more likely to cooperate that's interestingHow do you convince your borrowers to pay?58:03 because I know my probably the biggest frustrations I've ever had with seller financing are when I'm trying to58:09 communicate with this borrower about anything whether it's about this or something else and like they're just not58:15 responsive like it's like they've vanished from the face of the Earth and I can't get anything out of them because58:21 that it just makes it harder for everybody but um so when you say that no they don't do58:27 that does that mean they're not responsive or does that mean like they hear you they're just saying no I'm not going to comply I'm not going to do what58:33 you want um and how do you convince a person to do this like is there a certain letter58:38 template that you use where you talk about this deficiency judgment or certain verbal conversation you have on58:44 the phone on like what is most effective in getting people to just work with you so I don't recommend that you ever call58:50 borrowers on the phone that's the job for the servicer I'll also say that a deficiency judgment is not an option58:55 with a land contract that is only an option with a loan only the way that I59:01 would handle it is there you know in my experience there's a very clear process59:07 once the borrower reaches 90 days delinquent you're going to send a demand59:12 letter stating that you know you're now in default you need to cure the defaults59:17 within 30 days and this is the amount if you don't cure the default you know the59:23 Foreclosure is going to be filed I would also include with a note mortgage I59:28 would include that deficiency language in the demand letter and you know I would have the servicer59:35 try to communicate with them but that does happen frequently borrowers just completely go dark and they refuse to59:42 communicate and you know that's part of the business I mean you could that happens okay if somebody is of the frameWhat do you need to prioritize when underwriting deals if you want to make this a passive, hands-off investment?59:50 of mind where it's like I don't ever want to have to deal with foreclosure stuff with chasing borrowers59:56 around to pay what they're supposed to pay me I just want like total surety that I'm gonna get my money this is1:00:03 going to be a passive hands-off investment like what do they need to prioritize1:00:08 when they're underwriting these deals like are they just looking for like the best possible credit score and uh1:00:15 you know High down payment that kind of thing like just make sure that's as good as it can possibly be acknowledging that1:00:20 they're probably going to walk away from a lot of opportunities that aren't perfect but is that what you'd recommend you know the big four for me are pay1:00:27 history credit score down payment can investment to Value if1:00:33 all of those line up you know I mean you're you're probably fine but there's1:00:39 no guarantees in life I think that in my experience you're going to have a lot1:00:44 more issues with the no credit check no money down land contracts then you are1:00:51 going to have with a with a higher down payment and a higher credit score are there any states that come to mind thatAre there any states that have a particularly easy foreclosure process?1:00:57 have a particularly easy foreclosure process or repossession or auction process or whatever Texas is probably1:01:04 the easiest it's if you're not using a land contract rent yeah no they're not friendly to land contracts and and that1:01:11 makes sense because their foreclosure process is like three months or less uh it's just so fast there's no reason1:01:18 to use land contracts in Texas and if you speak to an attorney they'll tell you don't use a land contract1:01:24 um you know the the western states Arizona Colorado1:01:30 um uh Washington is fine California is fine1:01:35 you know all of those states have a pretty fast foreclosure processDo you ever resell the notes you buy?1:01:42 non-judicial and when you buy these notes or help originate them do you ever1:01:47 resell them again or is it your goal to just ride them out until they're paid off so I don't usually restell them1:01:54 sometimes lately I've been selling some of my older residential loans1:02:00 to free up some capital for more land purchases but you know I don't like I'm1:02:07 not in the business of brokering these which would be like you know just basically not fund it just kind of1:02:14 broker it to another party and actually a lot of the note buyers that you will1:02:19 likely meet in the industry are not actually funding it with their own Capital they're just trying to broker it1:02:24 to another party so keep that in mind if you're trying to sell your loans one of the first questions that you should ask1:02:31 is um are you going to be purchasing this or are you going to be brokering this yeah how much does a note broker make1:02:38 from each broker deal I would say a couple thousand but I don't think it's1:02:44 unless you're a very high level like institutional broker and there are some institutional Brokers that specialize in1:02:52 being the goal between between like huge funds and Banks uh individual loans I1:02:57 would say not very much I'm not even sure that it's a feasible business and IEric explains his Note-Buying program1:03:02 know we've talked a little bit about your note buying program is there anything else worth talking about with that I mean it sounds like a really good1:03:09 way for somebody who's never really understood how to do seller financing correctly sounds like a good way to get1:03:16 educated on that just because it sounds like you know you help them make sure everything is uh lining up correctly1:03:22 um but if somebody does want to you know get involved with what you're doing in terms of you know I want to offer seller1:03:29 financing to make this thing sell faster but I don't want to actually play that game long term1:03:34 um anything else worth mentioning about how that works or who that's ideal for yeah so I I created the program because1:03:41 I really do believe that land investors can sell their land much faster and for1:03:46 more money if they offer seller financing but most people they would rather have the cash they don't want to1:03:51 hold a note they don't really want to have to worry about originating the note and then selling it down the road so I1:03:57 created this program in which I purchase seller finance land notes for 80 of the1:04:03 sales price at closing and I basically handle everything I oversee all the1:04:09 paperwork I oversee the process so the only thing that you have to do is just1:04:15 Market the property with a just a couple of parameters it's designed to be super1:04:20 simple super easy super transparent no negotiation it's just you know exactly1:04:26 what you're going to get up front and I've had really great success with it so1:04:32 far people have been really happy with the program just because there are a bunch of things that you need to keep in1:04:37 mind when you're doing an origination and I kind of oversee that in the background for you1:04:42 got you I've I've got the buyers I do review the properties to make sure that their1:04:49 properties that I'm comfortable with um but I handle you know like the credit1:04:54 check and the whole process I mean it sounds like like you probably have a lot of repeat1:05:01 business right like it's probably certain land investors or Real Estate Investors they just you do stuff with them again and again and again is that1:05:07 accurate yes I mean if we had done that kind of thing together I mean I'm sure that's how it work would work when you1:05:13 find a good source of business that can help you with something it's like why not do that again and again if it's working so now I got a note here to talkEric shares how he was able to mitigate his tax liability1:05:20 about the power of zero by David McKnight so this is a book that I've not read but it sounds like there's1:05:27 something about this that's uh significant worth talking about did you want to get into that at all yeah so um1:05:34 I I really believe that the the biggest uh really enemy for land investors is1:05:42 not really any type of specific Market I think that the thing that that we should1:05:48 be most concerned about is taxes and um I read the power of zero by David1:05:54 McKnight and the premise of the book is that taxes in the future are going to be1:06:00 much much higher than they are now and you should be taking some specific steps1:06:07 to mitigate your tax liability now before the taxes get out of control and1:06:14 typically what happens with land investors is that they're paying taxes every year over and over and over on the1:06:21 same money and what are the suggestions that he makes in the book is the idea of1:06:26 the uh solo 401k and I have employed the strategy and it's really been a game1:06:33 changer for me so what I have is a self-directed checkbook solo one 4011:06:42 solo 401K that is a Roth account which means that I pay taxes on the money1:06:50 before it goes into the account and then I never pay taxes on it again1:06:56 so what I do is I contribute in 2023 I'm going to contribute sixty six thousand1:07:02 dollars after tax for myself sixty six thousand dollars for my wife and what I1:07:09 do is my company pays me and that money goes through a payroll processor I pay1:07:14 taxes on it so that I have uh Records that the taxes were paid in case I'm ever audited and then that money goes1:07:21 into my solo 401K I self-direct it so I can spend it on whatever I want to1:07:29 um within reason now you can't run a business in your IRA like you can't flip1:07:35 land in your IRA and never pay taxes that would subject you to what's called1:07:40 ubit tax you have to be purchasing Investments that are more passive that1:07:47 you are not actively involved in on a day-to-day basis now with that said if1:07:53 you're interested in this I highly recommend that you consult with a Tax1:07:58 Advisor or an attorney to come up with a plan for what you can invest in but it1:08:05 is such a huge amount of money that you can contribute into these accounts that it really it really is an amazing1:08:13 strategy I think it's probably the best game in town you do need to be self-employed either full-time or1:08:20 part-time the other caveat is that you cannot have any full-time employees you1:08:27 can have part-time employees and you can't have uh independent contractors1:08:32 yeah um but but for me it's just been a huge opportunity yeah and there's there's1:08:39 probably a lot of people in the re tips your audience that kind of fit that profile and it sounds like if you just1:08:45 scan the average person in the general population a lot of people wouldn't but you know we're looking at the land1:08:51 investors or Real Estate Investors who are at least some somehow self-employed without any full-time employees1:08:58 um I mean the closest comparable thing I can think of to this is the self-directed Roth IRA which I've done a1:09:05 bit of but the big drawback with that I mean it works similar in that you put after tax dollars into it but you're1:09:12 limited like I don't even know what the current amount is but it's definitely not 66 000 I mean it's way way less than1:09:18 that um and you can't get to it until you're 59 and a half because it's a retirement account is that age restriction does1:09:26 that apply to the solar 401K as well or when can you actually take the money out you know I don't I would rather not say1:09:33 because I'm not an expert on there I don't believe that is the case I believe that the age is lower1:09:40 um um what was my other point I draw a blank so this is something I heard you1:09:45 mentioned earlier when you're talking about the solo 401ks that uh or you were talking about the1:09:51 self-directed IRA you said that that um can't be used as a business it has to1:09:56 be more passive in nature is that like a rule or is that just like a practical guidance thing like it doesn't make as1:10:03 much sense to do it that way so if you want to run a business in your IRA you1:10:08 will be subject to ubit tax and I'm not a tax professional but my understanding1:10:13 is that ubit tax is around 37 that you would have to pay1:10:19 um so it's probably not the best uh entity or situation for land flipping1:10:26 but for more passive Investments it really provides you an amazing opportunity to go tax-free moving1:10:33 forward um there's just so many other you know you might want to have your normal land1:10:39 business and then there's just so many other opportunities that you could get involved in for other great Investments1:10:45 that are more passive that you can use your solo 401K for yeah I'm uh again not tax advice at all1:10:54 but I just did a Google Search and I asked when can you take money out of a solo 401K that says1:10:59 uh participants can withdraw funds at any time after age of 59 and a half so1:11:05 again I don't know if that's right or not that's just Google but um that I mean I know that is something1:11:11 that I find very annoying about a self-directed Roth IRA like a big drawback to doing that because you can't1:11:17 get the money I mean yeah you're you're uh you know saving a lot on taxes but if you can't use the money anytime soon1:11:23 it's like okay well yippee you know that's a great for me assuming I live that long um1:11:28 but it sounds like with the solo 401K especially one that you know is a1:11:34 checkbook self-directed 401 I mean it's just it's a lot easier to actually move1:11:39 the money instead of getting custodian involved and all the Hoops you have to jump through for that and also just1:11:44 being able to put so much more into fund that thing from the get-go I mean I know that was a huge uh thing that slowed up1:11:52 the process with the self-directed Roth IRA um but either way I'm a great tool to1:11:58 know about if you want to not pay a whole lot of taxes uh long term so and1:12:03 the other nice thing is that the setup costs are very low I think I may have paid 500 to start it1:12:11 um so for me it's really been a game changer I highly recommend it especially to those younger listeners out there who1:12:18 um haven't really started thinking about that yet um it's a great opportunity yeah and I1:12:24 assume that's something that you employ with this note buying business rightAre there any crucial resources vital to your note-buying business?1:12:29 correct I'm trying to think is there any like I don't know software uh or1:12:35 anything that you use that's vital to you in this kind of note buying business whether it's to keep track of stuff and1:12:42 it sounds like you do your own accounting that kind of thing but um I mean it's a fairly different1:12:47 business than one who flips land a lot of land flippers who might be listening to this they kind of know the land world1:12:53 but if somebody ever does want to get into this note space are there any like crucial resources that are just like1:12:59 amazingly useful to you yeah absolutely I use a financial calculator called T1:13:05 value I use it every day it's probably the best sixty dollars a year that I1:13:10 spend um it's a financial calculator and amortization uh schedule creator1:13:18 um I use pipedrive but I don't really use pipedrive as a CRM that I kind of1:13:24 organize my notes in it's not really designed for that so it probably isn't the best fit1:13:30 um I use QuickBooks for my accounting um and I just have a lot of you know1:13:36 forms and and Excel I keep track of my notes in Excel I keep track of my1:13:42 documents and word and that's pretty much it I mean I'll be honest with you1:13:47 I'm kind of a lousy marketer lousy with data you know I'm not that1:13:54 creative a land investor honestly but this I can do yeah okayHow to reach out to Eric?1:13:59 cool well if people want to find out more about you or work with you or have questions or want to reach out to you1:14:05 anything like that you're not obligated to share this stuff but if you want to what would be the best way to follow you or get a hold of you so you can email me1:14:12 my email is Eric E r i c at Damon capital D a m e n capital.com1:14:22 cool well Eric thank you very much for talking with me it's been very informative it's been awesome to get to1:14:28 know you a little bit better I hope your business continues to grow and do well and you sound like an awesome resource1:14:33 for people to learn more about how to do this properly because I know there's a lot of uh just I don't know if it's1:14:39 misinformation or just not a full awareness of how to do it quite right but uh it's guys like you that can help1:14:44 people bridge the gap and figure this out so appreciate your time yeah thanks so much for having me it was awesome and1:14:52 uh if you come across anyone who has any questions just send them my direction I'm happy to help people in any way I1:14:57 can and uh I will be at the at Dave's conference yeah I saw on next May yeah1:15:04 so we'll get to meet that yeah I can't wait for it it'll be a lot of fun thanks again Eric and hopefully we'll talk1:15:09 again soon that's awesome thank you so much Seth have a great day thanks you too



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