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when you see all our attendees starting to come on and see that participant aspect jump up very quickly so so real fast uh just to kind of talk a little bit about our up-and-coming speaker right his uh we're gonna be focusing on a lot of things from uh and he's done a lot of things from due diligence to passive investing to holding properties right but ultimately right he's focusing on one topic today before we go into that aspect we're gonna talk a little bit about quests and why everyone's here right so we do call this our trillion dollar investment mixer the reason it's called a mixer is right there everyone leverage that chat box in that q a box you can ask questions to myself you can ask questions to the speaker and you can network with one another you can put your own investments in there right you can go ahead and exchange uh information whether you're a wholesaler a lender a borrower doesn't matter okay guys so leverage one another and make sure you do your own due diligence so always remember write the quest we never can go ahead and provide any type of tax legal investment advice try to remember guys that we're one of the largest self-directed ira custodians in the u.s we are by far the largest in texas a little over 20 000 clients a little uh 2 billion in assets we're over 100 employees now which is really really cool and about 350 million dollars in undirected cash this means that quest has clients with money that they're looking for investments they're looking for where to place it what to do with it okay so always remember though before we ever work with anyone you need to do your own due diligence quest does not provide any taxable investment advice nor can we go ahead and recommend someone that you work with right so always remember some of the benefits behind self-directed iras from diversification diversification rate we want to diversify our portfolio diversify our assets right the biggest reason is really the tax savings everyone out there is the taxpayer right we every time we do an investment do a deal we need to pay taxes on our earnings but if i use my ira i can actually avoid those taxes on the profit so it's a huge advantage social investing using a self-directed ira to invest in your community you can actually go touch feel see look at what you're investing into when i buy stocks or a mutual fund i have no clue what my money is really doing but when i invest into the community and buy a property right lend my money right work with someone that's going on this aspect i can actually see what my money's doing lassie is investing in what you know best right we understand that your ira can do so many things from investing in stocks and mutual funds but do you really get direction on that quest is taken upon ourselves to bring in highly educated speakers like the one we have coming on here in just a minute to really help educate people so they understand what their money is doing right we have all sorts of plans that can be self-directed from traditional and roth iras which are the most popular employer plans and specialty plans remember guys we have a class on each one of these topics right here so let me know if you have any questions in this area okay we see people do so many investments from real estate and private entity type deals like multi-family but believe it or not one of our largest investments we've seen lately is notes we've seen people either buying notes or lending money and really focusing on being a passive investor we've noticed a lot of people aren't looking to be the landlords they don't want to deal with tenants and toilets right which is the common saying you hear out here in the real estate world so our speaker we have coming on could really be focusing a lot on passive style investing right uh don't forget the quest offers endless free education to everyone out there right from our youtube channel to the education center to our virtual happy hours right our weekly webinars like the one today mainly guys i want you to check out that youtube channel it's not big and new that we're trying we're making sure that even this exact webinar is broadcast out there on youtube so people can go out and get your information so without any further ado quest tonight we have a very special guest speaker right and not only has he worked with quest and been a client of quest along with his family but he's actually become a very good personal friend of mine right he's done a lot of things with charities he's helped so many investors and he has unique ways to help people understand how to be a proper passive investor and i as an individual have actually taken a lot of his classes and have learned from them myself and it's how i have structured many of my own personal notes out there so eddie are you with me how you doing i'm doing great eddie how you been i'm good so i'm gonna let you take it away i'm still here i'm gonna let you do a little introduction for yourself and let me know if you have any questions awesome thank you derek okay well we are gonna have a good time tonight i have about 60 slides to cover in 60 minutes so we're gonna move fast uh we'll try to leave some uh spots for questions the end and and may get to the spot where we just may be able to reach out to you and help you later but um i was kind of thinking i've done a lot of presentations for quest i understand i believe i think i understand you guys and the audience well and uh so what i was really what really became a reality to me was specifically um that um you know um a lot of people want to invest and they don't know who they are they're not sure who they are they're not sure if they're really a passive investor or um they're not sure if they're a active investor so i've not done this presentation before we're just going to work through it tonight but i've tried to define i've got some case studies and some examples and i've just tried to define if i can like what i think really what what matters in the business and why it matters so with that being said uh i'm gonna go to my first slide and um i titled this presentation the five steps to defining passive versus active investors uh because once again i think this is a this is a common thing that people struggle with what i know is time has something to do with it right if you're working 80 hours a week and you have absolutely no time you don't really have time to be an active investor uh tolerance um this has not this is not knowledge this is tolerance what are you comfortable with right and uh and so i've learned to help people slot things in finding assets or finding lanes that they can invest in that fit their tolerance the next thing is capital now um derrick was telling me about you know a student that just had come from note school and he comes and deposited a significant amount of money significant as in seven figures with them so he has capital but what if you don't have capital what if you what if you want to be the bank what if you want to build legacy but you don't have capital is that possible so we're going to talk about that tonight your direction and desire you know like um you may not be ready for this yet you you may not be uh you may not have transitioned there's an old saying that every real estate investor when they grow up they want to be a note guy and honestly you may not be ready for it yet i know people that just want to flip houses and make fion come up front they don't want to grow any wealth i know that sounds crazy but i'm telling you the truth they don't want that they're not ready for it yet and so that may be in your situation if it is it's fine so your directions are and the last thing your experience and environment one thing that i hope that note school always brings is i started doing this in 1980 i bought 50 000 notes i built note school with the heart and the desire that it people could leverage our experience and environment in other words they don't have to do this for 10 years to go be successful because they can leverage being in the environment and and with people with significant experience not just me on my team but a number of people on our team have been doing this for decades so we're going to talk about being a deal architect this may not fit some of you some of you may say i want i i love what you're doing i want to be passive and we we'll probably we probably can figure that out right but um this is what everybody wants if i were picking the one thing everybody wants they just want to turn on a spigot of money flying out and go sit in the chair and be passive okay uh oh oh wait a minute and they want something else they want a super high yield so this is a little bit of a reality check if you want a super high yield for a passive investment and and basically no risk this presentation is not for you it's not for you because you're looking for a unicorn right and we are in a yield starved deal starved market we are in a yield starved deal starved market meaning that people are struggling finding things to invest in why do you think quest has 400 million dollars in cash from their clients so part of this is a reality check you know i would i would rather help people that really got this than have a room five times as full of people that didn't get it i've been doing this 40 years right and so i've learned to like cut off at like where people are stuck and say we've got to get unstuck from there so passive investing super high yield i'm just saying if that's the kool-aid you're drinking i'm saying to you that i don't i know very few situations today that are going to get people there we're going to talk a lot today about risk of active versus passive we're going to talk a lot about this concept today okay so here's your risk meter the lowest of the low the highest of the high where do you want to be the reality is is the yield that you're going to make on your investment has a lot to do with it right why do people want why everybody wants to be passive but if you make an option to move to active why do you do it because you can control more the environment and you can use deal architecting techniques structuring deals and you can go earn an amazing return but you have to have some level of active now i'm fully aware of the rules relative to self-directed retirement accounts you can't go mow the grass in your rent property but you can have an active brain you can have an active brain so we're going to talk about some examples of that as we progress tonight and so i sort of laid this out like there's a lot of paths there's a lot of roads that you can go down the business non-performing loans non-performing loans loans would be specifically loans that are um hold on get my number back here it went away let's see so non-performing notes could be a loan that's just flat not paying or a non-performing loan can be a loan that is re-performing it it wasn't paying but it's performing again and we see a lot of assets in this category and we'll talk about this some in the performing note category you really have two things now i'm going to not really focus so much on hard money lending the night but let me just say this okay i have an excessive experience in the note business right if you're doing hard money lending you need to be fully aware that you're making a business loan the condition of the guy you're loaning to his business has to do with the success of your loan now you may have some vendor some relationship somebody that does all that for you but i'm saying to you that i've had a lot of people show up at my doorstep that tried to go do this themselves with not a sufficient level of experience they were wanting an active yield but they were only willing to be a passive level of activity and it didn't work out well so i'm i'm not discouraging you from doing it i'm saying you do it with street smarts right in either one of these strategies you can own the entire term of the note there's a unique strategy you can do with seller financing and that is you can actually buy long buy the whole note and then turn around and sell the front end of the note it's a leveraging strategy it's a way to recapitalize it's a way to take your retirement account and make it work a lot harder and what kind of return you can get now who makes money with financing well if you want to know the most profitable entity in virtually any new car dealership you walk in today it's the financing entity it's not selling cars it's financing you want to know the most profitable entity in a furniture company financing hmm who else makes money well obviously the bank and finance companies the so the finance side of the business is very very powerful because if you look at all these businesses their most profitable thing they do is the finance out of the business so what if that was your retirement account what if that was your business what if that was your part-time business right so i'm going to talk about a concept tonight i call it seller financing 4.0 this isn't your daddy's old owes mobile seller financing let me tell you what note school is not going to teach you we're not going to teach you to take a junky piece of property and take a guy that is highly substandard with no proven track record of paying his debts back and say that's a perfect candidate for seller financing that's not what we're going to teach i understand people do it i understand that people talk about it as if it's really an effective model it's just not and so i've looked at hundreds of thousands of financing i've studied the performance characteristics of this product as much as probably anybody in the industry ever has and so i'm going to take you in a lane tonight to show you what's possible but asset class both what you're selling financing and who you're selling financing to has all to do with your success so not all things are created equal first thing i'm going to tell you is is that it if you deal in good collateral you can attract better notes there's a stupid crazy market condition right now i'm fully aware at the moment real estate is on fire residential property is flying off the ship it's as good as it's ever been ever in the last 15 years what you may not know is that 35 a third of all the people that get a mortgage last january cannot get a mortgage this january okay it's called the mortgage credit availability index so understand while while real estate is flying off the ship the mortgage banking industry is looking at these lurking problems behind the curtain and they've cut back who they're willing to make a loan to so the availability of people that need some form of alternative financing is higher than it's been and let's pro say probably 10 years opportunity yes if you know how so you're buying a mortgage note you're the bank you're not the landlord you just own the mortgage against their property and they're paying you back so they're paying you back a principal amount plus interest monthly payments probably and it has an amortization term right so the buyer then signed puts the john hancock and signs the note and in that note then you've heard it called seller financing you've heard it called paper you've heard it called real estate notes you've heard it called a mortgage those are all things that you may have heard them call but it's all kind of the same thing now this note why people like my business honestly better than rentals is it produces mailbox money that mailbox money is making your mailbox grow and basically you do a transaction one time and it has a really long term benefit you get the check without the mailbox without the invoice coming in the mailbox okay so that's a really critical thing is why people like it you may love dealing with tenants and toilets you may love that and you and seriously you may do but if you don't have a tolerance for that we talked about tolerance this is a great alternative you can enter this business at any level you can be extremely passive or extremely active i'm being fair fair with you and saying you can't be extremely passive and expect an active investor's yield that's that's an unrealistic expectation but you can move into this business with something that's safe and comfortable for you that will work work one time long long long term benefit peop e like that notes are transferable you can buy and sell a note just like you can a car or a house or any other asset so a bank a mortgage lender owns notes right who else could own notes well it could be a seller financer it could be somebody seller finances property then all of a sudden you have a node investor that's me that's you and that node investor then can buy that note that seller finance note typically sells at a discount it's not absolutely legally required that it sells at a discount but that notes can sell at a discount now the note investor owns the note and all the rights that he had that the bank had to collect the note or the seller if an answer he inherits those rights now we're going to talk a lot and not a lot tonight about the passive versus the active and we're going to do a lot of comparisons and saying what do you need to know what degree do you need to know to go be one versus the other you're buying a note there's three underwriting characteristics that scream in any note deal the first is the guy that owes the money the payer the second the question is will they pay second is the loan itself the mortgage note the interest rate the payment how long it's payable over how much will you get paid the third characteristic is what we call the collateral characteristic right now there's two categories under collateral the first is the property itself most people already know that the house is my collateral and by the way you're going to see some chains come over this house and that is because that is mortgaged so the change represent a house that's mortgaged but there's other piece of collateral in our business and that is essentially the paperwork okay so if i were looking at this i would say the active investor has to have a really good handle on that okay pretty much anybody can figure the loan amount and the active investor also has to have a sense of the likelihood of getting paid so these are areas now once again there are no brainer great deals and there are deals that aren't as great so i'm just trying to help i'm not trying to necessarily get you to come to note school i'm not trying to get you to buy a note from me versus somebody else i'm not trying to do any of that tonight i'm trying to address in 20 years of training what i have heard a lot of people come back to me down the road and say eddie we didn't know so i'm trying to say i'm i'm giving you some lanes to operate within yes i kind of opened up tonight honestly saying if you want to earn some crazy double-digit returns and you want to be passive you need to know your money's at risk you just need to make sure you may not know what level of risk it's at because it's not a market condition at the moment right i've lived in the business since prime interest was 21 i've lived in a lot of cycles i understand but we're not in a yield driven market right now we are in a given get me my money back market so we have developed a very great website called notesdirect it's notesdirect.com there are there are notes in there that will not fit a passive investor there are notes in there that would fit a passive investor so you can decide whether you want to be passive or active and this is just a platform we have our notes for sale there and we have other clients notes for sale there we have loans in there that take a pretty sophisticated note school educated investor that are non-performing notes with big profits and things that need to be thought through and then we have notes in there that are pretty uh pretty passive they've been paying for years it's pretty safe there's not a lot to figure out it's a lot easier than owning a rent house and it's to me it's even even easier to underwrite than a rent house because they have a proven track record so there's notes in there that will fit both sides of the market i want to show you some some real deals real quick seminole florida i don't care where the asset is dear the one thing i would say to you is in my business i don't need to ride by the property it does not need to be in my neighborhood i bought 50 000 notes and virtually none of them were in my zip code i've seen that and that's a true statement from eddie so you you get that you're like i wanna i wanna go ride by my investment i don't i gotta say it i don't want due diligence i don't need to burn i'm not i'm not a contractor i don't need any contractor bags or gloves right i'm the bank so here's seminole florida this was a loan that was eighty thousand bucks it was written at six percent interest and uh we bought this asset direct so we didn't buy this is not an asset listed on notes direct at the price we paid but we were more active and we bought this asset at a dang good price so we bought this asset about a fifteen thousand dollar haircut fifteen thousand discount what's the house worth two hundred and ten thousand how long have they been paying well if there's 182 months remaining is a 20-year note uh they've been paying about five years so we've invested 65 000 as a first mortgage against a house worth 210. safe five-year pay history good title taxes were paid pretty safe 182 payments we're going to get back 123 000 bucks for our investment now let me just say this that's not for every passive investor but there's a way that we can work with a passive investor or our student can our network and we can show you how to do that but that's a pretty solid deal you can probably check yes in the blank i'd do that deal and we did do that deal this is near phoenix avondale arizona 92 000. this was a lower interest rate five percent 751 a month 172 months remaining that's like 14 years close to it we bought it at a deeper discount because why lower interest rate lower interest rate meant we bought it at a deeper discount compared to what the what the asset was worth right or what the loan balance was the asset's worth 155 000. we put 66 are we safe pretty safe 172 at 751 a month we're gonna get back almost double our money would you do that deal ask yourself would would i do that deal do i care that i'm not in phoenix because i've bought 50 000 over 40 years i don't care experience has taught me something different than fear i know what to be fearful of i'm not fearful of this here's another asset this was in maine athens maine this was a mobile home and land it is permanently affixed 68 000 7 and we bought we paid up for this asset a little more but once again it wasn't as long a term and it was a little uh a little higher interest rate 800 a month we're going to collect 800 a month we're going to collect back 95 000 on a 52 investment over 10 years once again ask yourself would you do this right i don't mean we've done the due diligence i'm not asking you to make a pure decision with no due diligence i'm saying with proper due diligence could you be comfortable with the numbers i'm showing you so source of notes is we've got notes direct and we that's what we've done we figured out if we could help people solve this problem in the industry it was a big under underserved market so we put a lot of value in that so these deals which one do you have to be do you have to be could only an active investor buy these assets well an active investor would probably have to bring these assets to the table so you couldn't be passive because nobody's going to tear your living room door open and go find those assets so if you bought them off a notes direct you probably could find assets like that they wouldn't be as good a price because we're gonna me us or a student or some other investor is gonna go out and do the work and pull it all together and then we'll put them on notes direct so it wouldn't be quite as good of a yield but it wouldn't be as much work it just gives you an example of one lane that i see people doing in the business so could you do this and be passive absolutely either one here's what i see a lot of passive investors do they don't they're committed to their work their family their retirement they're committed to a lot of things they're just not committed to a lot of work and they wake up kind of dealing with what i call a junkie deal right and then all of a sudden they're like well i but it ain't the deal you pass up that will keep you up at night it ain't the deal you pass up that'll keep you up at night let me just tell you this friend i have worked on some crazy stuff and probably somewhere in my career i've worked on something crazy like this but i've also worked at it a lot i'm more i'm an active investor i'm more experienced not saying that that looks like junk to me period but not saying that that isn't junk i'm just saying know what junk is and if it appears like junk and you don't have a tolerance for it then don't walk run another thing is the zombie house right a lot of people you know try to deal in in some asset class that's just not a good piece of property so i'm telling you as a seasoned active investor if that's the asset eddie is out now what do you think the answer is for a passive investor yeah out twice right times five here's a case study this is an asset that my wife bought and the price my wife paid for the asset was an active strategy but she also ended up dealing with a passive investor so she did both both people won here's the asset it's in san antonio the house was worth 120 grand 120 000 loan balance was 85 000 447 it was 9.1 interest payment was 710 a month remaining term was 322 months right the buyer owed 71 of what the property was worth or said differently the loan to value ratio was 71 percent so the buyer had a lot of what we'll call skin in the game okay so she buys it and she's out there with her fishing pole in the water every day so she buys this asset at a good discount she pays 60 about 64 000 for an 85 000 note now once again i'm giving you realistic expectations this loan had a three-year perfect pay history it was worth 120 000 she dug this deal out of the wood okay so i'm i'm i'm trying to say if you're passive don't say oh yeah you know hand me 10 of those well hell yeah every one of us would say that right but you got to go get out there and go do that so this but she has a strategy where she works deals and she bought this in a retirement account okay now once again it falls within the realm of we're in the business this is just a deal that came across our desk we created an environment where it comes across our desk but it did come across our desk so that nine point one percent interest plus a twenty one thousand dollar discount makes her interest or yield on her investment almost 13 percent would you do this three-year perfect pay history houses were the loan is 85 the house is worth 120. so she buys it in her ira account right she buys it at a good price of just under 64 000 bucks let me say this if we've disconnected in our communication you're like there's no way i would do that then you just don't have the train of thought to realize what we've learned after ye all these years is experienced her investment in this deal is just slightly over 50 of what the collateral's worth customers establish they're going to pay back because they've been paying back for over three years so it that's what to me makes it a solid deal now some people may say i would buy this but i don't have the money ah you need a capital recoupment plan we'll talk about that so this is the note this is just picture of an excel amortization it shows the orange just shows you the principal amount owed over the life of the loan and it shows you that that it is a long-term note 300 233 months and so we buy this in a roth ira account okay that's her investment which means that she bought that note at a pretty good discount hmm she's going to earn that discount over the life of the loan okay so she buys it and funds it and as we said she's got a pretty good cushion factor in this deal her investment is 63 and the property was worth you remember what it was worth it was worth 120 000 bucks so understand this is probably what less than 55 investment compared to the value of the property 50 000 closings i can live with that so look here's what we do we buy it she buys it at a good price and now she's got discount but it doesn't have anything to do with what after she buys it what she might could wake up and do later but she did buy it she did fund it she bought the note she bought the cash flow and now she says i bought a long term note i want to turn around and i want to sell she collects five payments on the deal has a loan servicer they collect the payments everything's going good and then she says after 3 500 bucks in payments she's received you know what if i wanted to really churn my investment better than 13 percent way better than 13 and once again passive or active how many passive investors are going to do this not without an active brain not without active resources right i'm i'm we're very clear to stay within the lane that the irs requires to be quote passive but we are in the opportunity business and we've created an environment where there's opportunity so martha has passive investors all the time that say look martha i'm not in your position this is my wife they say martha i'm not in your position i i i don't have the opportunities you have i've had rent properties i kind of hate them you may not but they do and and they're not working for me so i just want to go put my money out with something safe and real estate secured and martha goes and here's martha and my my whole family here that's my on on the on the right of me i'm in the middle and martha's in the middle if you can see that's my son wood he's a fireman a paramedic and works in the business kind of part time they have his wife tessa they have their second baby do here in about a couple of months to the taller one to the left that's my son hudson he works in the business with us full time my son-in-law the guy in the sweater matt he works in the business with us full-time on the bottom uh in front of matt that's my daughter emily she works in the business part-time she's also a professional ballet dancer so she's does something else to make a living as does wood my mother-in-law nana she's in her 80s she just turned 84 and we have kept her in the business my father-in-law passed away when about 23 24 years ago so we've kept her in the business doing what we do so she's stayed very passive but we've facilitated to be able to do that there's martha in the middle and then tessa wood's wife is in front so why does martha do all this right martha is extremely good at investing in our retirement accounts she has about nine different accounts right and including our kids including retirement accounts coverdale educational accounts covered uh for for our grandkids for then she has helped him every you have everything eddie we do we do why does she do it because martha wants to build a legacy and you see most people think i can't build legacy because i don't have millions of dollars to start with and the truth of the matter is you know for a hundred percent fact derek this didn't start with millions of dollars in the retirement accounts did it what it started with is understanding how to be a deal architect right that's how it started so martha buys the whole note and martha turns around and sells some payments of this note now remember martha already collected five payments then she sells payments on this note she sells she collects five payments she sells 15 years of this note to a passive investor that doesn't want to go do anything but get a check and don't have any aggravation for that they're willing to invest at a far lower yield because they have a far different level of activity and they like investing behind the because remember when is martha going to get the note back after they collect all their payments so that's a pretty they like that right they write a check for 84 178 bucks what yeah she bought it five payments she sold 15 years of the note and for basically 20 grand more than she paid for it right oh wait a minute whoa whoa whoa whoa whoa and they get a six percent return and the passive investor gets what they want of course martha does it's what she wants to because she owns the back 137 payments of this note now with no money invested now i'm being very clear about his okay i'm i've spoken to thousands of investors tens of thousands right i understand an investor says i don't want to do anything i just want to go be martha that's an unrealistic expectation but what i'm saying is if an investor wants safety and and comfort martha helps the investor do that no problem if you want to go do what martha does you come to know school we can teach you how to do it we've taught lots and lots and lots of people how to do it so you can decide what you want to be and there's no right or wrong answer it's just an answer that fits your situation all the engineers derek say eddie what is the yield on martha's investment i say very high [Laughter] of course i can calculate it it's crazy it's not it's you don't need a calculator it's too damn high right so martha sells the partial and she owns the back 137 payments of the note so here's the passive investor here right here's martha here right both of them got what they wanted this passive investor gets a six percent return he gets all of his money before martha gets any of the backside money so is martha incentivized to make sure that she's thought about all the things that she should have been thinking about before she sold it i say yeah now the other thing is is martha once again martha entered into a realm of doing more of a deal architect deal maker strategy the end of 180 months martha gets the note back they'll owe about 60 thousand dollars principal plus nine percent interest for the remaining that's about eleven and a half years of this note that's what's that's how it works all right so here's martha here's my note seller martha pays for the note she collects five payments she does it in her self-directed retirement account what does martha get a long-term cash flow then martha comes along and finds his passive investor okay he wants 15 years of the note and martha sells him 15 years the note and he pays her enough money to pay what she paid for the note plus some juice totaling about 20 000 bucks is that a good deal it's an extraordinary deal is it doable it is doable she did do it is it a good deal of course it's a good deal you're saying to yourself who do i want to be what level of commitment do you have if i've done anything in this presentation tonight i hope i've put a degree of caution into like people looking out there and saying i want to do this crazy high risk deal but wait a minute i'm not sure what i'm really investing in you think martha knew what she was doing i bet your texas cowboy boots she knew what she was doing right she's worked along beside me in this business for a long time she is good at what she does but also she finds investors that want to buy the partial and they believe in martha now they have a secure loan right they have a safe secure loan and martha has done this with a very high track record of 100 of our investors haven't lost any money that's not any guarantees there's no promises not anything we're just talking about what she does as an active investor and so martha is clearly the active investor okay so martha is this person in the deal and this guy right here with his 15 years of payments he's a passive investor any right or wrong it's all right you just have to know who you are so she paid 63 988 she collected five payments she sold the back side of the front side of the note for 84. she made 23 000 adding these two numbers together she's she's got she's got 20 almost 24 000 profit today and if you calculate future payments it's another almost 100 grand hey derek whoops i lost him he'll be back loan is serviced by a third party servicer this is what allows it to be a passive for the investor that bought it so every month the payment goes to the servicer and essentially they do the work they collect the payment they do all this stuff we would not sell a partial of that investor unless it was third party serviced so all of a sudden the payments go the servicer and now owned to the node owner that is what takes it to a very passive status for the partial investor what else do we teach well we teach people to buy problem loans non-performing notes it's like a pawn shop you have a certain price you pay for the note the collateral's worth this your investment is this that's how it works so think in terms of you have the as-is value the property you buy that note at a certain discount maybe you buy the note for 60 cents of what the property's worth maybe you buy it for 30 cents of what the property's worth and i've bought thousands of notes thousands of notes secured by non on non-performing notes secured by property great deal it can be a great deal right you by loan it's in payments are in default you can either modify the loan and let them start paying again you can get a deed in lieu of foreclosure in other words they just walk away and say i'll just give you a deed to the property or you can go through the foreclosure process statistically you're probably going to do about a third and a third and a third statistically that's probably about the truth but if you can't modify the loan so that deal is off the table and you can only get a deed in lieu or only foreclose what are you going to end up with you're going to end up with a property now remember you're into this thing at a deep discount maybe you're into it for 40 percent of what the property's worth right uh ask a real estate investor today if they'd like to be in new deal for 40 cents of what it's worth i pretty much tell you right now this tightest market is they would like that idea right so non-forming notes so when do non-performing notes happen when there's crazy stuff happen in the market hmm well where's the market well at the moment its own fire right reports show biggest housing market gains in 15 years you can't go wrong everything is unbelievable you know why because there's a shortage of listings listings are down about 40 percent so the property listings are down there's a shortage of property and residential property is on fire right could something go wrong did you did you say something could go wrong well if you're looking at loans that are in a legal agreement average loan balance of all the loans and forbearance is about 200 grand right there is 2 million 744 000 loans that are in a legal agreement not to pay this stands for government sponsored enterprise these are government loans otherwise and these are private loans right so 5.2 of all the residential mortgages in existence are delinquent no they're in forbearance they're not delinquent they just have a legal agreement with their lender they don't have to pay so people say well that's five percent that's a big number huh how about this what about loans that are not in forbearance loans that are delinquent that are not in forbearance are up almost 2 million loans from 20 from 2020 right so now we have another crazy number right there is over 2 million loans that are delinquent but not in forbearance now you're talking about nine percent adding forbearance plus delinquent bones you're saying that we have about eight and a half or nine percent of every residential mortgage in existence that isn't making a payment you see what i want people to do is to learn to make decisions based on what they understand this tells me there's going to be an avalanche of non-performing notes i've been doing this 40 years i've lived through several cycles there's going to be an avalanche and by the way derek if you're here you haven't seen this chart but it might be worth paying attention to i'm listening i've been loving this so far these are these are the these are the 17 million you got this 17 million americans that are cur that are either not making their rent payment or their mortgage payments 17 million this is the projected losses of those loans and guess what state is number one i'm looking through wow look at that 42 and a half percent of every mortgage every residential door in texas either didn't make a rent payment or a mortgage payment you think there's going to be some distressed assets on the market now i know you can't call a local real they'll act like you're crazy of course you're crazy they're fighting in the front yard to buy in the house let me tell you something we have never seen a market with a dam that's holding all the water at the moment but what happens when it tips over the top or it breaks i fully understand things are awesome selling houses right now but i've also been doing this a long time and i have a significant amount of energy time and money invested to make sure i'm reading the market right if you come to note school we're going to talk about seizing opportunities and how to analyze the market so you're making wise decisions this is the mortgage credit availability chart so this was in 2014 it was about here and this is the end of 2020 and we're almost at an even line this represents the drop in mortgage credit availability it's about a thirty five percent drop and who can get a mortgage that's for mortgage bankers association by the way commercial can you say nuclear bomb so this was a recent study that was done by commercial mortgage-backed security loans they evaluated the uh lodging properties and they are down in value 36 percent they evaluated retail worse they're down 41.5 in value value decline okay then they evaluated multi-family now derek there's a lot of people in your world that are drunk on multi-family yes am i right that is absolutely correct okay let me just tell you something multi-family is valued based on its income approach that's how you value it okay the income has been cons the occupancy and income has been considerably declined look if you can google you can find everything i just showed you let me just tell you something i believe we are looking over the horizon at the biggest opportunity that i've ever seen in 40 years in this business but we're gonna do it with information and facts and knowledge and utilizing experience we're not gonna we're not gonna shut our eyes and run blindly across the interstate big opportunity for both active and passive investors huge opportunity i hope i've done though i hope i've like lined things out where you realize that there is that that that there is a process right greed has nothing to do with investing greed is a foolish environment to be into do investing smarts and a cool hand and the smart decision is what lets you be a successful investor the guy that wants always wants the highest yield may not know what he's looking for he may not understand the element of risk he's taken and if i've ever seen one element i want to fix over and over so this asset class of office and retail and multi-family non-performing notes on the horizon you can bet your best pair of texas cowboy boots on that one nobody cares more about your wealth than you nobody cares more about your wealth than you invest wisely so the risk or the yield more passive you are the lower the yield the more active you are the higher the yield what's the yield on martha's partial crazy but she also made some things happen to do that that wouldn't fit necessarily a passive investor but the passive investor did really good right so i want to give you guys some resources if you like this and you think we might can help you let me just give you some things that you might progress with this is a free um ebook and a free free workshop okay noteschool.com forward slash quest trust note school for uh noteschool.com forward slash questros i'm going to give you a really nice ebook that talks about investing and i'm also going to give you a mind map that's martha's mind map on how she does partials has the workflow so you can kind of see what it looks like it's very good informational piece of info i'm also going to give you a workshop right so you're going to come be able to come spend time with us we want you to figure out who you are and what suits you best whatever level you want to be we want to figure out a way to help you we just want to help you identify what who you want to be it's like the select comfort bed derek ever you know like some people are a hundred and some people are 35 and it's perfectly okay whichever they are they just need to know what their their their their prime situation is so derek i'm gonna see if we can cover some things for you mm-hmm i don't know if you have any i don't know if you have any um yeah we got a bunch of questions um could you bring up your previous slide how people could get in contact and stuff and get some of that information real fast i will be happy to do that absolutely so um a lot of people were asking about some of the yields on some of the investments and it's sometimes hard to calculate because of not just that it's a good rate of yield right a good rate of return but really because it a lot of it comes down to uh whether you're buying or getting the payments on the front end the bad back end if there's any points involved these type of things is that correct it is i'm going to be perfectly honest with you i've never seen yield on a tax return [Laughter] fair enough okay so i i see a lot of times people get as i call it drunk on yield and sometimes you're not drunk on how much money they're actually making right and i understand the concept of yield and i'm not i'm just i'm as human as anybody else everybody wants to go to the country club and say i got an incredible yield passive investors generally get between five and seven percent return is what i generally see for really something that's safe and legitimately passive right that's for a long-term deal yeah you can do a short-term deal and earn a higher yield but in six months you gotta go do your do the deal all over again you said i'm saying there's nothing like long-term because you can put a deal to bed so uh asking some things about um can you explain how a note can be better than a long-term rental property right and uh i think i'm gonna have a different answer than you slightly but i'm just curious to see how you wouldn't answer that because i know just as investors we both have had both at some point in time look a rental property is a job a note is it is a is an investment people buy a rent house thinking they're making an investment three years later they figure out it's a job that's not a full-time job but i'm just saying and the other thing about rentals is is people consistently get fooled about how much money they're really going to get they think they're going to earn income and then all of a sudden the air conditioner goes out and it blows a year and a half or two am i right derrick so you are listen to thousands of people that are burnout landlords i know what the pain is and if you have a tolerance for it it's what you like don't let me stop you but what i'm trying to say i've learned a lot of people would rather be the bank than a landlord if that's you then that's a conversation we should be having you know on it's funny because i definitely would fall on the fence in both sides okay and as a guy who currently owns a couple of rental properties and i currently have notes all right i would say probably about every quarter there's something that i have to do for my rental property that's actually rather obnoxious whereas with the note i will say to be 100 honest my main focus is helping to build quest i have a full-time career i love my career i really do right i love doing these events with people like you eddie and networking and and speaking about this stuff and as dorky's as it is i like knowing that i know so much about irs tax code and while i'm learning and doing all that stuff i am not worried about tenants i'm not worried about my property manager and i think there's something to be said about that i can go build something else over here while i still get payments over here can i make money in rental properties absolutely but i'm trading a time for a dollar and i think that's where it comes down to play there's no doubt about it so and i've learned that so um eddie i i don't mean to throw you under the bus but i know um you have some other events outside of this right and so i know you have that partial class tools but i've attended your note school events uh can we talk about those a little bit or yeah so we have three day classes uh there's some preparatory things that we do so it's not just physically the three-day class there's engagement with staff there's kind of a a identifying you know a you know what your model is depending on what your story we try to help people apply note school to their story it's not a one size fits all shoe so we give people like other classes outside of the three day we we we require that they engage with our our team before and dear and then after the three day because otherwise look i've been doing this 40 years in all due respect i don't need the practice of teaching a bunch of other people to do it that aren't going to go do it absolutely i want people to go do this not to go become you know a library is full of information a library is not necessarily full of action so before we kind of end the whole uh present day and i know we still have a couple other questions and stuff is there a way people can get in contact with you or someone on your team this way they if they have more questions if they want to attend one of your classes if they want to do something like that is there a way they can get in contact with you you want to move past the little free gift i gave you just go to info at noteschool.com just info info at noteschool.com and that's that's the email address right yeah do that and we'll you'll get connected with somebody on my team that can help you answer questions we're happy to do that yeah please do and so eddie any last-minute thoughts before we kind of end things out i appreciate you coming on you've been saying i really i really this is the first time i've actually done this presentation but i've addressed this presentation at classes and in events and at quest events and everything else dear i've addressed this hundreds of times where somebody's like well i thought i made i thought i made an investment and found out i invested over my i got over my skis right i'm invested over my head and i'm like okay because you were drunk on yield i wouldn't i don't say an inappropriate tone i'm just saying i'm saying to myself they were chasing yield they weren't chasing an appropriate investment for what they had the competency and the commitment to invest right yep and and and you derek you live it i i do and sometimes even with me having great mentors like my dad and yourself and joe and things like that if people don't know who joe is he works with you but um uh i still sometimes think i'm better i'm like man i know it all i know this and then every time i think that boop here you come and you're like check this out and i'm like wow well i mean and once again i'm trying to go help your audience at where they need help right i don't you know like i can train people to be a ninja in this business i'm a hundred percent confident we can do that but the truth of matter is some people don't want to be a ninja in this business they want they they got a job that they're working every week or they got grandkids or they want to go look that's perfectly cool and if i've done that and helped define it at least where they have a caution flag where they're like okay well that's true and i can see that then i've helped people kind of round out to fit this business to their situation we would love for every one of them to come hang out with us at a three-day class i'll bet you anything when you leave there at the end of three days you're like oh my am i right derek you they're gonna absolutely all right so it's actually funny that's really where i got started the when i first got out of the military my dad had me take your class to understand real estate and the differences between fix and flips wholesales rentals etc and man when i understood notes it changed everything so eddie thank you so much for coming on i really really do appreciate it you know you're you truly are a good friend of ours you've worked requests for a long time so if there's ever anything that you have questions on you let me know and guys make sure you check out noteschool.com backslash quest trust and any one of us is here to help you guys out so thanks everybody thanks eddie good night thank