Be The Bank

011 - Do You Know the Walmart Rule?

June 01, 2022 Justin Bogard Season 4 Episode 11
011 - Do You Know the Walmart Rule?
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Be The Bank
011 - Do You Know the Walmart Rule?
Jun 01, 2022 Season 4 Episode 11
Justin Bogard

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Be The Bank S4 Ep11 - Do  You Know the Walmart Rule?

On episode 11 of season 4,  Justin Bogard interviews Richard Thornton.

 Key Takeaways:  

  1. Due Diligence
  2. Tiers
  3. Reperforming Loan

 Resources and links discussed  

 About the Host

 Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!  

  Connect with the Host: 

Show Notes Transcript

Send us a Text Message.

Be The Bank S4 Ep11 - Do  You Know the Walmart Rule?

On episode 11 of season 4,  Justin Bogard interviews Richard Thornton.

 Key Takeaways:  

  1. Due Diligence
  2. Tiers
  3. Reperforming Loan

 Resources and links discussed  

 About the Host

 Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!  

  Connect with the Host: 

Justin Bogard:

Interested in real estate. How about wealth? Well, they go hand in hand and here you'll learn all about it, about it. Welcome to be the bank, a podcast where we discuss and debate the topics centered around real estate. Investing your host, Justin Bogardshares insights into investing in real estate to create real wealth and passive income for you and your family. He'll share stories of real estate investments done, right? Walk you through the process of owning a real estate note. And most importantly, educate you so you can be the bank, your bank. This is be the bank brought to you by bright path notes. Now here's your host, Justin. Bogard Welcome back. This is episode number 11, and today we're gonna be discussing due diligence. And as it relates to certain note investors approach this a little bit differently, depending on if it's a performing loan, a non-performing loan, whether what pools of money they're using to buy this asset. And then also looking at it from a lens of some of, uh, my, my partner in crime here, Richard Thornton, who I'm gonna have on today. We're gonna kind of break down the differences on why we approach things a little bit differently as it comes to due diligence. So stay tuned. This episode is brought to you by bright path notes, Richard Thornton. Thanks again for being on our show today. Episode number 11, brought to you by bright path notes. How are you doing today? My friend,

Richard Thornton:

Glad to be here. It is 90 degrees in Southern CA or sunny, California, not

Justin Bogard:

Southern California. Yeah. Southern California is like five hours away from you, right?

Richard Thornton:

That's right. That's right.

Justin Bogard:

<laugh> so I always forget how long the state is. So if, and I'm only, I think I visited there like twice in my lifetime. Um, so if you're from the Northern part of California, the Southern tip I'm, I'm sure it's a pretty, pretty, like it's like traveling the entire country pretty much north and

Richard Thornton:

South. Yeah. I mean, a lot of people say, oh, if they're in San Francisco, GE let's pop down to LA, but okay. That's like, if you're in DC, let's go to Miami. And a lot of people don't realize<laugh>

Justin Bogard:

Why is that? Now that now that is something I can relate to. I, I can judge that distance. So that that's pretty cool.

Richard Thornton:

That's right.

Justin Bogard:

But we're not here. Talk about that today. Um, what I wanna discuss is due diligence, and I know, um, since I've known you, I, I didn't really know how you approach things until kind of, um, earlier this year with due diligence and also probably the same for me. Um, so since we've been doing a lot of deals together, Richard, um, it's been brought to my attention that we go about it a little bit differently and not that it's wrong. Mm-hmm<affirmative> we just look at it differently.

Richard Thornton:

I do. I stand in my head it's, you know, it's a good way to do it.

Justin Bogard:

You you're upside down and I'm right. Set up. Okay. I got it.

Richard Thornton:

I got I'm upside down. So the deals never upside down.

Justin Bogard:

I mean, that's a great way to look at it.<laugh> right. Right. So, so when it comes to performing loans, Richard, because that's kind of the, the easier one to look at, if you will, um, from, from your take on it, you have somebody that is a broker and they say, Hey, Richard, I've got this, this loan here. It's a first lean position. Loan wants to say, it's residential, it's a performing loan and they're giving you kind of information about it and stuff. And then when you get the information provided to you, the facts about it, you know, the documentation kind of walk us through a little bit, like what's kind of the first couple steps you take just to kind of get an initial feel of like, I like this asset and I wanna pursue further due diligence.

Richard Thornton:

Right. So let's step back just to just a second. Okay. In that, um, not all deals that you or I look at are brought to brought to us by brokers. Right. We both do a number of situations where we're dropping mail, um, just associates, give them to us, uh, or whatever. So a lot of times you've got a very unsophisticated seller. Yeah. And they don't know what to show you.<laugh>,

Justin Bogard:

That's true.

Richard Thornton:

Um, and your process and my process differs. I mean, we both get to the same end, but yeah. Um, a lot of my investors, uh, are doctors, lawyers, uh, people like that. And the criteria they use when they look at these as sort of a 30,000 foot, uh, review is what I want my, uh, college kid, uh, to live in that house. And if it passes that degree of muster, um, they decide to proceed or not with the, um, the deal or to, to at least consider it now. Um, so that means that what I do is I look at the house first thing, right. Straight at the box. I don't know what the numbers are. I, boom. I wanna look at the house, see if it passes muster then. Okay. I look at the neighborhood. I want find out, are there bars in the windows? Are there junkie cars? You know, are there, how many, what kinds of cars, all those things that, that you and I look at, so I'm looking at the neighborhood, then I'm looking at the crime. I wanna find out what crime rate is going on. I can do all those usually within about five minutes. Yeah. Um, if it passed all those, then, um, probably like you, um, my very next, uh, focus is payment history and payment history is king. Um, and I want to go from there. So maybe I'll stop there and you can tell the crowd a little bit about how you start.

Justin Bogard:

Sure. So, uh, I'm approaching it a little bit differently. Um, I'm more focused on, I guess, looking at the spreadsheet, Richard, I kind of see the terms and, and I have kind of calculations going on of kind of what I feel like is a loan that I can use with a certain pool of money I'm working with today, whether it's in one of our company investment counts, which will be cash, whether it's in one of our trust or retirement accounts, which would be money that we don't touch today, we kind of touch in the future. And so I I'm, I'm approaching it from that angle. So, but I'm still looking at the numbers first, I'm taking into consideration what the interest rate is. I'm looking at, you know, the down payment of the borrower, I'm looking at the payment monthly payment per month. Uh, as you know, Richard, sometimes we run into these at like a hundred dollars a month. And sometimes we run into'em at a thousand dollars a month in payment coming in. So you have to kinda weigh like, is, is that gonna be worth it, you know, with due due diligence costs and servicing fees, like all those things are coming to my mind. So I kind of have a spreadsheet laid out, I'm looking at those terms and numbers and it falls within my range for this pool of money that I'm using. Mm-hmm<affirmative> um, then I, then that's kinda my first pass and similar to you, it's gonna take a couple of minutes to look at it. Um, and then, uh, at the same time, you know, I wanna see what the value of the house is. So kind of like my, my second pass, I'll kind of jump in and, and let you, you do your second pass is looking at that property to see like, okay, does it look like something? I like what you put when my college kid lived there to pass your mustard check that, that that's great. Um, because I've lived in some pretty beat up college houses. So I understand what you're saying.<laugh> but maybe the ones that I lived in maybe are a little bit beneath the standard of some of your investors that would like to borrow, uh, will like get that loan going. But yeah, I'm looking at that. I'm looking at the neighborhood as well on my, on my second kind of pass there and just seeing, you know, does it look like it's in, in fear of having, um, you know, murders, homicides, things, things that are really bad, violent crimes, if it's just petty theft and, and stuff like that, breakins as far as car breakins and stuff, then I'm not as concerned with it, especially if it's not on that street. If it's just a street that's nearby, maybe one or two streets away, I'm, I'm not as concerned with that. And so, um, that's kind of, that's kinda what I'm looking at next. So you, you go ahead. What, what's your second, um, your second thing, I think you said is pay history is what you're

Richard Thornton:

Going to next. Oh yeah. So, so pay history. That's uh, the next thing I would look at, and if I've satisfied that then my second tier sort of mirrors, your first tier where I'm looking at it, I'm saying, all right, what's my investment value. Um, how would I do this? Where would I put this? As, as you know, we're both looking at a portfolio right now where the asking price is so close to the unpaid balance, that there's not a whole lot we can do with it, but either sell it as a whole note, or hypothecate it for those of you who do not know what hypothecation is. It's, it's a situation where, um, we can give a part of the cash flow, uh, to our investors, uh, and keep a small portion for ourselves. And it's an easy, easier, it's a very easy structure to work with, but that being said, I have to say, well, can I do it this as a partial? Um, how long is a term? If I'm gonna, uh, cut something into a partial, then I wanted to have a nice long tail. So if it's a 25 year deal, I sell a 10 year partial. I wanna know they've got 15 years of, um, payments left coming back to me as opposed to two years, which would make it not worth my while. So I'm starting to run through all the numbers, um, like that. And that's, that's my second tier.

Justin Bogard:

Okay. So that's, I like how you put it in tier. So I, I kind of combined my first tier, my first pass into kind of one thing. I do look at the numbers first. And then after that, I'm looking at the value. If I like what I see. So as Richard was explaining, you know, we're looking at a spreadsheet of loans and we've got, let's just say anywhere from a couple to maybe a hundred, you gotta narrow it down pretty quickly, as far as, you know, what, what is gonna, what, what, what, where you wanna be at, right? What what's gonna make you happy. So if you're able to cherry pick, as we say, pick the best ones that fit exactly what you wanna do, then that makes it easier to go through and kind of be, um, specific about what you want. You don't have to take the whole thing. You can just be specific and be like, yeah, I like this one. I like that one. And you can be kind of picky and choosy about it, so, right. But that pay history is what I would start turning to next is looking at it to see like, okay, if this is a performing loan, the, that the seller says, how strong is that pay history? Am I seeing payments like clockwork consistent every time? Is it consistent at the due day? Is it consistent later on before it's late? Um, is it erratic? Is it on time one month? And then the next month, is it towards the end of the end of the due date? Um, so all those factors weigh into the story I'm creating for this borrower, knowing, okay, the propensity to repay this is high, but I'm gonna have some struggles as far as cash flow. I'm not gonna see that on the first of the month, I might see that on the 15th and I might see it on the 20th next month and stuff like that. So those things I'm taking into consideration now, Richard, I'm getting comfortable with going, okay, I can give this a value at what I would pay for what we would pay for based on those first three strong factors of looking at the numbers, looking at that property value and the property, and then looking at that pay history for performing loan. And then kind of, we get really comfortable as far as like, uh, here's our strike price here. And we wouldn't fluctuate much more beyond that price because after that, you know, first five to 10 minutes of looking at that asset, we're pretty comfortable where we're at.

Richard Thornton:

Right. And so I like the way, um, you talk about the story because what I would call my, uh, third tier, um, starts to build the story. Um, also notice neither of us has mentioned credit history up at this point. So we're, um, looking at the payment history very, very, very much. Uh, and of course, if we can find out about, um, the credit report, some sort of credit report, then that's, that's great, but that's more often not the case. Uh, it's more difficult to do that, but we can build the story we can say, okay, third tier, where is this property located? Is it between two geographic cities so that, uh, Mr or Ms barer could work in one place or the next, um, do they have some sort of job that's steady? Do they work for the post office? Do they work? You know, are they a, a doctor assistant? Are they a plumber or whatever, how versatile is what they're doing or are they working on the line for general motors? Um, in, in, in general, if somebody is just working a line job like that, I won't do that deal because if that factory gets shut down, the whole city's shut down and any, there, there, it kills one of your exits, basically in, in a lot of different ways, it kills the housing market. It kills their ability to get another job, but if somebody's a plumber, um, that usually means they're pretty good with their hands and they can probably do some dry work and they can probably do some other stuff and stay alive. So, um, that's where I'm really, really building the story.

Justin Bogard:

So Richard, you, I like what you just said, because that's something that I don't hone in on very well is looking at that borrower and the let's just call it the ambient situation around them, which is their job status, which is important because quite honestly, let's just be real about this. We're dealing with working class property value homes and working class areas with working class folks. And so they are probably living close to paycheck, to paycheck, if not paycheck to paycheck all the time. So you made a great point about looking at the job of that borrower. You don't have to necessarily see the credit if we see that pay history in, in some length there, we'll get into that in just a minute, but that's, that's a great point. And it's something that I don't take into consideration very often at all. Um, I probably would with a non performer, I would look at it more closely, but performer, um, I don't look at it as much. So I like what you said, and it kind of changes my attitude now a little bit looking at different assets and seeing if they're, if they're like a, did you call it a line worker or a line job? Mm-hmm<affirmative>

Richard Thornton:

Yeah, yeah. A line job. Yeah. In other words, they're on the assembly line, they're doing something where that's their niche. That's all they're, they're doing. And as you know, in Indiana, but also, especially in Ohio, places like that, there's a lot of towns that, that live and die, um, based on one or two plants. It doesn't have to be, um, motors. It can be, um, oh gosh, oh, there's a couple others that I came across the other day that I thought was very interesting.

Justin Bogard:

But as far as what the factory does. Yeah. Yeah. Well, so we get to this point and we, we establish a value of this asset. So Richard and I, we, we, you and I are still gonna buy an asset if the price is right. You know, it could be$1, it could be close to full value. Right. It just all depends on all these things that we're looking at. Right. So at this point we throw out a price and then the seller has to agree to it before the, sell it to us. Right.

Richard Thornton:

Right. Right. And that, as you know, is quite often a, I won't say a long process, but, um, an interesting process in terms of why, why people sell and people's stories. And I ran into a very interesting divorce case yesterday where they're selling because of the door. So

Justin Bogard:

Yeah. Sometimes those are not fun situations that, you know, the seller is involved with, but also, I mean, you gotta think of it. It's, it's kind of a, win-win, you know, we're looking for a good deal. They're looking to exit Ellis inventory because they have to satisfy, you know, a, a new, new, um, wanna say a, a new debt, if you will. Uh, their, their, their debtor is, uh, now the X. Right, right. They have to have to split, split everything up. So excuse me. So we got a little bit into pay history and stuff, and I wanna touch on that a little bit. So before we get into that, I wanna make sure we establish, we have, let's just call out two sellers going on here. We have a more sophisticated seller. Like if we're looking at a hedge fund or someone that is a professional and has a tape, uh, a bunch of loans on Excel spreadsheet. And then we have what we call the mom and pop, who we deal with more often is the individual seller. That's not really that sophisticated. And you're trying to educate them through the process. You're trying to pull information from them and you know, that you're gonna run into some problems. So you get pricing it kind of accordingly as well. So there's, there's an ebb and flow and a song and dance. And this all sounds like, you know, pretty, pretty laborious work. But you know, it's not that laborious as long as you know who you're talking to and you kind of know, okay, I know I'm gonna have an issue with this seller as far as they're not gonna be very savvy on the computer. So I need to kind, help them figure out easy ways to give me the information. So they don't get frustrated and kind of walk away from a deal that can really benefit both of us.

Richard Thornton:

Right?

Justin Bogard:

So the pay history, I'm looking at the pay history, Richard, and I'm saying if the down payment is sizeable and I'm gonna say a sizeable down payment is 15% or higher, mm-hmm,<affirmative>, I'm gonna make sure I see about six, six months of pay history and it's gotta be pretty solid. And then I'm comfortable moving forward with a price, right? Richard, if I see a sizeable down payment, but the pay history is, uh, younger than six months, I'm gonna, I'm gonna step back for a minute and figure out a way, how can I still get into this deal, but lower my risk as well, because I haven't seen proof of concept totally yet. So I may come up with a different strategy, which we won't get into today of buying it. But Richard, if you are seeing a loan, that's a sizeable down payment. Like I described, what, what are you looking for to see some seasoning in that loan?

Richard Thornton:

Well, uh, obviously the longer, the better. Yeah. Um, I think you and I both look for six months plus, um, we'll do a deal if we can get only get a year, uh, seasoning. Um, but also I wanna look at the consistency of the payments. Mm-hmm<affirmative> of the payments. Now, some of my borrowers, um, or some of the, uh, newer, uh, investors that we've spoken to, uh, gets, um, upset if somebody's 30 day late or something like that. And you and I both know, eh, 30 days is nothing<laugh> as long as they're, as long as they're paying.

Justin Bogard:

Cause there's, there's a cherry on top. Right. That's

Richard Thornton:

Right.

Justin Bogard:

More than likely that late fee is split between you and your loan servicing company, 50 50. Right. So that's, that's actually a cherry.

Richard Thornton:

Right. I wanna see how they are paying. Yep. Are they paying via ACH regularly? Is it automatically set up mm-hmm<affirmative> um, is it a MoneyGram? Is it a check? Is it a credit card? Um, do they consistently pay 20 days late? Um, I've got one borrower who hit his late fee, um, on 15 days, uh, after, and he pays on the 20th day and I called him up and I said, do you realize, you know, this has cost you an extra 20 bucks a month and he says, yeah, yeah, yeah, yeah.<laugh>, I mean, not that difficult to save up just a little bit to get a month ahead. So you never incur that, but so everybody's got a pattern. Yeah. And if that fellow wants to pay 20 days late, but he does so consistently I'm fine with that. I don't think it makes much sense, but, um, that's fine. So I'm, I'm looking for consistency in his payments, whatever it is.

Justin Bogard:

So I interviewed Tracy Ruy. The last time I had a podcast here, which was episode number 10, and Tracy brought up a pretty interesting fact in her experience. And she's obviously been the note business a lot longer than you and I have mm-hmm<affirmative> is that she found out that if a borrower put down a down payment of less than 10%, she found there was a high probability of that borrower at some point in time, having a pretty good bump in the road, meaning they might miss a couple payments. So they might completely just, just fall off the wagons as far as being able to pay and make the payment back. And she said, that's kind of her magic threshold to say like, okay, if I know that this borrower is a 10% less down payment, I'm gonna price this accordingly, knowing that I'm gonna have some challenges down the road to protect myself. Do you look at it that way as well, Richard?

Richard Thornton:

Yeah. Um, I would say I look at that. I also look at, um, what I would say I try and engage with the emotional history is mm-hmm,<affirmative>, I've got one deal in Alabama that grandpa lived in it and then mom and dad lived in it and now the daughter's living in it. And surprisingly enough, they've still got a mortgage payment, which is a whole nother question as to why<laugh>, um, there was, there was some refining down there at, at some point, but there's a whole lot of emotional equity in that house. And you know, what, what improvements have they made? Did they add a new garage? There's a new, new, um, a roof on it. Um, all this type of stuff goes into that, um, that, that story and, um, you know, I'm in the nice position of not having enough defaults to be able to make a, um, a, uh, prediction on more or less than 10% equity. But I would, it wouldn't surprise me if, if Tracy's right.

Justin Bogard:

Yeah.<laugh> so she had some pretty good seller finance data information that if you guys haven't checked out episode 10, I highly recommend you go back and watch that one as well. Um, and by the way, if you wanna see the video version of this podcast that we're airing today, you just go to the bright path notes, YouTube channel, and look up, be the bank podcast, and you will see the videos of all of our, um, podcasts that we've done. Even the previous seasons of season three, two and one as well. This is season number four. So Richard, we, we talked about due diligence. We talked about how you and I approach it a little bit differently. We talked about, you know, different tiers. First, second, third tier. We talked about how we price it. We talked about looking at that, pay history, creating that story. This is all for performing loans, residential, right? That's kind of our bread and butter. We, we couldn't get to commercial, but I think that'll extend us past our, our time for today. If we get into commercial too much. So I wanna stick with their residential, but I wanna flip the script a little bit and we got some time here. So I'd like to approach the non-performing aspect of it, or, um, actually let's step back a little bit before we get into that. And let's talk about the reperforming aspect of it. So we're seeing a lot of loans now that are, that are coming across our desk, Richard, that are reperforming loans. Um, so at first light, if someone is looking for a performing loan, they're like, well, if they're reperforming, that means at some point, right, they had a modification or they had a default or something happened, right. Isn't that a problem? Well, you kind of have to put your blinders on for a minute and, and think about, okay, what's the current situation. What really happened? Why they became a reperforming loan? Was it really bad to where they just, they were three or four years behind and they just wanted to walk away. And the lender said, oh no, you know, we'll cut your debt in half. I mean, not, not likely, but maybe it's a thing to where, you know, what looks like COVID happened. I, I, I'm still making some income, but I'm not making as much as I used to, you know, can we stretch the term out longer? Can we lower my payment just a little bit to make it, you know,$50 less a month. So when we look into those things, Richard, we look at those, uh, reperforming loans. They're not gonna be priced as, as high as a performing loan, but they're gonna be priced pretty close to it. And so we're seeing a lot of those. And when I'm looking at those Richards Richards, when I'm looking at that, Richard, I'm seeing some pretty consistent pay histories with the re performers. So it seems like the borrower you got into the, the, the story or the, the emotional equity into the borrower. And you can tell that they're appreciative of their new current situation by that, by that new pay history from the time it was the modification going to, whenever we're looking at it like today,

Richard Thornton:

I I'd agree with all that. Um, I'd like to step back though, just a second and, and define better what a re performer is. You can say, well, it's just one where somebody's starting to make their payments again. Great. But as you and I have both seen, we've seen several tapes. And for people who don't know a tape is usually a, a spreadsheet. It's an old term for a spreadsheet, um, uh, that has all the data for the loans on it, uh, where they say, oh, gee, these are re reperforming and they've made one, maybe two payments. Mm-hmm<affirmative>, that's not reperforming to me. I wanna see, okay, we've got six months payments, something like that. Where as you say, they had a medical hiccup, they had a COVID hiccup. They had a, a whatever, but they've proven themselves. Yeah. Because if they've only made one or two payments to me, that's still not performing and it's gonna get a hold up. Um, lower price.

Justin Bogard:

Yeah. It's almost like, uh, they're on probation for 12 months. I like to think of it. If, if I, if I had a group of re performers look at, I would highly prefer them to be 12 months of pay history or longer. Um, I do still pull the trigger on stuff that are, I'll call it younger than 12 months. And it kind of has to do with let's just face it, the value of the house, right? If the value of the house is twice, as much as the current unpaid balance, I, I will take a little bit more risk and probably invest in that loan if the numbers make sense to me, um, as opposed to seeing that longer pay history, if the value of the house isn't that much more than the unpaid balance. So I kind of take that into consideration, but more than likely, I'm gonna have to see at least six to eight months of pay history on a re performer. And assuming the house value is about, you know, probably 30 to 40% higher than the U PB itself.

Richard Thornton:

Right. That, and that's that you bring up a very good point, which is, uh, location, location, location. Yeah. Um, is this house, um, out in lower Egypt someplace,<laugh> where, you know, you're not gonna be able to get a contractor to come in and fix it up. You it's gonna get, be a paint in the budget, get people to, to look at it. Yeah. Um, or is it in the, you know, the suburbs of, uh, Indianapolis or, or something like that where there's easy access to all those things that would enable you to put it back on the, on, on the market and, and very much yes. If it's, this goes back to your story where there's a whole story for this, you could have a 50% learned to value deal, but it, if it's the only house in, within a hundred miles, I'm probably still not gonna do that deal.

Justin Bogard:

That's true. So, and, and so that gives the value, the speculation, all right. That one is very subjective value, right? It's, uh, it's, it's in the eyes of the behold or what you think it is. Um, right. So those,

Richard Thornton:

So this is probably a good time to bring up the Walmart rule.

Justin Bogard:

Right. The Walmart, I like, I like the Walmart rule,

Richard Thornton:

Which you and I both know. So yes. So the, the, for the viewers and listeners out there, um, the Walmart rule is, is that, uh, if the house is within, uh, 10 miles or 10 minutes, um, of a Walmart, uh, that is a huge stamp of approval on at least the location, because Walmart does not put their, um, or place their stores lightly. They do extensive market research before they place any of them. And that means that there's, uh, economic viability to that a whole area, if there is, um, plus it means that they have a great place to buy their groceries, but we don't care about that. So<laugh>

Justin Bogard:

Very economical places, right. That's

Richard Thornton:

Right. That's right.

Justin Bogard:

Great point, Richard. Um, I thought we would have time to get in the non-performing part of it. We, we kind of don't for today. So we're gonna get into some, some more, uh, fun questions as we do at, at the end of the podcast. So this episode is brought to you by bright path notes, stay tuned, Richard, I got some more questions for you.

Richard Thornton:

Okay.

Justin Bogard:

All right, Richard. So I kind of wanna know. Um, and you mentioned this before on the podcast about kind of, um, your, your, your kind of plans. You have what I call kind of an, an aggressive plan that you kind of play with your retirement account. And that is that you tell me that you often want to, I dunno, what the word that you use. I'm just gonna say this, flip your money, or turn your money over multiple times in a year. So it's almost seems like it's, it's an ATM and I like how you word that and thinking about that, you know, in my head, I always, I always say to myself, you know what, that's a, that's an easy way to look at trying to put philosophy on your money. So if you're a fulltime professional, excuse me, note investor, like our sales, a real estate investor, I like how you approach that. So can you explain a little bit why you're thinking?

Richard Thornton:

Sure. So my goal is, um, to roll my money. That's the, the term I

Justin Bogard:

Roll. There we go. Good.

Richard Thornton:

My, my target is three times a year. So let's say I've got, um,$50,000, right. Uh, and whether I'm selling a whole note or a partial, the, the partial, if you can do that is a lot more, um, beneficial to me. Mm-hmm<affirmative>, but, uh, let's say I, I, I buy all, I buy a note for$50,000, um, and I sell it, uh, and I make a$5,000 profit. Well, if I can take that, I, I sell that note. I go out and buy another note, sell that note, rinse and repeat. Um, if I've tripled that I've made$15,000 off that one, uh,$50,000 in a year, that's a heck of a return that's$45,000 on a$50,000, um, investment. Uh, you know, that's, that's my goal. I often don't do that. I often only get to be twice. If I can sell a partial, it's even better. Mm-hmm<affirmative> because I I've got, uh, to use my typical 25 year deal. I've sold the first 10 years for close to what I bought it for. I retain the back 15 years of that note. So I've just created three debt services of 15 years, a piece for myself out of that 15 outta that$50,000. And at the end of the day, I've still got$50,000 to rinse and repeat and do it again next year.

Justin Bogard:

So these is a little tricks that make performing loans in that category. They can be very lucrative as well. It's not just investing in a loan and just getting a return on a monthly basis. It's figuring out ways how to recycle your cash and do it in a manner at which you can make large chunks of income. Almost like having a non-performer if, you know, if all things go well for it, you get a pretty sizable return after a long period of time. But it seems like performing loans. Sometimes if you have the right strategy in the right situation, you can make it very lucrative for yourself as well. If you're, if you're a professional investor,

Richard Thornton:

Right? So the partial strategy is good, but you can say, well, Richard, you don't, you don't get an income for 10 years. And, and you're right. So you're what you're doing with that is you're building an annuity. So if you look at your business plan, hopefully what you would do is you do several, um, whole note sales to keep your lights on. Right now, you might do some hypothe because they create current money. Also, not as much as say a brokerage deal, but they create current money. And then you would also, but it's, it's longer term, um, current money. And then you would also do partials, which is setting yourself up for 10 years out. So, right. I'm, you know, in my late sixties, um, I can do five year partials right now. And I, if I looked at my books right now, I've probably got 30 or 40, uh, partials that are start clicking in, in the next six or seven years. So that'll be a nice little income.

Justin Bogard:

Absolutely. That'll be nice, Richard. Thanks for sticking on today. Being a part of episode 11. Again, this is brought to you by bright path notes and, uh, we will see you on the next episode. Thanks again, Richard, man. I'll see you next time.

Richard Thornton:

Great. It's fun. Thanks very much, Justin.

Justin Bogard:

All right. Thanks for listening to feed the bank. We hope you learned something from today's show. If you enjoyed this episode, please rate and review us. Plus check out our bright path notes channel on YouTube and follow us on Facebook and Twitter at be the bank and on Instagram at be the bank podcast. Be the bank is sponsored by bright path notes. Thanks again for listening.