Be The Bank

009 - Face to Face

May 03, 2023 Justin Bogard Season 5 Episode 9
Be The Bank
009 - Face to Face
Show Notes Transcript

Be The Bank S5 Ep9 - Face to Face
 
 On episode 9 of season 5, Justin Bogard and Richard Thornton got to hangout recently at a mastermind!
 Key Takeaways:

  1. Charity Auction
  2. Mastermind
  3. Wholesalers overselling houses

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:

Narrator:

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 Bogart, shares 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 American Note buyers. Now, here's your host, Justin.

Justin Bogard:

Hello there, listener. This is episode number nine of the Be the Bank podcast. And we are sponsored and brought to you by American NPIs. Today we're gonna be kind of talking about really getting together with colleagues and people in your industry to kind of how to better, uh, your situation that you're in with your business or how you run your portfolio. And we call them masterminds, but you may call them something different. And we're gonna kind of get into that subject matter today. So stay tuned, Richard. How are you?

Richard Thornton:

Good. I like that, that, uh, architectural logo we got. That's, that's pretty sharp. I like the music. I like the way it kind of turns around there and fills out. It's kind of nice.

Justin Bogard:

It is. It's pretty cool. You guys can check that out on our YouTube channel for American Note Buyers. Mm-hmm.<affirmative>. And you look at the episode number nine on our Be the Bank, uh, playlist for our podcast. So that's how we, uh, we just record this and we strip out the audio for the podcast. Right, Richard?

Richard Thornton:

That's right. That's right. They don't get to see your beautiful view behind you nor the grand piano behind me, you know? Yeah.

Justin Bogard:

<laugh>, we do the virtual screens because when we record our, our podcast here, we're typically in our home offices and stuff. And, um, it's just, you know, you don't need to see all the background that's going on.

Richard Thornton:

Yeah. You know, I got peeled wallpaper and all sorts of stuff, like, you know, I mean, come on.

Justin Bogard:

We've got wires hanging everywhere. We're just com completely unprofessional. Nothing looks good here. They'll never know.

Richard Thornton:

That's right.

Justin Bogard:

Well, Richard, I have run to a few people lately that have mentioned how much they enjoy our podcast. And so I think that we must be doing a good job for a couple people. So

Richard Thornton:

That really got'em fooled. One of

Justin Bogard:

The two, our two our five subscribers. Thank you,<laugh>. Yeah. And the millions of download, Richard, we actually had seen each other recently, uh, about a couple of days ago from this recording

Richard Thornton:

Face-to-face. Yeah. Can you imagine that? As opposed to being just sitting here digitally beside each other.

Justin Bogard:

I was actually talking to somebody today about, um, they had mentioned, you know, they're talking about, Hey, I know you're a business partner cause I've seen you on your podcast and stuff. And they had mentioned like, do you go to California that often? To, you know, to, to do business with them? I said, I've never been out there<laugh>. Yeah. I've never been out there to see him at all. Said, I usually only see him once or twice a year just at events that we, that we plan on going to. And at that time, we really don't even hang out because we're so busy networking and, you know, that's right. Doing what we need to do for the business and stuff that we actually don't, we don't really spend any real time together. It's usually on a Zoom or a phone call. So it's, it's kind of funny when I see you in person, it just doesn't seem the same.<laugh>.

Richard Thornton:

I know

Justin Bogard:

You're much taller too. When we're on screen, we're the same height.

Richard Thornton:

That's right.

Justin Bogard:

That's right. Richard's like six, eight.

Richard Thornton:

No,

Justin Bogard:

180 grams soaking wet.

Richard Thornton:

Yeah. Right.

Justin Bogard:

<laugh>. But, uh, it, it is interesting though that we can conduct our business and really not even have to have, you know, close interaction to each other because of the technology that's available to us. Right.

Richard Thornton:

No, that is right. You know, my sister, my sister, my daughter works for Google and she manages a, a team. Mm-hmm.<affirmative>. Um, most of the, most of the team is in, uh, Switzerland. She's in Seattle and her other team members are in I think Rio de Janeiro and I can't remember where the other places are. She's never met a lot of'em in per in, uh, person.

Justin Bogard:

Yeah. It's just interesting. Um, one of the reasons why we got together, excuse me, I got something in my throat, is that we had done a charity auction last November in 2022 to get a chance to sit in front of Eddie Speed, one of our mentors and a guy named Cade Thompson and Eddie's wife, Martha Speed, and another guy that you all might know, uh, his name is Mike Powell and he is partners with Mitch Stevens, the guy that, um, wrote the book, uh, the Art of Seller Financing or the, the Man of, uh, a Thousand Houses. I forget the title. I I know it's, you know, hit myself head after this recording and I'm gonna be like, oh, that's what it was. But anyways, Mitch is a very, uh, I won't say famous, he's a very well-known owner, financer, and he lives in San Antonio, Texas. So his partner Mike Powell was there and he kind of runs operations similar to what I do for Richard and I's business. Um, so we got a chance to sit in front of those guys. Right?

Richard Thornton:

Right. So we met at a, at a got together for a mastermind, um, tail end of last weekend over the weekend. Mm-hmm.<affirmative> at about 20 people or so there. And the idea behind your mastermind, for those of you who don't know, is that you have a broad spectrum of people, um, from a lot of different areas. Um, uh, for instance, you've got Kade Thompson who manages a, manages a 70 billion portfolio and he buys all sorts of, uh, resi products to some people there who are just starting out and, and they're from, uh, come from different points of view. So when one goes there, one usually goes, um, uh, to, uh, be put on a hot seat and that means that you go with a, uh, question or a, a burning need and people will help you, uh, to the best of their ability resolve that issue, whatever it has. It could be personnel, it could be how to raise cash. It could be, you know, how to, how to, uh, manage people or virtual assistance or, or whatever. Um, but they are there, there to, uh, focus just on you for whatever your time in a hot seat is and can be very valuable.

Justin Bogard:

Yeah. So, so masterminds or a collection of a specific group is, is can be very specific. Meaning they can be people that are pretty much at your same level or higher or there could be people that are kind of a mixed bag and we, we happen to be in a group with a mixed bag, which I think is, is a little more fun, uh, because you're gonna have different challenges. There's people like you had mentioned that hadn't even done a deal before. Right. And so they're trying to figure out what do I do next? Right. And there's people that have been in the business for a long time, you know, like we have and we're like, what do we do next? Right. So it's funny how you can have some similarities and you can have, you know, obviously some disparity as well when you have a group like that, but everybody can kind of get a learn and get a sense for what's going on in the room. Like, we're not gonna dive into specifics of conversations cuz number one, we don't have enough time to do that number, number number, uh, two, you know, we, we don't need to specify specific things. Um, but ultimately, you know, you're, you're like what Richard said, you know, you're trying to find out what, what is the, what is that you're having a problem with today

Richard Thornton:

And what Yeah. And maybe, uh, well, I shouldn't say maybe, uh, in the notes school crowd, uh, it was pointed out to me, and I think this is quite true, is that most people there, um, are either in their second or their third act. Most people are in their second act like they've gone through a great job. You know, they've, they're very experienced. They've got 20 years of experience doing whatever. They're a lawyer, they're a, you know, uh, whatever. And they wanna move on to something else. They wanna diversify somehow. So they bring those backgrounds to that mastermind and, uh, I think that, um, really broadens the, uh, experience and, and is, makes it more, uh, a richer experience.

Justin Bogard:

Yeah. Cuz the whole group benefits from their, their specialty, from their, from their Act one and their life or act two. That's a good point that they bring up. So

Richard Thornton:

There's, yeah, we, we met one fellow, um, who was very knowledgeable. He was a, a taxation attorney and, you know, we had all sorts of questions for him.<laugh>.

Justin Bogard:

Yeah.

Richard Thornton:

And he was very helpful.

Justin Bogard:

<laugh>. Yeah. Like e every, everybody adds value, even if they've not done a deal before because they have some sort of experience in their life that they can, they can say, Hey, blah, blah, blah, I learned this from my previous life because it could pertain to somebody. Like, like, we're building a business, right? And we don't have all the answers to everything, but we, we know the, we know how our specialty, right, our sp our special hammer, we know how to use the special hammer, but we may not know how to, you know, run a company around the special hammer. So that's really what benefits us is because we can hear from people that have a 60 billion portfolio and how they run just a huge Wall Street firm versus, you know, somebody that's on a smaller level that has, you know, a few hundred, uh, loans that they manage in their portfolio. And you can see some similarities and disparities on, on how that works and how you can jump and, uh, and get into the game and, and g go for a higher level, uh, if that's what you wanna do. So it's always interesting.

Richard Thornton:

Right. And so, Mr. Bogard, yeah. Tell us something that you learned over this weekend from the mastermind.

Justin Bogard:

Well, I, I kind of knew this going into it, but it's also nice to be what I wanna say. Um, re it's reinforced that some of the things that we're doing that we were pretty confident in that are the right things to do. Meaning the path that we chose down, the way that we're doing things, the how and the why and the what. We got a lot of re um, reassurance from some of our mentors that that is the, the right way to do things. So it's like, okay, take a deep breath, exhale, okay, good. We're running down the path the right way. And there's a few things that we didn't think about. Um, again, I don't need to get into specific things, but, um, uh, what I'm trying to say is you can be focused on one thing, especially when you're running a company and you can miss out on some of the details or not understanding the full scope of where you want to go. So vision is really important, understanding where are you trying to get to? And that's something that's often gets lost by entrepreneurs, my, myself included. And you kinda have to step back for a minute and go, wait a minute, where are we actually going? And how are we trying to get to it? It's, it's easy for you and I to figure out how to get from point A to point B sometimes, you know, we have to go, you know, make a left, make a right, we have to go up, we have to go down, um, but we really, where is it that we're trying to go? And so once you kind of dial that in, everything else kind of lines itself up. And so that's, that's some of the things that I had forgotten. Um, you know, figuring out when this, in this world that we're doing with the fund is, you know, where are we trying to go with it? What's not just one year out, but what's kind of the fifth year out and what does this look like and how are we graduating to the next level so that our, the way that we get there, you know, we're, we're prepared for it and we're running in the most efficient direction that we can.

Richard Thornton:

Yeah, I think that's a good point. Uh, and I was actually speaking with one of our, um, fund investors, uh, earlier today, and he was talking, um, about, uh, actually, uh, reinvesting the, the funds and if he did something over 10 years or how much would he have and what could he do with it? And I, I finally said, you know, he, he wanted to sort of pin me down to one specific thing that he could do. And I said, look, it's really what your goal is. If you wanna make this, uh, if you want current income, if you want long-term income, if you want to, uh, if you're in an industry that's got lots of ups and downs and you want to smooth th that income, uh, you can do anything you want, uh, given what your goal is. And that makes it very, that makes you behave today very differently than you might otherwise, depending on what your goal and goal is.

Justin Bogard:

So what I, I have some things in mind that, that I wanna mention, but I want to hear from you as well. Cause I'm gonna ask you the same question is from your perspective, and this is good because for the audience, if they don't know us already, you know, Richard is more sales and marketing and then Justin is basically more operations, so more inside the office and backend type of stuff. So from your perspective and what you were trying to gain out of the insight from this mastermind that we went to, what, what's something that stuck out that you said, you know what I, that, that's something I didn't think of that I wanna focus on?

Richard Thornton:

Well, would be, I'd have to answer several things. I'd have, you're right.

Justin Bogard:

Just pick one

Richard Thornton:

<laugh>. Yeah, just pick one. Um, because obviously there's, uh, my function is both generating deals to do, but also getting investors. So getting the money to do it, you've just got the very easy job of laying back there and, you know, operating

Justin Bogard:

<laugh>. I'm in a cot back here just hanging out, waiting on the red phone to ring. So right

Richard Thornton:

Now, California, you can't hit me. No. Um, I, I'd say that it was, uh, the general consensus that we are finally coming into a better performing note market. I mean, it's been pretty dry for the last three or four years and Uhhuh<affirmative> pretty hard to generate, uh, that stuff. So that's, that's, um, good to know. Uh, because I think especially for what we're doing with the fund, um, it means that we're in the right place in the right time. Okay. Um, it's generally a good time to, uh, raise money, although you've got a lot of people who are sitting on dry cash cuz they really don't know where places where, um, the markets are going. So it was good, good to hear other people say those. I had sort of guessed it, but if that seems to be the general consensus, I think it adds a little bit of validity to what we're thinking.

Justin Bogard:

Yeah, so, so some of the things that we learned, um, about some projections that, that may may or may not happen in the future just just from people's experience and what they hear from other larger companies and stuff. But it, it was interesting to note because we had been seeing this very often too, and this is stuff that we've mentioned on our podcast as well, is that the wholesaling market, uh, for example, in the Midwest here, I live in Indianapolis, so there's a lot of wholesalers and a lot of Midwest properties. Um, it's, it's a fight to get deals and because there's so few properties still and there's so many wholesalers trying to go after the same deal at the same way that they try to get the deal, meaning, you know, it's like a cash offer, right? You really don't have any tricks up your sleeve besides saying, I'll give you X for it. Uh, Mr Wholesaler number two comes over, I'll give you x plus one for it. You know, it's like that, that is the battle right now. And the wholesalers that really win are the ones that can figure out this owner financing trick, right? Where they can buy the property and ask the seller to carry back terms for them because they're really, they're gonna be really flexible. And what's interesting to note is that one of, one of the guys in, in the mastermind this weekend, you know, he's pretty well known in his area for doing owner financing and creating owner financing and they're basically fed up with trying to figure out how to make these deals work that they're just trying to sell him the leads<laugh> and say, Hey look, you closed the deal because I obviously my cash offers are not working with these people. And uh, here you go, you take'em. So then he's able to basically take these leads with zero marketing effort and just close'em<laugh> with, you know, owner financing transactions. So it's just kind of interesting to hear that, you know, other markets are pretty similar to us to where it's their wholesaling is just just a war. Right,

Richard Thornton:

Right. And, and that puts us, as you just said in different words, um, in the perfect place because that's exactly what we're offering through the fund. We're we're talking with them, we're working with, uh, different wholesalers and, and sellers direct, uh, and helping them create the mon uh, create the, the financing and then we can buy that financing, um, ourselves. Uh, and so any of you out there who are listening who, um, would like to focus on that, we're not talking about sub twos, uh, although you can do that. We're just talking about straight, uh, deals where if you can't make the numbers quite work under a first, then you structure it as a first and a second and they carry back the second. I mean, this is pretty basic stuff for us, of us, those of us who are in the field. Yeah. But a lot of other people don't know this. They, they have no ideas how to structure one of these deals.

Justin Bogard:

One, one of the cautionary tales that I have to throw out there, Richard and I, I don't think I've talked to you too much about this because I, I see more of it and, and I already know what, what you would say about, about the deal we we're kind of in alignment on it is some of the times we'll get wholesalers that'll come to us and they have a property they have under contract and then they want to, they have a borrower that they have to sell to owner finance the property. So basically they're trying to buy the property for cash, they're trying to resell the property at the same time on terms, and they're trying to use that end buyer's down payment as part of the sale to give to their seller. And then also have someone like us buy the note at the same time so that they can just bake, you know, their cash transaction and get outta the way. The, the problem that we're seeing, and I think it's only gonna get worse with some wholesalers, is that some of them are not understanding the value add and they are overextending the value of the property by trying to over refinance the property. Now we always tell people, you know, premium financing, you know, premium service provides a premium financing, meaning if the house is worth one 10, you know, you can sell it like for one 12 with owner financing or one 13 or maybe one 15 you, but you can't sell it for two 20<laugh>. Right? Right. It it's the same house. Nothing has been done to it. You can't overextend the financing on it and expect somebody like us to buy that. We're not gonna pay 160,000 for a$220,000 note when you bought it for a hundred thousand dollars. Like, and done nothing to it. Like it's not, it's not gonna work. So we're starting to see people that are just, and I was giving obviously a very, um, overzealous example there, but we're seeing some wholesalers come up with these numbers and, and I just, I can't believe that they have an end buyer that's willing to pay, uh, that much in owner financing for a property like that. Cuz I know that we're not gonna buy it for that because the numbers just aren't, are just unrealistic, but

Richard Thornton:

Right. And I, it's fair to see that. Um, so something else along that same line in terms of a slightly cautionary, uh, a wholesaler talked to me yesterday and what he wanted to do was bring a house to us that was totally un renovated. Mm-hmm.<affirmative> sell it to, he was gonna have a 10% down payment, but he said, look, um, this guy's in the trade, he's a plumber or whatever and he wants to do a lot of the work himself. And now, um, that way he'll sort of earn his equity into that. Um, and I told him, I said, look, uh, I understand this fellow's in the trade, and this is not what I'm gonna say is not directly applicable to your situation, but, um, it's, it's what the world is and that we won't buy a house un unless it's a livable right now, comfortably livable right now. Um, we won't buy that house because, uh, one of the, um, mid-size pension funds, or not pension funds, I'm sorry, um, wall street com companies got in trouble a number of years ago for doing just that. They were selling houses to people, uh, on down payments and saying, you fix it up. And they got taken to court because the people in the end, uh, did not have the money to fix it up and basically were left for the place that they, they couldn't live. So we have to be very careful about that. We have to make sure that a places, if we buy something that's not being renovated right now, it has to be just as good as any seller finance deal that we've ever seen and, uh, not need any rehab at all.

Justin Bogard:

Yeah. The deals that I'm more comfortable with are actually the non-owner occupant deals that are like that to where they're, there is a true fix and flipper that that is their business model, but they just, instead of them getting hard money for the house, they just, they get owner financing for it. And I, I'm a lot more comfortable with those and than an owner occupant that's trying to live there, that has to live through e rehab because I've, I've been one of those, those guys that have done it before and I'll call myself an idiot for doing it because it's<laugh>. It's, it's tough. I mean, it, it takes three times as long when you live in the property trying to renovate it and it does when you don't live there and are renovating

Richard Thornton:

It. Right. Right. So, I mean, you just have to be kind of careful about doing that. Um, let's talk about some of the other things, uh, that we learned. I think that the general consensus is that we're not going to go into a huge recession, we're gonna go into a little bit of a dip. Um, and, you know, without getting too specific, uh, I think also the general consensus is, is that rates, while they're somewhat high right now are are probably gonna lower after the next 12 months or something like that. Would you agree with that?

Justin Bogard:

Yeah. We, we don't really know how much, but we, I think, I think we can all agree that it's not gonna go up, right. I think we're all saying, I think they'll go down a little bit. They may go down a lot. We, we don't, we don't know yet. Uh, we'll see a trend after a while, so let's give it another year and see where we're at next spring and then kind of know, okay, it looks like we're trending back maybe the way it was around the four or 5% window, or maybe it just stays where it's at right now. We don't really know, but we all agree that it's not going up,

Richard Thornton:

Right. So while people may see fewer deals being refied out of their portfolio, um, that, that might pick up a, again, if, if rates go back down. But the good news as opposed to, uh, 2008 is that people have a lot of equity in their houses, right? So they have a lot more flexibility. They don't have a gun to their head. They may not have the rate that they want right now. Um, but things aren't that bad and things probably aren't going to get that bad.

Justin Bogard:

This is a time where you have to be cautious in times like this. Uh, when you're underwriting deals, when you're buying real estate, um, people that get these houses under contract, remember how much skin and they have in the game, they, they typically don't have any skin in the game. Uh, wholesalers often want to do thing, do things with noth with no skin in the game. They just want, wanna use their hustle, find a deal and flip it to somebody else not understanding if they're giving somebody something of good quality. So there's a lot of great wholesalers out there that do a great job and you know, there, unfortunately there are some that, that don't do a good job. So just watch out, be cautious. Uh, my radar is up very, very high right now because I've seen what I'll call some bogus deals come in front of us and you just gotta stay disciplined and stay true just because you're hungry for a deal, don't buy the first one that comes to your, to your desk<laugh>. Right? You want, you want to find one that's the right quality and meets all of your metrics that you're trying to accomplish.

Richard Thornton:

Is that what that little pointy thing out of the back of your head, is that your radar? You said your radars

Justin Bogard:

Up so<laugh> binging, bing, bing, bing, bing.

Richard Thornton:

I've been wondering what that is.

Justin Bogard:

That's right<laugh>. It's growing. It's growing every day.

Richard Thornton:

That's right. So, but, but let's talk about a typical deal that we might, might accept and that is, sure, there's a seller finance deal that we're all used to that's got a year or, or two years of, uh, payment history on it. Um, but there's also a lot to be said for the deal that's got a at least 20% down, um, and has has a good renovation to it. What's a good renovation? I mean, the kitchen's completely done, the baths are done. Maybe the roof's done, the outside of the house is painted. In other words, it looks nice. So somebody has skin in that game, if they put 20% down, uh, and uh, they have a good rental history before that or, or something of that sort. Um, that's a deal we'll do. And I think that's, that's, um, a good solid deal.

Justin Bogard:

Yeah. Rent, um, no, I was gonna say rent ready? Move in. Ready. That's, that's a little, little different than rent Ready. Right. Move in. Ready. Yeah.

Richard Thornton:

Right, right.

Justin Bogard:

Yep. Richard,

Richard Thornton:

No, go ahead. I was tr I was trying to think if there's any, I don't think of anything co cautionary. I was trying to think of some, some good, uh, sort of factoids that we, uh, we got outta there.

Justin Bogard:

Here we go again, man. Of a thousand words, making up stuff on the spot. I like it. All right. This is episode number nine. It is sponsored by American Note Buyers. I'm Justin Bogart and this is Richard Thornton. And until next time guys, we will see you on episode 10.

Richard Thornton:

All right. Take care.

Narrator:

Thanks for listening to Be the Bank. We hope you learn something from today's show. If you enjoyed this episode, please rate and review us. Plus check out our 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 American Note Buyers. Thanks again for listening.