You're listening to the Master Passive Income podcast network.

Welcome to the master passive income show.

My name is Dustin Hiner, and I'm here to help you create wealth, afford anything you want in life by investing in real estate and achieve financial freedom.

And in today's show, we're gonna be talking all about how to invest in notes, how to lend your money, how to make money, and become the bank like investors do.

And we're gonna show you how to do it as well.

All right, let's start the show.

Welcome to the Master Passive Income podcast, where we talk about investing in real estate with a special focus on making enough money so you can quit your job and live the dream life.

And now, here is your host, Dustin Hiner.

What's up?

What's up?

Thank you so much for being here with me on the show.

Super blessed as always to have you here, and I'm going to share some amazing things for you as a real estate investor and an investor in general.

Now, more than likely, if you've been listening to me and the podcast for very long, you know that I'm a real estate investor.

I have 30 plus rental properties, short term, mid term, long term properties.

Fab.

Just bought literally a 355 unit apartment complex in hotels, as well as teach people how to invest in real estate.

Now, what's interesting is, as I continue to build my business, I go along the investor success roadmap.

And with the roadmap, I realized that everything that I do in my investing, my own personal investing, goes along that roadmap.

And if you listen, I think it was two or three episodes ago I talked about the real estate success roadmap that you play.

But the funny thing was, it wasn't until now that I actually put, I guess, pen to paper and shared with you the roadmap, mostly because I, even though I was playing or going down that road map and going down the path, I didn't really even know that this was the path I was taking.

I was just doing it.

And it came about that as I was going to my own personal mastermind.

We did a three day retreat, which was super amazing.

Tom Sylvester, Michael Kwan, and Adam Carroll, myself, we had such an amazing time with each other, diving deep into each other's businesses and lives, because we're really, really close friends.

We've been together for five or six years now.

And as we were working through everything in each one of our businesses, we got, to me, master passive income, everything I'm doing with real estate investing.

And we started mapping out the entire process of what a real estate investor has to do.

Because as we were talking about everything in our businesses, we're trying to figure out how we can better serve our students, serve the people that we are helping to invest or to do whatever.

Like Tom, he's amazing business coach.

He takes businesses that go from six figures to seven figures or more.

He's amazing at that.

And so he's helping us go through our businesses, and we're all giving our two cent.

Well, what it came down to was we mapped out the roadmap that all investors must go down.

Now, you start at the very beginning.

You're basically at the starter phase or beginner phase, and, well, go back and listen to the entire episode where I literally walk you through the entire roadmap process.

But you start at the beginner or the starter phase, and then from there, you get into the intermediate phase, or basically, you're the business owner.

You're now creating, and you're accelerating your business.

And then you get to the investor phase, where you are an expert investor.

You have reached financial freedom.

And the reason why I'm bringing on my guests today is because I want to expose you to these things that we, as investors, do.

Now, I personally love the idea of becoming the bank.

And if you have ever played monopoly, you know that real estate helps you to become where you just make more and more money, and then you lend money to the bank.

It's really what it comes down to.

And because you have all the money.

But with becoming an expert investor on the roadmap, there are different asset classes that you can invest in.

And the reason why the last few, I don't know, maybe months, I've been talking about the expert, the investor phase of this roadmap.

Remember, there are three sections.

The beginner, the intermediate phase.

That's where you're the business owner, and then you're the expert.

This is the expert phase.

I want to expose you to what's out there for us.

Now, when I say us, these are the people that are in the expert phase, the investor phase, because we have more money than time.

That's really where it breaks down, is when you're starting out, you have a lot more time than money.

Trust me, I've been there.

Most of us, or all of us have been there.

You know, we start on the roadmap, and we have more time than money.

Then as we're starting to make more money, then we need to create a business.

That's where we come.

The business owner, the scaler.

That's when we now have a system that makes more money for us and then eventually become financially independent, that is the gauge, or that's where the transition takes place.

Where you become the investor expert is where you have financial freedom now, then you also need to expand your asset class to other assets because you have more money than time.

I love investing with other investors who are terrific at what they invest in, be it mobile home parks or note investing or hotels.

Like, I don't want to do any hotel.

I don't want to do hospitality at all.

But I'll invest in people who want to do that.

And we'll both make money, which is great.

So the reason why we're bringing on my guest today is to expose you.

Like I was saying to what is out there.

And this might strike you as like, man, I now I'm getting to the point where I now have more money than time.

Let me make my money, make money for me, if that makes sense.

I'll basically park my money and have other people utilize my money so that I can make money on my money.

Sorry, just it's being a little convoluted.

And you guys know that the master passive income podcast network, we have other shows, we have the MPI multifamily investing podcast just got started talking about multifamily commercial real estate investing.

But we also have your passive income life, the passive income Life podcast with Zach Zimmer.

He's a coach at Master passive income.

He invests in notes.

Like he literally lends money and lends to other people and makes so much more money.

He loves lending to money, lending money to people.

You know, you literally just let them worry about making you money.

And then let's say you lent money on a house and they, the person you lent the money to can't pay you back.

Will you take the house?

It's pretty amazing that the protections and how you make money and all that stuff with node investing and that's what we're talking about today, is getting you into the expert investor phase that maybe in five years from now, four years or even ten years from now, you're going to put this on your radar, put this on your radar as what you do as you're going through the master passive income podcast roadmap that you're going through, starting as a beginner, as the starter in this entire roadmap.

Then you're in the business owner scaler phase, and then you get into the investor phase.

And that's when we get into larger deals.

That's where we now have our money work for us.

Now, that's all to lead up to this amazing interview where I interview a gentleman who's been, he started in real estate and he realized, man, I make more money lending money in note investing, and he's going to show us how he does it.

He gets other people to invest in his deals as well, or his note investing as well.

Super, super terrific.

You're going to get so much great value out of this.

But keep this in mind that you are an investor.

That's the roadmap that we're taking, the real estate success roadmap where you're going to get to the investor and you're going to start investing your money because you're going to have more money than time.

All right, let me jump into today's show where I interviewed Chris Seminy, who is going to show us how to make our money, make more money for us.

All right, here we go.

Chris, thank you so much for being on the show.

Dustin, thanks for having me today.

And I'm great.

Happy to be here.

You and I were chatting just before we got on that you started out in real estate investing and, you know, from residential to commercial, and you've also got into note investing, which most people don't even know what a note is.

But let's start with what made you get from real estate into note investing?

And almost even, how'd you even start doing that?

Yeah, so I always joke with, I either blame or thank my wife, depending on, you know, the mood of the day.

Uh, and like most real estate investors, you target rental property or fix and flip and, you know, like you mentioned, I love to, you know, just over broke for a job.

You're doing that while you're trying to work and while you may have a family.

And thats where we were at.

We were, you know, had two young kids at the time and we were buying some rental property.

We were rehabbing them and getting ready for rentals and we turn around and get them rented and after doing several of those and were spending all weekend long at these properties because my backgrounds in construction management and my wifes in finance, but she also basically can swing a hammer much better than I can.

So wed be at these properties.

And then finally we realized this is just way too much.

And also its really challenging to find property because youre in such a competitive market, which we are outside of Washington, DC.

So my wife is like, hey, we just cant do this anymore.

Im like, yeah, I kind of agree.

So I started thinking, okay, what else can I do with real estate?

Because Im not a stock guy, im not an options guy.

I've always been a real estate guy.

Graduated college, worked for a construction manager on the commercial side of things.

So always been in real estate.

And then I stumbled upon note investing and when I did I was kind of pissed off.

And the reason why was I've been real estate for almost 20 years.

I'm like, I knew private lending existed but I didn't know true note investing of buying loans on the secondary market, especially non performing loans, I didn't know it existed.

And I want to pause for a.

Quick second and share that honestly, I.

Really want you to invest in real estate.

Now my new goal is to help 1 million people invest in real estate.

So two things I would ask from you.

Number one, if you get anything out.

Of this episode, please share it with somebody else.

Just say, hey, you know, check out Dustin master passive income.

He really wants to help a million people to invest in real estate.

That's number one.

Number two, I want to get you to invest in real estate.

Get my real estate investing course, absolutely.

For free.

Text the word rental.

Rental to 3377.

Rental to 3377.

I'll literally give you my course, show you how to find the area of.

The country to invest, how to build the business first.

You know, I always talk about that.

And how to find the right properties.

How to make sure you're getting experts do the work for you and scale the business to where you're making dollar 250 or more in passive income.

Scale it to quit your job.

I'll literally get to you or go to masterpassiveincome.com freecourse.

Obviously it'll be in the description, but I really, really want you to invest in real estate because the more that actual normal, everyday people own real estate that are good landlords, the better everybody's life gets.

You are making money passively and then you find out that there are notes and these notes where you can, you know, buy up and start investing your money.

Now did you sell off all your real estate and go into all into the note investing or do you still have some real estate as well?

Oh, I saw real estate.

Yeah, I've never gotten out of the other real estate.

I'm a big diversification guy.

So while I love notes, I also, you know, we've got some rentals which, you know, isn't passive in my mind, owning rentals.

You know, we own some land.

We own property.

So yeah, we've got other aspects of real estate within our portfolio because again, I'm a believer in, you know, diversification across even, just nothing other asset classes, but even within real estate.

So what makes note investing?

Well, number one, what is note investing?

Because most people don't know what that is.

And number two, why is it so attractive to invest in notes?

I mean, first thing that I think of is that's how banks make the most money.

They're the ones that make money.

You know, you and I, we have to work hard if we're flipping homes or getting a rental property.

But man, when you're becoming, when you become the bank, you make a lot of money.

So, um, what is it?

And then why would we want to do that?

Yeah, so first, note investing is, you know, being the lender, like you mentioned, I always joke, if you drive through any major city who owns the tallest building, it's probably going to say chase Wells Fargo or pick a bank.

Um, you know, banks do have, uh, advantages over an individual investor, which we won't get into, um, in regards to lending.

But, uh, your simple example is if you buy a house and you, you know, you get a mortgage with your lender, typically like within 90 days, you'll get a notice in the mail that says, going forward, please send your payments to XYZ.

Most people have always, you always get those.

Well, guess what happened?

Your mortgage was just sold.

Now typically it might get securitized or sold, and again, all these fancy terms.

But what we do is we're that person.

We're buying that loan.

And so we become the bank, we become the lender.

So that's what node investing is, is we're just buying mortgages instead of the banks buying them.

It sounds amazing that you could become the bank, which is great, but it also sounds a little complicated.

I mean, is there like a Amazon for notes that you can get into?

And then what happens if like these things are all run through my head, how do you not lose money?

What if somebody goes, forecloses and all that sort of stuff?

But I guess we could take it from the beginning.

Where do you find these notes?

Great question.

There truly isn't a Amazon for note investing.

It's truly relationship based.

And most banks, what they will affiliate themselves with, are called large whole loan traders.

And what that is, um, if people have ever like bought a company or, you know, merger and acquisition companies, um, is really what these companies are.

They're facilitators.

You know, just like there's real estate brokers, they're just like a broker.

And the banks don't know, hey, who do I sell these to?

We're a bank.

Um, so these companies will get set up and they will know who buys and sells.

And you have to apply to these companies, and they'll do background checks and credit checks on you, because you have to realize, when you're buying somebody's mortgage, think of all the paperwork you filled out for that application.

All that's part of the package.

Your income, your job, your pay stubs, your tax returns, your Social Security number, all of that's in there.

So you don't just want Tom off the street corner getting access to all of this information.

So there's traders who deal with those, and then there's individual sellers and other funds as well.

But it is a very small, tight knit community of where you can buy loans.

When you're getting into the investing in notes, what type of return could somebody expect?

You know, somebody gets a.

I'll give you an example.

I just bought a house.

It's an Airbnb or short term rental property near Nashville, and I'm paying 8%.

And hopefully it seems like the Federal Reserve is going to lower rates, which mortgage rates come down because of that.

It's kind of correlated, but with that, I'm going to refinance.

What would you say about how much money can you make?

Like what?

Is there a certain interest rate?

Is there an IRR turnaround return?

How do you figure out how much money you're going to make on a note?

Yeah, so there's two types of notes that typically you see called performing and non performing.

And I think definition is pretty self explanatory.

Performing means the borrower is making their payments, and typically you're not going to make a lot of money on those because you're basically going to pay face value for what those knowns are written at.

So if it's an 8% loan, you might get 8%.

You can sometimes push it a little higher if there have been sketchy pay histories on those to get them up to ten to 12% returns on those.

So the interest rate almost doesn't play into account a little bit, because if the notes at 6%, you just buy it for a little less discount compared to one written at 8%.

Non performing, which is what we like to include a lot in our portfolio, is when the borrower is not paying.

So think of going in and buying.

I'll use an example that people can relate to.

A performing loan is similar to buying a house that's fully nicely renovated.

The value is probably going to be pretty close to what you think it is, and you're not going to have to spend any time or effort in repairing it.

Non performing loan is more like a house that is a rehab.

You kind of have an idea what it's worth.

You kind of have an ear what it may be worth at the end of the day and how much you're going to spend, but you need to keep a factor of safety because there's more risk involved.

So you want a greater return on that asset.

And on non performing loans, yields can be from 15% to 25%.

In the past, you know, pre Covid, you could push close to 30% today, you know, even though people think, oh, interest rates went up, so you should be making more.

No, it's actually the less, you know, it's like everything else, you know, everything.

All pricing has been compressed.

And one thing I just also want to mention about note investing, that's very different than real estate, that, you know, again, we're not buying the property, we're just, you know, giving them the, you know, owning the loan is, you can't get.

There's really no leverage in the sense of like, I can't say, oh, I'm going to go to Wells Fargo.

I'm just using them as an example and say, hey, I got a hundred thousand dollars note, can you lend me 70,000 on it?

They're going to be like, no, it's like, you know, we don't, you know, there's very, there are some banks, but it's very rare that somebody can get what's called note on note financing, which in the real estate space, leverage can have significant upside to enhance returns, but also can have significant downside.

So in our space, there's no leverage.

So typically that it's an unlevered return, which is traditionally lower than a levered return.

Obviously, making money is something that we want to do.

Also, my mind always goes to, how do I not lose money?

How do I note, I throw my money away, and how do I get it back?

If anything, I just want my money back.

And if I can get interest, that's exactly what I want.

So that's usually what I'm looking for.

But how do we make sure we don't lose money?

Yeah, so again, one of our main focuses for us is always the preservation of capital with any investment.

So what we will look at is when we do node investing, we focus kind of on three things.

We call them the three p's, which is the person, the property, and the predicament, and the property plays a significant role because that can have significant risk.

And give you some examples why, if your lender came and knocked on your door right now, would you let them in your house?

No, definitely not.

Yeah.

So we don't get access these properties.

So we can only get evaluation based on what it appears to be from the outside.

Now, we will typically, you know, devalue it because we don't expect a borrower who hasn't paid in two years to have a brand new kitchen, appliances and everything else.

And then the other thing we'll try and focus on is, which is much easier today than previously, is equity in the property.

And the reason I mentioned equity is, I'll just give an example.

You know, we like to buy.

Loans are like, say, ten years old.

So ten years ago, if you bought a $200,000 house and, you know, basically put $20,000 down, you know, so you owed 180 on a $200,000 house, what do you think that house is worth today?

Any idea?

Oh, my good.

Yeah.

At least double.

Yeah.

And your mortgage payment typically goes down.

So ten years ago there was, you know, it was pretty levered, but today, let's just say it's $150,000 balance on a $400,000 loan.

So our loan is secured by that property.

So if the borrower does not pay, we could foreclose on them.

And at the foreclosure sale, now we're owed 150 if it sells for 300 or, you know, we don't get all the money, we only get what's owed.

So we would get that 150,000.

Now, we also would buy this loan at a discount.

So if the loan was, you know, $150,000 loan, you know, we might pay, cut a 110,000 for it.

So that preservation of capital, when you look at kind of the numbers is.

I'm just getting simple numbers.

We bought it for 100, they owe 150.

And it's worth, I'm just going to say 300.

And so the loan to value is 50%, but our investment, the value is only a third because we bought it for 100, which is a preservation of capital on a $300,000 property.

So that's what an area that we really focus on in our portfolio is for the properties that have that equity.

Because certain places today, Florida, for example, people are mentioning prices are falling in Florida.

You know, if that 300,000 goes down to 200,000, we like to say we still try and we're, you know, we like to think we're still protected.

Yeah, you don't want to be underwater, like in 2008, where you.

They owe more than the.

Or, you know, you're an investment is more than the house is worth.

You definitely don't want that.

Now, you said something that kind of caught my ear.

So let's say we bought it for $100,000, bought the note for $100,000.

They owe 150, but they sell it for 300.

And if you're owed, are you owed 150?

Who.

Who gets the balance?

The $150,000 extra?

Like, how does that work out?

Yeah.

So if it did sell for 300, then it would either be other lienholders or the property owner.

One thing people, you know, when you think of a foreclosure, all it is is a for sale of your property.

So let's just say you own a home right now that, you know, you owe 400, and it's worth 500.

You know, you don't use a realtor.

It's forced to sell.

But when you sell any type of property, it's like, okay, let's pay off all the lienholders, and then the left or the gravy goes to that homeowner.

So really, that's.

You know, a lot of people think of foreclosure that, you know, oh, the bank's gonna get every single penny now.

The bank just gets what they're owed.

They don't.

You know, because people think, oh, you're gonna get 300 on $100,000 investment.

I'm a $300,000 property.

I'm like, no, I wish.

All the most I can collect is what they owe on the loan, not.

Any interest, like, so.

Well, the interest we would.

Yeah, so there would be, like, accrued interest and stuff like that.

But, yeah, but if it's sold for the equity.

Yeah, you can just take the entire house, because although 150, it's worth 300,000.

They sell it for 300,000, you get the whole thing.

It's not that I get it.

So they're trying to make the.

What do they call it?

Make good or make complete the loans and the liens so that everybody else is paid off and then whatever's left over.

Whereas back in 2008, there weren't any leftovers because everybody was over underwater, and so the bank was literally eating, you know, $100,000 losses because they had to take the property, and so no longer the homeowner gets it.

So that.

Okay, that makes sense.

What else am I missing?

Because it seems like we have covered the basis from protecting our assets, being able to.

Oh, I guess one thing I'm thinking of, and you can, you can definitely chime in if you think of another one.

But like in the foreclosure process, it's a long time, but there's also costs involved.

Do you, does that come out of the transaction?

You know, you sell the property.

How does all that work out?

Yeah, so it truly depends.

And this is one of the challenges with note investing.

Every state is very, very different.

And ill just use an example of if I had the same loan in Georgia as I do in New York.

The New York loan is probably worth 50% to 60% less than the loan in Georgia.

And the reason why is in New York, it might take you three to five years to foreclose on a borrower in New York.

So time is money when youre talking IRR and everything else in Georgia, its three to five months.

So think of time value of money.

If its $100,000 investment, whats it going to be worth three years from now versus six months from now?

Its very, very different.

If youre trying to target, lets just say a 20% return.

So that future value working backwards.

So that's a very challenging component is making sure, you know, understand the state laws.

And the other component to it too is, you know, what can you add on to the loan and what is, like, you have to absorb.

For example, in Michigan, like the lender has to eat the foreclosure costs.

Like that's on you.

But in other states, you can add it to the loan and then what happens is what a lot of attorneys will do.

And this is where, you know, I'll say the federal government kind of, you know, say did a good thing.

You know, a lot of people usually don't think they do good things.

They don't do good things very often.

Yeah, what they came up with, it was called, you know, Fannie Mae.

If you haven't heard of who they are, I mean, they basically are a quasi government agency that buys up a lot of the loans that from traditional banks.

So they came out with standard foreclosure costs by state that people could charge because what could have happened is, let's just say XYZ lenders, like, okay, I'm just going to charge $30,000 on this foreclosure.

One attorney charges three and the banks go with the expensive one because maybe they want the property back or whatever case may be.

They came out with, hey, it's this much money to foreclose or attorneys, what attorneys can charge in that state on top of the court filing fees and stuff, which are always changing, but at least they came up with a set of guidelines.

Here's how much.

And then you just have to understand, like I said, each state, whether or not you can hack that onto the bill or whether or not it's something that you have to eat which impacts your acquisition price.

That makes sense.

Now, is this something that anybody can just get into?

Let's say they had, I don't know, $100,000, $200,000 or whatever dollar amount.

And I know you would know the good dollar amount, but, like, it doesn't sound like something that anybody could just say, I want to go invest in notes.

Let me just start calling some banks and see if I could buy their notes from them.

But, like, if can somebody get into this themselves?

You could, you know, it's, I'd say, like any type of real estate investing strategy.

You know, for me, I spent about six months just learning the space and networking and getting contacts so I could actually get some loans sent to me to bid on and understand kind of like, you know, what are the numbers and where things work.

But it's, you know, people, you know, I always caution people because it is a, you know, legal intensive industry and it's conflict oriented because if the borrower does stops paying now, it can't be like a tenant, like, oh, I just let him go six months, you know, without paying.

You need to take some type of action.

And, you know, certain people don't like conflict.

The other is, it is heavily regulated, you know, from a licensing standpoint, from who can collect the money.

You know, we use third party companies to collect the money.

So it is something that is extremely heavily regulated.

So from that aspect, you know, it has more risk than traditional, hey, I'm going to go buy a rental and put a renter in there.

You know, we've been on eight years, we've had, I think it's two occasions where we've been, I'll call it a cross complaint, where we filed a foreclosure and they turned around and sued us saying, hey, it's a, you shouldn't be able to foreclose upon us, you know, in those instances.

So just, you know, how often as a landlord, if you own single families, you ever get a lawsuit?

And in those instances, it's typically somebody may trip and fall and insurance covers it.

Here, there's no insurance to cover you.

You know, you're going to have to get an attorney and defend that lawsuit.

So I know you have 70 investments which does the ha, basically allowing people to invest with you, is there a certain dollar amount that you would say, if you have this dollar amount, then we can start investing with you?

And with that amount, is there expected rate of return?

Do we invest in a specific deal?

Is there a fund?

How does all that work out?

Yeah, so we're a fund that we went through what's called the regulation a offering process, which is, I mean, a lot of past investors heard of 506 B, 506 C, crowdfunding.

Regulation A allows for both accredited and non accredited within the offering.

And our minimum investment amount is only $5,000.

So it's not, hey, I got to stroke $100,000 check without knowing who you are.

It's $5,000 minimum.

It's a four year lockup period.

Within the fund, you are buying shares of the company.

So it's not one asset, it's every asset the company owns.

Um, it's preferred shares.

Uh, so on the capital stack, you know, you're a preferred shareholder.

Uh, but we also don't have any debt.

Um, so when you look at the capital stack, you know, besides, you know, my salary or my team salary and, you know, our regular bills, there's not a, you know, you know, if we've got $30 million, there's not a $24 million loan that's floating out there, um, you know, on top of it.

So we tried to keep it extremely simple for people.

The returns for a $5,000 investment, we target 8% is where it starts.

And at 25,000, we start giving bonus shares and the returns and increase from that point up as well.

So that's where we are.

A income play where people looking for targeting that monthly cash flow.

We're not a vc or growth play where people are expecting this big bump at the end.

I like to say to people, hey, we're the lazy river at the water park.

You know, we've been on the roller coasters too much, too many times in life.

I like to lazy river now.

Jeff?

Well, definitely, as you get older, usually you have more money than time, especially if you're doing well.

You're investing in real estate.

Like, I have more money than time, and I need to be able to put my money in places that are going to make me money and that I'm not going to have to really be concerned about losing that money, especially with great companies or even just my friends.

I give you example, I invested in hotels with my friends who, they're the ones taking it down.

They're the ones doing everything.

I think I get like, I don't know, seven, 8% return on it.

But then also they're looking to sell it within four to five years, which get us, you know, value, value add as well, and close out and get money back.

And rather than me, because I don't have time to cut just all the money that we have, it's hard to constantly deploy it.

Whereas, like, yeah, hey, there's a good option right here, good investment opportunity right there.

And so if somebody were to invest with you, let's, let's just use, I'm just curious, what's, like the top, let's say somebody brings in $200,000.

Like, what's the most we would probably see on a return?

8% is great.

That's a great preferred return.

I mean, you put $100,000 in, you're getting $8,000 a year with that.

If we were putting, like, what's the high end that we would be able to make?

Yeah, around eleven is where it tops out.

So it tops out around 11% to investors.

And you mentioned one thing, too.

It's interesting because I have this thought process, too, of like, I also invest in other types of deals.

And for me, I run a fund, and when I invest, it's like, hey, take my money and just go do your thing.

And I kind of just want to leave it there where I know some people like, well, I only want a twelve month lockup or this.

I'm like, I don't want to have to find a new deal every year.

And that's one of the things where for us now, it's a minimum four years, but after four year period, you can let it ride and keep it.

You can take some of it out, you can do whatever.

There's not a.

And I know some opportunities will basically be like, well, if you don't let us know by the 47th day before it expires between the hours of 11:00 p.m.

and 11:12 p.m.

it kicks in for another five years.

We don't have any of that.

It's the after the four year lockup, people do have their rights.

I will have to make a note.

There is some gate clauses in there, so everyone all at once can't say, hey, give me my money back, because that would cause us to mass liquidation, which could impact the returns of the fund.

But other than that, we tried again to keep it as flexible as possible for investors.

That sounds great.

Now, what problems have you seen now, we've talked about a little bit of foreclosures and stuff.

But what other problems have you seen that you've encountered that we should be watching out for when we're investing in notes?

Oh, great question.

So the first 1st thing that I think a lot of people hear the term notes, and there's funds that are note funds and they also may issue notes.

So, you know, understanding, you know, a note is just an IOU.

That's all a note is, is an IOU.

And whether you're investing in a note fund or you're doing a note, whatever the case may be, is what is backing that IOU.

Is it real estate, is it cars?

Is it a business?

So that's the first thing people have to understand is what exactly am I investing in and what secures that component?

Okay.

The other thing we like to try and talk to people about, make sure they understand, are there tax consequences?

Because they can be different consequences depending on the offerings.

Typically, a lot of notes are considered ordinary income because it's interest income for us.

We did structurally differently as a corporation where we pay corporate tax.

So investors in our fund get a 1099 dividend.

I can't provide tax advice or anything, but if you google dividend rate versus ordinary income rate, you'll see there is a significant difference from a, you know, tax perspective on that.

Then the other is, which is also really, really important is what lien position.

And what do I mean by that is?

And again, if you own a house, you go out and get a mortgage, then all of a sudden you're like, you know what?

It's been seven years in.

My house has got an extra 300,000 with it, and I want to go pull $100,000 out of my house.

Well, you're not going to go refinance that whole mortgage.

You might get what's called a line of credit or a home equity line.

That home equity line is considered second mortgage because it's in a second position behind that first.

Now, those are much riskier investments than investing in firsts for numerous reasons of, you know, 2000, 880, 20 loans were the thing.

I had one, I remember.

And, you know, you basically get 80% of the first or 20% 2nd.

But if values come down, that second could get wiped out.

If the borrower files bankruptcy, they could say, I think the house is only worth 250.

It could wipe out that second mortgage.

You know, your first mortgage always protected.

It's got a get out of jail free card.

You know, that money is either owed.

The only time it's not is if they file chapter seven.

But then if they do that, they don't know you, but you get the property.

So it's kind of like, you know, but you know, in that second mortgage space, it is very different.

So something to understand because the way we like to explain it, the best is when you invest in first, you primarily are trying to hit singles, doubles, you may hit a triple and a home run here and there.

When youre investing in seconds, youre typically either hitting a home run or striking out.

I was talking to a guy the other day, he bought 3 seconds and I told him, im like, man, I could not do your roller coaster.

I think he said he spent about 150 grand between the 350 grand apiece.

He's like, on one of them, I lost everything, got completely wiped.

On one of them, I made about 70,000 and on the last one I lost about ten.

Overall, I made about ten grand.

Not bad.

And I'm like, I'm like, yeah, but yeah, not good.

That's not good.

Yeah.

To me, I'm like the roller coaster ride of like, you know, losing like everything on one, to me, yeah, yeah.

That's not worth it for me.

For ten grand, I mean, ten grand is a lot of money, but for 150 grand, it's not.

Yeah, yeah.

That's something that I always, whenever I get into any investment, I need to be able to at least explain to my wife, because I have to know it enough to explain it, how I'm going to make money, how I'm not going to lose money, and how I would ever possibly lose the money.

Like, what's, what's the way to actually lose the money?

So that's always something I always have to understand myself, because if I don't understand it, I should not be investing in it.

So that's why you try to learn as much as you can.

Now, Chris, we could definitely keep going, but I know you.

We are going to have our conference, the real estate wealth builders conference, the multifamily commercial real estate investing and passive investing.

And so we loved investing in all types of, from real estate to passive investing, note investing.

So it'd be great to see you there.

And at the same time, how can people connect with you?

Because most likely you're going to get some people that say, man, I really want to look into this and I want to learn how to invest in this way, especially if it only takes $5,000 to get into a note and getting 8% or more, I mean, that's, that's terrific, but how can people find you?

How can they reach out to you.

Yeah, so they can go to our website, seven e investments.com dot.

It's the number seven, the letter e investments.com dot.

You know, you can reach out to me, email me, find me on LinkedIn.

Thankfully, my last name is not very common spell like the number seven with an ey in it.

That will be in the show notes as well.

But you know, typically most people just go to our website and from there they can now reach out to me, reach out to one of our investor relations specialists that we have set up a call with them to learn more about the offering as well.

And like I said, we try and keep things as simple as possible.

All our investor relations people are out in California, so they're within the continental 48 states.

It's nothing.

Now, somebody calling you back at 01:00 in the morning.

Like I had one time when I went to go invest with somebody and it was, you know, somebody had on the other side of the world and I'm like, oh, man, check the area code in time zone before you call them.

Well, Chris, thank you so much for coming on, sharing us about this world of noted besting and becoming the bank, which is, I mean, that's the way to make money.

What do you really come down to?

But Chris, thank you so much for being on the show, man.

Yep.

Thanks, Dustin.

Take care.

And that is it for today.

Go ahead and get my free real.

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All right, guys, we'll see you in the next show.

See ya.