Turning Flips into Freedom with Debt for a Life of Wealth and Wisdom with Nathan Turner

Transcript

[Mattias]
Welcome to the REI Agent, a holistic approach to life through real estate. I’m Mattias, an agent and investor.

[Erica]
And I’m Erica, a licensed therapist.

[Mattias]
Join us as we interview guests that also strive to live bold and fulfilled lives through business and real estate investing.

[Erica]
Tune in every week for interviews with real estate agents and investors.

[Mattias]
Ready to level up?

[Erica]
Let’s do it.

[Mattias]
Welcome back to the REI Agent. Your friendly host Mattias here. We had Nathan Turner on the show today.

Nathan is a note investor and he has a fund that you can potentially invest in if you’re interested. I think it’s a really interesting way of diversifying maybe if you’re into that syndication or fund to funds phase of life. But yeah, I think with anything that comes to investing and learning your trade, your business or your finances in general, I think it’s just good to have more information to kind of make a better decision about where you can kind of allocate your funds.

So this is certainly something that you could do within a IRA, a directed IRA. He has something that you could, a contact that could help you do that with. But yeah, I think it’s interesting.

It wasn’t a topic I knew as much about. So it was a good conversation for me to have. So I hope you also learn from this and I don’t just look naive.

But it was, yeah, like I said, it was a good conversation. I mean, I’m gonna keep this one short since it was a great conversation and don’t wanna take up all your time with my blabbering. So without further ado, here we have Nathan Turner.

Welcome back to the REI Agent. I have the honor of having Nathan Turner here in the podcast today. Nathan, thanks so much for joining us.

Pleasure to be here, thank you. Nathan, tell us a little bit about your niche first and then let’s kind of get into how you got there.

[Nathan Turner]
Yeah, so I know you’re specifically targeting real estate investor agents and people who are getting in from that direction. So mine’s a little bit different. It’s real estate related, but it’s not exactly real estate.

So I’m buying residential mortgages, loans, contracts for deed, land contracts, whatever you wanna call them in different states, but essentially loans against property. That’s what I’m buying all over the country. So that’s my niche.

It happens to be secured by real estate, so that’s the real estate piece of it.

[Mattias]
Sure. Okay, well, we definitely had lenders on the show as well. So that’s not too far off.

But before we dive into the nuances of that, let’s kind of get into how you got started in real estate in general or in this space.

[Nathan Turner]
Sure. Yeah, I got started in real estate in the heyday, I wanna say, 2005, six, where everything was going so well and it was really easy to make some money off of real estate and it was great. Timing was perfect.

I started doing fix and flip. I live in Canada, so I was living in Montreal. All the houses I was flipping were in Saskatoon.

So just to give you some context, Montreal is right above Vermont. Saskatoon is just straight north from Eastern Montana. So clear cut across the country, but I would buy it with the help of a realtor in town there and I would fly out with my suitcase full of tools and a sleeping bag and sleep on the floor, just work like crazy for 14, 16 hour days for a week and bang out whatever I could.

Mostly cosmetic, I wasn’t doing anything too crazy. Because the market didn’t demand it and so it was easy enough just to clean it up and then resell it for a really nice profit. And again, like I say, the market was a huge help in that.

Honestly, I could have just bought it, waited a month and resold it for a profit back in those days.

[Mattias]
Yeah, I heard of people doing that, actually.

[Nathan Turner]
Yeah, yeah.

[Mattias]
I had a guest on my show, he got burnt from it. But yeah, he was basically just doing that, just sitting on it for a little bit and selling it. Maybe a year.

Maybe there was a year lease kind of situation. Anyway, keep going.

[Nathan Turner]
Yeah, yeah, so I did that for a couple years and then just as the market turned, I got hung with one property and it was my last one. I only did half a dozen or so, eight, seven or eight, something like that. But it was this very last one and I didn’t know very much about real estate and so I ended up renting it out because that’s what you do, of course.

If you can’t sell it, you rent it and so I did that. But it was one property, one residential door basically in the middle of town, not a very nice neighborhood and no volume, it was one property. So I could find one guy in this city, small, small cities, 200,000 people but prairie town, very sleepy.

There was one guy that I could get to take care of this property and he was terrible. He was absolutely awful where every single month I’d have to call him up and be like, hey man, so did we get paid? Like what’s going on?

Oh yeah, yeah, yeah, for sure. Yeah, I just gotta do some accounting, I’ll get this to you. And they did and for the most part, people paid and it was fine but every time we did have turnover, it was actually cheaper for me to hop back on a plane with my suitcase full of tools and go fix it up and then rent it out to the next person.

I was like, I don’t know, man. This is a lot of work.

[Mattias]
I don’t know, I don’t really care about this. Do you still own it?

[Nathan Turner]
No, we ended up finally selling in 2009, I think it was.

[Mattias]
Okay, but was it long enough to realize a profit or did you just kind of take a hit and move on?

[Nathan Turner]
No, we still turned a profit but you know, and then with the market conditions at the time, I really liked flipping and I thought that was really fun but this renting thing, the market wasn’t right for flipping anymore at that point and the rental, I was like, I don’t know. It seems like a lot of work for whatever it was, 400 bucks a month or something like that. I’m like, I don’t really get it.

So I was kind of turned off to tell you the truth and then it was about a year or so later. So this is like fall of 2008. A friend of mine called me and says, hey, do you wanna help me out with this real estate project in the US?

I’m like, sure, what you got? And I just sold my other business and so I was ready for something else and it was, we had all these properties, about 60 properties, mostly centered in the Midwest and it was a situation where they had bought these properties in like the spring of 2007. So like top, top, top of the market.

So they way overpaid for this stuff. It was supposed to just be a quick flip. They were supposed to just sell it off to another organization and then deal went sideways.

That deal never happened. So when I got on board, it was like, oh shoot, what do we do now? We’re stuck with all these properties that were in really rough shape, spread out all over three or four states and how do we deal with it?

They’re all based in California, so none of them knew anything or had no real estate experience at all. So that was the charge and so we kind of thought we’d, a couple of Canadian boys, we thought we’d invented seller financing. We started selling these houses on terms and creating notes and didn’t know any of the terminology, didn’t know that’s what it was, didn’t know how to do that properly.

So we made all kinds of mistakes, but at the same time, it was a great base. It was a way to get started in it. So that was my introduction to notes, was creating notes without knowing that’s what they were.

[Mattias]
Okay. Okay, so now you are, this is your primary thing and you are, tell me how you, let me, walk me through a deal that you would do to kind of help me get some more context on this.

[Nathan Turner]
Yeah, so you mentioned you’ve had some lenders on the show, which is great and I would love to meet them because what I do, I don’t actually lend out money. I look for somebody else that has already done that. Then I approach them and say, hey, any of those loans are you looking to recapitalize?

For a variety of reasons, whether it’s because they’re not paying anymore for some reason, or because they’re just looking to get cash back out so they can turn it around, do it again, or they’ve got a different investment or they want to send a kid to college, whatever it is, they want cash for that long-term payment stream, they would rather have a lump sum today. Sure. And that’s where I come in.

And so I say, well, you’ve already done the work to create the note. I will cash you out of that, of your position and take over as the new quote unquote lender, even though I’m not actually technically lending the money out.

[Mattias]
Yeah, so the terms don’t change. Right. And, okay.

So is this then primarily, I think, is it primarily seller financing kind of deals that you’re doing this with or?

[Nathan Turner]
It is today. When I first got started, it was all about non-performing loans and the vast majority of those were bank loans at some kind of institution. But it’s shifted over time, like as the economy has changed and there’s less and less of the defaulted notes out there, which is great, but the banks aren’t necessarily selling, not in small quantities to a guy like me, they’re performing loans.

So I’m now turned around. It’s kind of fun. I’m going back to full circle and looking for those people that were doing exactly what I was doing when I got started and creating notes.

And then I’m offering to buy them out and step into that place.

[Mattias]
When you were doing the bank ones, was that, I mean, were they like Freddie Fannie kind of loans? I mean, were they big institutions, not just like your in-house loan, that your bank at the corner. So these were big institutions that you’re approaching about buying their mortgage from?

[Nathan Turner]
Yeah, typically the way it would go is like a bigger hedge fund would buy a big pool from the banks. Like US Bank, we got a lot from them. No, not like Chase or Well.

Well, we did have some Wells actually, but typically, you know, tier B type banks is kind of smaller banks. But they would, the hedge funds would go in and do a purchase for a hundred million. And then they would say, okay, here’s our parameters.

This is what we want. Anything that falls outside of that, we sell off. And so that’s where I came in and I was the guy buying whatever didn’t fit their box.

[Mattias]
Okay. Now, is this on like Facebook Marketplace? Is there a portal somewhere you can go to like where, I mean, I understand this isn’t happening as much now, but like at the time, this is just having a connection to these places or?

[Nathan Turner]
All networking, like so much networking. So I started going to conferences in 2009 and that was it. It’s just, I, you know, called myself the Canadian note guy just to help, you know, get some recognition, some kind of branding.

And it worked pretty well. People got to know who I was. And, you know, if I say I want to buy that, I would actually follow through.

And so got a fairly good reputation that way. And people knew I was for real. So yeah, it worked out great.

And we’ve been just doing that for years and years. And then, like I say, we transitioned over to performing more these days.

[Mattias]
Yeah, okay. So now when you’re looking at, yeah, the owner finance kind of deals, how are you finding them? Are you looking for like delinquent kind of things or what’s that look like?

[Nathan Turner]
It’s still the same kind of thing, a lot of networking. So I actually took over a conference a few years ago. So we’re running that now.

And that’s been huge where people, again, just recognition to know kind of who I am and what I’m about, which is great. And so I’m actively looking for loans that people are looking to sell off for, like I say, all kinds of different reasons.

[Mattias]
And is there, so obviously you’d be getting the interest that Azori agreed upon. I would imagine you can’t change the terms to the borrower. Do you get a cut then off the top as well for like kind of doing this?

Like, do you get like some sort of fee like to, yeah, like I have $100,000 note currently. Are you getting like, am I getting like 95,000 so that you or something like that?

[Nathan Turner]
Right, yeah, it’s gonna be some kind of discount and that’s, it’s calculated. There’s a few factors. So very first thing is what’s the interest rate on the note?

If somebody wrote a note at 4%, 5%, my target yield that I’m looking for for my fund is 12. So my discount is gonna be pretty hefty. If it’s 100,000 balance, maybe 50% and that’s not great.

You’re probably not gonna like my offer. So if it’s a note that was written at nine or 10%, we’re gonna be much, much closer. My discount is gonna be much smaller.

So we’re more likely to make a deal.

[Mattias]
Okay, that makes sense. Yeah, and there’s probably more of those out there. Is there, I mean, just hard money, I know that’s usually short term.

Is that ever kind of come into play as well?

[Nathan Turner]
Yeah, and it’s funny. So I look for either short term or really long term. So it’s either, you know, one to two years or 25 to 30 years.

But that in between time is not so great for me actually. So it’s either gotta be really short or really long.

[Mattias]
Okay, and if there’s a person that is lending at a nine or 10% interest rate, and is that ever like a 25, 30 year product? And if so, what are like the circumstances? Is it just somebody that couldn’t qualify otherwise?

[Nathan Turner]
Yeah, we actually find those a lot. More often than not, that kind of a loan, like a long term higher interest seller finance note, you find a lot of those in Texas. Not to say that’s the only place, but that’s the biggest concentration for sure.

The buyers are gonna be anything from somebody who’s self-employed to ITIN borrower. So like they’re not here illegally, but they’re not citizens either. Those are kind of the two major qualifiers, or just somebody that didn’t qualify to a bank because of whatever.

It could be lower credit score, or it could be, you know, any number of things that made it so that they couldn’t qualify.

[Mattias]
Okay, yeah, that makes sense. Yeah, that’s interesting. So you said you’re investors, so you have like a fund, is it a fund set up then to, you know, people can invest with you?

It is secured by real estate, so that’s probably a selling point there. Then you have like a target return on investment there. Does IRR come into play as well in this circumstance?

Like do people get paid out at a certain time, or is it kind of more of a long-term kind of holding?

[Nathan Turner]
I would consider it more of a long-term thing. It’s a debt fund. Because we’re buying performing notes, when I resell that note, there’s not actually a bump.

Like we’re not selling for more at a future date. So because of that, we’re not doing an equity share because there’s no extra equity to be had. So this is your, you know, set it and forget it, use IRA funds, something like that, where it’s just collecting interest and off you go.

You can compound it if you want, you know, instead of taking the distribution, you just reinvest it. That compounds, that’s another option, but yeah, it’s the long-term stuff. That’s gonna be your best bet on this.

[Mattias]
Well, yeah, and I mean like 12% is great. Okay, so then on top of that, I’m curious how often you’ve had to like, if people have defaulted, how often you’ve had to foreclose and what that process looks like.

[Nathan Turner]
Yeah, it’s interesting. So when I got my start, it was all non-performing. So foreclosure is, it’s a great tool.

I’ll tell you the vast majority of the time, like more than 90%, 95% of the time when I foreclose, it’s because the house is vacant. So either they’ve passed away or they’ve abandoned the property. Those are really most of the foreclosures that we do.

It’s really rare that I actually foreclose on a person. I’m mostly foreclosing just on an empty house. So I, and I don’t like to be that guy, you know, like that’s not what I’m about.

I don’t wanna kick people out of their homes. So we’ve got all kinds of options because I bought it at a discount, I’m far more flexible than the bank would be initially. So, or whoever the original lender was.

So because of that flexibility, I can go in and say, look, you know, your $800 payment isn’t working for you, obviously. So what’s more realistic? You know, maybe we get this situation all the time where somebody, you know, lost their job and now they’ve got this other job.

Okay, great. So first of all, do they just need one or two months to get caught back up? If that’s the case, no problem.

We can tack that back onto the end of the loan. All right, no issue. We’ll just keep on going.

If it’s the better job or the other job doesn’t pay as well. Okay, so $800 a month doesn’t work. Could you do seven or how about 650 or six?

And we come up with whatever terms are gonna make sense for both of us. And then it’s a modification of the loan, it’s recorded the county and now that’s the new loan. That’s those terms.

[Mattias]
So in that circumstance, I would imagine you’re adding years to the end of the loan to make up for the less payment?

[Nathan Turner]
You know, maybe that’s one option and that’s where it gets really fun and creative because we can say, okay, and I’ve done all kinds. We’ve raised interest rates or lowered them, stretched out payment time or shortened it. Payments have gone up or down and it just really depends on what really the borrower is looking for, the person living in the home, what’s gonna make most sense.

And then we come to terms and that’s the new law.

[Mattias]
Yeah, no, I’ve done, I’ve personally done one owner financing creative deal, if you wanna call it that. There was a lot of moving parts with it. It was kind of a unique situation.

My parents were buying one, it’s a very nice quadruplex or it’s actually two duplexes put together. They were buying one apartment to live in, to downsize in. It’s a perfect scenario for them in a great location, beautiful, beautiful place.

We did owner financing on the rest and I actually put it all on one half of the duplex. So that half of the duplex is over leveraged, but an appraiser, it doesn’t matter, right? It’s the same thing as the owner.

And then now that allows me some flexibility to, if my parents were like, God forbid, they had an emergency, they need to get to a nursing home or whatever, I can do a refinance on just that half and get their money out and let them do their thing. There was just, it’s just fun when you get to that space because you can kind of custom tailor, yeah, perfect for that situation and where it’s a win for everybody.

[Nathan Turner]
Yeah, love that. That’s awesome.

[Mattias]
And at the time I felt like I was probably paying too much for it. I don’t know if maybe that was just my ego, but at the end of the day, I got a great term. So I only had to bring $30,000 of my own money into the deal, which made it a win for me.

And like I said, it’s a great property. My parents are super happy. So it’s just a win-win all around.

[Nathan Turner]
Yeah, that’s perfect. And then, so one other option is instead of refinancing, you can sell off the note. And that’s where somebody like me would come in and say, well, I mean, maybe it’s because you don’t wanna refinance with the bank because of, I don’t know, because you don’t like the bank, or maybe it’s because this is faster or whatever the case might be, but it’s another option.

Me or somebody like me, and if it’s not me, I can refer you to one of my colleagues and say, so this one’s not really in my wheelhouse, but you know what? Call Dave, he’s got you.

[Mattias]
Well, and the thought was securing more debt on it. So is that possible as well?

[Nathan Turner]
Yeah, it’s a little unusual, but yeah, that’s doable for sure.

[Mattias]
That was kind of like a worst case scenario where we don’t really have, they may need to move faster than we have really built up the equity or the appreciation to be able to do other options. And so worst case scenario, then we’re very over leveraged if we have to be for a period of time. But again, we structured this on a 20 year note with the owner and that hurt extra because again, the rents were lower.

I felt like I overpaid because of that, but it’s all turning, so it’s great. It’s a really good situation. And again, I’m just bringing that up because it’s the beauty of this space is that you can really fine tune the situation for, or fine tune the note, the scenario, all the details of it, all the terms for the scenario itself.

And it’s cool that you had the flexibility to do that. Big banks, they can’t. I mean, they just don’t have the capacity.

It’s just like, this is our box.

[Nathan Turner]
That’s the thing, the capacity, the imagination, I’m not sure which it is. In any case, yeah, they just, they won’t do it. This is what we can do and that’s it.

And anything outside of that, well, you’re out of luck. And then somebody like us takes over and we’re like, oh man, are you kidding me? There’s all kinds of flexibility here and there and we can structure this way or that.

Let’s figure it out.

[Mattias]
And yeah, I mean, any agent listening to this probably has had experiences with a bigger bank that they, one thing that comes to mind for me is I have a, we don’t have a ton of condos in my area. And there’s a condo that does, it’s warrantable, whatever the word is, for Fannie Freddie. It’s sold multiple times, tons of them have sold this way.

But have a big bank come involved and they see something in the disclosure pack that they don’t like and they’re out, they’re just done. And now we have a buyer thinking like, this place, I won’t be able to sell it again. I’m like, no, like we’ve literally had VA, FHA, every kind of different loan you can imagine happen.

It’s just, it was a big bank that has a box and they have very low risk tolerance and they don’t care about their reputation going forward because they have plenty of business coming in.

[Nathan Turner]
Yeah, yeah, exactly, exactly. And they’re big enough that, yeah, you don’t actually matter to them.

[Mattias]
Not at all. You work with a local lender. Their skin is on the line every time.

They wanna make sure that deal goes through unless there’s absolutely something they can’t avoid. And that’s gonna be the same for you. I mean, your reputation’s on the line, you’re networking to get your business.

So it’s important to you.

[Nathan Turner]
Yeah, yeah. And then really where I like to come in in that situation is I’ll let you go ahead and do all of that part of it. Qualifying the borrower and figuring out how to make the payments work and all this and that.

I’ll let you do all that part and then I’ll just come in and say like, so what are the terms again? Okay, this is how much I’ll give you for that. I’m the after effect.

[Mattias]
Sure, sure. But it’s cool that if there is a bumpy road you can get a little creative.

[Nathan Turner]
Yeah, definitely, yeah.

[Mattias]
For everybody. Yeah, that’s awesome. So is there any other, well, I guess, a better question.

Yeah. How is the market in your area now? Do you see things slowing down at all?

Has there been any price drops since the craziness of 2021 I guess may be the peak? And if so, what similarities do you see from the 2008 kind of market?

[Nathan Turner]
Yeah, it’s so interesting to see and you kind of look back over time and see how things have changed and there definitely has been a change. So just to give you an idea, my first non-performing note purchase in 2010, it was a package of three different loans on three different properties, all based in Columbus, Ohio. Three different loans, three different properties, total purchase price for me was $10,000.

And that was, I was talking with a friend, a colleague and he had the deal and I’m like, 10 grand, really? For all three of those? That’s insane.

Okay, and so I’m like, you know what? It’s worth a $10,000 experiment to see what happens. And it worked out amazingly well.

And I’m like, okay, this is awesome. I love this, let’s do this. Go from there to coming up 2018, 19, non-performing notes were trading at almost the same price as a performing note.

So in other words, if the balance of that note was $100,000 and it was, it had not been paying for the last year, the purchase price for that at the time was probably around like 70, 75, maybe 80 cents even. And if it was performing, if they had been making payments, I could buy it for almost the same amount. And so it just, the margins got so slim on that and just availability went way, way down.

And so that was- Are you interested in this? Is that why? You know, it was a combination of things where there’s much more interest in non-performers and so demand was much higher.

And then at the same time, just market conditions had changed. Enough of the 2008 inventory had moved through. So there was just less availability there.

And they didn’t have to lower the price as much, that whole supply and demand thing. Yeah, interesting. Because of that, we started really thinking and then when COVID hit, it was like, okay, let’s rethink what we’re doing here and how do we want to change things up?

And it just gave us, for me, it was kind of nice. We had a little bit of a break just to slow down enough to say, okay, let’s start working on the business instead of in the business and rethink some things and decide how we want to go forward. So that’s where we kind of first thought of, you know what, maybe we should just change over and start doing some performing loans.

And the biggest advantage, disadvantage there is with the non-performers, the potential for higher returns is much greater because you’re buying at a bigger discount and then it can take several different paths and all of them good. And depending on how you bought it and if it goes this direction or that direction, you’re still making money, maybe a little more, maybe a little less. But it’s generally speaking, you’re gonna get higher returns off of that.

There’s a lot more work and more time involved in those things. But like I say, it tends to be worth it in the end. With availability and pricing changing, it didn’t make as much sense.

Then you started looking at the performing loans. Performing loans have been around forever. Like that’s been the mainstay of note investing for literally centuries, for a long, long, long time.

Lower returns generally, but a lot less work, a lot less involvement needed once you’ve purchased this loan. Not none, but less. And so we started looking at that and looking at my kids are getting older and those sorts of things and looking at how I wanna be spending my time.

And that was really the catalyst for everything that we’re doing today with the fund. Yeah. And then it’s just interesting, you start looking at it and going, okay, so not only is it better for me, but it’s actually also better for the investor because then they’re instantly diversified into a pool of funds and there’s increased safety, there’s increased predictability on when and how much they’re getting paid.

Like, yeah, okay, all right, we’ll do it. Okay.

[Mattias]
Yeah, I love it. I love it. I’ve definitely talked to different people in different areas.

And I think the areas that are seeing price declines are definitely in the opinion of maybe those markets being the canary in the coal mine for something bigger. It’s really interesting how differing the opinions are between different people as to like kind of the future. I really say, obviously nobody has a crystal ball, but to me, it definitely, especially in my market seems very different than anything in 2008.

Inventory levels alone is kind of the biggest thing. The lending practices seem to be much cleaner as well. So yeah, I guess it’s just always interesting to hear people’s opinions on.

[Nathan Turner]
Yeah, and it was really interesting. So we just ran, I mentioned we took over this conference. We just had it just a few weeks back and same kind of thing.

We had somebody there from Mortgage Bankers Association. So he’s got all his charts and all his graphs and everything showing trends that have been happening over the last, I don’t know, going back 20 years and looking to see where the line’s going. And it is going up.

Yeah, from like defaults and things like that. So we are definitely seeing like, and I would kind of consider that mainstream where that kind of information is coming out where there is an uptick in a lot of these defaults and people starting to struggle with the mortgage payments. Right after the Mortgage Bankers guy, we had a different panel on, and it’s more people that are like in the trenches and doing this day-to-day.

And I think a lot of that information that they’ve got at Mortgage Bankers doesn’t account for a lot of the smaller investors like us and smaller being under a hundred million where we’re not reporting to the same agencies. So that information is not included in those bigger charts. And we’re definitely seeing that on our side where there is definitely an increase in short-term especially has been struggling just with payments and defaults.

And even in the long-term, there’s been a small uptick. It hasn’t been massive, but there has been a small uptick. And so we’re all kind of watching and waiting to see what’s gonna happen.

And are we gonna see a bunch of these non-performers coming back?

[Mattias]
We’ll see. Yeah. I talked to, he was a realtor that helps people avoid foreclosure.

And he had kind of a whole fund. He had went through it himself in 2008. And so he went through the whole process, has a lot of pain with it.

And most of the time people just don’t really understand their options and what they can do to try to advocate for themselves and try to right the ship. So he does his best to help them. And he was saying that he believed that there was a lot of, like the bailouts that were happening that are happening are a lot more consumer related as opposed to like a big bailout to a bank which he thinks is a good thing.

But he also wonders if that also kind of artificially creates a backlog of future foreclosures that could come and yeah, down the line all of a sudden. So yeah, it’s hard to know. It’s hard to know for sure what’s going to happen.

[Nathan Turner]
Actually, I would agree with that because like in 2019, we were all doing our thing and having conversations about like, okay, just if you look over history, we’re due. Timing is such that we’re due for some kind of a downturn and it wasn’t happening yet. So when COVID hit, same thing.

We all got on these calls and had this big 20 person Zoom call and we’re like, okay, so this is it, right? We’re gonna see all these defaults coming through. And then it didn’t.

And a whole bunch of money got pumped in and really artificially propped everything up. And so good or bad, right or wrong, I don’t know. But I’m just looking at the aftereffects and I think we are starting to see and I think we’re gonna continue to see and over the next year or so, a lot of those COVID payments that were helping prop things up are starting to fall apart.

And it’s getting tough for people.

[Mattias]
Yeah, yeah, yeah. Certainly if people didn’t take advantage of or bought something after those crazy low interest rates, it can be a high payment. I mean, we actually just, we did a cash out refinance on a property we were flipping.

And I think our payment on a house that’s about a thousand square feet is I think a little bit more than our payment on our 46,000 square foot house. So it’s just like, I mean, we got it a while back too. So there’s a lot of appreciation and yeah, anyway.

But it’s just kind of interesting to see and it can be tough. So I guess anybody out there looking to buy, definitely I think it’s good to try to be conservative on the numbers and make sure you got, yeah, you don’t max out your possible mortgage payments.

[Nathan Turner]
Yeah, if you’re looking at that like worst case scenario, middle case scenario, best case scenario, maybe stick with the worst case scenario for now.

[Mattias]
Yeah, yeah. But yeah, and other news, I think, did it get past that the 100% depreciation would come back? I guess that wouldn’t really apply to your world since you’re not actually owning the asset.

[Nathan Turner]
Yeah, and it’s really interesting. And as much as things are going on in all over, inflation and different rules changing and announcements coming out every day and changing the next day, there’s a lot of uncertainty. And again, I don’t care what side of your aisle you’re on or whatever, I’m Canadian, so I’m totally agnostic when it comes to that.

But really the key word today is uncertain. And which means change and it means fear for a lot of people and uncertain is the word. The cool thing is with notes is because what I bought is an established set of terms, very little of that matters.

Whatever inflation is doing, whatever it’s doing, pricing and this, that and everything else, eggs can be more or less. For the most part, it doesn’t really make a difference to me. Yeah, monthly payment is the monthly payment, the interest rate is the interest rate and it is what it is.

And either you can pay or you can’t. If you can’t, I can probably help you fix that. But we’re relatively unaffected.

So it’s, nothing is recession proof, but we’re definitely resistant.

[Mattias]
That makes a lot of sense. I mean, yeah, you’re not again tied to the pricing of the house so much. I mean, if it’s not really bad and you owe more than what the house was worth, that might be a different story, but buying at a steep discount, that’s a really good point.

Which actually brings me to my next question, which would be like, are people that are investing in your fund, do they have to be accredited investors or what does that look like?

[Nathan Turner]
Yeah, for my fund it is. It’s one of those government rules and again, government, good or bad, right or wrong, that it is what it is. And so that’s what they’ve set up.

And yeah, accredited. I wish we could do something different to tell you the truth, but my hands are tied.

[Mattias]
Yeah, so to hash out what that means to people that are listening, that’s a net worth of a million or more outside of your primary residency or making what, 200,000 single, 300,000 married. Is that right? Yeah, that’s right.

And that’s what, for the past two years, I believe?

[Nathan Turner]
Yes. And I mean, if you’ve just had that one year, still come and talk to me and we’ll see what we can figure out. But those are the, that’s what’s on the records.

That’s what’s in the books.

[Mattias]
Yeah, and it’s good to know about these options. I think like one of the things that I think is really good for agents to know is that this world exists. And as for many syndications, they can take advantage of the tax benefits with apartment buildings or whatever.

Getting that accelerated appreciation is all gravy as well. But the beauty of all this is, is you can look at it kind of like a stock portfolio as well where you can kind of diversify and place a certain portion into something like what you’re doing, where it’s gonna not be as dependent upon what the value of the asset is. And you can get that steady kind of income from it.

And it’s hands-off and related to your field, so.

[Nathan Turner]
Yeah, yeah, exactly. And that’s what I say to people as well. It’s like, look, don’t put all your eggs in any basket.

Split it up. And if you wanna put some into some kind of a syndication, great. Truth is, over time, you’re probably gonna get a higher return out of that.

But you’re probably also gonna have to wait for it. Where something like mine is, it’s, you know, we’re generating income day one. As soon as the money comes in, we buy a note, and that money is coming in month after month after month.

So it’s not a promise of some future projected return. This is, we know exactly what the return is as soon as we buy a note. So it’s, in that way, I like the security of it.

And then, you know, you mentioned like the housing prices going down. That’s another beauty, you know? So that $100,000 balance that we bought, the house is probably worth more like 150.

And then we also bought a discount. So our investment to value is really, really low. And so we’ve got a lot of room there for the what if, just in cases, whatever happens at some future point.

[Mattias]
No, it makes a lot of sense. So when people are investing in a fund like what you have, I know that with syndications, this is different than a fund, of course, but with syndications, you’re kind of presented the deal, right? Like you have to like vet kind of the operators, which would be an operator.

You would have to vet the deal itself. But in this circumstance, you’re more like kind of giving like your buy box, if you will. And so it wouldn’t be, they’re not gonna be presented each mortgage you’re gonna buy or each note you’re gonna buy, right?

[Nathan Turner]
Right. Yeah, no, and I think the important thing is for people getting involved in something like this is make sure you have just at least some understanding of how it works, so that you can be comfortable knowing what you’re investing in. But after that, you really don’t have to think about it.

It’s the mailbox money of all mailbox monies is it’s just coming into you without you really having to do anything at all. You can review the report, that’s it.

[Mattias]
Yeah, no, it is the beauty of it. Because I mean, again, with like a syndication, like there’s kind of a game plan they usually lay out. And so, it’s not a bad deal to check in to make sure that that game plan is kind of being executed.

So even though it is very passive, it is also maybe a little bit more work than what you would be providing. So, yeah, I mean, and the whole accredited investor thing is really boiling down to people. The government doesn’t want people like just spending money that they don’t have or they can’t afford to lose.

It’s kind of like an asset class that would be a little bit less traditional. Some might see risky, and there’s risk always with all this stuff. Always, yeah.

But yeah, so that’s kind of the point behind it. And when you become successful enough in your pursuits of real estate or whatever, it’s just open some more doors where you can kind of, the sum of all this money piled together can kind of, the magnitude of what it can do, it becomes a lot bigger.

[Nathan Turner]
No, exactly. And again, this is a great IRA investment or a solo 401k or any of those retirement plans, any of those work for this kind of investment.

[Mattias]
And then it can grow out there. Does it have to be self-directed to do that?

[Nathan Turner]
I guess. And if you’re with Fidelity or somebody like that that doesn’t let you do it, we can hook you up with somebody that will let you do that so that you can put it wherever you’d like.

[Mattias]
Yeah, that’s a great point. A lot of people could take advantage of that as well. Well, yeah, I mean, so this has been a super interesting conversation.

Not one that I really was as familiar with, to be honest. So it’s been educational for me. I hope it’s been good for everybody else.

Before we sign off here, I’m curious if you have any golden nuggets you wanna share with our audience.

[Nathan Turner]
You know, you mentioned that before we got on and I think first and foremost is just to know that this kind of thing exists and that it’s not some weird idea. Literally, you can go back in the Bible and find verses about buying and selling debts. Like it’s been around forever.

So it’s not a new idea. It’s not a new concept. It’s been around for a long, long time.

For some reason, it’s not very well known, but know that it’s out there. And if you’re a realtor where you’re looking to sell a property and maybe you’re having a harder time selling it, seller financing is a great option. And there’s different ways that you can set that up and I’d be happy to have a conversation with you.

And knowing that there’s a backend, if you’ve got a seller who is looking for total cash out, that’s still a possibility with seller financing in place. So we can have those kinds of conversations if you’d like. I think my last thing that I like to tell people is I think back in those days when I was flipping properties and things like that, that was almost 20 years ago now.

And I just think, you know, if I can go back and talk to that guy 20 years ago, me is just, things are bumpy and there’s always gonna be ups and downs and there’s always gonna be some kind of roller coaster. Just keep going, just keep going. There’s so much out there.

There’s so much opportunity and there’s so much to learn. Sometimes you gotta learn it the hard way. I did, but that’s what makes you better.

So just keep going.

[Mattias]
Yeah, I love that, having that perseverance. Yeah, not getting too bogged down on the current moment. Yeah.

Do you have any books that you think are fundamental that like you think everybody should read or maybe something you’re just currently enjoying?

[Nathan Turner]
If you want, so there’s, man, I like to read. So there’s a few books on note investing. There’s not a lot of books out there.

The one that I would say is kind of the granddaddy of note investing is called Invest in Debt by Jimmy Napier. It’s a little bit harder to come by because it’s older. It’s like four or five years old.

From the early 80s, late 70s, maybe. So it’s an old one and the numbers are kind of frustrating, kind of embarrassing almost. But when he talks about buying a house for $50,000 and this is the kind of payment, I’m like, really?

But the principles are there and add zero or whatever you gotta do, but the principles are there and they’re correct. And so it’s a great read and that’s a good base for what we do in the note investing world. That’s a great one.

That’s a fun one.

[Mattias]
Okay, cool. If people are interested in learning more about what you do or potentially wanting to invest with you, where can they find you?

[Nathan Turner]
Best place to go is my website. It’s earnestinvesting.com and that’s E-A-R-N-E-S-T. So earnestinvesting.com and then there’s links there for the conference. Won’t do that again until next year, but if you’re interested in being more hands-on, that’s a great place to come and learn about that. We don’t do any coaching or anything like that or nobody’s gonna try to sell you anything at the conference, but it’s a great place to come and learn and network. But otherwise, there’s a little more information about note investing and some ways to contact me through the site, but that’s the place to go.

[Mattias]
Well, Nathan, thanks so much for being on the show. It’s been a pleasure. Hey, thank you so much.

Good to be here.