The Notable Capital Fund specializes in acquiring in debt instruments secured by tangible real estate. These can be performing, re-performing, or even non-performing assets. Each asset class has it’s own financial model and different risk/reward scenarios. These are the kind of assets they acquire in their portfolio.
The Fund sources distressed mortgages via relationships with banks, hedge funds, and private equity groups. These assets may be purchased as ‘one-offs’ or as a small pool of mortgages.
Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the "Small Builder" borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and "Ground up Construction Loans" for investors only in NC, SC, GA, VA and TN (some areas of FL, as well).
As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.
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Hi everyone. Bill Fairman with Carolina Capital
Management. Wendy is not with us today. We are not letting her come in. She had
some other things to do. Jonathan Davis is with us today. He is actually the
guy that does all the work around here. Wendy and I just smile and talk a lot.
So don't forget to like, subscribe, thumbs up. What else?
Management. Wendy is not with us today. We are not letting her come in. She had
some other things to do. Jonathan Davis is with us today. He is actually the
guy that does all the work around here. Wendy and I just smile and talk a lot.
So don't forget to like, subscribe, thumbs up. What else?
Contrary to my age, I'm not that hip with the town.
That's right. You're a millennial. You're supposed to know
all that social stuff. By the way, we do have a fund and we would love people
that are accredited investors to check it out. It's CarolinaHardMoney.com go to
the investor tab, fill out a form and schedule an appointment and we'll talk it
over. Now we are a lending fund only and we lend money to other people. You get
a return. Anyway, we have the pleasure of having Bob. Geez Bob. I'm sorry I
messed up your last name. Help me.
all that social stuff. By the way, we do have a fund and we would love people
that are accredited investors to check it out. It's CarolinaHardMoney.com go to
the investor tab, fill out a form and schedule an appointment and we'll talk it
over. Now we are a lending fund only and we lend money to other people. You get
a return. Anyway, we have the pleasure of having Bob. Geez Bob. I'm sorry I
messed up your last name. Help me.
Malecki.
Malecki I've been saying it like for 20 minutes and as
soon as I'm supposed to say it, I forget it.
soon as I'm supposed to say it, I forget it.
I hear you.
By the way, forgive me. I flew from the West coast to the
East coast yesterday and we were through the daylight savings change as well,
so I'm suffering from jet lag, not to mention old age.
East coast yesterday and we were through the daylight savings change as well,
so I'm suffering from jet lag, not to mention old age.
So Bob is in the note business and you know we're in the
note business as well. The difference is we create new notes and Bob bills and
notes that have already been created. Bob, give us kind of a background how you
got into that business and then we'll talk about the current things.
note business as well. The difference is we create new notes and Bob bills and
notes that have already been created. Bob, give us kind of a background how you
got into that business and then we'll talk about the current things.
Absolutely. Bill, thanks for having me on. By the way, I
started I think in 2013 or so. I was a house flipper. I own some rentals. When
involved in real estate since about 2000, late 2006 or so and one of my agents
on a who helps me liquidate my flips. She was buying mobile homes and
repositioning those and she found a couple in Sammamish Washington. I'm near
Seattle. I'm on the West side and Sammamish is on the East side and they wanted
to sell their note. They had a note on a mobile home that they sold to another
couple and they, these, these folks were moving to Arizona to retire, but they
needed the cash and they needed to sell it fast. And so Deb, Deb contacted me
and connected me with this couple, and the note was only $14,500 or so, but I
offered them 7,000 or 7,500 for purchase, 50% on it.
started I think in 2013 or so. I was a house flipper. I own some rentals. When
involved in real estate since about 2000, late 2006 or so and one of my agents
on a who helps me liquidate my flips. She was buying mobile homes and
repositioning those and she found a couple in Sammamish Washington. I'm near
Seattle. I'm on the West side and Sammamish is on the East side and they wanted
to sell their note. They had a note on a mobile home that they sold to another
couple and they, these, these folks were moving to Arizona to retire, but they
needed the cash and they needed to sell it fast. And so Deb, Deb contacted me
and connected me with this couple, and the note was only $14,500 or so, but I
offered them 7,000 or 7,500 for purchase, 50% on it.
And they accepted that. And when I did the math on the
monthly payments over, I think it was a five year, I could just got paid off or
finished it, but it ended up being about a 40% return on my money and I bought
it my IRA and kind of hit me in the head. I've gone to REIA meetings where
Eddie Speed has shown up and talked about notes and I couldn't understand why
he was talking about notes and now it finally get me. So I bought the note in
the IRA and collected the cash flow and that got me really going on learning
more about distressed mortgage debt, which is what I do. I buy distress debt
and reposition it with the borrowers, get them re-performing if possible, and
it really magnifies the return. So over the past, what is that, seven years or
so I, I stopped flipping homes about three years ago.
monthly payments over, I think it was a five year, I could just got paid off or
finished it, but it ended up being about a 40% return on my money and I bought
it my IRA and kind of hit me in the head. I've gone to REIA meetings where
Eddie Speed has shown up and talked about notes and I couldn't understand why
he was talking about notes and now it finally get me. So I bought the note in
the IRA and collected the cash flow and that got me really going on learning
more about distressed mortgage debt, which is what I do. I buy distress debt
and reposition it with the borrowers, get them re-performing if possible, and
it really magnifies the return. So over the past, what is that, seven years or
so I, I stopped flipping homes about three years ago.
The market turned over here, made no sense anymore. I've
actually sold off a few of my rentals. My standing joke is that I have a tenant
who pays me money every month and leaves me alone and I realize that those are
called borrowers, you know? And it really made more sense for cash flow to have
a borrower paying me money on a monthly basis than a renter, although there's
not as many tax breaks. Doing it in my IRA made a lot of sense. And since then
I started to private equity funds. The first was resolution capital management,
which is, acquires first position, non-performing debt. We raised a few million
dollars, we're in the third year of a five year closed ended fund. And we're,
we've got about 95% of the loans re-performing or liquidated one of the other.
And that was great. It was, it was an opportunity for me to partner.
actually sold off a few of my rentals. My standing joke is that I have a tenant
who pays me money every month and leaves me alone and I realize that those are
called borrowers, you know? And it really made more sense for cash flow to have
a borrower paying me money on a monthly basis than a renter, although there's
not as many tax breaks. Doing it in my IRA made a lot of sense. And since then
I started to private equity funds. The first was resolution capital management,
which is, acquires first position, non-performing debt. We raised a few million
dollars, we're in the third year of a five year closed ended fund. And we're,
we've got about 95% of the loans re-performing or liquidated one of the other.
And that was great. It was, it was an opportunity for me to partner.
I've got a partner, Kevin Mowen in Seattle and Ben Cotey
in San Francisco and, we work virtually. We use FCI for our servicing. From
there, I met my partner now Josh Andrews and Scott Ruzich and they approached
me about it back in 2017, late 2017 they wanted to start a private equity fund
to buy distress mortgage debt. So I consulted with them for, well it took us
about nine months to construct the fund and put everything together. But by the
time that we got everything put together, they invited me to, to be a partner
with them, a third party partner and run the fund. And so we launched that in
spring of 2018 and that fund is a little bit different in that we're buying
primarily second position, the stress debt, he locks, that kind of thing in
markets, you know, if we can control the acquisition, we buy small pools from
hedge funds, but the ideal loan for us is appreciating market where the
borrowers is current and paying on their first position note.
in San Francisco and, we work virtually. We use FCI for our servicing. From
there, I met my partner now Josh Andrews and Scott Ruzich and they approached
me about it back in 2017, late 2017 they wanted to start a private equity fund
to buy distress mortgage debt. So I consulted with them for, well it took us
about nine months to construct the fund and put everything together. But by the
time that we got everything put together, they invited me to, to be a partner
with them, a third party partner and run the fund. And so we launched that in
spring of 2018 and that fund is a little bit different in that we're buying
primarily second position, the stress debt, he locks, that kind of thing in
markets, you know, if we can control the acquisition, we buy small pools from
hedge funds, but the ideal loan for us is appreciating market where the
borrowers is current and paying on their first position note.
And there's equity above the first and our second position
note. And for those kinds of loans, we're finding that those borrowers are very
willing to come to the table for a loan mod or if the balance is pretty low,
they'll just pay it off and refinance their, themselves out of the first and
get a lower rate. So it's been a really a good time in the economy to have
second position notes in most markets where it's appreciating and we're
continuing to run that fund through 2023 it's a closed ended private equity
fund under reg D, 506B I believe.
note. And for those kinds of loans, we're finding that those borrowers are very
willing to come to the table for a loan mod or if the balance is pretty low,
they'll just pay it off and refinance their, themselves out of the first and
get a lower rate. So it's been a really a good time in the economy to have
second position notes in most markets where it's appreciating and we're
continuing to run that fund through 2023 it's a closed ended private equity
fund under reg D, 506B I believe.
So when you raise the capital in these funds, are you utilize,
in other words, it's closed end funds or you're raising the capital and you're
buying all the notes at one time and then you have a five year workout or
you're buying them in different phases?
in other words, it's closed end funds or you're raising the capital and you're
buying all the notes at one time and then you have a five year workout or
you're buying them in different phases?
It's basically as we acquire the capital, then we deploy
that into assets. So it's a rolling deployment so to speak. And then the, the
fund is, so whoever comes in in the year three basically has two years left of
preferred return paid out to them. It does not, some funds will do a five year
where you, the first day you engage with the fund, it's five years before you
get your money back. Ours is basically cumulative.
that into assets. So it's a rolling deployment so to speak. And then the, the
fund is, so whoever comes in in the year three basically has two years left of
preferred return paid out to them. It does not, some funds will do a five year
where you, the first day you engage with the fund, it's five years before you
get your money back. Ours is basically cumulative.
So you're, you're constantly raising money through the
entire closed into term?
entire closed into term?
Exactly.
Okay. So you didn't do like a capital raise and then, then
move into it. You are going on the whole time.
move into it. You are going on the whole time.
Yeah, exactly.
It's fun.
Yeah. And what we found is because I'm fairly popular on a
forum called BiggerPockets, I've had a pretty good following and we ended up in
our first year and a half raising $2.5 million and now we're, we have a $5
million caps or continually raising as we go along. And we, you know, the
first, what I'm finding too is at first position distressed mortgage debt from
2008 that inventory has pretty much really shrunk a lot. I'm not seeing a lot
of viable assets that we can acquire in and reposition for a reasonable return.
So that's good that we're winding down resolution capital, but with notable
capital management, my partner Josh has got some very good connections with
asset managers that he's worked with over the past six years and there's still
quite a bit of inventory on distress. Second position debt.
forum called BiggerPockets, I've had a pretty good following and we ended up in
our first year and a half raising $2.5 million and now we're, we have a $5
million caps or continually raising as we go along. And we, you know, the
first, what I'm finding too is at first position distressed mortgage debt from
2008 that inventory has pretty much really shrunk a lot. I'm not seeing a lot
of viable assets that we can acquire in and reposition for a reasonable return.
So that's good that we're winding down resolution capital, but with notable
capital management, my partner Josh has got some very good connections with
asset managers that he's worked with over the past six years and there's still
quite a bit of inventory on distress. Second position debt.
People get scared when you're talking about second
mortgage positions, but you're getting those for a lot less money. And...
mortgage positions, but you're getting those for a lot less money. And...
Absolutely.
It's also a longer, a little longer term play. Most people
are gonna want to get in involved in the refinances and you can't do that if
you have a second position lien you, you have to, nope, you're not going to
subordinate. Right. So they have to work out something with you, right?
are gonna want to get in involved in the refinances and you can't do that if
you have a second position lien you, you have to, nope, you're not going to
subordinate. Right. So they have to work out something with you, right?
Yeah. Yeah. And what we're finding is only about 3% of
the, of the assets in our portfolio we're actually going to foreclosure on,
which is a good thing cause we, you know, both in both funds, foreclosure
obviously is not good for the borrower, but it's also quite, quite a disruption
for the fund because it entails obviously more expense for us for, from the
fund. And then the risk of getting the asset back and not knowing what's inside
the house can be kind of surprising sometimes. And, and we can actually lose
money on some notes because the condition of the house is just so bad that we
can't resell that asset as, as an REO and recapitalize at a profit.
the, of the assets in our portfolio we're actually going to foreclosure on,
which is a good thing cause we, you know, both in both funds, foreclosure
obviously is not good for the borrower, but it's also quite, quite a disruption
for the fund because it entails obviously more expense for us for, from the
fund. And then the risk of getting the asset back and not knowing what's inside
the house can be kind of surprising sometimes. And, and we can actually lose
money on some notes because the condition of the house is just so bad that we
can't resell that asset as, as an REO and recapitalize at a profit.
Right. Well, I'm going to, someone who just bought a house
that has all kinds of stuff in it. He knows what you're talking about.
that has all kinds of stuff in it. He knows what you're talking about.
Yeah. Hopefully no raccoon in there. That was, that was,
yeah. There you go.
yeah. There you go.
But, your number, and I want to stress this to the audience
out here. Your goal when you were buying distressed notes is not to foreclose.
It is to try and work out a deal because you're getting it at such a discount
that you have the power to go in there and renegotiate the terms and still make
a good money, turn them into performing assets and then turn around and sell
them to somebody that is looking for performing loans. Right?
out here. Your goal when you were buying distressed notes is not to foreclose.
It is to try and work out a deal because you're getting it at such a discount
that you have the power to go in there and renegotiate the terms and still make
a good money, turn them into performing assets and then turn around and sell
them to somebody that is looking for performing loans. Right?
Exactly.
I have two questions if you dont mind. Yeah. One is what
is your typical CLTV constraint when you're going into this? I mean it's
probably, you know, market-driven, I'm sure, but then you know, my other question
is if you're in second position and you're going into foreclosure, what's the
workout process with the first lien holder and how does that work? You know,
because there's a chance that your lien can be extinguished through the
foreclosure process. So what, what do you all do in there?
is your typical CLTV constraint when you're going into this? I mean it's
probably, you know, market-driven, I'm sure, but then you know, my other question
is if you're in second position and you're going into foreclosure, what's the
workout process with the first lien holder and how does that work? You know,
because there's a chance that your lien can be extinguished through the
foreclosure process. So what, what do you all do in there?
Well, yeah, I mean strategically and my partner Josh
really runs that portion. But from my background and working with him in this
fund, you know if there's equity then the extinguishment through the court
system is pretty minimal. If there's not equity, if the, if the combined loan,
the value of the CLTV is higher than the value of the home, we may not
foreclose. We may sit and spin on that one cause we don't want to risk
extinguishment. If there is equity and we foreclose and the first is sitting
there and it was pay being paid, then we would typically take over the first
payments and then liquidate the property as quickly as possible to pay off that
first. Cause once we foreclosed the second position, we are now the new owners
of the property so to speak. Although the liability for that first is still
towards the borrower, the former owner of the house that we don't want that
first foreclosing on us as the new new quote unquote owners so to speak.
really runs that portion. But from my background and working with him in this
fund, you know if there's equity then the extinguishment through the court
system is pretty minimal. If there's not equity, if the, if the combined loan,
the value of the CLTV is higher than the value of the home, we may not
foreclose. We may sit and spin on that one cause we don't want to risk
extinguishment. If there is equity and we foreclose and the first is sitting
there and it was pay being paid, then we would typically take over the first
payments and then liquidate the property as quickly as possible to pay off that
first. Cause once we foreclosed the second position, we are now the new owners
of the property so to speak. Although the liability for that first is still
towards the borrower, the former owner of the house that we don't want that
first foreclosing on us as the new new quote unquote owners so to speak.
Gotcha. Okay.
Nice. So I'm biased because I'm also in the loan business
or note business. But I like the fact that when you have a note that you are in
control of the asset without being responsible for the asset. And you know, we
talked about tax benefits of owning property and the importance of having as
many of your notes in a tax deferred or tax exempt vehicle. You want to expand
on that a little bit? Can people buy notes from you at all? Or..
or note business. But I like the fact that when you have a note that you are in
control of the asset without being responsible for the asset. And you know, we
talked about tax benefits of owning property and the importance of having as
many of your notes in a tax deferred or tax exempt vehicle. You want to expand
on that a little bit? Can people buy notes from you at all? Or..
Sure, sure. Yeah. Right now we're not selling much of our
portfolio. Our goal is to keep it in, keep all the assets as many of the assets
in the portfolio as possible so that when we liquidate at the end of the term
of the fund, we have a performing portfolio that we can sell off and we're
buying these notes because they're second position. We're picking them up for
around 30 cents on the dollar. So the value increase, the equity we have in the
notes when they're performing and rolling along is, is pretty immense. We do
occasionally sell a note to recapitalize for various reasons and we do have a
list that people join on our website and they can buy directly from us but to get
back to the self directed IRA retirement accounts, you know we, we do take
capital from investors through their IRA and we don't use any leverage in the
fund.
portfolio. Our goal is to keep it in, keep all the assets as many of the assets
in the portfolio as possible so that when we liquidate at the end of the term
of the fund, we have a performing portfolio that we can sell off and we're
buying these notes because they're second position. We're picking them up for
around 30 cents on the dollar. So the value increase, the equity we have in the
notes when they're performing and rolling along is, is pretty immense. We do
occasionally sell a note to recapitalize for various reasons and we do have a
list that people join on our website and they can buy directly from us but to get
back to the self directed IRA retirement accounts, you know we, we do take
capital from investors through their IRA and we don't use any leverage in the
fund.
Usually if a fund like a syndication would probably have
up to 70% leverage on a syndication. When a self directed IRA comes in as an investor
there are exposed to the UDFI which is on what is it, unrealized debt financed
income and they could actually be responsible for paying some tax on that and
all that and let me be invested on the return they're getting. So we were on
leveraged and basically the self directed IRA custodian. We work with them
onboarding their clients investment into the fund and then that client is
treated alongside the same as any non self directed IRA. The nice thing about
that and I think Bill, behind your question is is the income is straight, just
straight income. There's no tax sheltering. If you own a property in your IRA,
you're going to have or not, not in your IRA. A property is going to give you
some tax sheltering benefits, depreciation, so forth, but if you own a note
outside of your IRA, it's straight income and you're going to pay income tax on
that. Whereas in an IRA, having the note makes much more sense because
especially if you're on a Roth, you're not going to pay any income on that and
it'll grow your, your capital income will cut over from P and I payments will
grow that IRA.
up to 70% leverage on a syndication. When a self directed IRA comes in as an investor
there are exposed to the UDFI which is on what is it, unrealized debt financed
income and they could actually be responsible for paying some tax on that and
all that and let me be invested on the return they're getting. So we were on
leveraged and basically the self directed IRA custodian. We work with them
onboarding their clients investment into the fund and then that client is
treated alongside the same as any non self directed IRA. The nice thing about
that and I think Bill, behind your question is is the income is straight, just
straight income. There's no tax sheltering. If you own a property in your IRA,
you're going to have or not, not in your IRA. A property is going to give you
some tax sheltering benefits, depreciation, so forth, but if you own a note
outside of your IRA, it's straight income and you're going to pay income tax on
that. Whereas in an IRA, having the note makes much more sense because
especially if you're on a Roth, you're not going to pay any income on that and
it'll grow your, your capital income will cut over from P and I payments will
grow that IRA.
Yeah. I always tell people, if you're going to invest in
this space, use your tax deferred or tax exempt vehicles to invest in the
lending side of things and then use your cash to buy properties with or invest
in funds than on property is at least in a fund that owns property, they'll
pass through those depreciation benefits and stuff through to you and you're
not, you're not able to take advantage of it in an IRA because you're already
tax deferred or tax exempt.
this space, use your tax deferred or tax exempt vehicles to invest in the
lending side of things and then use your cash to buy properties with or invest
in funds than on property is at least in a fund that owns property, they'll
pass through those depreciation benefits and stuff through to you and you're
not, you're not able to take advantage of it in an IRA because you're already
tax deferred or tax exempt.
Yeah, that's true. Well, I think there's certain
circumstances where you could utilize the tax benefits even in an IRA. For
instance, if you did have your invested in, you know, syndication where you are
subject to some UDFI tax, I believe, and I'm not an accountant, so don't, don't
take my word for it, but I believe that then the tax benefits might, might be
beneficial.
circumstances where you could utilize the tax benefits even in an IRA. For
instance, if you did have your invested in, you know, syndication where you are
subject to some UDFI tax, I believe, and I'm not an accountant, so don't, don't
take my word for it, but I believe that then the tax benefits might, might be
beneficial.
And you're, you're, you are correct. And I'm not an
accountant either, so let's make all that clear. I've heard from others that
you can offset that tax because that tax is only charged on the profit. So if
you do have some depreciation in there, then eliminate some of that paper
profit that you'd have to pay the tax on. But in reality, if you do have a self
directed IRA and you are subject to some sort of attacks, be thankful you're
still making money, right? And it's going to be less tax than you normally
would pay. Well, it's a higher tax, but it's a smaller percentage of your
actual tax. So if you're making money, you're going to pay money to somebody
eventually. Right. So are your notes nationwide?
accountant either, so let's make all that clear. I've heard from others that
you can offset that tax because that tax is only charged on the profit. So if
you do have some depreciation in there, then eliminate some of that paper
profit that you'd have to pay the tax on. But in reality, if you do have a self
directed IRA and you are subject to some sort of attacks, be thankful you're
still making money, right? And it's going to be less tax than you normally
would pay. Well, it's a higher tax, but it's a smaller percentage of your
actual tax. So if you're making money, you're going to pay money to somebody
eventually. Right. So are your notes nationwide?
Yes. Yeah. We buy in every state. We obviously try to stay
away from the long foreclosure States like New York, New Jersey and Florida,
but we're agnostic so to speak. We buy based on combined loan to value equity.
Let me start, you know, I explained what our ideal one is. So even if it's a
note in New Jersey that has a lot of equity above both, both notes, we would
still acquire that because we figured that the chances of borrower working with
us and not defaulting is pretty high because they have equity. Sure.
away from the long foreclosure States like New York, New Jersey and Florida,
but we're agnostic so to speak. We buy based on combined loan to value equity.
Let me start, you know, I explained what our ideal one is. So even if it's a
note in New Jersey that has a lot of equity above both, both notes, we would
still acquire that because we figured that the chances of borrower working with
us and not defaulting is pretty high because they have equity. Sure.
I started working at a, at a company where that's what we
did. We bought and sold notes and when I left four years later, there were
several notes that were in foreclosure in Kings County, New York that were
there when I started and were still there when I left. Four years later. So
yeah, I get the hesitance in those markets.
did. We bought and sold notes and when I left four years later, there were
several notes that were in foreclosure in Kings County, New York that were
there when I started and were still there when I left. Four years later. So
yeah, I get the hesitance in those markets.
Oh, I was going to say, one of the notes I bought in my IRA
I bought from Gemini, this was back, I don't know, five years ago, six years
ago I bought into my IRA and it was in New Jersey and it was already in
foreclosure and it was a condo, like a town home, a vacant, the borrower, I
believe it passed away and even after, and it wasn't for closure at least six
months when I bought it, it still took over a year, almost a year and a half to
foreclose on it and get it out and get it. I think we, yeah, we ended up buss
selling it at the auction, but the good news is the property had appreciated
more and there was, it was so underwater that we just kept, you know, as as it
went on, even though it cost us money for fees, servicing fees, and there was
some overhead costs, we ended up making a pretty good amount of money on it
just because the property appreciated with the market. So sometimes that timing
is good, but in a down-market, obviously it's pretty bad.
I bought from Gemini, this was back, I don't know, five years ago, six years
ago I bought into my IRA and it was in New Jersey and it was already in
foreclosure and it was a condo, like a town home, a vacant, the borrower, I
believe it passed away and even after, and it wasn't for closure at least six
months when I bought it, it still took over a year, almost a year and a half to
foreclose on it and get it out and get it. I think we, yeah, we ended up buss
selling it at the auction, but the good news is the property had appreciated
more and there was, it was so underwater that we just kept, you know, as as it
went on, even though it cost us money for fees, servicing fees, and there was
some overhead costs, we ended up making a pretty good amount of money on it
just because the property appreciated with the market. So sometimes that timing
is good, but in a down-market, obviously it's pretty bad.
Yeah. So as opposed to loan sales and loss mitigation. When
we say loss mitigation, I mean, you know, working, working the loans out to get
them re-performing. Well I guess what's the percentage of loss mitigation do
you all or are you effective with? Cause I, I imagine it's fairly high, isn't
it?
we say loss mitigation, I mean, you know, working, working the loans out to get
them re-performing. Well I guess what's the percentage of loss mitigation do
you all or are you effective with? Cause I, I imagine it's fairly high, isn't
it?
What do you mean by percentage of loss mit though? I mean
everything goes into the loss mit...
everything goes into the loss mit...
Of successful loss mits so, so actually getting them
either loan modified or reinstated in some way.
either loan modified or reinstated in some way.
Yeah. Currently in the notable fund we're at about a 45% a
portfolio is 45% re-performing and 55% non. Yeah. And part of that is because
we're just kind of working through them, the lower hanging fruit. So we're
getting the best ones repositioned and the loss mit complete. And so that's,
that's a bit skewed in that if all loans being equal, I don't know if we'd
still be at a 40 to 50 we might be even higher. But you know, it's just a matter
of getting everything through our pipeline.
portfolio is 45% re-performing and 55% non. Yeah. And part of that is because
we're just kind of working through them, the lower hanging fruit. So we're
getting the best ones repositioned and the loss mit complete. And so that's,
that's a bit skewed in that if all loans being equal, I don't know if we'd
still be at a 40 to 50 we might be even higher. But you know, it's just a matter
of getting everything through our pipeline.
That's great. Those are good numbers.
Yeah. So I did finally remember what I was going to say.
I'm telling you the jet lag is killing me. Having notes all over the country
helps you diversify in different parts of the country because we all know that
real estate is local and you know, while one part of the country might be
suffering a little bit, there's other parts that are still increasing in value
and having notes that are diversified geographically helps the fund diversify
the risk. Just like you were saying in the Seattle area, you can't do fix and
flip there. You can't find properties cheap enough to make a profit. And the
municipality there has made it so difficult to build new. It's very difficult
to go in and, and, and do new housing as well. So it was a smart move moving to
the, to the note side of things.
I'm telling you the jet lag is killing me. Having notes all over the country
helps you diversify in different parts of the country because we all know that
real estate is local and you know, while one part of the country might be
suffering a little bit, there's other parts that are still increasing in value
and having notes that are diversified geographically helps the fund diversify
the risk. Just like you were saying in the Seattle area, you can't do fix and
flip there. You can't find properties cheap enough to make a profit. And the
municipality there has made it so difficult to build new. It's very difficult
to go in and, and, and do new housing as well. So it was a smart move moving to
the, to the note side of things.
Yeah. Yeah. And it's the diversification and doing
different States is, you know, helps mitigate some risk. Because when I talk
about all these, you know, a lot of the notes in our portfolio have a equity
above the CLTV and a prospective investor. So what happens during a downturn?
What happens when there's a recession and we're going to have one, and I said,
well, the good news is, you know, different States, different cities will have
a downturn at different rates. First of all, it's not going to be an even
recession in our portfolio. Also, at least from my perspective, homeowners who
have equity will tend to stick around in that house and not stop paying their
mortgage just because maybe one of the spouses lost their job or they, they've
got a lower income. Also because we're targeting loans with the substantial
equity above the CLTV. Even if the house depreciates 10% we're still covered
for the most part on the average.
different States is, you know, helps mitigate some risk. Because when I talk
about all these, you know, a lot of the notes in our portfolio have a equity
above the CLTV and a prospective investor. So what happens during a downturn?
What happens when there's a recession and we're going to have one, and I said,
well, the good news is, you know, different States, different cities will have
a downturn at different rates. First of all, it's not going to be an even
recession in our portfolio. Also, at least from my perspective, homeowners who
have equity will tend to stick around in that house and not stop paying their
mortgage just because maybe one of the spouses lost their job or they, they've
got a lower income. Also because we're targeting loans with the substantial
equity above the CLTV. Even if the house depreciates 10% we're still covered
for the most part on the average.
Excellent. I'm glad you brought that up because a lot of
people say, well, you know, why would you buy a note that has gone into
default. You know, you're buying notes from bums. That's not really the case.
No one goes into borrowing money with the intention of not paying it back. It
can be all kinds of things and what's going on right now with the, the Corona
virus scare. There's a reason why people would default on a second, right there
loss of a job for a certain period of time. Right?
people say, well, you know, why would you buy a note that has gone into
default. You know, you're buying notes from bums. That's not really the case.
No one goes into borrowing money with the intention of not paying it back. It
can be all kinds of things and what's going on right now with the, the Corona
virus scare. There's a reason why people would default on a second, right there
loss of a job for a certain period of time. Right?
Yeah. But also in that same respect, there might be more
app to be telecommuting rather than commuting to their jobs. So they want to
keep their home and stay in it so they have a place to work, you know, the two
example
app to be telecommuting rather than commuting to their jobs. So they want to
keep their home and stay in it so they have a place to work, you know, the two
example
But, but if they have a short term period where they don't
have any money in them to make that payment, they're typically. And what's
really unusual, typically they'll pay their second because the payment is lower
and they don't pay their first because it's higher, which makes no sense to me.
But at the same time it's usually a temporary loss of employment or it's a
temporary illness that get people into this position in the first place and
it's a whole lot easier to work those notes back out again. Down the line don't
you think.
have any money in them to make that payment, they're typically. And what's
really unusual, typically they'll pay their second because the payment is lower
and they don't pay their first because it's higher, which makes no sense to me.
But at the same time it's usually a temporary loss of employment or it's a
temporary illness that get people into this position in the first place and
it's a whole lot easier to work those notes back out again. Down the line don't
you think.
It is, it is. And again the discount you can buy the note
at gives you more flexibility on that loss mitigation and the workout you do
because you know let's say a borrower there, their unpaid balance of $60,000
and we were able to pick it up for $20,000 we've got $40,000 of equity so to
speak, to work with them. So reamortize their loan over a new period, we can
lower their rate, we have a few tools we can work with to make it work it out
with them so that it works for them financially and we still make a good return
on our investment on that asset. So it's kind of a win win for everybody.
at gives you more flexibility on that loss mitigation and the workout you do
because you know let's say a borrower there, their unpaid balance of $60,000
and we were able to pick it up for $20,000 we've got $40,000 of equity so to
speak, to work with them. So reamortize their loan over a new period, we can
lower their rate, we have a few tools we can work with to make it work it out
with them so that it works for them financially and we still make a good return
on our investment on that asset. So it's kind of a win win for everybody.
Nice. So Bob, give me your website or how you would like
other people to contact you about your fund.
other people to contact you about your fund.
Absolutely. It's www of course, NotableFund.com that's N O
T A B L E F U N D.com and my email is bob@notablefund.com be happy to do a
call, whatever. If you want to learn more about notes or if you're interested
in coming into the fund. We're still open for investments. We have a fixed
preferred return between 8% and 12% depending on the investment amount and it's
paid quarterly.
T A B L E F U N D.com and my email is bob@notablefund.com be happy to do a
call, whatever. If you want to learn more about notes or if you're interested
in coming into the fund. We're still open for investments. We have a fixed
preferred return between 8% and 12% depending on the investment amount and it's
paid quarterly.
Okay. Now are you taking accredited investors only?
No. It's open to both accredited and non-accredited. It's
a, it's a 506B which allows us a limited amount of non-accredited investors.
a, it's a 506B which allows us a limited amount of non-accredited investors.
Okay. Well this would be a great opportunity for me to say
we are not selling or any investment. You must read your PPM before you invest.
Your mileage may vary. I love the note space. Again, we're, we're basically in
the same space. We're just in it at different times of the, of the process.
we are not selling or any investment. You must read your PPM before you invest.
Your mileage may vary. I love the note space. Again, we're, we're basically in
the same space. We're just in it at different times of the, of the process.
Yeah, absolutely. It's, I find it's wonderful. It's, it
provides for, for me personally in my IRA, it provides me the ability to create
cash flow without the overhead of owning property and tenants trash toilets and
real estate agents and contractors and all the fun stuff that comes with that
you got, and you can run it, you know, run it in your pajamas. So to speak
because it's essentially just telephone, email. I've never been to a property
that we bought a note on. I don't care to bids. There is a lot of field
resources you can deploy. So the banks have created a great industry for
themselves in doing loans and then we can tag on to their resources on the back
end when we need to perform loss mitigation and, and property reviews.
provides for, for me personally in my IRA, it provides me the ability to create
cash flow without the overhead of owning property and tenants trash toilets and
real estate agents and contractors and all the fun stuff that comes with that
you got, and you can run it, you know, run it in your pajamas. So to speak
because it's essentially just telephone, email. I've never been to a property
that we bought a note on. I don't care to bids. There is a lot of field
resources you can deploy. So the banks have created a great industry for
themselves in doing loans and then we can tag on to their resources on the back
end when we need to perform loss mitigation and, and property reviews.
And just so everyone knows Bob is not working in his
pajamas. Quarantine and actually gets to work out of his house. That's the kind
of life you want to lead. Right?
pajamas. Quarantine and actually gets to work out of his house. That's the kind
of life you want to lead. Right?
That's right. My golden retriever sitting behind me
gnawing on his bone. Hopefully you don't hear that through this broadcast.
gnawing on his bone. Hopefully you don't hear that through this broadcast.
We're good. All right Bob, listen we, we thank you so much
for your time. I know it's a difference in time zone cause you're out there on
the West and we're not. How's your weather anyway?
for your time. I know it's a difference in time zone cause you're out there on
the West and we're not. How's your weather anyway?
Weather's good right now it's been sunny. It's last month,
we had I think 30 days of straight drizzle rain and now we've got a big high,
what do they call high pressure sell from Alaska. So it's dropped down into the
30s and they might have snowflakes tomorrow but it's nice to have sunshine over
here being so far up North. So.
we had I think 30 days of straight drizzle rain and now we've got a big high,
what do they call high pressure sell from Alaska. So it's dropped down into the
30s and they might have snowflakes tomorrow but it's nice to have sunshine over
here being so far up North. So.
So you can actually see Mount Rainier today, huh?
Yeah. And the Olympic mountains.
Nice. Again, thank you so much for your time folks. I appreciate
you joining the show today. If you want any information on our fund, it's
CarolinaHardMoney.com and click on the investor tab and then fill out the form.
We'll schedule an appointment and if you want to talk to Bob about his fund, it
is Notable fund.com we'll have the URL listed in there so you won't have to
listen to me. You can just click the link. Well I've been messing up all day
haven't I Bob?
you joining the show today. If you want any information on our fund, it's
CarolinaHardMoney.com and click on the investor tab and then fill out the form.
We'll schedule an appointment and if you want to talk to Bob about his fund, it
is Notable fund.com we'll have the URL listed in there so you won't have to
listen to me. You can just click the link. Well I've been messing up all day
haven't I Bob?
That's okay bill, I appreciate you having me on and I hope
that after we close down this session, you can go take, we can take a nap, get
some rest. Cause I know what it's like traveling like that.
that after we close down this session, you can go take, we can take a nap, get
some rest. Cause I know what it's like traveling like that.
Thank you sir. Again, don't forget the share, like
subscribe, all that stuff see you on the next show everyone.
subscribe, all that stuff see you on the next show everyone.
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