Brian Lauchner (00:01):
Can you really use the special COVID rules to invest right now with your IRA tax free, stay tuned.
Brian Lauchner (00:19):
Alright. Well, welcome back to NoteSchool TV, I'm Brian Lauchner and I'm a part of the GC team here. And I'm exited to be the one to bring you back in for the rest of the week and we kind of dive back into NoteSchool TV, if you are new to these videos and you get a lot of value out of it man, we would really love it if you would just like the videos as we produce them and definitely subscribe to the channel so that you're getting kind of, some of the content as it's coming out. And if you really want the most timely information, make sure you are like, clicking that notification bell so that you're getting notified when we go live. So you can jump on YouTube and engage with us with your questions. Bring some questions to the table. Today, we've got some interesting information about notes, but if you are newer to notes or you're newer to NoteSchool and you're just wanting to learn a little bit more, go to www.NoteSchool.com/TV, And you can learn a whole lot more about kind of what we do and how you can get engaged. But for day today, let's start by jumping into the news.
Brian Lauchner (01:18):
Alright, Mr. Joe Varnadore, take it away.
Joe Varnadore (01:38):
Good morning, everyone. Good morning, Brian. And we do have some breaking news this morning, hot off the presses yesterday. So starts off with we basically, as we wrap up this interesting year, right, we have three trains wedding or speeding towards the distress loan intersection, forbearance request, or up since the first week of December unemployment numbers are stagnating and increasing, and then the Cares Act expires in a couple of weeks. So with that, we have a few more, a couple of more items. One is reported by bank reg data, which says that aggregate the NPO Volume Non-Performing on Volume is up to $127.55 billion, which is basically $32 billion higher than the end of 2019. So, also this year Brian, which is just crazy, is that the four largest banks, and this is just the four largest banks reporting, which is Bank of America, JP Morgan Chase, Citibank and Wells Fargo have increased their loan loss reserves from 5.2 billion, the end of 2019 to almost $33 billion today.
Brian Lauchner (03:12):
Let me just clarify for people who don't understand what Loan Loss Reserves are, Joe, help me say this. This is literally their reaction to the market to protect themselves, right?
Joe Varnadore (03:23):
Right. So they have, so banks have a, they have a performing kind of portfolio. They have a Non-Performing Portfolio and they have to keep a certain percentage of those funds in a reserve account against a battle out non-performing loans. The, and the crazy part of that, Brian, is that as these banks hold that money there, they can't do anything with that. So they lose all of that leveraging effect. It's basically, we talk about dry cash at NoteSchool. This is dry cash for banks, so they are holding that and it is, it is just, it's kind of all coming together. And last week I did report that the moratorium on foreclosures and so on, did extend out to January 31st of 2021. So let's bring Eddie on real quick to kind of get his take on that. And then we're going to move on with our special guest today, Mr. Kevin Stokes, Hey, Eddie.
Eddie Speed (04:24):
Well, there's nothing going on in the market, right?
Joe Varnadore (04:29):
Absolutely nothing.
Eddie Speed (04:30):
Yeah. you know, guys, we are keeping our ear to the ground hard. I will tell you that. I just spoke to a group of high volume real estate investors last week. All guys that are what I call the Ninjas, the hundred house a year plus guys. And and I basically did a little waterfall, Joe, of some of these market details and some of the ones that you've been covering over the last few weeks. And what I find interesting is, is they didn't know this information and it's helping them form their decisions about how to progress the business. People say, Eddie, why are you so optimistic about the next five years in the business? It is because all of these variables just keep stacking up and those variables are going to produce some terrific opportunities. If we know how to take advantage of the opportunities, when those banks, when those banks gather up loan loss, reserve money, that means they can sell loans at a discount. That's essentially what it means.
Joe Varnadore (05:33):
Yeah. And you know, Eddie, we are going to be on top. We got a lot of experience in non-performing loan from the great recession as it flowed forward. And I can tell you that we are going to be on top of this as it continues to unfold in the first quarter of 2021,
Eddie Speed (05:52):
That's it we'll keep watching it. We'll keep telling you.
Joe Varnadore (05:55):
So stay tuned, guys. We have a special guest today and this gentleman, I'm a big fan of, of Kevin Stokes and his wife, Susan, Susan can be on today, but Kevin, come on and bring Kevin on. And Kevin one of the things I most like about Kevin, is that he is an Apache pilot for the Idaho Air National Guard. And man, as Eddie would say, I think that's being a pilot myself. I think that's as cool as the backside of your pillow.
Kevin Stokes (06:31):
You're too kind Eddie, or Joe.
Joe Varnadore (06:35):
So Kevin you guys were kind of in the corporate world and you know, you were, you know, doing flying Apaches and you guys became what we call in NoteSchool, a Ninja Real Estate Investor. You and Susan did. And I know Susan has a photography business as well, but you guys became what we call a Ninja, which means you were buying a lot of houses, right? Or flip.
Kevin Stokes (07:00):
Our goal is buying, buy and hold. That's what we'd always learned. And in I found that I didn't really like it a whole lot and it was seeking out a better way to do it that I ended up at NoteSchool.
Joe Varnadore (07:12):
Yeah, absolutely. So you have you guys have been, you know, buying and holding and you've done all of that. You've done the rehab and you know, you now you're buying on buying on terms and you're also selling on terms and they're in the Boise area. And really, you're kind of nationwide at this point as well. Aren't you?
Kevin Stokes (07:33):
Yeah. Notes was the way we were able to lever up and, and move from just the treasure Valley, which we could drive to and think bigger. And now we're in nine States, I think.
Joe Varnadore (07:47):
Yeah. So you're nationwide, right? That's.
Kevin Stokes (07:49):
Pretty much.
Joe Varnadore (07:49):
That's pretty impressive. Yet Ediie, we met Kevin and Susan in a three-day class here. Gosh, about a year, almost two years ago, wasn't it?
Eddie Speed (08:01):
Year and a half, I would say.
Joe Varnadore (08:02):
Yeah in Indianapolis, I believe.
Eddie Speed (08:06):
I remember that well, I remember.
Joe Varnadore (08:06):
I remember they sat right there on the, in the middle of the room on the back row. I don't know Kevin well, Eddie, why Eddie and I remember crazy things like that, but we do, you know, I mean, it's just yeah. They sat right. Third seat over from the beginning there. So you you took advantage of a program that was started as part of the cares act, which you know, came into play back in March of this year. I mean, we've all talked about that. So tell us a little bit about what you and Susan did. I know you had some money in you guys had some money in a corporate 401k and tell us a little bit what the, how that happened. Unpack that story for us.
Kevin Stokes (08:49):
Well, you know, we met you guys when we started investing in looking to invest in notes. So we, a lot of time analyzing it. It's just analysis by paralysis is something I've had to overcome my whole life. And we spent a bunch of time trying to understand how to move out of our buy and hold mentality. I still have a corporate gig that we've been looking to exit for quite a while, but all the money we had saved up that wasn't tied up in other properties already was tied up primarily in my corporate 401k. Then I had a traditional IRA and Susan had a traditional IRA from her previous employment plus for business. And so we started a self-directed retirement account under her business. And we were looking to fund it. We were gonna use notes to kind of start that a hundred dollar plan with that retirement plan and then find a way to roll over.
Kevin Stokes (09:42):
But we hadn't really decided in about the time. We had figured out a plan, the Cares Act kind of changed everything, provided the Cares COVID related distribution. And because of the lockdown in Idaho Susan's business tanked, as far as photography goes and she didn't do any sets for nearly five months. Well that qualified us under the Cares Act Distribution Plan to take out the amounts that we had available to us. Every individual is kept a hundred thousand. I was able to split that between my corporate 401k and my traditional IRA. Susan was able to take hers out of her traditional IRA completely. And so between the three of us, between the three accounts, we got 153,000 that we were able to pull out roughly, I think a little bit less. And we use that money to go set up funding of our note purchases.
Kevin Stokes (10:44):
We knew we wanted a high-income, hi cashflow, because our goal is to get me out of my corporate gig. So we got, we concentrated on the monthly income potential for payoff and a lot of equity in each one of the properties, because I'm not full-time in this, she's not full time in this. We wanted the least amount of trouble that we can get. We did a number of calls with NoteSchool on our weekly calls looking at some of the calls. And in fact, one of the, I knew I was on the right track. Cause one of the assets we were buying, we're looking at buying came up as one of the spotlight.
Joe Varnadore (11:26):
One of the Assets Of The Week, right?
Kevin Stokes (11:29):
Like the Assets Of The Week, it popped right up. And then that was the moment for me that I went, okay, I know what I'm doing. Like, like I've reached it to where this is, this is the right place for us.
Joe Varnadore (11:40):
Gotcha. So let's talk a little bit about, so this Cares Act Distribution allowed you guys, you had like a hundred thousand in one account and 53,000 and another, and you got to move that over into your into your account. And so that allowed you then to use that money and you basically went to NotesDirect and you started, you didn't use all of the money. You used a hundred thousand dollars on buying some notes and we'll look at those in just a few minutes, but that allowed you to go in and you know, to create income in this COVID distribution. It allowed you or Cares Act Distribution. It allows you to pull that money out of there. And really you're going to have to pay the taxes on this, but at the end of three years, you'll get all of any taxes that you had to pay back. And then you keep the total income off of that, right?
Kevin Stokes (12:36):
Yeah. So the, the, the big key to this is that the, your tax burden is just like regular earned income, like a normal distribution, but the Cares Act allows you to split that up into three equal payments over the next three years, then the additional bonus. And this is the big kicker and why this is so powerful is that if you put the money back into a qualified retirement fund, then you can file amended taxes for the three previous years and get all that money back.
Joe Varnadore (13:06):
Right.
Kevin Stokes (13:06):
So what this is allowing us to do is I'm using the cashflow to pay the taxes this first year, so that we can leverage the remaining assets we've got for levering up our business to get us some private investors and to move forward with that, and then pay the taxes this year, pay the taxes next year, and then all that money that we've got. I can just, I don't know any number of options. I can just put that money, that full 153 back into the retirement account. And we get to keep the taxes they'll come back to us.
Joe Varnadore (13:41):
So Eddie, so what Kevin did was he, you know, he went into NotesDirect, right? And they started looking at notes and they picked the four notes. And that we're going to look at here in just a second. So they found four good notes and they took a hundred thousand dollars of that money and it allow them to go do this. And if we'll pop that up there on the screen, there let's look at those. So Kevin purchase you guys so on NotesDirect our notes platform, There's your four notes and the UPB guys is Unpaid Principal Balance. So the Unpaid Principal Balance on loan 1 was 26,245. The monthly cashflow was 558.60. And you purchased note , you purchased notes at a discount. So the purchase was 24,875. And you can see that for note two, note three and note four, right? So these four notes had $112,933 in unpaid principal balance. You bought those four notes for $99,485. Right. And because of that, you now have a monthly cashflow, right. Of 1500 and basically $50 per month, right?
Kevin Stokes (15:05):
Yep. Yeah. It's actually so far, it's been a little bit higher than that because number four, there he's been paying double payments.
Eddie Speed (15:12):
Wow.
Kevin Stokes (15:12):
And he's been asking three times he's asked the servicers what the payoff balance is. So I think he's getting ready to pay it off.
Joe Varnadore (15:21):
You mean, even during the pandemic, you've got a guy just saying, Hey, you know, I'm just going to pay double payments.
Kevin Stokes (15:27):
I, it's, we're blessed. A lot of people are scared of this last year, but this has been a good year for us.
Joe Varnadore (15:34):
Yeah. You know what, it has. And so, Eddie, you want to chime in here and talk about this a minute.
Eddie Speed (15:40):
Yeah. I want to congratulate you, Kevin. You know, we NoteSchool tries to put out a lot of information and one of our preferred vendors who has, which was Quest Trust they are the ones that essentially told you guys about this opportunity, but it's not just knowing about it. It's doing something about it.
Kevin Stokes (15:59):
That's right.
Eddie Speed (15:59):
That's what I love. It's the action. And so you took that information and ran with it and bought four notes. And then you have another, essentially $50,000 that you have a very active investment business where you're soliciting capital investors. You're trying to pursue by buying properties, own terms, creative terms, along with you know, buying these existing notes. It doesn't take a lot of budget to buy these marketing budget by these existing notes. Cause you just went to NotesDirect and click the button and bought them. Right.
Kevin Stokes (16:36):
Yeah.
Eddie Speed (16:37):
And I do remember, you know, you're bringing some of these deals on our little special, what we call our deal lab every week and, you know, and just kind of breaking it down us, just kind of beating it up and talk through it. I teach you guys all the time. You're a more tactical personality than me, Kevin, but you're also really good at due diligence. Right. And it makes a good mix because it doesn't take me long to make a decision, but I like having good facts and you're good at gathering up the facts and position them to where I could say, yeah, I could live with that. Or I wouldn't, or you know, it was just sort of talking through it at the end of the day, obviously it's your decision, but you're leveraging some experience. So let me tell you something, you take a hundred grand and turn it into $18,000, annual cashflow. It doesn't none of us on this show today need a much of a calculator to know that the math's gonna work in your favor.
Kevin Stokes (17:38):
Yeah. That's the kind of Excel spreadsheet that really gets me excited.
Joe Varnadore (17:43):
Yeah. That's that math, that 18% return math. Right. And well, you know, Kevin, you know, Eddie with Kevin, you as an Apache pilot you are an engineer and you have a lot going on in that cockpit at one time, there is not, you're using both feet, both hands. And one of those eyes to look ahead and one to look below you, right?
Kevin Stokes (18:05):
Yeah. Those were good days.
Joe Varnadore (18:07):
Yup. Yep. So tell us a little bit about, so again, this is, if you roll this into a qualified account within three years, then those taxes you'll follow amended return, and there'll be, they'll come back to you. So any taxes you have to pay on this, you'll get all of that tax money back, right?
Kevin Stokes (18:28):
Yeah. Like, so for instance, the not to get into the specific numbers, but I'll use easy ones. The tax burden is about 45,000, but rather than spend that it's 15 a year. And the cashflow is going to cover the first year. And then I'm assuming that at least one of these is going to pay off and we can pay the others and then just continue to collect that money outside of it. And then as long as we pay the 153 back into the retirement account and in the beauty of it is it doesn't have to be in the one that originated. So we're done with the traditional IRAs and we'll be able to put that into our self-directed account. And in the self-directed account, we've got two other NotesDirect assets in there now that are performing as well. We use the same criteria for those as we did the others just to get started. And once we pay it, then the amended returns get filed and then we'll, we'll get that money back. As if we choose to do it.
Joe Varnadore (19:31):
So that really means is that all of the profits on this, cause you were doing this out of a retirement account anyway, so this really wasn't today money, right?
Kevin Stokes (19:39):
Yeah.
Joe Varnadore (19:39):
So it'll all go back in. You'll have all of the taxes you paid in back, and it will have been a great move because that allows you to get that money out of that corporate 401k into a self-directed and then never have to pay, and then having the taxes come back in the back door So that's an amazing thing by the way, folks that is still around, you've got until the end of the year until the 1st of January, the December 31st to do this, or look into it yourself. And I don't know, it may get extended. We don't know. I talked to the folks at quest yesterday to check on that and they don't know as yet, but we will stay on top of that for sure.
Eddie Speed (20:22):
Yeah. One thing I wanted to say to you guys, and I know we want to bring Brian on here and, and make sure he's got any questions, but one thing, one point I wanted to make to you guys is, one of the things that we do at, with our students at NoteSchool a lot is we show them ways to recapitalize their business. So right now, Brian and Susan have a hundred thousand dollars invested in these notes, and you're doing the math in your head go in and well, the cash flows great. But in three years, Brian and Susan are going to need to do something to put that $153,000 back in their retirement accounts so that they can get their income tax. They had to pay on the money when they took it out, that they can get it back.
Eddie Speed (21:08):
Well, instantly in our head, we're going, no problem. You take those notes and you could sell a cashflow with those notes or, and not ever, not really have to sell the whole note. You don't have to sell all the payments in order to do that. Or the other thing is those notes are good performing notes. Kevin, you could just, you could go find a passive, I call it wouldn't really be a passive investor. It would be a passive lender and you could just borrow money and pled those notes as collateral. So, Kevin already knows how he can get the money back, even though he's enjoying the cashflow right now, but to get that money put back in the retirement account so that he can get his get it placed back in there. Again, he already knows how he can recapitalize and do that. And to me, when you start being able to think down the road of how you structure financing around, he's bought a note, but you could do the same thing. If you, if you did sell financing on a piece of property. Now, all of a sudden you don't do one deal. Now you built a business where you can do many, many, many deals.
Joe Varnadore (22:14):
That's right.
Eddie Speed (22:18):
Let's bring Brian on, and let's see what else Brian would ask Kevin. This is a great session today, guys.
Brian Lauchner (22:25):
Yeah. Well, first things first, very impressive. I think some of the things that stand out to me were not even questions, just things that stand out as far as there are so many investors right now who they feel like they're in this rut because they they're struggling in their say their wholesale business. They feel like they're struggling because they can't find houses to buy whatever it is. And this is where I try to encourage people as much as I can to say, you got to get involved, you got to start learning some of the stuff, a guy like Eddie Speed has been doing it, you know, for 40 years he might know a thing or two. Right. And and I think Kevin has kind of taken this information. He's really run with it. Now I will say this just as a quick disclaimer definitely may seek some accounting professionals to get you the information you need.
Brian Lauchner (23:10):
Nobody on here is trying to give you legal or accounting advice or tax advice. But to see that it's possible, I think is what most investors really need right now is to just know like, Oh, there's an opportunity here. And I just got to figure out those steps, right? And I would say that for some of you who are brand new to NoteSchool, the first step is going to be going to www.NoteSchool.com/Tv. Just to learn a little bit more about how does this whole note world work? What is this Eddie Speed ecosystem kind of thing that he's developed. to really get engaged, start getting this information in your head and going out and plug it in. And for those of you who wanting to do what Kevin did and just start buying notes right away whether it's in a tax advantage account or not, you can do that and we can actually teach you a little bit more on our YouTube playlist.
Brian Lauchner (23:56):
There's a Feeding Frenzy Friday where we break down the NotesDirect Friday Featured Asset. If you caught all of that.
Joe Varnadore (24:03):
Wow.
Brian Lauchner (24:03):
Who's rewind it to rehear it. Right. But we break down a note and we talk about those details to give you the confidence that Kevin had, which is, I'm on the right track. I feel like I'm absorbing the information and I'm really getting it. It's now just time to go out and take action, click that buy button, and you can obviously buy something as easy as buying something on Amazon. So, that's kinda how I would say we can go ahead and wrap up the day here. We've been going for a little bit, so thank you to Kevin for coming on. Really appreciate your time and you know, sharing your story. I think it's encouraging to a lot of people who want to get involved.
Joe Varnadore (24:41):
Very good. Kevin, thanks so much, you know, we appreciate you guys and and what you guys do and your family that you have there in Boise and you know, the creativity guys, we are going to have to get even more creative than we had to earlier this year as we move into 2021. So, Eddie final thoughts?
Eddie Speed (25:05):
Kevin, Congratulations. I would say that in light of the fact that you guys, that your wife had an interruption of business this year. You took some smart action and you made a significant adjustment. By the way, I was thinking about this also, if you had to pay taxes in a year, your income was down a little bit.
Kevin Stokes (25:24):
Yeah.
Eddie Speed (25:24):
Right. So that was the smart time to pay taxes when your income was down a little bit and glad that you guys are back going. And I, it's fun to hear you guys every week talking about buying properties on creative terms as well. So just keep doing what you do, man.
Joe Varnadore (25:39):
Absolutely. And guys, as we roll it, as we want to wind up the end of the year as well Eddie, we're going to start into 2021 talking about more and more and more about buying on with Creative Financing, buying and selling on terms. So just gotta keep that in mind. And we do have a show next week and the week after Christmas as well. So we look forward to that. Brian, tell us how, if people can get involved or find out more about NoteSchool, man.
Brian Lauchner (26:09):
Yeah. So first of all, obviously you, you can definitely like it, subscribe to the channel, make sure you're clicking the bell notifications. I see several people chimed in here, Stanley, man, thanks for engaging. How do you get started? You go to www.NoteSchool.com/Tv. It's probably a great starting point to get signed up for some of the training that we have. Some classes that we teach. Shelley mentioned she aspires to be a Ninja. I think that's really cool. Like if that's what you're trying to build your business around, man, let's get engaged. Let's get you on your way. Let's get you some support and some education to help you reach those goals. Right? So for the rest of you, we will see you next week, every Wednesday at 11:00 AM central time, click that notification bell. So you are in the know we're going to have another great guest and we will see you all next week.
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