October 29, 2025 • 24 mins
In this episode of The Paper Trail Podcast, Chris shares what he calls the biggest mistake of his note investing career: buying a 0% interest loan. Despite acquiring it at a steep discount, the loan turned into a frustrating and time-consuming challenge. Chris breaks down what went wrong—from unpredictable borrower behavior and high servicing fees to the illusion of “cheap” deals that aren’t worth the effort.
He explains how low monthly payments can erode returns, why understanding your servicing contract is critical, and how certain borrowers exploit the system. Through this candid story, Chris illustrates the hidden dangers of loans that seem too good to be true and why discipline, due diligence, and realistic pricing matter more than chasing a bargain.
This episode is an unfiltered look at the mistakes, frustrations, and lessons that come with real-world note investing—offering valuable takeaways for anyone entering the business or managing a portfolio today.
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Episode Transcript
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(00:43):
Welcome back to anotherepisode of the Paper Trail podcast.
I AM your host, Chris 70, andtoday I am going to share probably
the biggest mistake on a loan,purchasing a loan I ever made.
And interesting thing about itis I knew this going in and it was
(01:06):
like, know it's one of thosethings of like, like touching the
hot stove, you know, not totouch the hot stove.
But I still did it anyways.
And I'll share the story.
This is probably one of my themost frustrating notes I've ever
had.
So we will dive deep into thisand hope you will enjoy this episode.
(01:31):
Prior to getting into it, Iwant to just mention a for those
who attended the Paper Trailconference, again, I want to thank
you recording this episodeactually in October, October 1st
actually of 2025, and it isthe final quarter of the year and
(01:56):
what typically happens in thefinal quarter of the year?
Inventory.
You are going to see a spikein inventory.
Typically you see it inOctober and November and then December
is, you know, the leftoversand the stuff that doesn't sell on
October, November you'll seefloating back in December.
(02:20):
So I want to mention that.
So if you're on the hunt forloans, now is going to be a great
time.
If you are interested inloans, reach out.
We have loans for sale.
I can put you in contact withother people who have loans for sale.
Just tell me what type ofloans you're looking for.
And one thing I'll justmention, make sure your pricing expectations
(02:42):
are in reality.
That's the biggest thing Ithink the biggest hurdle people make.
They want the perfect note ata price of a loan that is not a perfect
note.
So and that's why I want toshare episodes of this podcast, lessons
I've learned.
You know, we're talking a lotabout bidding on assets and, you
know, mistakes that I've made.
(03:03):
And my end goal with all ofthis is to make you wiser, smarter,
more experienced.
Learn from the lessons I'velearned as I'm again preach, I'm.
I believe I'm one of the onlypodcasts or out there that really
share the stories of casestudies and things we've been through.
(03:26):
I'm not up here, as you cantell, pitching, marketing, you to
buy any course from me.
I don't have a course.
I shut down my membership group.
I'm looking at in the futurehaving some seminars for people.
You know, last year we did thePaper Trail conference, looking,
you know, at that in 2026 as well.
(03:49):
That's it.
You know, we have over 950investors in our fund.
That's a completely differentanimal from people who are actively
investing.
But you know, I like to sharethis with people because again, I'm
not up here just marketing youon how to find notes or anything.
I'm rolling up the sleeves anddiving in.
(04:12):
So.
Okay, enough of me on my high horse.
Let's talk about one of theloans that, you know, I say, you
know, it's, you know, I'vedone this loan twice.
My first and last time everdoing it.
So drum roll please.
What was that mistake?
(04:33):
Bought a loan, I had a 0%interest rate.
Even though I bought this loanat a huge discount.
It was non performing at the time.
If you listen to my lastepisode about low interest rate loans
that are not, you know,significantly behind.
(04:53):
Yeah, this one, oh man, ifyou're watching this, you know, I
can see, oh, how do I turn myhead the right way?
The gray hairs, you know, thegray is moving up and I think like
a quarter of this is becauseof just this loan.
And you always remember the,the, the, the ones, the most vivid
(05:14):
remembrance of loans are theones that kind of, you know, leave
the biggest scar.
And outside of the Nightmareon Elm street loan that I've had
that I joint ventured withJamie Bateman on, that one's a disaster.
The four feet of water in thebasement on a property in Ohio, that
one was pretty ugly and messy.
(05:37):
You know, those were probably,you know, in this one were the hardest
loans to manage.
And I've had other loans.
Again, we've been doing, we'vedone over 750 loans.
Yes, we've lost money on loans.
Anyone that tells you theyhaven't, haven't been in the business
long enough.
So yeah, we lose money.
But there's two ways to losemoney is lose money.
That is, didn't you know, theprocess went through.
(06:00):
There's nothing you can do.
And like you don't have towaste a lot of time on it.
Just hey, deal sucks.
Sorry.
And then there's the ones thatyou feel like you went four quarters
in the trenches and you'refighting an uphill battle.
And this was one of them.
And you know, it was a loanthat was at 0% interest and borrow
(06:21):
is behind.
And still I forget what thediscount was, but it was huge, huge,
huge discount.
But I valued it more as, hey,look, we're going to foreclose on
this person.
There is no way this personcan reinstate or do anything or whatnot.
(06:41):
But they did.
But what they did do is, andthis is where I was a rookie, I'll
call myself a rookie.
And allowed them to make notfull reinstatement but make partial
payments to get caught up.
So they got to a point wherethey basically got to like two or
three months behind.
(07:02):
So they made it up.
So I got some money coming inthe door.
I did overpay for this becauseI was predicting foreclosure.
Again I don't remember thefull numbers but then what happened?
And the payment on this loanwas in like the three.
I think it was like 250 to $300.
It was a low, low monthly payment.
(07:23):
So even though I think I paid,I paid like 12 or 15 thousand dollars
for this loan.
Again the UPB was like 30something thousand dollars or whatever
it was.
So it was like less than 50cents on the dollar.
The issue was the payment wasso freaking low and they got behind.
(07:44):
They caught up but then got behind.
What did I not notice anyone?
Of course this recording.
So no one can actually respondto me servicing fees.
So the borrower make apayment, miss two, make a payment,
miss one, make two, miss one.
(08:06):
So if the borrower isn'tconsistent, your servicer will put
it as non performing and $95 a month.
So 30% plus of that paymentwas going to the servicer and there
was nothing I could, it wouldhave been cheaper for me to actually
(08:28):
make the payments for theborrower to keep them current than
it was basically to some ofthe losses I think I was taking.
But that was the issue.
Here's the other issue with 0% loans.
They may, or typically theydon't have a late fee or they may
(08:49):
have a late fee but big deal,it's $10.
There's no default interest orlike no interest accruing.
So if they miss a payment whenthey make a payment doesn't matter,
it just goes towards a principal.
I see a lot of land loans outthere that people should put out
there at 0% interest thinkinghey the borrower, they love it because
(09:13):
0% all goes to principal.
As a lender I would run from these.
There is no incentive for themto pay if they're savvy, you know.
And let's say payments $500 amonth, they don't make payments for
six months.
You file foreclosure, you gothrough the whole process, you know,
(09:36):
or if I send a demand letter,150 bucks whoopty do you know for
them it's like okay then gottawait a 30 days.
You go through some, you know,process, they're like oh, here's
two months payment now.
Oh, then do you send anotherdemand and spend the 150 that then
you gotta try and go back and collect.
(09:57):
What do you do in those instances?
Because taking action is justgoing to hurt you, it doesn't help
you.
So again you are completelystuck in these 0% loans and again
you can get them at such asteep discount.
It's so enticing.
Like oh, I could get a $30,000loan for $10,000 and I'm a new investor
(10:23):
and all I have is 10,000.
I'm gonna go buy this $30,000loan that's written at 0%.
That's over you know, 20 yearsor even 10 years, you know, 30,000
divided by 120.
Okay, it's 250amonth.
Woohoo.
So I'm gonna get $3,000 amonth, I'm gonna get 30% on my $10,000.
(10:44):
Oh no, 250.
You know, all of a sudden youhave the servicing fees and everything
else.
You know, you may be lucky getif you're getting 1500 and that's
if it's over 10 years.
A lot of times these paymentsare over 20 years or more.
So you might see payments oflike 150, $200 on some of these loans.
When you see those low monthlypayments, understand your costs because
(11:07):
it's $200 and you got to pay$95 and that's of today.
I don't know what the nonperforming charges are anymore but
let's say it's 95.
It's basically cutting in halfand you're not getting that consistent
cash flow.
You're not getting 12 paymentsa year, you're getting 10 and 11,
you know, and then they'rekeeping enough and then maybe next
(11:29):
year you get 12, but then theygo back to nine, you go to foreclosure,
they'll get you 12.
It's this back and forth andthen because you have the inconsistent
pay history, how do you sell it?
Can't sell the loan.
I mean somebody's gonna lookat and basically like this isn't
really performing, it's non performing.
But I'm getting, you know,give me the pay history that shows
(11:51):
you made 10 payments and youmade $1,000 last year on this thing.
You know, after all yourexpenses now is it worth all that
headache of dealing with a nonperforming loan or semi performing
loan or a thousand dollars a year?
How much time were youspending on?
(12:12):
And that was the biggest thingI was spending so much and this is
before I had my company.
I was doing this all alone.
You know, I had severalhundred loan.
You know, at one point intime, I had over 200 loans I was
managing all by myself.
This was the time I, you know,when I had 50 to 75 loans.
And yeah, I'm sitting herespending the most amount of time
on the loan that's providingthe least amount of value to me because
(12:35):
I was so stuck on figuring outhow to win on this thing.
How can I figure it out?
What can I do?
Do I file foreclosure?
Okay, great.
You know, you send a demand,spend 150 bucks, and then, you know,
great, they reinstate and theygive you the $150, but your money
was out the door for, youknow, 60 days.
(12:57):
So you're waiting 60.
So you're basically again,you're not making any money on your
money because even if you havelegal and all that stuff, you know,
you can't charge to it.
So you're basically again,giving no interest loans.
So you're putting money outthe door, which is costing you money
to have it come back in.
(13:18):
So, you know, what's your costof capital?
So, yeah, and on this one,man, this borrower just had me so
frustrated because they knewhow to play the game.
They knew that if they wouldget it 90 days behind and then just
say, okay, are they gonna sendthe demand or not?
(13:38):
If they don't send the demand,they would just keep letting it roll.
Then you send the demand, andthen they would basically, you know,
reinstate it and make the payments.
Even if they made the fourmonths of payments from four months
behind.
Great, you got it, but youdidn't get it.
You know, you got four monthslater and what they would do, still
not pay.
(13:59):
And your servicer, even ifthey reinstate, and this is important,
understand, read yourservicing agreement.
At the Paper Trail conference,Kevin Cordell Madison was up on stage
and we were talking about thisand you know, we're talking about
how to manage your services.
And I asked Kevin, you know,what's the biggest mistake people
make?
He's like not understandingthe contract.
(14:23):
And I agree 100% because ofsome of the stuff I see people post
on Facebook.
Why did my service or whydidn't my servicer do this?
Or why didn't my servicer.
Now there's one post about thefloods in North Carolina and someone
made a comment about they'reupset with their servicer that didn't
go check on the property for them.
And I made a comment like welldid you request it from the servicer
(14:45):
and did you actually pay themto go look or you know, or contact
the borrower?
The area had no power, nophone and you know, basically they
were upset with the servicer,that servicer had made contact with
the borrower.
They're like, how do you knowit's your loan?
You know if you want theservicer to make contact with the
borrower, pick up the phoneand call a servicer or email them,
(15:06):
say hey, can you make contactcontact or can you send somebody
out?
And of course you have to payfor that.
Now make contact, you know,they make the phone call for you
typically as a courtesy.
But if there's no phones orever, you know the phone lines and
they don't have a cell phonenumber or whatnot, what do you want
to do?
Now the only way would be inperson communication.
(15:27):
And that's a big thing thatpeople don't understand is reading
these contracts.
And in the contract justbecause a borrower reinstate doesn't
mean it's not still under thatspecial servicing.
I believe it's threeconsecutive, three consecutive monthly
payments.
(15:47):
So for borrower misses threemonths and makes all four months
at once, misses three months,makes all four months at once in
their mind because they'restill doing all the reach out and
everything.
That is a non performing loanand you are going to get charged
the non performing rates.
(16:09):
Thankfully in this one theborrower did have insurance but if
they didn't think about thattoo, you're paying force place insurance,
you can add it to the loan.
Now it's basically at zero,you know, you're not getting any
interest on it and you getthat payment every four months as
well.
So that's a great deal for aborrower if you think about it.
Somebody gives you money andyou can go four months, five months
(16:32):
without having any interest orany payments due and then just be
like, ah, I'll give it to youwhenever I want.
And they knew that.
And what was interesting is ifwe sent the demand at 90, they would
pay.
If we didn't send the demand,they wouldn't pay until we sent the
demand.
They knew exactly how to playthe game.
I think what frustrated me themost or pissed me off the most on
(16:53):
this is you know, I'm very,very competitive.
If you didn't know that.
I also like to win and in thisone I was so frustrated because I
lost.
It's like this guy got me, heduped me and that burned me.
The fact that I was like Damn,he got me.
(17:17):
And it's like, hey, you know,now that I turned 50, and this was
probably when, you know, this is.
I don't know, when I was in myearly 40s, I was still at that point
where I really didn't like to lose.
And I take it personally andfigure out tried and way to win,
you know, today it's more of,you know, my mindset is, hey, you
take your losses, you move on.
Because looking back, and I'vealways been type person that, you
(17:41):
know, I won't look back anddwell on it and learn from my mistakes.
But, man, as you can tell inthis episode, you know how I'm talking
to you, this one, this one stings.
This one did sting, you know,because it was just like, so frustrating.
And, you know, the.
The arrogance of the borrower, too.
And as the lender, you know,you sometimes think, hey, I'm the
lender.
You know, I'm, you know, I'vegot, you know, the quote, unquote,
(18:03):
higher ground.
Oh, no, not in this one.
This guy, I was at the bottomof the valley and he was on, you
know, the mountaintop, youknow, complete control.
And again, nothing I could do.
So looking back, as we wrap upthis episode, so it's maybe like,
okay, Chris, you got burned.
What do you do in these instances?
(18:25):
First, I wouldn't buy 0% loans.
I just.
I wouldn't.
If you do buy 0% loans, thatdiscount has to be significant.
And even if it's a performingloan, even if it's performing, let's
say the borrower was never,ever behind on a payment.
(18:45):
I would only assume eight ornine payments a year in that calculation
and bid off of that.
And I would probably assumesome discount on sir.
I mean, I would just discountthat value so much that I don't think
it would pro.
I mean, they would almost haveto give this thing away for me to
take on another one.
(19:08):
Now, I am in different shoestoday because I do have a fund, and,
you know, we are, you know,have a decent portfolio.
You're just starting out.
It's like, great, Chris.
You know, you got a $50million fund, you can do this.
I've only got 10 or $15,000 tomy name.
(19:29):
I might go after somethinglike this because it's a $30,000
note that maybe I can get for10 or $12,000 or whatever that number
is.
I didn't do the math in my head.
So I'm just throwing numbersout there.
I'm not telling you you shouldpay 30 cents on dollars for these,
run the numbers.
I'm just in my head throwingnumbers out there, you know, and
let's say it's a land loanthat you can get for $10,000.
(19:51):
Again, run the numbers to see,okay, if, you know, if it goes non
performing and I got to pay95amonth, what does that look like?
How, look, maybe the borrowercontinues to pay and you know, I
just got burned.
But look at it again.
The whole point of this seriesis look at the other avenues and
(20:12):
options to see how they impact.
Because if the loan payment isonly a hundred dollars a month, 95
of it goes to the servicer.
If it's not performing, you'rebasically making zero on that thing.
So it has to have enough meaton the bone as a payment from that
borrower and you know, justreally got to dive into the numbers
(20:36):
on it and what makes sense.
And again, because I knowpeople buy these, especially on land
and you can still make money.
I'm not saying you're notmaking money on them.
I'm not saying theypotentially are bad deals.
I'm just saying you can beburned pretty badly.
So just be careful.
And the whole again premise isfor me, as part of these episodes,
(21:01):
I am sharing some of themistakes we made.
I want you all take thisagain, take it with a grain of salt
if you want.
And you could be buying 50 0%loans and they're paying on time,
great.
And you're buying them atdiscount and the cash flow is awesome.
You're selling off partials toother people as well and life is
good.
That can happen too.
(21:21):
All I'm trying to do is sharewith you because a lot of people,
especially on social media,only post the rosiest of red stories.
Everything is great.
Everything is wonderful.
You know, have you ever seenon social media someone basically
saying, my marriage sucks, Ihate my marriage.
You know, there's no, youknow, you know what going on or anything
(21:45):
like that, or, you know,people being truly honest and open
about that, or I fight with myspouse every other day.
That's not me, by the way.
But you know, that happens.
I know.
You know, again, people gothrough challenges, of course, in
life with relationship and everything.
You never see any of that onsocial media, do you?
What do you see?
People's vacations, peoplewith their kids, winning.
(22:06):
People celebrating.
You see the wins, you rarelysee the losses.
And for me, I'm not afraid onthe note, investing space to come
share my losses, to come sharemy mistakes.
And again, I feel like I'm oneof the only people that do that.
So I hope people appreciate that.
(22:29):
And if you do appreciate it,make sure to leave us a like review
on your favorite listening station.
You know, a little plug right there.
But no, as we wrap up thisepisode, I hope you truly do appreciate
some of these podcasts that wedo provide, because I hope you can
find them valuable in tryingto benefit you for your note investing
(22:50):
journey.
If you want to stay in touch,get on our mailing list.
Reach out to us go to 7einvestments.com again we put out
notes for sale.
We're going to be startinghaving some seminar programs diving
deeper into some of this stuff.
Or if you're looking to sit onthe sidelines and invest in some
(23:11):
type of offering, check out 7eInvestments.com can check the offerings
that we have live and at any time.
And we have investor relationspeople, asset management people,
myself, we're always willingto talk to you to see how we can
better you and understandingthe note space and this journey that
(23:32):
we all go through.
So thank you, take care and asalways, I will catch you on the next
one.
Welcome back to anotherepisode of the Paper Trail podcast.
I AM your host, Chris 70, andtoday I am going to share probably
the biggest mistake on a loan,purchasing a loan I ever made.
And interesting thing about itis I knew this going in and it was
(01:06):
like, know it's one of thosethings of like, like touching the
hot stove, you know, not totouch the hot stove.
But I still did it anyways.
And I'll share the story.
This is probably one of my themost frustrating notes I've ever
had.
So we will dive deep into thisand hope you will enjoy this episode.
(01:31):
Prior to getting into it, Iwant to just mention a for those
who attended the Paper Trailconference, again, I want to thank
you recording this episodeactually in October, October 1st
actually of 2025, and it isthe final quarter of the year and
(01:56):
what typically happens in thefinal quarter of the year?
Inventory.
You are going to see a spikein inventory.
Typically you see it inOctober and November and then December
is, you know, the leftoversand the stuff that doesn't sell on
October, November you'll seefloating back in December.
(02:20):
So I want to mention that.
So if you're on the hunt forloans, now is going to be a great
time.
If you are interested inloans, reach out.
We have loans for sale.
I can put you in contact withother people who have loans for sale.
Just tell me what type ofloans you're looking for.
And one thing I'll justmention, make sure your pricing expectations
(02:42):
are in reality.
That's the biggest thing Ithink the biggest hurdle people make.
They want the perfect note ata price of a loan that is not a perfect
note.
So and that's why I want toshare episodes of this podcast, lessons
I've learned.
You know, we're talking a lotabout bidding on assets and, you
know, mistakes that I've made.
(03:03):
And my end goal with all ofthis is to make you wiser, smarter,
more experienced.
Learn from the lessons I'velearned as I'm again preach, I'm.
I believe I'm one of the onlypodcasts or out there that really
share the stories of casestudies and things we've been through.
(03:26):
I'm not up here, as you cantell, pitching, marketing, you to
buy any course from me.
I don't have a course.
I shut down my membership group.
I'm looking at in the futurehaving some seminars for people.
You know, last year we did thePaper Trail conference, looking,
you know, at that in 2026 as well.
(03:49):
That's it.
You know, we have over 950investors in our fund.
That's a completely differentanimal from people who are actively
investing.
But you know, I like to sharethis with people because again, I'm
not up here just marketing youon how to find notes or anything.
I'm rolling up the sleeves anddiving in.
(04:12):
So.
Okay, enough of me on my high horse.
Let's talk about one of theloans that, you know, I say, you
know, it's, you know, I'vedone this loan twice.
My first and last time everdoing it.
So drum roll please.
What was that mistake?
(04:33):
Bought a loan, I had a 0%interest rate.
Even though I bought this loanat a huge discount.
It was non performing at the time.
If you listen to my lastepisode about low interest rate loans
that are not, you know,significantly behind.
(04:53):
Yeah, this one, oh man, ifyou're watching this, you know, I
can see, oh, how do I turn myhead the right way?
The gray hairs, you know, thegray is moving up and I think like
a quarter of this is becauseof just this loan.
And you always remember the,the, the, the ones, the most vivid
(05:14):
remembrance of loans are theones that kind of, you know, leave
the biggest scar.
And outside of the Nightmareon Elm street loan that I've had
that I joint ventured withJamie Bateman on, that one's a disaster.
The four feet of water in thebasement on a property in Ohio, that
one was pretty ugly and messy.
(05:37):
You know, those were probably,you know, in this one were the hardest
loans to manage.
And I've had other loans.
Again, we've been doing, we'vedone over 750 loans.
Yes, we've lost money on loans.
Anyone that tells you theyhaven't, haven't been in the business
long enough.
So yeah, we lose money.
But there's two ways to losemoney is lose money.
That is, didn't you know, theprocess went through.
(06:00):
There's nothing you can do.
And like you don't have towaste a lot of time on it.
Just hey, deal sucks.
Sorry.
And then there's the ones thatyou feel like you went four quarters
in the trenches and you'refighting an uphill battle.
And this was one of them.
And you know, it was a loanthat was at 0% interest and borrow
(06:21):
is behind.
And still I forget what thediscount was, but it was huge, huge,
huge discount.
But I valued it more as, hey,look, we're going to foreclose on
this person.
There is no way this personcan reinstate or do anything or whatnot.
(06:41):
But they did.
But what they did do is, andthis is where I was a rookie, I'll
call myself a rookie.
And allowed them to make notfull reinstatement but make partial
payments to get caught up.
So they got to a point wherethey basically got to like two or
three months behind.
(07:02):
So they made it up.
So I got some money coming inthe door.
I did overpay for this becauseI was predicting foreclosure.
Again I don't remember thefull numbers but then what happened?
And the payment on this loanwas in like the three.
I think it was like 250 to $300.
It was a low, low monthly payment.
(07:23):
So even though I think I paid,I paid like 12 or 15 thousand dollars
for this loan.
Again the UPB was like 30something thousand dollars or whatever
it was.
So it was like less than 50cents on the dollar.
The issue was the payment wasso freaking low and they got behind.
(07:44):
They caught up but then got behind.
What did I not notice anyone?
Of course this recording.
So no one can actually respondto me servicing fees.
So the borrower make apayment, miss two, make a payment,
miss one, make two, miss one.
(08:06):
So if the borrower isn'tconsistent, your servicer will put
it as non performing and $95 a month.
So 30% plus of that paymentwas going to the servicer and there
was nothing I could, it wouldhave been cheaper for me to actually
(08:28):
make the payments for theborrower to keep them current than
it was basically to some ofthe losses I think I was taking.
But that was the issue.
Here's the other issue with 0% loans.
They may, or typically theydon't have a late fee or they may
(08:49):
have a late fee but big deal,it's $10.
There's no default interest orlike no interest accruing.
So if they miss a payment whenthey make a payment doesn't matter,
it just goes towards a principal.
I see a lot of land loans outthere that people should put out
there at 0% interest thinkinghey the borrower, they love it because
(09:13):
0% all goes to principal.
As a lender I would run from these.
There is no incentive for themto pay if they're savvy, you know.
And let's say payments $500 amonth, they don't make payments for
six months.
You file foreclosure, you gothrough the whole process, you know,
(09:36):
or if I send a demand letter,150 bucks whoopty do you know for
them it's like okay then gottawait a 30 days.
You go through some, you know,process, they're like oh, here's
two months payment now.
Oh, then do you send anotherdemand and spend the 150 that then
you gotta try and go back and collect.
(09:57):
What do you do in those instances?
Because taking action is justgoing to hurt you, it doesn't help
you.
So again you are completelystuck in these 0% loans and again
you can get them at such asteep discount.
It's so enticing.
Like oh, I could get a $30,000loan for $10,000 and I'm a new investor
(10:23):
and all I have is 10,000.
I'm gonna go buy this $30,000loan that's written at 0%.
That's over you know, 20 yearsor even 10 years, you know, 30,000
divided by 120.
Okay, it's 250amonth.
Woohoo.
So I'm gonna get $3,000 amonth, I'm gonna get 30% on my $10,000.
(10:44):
Oh no, 250.
You know, all of a sudden youhave the servicing fees and everything
else.
You know, you may be lucky getif you're getting 1500 and that's
if it's over 10 years.
A lot of times these paymentsare over 20 years or more.
So you might see payments oflike 150, $200 on some of these loans.
When you see those low monthlypayments, understand your costs because
(11:07):
it's $200 and you got to pay$95 and that's of today.
I don't know what the nonperforming charges are anymore but
let's say it's 95.
It's basically cutting in halfand you're not getting that consistent
cash flow.
You're not getting 12 paymentsa year, you're getting 10 and 11,
you know, and then they'rekeeping enough and then maybe next
(11:29):
year you get 12, but then theygo back to nine, you go to foreclosure,
they'll get you 12.
It's this back and forth andthen because you have the inconsistent
pay history, how do you sell it?
Can't sell the loan.
I mean somebody's gonna lookat and basically like this isn't
really performing, it's non performing.
But I'm getting, you know,give me the pay history that shows
(11:51):
you made 10 payments and youmade $1,000 last year on this thing.
You know, after all yourexpenses now is it worth all that
headache of dealing with a nonperforming loan or semi performing
loan or a thousand dollars a year?
How much time were youspending on?
(12:12):
And that was the biggest thingI was spending so much and this is
before I had my company.
I was doing this all alone.
You know, I had severalhundred loan.
You know, at one point intime, I had over 200 loans I was
managing all by myself.
This was the time I, you know,when I had 50 to 75 loans.
And yeah, I'm sitting herespending the most amount of time
on the loan that's providingthe least amount of value to me because
(12:35):
I was so stuck on figuring outhow to win on this thing.
How can I figure it out?
What can I do?
Do I file foreclosure?
Okay, great.
You know, you send a demand,spend 150 bucks, and then, you know,
great, they reinstate and theygive you the $150, but your money
was out the door for, youknow, 60 days.
(12:57):
So you're waiting 60.
So you're basically again,you're not making any money on your
money because even if you havelegal and all that stuff, you know,
you can't charge to it.
So you're basically again,giving no interest loans.
So you're putting money outthe door, which is costing you money
to have it come back in.
(13:18):
So, you know, what's your costof capital?
So, yeah, and on this one,man, this borrower just had me so
frustrated because they knewhow to play the game.
They knew that if they wouldget it 90 days behind and then just
say, okay, are they gonna sendthe demand or not?
(13:38):
If they don't send the demand,they would just keep letting it roll.
Then you send the demand, andthen they would basically, you know,
reinstate it and make the payments.
Even if they made the fourmonths of payments from four months
behind.
Great, you got it, but youdidn't get it.
You know, you got four monthslater and what they would do, still
not pay.
(13:59):
And your servicer, even ifthey reinstate, and this is important,
understand, read yourservicing agreement.
At the Paper Trail conference,Kevin Cordell Madison was up on stage
and we were talking about thisand you know, we're talking about
how to manage your services.
And I asked Kevin, you know,what's the biggest mistake people
make?
He's like not understandingthe contract.
(14:23):
And I agree 100% because ofsome of the stuff I see people post
on Facebook.
Why did my service or whydidn't my servicer do this?
Or why didn't my servicer.
Now there's one post about thefloods in North Carolina and someone
made a comment about they'reupset with their servicer that didn't
go check on the property for them.
And I made a comment like welldid you request it from the servicer
(14:45):
and did you actually pay themto go look or you know, or contact
the borrower?
The area had no power, nophone and you know, basically they
were upset with the servicer,that servicer had made contact with
the borrower.
They're like, how do you knowit's your loan?
You know if you want theservicer to make contact with the
borrower, pick up the phoneand call a servicer or email them,
(15:06):
say hey, can you make contactcontact or can you send somebody
out?
And of course you have to payfor that.
Now make contact, you know,they make the phone call for you
typically as a courtesy.
But if there's no phones orever, you know the phone lines and
they don't have a cell phonenumber or whatnot, what do you want
to do?
Now the only way would be inperson communication.
(15:27):
And that's a big thing thatpeople don't understand is reading
these contracts.
And in the contract justbecause a borrower reinstate doesn't
mean it's not still under thatspecial servicing.
I believe it's threeconsecutive, three consecutive monthly
payments.
(15:47):
So for borrower misses threemonths and makes all four months
at once, misses three months,makes all four months at once in
their mind because they'restill doing all the reach out and
everything.
That is a non performing loanand you are going to get charged
the non performing rates.
(16:09):
Thankfully in this one theborrower did have insurance but if
they didn't think about thattoo, you're paying force place insurance,
you can add it to the loan.
Now it's basically at zero,you know, you're not getting any
interest on it and you getthat payment every four months as
well.
So that's a great deal for aborrower if you think about it.
Somebody gives you money andyou can go four months, five months
(16:32):
without having any interest orany payments due and then just be
like, ah, I'll give it to youwhenever I want.
And they knew that.
And what was interesting is ifwe sent the demand at 90, they would
pay.
If we didn't send the demand,they wouldn't pay until we sent the
demand.
They knew exactly how to playthe game.
I think what frustrated me themost or pissed me off the most on
(16:53):
this is you know, I'm very,very competitive.
If you didn't know that.
I also like to win and in thisone I was so frustrated because I
lost.
It's like this guy got me, heduped me and that burned me.
The fact that I was like Damn,he got me.
(17:17):
And it's like, hey, you know,now that I turned 50, and this was
probably when, you know, this is.
I don't know, when I was in myearly 40s, I was still at that point
where I really didn't like to lose.
And I take it personally andfigure out tried and way to win,
you know, today it's more of,you know, my mindset is, hey, you
take your losses, you move on.
Because looking back, and I'vealways been type person that, you
(17:41):
know, I won't look back anddwell on it and learn from my mistakes.
But, man, as you can tell inthis episode, you know how I'm talking
to you, this one, this one stings.
This one did sting, you know,because it was just like, so frustrating.
And, you know, the.
The arrogance of the borrower, too.
And as the lender, you know,you sometimes think, hey, I'm the
lender.
You know, I'm, you know, I'vegot, you know, the quote, unquote,
(18:03):
higher ground.
Oh, no, not in this one.
This guy, I was at the bottomof the valley and he was on, you
know, the mountaintop, youknow, complete control.
And again, nothing I could do.
So looking back, as we wrap upthis episode, so it's maybe like,
okay, Chris, you got burned.
What do you do in these instances?
(18:25):
First, I wouldn't buy 0% loans.
I just.
I wouldn't.
If you do buy 0% loans, thatdiscount has to be significant.
And even if it's a performingloan, even if it's performing, let's
say the borrower was never,ever behind on a payment.
(18:45):
I would only assume eight ornine payments a year in that calculation
and bid off of that.
And I would probably assumesome discount on sir.
I mean, I would just discountthat value so much that I don't think
it would pro.
I mean, they would almost haveto give this thing away for me to
take on another one.
(19:08):
Now, I am in different shoestoday because I do have a fund, and,
you know, we are, you know,have a decent portfolio.
You're just starting out.
It's like, great, Chris.
You know, you got a $50million fund, you can do this.
I've only got 10 or $15,000 tomy name.
(19:29):
I might go after somethinglike this because it's a $30,000
note that maybe I can get for10 or $12,000 or whatever that number
is.
I didn't do the math in my head.
So I'm just throwing numbersout there.
I'm not telling you you shouldpay 30 cents on dollars for these,
run the numbers.
I'm just in my head throwingnumbers out there, you know, and
let's say it's a land loanthat you can get for $10,000.
(19:51):
Again, run the numbers to see,okay, if, you know, if it goes non
performing and I got to pay95amonth, what does that look like?
How, look, maybe the borrowercontinues to pay and you know, I
just got burned.
But look at it again.
The whole point of this seriesis look at the other avenues and
(20:12):
options to see how they impact.
Because if the loan payment isonly a hundred dollars a month, 95
of it goes to the servicer.
If it's not performing, you'rebasically making zero on that thing.
So it has to have enough meaton the bone as a payment from that
borrower and you know, justreally got to dive into the numbers
(20:36):
on it and what makes sense.
And again, because I knowpeople buy these, especially on land
and you can still make money.
I'm not saying you're notmaking money on them.
I'm not saying theypotentially are bad deals.
I'm just saying you can beburned pretty badly.
So just be careful.
And the whole again premise isfor me, as part of these episodes,
(21:01):
I am sharing some of themistakes we made.
I want you all take thisagain, take it with a grain of salt
if you want.
And you could be buying 50 0%loans and they're paying on time,
great.
And you're buying them atdiscount and the cash flow is awesome.
You're selling off partials toother people as well and life is
good.
That can happen too.
(21:21):
All I'm trying to do is sharewith you because a lot of people,
especially on social media,only post the rosiest of red stories.
Everything is great.
Everything is wonderful.
You know, have you ever seenon social media someone basically
saying, my marriage sucks, Ihate my marriage.
You know, there's no, youknow, you know what going on or anything
(21:45):
like that, or, you know,people being truly honest and open
about that, or I fight with myspouse every other day.
That's not me, by the way.
But you know, that happens.
I know.
You know, again, people gothrough challenges, of course, in
life with relationship and everything.
You never see any of that onsocial media, do you?
What do you see?
People's vacations, peoplewith their kids, winning.
(22:06):
People celebrating.
You see the wins, you rarelysee the losses.
And for me, I'm not afraid onthe note, investing space to come
share my losses, to come sharemy mistakes.
And again, I feel like I'm oneof the only people that do that.
So I hope people appreciate that.
(22:29):
And if you do appreciate it,make sure to leave us a like review
on your favorite listening station.
You know, a little plug right there.
But no, as we wrap up thisepisode, I hope you truly do appreciate
some of these podcasts that wedo provide, because I hope you can
find them valuable in tryingto benefit you for your note investing
(22:50):
journey.
If you want to stay in touch,get on our mailing list.
Reach out to us go to 7einvestments.com again we put out
notes for sale.
We're going to be startinghaving some seminar programs diving
deeper into some of this stuff.
Or if you're looking to sit onthe sidelines and invest in some
(23:11):
type of offering, check out 7eInvestments.com can check the offerings
that we have live and at any time.
And we have investor relationspeople, asset management people,
myself, we're always willingto talk to you to see how we can
better you and understandingthe note space and this journey that
(23:32):
we all go through.
So thank you, take care and asalways, I will catch you on the next
one.
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