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Specializing in seller financing, Dawn is a visionary real estate professional who gets families into (or out of) homes and investments in a way that empowers and enriches them, as well as the communities in which they live… with or without banks and regardless of market conditions. Dawn is the antidote to America’s addiction to Wall Street’s financial opium. She makes the powerful, non-bank, strategies usually reserved for sophisticated investors accessible to everyday people, making or saving them thousands and instilling hope as she illuminates hidden opportunities. As a seasoned note investor intimate with seller financing and the secondary market for private mortgage notes, she provides mission-critical expertise that is extremely rare in today’s marketplace. Sellers: know what your note will be worth before you create it. "Landlord Liberation", "Buyers: The Seller is Your Bank" and "Note Investing for Newbies" are key gateway books for those wishing to engage with The Realm. Visit www.NoteQueen.com.
We're not being told the truth really about what's happening in the real estate market for sure. It's not an inventory problem. It's an affordability problem. And, anyway, with unemployment of white collar people and displacements of things, there's a kind of a consensus that there's this perfect storm to make note buying incredibly profitable over the next three years. And particularly, non performing institute thank you so much, Robin, Gilbert.
Dawn:Institutional notes, of course, it'd be solitary too. But what does it mean when it's gonna be great for note buyers of defaulted notes? What does that kinda mean? I mean, what does that make you think of? If it's gonna be great for note buyers buying defaulted bank paper, what does that mean?
Robin:And that's deja vu to 2011-2012 all that, which if you're a note buyer, yeah, you like it. I mean, it's cheap compared to what we're paying these days. But for anybody that's lost their house, that's not you know? That whole big picture is not a good scenario.
Dawn:No. And it's, I mean, if it's good for the defaulted note buyers, that means it's not good for the general the general public. There's gonna Well, welcome. My name is Dawn Rickabaugh. You are here at Property and Paper Live.
Dawn:I'm the owner founder of notequeen.com, and we're here to talk about seller financing, real estate, and note investing. And it was really interesting going to this conference, which I was telling the people earlier that I haven't been to an event industry event or held one or anything for well over seven years. And I didn't advertise I was going because I really til the last minute, I didn't even know if I would get on the plane, so I had to make it kind of an on the DL. And it was fine. It was all fine.
Dawn:So I feel like my neurosis has completed its cycle for the moment. We'll see. I'll pick up something else probably. Anyway, I thought it was great to, like, just okay. What's happened?
Dawn:A lot changes in the industry. There's it's kinda small and intimate, and there's kinda just a few players. I mean, think about well, there's just not that many of us at a conference. It's so niche of a thing. It's like there's so much opportunity that's not being tapped in.
Dawn:There's so much opportunity in seller financing strategies and note investing. But it was interesting to see who is still out there buying notes and doing their thing and who and all the faces that have changed. And so I was really glad I went, and I wanted to connect with Melody Wright to deepen that connection, and that was possible. So that was wonderful. I think she's gonna have me on her podcast in a couple weeks here.
Dawn:So I just wanna get the word out to more and more people about these powerful strategies. And one thing that I I came away with just in a day and a half of of being there, really, in the in the main meat of everything from Thursday evening till about noon ish on Saturday was that, you know, there's I'm real I'm already pretty conservative in my underwriting, which is why I I'm not the highest bidder for a property, and I'm not the highest bidder for notes. I'm gonna be happy to let all those other people pay these crazy these crazy prices. Right?
Gilbert:But I came away going, I'm gonna be even more conservative. And then just with the with the the kind
Dawn:of flooding is actually one of the biggest problems within the insurance industry, and different things. So I'm like, okay. I'm gonna add definitely do flood inspections for any proposed collateral notes secured by, you know, collateral. I've gotta make sure it's not in a floodplain. You know?
Dawn:Unless it's a known area for hurricanes every other day, I usually, you know, have that hasn't been always something I check off. David, do you wanna share what your main takeaways from it? And maybe I'll remember what I was gonna say before.
David:I I just kinda looked at it from a very general standpoint. And the thing I was impressed with, number one, it's an incredibly well well run conference. There's no there's no wasted time and a lot of time to interact. But, what I was interested in is a lot of the new people that are showing up with incredibly interesting new ideas, putting together mini storage, this, that, or the next thing. And, I was quite impressed with that from my perspective considering my age.
David:I'm just looking for very conservative things out there. And and that's for
Dawn:that's for real estate purchases investing in
David:Well, real estate purchases or note or notes.
Dawn:Notes secured by those things.
David:Yeah. Yeah. I mean, basically Yeah. Think I was the oldest person in the room, frankly.
Dawn:Did you get a did you get a a brownie point? Did you get a badge? You well, we should give you Right.
David:But, you know, but just the fact that that, you know, coming back, it just says, you know, there's it's just new and exciting stuff out there, but I also think there's an awful lot of extremely excited people and a little bit of exuberance that might come back to bite them.
Dawn:Yes. You wanna you wanna elaborate?
David:Well, it's it's almost like any market, the stock market or whatever. It's, oh, the it's this great deal. And then as you just alluded to earlier that, you know, you're gonna let some other people have the bids because they were pushing it too far from your perspective.
Dawn:Yeah. And that and that is so true from you know, just the older we get, we remember what we paid for things. Right? And and when I came on onto the scene in, I don't know, that year after I quit my nursing job, so we're talking twenty plus years ago, twenty two. Yeah.
Dawn:Twenty years ago. And then I was doing, you know, little bits of things before that, but, like, I was all in by 2004. It was standard hard money lending was you don't go above 65% loan to value or combined loan to value. 65%. And now it's, like, no big thing that people are, like, 80.
Dawn:It's like, that's the new 80 or 85%. Right? Like, they go, oh, 20% equity. And I'm like, oh my gosh. That can disappear in a heartbeat.
David:The what what's what's interested me was how they're talking about, you know, fix fixing houses and then selling them for 10% down, you know, and and and feeling feeling like they have gold. And as you say, it takes half hour to wipe out 10% equity.
Dawn:Even 20. Even 20. I mean, there's many areas in the country that are already down more than 20%.
Gilbert:Mhmm.
Dawn:So, anyway, but you've got a lot of money. When these funds have a lot of money that they need deployed, then they deploy it. Right? And they've gotta have some sort of return that the little onesie twosie seller financing deals that can be really, really profitable, you can't you can't just go, okay. I want 10,000,000 of these, dollars worth of these.
Dawn:They're just here and there, here and there. Right? Also, a thing to remember is there's a couple of banking institutions that are buyers of notes. First National Acceptance Corp is one. And then Will Henning, who used to work for First National Acceptance Corporation, FNAK, in the industry, he got on with a bank.
Dawn:What was it called?
David:I don't I don't remember, but it was in Dallas, I think.
Dawn:Yeah. So he so there's another bank institution. Now the banks, their rate of funds is so low. Right? In fact, we know they can even create money out of thin air.
Dawn:So they can afford they can make a spread buying something out of five, six, seven percent return, whereas you and I have a harder time, you know, doing that. And he but he's still trying to get up his, it's mostly institutional notes, papers, loans, paper loans. That's those are all three ways to say the same thing, really. He's 80% institutional, and he wants 20% seller finance because he can he can bump that up. But, of course, the institutions, they're federally regulated.
Dawn:They have their buy boxes, and they've gotta have a certain quality. They they just can't buy it if it doesn't meet certain guidelines. So that's where the private investors, we can create I mean, they're like the Titanic. We're we're little tugboats. Right?
Dawn:And so we can navigate nimbly and create custom solutions, that work and that makes sense, that the the big players just really can't. But one of the things that that the Mortgage Bankers Association guy was there talking about the trends that they see. So, for those who weren't on the call earlier, there's a link in the chat for the Linktree. It's linktr.ee/billbymel, bill by mail. He wasn't the mortgage banker guy, but he was another guy.
Dawn:And between what those two guys said plus my what Melody brought to the table and the other things that I've been gathering, number one, we have credit card debt, has gone vertical. So there's more and more people that, you know, they're they can't pay off their they're living off their credit cards. Right? And, of course, people have had to start paying for their school loans again. Foreclosures or, defaults in FHA, the FHA product are north of 12% now.
Dawn:So we've got several things that are converging, and this guy, Bill Baimell, actually has a book called The Storm. And what he's been a a proponent of, you know, scale up, scale up. I'm always like, stay small. Be mom and pop. Stay small.
Dawn:Keep it all. I don't know. I remember Gordon Moss used to stay say that. You can stay small, keep it all, or go big and blow your brains out. I don't know.
Dawn:For me, that would be so crazy. Try to manage huge, huge amounts of money. We kinda got a perfect storm going on. And Melody Wright, if you don't follow her work can someone type in a link to her sub stack or something? I just wanna pitch her.
Dawn:If someone could just find that and do it, that'd be awesome. Melody Wright, she has a sub stack called m three something. I she's a really great follow, but she is contending that she's looking at data. We're not being told the truth really about what's happening in the real estate market for sure. It's not an inventory problem.
Dawn:It's an affordability problem. And, anyway, with unemployment of white collar people and displacements of things, there's a kind of a consensus that there's this perfect storm to make note buying incredibly profitable over the next three years. And particularly, non performing institute thank you so much, Robin, Gilbert. Institutional notes, of course, it'd be solitary too. But what does it mean when it's gonna be great for note buyers of defaulted notes?
Dawn:What does that kinda mean? I mean, what does that make you think of? If it's gonna be great for no buyers buying defaulted bank paper, what does
Robin:mean? And that's deja vu to 2011-2012 all that, which if you're a note buyer, yeah, you like it. I mean, it's cheap compared to what we're paying these days. But for anybody that's lost their house, that's not you know, That that whole big picture is not a good scenario.
Dawn:No. And it's, if it's good for the defaulted note buyers, that means it's not good for the general the general public. Yeah. It just means that there there's gonna be a lot of pain in the market. Now if there's not, that's great.
Dawn:Right? But I really think it behooves all of us. And in fact, I really didn't answer the panel questions. They put me on a panel last minute because they had a someone bail out on them. So, I really just said what I wanted to say and didn't really answer the questions because I think one of the most important things that we need to be doing is looking at asset protection.
Dawn:That was the name of the panel. Like, you you people need to prepare for what if we have a good three years of grinding to the downside where there's, just a lot more pain and struggle in the market for everyday people to afford their their lives. So to me, food storage, the water storage, backup heat, backup light, you know, some cash that you keep at home, some silver coins that you know? I don't know. I just think you gotta be really thinking about that in terms of, okay.
Dawn:What am I gonna invest in first? Well, don't miss the piece where this real estate this real estate gotta you gotta protect this real estate and the bodies of the people that you love. So I don't I it's, like, my last ditch warning. I maybe I I try to not say it so much anymore, but I am gonna say it again. So important just to go.
Dawn:If you can't go to the store or order anything online for a month or more, make sure you you it doesn't matter what your net worth is if you can't eat and protect your family or survive, you know, at least a few short weeks without our normal civilized services. So and I and I really believe that's important. So, anyhow but I'm excited in in the way that because of what we know how to do here in these types of rooms, we know how to solve problems. So when there's more pain in the real estate space or financing and and that, we know how to come to the table and fill the gaps where the institutions leave gaps. We can fill those gaps.
Dawn:Gilbert, we should try to see this as an opportunity to keep people in their homes. Yes. Yes. Yes, Gilbert. Yeah.
Dawn:It's a it's an opportunity. Sri, what did you put right there? What is that small print thing?
Gilbert:Right. It's our. There's not really their data doesn't support if they are coming in. If it comes in, we are looking at two, three years back. So if you see anything, it'll at least be any year to eighteen months.
Gilbert:There's no huge way of coming in because banks don't start right away selling notes or foreclosures right away. It takes time. It takes at least about a year. Maybe if the trend goes the same way, you'll see something next year, probably '27. Yeah.
Gilbert:You're not seeing anything in '26. It's all just because she was talking about the same stuff last year. And I was in the audience. I asked, you know, what do you expect when it's still gonna she said you will see it in '26 for sure. '26 beginning.
Gilbert:Nothing.
Dawn:Yeah. Well, we'll we'll see. But it it's good to kinda be prepared for anything. And I think Sure. This guy was running around trotting his big ginormous fund now because he's getting ready.
Dawn:He's a lot of guys are, you know, building up their funds and have getting money ready so that
Gilbert:Yeah. I know Bill Beimel for the past ten years.
Dawn:Oh, what do you tell me more.
Gilbert:Yeah. This is his third book. You when COVID hit, we used to be on mastermind calls talking about all the data that is gonna I mean, all the notes that are gonna come in. Mhmm. It did not happen.
Gilbert:There we because if you look at the delinquency right right now compared to what was reported during COVID, COVID was, like, three times more. Like, it went up to almost as big as the last crash. And, obviously, we they pumped in money, they stopped the they put in the moratoriums. They did not let it happen. So I don't know what's gonna happen right now.
Gilbert:But as far as the delinquency numbers are concerned, because, you know, these are directly from core logic that I provided, there's not even 600 k delinquent. So what happens is you have to look at seriously delinquent ninety days or more late, not just thirty days, sixty days. Thirty days, sixty days are more like false negatives or false positives, how you look at it. Whenever a service transfers or a servicer shuts down, it merges with other then the delinquency shows because the because of the service transfer, it doesn't really it's not until it goes ninety days and beyond that, that's when they are in serious trouble. So thirty sixty is an indication, but it's not really delinquency.
Gilbert:Yeah. Except for some states, you can't even start the legal process for, you know, sixty days delinquent. Right? Yep. I mean, it might turn into something, but it's not gonna be anytime soon.
Dawn:Yeah. So even if it got really bad real soon, what you're saying is we're we're not really gonna see the paper, the paper pile up till next year.
Gilbert:There are two other conditions. Right? And back in 2008, I was at Fannie Mae at that point in time. They didn't have a clue what to do.
Dawn:Yeah.
Gilbert:K? Defaulted notes were managed in an access database. Anyone who's in software, you know what access database are the after sixty four thousand rows, it used to crash. That's why they were managing defaulted I mean, they were not selling notes at that point of time, but defaulted loans. And there were three people in all of default servicing in 2006.
Gilbert:That's when I joined them. After that, they build systems around it, how to handle it. They started with bulk audios, then we came up with how to actually sell notes, default notes. Because the only experience at that point of time was selling performing loans in the secondary market or creating an MBS out of it and putting it on the market. That was the only experience.
Gilbert:They did not have experience of actually selling defaulted notes because they were thinking, would buy this? Yeah. Right? So they build a system, and a lot of educators came and actually taught how to buy nonperforming notes both first and second and all of that. So now what's happening is everything is demand and supply.
Gilbert:At that point of time, there was no I mean, I bought notes at 14¢ of the UPB. Yep. Right? Yep. There were not many buyers.
Gilbert:There were too much product. People were looking for REOs, but not for defaulted notes. Yep. Only a few people I mean, I got locked down right place at the right time. I was not even half smart, but I I was at the right place at the right time.
Gilbert:So what I'm saying is now there are a lot more people with lot more capital, a lot of peep lot of hedge funds who are in this space, and they actually left because there is no product. I know a lot of them that that are left, there's no product. And a lot of people have equity right now. So back in the day, we were was upside down. So they would just give the house or, mean, just walk away.
Gilbert:That's not the case anymore right now. They you have a lot of equity. The prices have to drop considerably to get that. I mean, do I wish? Absolutely.
Gilbert:I wish what they were saying is true, but the data doesn't suggest it.
Dawn:Okay. Well, I appreciate you coming on and and sharing that. It's always interesting. I mean, I'm not in the nonperforming paper space, institutional space at all. And so, I don't know.
Dawn:Dave, do you remember talking to anybody else that, besides Bill, Melody, and some there was a couple other funds, guys that I talked there that run their funds. But
Gilbert:Yeah. I mean, I talked to certain hedge funds. They, you know, they buy easily a 100 to $2,000,000 every year. Right? Even they are not they are not raving the red flag yet.
Dawn:So Oh, interesting. So so alright.
Gilbert:Yeah. I mean, it might come down the lane. If if let's suppose everything goes bad in the next six months. So you'd probably see something in 2000 '28.
Dawn:Yeah. '20. Okay. Yeah. Good good good to know.
Dawn:But it's like, okay. Then a word to the wise. It's just kinda like prepare for Yeah. If if you're, you know, if you're just a regular mom and pop, just hunker down a little bit. Like, get lean, get prepared on all the ways that you can just so if things get messy and, it's a rough go for for a few years, you can make it, or you're fine.
Dawn:Get your capital together so you got the cash to come in when the opportunities are there. I don't know. It's it's interesting because one other thing I'll mention before we get into talking with Eric and Gil Gilbert that I promised is that, you know, the number that Tracy, z, and Fred Rui pass around. Apparently, the they're like, how much seller finance date, paper is there created every year? And I think the latest number was around 35,000,000,000, give or take, but that's only based on MLS data, apparently.
Dawn:Do you do you disagree, Sri, on that? Do you know any difference?
Gilbert:Yeah. I'm I'm I'm follower of their you know, I'm part of
Dawn:their Yeah. But they apparently, they they only track MLS seller financing closings. And so I know everything I've bought and sold with seller financing has never hit the MLS. So if you just even take just my example and my tiny little life over here in, you know, Nevada or Nevada, if you don't know. You know?
Dawn:It's gotta be double. I I mean, the number's gotta be double. Like, some more like, $70,000,000,000 of seller carry. Maybe even more because you've got all these you know, a lot of, real estate investors are cranking out paper. The ones that learn how to keep some notes, they're cranking out paper Yeah.
Dawn:At month. You know?
Gilbert:You are a better person to answer about seller financing notes. You know, I mostly concentrate on, I mean, I buy a set of finance, but mostly distressed bank originated paper is where I concentrate. So I'm not the right person to comment on that.
Dawn:Okay. Well, but anyway, just sometimes in term you know, you brought up data points, and I don't even know that I trust the core logics of the world, though. That's the thing where I'm not even a 100% sure because, I don't know, just like how AI makes it hard to know what's real and not. You know? I don't know.
Dawn:So Yeah.
David:I mean
Dawn:But, anyway Can
David:I say something real quick? I mean Yeah. The data
Dawn:Thank you for engaging with my content. If you'd like to hear the rest of the replay, please go over to citizensoftherealm.com and join our free community. If you'd like to participate live, be sure to subscribe at notequeen.com. And if you have a situation where you could use some one on one help, check out notequeendeepdive.com and schedule a private consultation. I guarantee that one hour with me will either make or save you thousands.
Dawn:Take this information and go out there and create financial solutions just one mom and pop to another. See you next time. Take care everybody.