Think Bigger Real Estate

Join us with guest Eddie Speed as we discover the benefits of mortgage note investment, including passive income, portfolio diversification, and higher returns. Learn how to get started and make informed investment decisions.

Creators and Guests

Host
Justin Stoddart
Host
Stephanie Peck

What is Think Bigger Real Estate?

The road to success for real estate agents is well-marked. The road to significance is not. Here, we help you to Think Bigger than just your business. We inspire you to seek success AND significance, income AND impact. We do that by interviewing the biggest thinkers and highest achievers in the real estate industry, extracting the secrets to having it all.

So we talk about purchasing mortgage notes. We have a gentleman who's bought over 50,000 notes themselves, and he teaches those of us who know that wealth is built through real estate a creative way to build wealth using the power of purchasing mortgage notes. Stay with us. We have the expert with us today. You so the big question is this, how do those of us in the real estate industry who have crazy amounts of ambition, how do we think bigger than the building of our own empires? How do we create success and significance income and impact? My name is Justin Stoddard. This is my co host, Stephanie Peck and together, we bring you the Think bigger real estate podcast. All right, welcome back. Everybody. Excited to be with you. Stephanie, hello. How are you?

Hey, I'm doing great. I'm super excited for this because, you know, I'm always looking for opportunities for wealth building and investing and maybe something that doesn't get my hands dirty.

I love it very good. We're excited to introduce Eddie speed. Let me just do a quick bio for those who maybe haven't heard of Eddie. Eddie again, is someone who and I had it right here in front of me, darn it. Hold on really quickly. This is going to be worth it, everybody. The feedback that I got from is, if you ever wanted to buy mortgage notes. Eddie is your guy. Again, as I mentioned, he's purchased over 50,000 of them. He simplified it, taken it all the way down to where he he is the leader of the note school, to where, if you ever wanted to build wealth in this way, we have your guy right here with us today, and stay tuned to the end of the show. Eddie has a special master class he's going to offer to anybody that listens all the way to the end. So I'm, Eddie, excited to have you here today. Out of South Lake, Texas. Thanks for joining us on the Think bigger real estate podcast. So

glad to be here. Thank you. Yes, we

love our Texan friends. I know Stephanie owns properties in Texas. I've got friends in Texas, coaching clients in Texas, so it's a great place to be from. And again, we welcome you here today. Let's dive in. Eddie. Give us for those who are maybe just learning about purchasing mortgage notes. Just, just give us a quick overview, so we understand contextually what it is we're talking about today. Okay,

so basically, you earn a first mortgage on somebody's property. It can be a house, it can be land, but, but you own a first mortgage, a mortgage is transferable. So most of us that have done had a mortgage on property in the past, either a house or commercial real estate or land. We've seen our notes sold, right? We've gotten a notice, hey, you're not your loans been sold. You know, it used to be owned by Justin, and now it's owned by Stephanie, right? It's, in fact, it's a legal requirement that you do that on owner occupied property. So we've all know that loans can be sold, and what I represent is really buying loans outside of conventional mortgage banking, right? I bought institutional loans, but I bought more seller financing, kind of probably, than anybody in the country, over 50,000 seller finance transactions. So somebody, seller finances a property, and they, they, they run out of cash, right? Because you can only afford to carry the mortgage on somebody's property before you run out of money. And then they call someone like me, and I buy the notes. And so I've been doing that since 1980 very

interesting. Stephanie, what questions do you have? I know, again, you invest in real estate frequently. Have you ever heard of anything like this? Or did you know that this was a possibility for an individual like us versus a big entity to step in and purchase mortgage notes?

Yeah, that's what's exciting about this. Is that Eddie's going to show us how anyone can do this, that it's not just the big institutions that can take advantage of these. So who, who would be your ideal client and ideal scenario to step in and help with something like this?

So that's why I built a school. It's really I've sold, you know, 10s of 1000s of notes to institutional investors, and I still do. We are very active Note buyers, so it's not like I'm not one of the old guys that did it in the 80s, but I don't do it anymore. I'm still we're active in the business. So my clients are people that have investable capital, and to be honest with you, Stephanie, they're probably burnout landlords, right? I mean, they've, they've had rent houses, they've had syndications, you know, I believe that a note is a perfect combination between a syndication and a rent house. A syndication you it's very passive, but you have no control. A rent house, you have control. Let's just say you have more control than you wanted. You know, you know what I'm saying, right? And so a note is in the middle, because it is. You're the bank, not a landlord, and but you own the asset. And so we found out it's a good combinations for people's financial building. You know, we have people that certainly. Have rentals that are invested in syndication. So we're not saying they shouldn't do those other things, but we're very competitive in today's market. Like today, you can earn a lot more cash flow with a lot less risk than you can on a rent house. With a note today in most markets, in most situations, at least um, East, I'll give you an I'll give you a super quick analogy, $250,000 right? So let's go pick a middle market. I live here in Dallas, Fort Worth, and it is considered a middle market, right? It's not the rents, not so extreme on either end. You know, it's not San Diego and it's not Toledo, Ohio, right? So you have $250,000 $250,000 buys you a house that'll rent for $1,800 a month. So the gold standard is, you guys know about 50% of the income that comes in off your rental goes to expenses, right? And that's pretty much definitely true today with inflation and the expenses that we've seen. So instead of, instead of netting $1,800 you're on your rent house, you're going to net 900 today. 27 $250,000 in capital buys about $2,700 in income on a note with very minimal expenses, because all you only pay at to pay a loan servicer. So call it 3030, 35 bucks, and now the rest of it becomes cash flow. So you're looking at, call it 20 650 bucks, versus 900 bucks for the same capital invested. The other thing is, is that note that I buy, while you only invested 250,000 the collateral is worth more than what you invested. There's a cushion factor. Just say the property is worth 325,000 so there's a cushion factor between what the collateral is worth and what you invested in the note on the rent side, you invest $250,000 in a rent house. You have $250,000 invested. So there's not so much of a cushion factor. So that's a quick analysis, just on the rent house side that says this is why a burnout landlord kind of likes this type of deal.

Stephanie, I don't know that I'd call you guys burnout landlords, but you're very actively in that space, flipping properties, holding properties. What type of I guess, concerns come up for you in not that you would pivot your portfolio entirely, but looking in this manner, what? What additional questions might you need to know, to say, you know, this would be an additional interesting way for us to build a portfolio of real estate investments. Does anything else come to mind that you would need to know to feel comfortable

doing that? You know one thing that came to mind, because I hear this a lot with seller carried financing. People are saying, but what if they don't make the payment? And then when I pivoted my thinking on that, it's like, then that's great. That means I get the property, yeah, I get the property back, right? So that's kind of the same thing. What you were saying when you're talking about the value of a collateral, right? Am I understanding that? Correct? Yeah,

that's true. Stephanie, and here's what I would say I've been doing. This is my I've been in this four and a half decades, right? I designed the note system for home investors. I've, you know, I've been, I bought more seller finance I bought over 2000 portfolios of seller finance notes. So there is, there is a risk management profile in any investment strategy under the sun. And so without understanding that, I would definitely say you could step off in the mud. For sure. That doesn't mean you can't buy a bad deal. That's why I have a school. But I would say that 50,000 notes later, we've kind of have, you know, a prediction meter of predicting the likelihood a loan will pay. So we pick notes on good collateral and good borrowers with redeeming factors that said the chances of default are not impossible, but they're very low, right? So I would say, don't buy notes if you think I'm just going to go get the collateral. I don't believe that's a good business. Yeah, I don't think, I don't think you can buy the notes at a deep enough discount to make that model work as well, but if you buy the notes that I'm buying, and you're buying cash flow and safety, I think in today's market, that's the case. And, and once again, it's a diversification for somebody like you and your husband. It's just a diversification to your portfolio, right? And, and, you know, I have real estate too, so I'm not against real estate, but I definitely would say if I'm looking for a cash flow model in today's market, notes are going to trump it almost every time,

right? Yeah. So that's that balance of short term return and long. Return. You you do a little bit of both. You do everything, and then you've got both bases covered. And so if you're, if

you're at my age, and you're looking at a 30 year loan, it's not necessarily short term, right, right,

right? Well, exactly. So that's where I was going to go with that is, I work with a lot of clients that have investment properties or inherited properties. And when we use that, that analogy of the burnt out landlord, you know, whether they're burnt out or they're just at an age in or stage in life where they don't want to be taking care of property. They want to, they want to be snow burning and living in two states, or just have some freedom. You know, I as a real estate agent, I do work with a lot of people that come to me, and they think that selling that property and taking the the tax hit on that is their only option. So it's great for us as real estate agents to have another option that we can bring to our clients. So how, how, as a real estate agent, could I introduce your system to my clients? Well, first

of all, there's a tax hack if you sell or finance, because you can take the gain on your property over time. You don't have to take it the year you sell it. It's called installment sales. The second thing is, you can take long term depreciation, and you can amortize it also over the life of the note. So what would have been a fairly significant recapture and capital gains trigger up front. You trickle that out over time, if you take payments over time. And so most people don't think of seller financing as is kind of a tax advantage, but it is. And so the next thing is, you know, I think it's just simply looking at, you know, somebody just running the math on their rental. And most people's mortgage payment today is higher than their rent. Is that a truth?

Yeah, sure. Well, then

why didn't a good day to be the bank? Well,

yeah. I mean, I, I just purchased a property, and I was telling a lot of people the story of, you know, I'm negative cash flow every month right now, but I'm, this is a long term hold for me, and I'm okay with that, because I know that the equity, over time will make up for that, but it's great to have additional options that are going to cash flow. Still got to pay the bills.

Other things Stephanie is this, seller financing is very effective when traditional financing isn't effective. I don't know if you know this or not, but mortgage banking had mortgage bankers have just announced that they're retracting their production numbers for 2025 they were predicting $2.3 trillion which is was in 2021 it was like 5.3 trillion. They've now retracted the number and rolled it back to two point 1,000,000,000,002 point 1,000,000,002,025 over 5 trillion in 2021 the loan business, the production is excessively off, as I'm sure you well know, right? And I look at it and think this is a perfect time for me to be the bank. I don't have to go take the buyer of last resort. I can go take somebody that's fully qualified, because mortgage banking is so tight. I can take somebody that's fully qualified that's been left behind. You know, all of us, guys, self employed, all the reasons that are difficult today, and I can be the bank and net more money than I make in in some other exit strategy. And maybe, maybe if I sell the house, what else would I put my money in? Right? So maybe it's a good, really good deal for me to do that, because I wouldn't want to put my money in something else, right? So there's a lot of reasons I think, you know, people would consider creative financing, you know, sometimes that has a funny tone to it. People kind of think that somehow dishonest, or, you know, whatever and stuff. And so, you know, I have been in creative financing for since 1980 my specialization is seller financing. And I think that we've entered truly a note cycle right now. You know? I think the math overwhelmingly is, is says, Hey, you gotta look at notes as a consideration, at least,

fascinating concept, right? Is it? Where's the money at right? Is it in the property right now? And what I hear you saying is that the market is primed right now because of where interest rates are at. This is the opportunity to step on the other side of the table and not be borrowing from the bank, but to be the bank

I have. There's there's a few places that I've done more than others, more i. Done a fair amount with Keller Williams, some of their highest in group, and I've seen them overwhelmingly active people in the business sell their rentals and owner financing, because when I pencil it out for them, they're like the mass overwhelming. And so it's a consideration that, as I agree with you, Stephanie, like as a realtor, like, how are you best advising your clients? And it's something that without your advice, many times, they wouldn't consider it

exactly and as a real estate agent, and that's primarily our audience is real estate agents, we're always looking for other opportunities to to create a sale or to be more valuable to our clients, even when they don't need us for the sale at that time. So it's great to have something like this in our pockets, where we can be directing our clients to whatever's going to be best suited for them in their scenario, and

something else. And I'm gonna, I'm gonna bait the hook a little bit. Okay, something else that I'm gonna cover very thoroughly in this master class is how you could use notes as your retirement strategy. And I'm gonna show you some unique things that you can do with retirement accounts that we figured out over the last four, four and a half decades, that I think the self directed retirement account companies consider to be the best thing you could do with retirement accounts is use a note strategy. You own notes in your retirement account, and you can even use an amazing, pretty amazing leveraging techniques to do that.

So it sounds like your master class is going to be full of great advice, great opportunities that are just going to open our eyes. Justin, did you have any more questions, or should we just talk about how someone can dive into this? I

just want to make an observation. It's before, Eddie, you joined us here this morning. Stephanie and I were having a conversation about how in the real estate industry, it's unfortunate how even sometimes sophisticated buyers and sellers will choose a real estate professional based on emotional decision, like, my brother needs it, or my friend really needs the money. And then at this, this same time, occasionally, those same people will complain about the lack of professionalism in an industry right when they chose based off a set of criteria that really didn't lead to somebody being choosed off of merit and who was going to do the best job. And it's interesting how to observe someone like Stephanie, who not only is probably the best real estate agent I've ever met, and extremely savvy investor with her husband, and you realize that there is a difference in real estate agents who constantly educate themselves, not just through advising others, but through doing it themselves, and that you really can get a superior experience from a real estate agent who's, for example, taking master classes like Eddie's gonna offer here, so that when you sit down with clients, you truly can act as an advisor. Because one of the stereotypes is like, what? Okay, as an advise real estate advisor? What advice does real estate agent give you? It's always a good time to sell. It's always a good time to buy, right? Whereas, when you have someone who's more professional, they can say, here's some additional ways that you could get to that same goal. And by the way, before I tell you that, I want to hear what is your goal? What are you trying to accomplish? And then you've got a whole, you know, a whole tool chest of options to help them to succeed at getting to that goal more quickly. So it's fun to hear the two of you talking, and Stephanie to put one more tool in her tool belt to be able to now be even more of an advisor than she's been, which is super exciting. We're appreciative of that. So without further ado, Eddie, let's talk about how we get this masterclass to our audience. I know you've created a very special opportunity for those who are listening to this to get access to it. Would you mind sharing with us what that would be?

So the master class is going to be pretty simple. You're going to go to noteschool.com, forward slash, think bigger. Great and Stephanie, let me challenge you for just a moment, if I can please. Here's what, here's what we're going to do. I'm going to show you math. I'm going to whiteboard out, and I'm going to show you financial modeling. We've talked conceptually this, about this, but what I'm going to then show you is, I'm going to show you a real note and how you can cut it up and carve it up and do do things with it that I've been doing for now four and a half decades. So it's kind of normal to me, but I've learned that no matter how long somebody's been in real estate, this is a little different kind of thinking. Now, because of your real estate experience, you're going to jump on it pretty quick. I get I'm pretty sure, right, but I'm going to show you some modeling that we have perfected in the space, because when I show you the math, then, then it's not so hard to jump on the bandwagon, because it's just. Just evidence of things that you're already very familiar with, which is that you, I'm sure, I'm certain, you're very good at math, right?

Show us the math, buddy. Show me the money. Show me the math. So

I think that's what you can expect at the master class. And I think, I think, I don't believe you'll be disappointed. I believe me, I've had a lot of experience with a mega lot of realtors. And I'm and I think you'll, you'll all in there saying this. This is something to consider as well.

Love it. Love it. So to get to that is that what you're saying to get to the math, go to noteschool.com, forward slash, think bigger. Well, actually, in that masterclass, you will be walked through the math. You can see for yourself how attractive this is in general, let alone in this market right now. That's it so good stuff. I put it up on the screen for those that are listening versus viewing again. Noteschool.com, forward slash, think bigger. That's a gift to our audience for joining us here today and becoming more of an advisor yourself, right? Truly, that's the mission that I have leading a company called Pro insight that Stephanie has and leading her clients forward is to really help real estate professionals become true advisors in every sense of the word. So Eddie, it's been such a pleasure to have you here on the podcast today. Let me ask just one final question as we wrap up, you're a big thinker. You've been doing some big things for a long time. What does Eddie speed do to continue to be a big thinker. What does it look like for

you? You got to know the market I spend a huge amount of time looking at market updates. I think we're pretty solid in knowing the data. And we, you know, a noteschool does a podcast once a month. We do a podcast on the market update, and we really crack it open. We look at, you know, what you know we we're looking at what the big guys are looking at. I'm fortunate to know some guys that run some mega, billion dollar operations, and they share analytics with me and stuff. And I just think you got to know them the market, like, it's like, if you don't know that, you're, you're you don't really know the weather report, so to speak.

Super good advice. I know Stephanie is a deep student of the market as well, and is actually meeting with financial advisors and other professionals, educating them on the market, which, again, is kind of right up the alley of what your advisors do. So Eddie, such a pleasure. Want to thank you for joining us today. Again, for that are just joining us or want a reminder, noteschool.com, forward slash think bigger. And you can also follow us on Instagram at Think bigger real estate and also join our Facebook group, think bigger real estate. Look forward to being with you all again soon. For those that are watching live, Happy Thanksgiving. We're grateful for you. We're grateful for this audience, and we look forward to being with you again soon. Thanks, everybody.