024 - Own Nothing Control Everything

2 Wealth Show S3 Ep24 - Own Nothing Control Everything

 Super E and Justin discuss better news for the economy. 

 Key Takeaways:  

1. Don't Be Involved in the Day-To-Day
2. Know When to Say No
3. Technology 

 Resources and links discussed  

• Videocast on BrightPath Notes YouTube Channel 
• Videocast on Elizabeth Maora YouTube Channel 
• BrightPath Notes Website - https://brightpathnotes.com 
• Elizabeth Maora LLC Website - https://elizabethmaorallc.com 

 Sponsored By: Integrated Health Solutions

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 About the Hosts 

 Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!  

Super E – Real Estate Investor specializing in short-term rentals and the management of them. She connects investors with short-term tenants and manages everything in-between.  

  Connect with the Hosts: 

• @2wealthshow – Facebook/Instagram 
• @wealth_show - Twitter 

Transcript

Justin Bogard: 0:06

[inaudible] Welcome to the 2 Wealth show, a show that shares how you can create real wealth for you and your family. I'm one of your hosts, Justin Bogard. And my co-host is Elizabeth Sickles, AKA super E I am a real estate note investor specializing in performing residential real estate debt. I find the deals acquire them for my own portfolio, as well as educate investors while walking them through the process of owning a real estate note. My co-host super E a real estate investor specializing in short-term rentals and the management of them. She connects investors with short-term tenants and manages everything in between. Our show was sponsored by bright path notes and Elizabeth Maora. You can find out more information by visiting our websites at brightpathnotes.com and elizabethmaora.com. Hello, Justin Bogard and hello to our audience. We are on episode number 24 of the 2wealth show. So welcome everybody. And I'm Elizabeth with Elizabeth Maora Awesome. Well, Hey Elizabeth, and Hey to our listening and viewing audience. I'm Justin Bogard with BrightPath notes and a yes, this is number episode 24. We've got a couple left until the end of the season. So we get a season three just about ready to wrap up. So free

Elizabeth Maora: 1:37

Time has flown.

Justin Bogard: 1:38

It has been fun. We we've definitely, uh, uh, brought it some excellent guests on for some interviews this season. And I look forward to having some more, uh, for season four.

Elizabeth Maora: 1:50

Absolutely. Absolutely. So fall is definitely here in Indianapolis. We've had some cold, even some winter temperatures, so I hope that everybody's prepared their houses, uh, accordingly for those that are in the winter or in the Northern part of the us and you know, around the world as well.

Justin Bogard: 2:10

Yeah. Speaking of that, I actually have a property that we have a note on that that went delinquent, then the borrower doesn't live in the property. So it's up in Michigan. So we're having to go through that, a winterization process with the property right now, we're trying to hit that before December comes around.

Elizabeth Maora: 2:27

Do you, are there companies, Justin, that specialize in that?

Justin Bogard: 2:32

Yeah, we call them property preservation companies and they just, they work with, uh, REOs and banks and stuff and they just, their job is to go out there and secure the property and winterize them and, and just to protect the investment for the bank.

Elizabeth Maora: 2:48

Excellent. That's a huge job.

Justin Bogard: 2:51

Yeah, sure. It's not fun. Luckily, the houses that we get into, they're not very large houses, so they're typically a one, one or two bath at the most three bedrooms or four bedrooms at the most. So the footprint's pretty small. So the work, I don't think is that difficult to do, but you gotta do it. You know, there's a whole checklist of things you gotta do once the property goes vacant and delinquent, just to, you know, you don't want that thing. Yes. But, and you know how it is Elizabeth in the Northern states, uh, you know, Indianapolis and above it's, uh, the winters can be kind of harsh and if you aren't protecting the pipes and stuff, or if you have a slow leak and you don't know about it before long, you have a giant pool in the basement.

Elizabeth Maora: 3:28

Absolutely. You know, we have, we currently have three traditional rentals that, um, we're looking for some great residents for. And so we've had to just, we have all electricity of course turned on, but we still check them every week. And the one, even though the pipes are on the outside and we have the temperature at 60 degrees, but we still put on just a drip of running water in the kitchen sink, just, just to make sure because you never know what can happen.

Justin Bogard: 3:54

Yeah. It's going to be less expensive for you to have that water bill raise up a few cents than it is to have that pipe burst and cause a lot more damage in the house and then be down for a not receiving income.

Elizabeth Maora: 4:08

Exactly. And you know, we, we had that happen in January of 2018. We had a polar vortex go through, uh, for all of our listeners and viewers in the Indy area. And one of our properties in broad ripple, the, um, hot and cold water in the shower, the pipes busted, and this was in the middle of the house. It wasn't on an outside wall or anything. So that did the tune of$150,000 of damage. And we were down four months for that rehab. So it happens. I haven't been,

Justin Bogard: 4:45

That has incredible, just a light mentioned for those of you that are listening to our show, uh, via the podcast, through the audio channels. We do stream this via video on our YouTube channels. Brightpath notes. You do channel Elizabeth Maora's YouTube channel as well. Just want to point out that Elizabeth already has her festive colors on for, um, the holidays. So you've got your red and your black. It's hard for me to see on the screen, uh, what you got on, but I see you got like your gold, a gold necklace on reminds me of stuff that kind of goes around and free. So it looks like you got your tree wrapping up at all.

Elizabeth Maora: 5:23

That's right. I'm almost done with my Christmas shopping actually. So

Justin Bogard: 5:27

Good. I have, I done a couple of items. I got some, um, some nice items for the kids before. Cause I heard, or I heard a rumor that perhaps Christmas, uh, Amazon deliveries after Thanksgiving might be a little, a little difficult to get through to everyone. So I went ahead and got some, some ones early that I thought about it. So

Elizabeth Maora: 5:48

That's, that's a very good idea and you know, kind of while we're on the topic of, of Christmas and the cold, um, so one of the things that we get that sometimes they'll call us and ask us if we'll do all kinds of different things that are out of our wheelhouse. And we had a client that called us from here in downtown Indy and he and his wife go to Arizona for the winter and they need somebody to check the property every week, do a walkthrough, check all the windows, make sure there are no leaks, um, and just do a forte of other items. And so we've taken them on. Um, you know, so even though it's out of, that's not what we normally do. This is going to be vacant property that people live in. Um, you know, there's always kind of a way to, if you want it to work, um, to make that happen and have an extra revenue stream.

Justin Bogard: 6:36

Absolutely. It's a great idea.

Elizabeth Maora: 6:39

Absolutely. You know, and they also, they have a security system, so we'll be the point person once they leave, you know, we'll be on call for them twenty four seven, um, not 365 because they'll be back in the spring. But, uh, you know, so you just figure out what it's gonna cost you and then what margin you need to make on it. And, um, you know, and, and quota, if you can swing it, you know, obviously we, we still have labor some labor shortages. Um, but if we can make something work, we always try to say yes and figure it out.

Justin Bogard: 7:08

Right. Everything. Right.

Elizabeth Maora: 7:12

That's right

Justin Bogard: 7:13

Own everything, rent, everything you say in the banking business, own, nothing control, everything.

Elizabeth Maora: 7:21

That's,

Justin Bogard: 7:24

What's been going on with you. I know that we both have visited some conferences or attended some conferences recently. And why don't you tell us in our listening audience here, what you want to?

Elizabeth Maora: 7:34

Sure. So I was at the vacation rental management association international conference in San Antonio. So we had a total of around 1700 participants. I, I spoke at a session and then I was a moderator, um, around table leader actually at another session. And I would say the two biggest takeaways for me actually, there's kind of three, is that number one, a lot of the other conferences are always pushing technology. And you know, if you want to manage efficiently, you have to have all this technology. And we use a lot of technology. Um, but it was kind of interesting because this conference, the tone was a little bit different in the fact that, well, you can still be efficient and not have all of these, all of the software and all this technology because it all costs money. So that was the first time that's ever kind of been said, or even been accepted because it's always, oh, what software do you use for this? What software do you use for that? And that was really interesting. And then, um, also one of the big things, um, I just totally lost my train of thought. Um, but there are two other big takeaways that I had from, from the conference that are gone right now, but they'll come back.

Justin Bogard: 8:51

That's interesting that you say that when you figure it out, just jump on in, um, when you were mentioning about how they weren't focused or driving the conference towards having new technology and more technology to control your business, but to, you know, how you can still manage your business, not having all the technology and having some of it like you do and, and still thrive. So that's pretty interesting. And it made me think in my head, a conference that I went to a big conference called the note expo, and it's an annual conference it's always in the first weekend of November. And it's typically in Dallas, Texas and allow all the, the larger note players in the, in the note space. And a lot of the, the smaller time investors like myself are going to this type of conference to get, you know, education, to get in contact with some vendors that we kind of all use to have some face-to-face with them, learn about new, um, vendors that are coming up and then, and then hearing a lot of stories. And so it's, it's not sales pitch driven, it's it is an expo conference and it's generally just for education and just to get the word out or to help people along and their note business, if they choose to have a career in it, or if they just do it as a hobby or as to, you know, make money passively in their, in their retirement account. Right. So it was, it was pretty good. We hadn't been live in person for since 2019, so it was nice to see all the, all the familiar faces and all the new faces that are in the note space as well. And so I didn't get the opportunity this time to speak or to be at a round table or to be on a panel this time. So I was able to sit back and kind of listen and soaking and soaking, absorb all the information in front of me. But I did get, I think, a little jealous. I didn't get, get up on stage this year, so maybe I'll have to work a little bit harder to get noticed so I can get up on stage next year.

Elizabeth Maora: 10:41

It's always, you know, it's great to give back right. Being up on stage and, you know, teaching people what you learned. And I do. I remember that the other two big takeaways. So one of them was before at all of the previous, cause I'm very involved with Burma. Um, the previous conferences, the international ones, and even some of our bigger ones as well. Airbnb has always had a pretty large presence this year. The Airbnb presence was very small and the VRBO presence was much larger. Um, as a matter of fact, I didn't even go to the Airbnb booth and it was much smaller than normal and they didn't have near the representation that they normally do. Um, which is interesting because their stock, so week before last, their stock just went up 18% because their revenue has been phenomenal, um, for the third quarter and just overall for the year. So they're, they're making money, which is a great thing, you know, both their revenue and their profit. So, you know, it doesn't really matter how much revenue you make if you're not making any profit. So when you're in business, you really understand that because, you know, if you're making a million dollars, but you're spending$1.5 million, then that's not type a, well, that is not profit. So yeah, the opposite way,

Justin Bogard: 12:07

What's that takeaway not profit. Right.

Elizabeth Maora: 12:10

That's right. Oh, and then the other takeaway was Matt Landau. He's, um, he's the giant in the short-term rental industry, very, very highly respected. And he gave the, um, the ending. So the wrap up, um, oh presentation. And one of the things that he said was, you know, a lot of these people, I mean, they're huge. They have 500 anywhere from 500 to 2000 properties that they're managing, you know, sometimes they're well all over the world, not just in the U S so really, really big, big players. And I loved it because he said, Hey, if you meet somebody that they're just managing two properties, you welcome them because at least they're here and at least they're trying to learn how to be better and do more. And, you know, sometimes people get wrapped up in their egos and, oh, well you only have two properties. Or in our case, we were up to 30 properties. Uh, you know, so it was just cool that he said that from the stage.

Justin Bogard: 13:06

That's awesome.

Elizabeth Maora: 13:08

And actually, oh, sorry, go ahead.

Justin Bogard: 13:10

Because I, and from the stats that I've been told through note expo, which I'll explain in a few minutes, is that the smaller players make up the largest margin probably in your market. Uh, would, would you agree with that statement? Like the, the people that have maybe the one to one to four, uh, properties of Airbnbs make up the largest portion, as opposed to the big giant players that maybe make up a small sliver, but they have thousands of properties.

Elizabeth Maora: 13:37

Absolutely. Very true.

Justin Bogard: 13:40

So the same thing in the rental market, and I know, you know, the stat Elizabeth, but for our listening and viewing audience here. So there's about 16.4 million rentals, uh, in the United States, uh, out there. And that are the single family rentals, right. That are owned by an, like a mom and pop. Um, and of those 16.4 million, there's like, let's just call it, um, uh, four 14 million that are, that are, uh, owned personally, as opposed to own an LLC. And then of those 14 million that are owned individually, 11 million of those 14 are self managed and not managed professionally. And so when, when you see, when you see those trends, you realize, okay, the Atlas let's call them amateurs. The amateur players are the biggest, uh, share of the market. And they're doing things not efficiently because maybe they just don't know what they don't know, but it was just, it's interesting to know. And then it's right there, right in front of you realize, okay, here's where you can solve a problem. You Elizabeth, you have to know that those 11 million let's say rentals and maybe, you know, it's a handful of rentals per person. So maybe it's not 11 million people. Maybe it's like, you know, three or 4 million, the, those landlords are probably reaching a breaking point, right. They went through COVID. They probably had struggles because they're self-managed, and they probably didn't know how to vet their tenants properly. They didn't have the proper education and knowledge to do so. They just did it because their buddy down the street has a rental one. He made a thousand bucks a month. So here in lies a problem to where that tenant is probably an issue for them. And they're probably at their wit's end. And so someone like ourselves, uh, can come in and we can offer them a solution and be like, you like receiving that monthly cashflow, but how would you like to lower that liability and that activity in that, and keep the same cashflow? Well, you know, and, you know, investing in partnering and, and being the bank and, and getting into the Airbnb business or having someone like Elizabeth self-manage, uh, managed the whole process for you. It just makes a lot of sense for those people. And so I guess what I'm saying, Elizabeth, is that there's a lot of people out there that don't want to go back to the traditional markets. They want to stay in real estate, but they get so burned out because they don't have any time. Now they need to place the land, their money to make money. And what better opportunities then kind of what you and I do, Elizabeth, to park their money to where they're backed by real estate, but they don't have to be active in real estate.

Elizabeth Maora: 16:17

Exactly. Not having to worry about that. Asset is a huge, huge relief. And, you know, and you don't need to be involved in that. Day-to-day, especially if it's not your forte, we actually just got two new traditional rentals from, um, from a gentleman that's been self-managing and he said, we're just, we're too nice. And they just call us all the time. And I'm like, well, I've got no problem setting those boundaries. So, um, so absolutely you're you're right. You know, and sometimes too, whenever if the resident knows that, you know, they are dealing right with, directly with the owner, the owner is going to back off a lot on maybe some things when they would say no, where, you know, when you have that management company, you know, you know, I'm sorry, but that's, you know, that's not something that we do. Let's look at the contract, I'll show you in the, you know, so it's just, it does make a difference, right?

Justin Bogard: 17:09

Yeah. When, when you're in, in the business that we're in or any type of real estate business, you, you don't want to be the highest person, you know, the highest level person talking to the actual client or the customer because you, that emotion comes into play. And it's tough to say no, and it's tough. You know, when you hear a, you know, a sad situation or a sad story or a situation that's a little tough, you kind of have to have the lines of defense. It'd be like, look, you know, this, this really stinks. And this is what I can do for you. But I can't, I can't go beyond that. You know? And so I can see a lot of these self managed, um, short-term people and self-manage rental people having those struggles because it is everyone's and everyone, you know, they, they understand and they empathize with someone's situation or sympathize with them. And it's tough to get beyond that. But when you have a layer in your business that separates you from that individual, you know, you can put stop gaps in there and be like, look, I went up, the chain, corporate chain is just not approved. And sometimes it has to be hard and fast rule, like, you know, with kids, you know, you love them. You want them, you want the best for them, but you got to have that tough love too. And you gotta know when to say, no, I'm going to tell him, Nope, you got to go to your bedroom. You're in trouble. Especially when you have young girls and you're a father, they can, they can, uh, wrap you around, uh, your finger pretty quickly.

Elizabeth Maora: 18:36

That's right. No when

Justin Bogard: 18:39

Say. No.

Elizabeth Maora: 18:43

Exactly, exactly. Um, so in the note business, Justin, are you seeing any type of slow down right now? Do the holidays affect that and going into year end?

Justin Bogard: 18:56

No, it's funny. You mentioned that because they kind of affect it and they kind of don't. So the end of third quarter, beginning of fourth quarter, there's typically a lot of activities. So the last month, the third quarter, and the first month of fourth quarter, it typically is a lot of activity going on. So the reasons why is because typically funds are dissolving and they're divesting themselves of the investment to, um, to liquidate the fund. So the waterfall can go out to the investors. And so that's a good time to pick up assets. So if you are cash heavy during those time periods, you can find a lot of good deals, uh, going into the end of fourth quarter, beginning of first quarter of the next year. So that's where we're at right now is where there's been a lot of activity pushing and pulling going on in the note business. Uh, what we also see now from the bigger hedge funds that got a chance to speak on stage is that there are a lot of non-performing assets that were not performing before COVID even happened. So Elizabeth, imagine if somebody on stage mentioned, they bought a$30 million portfolio of delinquent loans, and they said the average last due date. So the last time they actually made a payment was 2015.

Elizabeth Maora: 20:14

Oh my gosh.

Justin Bogard: 20:16

The average date was 2015 in the last payment date. So you got some that are, you know, closer to 2000, 1920, and you got some that are beyond us 15. You asked how the heck can you be a lender and let somebody get that delinquent? Well, here's why these bigger banks and these bigger firms, they don't have the capacity to treat each loan individually, to empathize with their situation, to go down a path that's best for the borrower. They go down the path of least resistance because working in volume, they have thousands of loans. So this is why it's good for people like us to get into those non-performing loans is because we can work with the borrower. We can remodify loans. We can spend some time with them and help figure out a solution, number one, to help them out. And number two, to be profitable for us as an investment as well. So with that set of volume, that's just a small sliver of what's going on. So there is volume that was going to get enforced over half. So if you can imagine there's a couple million, let's just say a couple of million loans that are sitting there in this ether before COVID even happens. And then COVID happened. So if they started a process, guess what they were for Baird, they went through forbearance, they were there, their loan information was moved to a later date. So they got another 18 months to be delinquent. So now those loans are five, six years delinquent, and they haven't been paying. So now guess what? The price of real estate has gone up pretty much everywhere. So their home has appreciated. So more than likely Elizabeth, they're not underwater with their mortgage. Very interesting times, versus 2007, 2008, 2009, when the real estate market dropped and they were quickly underwater with their mortgage. So now we're looking at non-performing loans, Elizabeth, and we're saying, okay, there's an unpaid balance of$50,000 here. They have a crude interest arrearages for the past couple of years. So that number goes from 50, let's say 56 to 60,000 plus any corporate advances from the loan servicer, meaning they paying taxes or insurance for them because they're not making a payment or any sort of, uh, attorney incidentals or anything like that. So that number now is the payoff balance is now$60,000, even though the unpaid balance is$50,000. Okay. But the real estate was worth$50,000. You know, in 2015, now it's worth a hundred thousand dollars. So now they have this, this, uh, fabricated equity. So they're able to remodify this loan pretty quickly. If they need to, they're able to defer payments to the backend and start paying. They're able just to sell the house and actually make money and move forward. So it's a very interesting time right now. So when those loans actually come and hit our level, which hopefully should be pretty soon, there should be more opportunity to go buy non-performing loans and help us people out. And it's not going to be anything like it was in 2010, 2012, where there was 250,000 foreclosures going on at the same time every month. It's nowhere near that. It, you know, we're going to be, you know, a couple thousand at a time, uh, you know, each month here and there. So that that's the main difference of what's going on. So that's what we hear is coming down the pipeline. So the COVID loans, Elizabeth there's about 8.8 million loans that were in forbearance of those 8.8 million loans, 75 to almost 80% of them are getting out of forbearance because they're repaying the Reaper format where they sold their property, where they refinance their property and got out of it. So a very small select set of those are actually going to be delinquent to where they're going to be a problem. So what's this call it a couple of million loans, uh, at the end of 2021 are probably going to be delinquent and going to be starting because they go through either an act of foreclosure or loss mitigation to get re-performing.

Elizabeth Maora: 24:17

Wow. That's incredible. Yeah. Much better news for the economy.

Justin Bogard: 24:25

Yeah. So we're not going to have people not paying, uh, cause loan services. The bigger loan servicers got hit very hard because they had to front the money for these larger banks because that's their agreement with them is that they will advance the money if the borrower's not paying because the lender is paying a special insurance for it. So just imagine these loan servicing companies having billions and billions of dollars of debt, just piling up that they're just, they're handing out to pay the lender. Um, and so that it, we're going to see if any of these bigger servicing companies either need to ask for some government assistance or they may end up, uh, flopping over and closing doors.

Elizabeth Maora: 25:06

Wow.

Justin Bogard: 25:08

It's just very interesting. So, um, I'm optimistic about it. I'm not gonna run around and say, I'm going to buy just non-performing loans. If I see opportunities in front of me, I will take advantage of them. If not, I'll probably stay down the same path I'm down as which is, you know, the performing loans and buying mom and pop seller finance notes, which is what we kind of really good at.

Elizabeth Maora: 25:32

Wow. Love real estate. There's always a way, right? Yeah.

Justin Bogard: 25:36

This is a new cycle that no one's ever seen before, because real estate values are so high that it's just, no one never saw this before. You know, it's been a sellers market for so long. It's starting to look like it's going to balance at some point, maybe you're in the realtor part of the space a little bit more than I am was with maybe by next spring. It might start to balance out more with, by, uh, buyers and sellers.

Elizabeth Maora: 25:58

Oh yeah. I totally agree on that. Okay, cool. Totally agree.

Justin Bogard: 26:04

It was with us was a good round of talking today. I think we're just about out of time. And, uh, do you have any last comments or anything you want to make for the end of episode number 24?

Elizabeth Maora: 26:15

I would just echo what you had said. If you are buying Christmas presents this year, you might want to get them bought just to make sure you get them delivered on time or they're at the store.

Justin Bogard: 26:25

That's right. So if you didn't know already, we mentioned this before, but please check out our YouTube channels, Elizabeth Maora's YouTube channel. And then my YouTube channel is BrightPath notes, YouTube channel, and we record and stream this, uh, podcast on those platforms. So was episode number 24. I'm Justin Bogart with BrightPath notes and I'm Elizabeth with Elizabeth Maora. Thanks everybody. Bye The 2wealth show was produced by Justin Bogard and super E sponsored by Brightpath notes and Elizabeth Maora. Thanks for listening and watching for our show.