Eddie Speed Shares How He’s Bought 50,000+ Deals

Steve Trang: Hey, everybody. Thank you for joining us for today's episode of Real Estate Disruptors. Today, we have Eddie Speed with no school, and Eddie flew in from Southlake, Texas to talk about how he's done over 50,000 transactions. If this is your first time tuning in, I'm Steve Trang, sales trainer for some of the top wholesalers in the country, and I'm on a mission to create 100 millionaires. Question I get all the time is how to become one of the 100 millionaires.

The inform information on this podcast alone is enough to help you become a millionaire in the next five to seven years. If you will take consistent action, you will become one. If you wanna get there faster, send me a message on Instagram, and we'll see if we can help you. If you get value today, please tag your friend below or share this episode right now. That way we can all grow together.

And this is a live show, so please ask your questions for Eddie to answer. And before we get started, just wanna make one announcement for two people. Rafael Escobedo, congratulations on getting your gray disruptors chip, and Aaron got congratulations on getting your purple chip. So Aaron's up to five poker chips. If you guys are interested, don't be afraid to reach out.

We love to send you guys poker chip free at our cost. So, you ready?

Eddie Speed: I am.

Steve: Alright. So first question is, it's been some time now. What got you into real estate?

Eddie: My father-in-law. My my father-in-law was not my father-in-law at the time, and he and another guy were sort of pioneers of buying seller finance notes in 1980.

Steve: 1980? Yeah. Alright. And, how was he buying those seller finance notes?

Eddie: He had some capital, and he was buying notes, and then he was basically flipping them. I mean, he would go buy notes and resell them, and then he got to where he had money lined up to where somebody was the kind of money was standing in place. Mhmm.

Steve: So when

Eddie: he got a deal under contract and he needed to get it funded, he could. Not much different than flipping houses when we started.

Steve: Right. And then how how with him doing that, how did that bring you into it?

Eddie: So I had no background. I was 20 years old. And, so, basically, he gave me a a kind of a simple task to get started. Now this was 1980, and interest rates were 20%. So this is a much different economy in many ways.

Right?

Steve: Mhmm. But

Eddie: he sent me out to go call on realtors because realtors had clients that were kinda forced to sell or finance so they could sell.

Steve: Right. It was a very, very different time.

Eddie: Very different. Mhmm. And so but but I taught me several things. Right? I had to I had to go out and call on people when I didn't know everything, you know, and just get over the fact that I that that you're never gonna know everything.

And, I just went and built a rapport and started bringing deals in the door.

Steve: So you're cold calling realtors? Yeah. Alright. And you're bringing to them the option to seller finance their homes to other buyers or to your father-in-law?

Eddie: What happened at the time, realtors had clients. Just regular list and sale realtors had clients. And and, you know, they carried seller financing just to make an affordable mortgage. Mhmm. The conventional mortgages weren't affordable.

And so in that period, they were just trying to help their clients out because the they were getting calls all the time. Like, we is there some way we could cash in? And we just go in there and buy these notes.

Steve: Got it. So you would buy let's just take a step back here. Buy the notes. You wanna explain which notes were were being created and then what you were doing as far as buying the notes.

Eddie: So so let's say that John Doe sold a house Mhmm. In 1980. He had a a regular first mortgage. Back then, first mortgages, even Fannie Mae and FHA and so forth were assumable. So So they didn't have a due on sale clause.

Mhmm. So people would take over the existing mortgage, and the seller would get part down payment from the new buyer, and then they would seller finance part of their equity. So instead of going and getting a new mortgage at 20%, they liable to owner finance at 10% interest.

Steve: Alright. So the existing older note was taken over. Yeah. Mhmm. And so it's fascinating.

And I think just real quick, just to kinda, like, make it a little bit, simpler to understand. For those that are not familiar with with due on sale.

Eddie: Yeah.

Steve: You wanna elaborate on what that is?

Eddie: So, really, after the gigantic rate increase market and lenders got really caught in the in the v of paying much higher interest rate to their depositors than the interest on the mortgages they were holding in their banks and savings and loans. Then they put a clause in there that said that the property sold, that it was the loan was due on sale, meaning that it wasn't a sumable mortgage.

Steve: Right.

Eddie: And so somewhere in around 1985 that that became a a factor in the market. But prior to that, they it was not in the documents.

Steve: So interest rates were 20%. It was easier for a homeowner or a potential buyer to buy a home that had an existing mortgage on it that was a locked in lower interest rate. Yep. Banks saw this, were not excited about it, and wanted to make sure that they were lending on these properties again.

Eddie: They tightened up their criteria.

Steve: Yes. So is there a history lesson here for when they might start calling notes? Because they're not calling notes right now. Right? I mean, people are taking over property sub two right now all day.

Eddie: Well Is

Steve: there a lesson here?

Eddie: I think sub two is is all a matter of how you kinda configure it.

Steve: Mhmm.

Eddie: And there's risk elements that I think that if you don't cover those correctly, that I think you are really exposed to the lender calling the note. Yeah. Here here's a here's a catch line. The most likely way for a lender to find out that you have transferred ownership is through the insurance. If you don't handle the insurance correctly

Steve: Mhmm.

Eddie: You're probably gonna have a problem.

Steve: Right. Gotcha. Okay. So we're definitely gonna talk about that later on.

Eddie: Okay.

Steve: Okay. So you're calling realtors. You're helping them move their properties, and you're buying the notes. So you're buying these notes that have been assumed.

Eddie: We are buying the seller finance note. So the seller the seller carried the financing.

Steve: Mhmm.

Eddie: So think in terms of this. Since for for my forty years in this business, creative financing or seller financing has always filled one problem. What is conventional lending not solving? With conventional lending could solve every real estate problem, we would have no need for creative financing.

Steve: Mhmm.

Eddie: Right? So in in 1980, creative financing was in the form of a seller carrying the financing in lieu of getting cash because he could carry it at a lower interest rate than current bank rates.

Steve: Right.

Eddie: He filled the gap.

Steve: Sure. But this was and I apologize if I'm dumbing this down.

Eddie: Oh, that's alright.

Steve: So we got the existing mortgage, and then there's a second mortgage That's

Eddie: great.

Steve: That the seller is financing for the buyer.

Eddie: Typically, it was a second mortgage. Not a 100% of the time, but a high percentage of the time. And those

Steve: are the notes you're buying?

Eddie: And those are the notes I was buying.

Steve: Yeah. And it's really fascinating because, we have Leon Johnson here. I don't know if you know him. Mhmm. But he started buying creative notes back in 1978.

Yeah. And it's mind boggling to me because I was born in '79. So alright. So you're buying these notes. What were you doing with them?

Eddie: They were originally selling the private money, and then they got to they opened up, an institutional investor. Mhmm. And, of course, that really opened up the gap because a lot easier to chase a lot of deals with institutional money than it was private money. And, but they just, you know, started, started with a company called Finance America, and they were

Steve: Good name.

Eddie: And they were part of Bank America, and they had just endless capital. But then it became a matter of how we could really scale it. That was about the time I came along.

Steve: It was how many notes you guys could buy. Was really that was the name of the game. That was it. Okay. Alright.

So you came along, and you're helping them buy the notes. So what was that journey like? Because you're saying you're in the late twenties at that you're late twenties at this point.

Eddie: No. I was early twenties. I was 20 when I started.

Steve: Oh, you're 20. Okay. Early twenties. Okay. So what was this journey like?

Because a lot of people listening to the show right now may be either a little over 20 or a little under 20. What was that journey like for you as a 20 year old jumping to this world

Eddie: of finance? There's probably no doubt. If I know if I wouldn't had a mentor, I would have not gotten started. I just didn't have enough base of knowledge. Here's the thing I would say about most people entering any kind of entrepreneurial endeavor.

It first takes your willingness to try it.

Steve: Mhmm.

Eddie: Right? And then secondly is what support are you gonna have if you try it? So I had them helping me. And first of all, I was willing to go try it. Yeah.

And, the one thing that I didn't I wasn't a master of then. Like, I wish I would have known you then because I wasn't a master at negotiating. Mhmm. You know? And so I've developed some skills.

I don't think I'm at your level.

Steve: Oh, stop.

Eddie: But I've developed some skills, But it but it was a long path, and so I've become I've really loved to accelerate people's negotiation skills because that's really that that's that's where the dollar's really earned.

Steve: Right.

Eddie: Right? And so it it took me a while to call it 10,000 tries, And, but I was persistent and, got a little better at it all along the way.

Steve: Yeah. So you guys got an an this unlimited capital, right, from Finance America, and you're trying to buy all these notes. Were you trying to buy everything in were were you in Texas at this time?

Eddie: So, I started in Hattiesburg, Mississippi. So there wasn't a bunch of notes in Mississippi. So these guys were smart. Mhmm. We targeted Texas and Florida.

Mhmm. That's where we really started. And, so that's what it's how I end up in Dallas Fort Worth. They had another guy that had had moved to Houston Mhmm. Sorta had an office for him in Houston.

And then I when I Martha and I married in '82, then we moved to Dallas Fort Worth.

Steve: Got it. Yep. So you moved to Dallas, and then it was same thing. You're calling realtors.

Eddie: No. By then, we had progressed, and we had developed, I guess I'm the first guy in The United States to ever do any form of direct mail because I did I went to the courthouse and figured out you could do research and figure out if a individual was the was the lender. So we just did courthouse research, and if I saw Steve Trang was the lender on

Steve: a note, we'd send you a

Eddie: letter and say, do you know you could sell your note?

Steve: You know, it's interesting. So we have mutual, mentees. Right? So I was in a call on Thomas Joseph, Thomas Hajo. You know him?

Mhmm. And he said, guys, look at this piece of mail I got from Eddie, and it's a deposit bag. Yep. Right? Yep.

He's like, do you think I opened this bag? I got I got 30 pieces of mail. Which Which one do you think I opened first?

Eddie: Well, all it takes is money in that case. Right? Yeah. No. We we were doing we started direct mail around October 1982.

Wow. I went to the Dallas County Courthouse and, you know, those ladies down there between cigarette breaks. Right? They were they were they had these old dusty books. Mhmm.

And we went down there and did it, and I found, the oil and gas business was was not in a good way. Mhmm.

Steve: Right? And so a lot of

Eddie: these guys, it used to be land men. And so I found an old land man that was kinda hungry, and I paid him so much in name, and he started giving me those names. And what and then

Steve: land man?

Eddie: They basically, they're guys that do oil leases. They do they do research at the courthouse Okay.

Steve: And find out who owns interest in,

Eddie: you know, oil royalty interest in the property. Mhmm.

Steve: And

Eddie: so they do a lot of courthouse research. And so that was kinda how I got started. And before technology and list vendors and stuff, at one time, we had probably a 100 people in courthouse around The United States.

Steve: Yeah. So would you say, given the technological technological challenges at that time, It's a lot easier to get data today. It was a lot more work back then.

Eddie: It was a lot more work.

Steve: Which would you prefer today?

Eddie: Well, I wish I knew what I knew now

Steve: Mhmm.

Eddie: When it wasn't as competitive because I didn't really understand direct mail. I didn't understand copywriting. I didn't understand list stacking.

Steve: Mhmm.

Eddie: I didn't understand a lot of things that are, you know, you completely are clear as was what as to what I'm saying today.

Steve: Mhmm.

Eddie: And I would just say that,

Steve: you know, we didn't know what we didn't know,

Eddie: and, we probably were terribly inefficient in some areas, but it wasn't as competitive.

Steve: Right. How much direct mail were you sending?

Eddie: I have dropped over 5,000,000 pieces of direct mail to people on the note.

Steve: Mhmm. At that time, what were you sending?

Eddie: Oh, I don't know. Probably for us, you know, maybe 10,000 pieces a month would have been huge.

Steve: Yeah. Yeah. And, this is a tangent here, but I think it's important for people that are listening. Right? You mentioned copywriting.

Yeah. That's an art form and a skill that's extremely valuable, but you don't really hear people talk about it on this show or many other places. It was an incredibly valuable skill. You wanna talk about where you learned about copywriting?

Eddie: Well, let me tell you that I'm definitely not a copywriter.

Steve: Okay.

Eddie: And I've paid a lot of money for copywriting.

Steve: Because I'm not a valuable skill.

Eddie: And and there's there's different kinds of copywriting. So I had a lady that taught me the a lot of concepts of copywriting back, call it, fifteen years ago. And, she she she said this to me many times. She said, Eddie, copywriting is not a somebody that got an a in English class. She said they are technical writers.

They're not creative writers.

Steve: Mhmm.

Eddie: And she reminded me for about ten years, the most effective marketing campaign that we all knew about was poor grammar.

Steve: Yeah.

Eddie: Got milk? Mhmm.

Steve: Well, it's interesting you say poor grammar because that's what's trending right now on social media. Right? If you want your message to stick, you just use poor grammar, poor spelling, and people will correct you. And by people correcting you, it tricks the algorithm and say this guy's con content is is interesting Yeah. And they'll push it more.

So you see this all the time. You guys are looking on TikTok or Instagram, whatever, you're seeing, like, these trending videos is because the author intentionally misspell misspelled their their their messaging. So then what about direct mail? How did you learn about direct mail?

Eddie: Well, I I didn't it was by pure accident. And so, we were just, we were gathering names from the courthouse. We weren't verifying the addresses. There was a lot of inefficiency back then, but we were we were mailing them a letter, mailing them a postcard, something. And, so we really didn't use what I would say are industry standard direct mail techniques back then.

Steve: Mhmm.

Eddie: And we literally just hired a couple of high school girls in the office, and they were typing letters. And we bought this this is so ridiculous. I mean, we bought this, you know, the paper with the little pen feeds on the side that would like, a young person now would like, what is he talking about? But they had it they like, there wasn't automated, printers, and so they you know, it was like, old stock ticker tapes.

Steve: Right. You know? And so we we did that. And, anyway, it was it was, it was funny. I kinda hadn't thought about that in a

Eddie: long time. I'm glad you reminded me of that.

Steve: Alright. So you're doing direct mail. I mean, at this time, are you driving all over Dallas? Like, you know, today was cool because you're in multiple markets. You're doing virtual wholesaling.

Like, today like, back then, like

Eddie: I would say that we worked Dallas Fort Worth. There was two counties, and then we worked every county around that. That's probably what we started with.

Steve: Mhmm.

Eddie: And that's that was kind of effective for a long time. Yeah. And then, obviously, then we're then we started realizing, wait a minute. We don't need to be near the property. We're not rehabbing it.

Mhmm. And then we could go work other markets. And so it probably took us, say, two or three years to really get comfortable with that.

Steve: So you guys were doing virtual business?

Eddie: I've been doing virtual business since I started. I mean, I was I was sitting on the phone in Hattiesburg, Mississippi buying loans in Tampa, Florida in 1980.

Steve: That's incredible. So alright. So then what was your next big step in your in your story?

Eddie: So we started sending out these letters, and, occasionally, a guy that had done a subdivision and owner financed the land or a guy that, you know, bought and sold houses and did it started calling us. So then all of a sudden, they said, I don't have one note. I have 10 notes. I have 20 notes. And so then, and so for some reason, that really triggered with me, and I really just had a a real high interest in doing it.

And so, I started buying portfolios of notes. Still buying one off notes

Steve: Mhmm.

Eddie: But I started buying portfolios. Say this was 1986 or '7. And by 1990, within within the company, my personal specialization is I don't I didn't deal with anybody who had a one off note. Our company had people that did that. Mhmm.

But all I did was work on portfolios.

Steve: Got it. When was the savings and loans crisis?

Eddie: It was around 1986.

Steve: Okay. Did that impact your business?

Eddie: Huge.

Steve: And how did that impact

Eddie: your business?

Steve: Because and I and I bring this up for people that, you know, are younger.

Eddie: So

Steve: there's a there was that is the first bad real estate recession that I'm aware of, you know, in my lifetime. So

Eddie: Well, it was it was a bad one. It was for Texas and the Southwest, it was the worst real estate recession since the great depression. And so then we started buying loans from banks. Right? Defaulted loans.

And, the modern day term for it is NPLs, nonperforming loans.

Steve: Mhmm.

Eddie: But, and we would go buy these loans from the banks, and then the banks and savings and loans, then the government formed an entity to liquidate all of these assets. It was called the Resolution Trust Corporation, RTC. Mhmm. And, they had gigantic auctions, and they would sell these loans and stuff. And so we really shifted and did a lot of that.

And, of course, it was very interesting times because real estate values were so depressed, and you were buying a loan that almost every time they owed more than the property was worth. Mhmm. And, so once again, it was a big shift in, you know, markets that I had been used to before and stuff. And,

Steve: Would this be in a way kinda like a lot of people were buying foreclosures at the courthouse steps in 02/1978, and '9?

Eddie: 100%.

Steve: You're buying notes?

Eddie: 100%. I whatever happened in in o eight, I'd already lived in in deep reality in 1986.

Steve: Yeah. Yeah. Alright. So you pivoted, and then what was the next bit? So you started doing portfolio loans at your company.

Eddie: At this

Steve: point, was this your company or you're working for somebody else?

Eddie: No. I, so I'd left my father in law's company, about four years into starting.

Steve: Okay. He

Eddie: and his partner split up, and so I was on my own. I formed Colonial, which I've had since the '80 1984.

Steve: Wow.

Eddie: So so I met a guy. He came along, call it 1987, and he and his brother had a real estate investing business. And it was called Rainbow Realty, and his name was Ken D'Angelo. And, so he he and his brother had this real estate investing business. His brother is still in the business today.

Ken passed away. Ken, around 1990, had this dream of building a franchise, a franchise for buying houses or home investors. And so so he had he said, basically, I want you to be my note guy. I want you to construct and build a box that the franchisees can write these loans to your specifications so that they can then sell you the loans. And so when we did that, we got a lot of pushback from some of the institutional investors.

They basically the the general belief in that era was they didn't trust rehabbers. You know, they didn't they they they they didn't trust them. And we fixed a lot. We fixed that. But it so, but they did trust me.

I had a good reputation. And, so I took I I I took that mission on, and we mechanized it. And we were the first company ever to create a a a a box, a specific system where people created owner finance notes. Mhmm. And the HomeVestor franchisees follow that system, and we bought those notes.

And then it revolutionized the business. Some of those companies were were going from buying, call it, $70,000,000 worth of loans a year to $400,000,000 worth of loans a year. So it it built the production level in the business way, way up.

Steve: And these were situations where you're financing the transaction for a HomeVester guy that's buying A

Eddie: HomeVestor guy was owner financing the property and immediately selling the note to us.

Steve: Yeah. So he's buying it, whatever, selling it on terms, and then selling you the note.

Eddie: Flipping the note to me.

Steve: Incredible. And you're just buying a bunch of these. Yep. Awesome. Awesome.

Okay. So, one thing we haven't talked about and I think it's interesting for, you know, some of the, guests to listen to is you're buying these notes. What is the the the presentation, the pitch? Like, how are you talking to homeowners and and convincing them that you would buy their note on a seller finance situation?

Eddie: So you remember I'm buying a note at a discount. Mhmm. Right? And so, so this is a little bit of a riddle, but I think it'll make sense. Right?

So what's the so you you we basically know that you're you're you're identifying pain, you're billing rapport with them, all the basic sales stuff that you are so great at. Right? And everything is good till you get to the price. Yeah. Right?

Now now the friendship backs up a little bit. Yeah. You've been there?

Steve: Oh, absolutely. Now now we're like, woah. Hang on now.

Eddie: So so in the early days, there were, you know, older guys, and they're like, well, what you need to explain to them is it's present value of future dollars. Of course, they didn't know how nerdy that sounded, but to me, it sounded like sales prevention. Right?

Steve: Oh, absolutely. That's that is how you make sure you don't get to sell.

Eddie: So I developed a little skill or I I developed this and we turned it into a skill, and it starts out like this. So, Steve, you're collecting a thousand dollars a month. Right?

Steve: Yeah.

Eddie: And you're gonna collect that money for the next twenty years.

Steve: Mhmm.

Eddie: So what you're wondering is is why your note is discounted. So let's go take your thousand dollar payment, and let's go to Walmart. How many grocery carts could you fill up?

Steve: Three.

Eddie: That's a good number. Three. Let's go back five years. How many grocery carts could you have filled up then?

Steve: Four or five.

Eddie: How about twelve years back?

Steve: A lot more.

Eddie: So you see, if you flipped the history forward, you realize that the thousand dollar payment that you're getting will not buy you the same groceries it buys you today.

Steve: Mhmm. Yeah. I I see that.

Eddie: So what I what that is in reality is it's a lesson in present value they could relate to.

Steve: Mhmm.

Eddie: Because I learned if people you can't tell people I'm being honest with you. This is a fair price. Right?

Steve: No. They have to believe you.

Eddie: They have to believe it's a fair price, or then you can only deal with desperate people. Mhmm.

Steve: And

Eddie: you can't do big volume if you only deal with desperate people. You have to find people that you have to you have to reach a justification in their mind of why they can do that.

Steve: Mhmm.

Eddie: And so that was an example of how we kinda work through it.

Steve: I like that. I like that a lot. Alright. So then what you're you're buying these massive volume from the Homevestor guys. Yeah.

Eddie: Right. And land developer guys and other real estate investors and yeah.

Steve: Alright. So at this point, this is the nineties. Mhmm. At this point, you are you are you nationally recognized as the note guy? Or

Eddie: Yeah. We were we were we were we were the biggest traders in the market. I've probably bought close to 2,000 portfolios of notes. Mhmm. And I would say that if you took the you know, any aggregator, you know, that was doing it in the market, nobody would there wouldn't be anybody close to that number, I don't believe.

Steve: So you were buying a lot back then. Mhmm. How does that never compare to what you're buying today?

Eddie: Well, it's a it's a different market, but we still chase people with portfolios of notes. Now what we do today is very different because one of the things that we'll do with today is we'll actually loan somebody money against their portfolio. Right? And the other thing is so look at what I did at the HomeVestor model. Right?

What I did was show people how to manufacture the product I wanted. Right. I showed them the formula of how to make good notes. So today, it may not be HomeVestors or some other real estate investor group, but I believe that the small time landlord is sort of desperate for a solution, and I believe that there's a great strategy for your listeners

Steve: Mhmm.

Eddie: To be taught how to go work with them so that they can make notes. Because when they bought the rental, they were looking for an investment that was passive.

Steve: They were looking for a mailbox money, which is what the books talk about. That's it. But it's not really mailbox money.

Eddie: But if they went from the landlord to the bank, they could have mailbox money.

Steve: Absolutely.

Eddie: And they wouldn't think of that. And there are some tax advantages in them doing that that they certainly would never think of.

Steve: Right.

Eddie: So what I've learned is is it's sort of our job to have some unique knowledge, some specialized knowledge, and then go direct people in a way that at the end of the day, we're giving them what they wanted.

Steve: Mhmm.

Eddie: And at the same time, as old Zig Ziglar said, then we get what we want.

Steve: Right. So let's talk about this then. Right? I mean, so today, you're going to meet a homeowner. Not a homeowner.

You're dealing with a landlord.

Eddie: Yep.

Steve: Right? What is this conversation like when you're talking to them about buying their property and and creating a note out of it? What does that conversation sound like today?

Eddie: Well, a little framework. Okay? So, I don't know that I just wanna make sure everybody understands how big this market is.

Steve: Yeah. I think that's important.

Eddie: There's 17,000,000 houses, one to four family. Right? There's 17,000,000 owned by people that own five houses or less. So the hobbyist landlord owns 72 of all the rental houses. Right?

It's not hedge funds.

Steve: Mhmm.

Eddie: Right? People think that it is, but it's just not true.

Steve: Because just because it's in front of your face all the time doesn't mean it's real.

Eddie: Exactly. Yeah. So so so the hobbyist landlord controls the market. Three quarters of them self manage. Now this is according to Urban Institute, by the way, just to kinda give you my source.

Steve: Sure.

Eddie: So three quarters of them self manage. So so now we're down to maybe a guy owns multiple houses. Okay? So now we're down to a count of, say, between ten and ten ten and eleven million people that own rentals, many of them on multiple rentals that do it and and three quarters of them self manage. So now you have seven and a half million people that really are not professional landlords and certainly don't have systems and and operations in place.

Steve: Right.

Eddie: And they're managing their small time rental. Mhmm. And so they and so the so they didn't like their rental before the virus. Okay?

Steve: Alright.

Eddie: But since the virus, they really don't like their rental. And so so if if you or I are talking to and you train the biggest and the baddest. Right? And I know you do because you're in the same masterminds I'm in. Right?

Steve: Right.

Eddie: So I know this is true. Right? But, you know, you you know, you hear this objection over and over and over. That landlord is not broke. Right.

Right? You can if a landlord is broke or getting divorced or got money issues, then he'll turn loose and sell the house. He's not broke. Mhmm. He's just frustrated.

Right. And so you're looking for a reason for him to

Steve: He's irritated.

Eddie: He's irritated. Yeah. You're looking for a reason for him to sell the house in a much different way than than just the desperate homeowner. Right? And so what we figured out is is if you approach him and say, okay, Steve.

I'm gonna buy your house and pay you the price you want, but you're going to carry terms. You don't necessarily see that as a good proposition.

Steve: Mhmm.

Eddie: Right? But if I say, Steve, did are you aware that the IRS has a little known strategy? It's actually been around for decades, and that you can defer your capital gain over many years? What's the odds that you wanna lean and say, tell me more?

Steve: If I'm a self managing landlord, pretty high.

Eddie: Exactly. Now you've got a hook like the other cash buyers don't have.

Steve: Right. Yep.

Eddie: So what you're gonna then do is you're gonna kinda separate the herd, so to speak. Right? I'm an old cowboy, so I know about separating the herd. Right? So you're gonna separate the herd because you have some landlords that have been collecting rent.

They have a good tenant.

Steve: Mhmm. You

Eddie: have some landlords that have a bad tenant. Forbes did an article, I'm gonna say, less than sixty days ago, and it it quoted some stats in there that said, 8,000,000 tenants owe small time landlords $20,000,000,000 in back rent.

Steve: Wow. Wow. 8,000,000 tenants.

Eddie: 8,000,000 tenants.

Steve: Wow. Okay.

Eddie: So you have landlords that have a bad tenant, and you have landlords that have a good tenant. So at this point, then you can separate how you approach the business.

Steve: Mhmm.

Eddie: Right? A guy with a bad tenant, you buy it from him, and then you're gonna take over his problem.

Steve: Mhmm.

Eddie: Now your fear if I'm gonna go buy his rental property, he's gonna owner finance it to me. Oh, by the way, those 10,000,000 people that own those rental properties, 50% of them don't have a mortgage. So the equity factor is amazing compared to other consumer type houses.

Steve: Yeah. Interesting.

Eddie: So you can stack this list. Right? You could do direct mail and stack everything in this list you're looking for. Right? Mhmm.

So you can target this customer. It's not like a mystery. It's not like it's you you everything about this is very definable. Yeah. So so now you're chasing a guy that that has all equity or very little debt.

Steve: Right.

Eddie: Right? And then you're gonna say, okay. I you're you're I'm gonna give you a tax strategy. Steve, would you rather carry would you rather defer your capital gains over ten years or twenty years?

Steve: Twenty.

Eddie: Okay. Now you just committed to a twenty year loan.

Steve: Mhmm.

Eddie: Right. So I describe it like the breakfast analogy. Mhmm. You have you heard this?

Steve: I remember Leon talking about it, but go ahead.

Eddie: Well, it's it it you know, in at breakfast, pig and the chicken.

Steve: Mhmm.

Eddie: Right? Right. Now the chicken in breakfast, he, he is involved. Right. Right?

Steve: Mhmm.

Eddie: But the pig is committed.

Steve: Absolutely.

Eddie: Okay.

Steve: Yeah.

Eddie: Well, in this in this strategy, the IRS deferred capital gains is the pig. Mhmm. They're they're they're they're absolutely committed to the IRS strategy. It's just that seller financing needs to be involved.

Steve: Right. Got it.

Eddie: Right?

Steve: Mhmm.

Eddie: Instead of me forcing seller financing down your throat.

Steve: Sure.

Eddie: So so it's a different selling cycle, but, then all of a sudden, it's a matter of structuring those terms. Now what if I inherit if I buy a house from you and you carry terms, and what if I have a bad tenant? And you're saying, well, ain't that scary? Because all of a sudden now you're gonna you're gonna be forced to start making payments to to to the landlord when you're when you're not getting any money yet. Right.

Steve: You're gonna be in the same exact situation that they were in.

Eddie: Okay. So so what you do is then you have to dictate the terms. And an example of dictating the terms would be that you bake in an agreement, a forbearance agreement that basically says, I don't owe you money, Steve, until I'm collecting money.

Steve: Mhmm.

Eddie: So I can defer when my first payment is due. Now you're not cheating him. You're just giving yourself time to solve the problem.

Steve: Right. The clock doesn't start Exactly. Until you collect your first payment.

Eddie: And and once again, then, you know, what kind of interest rate you negotiate, whether you you might go a few years and not pay any interest. Mhmm. You might go and have a stepped up interest rate. Yeah. Like, in your mind,

Steve: if I if

Eddie: you were gonna finance $200,000 for me, what interest rate would you think would be fair?

Steve: My default would just say would just go to here's what mortgage rates are at, three and a quarter.

Eddie: Okay. So three and a half percent interest.

Steve: Yep. That's

Eddie: fair. So so that's I think that's a a good normal reaction.

Steve: Mhmm. And

Eddie: so here's what I would say. I'm gonna start you out at 1% interest. And then after, say, five years, we're gonna go to 2% interest. But here's the good news, Steve. After ten years, we're gonna go to 4% interest.

Steve: Mhmm.

Eddie: And then we're gonna go to 5% interest.

Steve: Oh, okay.

Eddie: Now in your mind, you've averaged it out now in about what average interest rate are we paying? Three and a half percent? Yeah. Right? Mhmm.

Here's the catch. When I owed you the most money, when the most interest was due, I was paying you 1%. Right. The second most money I owed you is when I was paying you 2%.

Steve: Mhmm.

Eddie: So I can change the debt service number drastically. Call it I can cut my debt service in half or in a third Mhmm. Of what it normally would be by using that concept of a stepped rate

Steve: Mhmm.

Eddie: In order to get them in their head what they see is. And so you say, well, I need to earn more interest. And I'm gonna say, you don't wanna earn more interest.

Steve: Why don't I wanna earn more interest?

Eddie: Because you're gonna pay more taxes. What you wanna do is collect this early money and not have and and have a preferred tax rate.

Steve: Mhmm.

Eddie: And your preferred tax rate is what you got for selling the property. It's capital gains.

Steve: Right.

Eddie: So you're so in the early days, you can position yourself to collect back that capital gains from the principal amount of the loan, the debt part, not the interest part.

Steve: Mhmm.

Eddie: And so once again, I've learned that investors will be like, oh, oh, okay. Yeah. That's what I so it's funny. Like, I there's something I learned a long time ago. Investors will do the strangest things in order not to pay taxes.

Have you seen that?

Steve: It's not just investors. Entrepreneurs. They're proud to tell you they pay zero on taxes. Yeah. And it's like, well, if you pay zero on taxes, how much did you put your bank account?

Eddie: So so, so those are the triggers that we've sort of learned. Those are those are value decisions that they're making Mhmm. That just in enough of looking at thousands of deals, we've observed, these are the things they repeat back to us. Yeah. So we sorta learn the pattern of what's important to them, and we've learned to kinda reposition it in a way that they can see it.

And now what now look at what we've done. We've been able to buy property, and the seller has been the bank. Mhmm. You don't have to qualify for the mortgage. Right?

Steve: Mhmm.

Eddie: You probably don't have to personally guarantee the debt. Nope. You you you you you don't have all the underwriting guidelines, and then you can write terms in the loan that our bank or mortgage company would never agree to. Right. Like deferred payments, deferred interest, all of these things that now all of a sudden you are borrowing money but telling your lender the conditions.

Steve: Right.

Eddie: Unlike going to the bank, when you borrow money, he's gonna tell you the conditions. And so now all of a sudden, you've got a wealth strategy. And then then if you're gonna now you owe the money, what could you do? You could resell the house on a wrap note.

Steve: Mhmm.

Eddie: Right? Maybe you wanna lease it. Maybe you wanna lease option it. I'm not saying you would never do that. But why why a wrap note?

Because right now, what what the market is very seemingly to me unaware of, we have a housing boom and a credit crunch.

Steve: A credit crunch.

Eddie: We have today, thirty five percent of the people that could get a mortgage before the virus cannot get one now. That's according to Mortgage Bankers Association.

Steve: Interesting.

Eddie: Mortgage credit availability. Yeah. And it's a it's an index, and they develop it. And there's a chart, and it's all pretty clear. So now what you find is is there's all these people that they're not bad.

They're just not perfect. Mhmm. And so they're they can't get a conventional mortgage. And so now all of a sudden, they are in a pool of available people that you could sell or finance to on a wrap note.

Steve: Right. And how would you find them?

Eddie: I'll tell you how I would do it. I would I would use, Facebook Marketplace and Craigslist and other strategies like that, and I tell you exactly how I would position it. I would not say seller financing in the ad. Mhmm. I've learned that when you put seller financing in an ad, it kinda resonates with the buyer of a nonqualifying loan.

Mhmm. Meaning that you might get the worst of the the the pool of pit potential buyers. Yeah. Instead, I would say private financing for deserving buyer with large down payment.

Steve: Much more attractive.

Eddie: It's very you you tend to get what you ask for in marketing. Mhmm. Right? And this we have found out that this is the most premium way to target the customer we're looking for.

Steve: And they'll filter themselves out.

Eddie: They filter themselves out, and you get a guy that's been left behind. Mhmm. And by the way, you're saying, well, you know, am I gonna be forced to carry this in you know, this low interest rate mortgage? So about 30% of conventional mortgages right now are mortgages that are not Fannie Mae, Freddie Mac, FHA, or VA. Right?

Those are called GSE loans, government sponsored enterprises. Right? And those are the ones that are written at the low rates. But these non QM loans, QM means qualified mortgage, non QM loans, the average interest rate is six or 7% interest. And so if you borrowed money, Steve, at 1% and you're collecting 6% interest

Steve: Arbitrage is pretty good.

Eddie: You you're gonna do pretty good on the money. Right? You're now you're running your own bank. Right. Plus, what is the average down payment a home buyer is making today?

Do you know?

Steve: Between three and a half to 5%.

Eddie: Mortgage bankers association through Ellie Mae says the average down payment on a conventional mortgage is 19% down.

Steve: Really? Yes. Wow. Okay.

Eddie: So I you know I like mortgage data. Right? And the reason I do is it tells me what the market tolerance really is.

Steve: Mhmm.

Eddie: Right? I if you if you know where there's a gap in the market, you know how to go address the market.

Steve: Right. Yeah. Okay. So you've got the note generated, selling it on a wrap. Where do you sell it?

Where do you where where what because we're talking about selling the the property through a wrap.

Eddie: Where do you where do you sell the note?

Steve: Where do you sell the note?

Eddie: Well, you you can sell the note, but remember when if you bought the property with almost nothing down and got 20% down,

Steve: you sold it. Mhmm. On a

Eddie: $200,000 house, you're doing pretty good. Yeah. You probably made more money on the down payment you did on just a flip fee if you just bought it for cash and flipped it.

Steve: Right.

Eddie: So so but you could sell the note. And one of the things that we teach is, like, how to recapitalize your business strategies.

Steve: Mhmm.

Eddie: Right? So so the the biggest investor for private notes right now, the the loans that we deal in are, believe it or not, the same guy that we're buying houses from. They're burnout landlords. Because after they've owned two rentals, they're not out of cash. They're out of tolerance.

And so we we circle back that same pool of people, and now they're the same people that buy notes from us.

Steve: Genius.

Eddie: Well, I mean, you know, when you know, I've had note school for twenty years.

Steve: Mhmm.

Eddie: Right? And so people there's a pattern of of your students, and they come up, and there's a pattern to their stories. So the story has become for years and years, who trains what does NoteSchool train? Well, NoteSchool woke up and figured out it trained a lot of burnout landlords because they were coming to learn about notes because they didn't have a tolerance for rentals.

Steve: Right.

Eddie: Or they were just tired of them.

Steve: They just figured out rentals was not meant to be for them.

Eddie: Well, there's a funny thing about rentals. There's you know, you're an engineer. Right? Mhmm. There's the spreadsheet.

There's the Excel spreadsheet, and then there's the checking account. Mhmm. And what many people have figured out with rentals is the spreadsheet is not talking to your checking account.

Steve: Spreadsheet's theory. Spreadsheet's very theoretical. It's, it's like learning from a book and then the real world real world kicking in at you.

Eddie: And and so the the math is very much in favor. You know, it's funny. I just left a very advanced event. One of some of your guys were there, by the way. Yeah.

And, and so we got into this conversation about this very thing and then the tax angle. And, there was some very advanced guys that you know well, and they were saying, well, why don't I sell our finance right now? And I said, I can't think of a good reason. You know? And we can we can argue about the real estate market.

Obviously, you're in Phoenix. It's crazy on fire and stuff.

Steve: Especially compared to the rest of the country. I had no idea. I know the whole country's on fire.

Eddie: Well, Austin Austin and Phoenix are on their own plateau for sure. Yeah. Right? And, but but once again, if you can take some money off the table right now, that might not be a bad idea. I'm not saying go liquidate everything you've got, but you might take some money off the table.

We look at the market going forward, and we think the things that affects the market are primarily supply and demand. Right? So right now, we have a tremendous shortage of listings, about half of the listings that the market needs. So there's about a million houses listed and about 2,000,000 houses needed. Right.

Right? So let me ask you some questions. Where is the inventory of houses that aren't currently on the market that might be forced to be put on the market.

Steve: Well, the idea is the forbearance, and that that that is the the prevailing theory is Yeah. We're gonna have a bunch of inventory come from forbearance.

Eddie: Yeah. So forbearance really isn't as big a factor as people think it is. We have just

Steve: I made the same argument. So yeah.

Eddie: We we have a just under a tick under 4,000,000 loans that are currently not paying. Mhmm. Okay? 1,200,000 of those loans are in forbearance. The rest of them are just not paying.

Mhmm. So so a third, call it, of the the nonpaying loans are in a legal agreement where they don't have to pay. That doesn't mean that they're gonna get modified.

Steve: Right.

Eddie: I believe I believe 50% of them will get modified and 50% of them won't be modified.

Steve: Okay?

Eddie: Because it won't qualify. Mhmm. Now, but here's the bigger number. Now we've got, you know, just under 2,000,000 or just under 3,000,000 loans, right Mhmm. That are delinquent, not in forbearance, not in any kind of legal agreement, and that we're gonna be looking down the gun barrel in six months.

Are they gonna have to do something? Because a notice of default's coming.

Steve: So based off the data you're you're reviewing, there are a whole bunch of people that are not paying their mortgages.

Eddie: That's correct.

Steve: But they're not in a foreclosure process.

Eddie: That is 100% correct.

Steve: Because the banks were not allowed to foreclose when their hands were tied.

Eddie: It's pent up inventory. Mhmm. And here's the other thing. National Home Build Association came out with, some statistics, call it sixty days ago. They're saying that there's 800,000 houses under construction.

So what we have to do is look over the hill and look at what could affect inventory. Mhmm. Right? And so there's some reasons to think that shifting to, you know, using creative finance strategies and reselling the house, you know, and and taking some of our rentals off the table, there's a reason to think that that could be a possibility. Now once again, the market and the situation and people's financial wherewithal and all that stuff has has a factor.

But there there's some shadow inventory on the horizon. That was a term, of course, that you know that they they used after 2008.

Steve: Yeah. They use that a lot, and it turns out it was a little bit overblown Yeah. At that time. So I wanna wanna take a step back here. Right?

Because we're talking about how you've done 50,000 deals transactions. And it's an unfathomable number. Right? I mean, for some people, if they can do, like, a deal a month, they're pretty happy. So you wanna share some of your life lessons?

We're gonna talk about creatives some more in a bit. You wanna share some life lessons, how you went from a 20 year old, cold calling realtors. I can't even imagine what it was like back then. There was no dialer. There was no yellow letter system.

Right? So what were some of the biggest life lessons you learned from a 20 year old co calling realtors to today help you get to a point where you've done 50,000 transactions?

Eddie: Well, I I became I I I really was in the training business long before I had note school. Because what I woke up and figured out was, I can buy one note from one person, and I can scale that to a degree, but I can never really scale that. I'd never I would have never done 50,000 notes, just one note from one person. Mhmm. So how I did it was is I HomeVestors became my springboard where I learned to teach the a company that could create hundreds of notes Mhmm.

How to create how to create notes, then I became their exit strategy. And then I did that with land developers and start I so I I basically showed them how to become a bank, and then I became the exit for their bank.

Steve: So you were telling them, hey. Here's how you can create some inventory that I will buy.

Eddie: That's correct. What happens is is real estate investors wake up, and you've heard this many times. Right? They make a seller finance note, and then they show up with somebody like us that's a note buyer.

Steve: Mhmm.

Eddie: And then we discount the loan more than they think is fair. Well, the reason we discount the loan is they've done they've made mistakes in structuring the loan and underwriting the loan and papering the loan, and they've made it not really to meet, you know, an industry standard.

Steve: So mistakes, they're easily avoidable had they gone through no

Eddie: They just didn't know the rules.

Steve: Yeah. So and I think it's interesting. So I, I've shared, this on the podcast before. I was actually supposed to buy I was really close to pulling trigger on buying a home investor franchise. Right?

At that time, there was, I think, Clint Shipp, Mike. I can't remember his his last name. And then I would have been number three. And this was back in 2011, 2012. Right?

Because I was buying houses at the time. Mhmm. And I wanted to buy it, but I had this issue where I was already buying houses, and they're like, you get a piece every we get a piece of every single I was like, how about I just pay you a piece of every single one that comes from you guys, and I'll keep doing my thing? And they said no. But what was interesting there's two things that were interesting to me when I was reading the franchise disclosure.

First was that at that time, Homevestors is owned by Subway, the restaurant.

Eddie: Mhmm.

Steve: That was crazy to me. But the second thing was that they would fund all my deals. Mhmm.

Eddie: And I

Steve: think you have part to do with this. If I could get the seller to sign a contract, it's 65% minus repairs. Yeah. Was that your buy box that you had created?

Eddie: So what I originally did now you gotta remember, I did this for homevestors in, like, 1991 through, like, 2000.

Steve: Mhmm.

Eddie: Okay. So I had a long history with homevestors. I haven't done some things with them in years. I'm friendly with them, but we

Steve: But I imagine part of your things is still in there.

Eddie: But the original underwriting box that we did, even for the hard money lending piece, I was deeply involved in. And, because once again, we we sorta knew we we were trying to help them not get in trouble.

Steve: Mhmm.

Eddie: Right? And so we were trying to come up with things that, you know, you don't let you don't let a guy have 20 hard money loans out because then I then he's got too many construction projects, and he didn't manage any of them well.

Steve: Mhmm.

Eddie: You know that routine.

Steve: Yeah.

Eddie: So those were the kinda, fail safes that we tried to put into the underwriting. So, yep, I did do that.

Steve: Hadn't thought about that in a

Eddie: day or two, but I did I wasn't deeply involved in that.

Steve: Yeah. Okay. So first great lesson, and I think it's a huge lesson. Help people make a product that you will buy. Teach them everything.

Empower them everything they need to know Yep. So they can buy your product or so they can sell sell their product to you. It's

Eddie: it's a it's freemium education.

Steve: Yeah.

Eddie: You're giving something of a of a premium value for free so that you can then grease the wheels Mhmm. So that then they can do business with you.

Steve: Incredible. Brilliant. Any other major life lessons along the way for someone that's looking to you know, they're they're either starting or they're halfway through their journey. Any other major life lessons? Because, again, forty years, 50,000 transactions, you learn a thing or two.

Eddie: Well, the other thing that is is sticks out in my head is, I think, sometimes seller financing, people people are sorta taught, whether if you're at a real estate club or you're on online and Facebook and you're in some network, we sort of a little bit think seller financing is for substandard properties and substandard borrowers. You know, we we kinda we get in our mind, like, well, of course, they had bad credit. That's why I sell our finance. That you know what I'm saying?

Steve: Yeah. These are limiting beliefs we put in ourselves.

Eddie: Exactly. So what I've learned is this. I've if I bought 2,000 portfolios of notes, I've looked at six or 8,000 portfolios. Mhmm. So I tried to look at the portfolios that I didn't buy and figure out what was wrong what what went wrong with their strategy that meant that I wasn't even willing to write a check and buy it?

Mhmm. So here's what I've learned. I don't deal in any form of substandard real estate. Right? Now I don't deal in mansions necessarily, but I don't deal in substandard.

So if it's really if it's high risk neighborhoods or, you know, if it's land that, you know, if people are you know, a lot of people owner finance land or something like that. If it's undesirable land that people are not gonna wake up and love, they're not gonna pay you for it. Yeah. Right? Those are just those are patterns that I saw.

And so I learned that you start out with a good piece of property, and then you start next with how to attract the buyer that you want. Mhmm. So if I was a bank and I ran an ad on Facebook or whatever today, and I said, you know, we loan money to unqualified people, then they'd be lined up out the door with people that my bank would not end up in being a good way if they made loans to those people. Mhmm. But if I said, if you've been if you've been left behind and you're solid and you've got good down payment, then we'll figure out a way to make it work for you just because you didn't qualify for an institutional mortgage today.

And so I learned that if you can stay in that mode, you're you're solving a problem that the public needs solved, and you're gonna wake up with a good bank. You're gonna wake up with a bunch of people paying you back for a long time in the future. I used to deal do a lot I've done a lot of land business also and, with seller financing, a lot of it. And, so I learned that, a guy told me something. He said, Eddie, if you'll have these disciplines, the business will be good to you a long time in the future.

Steve: Yeah. Don't settle. Don't rush. Make good loans.

Eddie: Be be intentional.

Steve: Yeah. Got it. Yeah. Yeah. And it's really wise but easy to overlook.

Because we get hungry. We get desperate. We wanna make a quick dollar sometimes.

Eddie: Well and and once again, you know, I I you know, you've got this incredible podcast. Mhmm. You know? Thank you for having me.

Steve: It's my honor.

Eddie: And all these guys are watching this. So let me ask you a question. Sure. Did you did you get into this business to have a job, or did you get into this business to build wealth?

Steve: Got into this business to build a wealth and a legacy.

Eddie: So if that's the case, then you've gotta go do something past just today. There's nothing wrong with transactional income. Mhmm. You know, I still flip some notes. You know, we've got a note buying shop, and we buy notes, and sometimes we just need to cash a check.

Steve: Mhmm.

Eddie: I get cashing a check and breathing some oxygen into your business. Right? Right. But but what we try to do is have a balance. My father-in-law had a great saying.

K? Man that taught me this business. He said, Eddie, if your if your net worth is not growing faster than your current income, you're going in the wrong direction.

Steve: You wanna elaborate on that?

Eddie: Well, I think you see a lot of people that are very focused on, you know, I I I made half $1,000,000 last year or a million dollars last year, and I'm gonna make million 6 this year.

Steve: Mhmm.

Eddie: And and I'm thinking that they're they're they're the problem with the fact that the market's being good to the particularly the high volume guys. Right? The smaller guys are not getting they're not pulling this off as well as the high volume guys.

Steve: Sure.

Eddie: They don't have their marketing in place as tight. They don't have their negotiation strategies as tight. So, you know, they're they're competing with the wolves. Right? Yeah.

But if you're if all you're doing is growing transactional income, you're not working to your future.

Steve: Right.

Eddie: You can you can structure the note business or part of your business related to notes and make money today and money over time. And then you've got this it'll be good to you a long time in the future concept.

Steve: Right. Absolutely. So I'm brand new. Right? I'm I'm 20 years old.

God. That'd be amazing. I'm 20 years old. I'm getting into real estate, and I wanna start doing creative financing. What are the two or three two or three things I need to know or learn in order to start being able to buy houses creatively?

Eddie: First of all, you have to be completely clear as to your avatar, your customer.

Steve: Mhmm.

Eddie: Your customer is a burnout landlord. He's he he has a pain factor. There's articles written about this every week. We you and I are just making this up. Right?

It's a it's a common knowledge.

Steve: Well, that's been the number one seller for a lot of us throughout all of COVID was motivated landlords.

Eddie: Right. So what happens to the landlord that didn't sell to you? Mhmm. Right? That's that's the guy you're really looking for.

Steve: He's depleting his savings. He's stressed.

Eddie: Right. So that that that distressed financially distressed landlord is an obvious seller for cash. Mhmm. Get rid of it. Move on.

Right?

Steve: Mhmm.

Eddie: But the landlord that's not in distress, what he's worried about primarily in in in this year, for for sure, because it's in the news all the time, he's worried about taxes.

Steve: Mhmm.

Eddie: You know? He's worried about the future. And so if you can position him if I were if I were an Eddie Speed at 20 years old today, and you said, Eddie, you're gonna be a real estate investor, Tell me what strategy you would go chase. I can tell you with a thousand percent in integrity. I would focus on creative terms and focus on buying from landlords with a with a tax strategy because you are that you are the big guys, as you well know, they're not chasing that customer.

Mhmm.

Steve: No. They're not. Yeah. Alright. So, before I get into asking all the questions, I wanna ask you something right now because this is really trending at this exact moment.

Eddie: K.

Steve: Federal government is talking about taxing unrealized gains. What do you think is gonna happen if they pull that off? Which I think is a near impossibility. I don't think it's constitutional. Well, let's say they did.

We're gonna have more than just a few distressed landlords.

Eddie: We have we have a lot of things in the works that can be very interesting for our business.

Steve: Mhmm.

Eddie: K? We are we really are probably looking at an oil shortage. We could be looking at $6 a gallon gas. Right? Mhmm.

Steve: We

Eddie: are probably for sure gonna see an increase in interest rates, which are gonna mean less people are gonna get a mortgage.

Steve: Mhmm. Which is gonna be less demand.

Eddie: Exactly. So there are some things on the horizon that I think are a big factor, and this unrealized gain, you know, it's it's kinda like I I kind of agree with you. I think the odds are are are are not necessarily high, but but I think a lot of people act on fear. And I think that I think that the positioning of the tax strategy and take your capital gains and take it over time, I think that fits a very high demographic in the market. Mhmm.

And and once again, it makes it a lot easier to negotiate because it's the IRS that says you have to sell or finance, not me.

Steve: Right.

Eddie: Right? In other words, I can defer the the the the the part that, well, I I'd they of course, everybody love to have their cake and eat it too.

Steve: Mhmm.

Eddie: Just give me the cash today, and I'll pay the taxes tomorrow.

Steve: Right.

Eddie: Well, that's not how it works.

Steve: Well but if they move forward with this unrealized taxing unrealized gains, then this ten years of or twenty years is gonna go away, though, isn't it?

Eddie: No. No. Because it's not unrealized gains. They they they opted into a a deferment of capital gains and accepting the money. The unrealized gains

Steve: So it's gonna be a bigger advantage.

Eddie: Huge advantage. The unrealized gains is where you reappraise the property and say the property went up 50,000 in value. You gotta pay tax on 50,000 just because your house went up in value. Mhmm. And think about what could happen in the stock market.

Steve: It's gonna crush the stock market. I read a really interesting, tidbit. Not validated it. Right? I'm not a stock person.

What they said was if, you know, Bezos and Elon, all these guys are worth billions of dollars in stocks. But the amount of money, the market cap in the stock market far exceeds the GDP in The United States. So these people can be worth on paper hundreds of billions of dollars. But if they sold all their stocks today, they would get nowhere near that. So it's just a fascinating thing.

Okay. So, we're gonna go to the questions here on YouTube. K. Kale Maho, what is more accurate, up to date, or faster? Go into the county office today or using a software service?

For example, a PropStream, a Bachelors, and so on. Do you happen to know the answer?

Eddie: I can tell you a 100% that you're gonna use a data source today. I I've just I've just been with Rob Swanson Mhmm. Who owns FreedomSoft. FreedomSoft, and we we had a long lengthy conversation about it. You can buy this data today.

The only reason we sent somebody to the courthouse is that those those resources weren't available back then. It certainly wasn't efficient.

Steve: Mhmm.

Eddie: It was just a way to get the data. Yeah. So, definitely, it's a lot cheaper to buy data.

Steve: It's a lot cheaper. So, and then, Kiali, what I would say on top of that is, Jason Lewis was a guest just a few weeks ago. He he pulls it directly from my data, and I can attest because I'm a client that we get it faster getting from Jason than getting from some of the other data providers. Yep. The investment machine is the fastest if you're looking for speed.

How often would you pull data from the county for distressed sellers? Once a once a year, once a month, once a week?

Eddie: I I I'm not I don't want a current seller. I want a prop I want somebody that's owned a property five years.

Steve: Five years. I want

Eddie: somebody that's owned the property enough that they've gotten tired of it. If they bought it last week, they're not tired of

Steve: it yet. They're still in a honeymoon phase.

Eddie: Yeah. And then, also, I would run I would make sure that I could run equity, and I would chase either people that had free and clear. And by the way, don't be scared of free and clear. That's a gigantic list.

Steve: Mhmm.

Eddie: Right? The free and clear isn't so productive for the guys you're training to buy houses at a discount. Right. Because the free and clear guys are not motivated by cash. Right.

They're that's why I'm saying that they're we're chasing somebody with a different problem or a diff we have a different solution to their problem. And so we're chasing somebody that has owned a property. They're probably tired of it, but they're not in any kind of financial distress.

Steve: Yeah. Got it. And then a question from on Instagram. Jeremy wants to know, when you say a portfolio of notes, is that the same as nonperforming loans?

Eddie: No. A portfolio of notes is just simply a group of notes. I mean, instead of buying one note at a time, I I bought I bought a thousand notes at one time.

Steve: When you're buying a thousand notes at one time, what kind of discount do you get versus buying one note?

Eddie: I bought probably three years ago, I bought 800 notes at 70¢ on the dollar.

Steve: That's a pretty good discount.

Eddie: Were performing notes.

Steve: That's pretty awesome. And a follow-up question on YouTube from Kelly is, which list do I pull to find landlords or bad tenants? So you mentioned find these frustrated Right. Landlords.

Eddie: So once again, I my my this is what they call list stacking.

Steve: Right?

Eddie: This is this is like, you know it's a landlord, and now you're looking for variables about that landlord. I prefer chasing a landlord that's owned it for a few years, and I would not and I know a lot of people target while chasing the landlord that has filed for eviction. I think that's I think that's a head fake.

Steve: Mhmm.

Eddie: I think most landlords have not filed for eviction. I think most people that you're gonna deal with are frozen. They've not filed for eviction, and you have no idea there's a problem.

Steve: They're overwhelmed.

Eddie: That's what I think.

Steve: Or or their head's in the sand. Got it. You know what's interesting? From a lot of these landlords that we buy from, they are terrified of their tenants. And when they sell to us, it's because they don't even wanna deal with the tenants.

So I think you're you're you're spot on here. People they're not gonna file eviction because for them, the confrontation they didn't they didn't become a landlord so they can have a confrontational conversation. They bought a land they bought a rental to for mailbox money.

Eddie: I have I have had, connections with a number of sort of specialist attorneys

Steve: Mhmm.

Eddie: That would deal with that that might do legal work for you or I, but they also do legal work for people that are, like, clients of self directed IRA companies or things like that. Right? And I've asked them many times. I said, when a small time investor has a delinquent note in herself through a IRA account, I said, when do they call you as the attorney? They say, well, they call me after eighteen months.

They don't say they call me after two months. You and I would call them after a week.

Steve: Right? What the heck is going on? Let's take a look.

Eddie: Not the behavior of a small investor. Mhmm. That's what that's the pattern I've noticed.

Steve: That is incredible data, though. Eighteen months. And this kinda goes into, like, for me, I've been sharing this, and this might sound awful. Right? I've been doing this for fourteen years, not as long as you, but I've become jaded.

And, you know, like, the first many years of my career is like, hey. There's a problem, Eddie. Let's work this out. Eddie, you know, I'm sure there's a way we can come to terms, and sometimes it works great. Yeah.

Sometimes it doesn't. But after fourteen years of being in business, there's a problem. Reach out to my attorney, and it's like, send Eddie a notice, and let's get this resolved right away. And I hate that, but that's what happens over time. So I think a great testament to your point.

Right? Like, you and I, after a week, are like, hey. What's going on? But someone that doesn't do this day in, day out, eighteen months.

Eddie: Well and I think one thing and and, hopefully, this is the value of the podcast and training and all the stuff that you and I try to do. Right? When you've seen thousands of transactions, you have developed a an observation of patterns. Mhmm. What we're what we're speaking to today are just what we've seen over thousands of deals.

Statistically, you're the engineer. Right? Mhmm. Statistically, there's a pattern to it. If you can identify what those points are, then you start understanding the behavior of people just by this is just 80% of the people are gonna act this way.

Never a 100% of anything.

Steve: Mhmm.

Eddie: So what we're describing are behaviors that we've noticed. And once again, that's why I wouldn't you know, I you and I know a 100 of the biggest house buyers in the business that are all mailing to landlords that have filed for eviction.

Steve: Mhmm. Absolutely.

Eddie: I believe that landlord is least likely to sell at a discount than the landlord that hasn't filed for eviction.

Steve: Very fascinating. And I think going back to, you know, the behavior, 80% of people behave a certain way. There's actually a book out there, Predictably Irrational. Have you read that?

Eddie: I have heard about it. I have not read it, but I now you now you've made me curious.

Steve: Yeah. Right? But we just know that people will act a certain way. Yeah. For example, the one of my favorite stories in there is, like, you know, if I said, hey, Eddie.

You know, you can buy this, pen right here for, $20, or you go across the street, you know, you can buy the same exact pen for $7. You know? So $13. I you know? That might be worth going across the street to save $13.

Right? But if you were buying a suit for $2,000, like, Eddie, hang on. Before you buy the suit for $2,000, I saw that same exact suit over there for 19, $1,987. You can save $13 if you go go across the street. You wouldn't do it.

Exactly. Why? It's the same $13. Right? But human beings are predictably irrational.

So, anyway, that was just a quick tangent there. John Clich wants to know, why is now a good time to be buying nonperforming loans?

Eddie: Well, the nonperforming notes at the moment are typically the loans that are being traded, are loans that were delinquent before the virus. You may have read about this. Mhmm. And they're referred to as legacy loans. These are loans that are delinquent before the virus.

There's about a half a million of them. And, there's two loan portfolios that traded literally last week. Fannie Mae, Freddie Mac sold about just under $3,000,000,000 worth of nonperforming notes about, call it, six or 7,000 loans, best I remember. Do you know what and and these were these were loans that were all at least twenty four months delinquent. Some of them were as much as thirty, I believe, thirty eight months delinquent.

And they they they quote the stats, so I'm just giving you, like, in but you know what was interesting is, if I took 7,000 defaulted loans, half from Fannie Mae, half from Freddie Mac that got sold, legacy loans, loans that were delinquent before the virus, guess what the average loan to value was on those loans?

Steve: I mean, I'm guessing less than 70%.

Eddie: You were spot on 65%.

Steve: Yeah. So That's a good deal.

Eddie: What's interesting is is nonperforming notes. This is obviously something we teach a lot. Right?

Steve: Right.

Eddie: Nonperforming notes. The the learning this is much easier to learn than it was in 2010. Yeah. Because in 2010, when you saw me come to real estate club here in in Azria. Azria.

And and and I was teaching people to buy nonperforming notes. Do you remember that?

Steve: Mhmm.

Eddie: The problem then was that they owed a 150,000 and the house was worth a 100.

Steve: Right.

Eddie: So every time there was no chance somebody else was gonna outbid me at the foreclosure. Today, a high percentage of those loans, you're just gonna buy the delinquent note at a discount Mhmm.

Steve: And

Eddie: you're gonna get paid off. Either you're gonna get paid off because they're gonna go go sell the house or and and get rid of it before the foreclosure date. Or at foreclosure, somebody's gonna come in at the foreclosure sale and pay more than the lender is owed.

Steve: Right.

Eddie: So the the market today is what I would refer to as equitable delinquent notes.

Steve: Yeah.

Eddie: This is my first time in forty years in this business I've ever seen this cycle.

Steve: Interesting. And but I think it's it's a great, great point. Right? Because normally, we say nonperforming loans. Why would you wanna buy nonperforming loans?

Because a great chunk of these have amount of equity. Alright. So Warren Clark wants to know, when creating a note with the view to sell that note, what are the best terms for the note buyer? How long should a note be? Ten years, twenty years, thirty years?

Eddie: Well, I I don't I don't I don't wanna evade your question. It's it it it's it's a it definitely is a it's depends answer. Right?

Steve: Well, it's a complicated answer.

Eddie: It it's it there there's a it it's what are you selling, who are you selling it to, you know, like, you would prefer to have a loan with a twenty year amortization and a eight year balloon. If you're if you are if you're making loans, if you're subject to Dodd Frank, which says you're essentially a dealer of real estate

Steve: Mhmm.

Eddie: Okay? If you're if you're making a loan, they don't allow you to put a balloon on the note and say five years.

Steve: Right.

Eddie: So eight years is about as close a balloon as you can do. But a eight year balloon would be better than doing it with a straight twenty year AM. The question is, have you qualified the buyer well enough that in eight years, he actually is gonna be able to pay the balloon off, or have you just created a a problem loan in the future? Mhmm. So that's why it depends.

Steve: Yeah. It's complicated. And has Dodd Frank made your business worse or easier?

Eddie: I think Dodd Frank, believe it or not, has made our business better because it's put disciplines in our business that have caused people to focus on something. I I wrote a book in 2002 called Streetwise Seller Financing, and it basically said do what Dodd Frank now makes you do. Underwrite the loan.

Steve: I think that's fantastic. Where do note rookies acquire quality discount notes?

Eddie: Well, we own a trade platform. Mhmm. We own a trade platform called Notes Direct, and we sell between 600 and a thousand single notes a year to just small investors.

Steve: And what if Jeremy wanted to get a portfolio access your portfolio of notes?

Eddie: Well, Jeremy, you know, first of all, I'm gonna be honest with you. If Jeremy called me and says I want a portfolio of notes, I I'm we're gonna vet him a little bit.

Steve: Mhmm.

Eddie: We're gonna make sure that he is prepared for that journey. I'm not gonna go sell if he's never owned a note before, the odds of me selling him 20 notes at one time are not are not very good.

Steve: Yeah.

Eddie: Because I don't want him to overwhelm himself when he needs to get some experience just owning a note or two, and it could be only six months. Now you're ready to go buy more.

Steve: Yeah. One is the same thing, right, where you didn't wanna have a a flipper handling 20 hard money loans at one time.

Eddie: You you know, if you care care about the business, you're gonna try to look at things and figure out ways to help people so they don't make it's back to those patterns. Right? You've seen those mistakes in the past with other people, and you're trying to look forward and say, let me help you not make that mistake.

Steve: Absolutely. Absolutely. And that's one of the things I I I enjoy as as a mentor, as a coach. Right? It's like, no.

Like, everything you just told me right now, no. That's off the table. You're not allowed to do that. I've seen what I've seen this story I've seen this movie before. You're not allowed to do that.

Yeah. Andrew Casares on Facebook wants to know, what is your greatest challenge today?

Eddie: I think people think this is complicated, and I think everything's complicated until you understand

Steve: it. Mhmm.

Eddie: And I just think if you if you'll just, you know, as the old saying, dispel your disbelief. Right? If you'll just dispel your disbelief and say, can I learn this? And you and I have had a lot of offline conversations about this. Right?

Steve: Mhmm.

Eddie: But I think the first thing is is just realize that that this is no more complicated than doing a fix and a flip. It's just different. Yeah. Just different.

Steve: It is different. Although, I shared this with you. Right? I mean, I read Jimmy Napier's book, and I needed, like, a heavy nap after, like, having running halfway through of it. Now, you mentioned that you're you've been able to take this material Yeah.

And present it in such a way where it's digestible and you can go and do it. So if someone wanted to do that, how would they go about learning more about creative financing and buying more properties?

Eddie: We've got some we've got some good paths. I tell people that, you know, if it's you, Steve, and you've known me for years and you know all these people that know me, you're gonna just come straight to a three day class. Mhmm. Because you're you're gonna it takes about three days to unfold these things. And and once again, we have practiced a lot in showing case studies that make it clear and and and so that you can learn something that's more complex than you thought.

It's just how you've been taught the information or presented it.

Steve: Mhmm.

Eddie: But if somebody's just curious, we've got a great one day class, and they can just come and and at the end of the day, they'll they they will have clarity. Well, I have a tolerance for this or I'm interested in it, and it'll give them enough ideas of how it works. You know, everybody wants a paragraph to determine whether they wanna try something. Sometimes a paragraph is not a fair assessment of really saying this is something that could change your life

Steve: Mhmm. Or

Eddie: it's just something that you're you're not gonna like.

Steve: Yeah. And I've seen so many with the you know, we're talking about Azure earlier. I've seen so many success stories at Azure. Right? People that, like, I went to another school, and it it changed it changed my the the trajectory of my life.

So with your business then today, what what is your biggest struggle right now? Oh, we kinda talked about that a moment ago. So what we're talking about there are things that are interesting. You know? Oil going to $6 a barrel, interest rates potentially going up and bringing demand down.

Besides maybe taking some of your chips off the table, what else are you doing for you and your entire organization to prepare for potential market shift?

Eddie: Well, you know and I wanna be clear about this. I I don't see at this point, I don't see a 2,008 scenario.

Steve: Yeah.

Eddie: I I I will say that we have experienced this crazy abnormal market due to a lack of supply. And, you know, people are in a mindset now that, you know, just things are just gonna grow, and they're just gonna be this and that. And so I think just understand I look at the this business kinda like the weather forecast. It's beautiful outside today, but it could it could they could be predicting a storm, you know, two days from now.

Steve: Mhmm.

Eddie: So we just need to be aware of that. And I put a lot of focus in it. I have a note school. You know, we have a YouTube, thing, and once a month, we do state of the industry. Mhmm.

We're not try I'm not trying to convince you everything is great. I'm not trying to convince you everything is bad. I'm trying to make you informed. I'm trying to give you variables so you can make informed decisions. So I don't really believe things are bad right now, but I I believe that everything that we do is focused on an unsolved problem in the market.

Mhmm.

Steve: And

Eddie: if you if even in a hot market, if you can solve problems other people can't solve, well, there's your entrepreneur advantage.

Steve: Right. Absolutely.

Eddie: And that's what and I think everything that we're focused on is that. It's like non performing notes. How many people would dream there's a half a million nonperforming notes getting moved in the marketplace right now that you can buy at a discount?

Steve: Not a whole lot. I mean, it's not something we would have thought about not too long ago. Yeah. So forty years, again, 50,000 plus transactions. What keeps you going?

Eddie: Man, I'm just lucky, dude. I just I just found something I'm passionate about. Mhmm. I just I mean, I I I I can tell you that I drive to work excited every morning, and I'm just I I I think I'm in a good I think I'm I'm in a business that doesn't suck the life out of you. Mhmm.

I believe that landlording would suck the life out of me. Mhmm. I'm not saying it'd suck the life out of everybody.

Steve: Right.

Eddie: But it would suck the life out of me, and it and I just love this business. And it is creative. If you like not being bored, And then, you you you kinda like this, and you you get to where you really embrace, you know, taking on the challenge of seeing the next way to structure a deal.

Steve: And what is your superpower?

Eddie: I'm good at structuring deals. I'm I'm Add a

Steve: few reps.

Eddie: Yeah. I mean, I've had a lot of practice. Yeah. And you've heard this. You've been around a lot of guys that you know, I I'm I'm I'm pretty good at whiteboard a deal.

Steve: Yeah. I think it's awesome. Is there a lesson that, one lesson that's the greatest lesson that you have learned?

Eddie: Life starts out with a dream, but it can't be a pipe dream. So that means that that your dream has to have plans behind it. Mhmm. But if you look at Martin Luther King's speech, it wasn't named I Got a Plan.

Steve: Yeah.

Eddie: It was named I Got a Dream.

Steve: Right.

Eddie: And so I at 20 years old, a kid that grew up in a cattle auction barn, learned this business, and and and I know that it's not because I was smart. I may have had certain aptitudes, but my greatest aptitude was tenacity.

Steve: Yeah. Well, again, cold calling realtors on a probably, possibly a rotary phone. Right? I can't even imagine doing that at 20 years old. What is your favorite, best, or most interesting failure?

Eddie: I've learned that there's difference between hoping and planning, and I've seen times that I thought I was hoping we had it right, but there were details in our plan that weren't weren't defined.

Steve: Mhmm.

Eddie: And so I've I've always and when I'm addressing my team, I'm like, okay. We're gonna do this endeavor. We're gonna add this piece to our business. We're gonna do a pivot here, and we're gonna shift to this. What are we planning?

We're hoping for success. We'll all agree a 100% of the time. We want to have success. But let's make sure that we are positioning ourself with the ingredients so that we don't find that we were hoping for something that had holes in it. Mhmm.

And so the biggest mistakes I've made of all have probably been not making sure that everything was buttoned up upfront.

Steve: Yeah. And that doesn't mean

Eddie: that doesn't mean overplaying the point you never do anything.

Steve: Mhmm.

Eddie: But it I think we've we've come up with a decent balance of that.

Steve: Yeah. It's that it's funny because, I mean, for me personally, right, I mean, I I made every decision. Without any planning. Like, let's go full bore, 100 miles an hour, and then you trip on the first speed bump because, you know, you didn't even make sure your your shoelaces were tied or whatever. And it says over time, you go fast and then you crash.

You go fast and you crash. But, eventually, you don't go as fast to make sure you don't crash.

Eddie: Well and you have to you have to position yourself. My my operation I'm a my PI test is I'm a captain. I suspect you're something like a captain. Right?

Steve: Pretty high a.

Eddie: Yeah. Yeah. So so understand, we we have those traits, but we I have a I have a team behind me that has extremely good operational experience. Mhmm. And And then when they when somebody comes to note school, they say, well, how does that benefit me?

Because we've thought through things that you haven't you don't have to think through them because we've experienced them, and we've we are able to define that

Steve: Mhmm.

Eddie: To make sure you have this in place. Right. Right? If you're gonna here's the simplest of things. Right?

If you're gonna do direct mail, you better make sure you have somebody live answer your phone.

Steve: Right.

Eddie: They're not gonna leave a voice mail, are they?

Steve: No. No. They're not. They're calling the next postcard. Literally, the next postcard.

Is there a book you've gifted more than any other?

Eddie: Yeah. Probably. I would I I I'm a Chris Voss fan. Mhmm. I just think that I think that book has revolutionized the the concept of negotiating in such a great way.

So never split the difference.

Steve: Yeah. It's a fantastic book. I mean, it's a lot of our training is built with a lot of those same principles. And I when I picked it up in 2017, it was before I got into sales training. And the lessons I learned from that is they still carry for it today.

You know, it's it's interesting people tell me or they ask me, you know, like, what makes me a great negotiator today? And I said, well, the sales training definitely helps. But before I got into sales training was reading the book and practicing. And it wasn't one of those things where I read the book once, read it twice, read it three times, read it four times. Made my entire team read it multiple times.

And so, yeah, I I I am with you.

Eddie: That's incredible. It is not a book. It's a workbook.

Steve: Yeah. And then on top of that, I highly recommend everyone also get the masterclass and the audiobook. So we've digested it multiple different ways. So I want you to think about what you wanna leave the listeners with while I make you just a couple of quick announcements. Guys, if you got value today, please like, subscribe, share, and comment.

My team shared with me. We have 60% of the people subscribed. I wanna hit everybody. Right? That's if you're watching this, please subscribe.

It tells YouTube to share this to more people. And the more people we see it, the more millionaires we will create. We do have our workshop coming up next month. It's two and a half days, November. If you guys are interested, we're gonna spend half a day.

You get to see my team actually in action and ask them questions. They don't know about this yet, so there's a surprise. But you get to ask them questions as they're working. And then next week, we got Michael Moulton who built an MMA gym or went from an m MMA gym to nine businesses working together, which is kinda crazy. Building that to 3,000,000 in real estate free and clear.

So if you guys want to have $3,000,000 in real estate free and clear, be sure to tune in next week. What are the last thoughts you'd like to leave the listeners with?

Eddie: Well, I mean, you know, I wanna give them some some tracks to go forward. We've got a we've got a some information. I I wrote a I wrote a little book about creative financing. Mhmm. And it's broken into chapters, so it gives different ideas.

And then there's if they wanna, like, see what a deeper dive of this looks like, then they can go there and do that. Just noteschool.com forward slash get started. And, and it's and it's, we we're trying to, zero in on a market that we think a lot of people say, I would like to define myself just different than just being everybody else. Right? There's so many people out there chasing this market, and so we're trying to get some clarity about how you could do that and how it could work.

Steve: Awesome. And how can someone get ahold of you if they wanted to get ahold of you directly?

Eddie: Best way to do it is to do that. Okay. You know? I mean, I'm not gonna mislead you. I travel a lot.

I'm in meetings a lot. So, you know, I don't want somebody to be frustrated. I want to give them somebody on my team that can commit to it and commit to, you know, getting them a path to get started. You know, you know that I'm a regular guy. The people that train and coach with us down the road, they know me well, so I'm not mystical.

Steve: Mhmm.

Eddie: But, you know, you need I wanna give them a basis of information to start. So just Yeah. That's a good way to do it.

Steve: Awesome. Thank you very much, Eddie. I appreciate that so much. Thank you guys for watching.