The industry has undeniably gone through a lot of changes over the years, and veterans who have been here for long have seen and navigated their way to success. Our very own Kevin Shortle has not only ridden the waves of note investing but has made a name for himself with over 25 years of experience. In this episode, Kevin takes the hot seat in an interview by Rick Allen for Paperstac, where he takes us into his journey and the changes he has seen in the industry through it all. From buying his first note to getting into teaching and being a mentor, Kevin shares all the stumbles, wins, and lessons learned in his career. So tune in to this conversation and get a glimpse of Kevin’s history as well as some history lessons about the note industry!
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Kevin Is Interviewed By Rick Allen Of Paperstac
This one is going to be a replay of an episode that I was interviewed on that I thought you all would enjoy. The interview took place at the new offices of Paperstac. It is an online trading platform built and developed by a couple of guys that I trained in the business about a dozen years ago. I know them well. I enjoy the platform they have provided. I’ve had a lot of my clients by successful transactions through that platform. It was a pleasure being interviewed by them. We had a lot of fun. I think you’ll enjoy it. I’ll turn it over to Rick at Paperstac.
Welcome back to the Paperstac Podcast. My name is Rick Allen, and this is Kevin Shortle, not Brett Burky. He’s behind the scenes. We got somebody live in the office. Kevin Shortle, for the ever-so-popular My First Note Purchase. I learned this business from this gentleman sitting right here. He taught me most of everything I know now. It’s going to be hard for me not to go into the stories of Kevin’s past. He’s one of the most interesting men in the note industry. Kevin, welcome.
Thanks, I appreciate that very much. I enjoy coming to the office. It’s great to see you guys. It’s an easier location for me to get to. It’s down the road. Now that I know where you are, be careful. I might be popping in here.
How long will it take you to get here?
It’s 3.7 miles.
You walked here for about fifteen minutes.
I’m known for being a quick walker. That’s referencing.
Kevin is fast. We went to Puerto Rico one time in Old San Juan. I was trying to keep up with Kevin, walking around Old San Juan. If we were turning laps, he would’ve lapped me three times. The guy is hard to catch up with. Tell us about the note industry. You’ve been in it for forever. When did you start in it?
I’ve been married for several years. We got started in it right around the time we got married. It was a completely different business as far as how everybody approached it. It was the late ‘80s. We didn’t have the technology. There was no such thing as Paperstac. I’d have to go to the courthouse to try to find it.
Before notes, where were you?
I always wanted to get into real estate. As soon as I graduated college, I moved to Orlando. I became a commercial real estate appraiser. I did that for a year and a half. I was like, “The big money is selling real estate. I’m going to sell real estate, and I’ll be driving the big car.” I still have my 68 Mustang from college. I’m like, “I got to get the Honda Accord.”
I remember at the interview, they were like, “We’re looking at your resume. You bartended.” I bartended all through college. They said, “You can’t do that at night if you’re selling real estate.” I’m like, “Okay.” They said, “We don’t want you trying to sell somebody’s house, and they go to dinner that night, and you’re serving drinks.” I said, “I get that.”
I bartended way across town because I had to eat. I stay out of my area. I gave myself a year in that. It’s tough. The one thing I got out of it was the first piece of real estate that I bought. We used to have back then receivable, non-qualifying loans. You signed a document, and now you’re responsible for making payments. That was it.
I was working the desk Saturday and Sunday at the real estate office. I was a low man on the totem pole. This guy comes in and he goes, “I want something to take over the thing.” I’m like, “I’ll buy it.” That’s how he got into my first deal. It was a two-bedroom and two and half bath townhouse. It’s funny how passes lead into something down the road. I knew more about real estate and valuing real estate than anybody in that real estate office. It was an old Higginson ERA. Remember Electronic Realty Associates? They became Better Homes and Gardens, I think.
They at least recognized me and said, “You know a lot about real estate.” I’m not making any money. I’m not selling or listing anything being young. He asked me if I would teach the group how to evaluate real estate and how to go into some other things about real estate. That’s how I started speaking in front of a group.
How did you know so much about evaluating real estate?
That first year and a half as a commercial real estate appraiser, I was the guy who did all the work. It was going to the courthouse. It wasn’t the internet and sitting on my computer. It was going to the courthouse and through big books. MLS was on a book. We didn’t have MLS on the computer. There are no cell phones. I’ve spent my days in the courthouse going through stuff and getting documents. You had to learn the business. With that, I carried a lot of knowledge with it because I enjoyed it. I like teaching the stuff. It led to me speaking and doing some gigs like that. That put me on that path of training.
You went down and started real estate. What caused the first note? Was that it? Was that like you’d say, “I assume that note?”
No. Notes I hadn’t even heard of yet. It was all about buying real estate. I was working for this company. I got into their real estate division and we were teaching people how to invest in real estate. I met a guy who made $15,000. You have to think of the timeframe here, where we’re talking about. That’s still a lot of money. I’m like, “How did you do that?” He told me that what he was doing was wholesaling real estate notes. I’d never heard of that. I’m like most people. When they run into this business, they are like, “I never knew it existed.”
That was for me. I’m like, “That’s interesting. You never saw the house and met the people. You put this together with this buyer and made that. That’s different. I want to start pursuing that.” I hooked up with him. I was the marketing creative guy. You look at businesses and you go, “How do we scale this?” If there’s two of our efforts, me and this other guy, and we’re doing this business, we’re going to be limited. I said, “I’ll write a program and teach people how to do this. We’ll provide them with leads.” At that point, there was finally a lead generation company that would do a printout of leads. You don’t have to go to the courthouse anymore to find the leads.
It was a game-changer because it allowed me to scale. We sold this little program that I wrote, the Hidden Cash Flow System. It was on 6 cassette tapes in a 3-ring binder. As we sold those and I had this other company I was working for, they bought not the rights to it but they paid me a royalty when it went out there and sold.
All of a sudden, across the nation, we started building up this network. We’d supply them with the leads. What they would do is go out and find the people who own notes. They would fill out a form, get it back to us, and we get the note sold. That’s how we made our money. When I first started, it wasn’t about buying a note with your own money. It was about how we build a business where we can get all these notes, turn around, and let somebody else buy it. We’ll make a fee.
You didn’t know so much as going buy your first note. You jumped in and started turning and burning.
I was waiting for when you are going to get that question of, what was your first note? I honestly don’t remember. It didn’t have that impact of like, “This is my first investment.” Someone came in with a lead, we looked at it, gave a quote, he came back with a quote, and I handed it off to my partner. He gets it funded, and I’m off to the next thing.
I’ll tell you what note did. The first note that stood out to me and impacted me quite a bit is an interesting story. I remember this person to this day. It wasn’t my note, but it proved to me that if you taught someone correctly and guided them in this business virtually, anybody can do this. This one stood out to me. This goes back many years. I remember her to this day. I love it. It was in Texas. Her name is Carol Backus. That’s how much of an impact it had several years ago.
I’m starting to train people now. She comes up to me at an event. She’s in her mid-60s. She’s a little tiny and shy. She’s about to invest $600 to $700. She goes, “Kevin, I need to hear from you personally face to face that I can do this business.” I said, “Carol, I’ve worked with many people with all different backgrounds.” She goes, “Yeah, but I need to know that I can do it.” I said, “Tell me about yourself.”
She’d been married her whole life. She didn’t know anything about money or financial management, let alone real estate or notes. That wasn’t in her thing. She goes, “I leave my house to go to church. I go to the grocery store, and that’s it.” I was like, “Carol, this is a people business. The product is real estate back notes.”
It’s a whole part of it. I said, “Carol, you’re going to have to break out of that shell.” I came close to telling her, “Carol, this isn’t for you. Don’t do it.” Part of my brain was like, “Don’t get her involved in this because she’s not going to be able to do it.” Thank goodness, I didn’t do that because she went on. Her goal was to get her grandkids into jobs. They were going to college. She wanted to pay for their college and get them going, which was expensive.
In her first deal, it was one of these deals where it was on and off. When you all start doing your due diligence, everybody who is reading this probably has done this, but it’s levels. You think you know everything about the note and something else comes up or this document is missing. This deal was on and off.
I wanted her to succeed. I said, “Carol, you got to walk away from this one. You’re spending all this time on one deal. You got to look at multiple deals.” It finally came back to us and it closed. It took six months from start to finish, which is way too long. She ended up making maybe $1,000. I can’t remember the exact amount, which is nothing over six months. For her, she took a copy of that check. She put it up on her wall. She was proud of that.
I invited her to come back because, after that, that’s all it took. That was the catalyst for her. She became a different person. She stood up straight because she was always rounded and shy. She would look at somebody straight in the face. She would also stand tall. She would get in front of an audience, which she never would do. She ended up doing stuff all over the country. Her grandkids, both of them, went through college. They ended up working for her instead of getting jobs out of college. It impacted me so much because I’m like, “I was that close to talking her out in this.”
You helped her.
That was a thing. It’s like, “No, you can do it. I’ll work with you and we’ll make it happen.” This is still true nowadays. Every deal you do, you get paid in money and knowledge. Sometimes, people stumble into deals. They’re like, “This is easy. I found a note and bought it.” They get lucky. They made money, but they had zero knowledge. I promise you, that will equal out.Every deal you do, you get paid in money and knowledge. Click To Tweet
That happened to us. We got five easy ones that’s off the rip. With the first one, I was like, “This is like taking candy from a baby.” You look back and it’s like Indiana Jones when you have to step on the things, not for the floor to fall out. I happened to hit the right steps and didn’t blow my legs off. I didn’t make some money on some few but I got some knowledge.
It’s the same thing for her. She made a little money in the first deal but learned a lot of knowledge. There’s a lot of confidence. She took it from there. For me, that’s the first big deal that I remember had an impact on many different levels.
You bought a lot of stuff. How did you get into teaching? We’re going to deviate a little bit from typical because you did such a high volume. It seems like the teaching started before the volume started, or did it start walking hand in hand?
There’s only so much you could do when there were two of us. We’re trying to find leads and do these deals. It took a lot of time because we had to go to the courthouse and do some research before the lead list came along. Once that was there, I said, “If we can do it again, imagine you got 200 people across the country that you’re providing leads and they’re following up with.”
Is this your first teaching thing? I know you taught at the real estate ERA, but this is your first like, “I’m going to put together a course.”
This is the first time I wrote a course, put it together, recorded it, and sold it.
Did this lead to further teaching?
I have a talent for it. I enjoyed doing it. I know the topic well. There’s something also about when you teach something, you learn more.
You learn it three times better. There are some metrics there.
There’s a dynamic with that. I look at paper stacks and notes every single day. I spend hours at a time looking. When you do that, you see many things and pull up. It led me a long time to get down to that path where I’m working with people personally one-on-one because it’s always been through courses. From courses, you start to do some consulting. It starts to grow from there. You’ve heard me talk about the stories of being on TV. I don’t know what direction I should go.
You’re on Lifestyles with the Rich and Famous.
I was with Robin Leach. I wasn’t on that show, but Robin was from Lifestyles of Rich and Famous. You’ll find Robin Leach back in the early ‘90s.
The stories that I’ve heard and talked to you for hours of stories that I almost would have a separate show to have you back on. We could get some bourbon or Heineken and sit back and tell stories for a while. We won’t do that on this one.
It was on a mass scale. I was on shows like ABC and NBC. It was nationwide.
At this time, are you still doing the notes? Are you still getting the notes and wholesaling?
The program had changed at that point, where the wholesale side of the business dried up a little bit at one point. You have to understand the history of this business. The first note that became massive in the United States was the interest rates were high. Everybody thinks interest rates are high. We’re talking 18% and 19%.
A lot of people back in the Carter administration would sell the house with financing. There were a lot of people who created notes that they didn’t necessarily want to. People weren’t buying houses at 18%, but they would at 9%. A lot of seller finance notes were written at 8% and 9%. That’s right. It was half of what the rate was at that time. We would find those individuals and see if they would rather have cash now versus the monthly payments. A lot of them didn’t even know you could sell a note.
That happens so much. People own these notes, and they’re like, “I didn’t know I could even sell these.”
It grew from there. That’s what everybody is doing. That’s where big buyers, like Metropolitan. MAC is still around, but associates were these big buyers in the industry that everybody went to bring their deals through. They were the bigger buyers. It was an easier move at that point in time to make revenue with the wholesaling of it.
When that inventory started to dry up, the industry made a change. Metropolitan, which was one of the biggest buyers out of Spokane, Washington. We know people who worked for that company. The old man who owned it passed away and the family didn’t want to take on. A huge buyer was gone and eventually, associates went away to a couple of other places and the smaller one is in DC.
All of a sudden, those big buyers aren’t there anymore. They drew up. You have to adjust to the marketplace. That’s the whole thing. We’re doing that now. The last crash in 2000 was an adjustment to the marketplace. We saw inventories explode in a different realm. We’re anticipating a change in inventory coming up now. Back then, it was a shift and you started to buy your own assets and build them up that way.
How many deals were you moving a month at your peak?
I wish I had an answer for you. I don’t remember that much. For some reason, it’s probably 20 or 30.
You’re talking 300 to 400 a year. That’s a lot of inventory. You are dealing with huge buyers.
MAC has been around for many years. They’re still buying $3 million to $9 million worth per month.
It’s crazy they buy that stuff. People are like, “How’d they get it?”
Fred Pugh and his brother started that years ago. One of the brothers is still around, but they’re still in the business. They’re backed by a bank. Their funds are unlimited.
There’s no bottom there. They have to adjust how they buy.
It’s a completely different model, which we see a lot of people have a fund. They raise capital and buy. There are different rules, regulations, and approaches to all of that.
You started selling volume. You’re in the teaching and you’re on TV. Now you’re still teaching. You’re not on the mass stuff now. You take in students who are looking to take on a mentor.
I made a major shift, and I had a chance to look at the overall industry, where we were, and what’s going on out there. I saw a lack of true mentorship. There are a lot of group coaches and courses. I got feedback from many people because, over the years, I’ve probably trained more than anybody through the courses in the companies I was working with. The feedback I’m getting is people need more handholding, help, and guidance. You can talk about all the fancy stuff we can do in the industry, but trying to apply that is a whole different thing. There are moving parts and it’s new to people.People need more hand-holding, help, and guidance. You can talk about all the fancy stuff we can do in the industry, but trying to apply that is a whole different thing. Click To Tweet
Technology and legislation changes that happened after the last crash shifted this marketplace into a whole different realm. We never used to have inventory the way we do year-round now. We never had that. It came in cycles and waves. We have that because of legislation. We have a more liquid marketplace.
You guys identified it, Rich. You saw that there was nothing like Paperstac and created it. That gave a place where people could actively trade. When you have liquidity in a marketplace, legislation working in your favor, changing banking laws, and technology like Zoom, now I can get on Zoom with everybody. I work directly, share screens, go through the deals, look at the documents, review everything, run through the calculators, look at public records, look at the contracts, and go through everything. That, to me, was a big game-changer and has been for my clients as well.
There’s nothing else like it. Handing somebody a book and tape, those days were gone. Having online video courses is nice, but the business becomes real when, all of a sudden, you’re doing a note deal, not reviewing a course on it. You’re like, “Did I do that the right way? Is that right? Did I miss this? Did I sign that document the right way?” It’s a whole different thing. For some people, it’s to have the confidence where someone like myself is like, “Yeah, you’re good. It’s going to be fine. It’s a good deal. Go for it.”
It’s been great. I have enjoyed this part of it because, for many years, it was teaching somebody and hoping they do well. I’m out on the road teaching courses again, and I don’t know the results. Now I know very well what we’re doing and how people are doing. It’s been an exciting move for me to go to that format.
The hardest step is going from 0 to 1 note or 1 to 10 notes for people.
I’d probably say 1 to 10. What inevitably happens in this industry is you typically run out of your own capital. Everybody starts to face that at some point in time. When you run out of your own capital, you’ve got to think, “What do I do from here?” Some people went on and built funds and raised capital that way. Some people did smaller partnerships, where they may have started with a relative and graduated to find some investment club where they could start to do some deals that way. They simply learn some techniques like partials and structuring deals where they bring a deal to another investor and that investor pays the money.
At some point, when your capital gets exhausted, you’ve got to get creative. That’s why I tell everybody, “The biggest thing in this industry, like most things, is the ability to identify a deal. If you know how to look at a deal or a note and identify that that is a good deal for somebody, and you’re able to explain that to somebody and lay it out in a fashion where they can understand it, the opportunities are constantly there.”
They’re there and you can find the funding. The funding is there if you’ve done a couple of deals and you can identify it. I don’t know if you’ve done this, but I would imagine having somebody like Kevin Shortle in your corner when you’re going to talk to capitalists, you say, “This is the deal. I’ve looked over it with my mentor. He’s been in the business for 30 years.” I imagine that helps. When you’re working with your clients, are you teaching them? Are you talking about like, “There’s a goal to get. Let’s buy that first note.” We have to look at, “Let’s look at partials or hypothecation. Let’s set up this plan. What’s your goal? Are you looking for 1 or 2? Are you looking to make a business?”
My approach is education and consulting. The consulting is the true mentorship. It’s me working directly with you one-on-one, but you have to have the education there because you have to be well-rounded. There were some other people in the industry who may still do it now, where they only teach one side. One performing note or non-performing note, or one technique, which might get somebody going, but what are you going to do when that technique isn’t there anymore, or it doesn’t work anymore?
What happens when you’ve learned performing and it turns non-performing?
Everybody should be well-rounded and get the complete training. That’s part one for me. You’ve been to my live events. You’re filling out a yellow patch as you’re going through it and taking notes like crazy. There is a comfort in being able to have those on videos where they’re broken up into pieces and you can stop, start, go back, replay, or even go, “I know we talked about that technique. I wonder what that was.” You go into your video archive and go, “There it is. That’s how we do it. That’s how the calculator works.”
When we went to the three-day live you were teaching, we were in a different place than most people that walk in because we owned fifteen notes and I had a couple of million dollars liquid waiting to buy more. You don’t know what you don’t know, but when you’ve been in it, at that point, twelve months, there’s a fire hose of information. I was like, “Oh my gosh.” I was trying to catch it all. At the end of it, my head was exploding. I was like, “There is so much here.” At that point, I was like, “It doesn’t matter what the mentorship costs. We have to do it.”
I remember leaving the live event. We drove back and on the ride back, we learned something that we learned in the live event. You’ll learn some stuff there. The meat and potatoes are when you can get into the videos. You can digest it. I can pick up the phone and call you. We learned something in that live event. We made half what we paid for on the ride back. I was like, “This is it.” This is a loaded question. I think I know the answer. I know what my answer is. If you have one piece of advice for somebody getting into the business, what is it?
Understand that you’re getting into a business that’s not perfect. You become a problem solver in that imperfection. That’s the key to this whole thing. If you come into this expecting everything to go perfectly, you’re setting yourself up for a rough ride. You may have a deal that goes perfectly, but I’m telling you, it’s the same way in rehabbing a house. If you think you’re going to buy a house that needs rehab and it’s going to work, come out on time, and perfect at the cost that you estimated, you’re in for a rough ride because it doesn’t quite work that way.You’re getting into a business that’s not perfect. You become a problem solver in that imperfection. Click To Tweet
You have to have a good knowledge base of the industry and expect to be able to move on your feet a little bit. What I mean by that is to adapt to what comes at you. If the document is missing or this is wrong, how can we fix that and not go into panic mode? That’s the key to the whole thing. I’ve said this before. On my hats here, they think it has something to do with Notre Dame or Tony Robbins. It doesn’t. I’d like the brand. I like this statement and I’ve said this on some of my tips of the day. This is the brand called Live Lucky. The definition of luck is the intersection of opportunity and preparedness. When you’re prepared, you see opportunity over there. That’s where I’d come back and say, “Be a good boy scout. Be prepared.”
I had his ownership. It was an opportunity and preparedness holding hands. I like it. It’s that intersection.
All of a sudden, you feel like you’re getting lucky, but no, you’re prepared.
My answer to the question is when somebody is getting into the business or every time somebody is new getting here, I’m like, “You need to get an education. Before you do anything, educate yourself. Find somebody to listen to, snuggle up with, and talk to. There’s plenty of free stuff to start with, but you want to get somebody who’s been in the business to teach you what’s going on.” I do love that answer. It’s not perfect. There are rocky roads ahead no matter what the mirage looks like.
I went to unlimited consults. When people are in my program, they can book as many appointments with me as they want to because sometimes you need it. Sometimes something changed. I need to talk to somebody. It enables you to go forward. With education preparedness, you’ll see plenty of opportunities in this industry. The way the legislation is, Dodd-Frank and everything else, those laws aren’t going to change. We’re going to be good if the economy stays the same. We’re going to have year-round inventory, which we’ve had now for a long time. If it gets worse, we’re in the industry where it gets better for us.
You talked a little bit earlier about problem-solving. Identifying problems is a good thing, but knowing that, “I know I’m going to be able to solve this problem. There are 3 or 4 solutions to that problem.” My experience has been the people who are the best problem solvers and the most creative because you’re right. It’s not a perfect business. You can look at a deal and say, “I see 2 or 3 problems with this, but I’ve got 2 or 3 solutions for each of those problems. I’m going to move forward.”
A lot of times, those are the deals for me that always turn into home run deals and are knocked out of the park because everybody else looked at them and said, “That’s not a good deal.” The sellers are going, “I need to get rid of this deal.” You’re like, “I’ll take it on. I need it for this price.” The next thing you know, you solve those problems and you solve them quickly. You’re like, “This is another problem solved.”
There was a deal on Paperstac. The problem was that it was tough. It was one of those neighborhoods where you couldn’t get a clear valuation of the collateral. The range would come back and it’s like, “It’s worth somewhere between $20,000 and $70,000.” You’re like, “What, $50,000 swing?” It was hard to judge that.
One of the things we always look at is, “What’s our risk?” If you don’t know what the underlying collateral is worth, it makes it difficult. I’m sure a lot of people passed on that deal. I told my client, “Alvin, offer this guy a partial with a right to buy the back end. There’s your solution.” The problem he has is he’s going to have trouble selling this note because people are going to run into the same issue. The house, we don’t know what it’s worth. Other than that, it’s a good-looking note. Offer him some money now with the ability to get on your options. There is some money in the future on that. He did. The guy accepted the offer. It went through, and it’s paying great.
You mitigated your risk. You say, “It’s paying. I’m mitigating my risk. If it goes bad, he’s going to step in, or I’m not out that.” That’s fantastic. Where can people get ahold of Kevin Shortle if they want to talk or want to sign up?
I love consistency. There’s a branding going on there.
I do this little tip of the day. You guys comment every once in a while on those as I’m walking around town. YouTube channel and Facebook, you can find me there. If you’re looking for mentorship, the program I put together has been fantastic. I’m loving it. It’s been great. The clients are all happy and doing well. It can’t be any better than that.
Kevin Shortle knows the industry inside and out. You meet some people who teach and you’re like, “They’re okay.” You know how to teach, connect, and explain stuff. I’m bragging a little bit because I went to him. The proof is in the pudding. I’ve tasted it. I’ve sampled the goods. Go for it. Other than that, I appreciate you coming out.
It’s a pleasure.
Kevin Shortle, thank you for joining us. We’ll catch you on the next episode.
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