Just like everything else, learning to invest is a process that takes time. Learning to invest goes far and beyond just the theoretical—you can do absolutely everything right, and something else out of your control could still go wrong—so you have to treat everything as a learning experience. Kevin Shortle is joined by Leandro Ramirez, a note investor. Leandro shares his story of learning to invest as a new note investor. For the investors out there who are just beginning to find their own in the field, Leandro shares some fantastic tips that could help you along on your journey.
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Learning To Invest: The Journey With Leandro Ramirez
Thank you once again for tuning in and also sharing it with a friend. If you have people in the industry or you are a part of a real estate investment club, I do appreciate you getting the word out for everybody. If you’d like to show, please go ahead and give me a nice rating on there. Believe it or not, that does help for sponsorships and everything else. That will enable me to bring you more shows and bring you more guests. I’ve got another new show under the new format that we’re doing. I appreciate all the comments by the way and let me know if you like the new format. It reaches a lot more people. I’ve been happy with it. It takes me a little bit longer to do the production, but we’re starting to get that down to a system at this point in time here.
On this episode, I’m going to start with my Duly Noted segment. I’m going to give you some information about where we are inventory-wise and where the business might be heading. You’ll find it inspirational and hopeful. We’ve got some great opportunities coming up with that. We’re going to follow that up with an interview with a fairly new client of mine that came on, took everything that I provided and went through it. He’s been getting good results on that. Once again, you’ll find that very inspirational. It’s going to be very upbeat show here with everything else and craziness going on in the world. There are still a lot of good, positive things out there. We’re going to stay on that message. I’m going to have another message for you from some other investors in the industry, some comments about new inventory. That’s out there as well. It’s going to be a great show. We’re going to go ahead and start it off with my Duly Noted segment.
I’m going through a lot of different thoughts about the industry, where it’s heading, what we can do, and how we participate in it. I was very inspired by what we are able to do as note investors. We have the capability of helping people stay in their homes, number one. That’s going to be huge. Banks and other big lenders have the capability of that but they’ve proven in the past that they choose not to or simply can’t get that done. Even with all the government’s help, all the money that they’re throwing at them and everything else, that didn’t work out during the last crash. What did work out during the last crash was individual investors like you and I buying notes and turning those things around. That’s going to be a big play in the future. That creates a true win-win scenario.
It is all about the numbers and the story in this industry. We have to remember that there are people behind all of these numbers and we can help those people. We have to find out their story and see if we can also work with them to make those numbers work. There always is going to be some give and take on that. There’s always going to be scenarios where we simply can’t help everybody. Some people are going to want our help. Let’s face it. There’s going to be a small percentage of people who will say, “I’m not going anywhere.” They’re going to fold their arms and dig their heels in and say, “You’re going to have to kick me out.” It’s unfortunate, but that is a part of it.
If we looked at the bell curve of things, you’re going to find most people when contacted them properly, they’re going to want some additional help. This whole concept of forbearance, no evictions, and all of that, that’s going to come back to a sudden reality. Forbearance is not any kind of a grant at all. It’s a re-arrangement of loan payments and people are going to have to pay that. How they pay it is going to depend upon two things. How upfront their bank is about how they can pay it back and their knowledge about how forbearance works? Some banks have even been telling people, “You’re going to owe three months of payments after this period of time.” They go, “How do we do that? How does that help us out?”
The actuality is they can move those to the back end of the loan, but there are lots of things we can do especially when we buy these assets at a discount. There are some challenges within our industry because courthouses aren’t opening. They don’t look at foreclosures as a necessary thing to do. I get that, but they’re also pushing the date back further. They did that here in Florida. There’s going to be some things like that, but the reality is these opportunities are coming. Number two, there are opportunities here. Don’t try to time the marketplace because what you’re going to find is it probably isn’t going to happen the way you think it’s going to happen.There are people behind all the numbers and we can help those people. Click To Tweet
For example, we’ve seen property prices maintain. What we have seen is that the lending for the lower middle income and the lower price band properties has fallen off because they’re not doing non-qualified loans anymore. That means small business people are going to get hurt with that. People buying homes less than $100,000 who don’t have large down payments are going to be affected by that as well. That disruption in the industry is what creates our opportunity once again to get people in a home in this case.
We can keep people in their homes. We can also get people in the home by offering seller financing to people and all the creative techniques that we can do with that. I did a couple other episodes talking about combining the best of real estate with the best of real estate notes, the techniques for both of those things. That’s what’s going to be important to you as an investor moving forward, but the opportunities are here. They’re here now. I wouldn’t try to time the market. Go into the deals with expectations that you may have to do some loan mods, that the payments may be coming in now. They may not be coming in a little bit down the road.
Go in with those expectations. Do your numbers the right way, but also understand that there’s going to be great opportunity in the future here very soon to buy deeply discounted notes. Get those turned around or if we have to, we acquire real estate, turnaround, fix up the home, and resell it with seller financing to somebody else. Doing wraparound mortgages. We’ve already seen growth in that. You’re going to see growth in lease options. All these techniques that we’ve been talking about, it’s time to sharpen your skillset and be ready for those opportunities because they are coming. Get into the pattern and the habit of doing something on a repetitive basis.
That means, if you’re reading this and you’re a part of my consulting program, let’s email back and forth, let’s get on a Zoom call, let’s get you moving in the right direction. If you’re not, find your own motivation to get out there and start reviewing assets. Start knowing what’s going on in the overall marketplace. I’m telling you, the most opportunity is going to be coming to investors who are willing to help people. They’re going to be combining the best of real estate skills with the best of real estate note skillsets. I want that duly noted because that’s exactly what’s going to happen.
I’m here now with Leandro Ramirez. I met Leandro through Gail Villanueva. He learned about me and my educational side consulting program and such. We had a couple of conversations. He made a business decision. He’s been sticking with it and doing well in the industry. Welcome, Leandro. How are you?
I’m doing great. Thanks for having me, Kevin. It’s my pleasure to be here.
I appreciate it. I’ve been in the industry for a long time and one of the things I’ve always seen over the years is people do get motivated. People do get re-motivated when they hear what other people are doing. Sometimes people get bogged down in life or sometimes people struggle a little bit in the beginning of this. It’s always nice to hear from third party, someone like yourself who’s new to the industry. You were brand new to the industry when you started.
I came to the US in 2018 to pursue an MBA. I’m just starting in the notes industry.
What attracted you to the note industry? I was always curious about that myself. I know you met Gail so maybe there’s a story within that as well.
I was working as an expat in Peru as a risk manager for a big contractor company. My story in the US start with this MBA 2018. After my graduation, I had an integrated project to put into execution what I was intending to do in the US after the MBA. I mainly was trying to attract some foreign investment in the real estate industry in the US. My first goal is to find some multifamily. At the beginning, I was focused on the multifamily industry. There are some good attractions there, some good points, but then I realized that the multifamily was not so liquid for the investor side.
Mainly most of the deals were on a hold for 3 to 5 years. I said, “I need to look something more liquid where I can try to make it easy to invest. If they decide to get out, there is a way to do it like after a year or a year and a half. I start to understand and try to study more about notes.” I heard one podcast from Gail. It was very interesting. I said, “I’d like to connect with Gail because I’m here in Florida too.” Gail introduced me to you saying, “Kevin is the right person to guide you for the notes industry.” Here we are.
Coming to the US and having to learn about our system, how the real estate works and everything, and to lead you to notes is an interesting journey. You’re in the right spot for that. I’m assuming that based upon the fact that you came here for further education, you’re a big proponent of learning the business before going out there and starting to look at assets. What I mean is I’ve got several people that are considering the education and they go, “Maybe I’ll start looking at assets, maybe buy something on there and see how it goes.” What are your thoughts on all of that?Education changes people and those people will be able to change the world. Click To Tweet
I believe that education is key for everybody. I have a motto on my side that education change people and people change the world. I advocate that we need to keep educating ourselves for the entire life. It’s a never-ending process. On the notes side, I said that I need to understand the business as a whole, to have all the tools, then put the boots on the ground and try to see some deals. That’s something that I believe that we need to surround ourselves with smart people, that we can get some insights and get some training to know what you are doing.
The notes is not that easy. There are some good things that we always talk about. What is the attraction that we have through the notes? You can buy a discount, high yield, the security collateral, but you need to understand the whole business to make sure that we are doing the right thing. That’s through education. There is no way that you can invest without knowing the whole big picture. There’s step in and there’s step out. There is a way to come into the notes and there is an exit strategy. You have to navigate through the entire process in this industry and education is the way.
You were able to go through quickly the educational courses I have online and such. You tasked yourself to do that, which I always try to encourage people to do. It was great when you said, “I’m going through them. I’m getting to that point. I’m going to start look at assets. That was great, but there may be some people curious as to if they’re getting started or restarted again, how much time do they need to invest to start to learn the business again?
When I first got in contact with the material and all the videos, I said, “I need to split some time and have some dedicated time to do it.” I was doing it in the morning and late night because I have kids. I have all this stuff to do for the entire day. I said, “At least I need two hours a day to go for the videos and try to get all this information and digest this information.” It’s not only about watching the videos. You’ll have to pause to try to understand and to make sure that you are getting all the information in the right way. I recommend everybody to get at least an hour-and-a-half, two hours a day so you can keep your progress. When you start something and then you stop, it’s not easy to get motivated to come back. You have to be very dedicated to put some goals and try to achieve those goals.
The other thing it does, at least for me, if I’m studying something new and like you said, if I don’t do it consistently, it’s getting back in that whole mindset again, where you’re like, “How did that work again?” Versus if you do have a set agenda and get through it, there’s a lot more congruency to that. I appreciate the other thing that you did along that. I offer a lot of services as you know and I tell people, “If you have questions, ask.” That’s the other thing, it’s hard when you’re learning something new to be able to move forward on it if you have a lot of questions on it. You and I interacted quite a bit from the very beginning.
I was checking the number of emails that we were exchanging. It was quite a lot because that’s the way education works. You have to go through the material and you always have a question at some point in time because your material is very good, but you are always trying to make the match with what you are learning and what you are seeing on the notes when you were underwriting. It’s important to get this feedback. You’ve been awesome with me trying to answer all the questions, so I can keep and moving forward.
Also, getting on and reviewing assets. As you got through the education and started turning that corner of, “Okay, now part of the education is I have to look at assets.” Some people are amazed that you don’t have to look at as many assets in the note business to get good deals as you do, for example, apartment complexes or single-family homes. You have to look at a lot more of those assets to find something good. You were pretty quick on finding some things that fit. What was your methodology or insight behind that?
Going through the material, I was checking all the options that I had to invest. As always, we have a limited amount of money. We have to be careful in what money we want to deploy into this business and all the asset class. I decided to be more on the protective side of the notes. I say no first as a beginner. I need to do it carefully. I don’t want to do non-performing second liens that we have to go through all this loan modification and strategy. I said, “I’m not in that point to do it. Let’s do the basic. Let’s start on performing one that I like in some states that is easy to do like a foreclosure or if the deal goes wrong.” I challenge myself to find some deals on the performing side and good deals with a lot of equity to navigate in those hard times that we are right now.
Education and consistency is key, but you have to challenge ourselves to start and maybe can start small. You can buy partials. You can buy some small notes. There is plenty of opportunity for everybody. On the notes industry, it’s not easy and it’s hard to have an excuse to say, “I don’t have money.” You can buy partials with small amount of money. You can be very creative. On my strategy, I decided to focus on performing one first to jumping into this industry and try to learn. It’s like a game. Training is training. The game day is different. Despite listening and reading a lot, once you step into the deal, it’s completely different because you can see the real picture.
It’s big dividends because through Zoom, we’ve taken some deep dives into some of those deals because it required it. We had to go through public records. We had to scrutinize some documentation. We had to request additional documentation, but that’s all absolutely a part of it. That’s what you have to know. I know you’re working on some things that you haven’t had asked me questions about it anymore. You’re got it down that path like, “I’ve seen that a little bit before.” Part of it is doing that pattern and looking through the proper materials and understanding that process. I know you have two goals in my mind. One was initially to prove it to yourself, proof of concept kind of thing, and also working with other investors. You already know this, but it’s going to be an easier transition when you can know the documents, know the procedures, know what to look for on all of these deals. It’s going to get easier and quicker for you to go through.
As you always said, it’s all about the story and the numbers. To do the underwriting, you should understand what is the collateral, what is all that you can get from this property, but you should never forget behind all this underwriting process, we have dates, dates it was sold. I was amazed about this mix of story and numbers because I love underwriting. I have this background of risk management and underwriting. I love to play with the numbers and with the exit strategy, but you can change the story of the person. This is awesome for me. I like this concept of doing this underwriting on both sides, on the numbers and on the personal side of the person that lives in that home.
What were your thoughts on your first deal and going through the process? Was it easier than you thought? Was it more difficult? Do you feel a little lost until you do it? How did it work after that going into the second one?You can always start small. Click To Tweet
The first one was a little bit tricky because you were trying to understand the numbers and trying to get all the material on the collateral. There is a lot of legal process on this note that we can’t avoid. You have to look at all the security, the collaterals, and it’s not easy to understand all of the chain of liens and everything. When you go through it trying to track record, it’s not easy. We start to move forward and get over all of these documents and you feel more comfortable. At a certain point in time, you need to make a decision and fast. It was not easy because you say, “I know the story. I know the numbers. Let’s move forward,” but the next day you never know what’s going to happen.
Despite the spreadsheet accepts everything and you can do it the best way on the exit strategy. The next day the guy can have, as you always say, the main reasons for a default is death, divorce, and disease. It can happen. Despite doing everything right on the underwriting side, something wrong can happen the next day. It was challenging me to move forward because I say, “Let’s sign. Let’s move forward. This note is mine.” The next day that guy can default. That’s part of the game that you have to accept. It was very interesting for me and challenging on the first deal.
You learn so much going through that process. I tell people all the time at any of my training events. I say, “Nobody can teach you everything about this. You have to go through yourself and to think through all of those thoughts, emotions, the risk, and the potential doubt on there.” It’s like building a new muscle. Once you keep working on it, it gets easier. You get a little used to not being able to see the properties in person. There are a lot of things that you have to work through yourself to get going. You did a good job getting through that. You’ve got two finished.
I have one in Texas, one in Alabama and I’m looking for other notes. When you get the notes and you start to talk with the servicing company, there’s a lot of things to deal with those companies. It’s also another learning process. My portfolio is a small one, but it’s growing fast.
Any other recommendations that you have for our audience and thinking, “What should I do? Should I move forward? Is it the right time or not?” What are your thoughts on all that?
From my side, I do believe that education is very important. You have to be surrounded by smart people. At the end, it’s your own decisions. It’s like making the kids learn how to ride the bike. You can go through but at a certain point in time, you should let them go. It’s the same with the coaching process. Despite that we have a lot of calls and everything, sometimes you need to make your own shoe and go. You have to make your decisions and take the risk. There are no excuses to not doing it. I believe being a foreigner here in the US, it’s amazing how easy it is to find information in the internet nowadays.
You can do it right from your computer. It’s amazing the amount of information that we can get, but you have to train first. You have to be comfortable to do the business, because if you’re not comfortable, it’ll never work. It’s the recipe, train and get comfortable with the business. If you are not comfortable, you can jump on another industry class like I did. In the beginning I was doing everything to jump into the multifamily. It’s a wonderful and an incredible asset class. At that time, it was not suitable for me, so I pivoted to the notes industry. You have to find your own path.
I know when you start talking with your investors that want to put money into the US. I know it’s going to be a lot easier for you to talk about everything that you’ve done and accomplished with them. It’s repeating it on a bigger scale.
It’s my goal. I’m trying to build up a fund to bring some foreign investors to invest here in the notes industry. It’s all about the investors need to know, like and trust. For these three combinations, you need to have a track record and skin in the game. That’s what I’m trying to do now. I invest my own money so I have my skin in the game to prove that I’m doing right with my own money, so I can manage the money off all those people, and also doing some education that people can trust on my investment strategy and process.
I appreciate it so much. It’s great when I can provide something like that and somebody takes it and runs with it. It’s always great to see. It’s inspiring to me as well so I know this for the audience so thank you for taking the time to go over that with us.
It’s my pleasure. I believe that notes is a wonderful way to invest. If you think on the other side, we help a lot of homeowners stay in their homes because we are much more flexible than the big banks. We can afford to do different little modifications, very creative ways to keep people stay in their homes. This is also the social aspect of the business that you cannot avoid to talk about. That’s awesome to know that we are helping people to stay in their homes.
That’s a great point especially moving into the future here. That’s going to be very important. I agree with you wholeheartedly. That’s the opportunity that we have. We can do things that banks either can’t or aren’t willing to do. That’s going to help a lot of people moving forward. Thank you once again, Leandro, for being on.You learn so much just by going through the process. Click To Tweet
Thanks for having me, Kevin.
That wraps up another episode. I truly hope that you enjoyed that. I hope you were inspired in some way for that. Until next time, stay safe and stay motivated.
About Leandro Ramirez
In charge of contract analysis and the risk matrix for all infrastructure projects at Norberto Odebrecht. Also in charge of setting up road shows in Brazil and London for insurance and bonds placement of the following major projects: Santo Antonio Hydro Project, Conventional and Nuclear Submarine Project, Brazilian World Cup Stadiums and Gas Pipeline Project.
Also responsible for claims settlement of more than USD 85 MM, including a mediation process for a USD 40 MM claim
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