EP105: My First Note With Rick Allen

🔥 Rick Allen's First Mortgage Note Purchase: Uncovering the Secrets to His Success! 🔥

In this captivating episode, we talk about Rick Allen's first note purchase. Join us as we dive into Rick's first mortgage note experience, uncovering the lessons learned and how they influenced the success he enjoys today.

Journeying from Real Estate Investment Homes to the Realm of Mortgage Note Investing 📈 We start with the backstory of how Rick transitioned from selling real estate investment homes to exploring the note market. Find out how he got a call from a real estate agent offering him a chance to purchase a frame duplex in Winter Garden, Florida.

Navigating the Note-Buying Process:
Explore how Rick stumbled upon this fantastic opportunity and skillfully navigated the ins and outs of the mortgage note-buying process. Rick's journey of making an offer, negotiating the price, and securing the note for $8,400 will keep you on the edge of your seat!


Stay tuned for more captivating stories from our my first note purchase series!


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Chapters: 

00:00 Introduction
00:50 Rick's Fasting Journey & Brett's Kitchen Renovation
01:14 How Rick Got Into The Note Investing Space
02:26 The Story Behind Rick's First Note Purchase
04:39 Negotiating the Purchase Price with the Seller
6:03 Conducting Due Diligence & Research on the Property
8:00 Negotiating a Deed in Lieu of Foreclosure
10:12 Closing the Deal & Listing the Property for Sale
11:44 Selling The Property Quickly & Profitably 
13:36 Challenges & Obstacles Faced During the Note Purchase
14:51 Learning Experiences & Lessons From the Mortgage Note Deal
16:27 How Word Spread About Their Success in Note Investing
17:35 The Start of a Successful Note Investment Journey

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Transcript

0:00

Hello and welcome to another episode of the Paperstac Podcast. I am Brett Burky and this is Rick Allen. We are here on a lovely Friday afternoon, or actually not afternoon, it's still before lunch. It's ten in the morning. It's kind of afternoon. Somewhere it's afternoon. But yeah. Today we're gonna do something very special. Before lunch. I'm hungry. Yes, he's been fasting for over 36 hours. It's a long time. But, you know what? I feel good. I heard. Yeah. I feel good. I haven't had food. You haven't had food. Because you don't even have a kitchen. Yeah. I've been. Getting a new kitchen, it cracks me up. You're like, yeah, he's going to have it done in a week. Yeah. I feel like Tom Hanks the Money Pit, like where they got two weeks, two weeks, it's been like, we're on, like we're going on the fourth week right now. It's oh my gosh, the guy's supposed to come and measure the countertops today. We'll see what happens. If he measures a countertops today, you probably have another two weeks. Yeah, so basically I'm camping in my own house, so it's kinda, it's... Gives me an excuse to eat out every day, I've just been eating out and, and I haven't been eating, yeah, two different worlds. Two different worlds, but so today we're gonna do something really cool, we're doing another one in the series! This is! This is my first note series, but as you can see, there's not... A guest that we're interviewing is me interviewing Rick about his first note. And You know what, I think people have heard a little bit of the story, but they haven't heard the full story. Yeah, you always touch on it on how you got into the space and, the, you get the call and all that stuff. But I didn't know, I, is there more to the story? I don't know. There's the back story, then there's more of actually what went on, and then Yeah, just like how it all panned out. Yeah, start from the beginning. So I was just coming off of selling a company, leaving Investment Homes Direct. I had co founded it with a couple other guys, and it was just, it was time to, to vacate that market. And so myself and TJ... We left, and was gonna play golf, and I had purchased, prior I, we bought so many houses from bank agents, REO agents and so there was this one in particular agent, Who Patrick, but we called him Bagel. he sold me a lot of REOs or foreclosures during the, yeah, 2008 through 2012. Even on later on. And so he called me up and he said, Hey are you interested in buying a note? And I had looked at notes and I had actually offered and had an offer on a note through a bank accepted. At that point where the high school sits. Oh yeah. That one. Which people, I'm sure you've heard of it. That's my two comma mistake. I put an offer in with a small community bank on a note that was like, I think it was like 1. 5 million, 1. 6 million. For, it was raw vacant land. And I offered, I think I offered 600, 000. And they accepted it. And I was like, oh man, I don't have 600, 000, I don't know what to do. Ended up passing, just didn't put the deal together. Probably, I could have, I had somebody say they would give me the money. But I didn't put the deal together. Fast forward, whenever it went through foreclosure a year later, I think the school board ended up buying it for 4 million. And that's where they put the high school. Yadda, yadda yadda, I messed that one up. Anyways This was, this guy calls me, my bank agent. He says, hey, are you interested in buying a note? I said, sure, I'll take a look at it. And it was a framed duplex in Winter Garden, Florida. It was on Park Street. And I, was leaving the wholesale game that I sold my company and was doing the fix and flip stuff. And this was in an area that we had wholesaled a bunch of properties. So I knew the area, I knew Winter Garden pretty well. And it was something where we were selling wholesale properties for like high teens. If you got something in 21, 000, it was going to sell quick. You're like, okay. So I was like, all right, sure. I'll take a look at it. So I went and looked at this property and it was a frame duplex. both sides, it was vacant, but both sides were packed with stuff. There was nobody living there, but both sides of the property were just trash and wet. Wet. There was holes in the roof. It had been leaking in. Oh geez. So it was just, it was like, I was like, oh my gosh, this thing is a disaster. So that was gonna be like a full rehab if you're, oh, if I was gonna rehab, it was gonna be full me a full rehab. So I had someone full rehab. I, we went by that house. It doesn't look like they did anything. It was, you could put a roof on it and clean it up. It was a frame house built in the 40s. Yeah. There's so much lipstick you can slap on that pig. Yeah. Anyway I actually called a guy over his name was Rishi. He was a he was like Trinidad and Tobago guy. And he would do work for us, and he was looking at it, and he was like, Oh man, it's gonna take this much work to do it. And I was like, okay. So I called I called the agent. I said, look, I'll give him 8, 000 bucks. And he just I'm on the phone with him saying eight grand, and the phone just starts getting loud, and I'm like holding it away, I'm like, oh my gosh, he's like letting me have it over the phone, he's oh no, you're talking twenty, twenty one thousand that's the minute, that's just where it's gonna be, I'm like, dude, I'm not paying twenty, he's maybe I teens, I go, tell him eight grand. So he was like, he goes, they're gonna yell at me, I was like, Beggle, just tell him eight grand, and I'll pay, I'll take, I'll compensate you. If I throw you 500 bucks or something extra on whatever you're making off of it. He's alright. How much could you make it if you're only buying it for 8 grand? Nothing, right? He's just... He just... I don't even know how he was going to get paid. Because he was a real estate agent. They're selling the note. So I give him the, on the phone, and literally he calls me back like a half hour later. And he goes, they countered you at 8400. And I go, 8, 400. He goes, I can't believe they're taking it. I go, Alright Yeah, I'll take it. So And for me, I didn't know anything about notes. I knew about notes, but I didn't know anything about notes. And so I was just like, Okay, so 8, 400. We've got a price. And now I'm coming from the wholesale game, where I'm usually used to having, 8, 400. 7 to 10 days to flip a contract or whatever. What are we gonna do with this? I was like, I don't even know. It's we probably have to just close on it. So I was like, okay. Let's take a look at this and just do more research on it. So we started looking through public record, started looking at like the MLS pulling up, say, what are the comps really in the area? Just doing, because I didn't expect to get it for eight, I gave them like the... Bottom of the barrel, hey, if you take it for this price, I'll do it. Yeah, because I was like, whatever. So I gave him that bottom of the barrel price and I started looking at it and I was like, okay, is there is there a foreclosure going on? I don't even know I'm so early in my life I don't even know anything about it. I don't know, I don't know how to search any of this stuff. I don't know how to do any of that, right? I don't know how to check, I knew the property appraiser's website, but I'm not like, okay how do I go look at the comptroller's website or go look at the county records, go look at the the foreclosure courts? Oh, you never used to do that? No, I didn't really do that stuff. I just didn't do it. I was buying right from REO agents as a foreclosure. It was, by the time it got to me, Oh, all that stuff had already been done. All that stuff had been done. I didn't have to worry about it. We weren't really doing anything at the auction, so I wasn't having to do too much work, and any work I did do at the auction, I would just give it off to my title agent and say, here, tell me what's wrong with this. We went and started looking and I was like, oh, look, the last person to, I pulled up the MLS history because I was a broker and I'm like the last person to sell the property was actually the owner. They were the, or, to sell it on the MLS it was listed on the MLS. They were the selling agent. And I was like, oh there's their contact information, which, how hard is it to get somebody's cell phone number? It's not difficult. You can skip trace them. At that time, I didn't do any skip tracing. So having a cell phone number readily right there, I was like, oh, perfect. There's a cell phone number. So I was like make this happen. I'm gonna call her up. So I called up the the owner who was the agent. And I was like, hey. Hey. Hey. I'm about to buy this note from this company, Condor Capital. And... Oh, you didn't even, you hadn't bought it yet? No. I literally had just told, I just had my offer accepted. I didn't even have a contract in my hand. Oh my gosh. Okay. You don't know what you don't know. You should never do that. I didn't know, but I did that. And I called her up and I was like, I'm buying this property, this note. Are you interested in doing a deed in lieu of foreclosure? Because it was going for... It was a non performing loan, so I knew there was, I knew about Deed in lieu? Deed in lieu of foreclosures. Because I had gone through a foreclosure. Yeah. In 2008. Yeah. Whenever I started the company. Interest rates. I was just I was in the wash. So I knew about a deed in lieu of foreclosure I knew it was an option to get out. I don't know how it works. You didn't do it? I didn't. No. No, I didn't know anything about it. I just let it go. I was just like pride whatever got in the way. So I got in there and she's yeah, I have five foreclosures or four foreclosures going on. I don't need a fifth. I was like, oh really? Cool. She's but I have a partner on this deal. And I'm like, okay. And so I'm used to things happen like quick when you come from the wholesale game. It's somebody wants to buy a, wants to buy a property. They say they want to buy your property. It's the first one in with the deposit check and the contract gets it. So stuff happens like this real quick, right? This lady was like, sure, we'll get together sometime this week, but you got to get My partner to agree to it also because I have a partner in the deal the partner was like if she was a traveling nurse or a nurse that I couldn't get a hold of her for an eternity like three days. I couldn't get her on the phone And finally I got her on the phone and she was like, yeah, I'd love to sign us over Okay, so you got both to consent. I got both people to consent and In the meantime, I signed the contract on it and they're like how long do you need to fund? I was like five days And they're like, okay, five days. You got to fund this in five days. And I go, okay, perfect. I get everything literally lined up with the current owner and then her partner and finally get a deed in lieu assigned. I had to have an attorney. I was like, look, I need an attorney. I need a deed in lieu of foreclosure. They're going to sign it over to me and then we're going to sell it. I go and I wire the money, right? And I list it for sale the same day. You didn't even own it yet. No. And then I go and I get... You're listing it for sale on the MLS and you don't even have... I had a meeting that day to go get it. To go get it. Wow. So I go and I get it. They both signed the deed in lieu. Okay. So we're done. I own the property. And I list it for sale. And the guy who was going to do the work, Rishi, was like, I'll give ya, I'll give you 19 grand. And I'm like, 19 grand's good. Yeah, that'll be your money. Yeah, and I didn't have to do anything. And I was like, Yeah, I think I'll take it. Let me let it sit for a couple days and see what happens. And immediately I started getting Offers? Offers. And he's I'll do 22. I'll do 24. And he starts trying. He's maybe I don't buy it and we'll just own it together and I'll do the work for free. And I'm like, holy cow. So I let it go and it ends up selling for 38, 38, 000. I think it was 38 grand. 14 days. It sold within five, five or six days of me listing it. Just on MLS? Yeah, just on MLS. So I listed it for there. It sells in five or six days. Highest and best. I get everybody in there. I get a cash. I get a cash offer, obviously no financing, no inspection period. I just want it. All right. Close as fast as you can close. Did you sell to a flipper or? I didn't even know who the hell I sold it to. I didn't care. I was like, holy cow, we got this. So I sent it off to the title company and I'm like, hey, I just picked this thing up. I sold it. I'm ready to go. Yeah. And I, the title company runs title, they pull it back and they're like we got clean title, we're ready to go you need to show me that you own the property. And I'm like I got the deed in lieu here. She's she signed a deed in lieu, but there's a mortgage, like, where's the assignment of mortgage assigning you the property? I'm like, what are you? I'm like, what? What's an assignment of mortgage? I gotta, I sent them the purchase agreement, like this is a purchase agreement. I'm like, so I had to call up the people who had... Condor? Condor. And I'm like, hey where's the assignment of mortgage? They're like, the collateral, it's in the collateral package. I'm like where's that? They're like, it's in the collateral department. I was like when do I get that? They're like, you'll get it in a couple weeks. And I'm like... No, I need that now. I sold the property already. Yeah. I've already, I took it back, I sold the property and they're like, How'd you, what? I'm like it took me about 14 days from the time I sent the money out until they actually gave, they sent me the collateral file. I took the collateral file to the title company because I didn't know what the hell to do with it. And I go, what do you need out of here? They're like, we need that. That's the assignment of mortgage. It shows that you're the mortgage holder. I'm like, okay. And they're like, We're going to go ahead and record this. Then we'll record the satisfaction of lien and we'll do the closing. And so I had no idea what was... Satisfaction of lien? Yeah, to satisfy the mortgage, right? So they have to assign the mortgage first into my name and they record the assignment, which they had. Then they needed to write up a satisfaction because I had this person sign a deed in lieu of foreclosure. So they signed a deed in lieu of foreclosure. And Yeah, everything just got recorded. Kind of boom, all done. You're lucky you were doing this in Orange County, huh? Yeah. Because it might have been slower someplace else. It was in my backyard. You could walk, you could like, you could get stuff recorded quicker if you walk right into the courthouse or you walked you walked into the courthouse in winter. Oh yeah. We walked into the not in winter garden, in down Orange County. You walked into the Orange County and you get stuff recorded. I didn't do any of that cuz I didn't know to do all that. I just had the deed in lieu of foreclosure and I gave it to'em and I said they signed this. So it was a total hack job of a deal. If you look at it, it was like the, it's the most efficient deal I've ever done. Yeah, you saw it before he even had it. Yeah. That's pretty crazy. But it was one of those things where that was the first note that it was we were in and out of it in 14 days Bought it for 8, 400 bucks. There was closing costs. There was like past utility liens. There was past Which I didn't realize that I was responsible for because I took over the property. There's past due taxes Oh shoot, really? Yeah, but the whole thing was like I want to say it was like 3, 300 and like stuff. So I think we were all in at 12, 12 and change. So it was like, whatever it, for me, it was like, look, we bought it for, so we were into it for 12 and we sold it for 38 and we did it in 14 days. And you're like, Wow, that was amazing. What was that return? I was like, enough . It was enough. I broke the calculator to where you're like, okay. So we immediately TJ and I looked at, so I was like, dude, that was great. And I, and Patrick Bele actually ends up calling me a couple, three weeks later, whatever. He's like, how'd the hell's that deal going? I was like, oh dude, we're out of it. We sold it. And he's what? I was like, yeah, we took it back, did this and sold it. I was like, here's, 500 bucks. Thanks for it. You got any more? Yeah. And he was like I can call him. Before he could even call that Seller? That seller, Condor. Condor, once you get Condor, they would buy two or three hundred million dollars worth and then just like, how quickly can I send it out? They probably paid two grand for that loan. That's crazy and they sold it to me, they made six grand and they did it and you know a month or two 45 days so Soon as you started buying from Condor You're on Condor's list and Condor will then flood the shit out of you And so they flooded me with stuff and then once I bought enough they actually I got assigned somebody an asset manager and the asset manager would be like he would like Patrick Brimer. He called me all the time. Oh, I remember Patrick. Yeah. So Patrick called me all the time. I did, he sold me a lot of stuff. So yeah, at that point, but we were, once we did our first deal, we were like, this was, that was easy. That was money. Let's do that again. But we first started calling around and just, we just started talking to people. How's business going? Because we, word got around by that point that we had sold. TJ and I had sold Investment Homes Direct. Yeah. So just started talking to people. Hey, how's it going? What are you up to? It's ah, fixing flip stuff. Just rental, playing a little golf. Got a new kid. How about you guys now? I don't know, I was thinking about playing with notes. You ever done anything with notes? They're like, what? What do you mean? They're like, nah, we're just buying foreclosures. I'm like, oh, cool. Started asking around and nobody was doing it. And this is... So you got your own little honeypot. So we got this own little honeypot. So then it was just like, okay. Let's buy and so we just started buying and buying but that was you look back on it You're like, holy cow. What all I did there that I would never do now. Like how many laws did you break? I don't know, yeah, Dodd Frank and like cooling off period, debt collecting. Oh goodness, yeah. Reaching out to the borrower when I didn't own the loan and didn't have the permission from the seller There was a lot, but if I didn't do that, I'm probably, we might not be having this podcast right now. That's very true. That's very true. Yeah, wow. That's pretty interesting. That's, yeah, that's that, that, that was the first successful note buy. There, again, there was the, you got a two for one there. There was the failed note buy that I never pulled the trigger on. That's a lot of money. Especially your. Younger, like then. I know. You do those things when you're young. So yeah, because you grew up, you have enough time to recover? Yeah, but it wasn't going to be my money. Like the, you're talking about the high school. The high school. It wasn't going to be my money. I had somebody that said, they were like, yeah, I'll do it. But the guy, We had done some fix and flips with him when we had the wholesale company and he was a builder and he took, we did a couple flips and we had a we managed it okay, didn't manage the property like the timeline wasn't the best but we didn't manage it poorly but he came in and he started showing up the property, started talking to my guys that were doing the work next thing he had all the money, guy was a millionaire next thing you know my guys are working for him and he doesn't need me to bring him property anymore That's it. And who would've known that property that, that sold to the county probably would've turned into a neighborhood? You know what? It probably would've . But that, that ended up, no, it wouldn't have, because we would've let to go through foreclosure and it would've sold that. Oh. But that guy, he taught me a lot. And, he actually, he gave me a piece of advice. I gave him my kid. My kid's been, he wants to buy paintball stuff, and I'm like, He's got, 500 in his checking account or bank account and he's just I just want to go buy these things. I'm like, dude, listen, this is what this guy told me. He was like, first of all, he told me to read the e myth. He's read the e myth. You need to read that. And this is back in 2000 and that was like 2010 or 11, he told me to do that. But he goes, if you want to buy something, he goes, treat it as a reward. Go make a bunch of money first and say, if I can do this deal. Tie whatever you want to buy to a deal and if you tie it to a deal Then you're rewarding yourself for getting the deal done. But also You go and you make this money from doing the work and then that thing you want to buy you're like I'm gonna spend this much of that money on the thing on the money. I just made he'll tie it. So that's good. I gave my kid that advice yesterday, but I don't hate the guy for screwing me over, I learned a lot from it, wouldn't change my past. The only thing I maybe would tweak a little bit would be my first note actually buying that piece of property. I could see that, yeah. I just didn't want to get screwed over again. The school was right behind the, right near the place where we went to a demon house. That was that was fun. Yeah, there's a lot of different stories. We can start doing that. We can, there's plenty of other... I got plenty of other... That one was scared the crap out of me. There was a pentagram in the middle of that house. It's concrete and all the, everything. Burnt down candles, pictures of kids, and... I was like, what the heck? But, it was all fake. But yeah, that's a different story for a different time. But yeah, that was really cool, man. I didn't know all that, now I do. It's it's pretty interesting. So that's Rick's first note. Yeah, that's the first note. Cool. We'll be doing a lot more in this series. We've got a lot of people that are interested in this, and you guys stay tuned. We'll bring more on soon. See ya. See ya. That was good. 11. 48. Good timing. How's that compared to the other ones? That was good.