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PLP-049 All Things Private Lending with Steve Driscoll

PLP 49 | Private Lending

PLP 49 | Private Lending


Some of us originate from somewhere away from real estate investing. A person who has been through the same journey is Steve Driscoll of ECONO HOMES, LLC who talks about his experiences and all things private lending. He shares his background on how he went from auto finance to real estate investing, walking us through cars and houses. Steve gives some great insights on how he runs things, from buying and liquidating credit card paper to financing. Touching as well on subjects like LTV and RMLO, he brings information that shows the inner ropes of private lending.

Listen to the podcast here:

All Things Private Lending with Steve Driscoll

I’m proud and honored to have Steve Driscoll with us. I met Steve down in Cancun on the Mitch Stephen Real Estate Mastermind. If there’s anything you want to know about that trip, Steve could tell you all the dirt on me and everything. Steve, thanks for coming on. It’s good to see you.

Thanks for asking me to come on board.

There’s no formal structure to this interview. I wanted Steve to come on. We got along good down in Cancun. I’ve seen him in Texas since then at another Mitch Stephen event and I wanted to continue the roll. You were on very quickly on the episode I did regarding the Cancun mastermind, but I want to delve a little deeper into your past and what you do. Correct me if I’m wrong but you are a New York gangster. You’re in the mob.

I was out in the San Antonio and Houston. I didn’t spend much time in Houston. It’s a nice part of the world there but it’s a lot different than what New York is and a lot different than the Northeast. You don’t appreciate the country until you start traveling around it. I had a great time. I met some good people.

You did it right. You went down there in October, which is a good time to go to Texas; May through September. Besides that former criminal activity that you never did, I know you have a background in finance. Give us your background in how you went and got into auto finance I believe now you’re doing in real estate. Walk us through how you went from cars to houses.

If you're an entrepreneur, you better roll with the punches.
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The cars started way back. I took a hobby and decided to make a living out of it. I love automobiles. Who doesn’t love cars? Who doesn’t like cars? I was a kid and I was selling cars out of my driveway. As time went on, I opened up car dealerships and it was around 1985. In 1985, when our friends from Korea started bringing cars to the US under the name Hyundai, we also got another beautiful automobile here called the Pyeonghwa. Detroit started to feel the pinch because they were taking sales away. They started dropping their interest rates and as they dropped the interest rates down, they were buying anybody’s loans that they could fog a mirror speaking.

We went from doing a great business to being almost shut down overnight. What do you do? You had to reinvent. If you’re an entrepreneur or a true person, you better roll with the punches. You’ve got to change with the market and you’ve got to make yourself reinvent it. We went ahead. I did a little research and I said, “It’s the same thing in the real estate market if you’re doing financing. Look at the biggest side of the market. The biggest side of the market is the people that can’t get financed and it’s over 80%.” At the time back in the ‘80s New York metro area, over 80% of the people who were shopping to buy a car didn’t qualify. I said, “I want to go service that into the market.” I made some alliances with some finance companies and that these guys were absolute crooks. They were the gangsters. I said, “If these guys can do this, I can do this legitimately.”

I went and I became a licensed finance company. In New York State, that’s not an easy thing to do. Nothing’s easy to do in New York, but I did it for a long time. You use your own money for a while and after a while, you run out of money. You are bringing in private investors. There are banks and finance companies that are unique, that are just boutique lenders for that end of the market. After a while, we were collecting $500,000 a month just in interest. We were doing well. I had lines of credit with asset-based lenders. I had one line for $65 million and a backup line for $15 million. That’s $80 million and thank God we never used the backup line. We came close at one time using the whole line, but we did well for a long period of time. This podcast is about private lending and if I go back and I think, “You’ve got to be able to put a price on an asset. You’ve got to be able to look and see document wise no matter what the asset is.” I used to loan money. I had loaned money on some of the craziest stuff. I’ve come out with that book. You’ve got a copy of it right there, Real Estate Rock Stars. I contributed to the first chapter inside the book. I didn’t write the whole book.

I was asked to come on board with it and I talk all about my business model and I talk about how to protect investors, what you should do, what the steps are in general. I’m a pretty conservative borrower. I don’t like borrowing money, but if you can’t do business now, sooner or later you’re going to run out of cash. This is a quick story. I’d buy almost any damn thing if I could liquidate it. I learned from these two old timers from New York City. They were both old retired attorneys and they’d buy anything. They could make chicken soup out of a chicken crap. They called me up one day and I was buying a credit card paper and all kinds of notes and stuff from them and just liquidating it out in big volumes through my company. They called me up one day and say, “Where are you?” I said, “I’m in Long Island.” These guys said, “Move to Arizona. Get in your car. You’ve got to go to Connecticut for us. You’re in this deal.” I said, “What’s the deal?” He says, “We’re buying a submarine.” This was the craziest deal I ever did. He said, “You’re in.” I said, “What are you talking about?” He said, “You should just get in the car. Call me when you’re on the way.”

PLP 49 | Private Lending

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I had a couple of loose ends that I need to take care of and I hop in the car. I’m driving up the New England Thruway and I’m heading up to Connecticut. I get them back on the phone and he says, “These guys will liquidate us. We’ll loan this guy money against this submarine.” I go, “Yes.” He goes, “He’s not going to make the first payment on it.” I was like, “How do you know that?” He was like, “I’m telling you, he’s not going to make the first payment.” I go, “What’s the deal?” “Instead of us just buying it, we’ll get a loan of money against that. You’re in for $150,000. We’ve got the rest of it handled.” What does that mean? We already got this thing sold. I didn’t say anything after that. He said, “Go up there. Pull up to the place. See if it’s in the water. That’s great. It means it floats. If it starts up and it runs, that’s even better. If it moves, that’s even better. It’s a celebration.”

I wind up and I was up over there. There is this big black turd in the ground. It was a World War II whiskey sub. The guy had bought it up in Nova Scotia and it was decommissioned. Then he drove it down to Connecticut and he wanted to borrow some money against it. I show up there and the guy said, “Are you here to inspect it?” I go, “I guess so.” “Come on our board.” I said, “I’ll stay right here.” He started it up and the big wheels turned. All was well. I left and I was on the way back and I called him. I said, “Is this thing all right? It’s in the water.” He said, “It’s great.” About five six weeks later I called because I haven’t gotten the check, “What’s going on with this thing?” “It’s all being worked out.” It was about eight weeks. He said, “The guy defaulted so we foreclosed. We’re dicing it up. We’ll ship it to San Diego.” I said, “What does that mean?” “We’re cutting it up,” because you can’t put the thing on one trailer.

They’re cutting it up in pieces and they’re selling it to a salvage company in California. They already had money from the guy. These guys were incredible. These guys are real hustlers. That was a lesson I learned early about knowing what a liquidation value was worth. If you’re going to buy an asset and you’re going to loan somebody money against something, you want to know what the quick liquidation value is if the crap hits the fan. That’s important. Without knowing the value, you’re gambling. I don’t mean to take over your shoulder.

I have no problem doing it. It’s a great story. You went to Connecticut to look at a submarine. I can see a mobile home or maybe a hot rod car but a submarine.

We made six figures on that one. I was happy on that. They sold it to us. They salvaged it supposedly. It was in pieces on trucks by the time I called the guy. About six, eight weeks into it, they had already cut the thing up and they were transporting it. They had a piece left in Connecticut.

I’d like to continue down this tangent a little bit because you mentioned that you were buying and liquidating credit card paper. Run us through how that worked.

Without knowing the value of what you’re buying is gambling.
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Back in the day, I don’t know how it is nowadays because I don’t do that, but you could buy volumes, lots of defaulted credit card paper. This fellow was taking over companies that were going out of business. Let’s say a guy at a jewelry store and he had four or five different jewelry stores. When I say credit card paper, it was more like loan paper, this particular transaction. They originated millions of dollars and it was all just paper. Meaning, it wasn’t cash. I promised the pays. I don’t think the guys cost of goods was even 5% of what was writing the stuff for but it was crazy. It was marked that way up. When he was liquidating these buildings, he got everything. He was going to make it play and he says, “I’m going to buy everything. I’m going to buy all the assets. We’ve got the buildings, the furniture,” he got everything in it which included the account paper. When he put a liquidation value on this and that, I want to put it all on the paper.

Some of the transactions were big. He also bought in a different transaction, he wants them taken over. It was a collection agency and he got a lot of accounts that they held in-house that they had purchased and he wants them shoveled out over to me. There was a lot of HSBC. I believe it was HSBC Bank many years ago. We started running this through our systems and most of the stuff was fraud and the people never existed. When they send you a credit card and all you’ve got to do is sign, they wouldn’t go by people’s addresses. Generally speaking, what the income is for the area. They’ll give anybody a $1,000 line. That’s where all this crap was, most of the stuff was a collective. We wasted a lot of time on that. I bought judgments in the past. You can make money with judgments if you know what you are doing. When anything you’re going to look at is going to be tied to a piece of real estate, you’re in the driver’s seat if you know what you are doing.

You mentioned your business model in the book, Real Estate Rockstars. You do a little bit of landlording, some lease optioning and seller financing, but what does your business look like now?

What I do now is I bring in private lenders, buy houses and finance them for the long haul. I like passive mailbox money. I’m not in getting big checks right away. I want to retire one day. I’m getting old. I love mailbox money. One thing I found when I was in the auto finance business was good times and bad times, no matter what. You might not be selling anything or you might not be financing anything, but money still comes in the door. That’s what I love. When you’re in a business, when you can manufacture a business like this, when you’re in a business where the money makes the money, now you’re in a business. In the home finance business or owner finance business, you’re limiting your income to how many units you can go out there and sell and finance. The long-term, since what you’re doing is facilitating financing, you’re selling money. You’re not selling a piece of real estate. I’m selling money. When you sell money and I’m writing 30 contracts on it, that’s forever money. I bring investors in for five and ten years and I just do interest only with them.

I was at a REIA meeting. He’s all happy about this renovation that he did on this house, this rehab. Many people watch this stuff on TV and they think they’re going to make so much money. He’s talking about this and when he gets all finished, with all the money that he invested in this property, he takes out a calculator and goes, “What’s the net number before taxes?” It was less than 3.5%. This guy killed himself that put this thing together. I didn’t crack what it was with the guy or anything like that, he was a lot bigger than me anyway. I said, “The thing to do is just sit back and watch it.” I don’t know when this is going to hit the airwaves, but the stock market dropped 650 points. This is no ordinary mom and dad stock market. This is not the Wall Street that your dad invested in. The individual people or even if your company’s investing, we’re not big enough to be in the know as to what’s happening. They say this insider information is all illegal. It’s all over Wall Street and that’s how these guys are making their plays. We’re not big enough to being inside that club as they say to know how that’s going to work. Where does that leave us? If you’re investing on Wall Street, you’re gambling. It’s the biggest casino in the world.

PLP 49 | Private Lending

Private Lending: If you’re investing on Wall Street, you’re gambling. It’s the biggest casino in the world.


You have absolutely no way of knowing what this stock is or whatever you invest in is going to be worth anything. After the meeting, I was giving away my book. A bunch of them came over and said, “What’s your strategy? How do you figure this and that? Why is what you do so much better than what happens on Wall Street? I’ve been investing in Wall Street for years.” I said, “How much money do you make?” They go, “Enough for a part-time job.” I said, “The big difference is the hedge.” “What’s a hedge?” I go, “If you buy a piece of stock, you buy one stock for $100 on Wall Street, you’re paying 100% of the value for that stock.” It costs you $100. A week from now for some reason, the stock loses 10% of its market value. Now it’s down to $90 a share. If you decide you want to get out, there are fees for getting out of it but let’s just say it’s $90 now. What do you do? Does the street tell you to reinvest it to just sit back and wait? Maybe it will go up. How many times are you going to sit there and stare at the business news and hopefully there is more good news that will help you maybe push this back up? I can’t do that and I can’t be responsible like that for an investor. I can’t tell somebody that that’s legitimate investing.

My dad was a banker all his life. He invested some money in Wall Street and he never made a lot of money on it. I was raised saying, “Don’t gamble. There are no sure things in life.” Let’s change the numbers. Instead of $100, it’s $100,000. It’s a $100,000 house and you’re going to give me $60,000 on a first mortgage. That’s $0.60 on the dollar. That $40,000 is the hedge. It’s the spread. In order for your value to start dropping, in order for that mortgage, that value that you have, that note to take a big hit, that number from $100,000 has got to drop way down. That’s your hedge. That’s what banks look at. This as a bank model. If you don’t think so, ask yourself one question. Why are there banks on every corner throughout the United States? Why is it that you can put money into their bank and they’re only giving you a point two or three quarters of a point, 1% or maybe a point and a half. They turn around and put it out for five or six. They’re making money on your money arbitrage. That’s what they call it.

There’s no reason why the general Joe, the general consumer, can’t go ahead and get into the banking business not as a business but as an investment. I had a guy at the REIA who stood up and told me, “What you’re doing is illegal.” I said, “I’m illegal? I’ll tell you what’s illegal. You can’t take a private investment like this.” He had his laptop with him. I said, “Go bring me a caseload. Go online and do a little research for me. Download something that shows I’m illegal.” There were 100 people in this room. Later, he brings up all these pages and we looked at them very single page that he brought up visually reinforced what I said that this is not only 100% legal but the people out there writing about it are saying you should be doing this because the government’s not going to watch out for a long-term. The banks are not rooting for you.

Not only is it 100% legal, but the IRS also allows for in retirement programs. You can loan money out of your retirement programs. I’m glad that you challenged that guy. I bet you had a blast.

I was asked to get up and speak for a few minutes. As you can tell, I’m very shy. He stood up and he was like, “You don’t know what you’re talking about.” I was like, “Okay,” and the whole place started laughing because that was the first time this guy ever came to the meeting. People know me and I had investors in the audience. They all started laughing.

Numbers don't lie. If you don't know the market and the area, then you don't belong in investing.
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A couple of things I want to go back to. What you call the hedge is the loan-to-value or LTV. If the house is worth $100,000 and yet you’ve only loaned $60,000 on it, you’ve got a 60% loan-to-value or a 40% hedge.

The other number to consider are a few things. Let’s say I’m buying a single-family house and I’m figuring I can sell or finance this house for $110,000. In my head, I’m going to take a $10,000 down payment and I’m going to pay $50,000 for this house. What happens if that doesn’t work out? What if something happens, I’ve got to have more than one escape point and I’ve got to have a plan. My investors are all friends of mine. We go out to dinner and they’re great people. There’s got to be something to protect everybody. I look at the immediate liquidation value of that property. That’s very important. If I’m writing a check for $50,000 for this house, I’m going to retail this house with my seller financing for $110,000. What happens to this house if I got to get out of this thing quick? Something happens. Maybe it’s only worth $40,000. Let’s say it’s worth $40,000. I bought an investor in for $55,000. Am I willing to write a check for $15,000 to get out of it? I’ve got to know going in that I’ve got to protect my investor. If I’ve got to get out of this thing quick, what’s it going to cost me? My investor eats before I do. Talk to any investor of mine, they’ll tell you the same exact thing. I don’t have respect for a lot of people who don’t make payments to investors. My investors get interest checks every month, but they get them early.

One of my investors gets up with the real estate meeting. I didn’t ask the guy to say a word. We were just going around the room introducing everybody and he said, “I want to tell you about this guy, Steve Driscoll. He’s making my mortgage payments on my house. I invested this money. Not only do I get the money, but I also get it early. I get it 24th in a month and it gets added to my checking account.” This guy goes, “When is it due?” He says, “The first, I think.” There you go. Pay your customers early. Pay your investors early. It’s just a great way to do business. Going back, you need to know as an owner what the liquidation value is of that property right away. If I was investing, it’s the same thing. Go back to the submarine. Before I put $1 up, I want to know what this thing is worth. I checked into it. I checked the salvage value of it before I did anything. I don’t know. If I’m putting up $150,000, what is this thing worth? If he is going to ship this thing all the way to San Diego, that’s going to cost money. The whole thing was making about $400,000, $500,000. We did well on it.

You’re talking about your liquidation value. If I’m in your shoes and I’m going to get the private lender lined up and I’m going to get the property, then I’m going to sell it with seller financing. That immediate liquidation is if I had to go to a wholesaler.

I’ve got to sell it this week. Something happened. I’ve got to get rid of this thing right now. I’ll sell it to the wholesaler. I’ll turn around and I’ll make the difference up to my investor, everybody’s whole and I walk away. You’ve got to be able to do that. A lot of people are overly optimistic when they put deals together and they do that because they don’t have the experience. They’re hoping, they’re wishing. Numbers don’t lie. You know the market, you know the area and if you don’t, you don’t belong in investing. It’s simple as that.

PLP 49 | Private Lending

Private Lending: A lot of people are just overly optimistic when they put deals together because they don’t have the experience.


I talked to Mitch a little bit about this, but you do the interest only for five to ten years. Do you pay down or do you hoard cash, so you can finance that investor out? Let’s say you seller finance for 30 years and you line up one private lender for the first ten years, the second private lender for the second and third for the last ten. Without getting in your checkbook, how do you work those numbers to make sure that the check to the private lenders are on the 24th and by month 360, that owner has now paid everything he owes to you and everybody’s happy?

They refi or they sell a house or whatever it is. I can’t say that with utmost sincerity because I do business in different parts of the country. The homes that I do in Florida, it’s more of a transient state. If I’m selling a home to a couple of seniors and it’s a two-bedroom home, you’re not going to get a big family going to want to move in to that house down a road. If it’s in a community where there are more seniors, when these people are in the house ten or twelve years or whatever it is, if something happens, a life event happens, somebody has a stroke. They decide it’s not for them and they’re going to move back to wherever they came from. They’ve got to be able to sell a house or call me up and say, “This isn’t working out. I’ll take that back.”

That’s another thing which is very important to know. I tell everyone of my homebuyers that I’m holding on the mortgage. I say, “If there comes a time where this is no longer for you, where your back is against the wall, where financially you can’t make this happen anymore. You pick up the telephone and call me and tell me what I just told you. I’ll let you put the keys on the counter and walk out the door. I’d rather have the house back in one piece rather than have an issue, have a problem. If you find yourself in that same situation and you trash my house, you’re done. This is my retirement. Respect the property. You’re not dealing with a bank. You’re dealing with this poor little guy from New York.” I invest over 1,000 miles away. I’m not investing in New York. You’ve got to have rocks in your head to do what I do in New York. I invest primarily in nine judicial states. I don’t know if you have ever discussed that on here.

That basically means that you can foreclose without having to go in front of a judge. That’s the nutshell. You still have to file. There’s still a process that has to be followed but you don’t necessarily have to have a day in court in order to take the house. The average mortgage is seven years in the United States. They either refi out, they move. There’s a life event or something like that. It’s easy to keep your private lenders paid up with interest only payments. That’s one thing. Some people trip over if there are no principles being reduced.

They’ve got to go out before with all my contracts. My seller, if he doesn’t miss any payments, he never makes a payment early, he never makes a payment larger than what he’s supposed to. My end buyer’s contract has to go out 22 years on a 30-year contract equal what is owed to my investor on the front. I got 22 years. A lot can happen in 22 years. If it comes out to that point, I just turn around to stroke a check, sell the note, we can do all kinds of good things but it’s never going to go out that far. I won’t let it go that far. My game ends at ten years on majority of these.

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When the buyer gets into a bind, you say, “Just leave the keys on the account and walk away.” Do you assume that it’s a deed in lieu of foreclosure? Do you get them to sign some paperwork?

I might just foreclose the house out because there are other liens on the property I’ve got to get rid of. I’ll say, “No hard feelings, but you had all these repossessions on the street of the car since you bought the house. I’ve got to get these off titles.” That’s a thing you’ve got to be careful to protect your investor. You’ve got to know what you’re doing on that end. If my investor comes in the door, he’s holding the first mortgage anyway. Anything that happens after that, it doesn’t affect him. I still want to make sure it’s all nice and clean.

As much as I like to avoid foreclosure on my notes, sometimes you have to because it cleans up the title. You could get a lot of different mechanics’ liens and other subordinate liens that you can wipe out.

I haven’t got a lot of closure issues but everyone that I’ve done I’ve made money on. That sounds crazy. I made money. Properties go up in value. Sometimes when this person was in this property before it was foreclosed, they paid down the principal. That’s income. I’m going to collect it on a down payment from the next buyer. If the house is distressed, the insurance company is paying me to fix the house and he pays me a retail. There are four income streams there. I don’t like to do foreclosures but that’s the way it goes. It’s the way it is. Even when all that happened, my first note, the first mortgage, that investor never knows what’s going on and never needs to be involved because he’s the bank. He doesn’t care because he gets paid no matter what. If my guy in the backend, I had to foreclose him and he stopped paying me six months ago, my investor doesn’t know the difference because I’m still paying him. He doesn’t know. Nothing ever happens with that. That’s the right way to do business. If you’re doing business with an investor and I’m talking to people that are investors in this private lending arena, if you’re doing business with people who aren’t capitalized, this is their first rodeo and you’ll loan them money, there’s nothing wrong with that.

Make sure the liquidation value is going to be there where you’re not going to get socked if this deal goes south. Watch your paperwork. All your paperwork is only as good as the people you’re doing business with. My investors will tell, “Steve, we’ll loan you the money.” I can’t sign personally on it. Good investors shouldn’t if they’ve got lots of assets. What happens is if something went wrong, I get sued and I lose, it’s on property number one and it’s not enough that judgments for way too much money to cover assets and property number one. They go after property number two. It starts a domino effect. I don’t want that. I make sure that every investor I do business with on a private lending side, they’re happy with this property. We’re going to buy a house for $0.50, $0.55, $0.60 on the dollar. If for some reason I don’t pay you, I’m going to hand you the house. It’s a great deal. I haven’t had anybody in the house. I’ve never done it and I don’t have any plans on doing it anytime soon.

PLP 49 | Private Lending

Private Lending: There’s no way to buy a stock at a discount unless it’s through a company employee discount.


That is the absolute worst-case scenario, nuclear holocaust option, giving them the house back. When you put the hedge in there, you get your loan-to-value correct. Even if you do have to fire sale it by Friday, you’ve mitigated a tremendous amount of risk especially with market fluctuations like your example with the stock. You’re buying retail at all times. There’s no way to buy a stock at a discount unless it’s through a company employee discount. You’ve got to wait six months or whatever the waiting period is for that. That’s what I like about private lending and the passivity of it as well. Private lending keeps me around successful active investors like yourself. It keeps me in the biz and the industry and I’m able to take care of my job, what I got to do and yet I’m still invested in real estate. Every month I get an email that says, “This amount of money was deposited into your account for this address, this lien or this note.”

It’s fifteen minutes on the third of every month that I spend in the computer making sure I got paid. If somebody doesn’t pay me, I go tell the lawyer to go take care of it. “Keep everything above board. Send out the letters. Send me everything so I can document my file.” Most people get their act together and pay the late fee and keep going. If they don’t, we’re going through one where my partner, Landon and I created on the finance note. We bought a house for $5,000. We turned around and sold it for $30,000. Hurricane Harvey hit and we told the guy, “Stay in, we’re not going to foreclose on you.” He ignored us. He didn’t return any calls. We told him we wanted to modify the loan we gave him. I even suggested we give him six months no payment, so he can get on his feet. He ignored all of our attempts. Fourteen months after Harvey, we’ve initiated the foreclosure process.

Was the house damaged?

Slightly, it took some water. The funny thing is that Harvey didn’t do anything to that house that was already done before. We got it for $5,000. If anything, they just had to rip out the carpet and some of the padding because it did take on some water. The bones were good. Structurally speaking, the house is okay. The roof was still pretty decent when we purchased it. After fourteen months, we just decided, we communicated. We sent certified mail. We’ve emailed. We texted. We called. We even called the guy’s parents and said, “We want him to stay in the house. We don’t want to foreclose.” Nobody wins in a foreclosure, even if I make money on it.

It’s a hassle. It’s an embarrassment to the people over there. The neighbors are all involved. Everybody’s got an opinion. It’s a tough situation. I make money on them, but I don’t want to do them. When I shake hands with somebody, I meet every one of my investors. I meet every one of my buyers. I look at every house I buy, even if I’m doing it from 1,000 miles away. I still like to look the person in the eye. When I close the deals, I want to make sure that the people who are buying my property understand every single document. I’ve been to two closings. I use a different attorney in the particular town I do business in. The people were embarrassed. They weren’t all that up on buying the house and they had some legitimate questions. They went to ask the attorney and the attorney turned to the last page. He said, “This is all concrete. Everything is the way it is. It’s all systematic. This whole thing says, ‘If you don’t pay, you can’t stay.’ Sign your name right there.” I went, “Look at this.” I just got up and I tore up the other document that was in front of me. I told the people, “Let’s go.” The guy was floored.

I did this twice. You’ve got to learn the attorneys you use. One of the attorneys I use in Alabama, he does 70% of the foreclosures in that state. It’s not a tremendous state but he’s a big player in that arena. I want someone like that on my legal team. If I’ve got questions, if I’m producing documents, everything I’m doing is within the law. People are trying to go around Dodd-Frank. When I retail a house, not only do I make sure everything is where it’s supposed to be. We close with RMLOs, licensed mortgage loan originators. I want to make sure when we create these documents that I can sell that note, I can sell that mortgage down the road if I want to. It’s going to be within the realms. It’s not going to be one of these exempted ones where you’re going to get hit over the head and take a big discount. I don’t want that. That’s another avenue.

I love the fact you bring up the RMLO. I’ve always told people, if you’re looking to make a quick buck, don’t read this. If you’re looking to make a shady dollar or a gray dollar, don’t read this. Keep everything above board, stay compliant with your state, your federal, your municipality, whatever the rules and regulations are.

Don’t do business in places that are hard to do business. I go to places where they want me to do business. It’s great.

There are plenty of places to do it. If I give you a note, then I have some documents drafted up by my attorney. You review them, you agree to them, we close and it’s done. If you or I are selling a house to an end buyer, put them through the RMLO, residential mortgage loan originator. Let them vet his situation, his finances, make sure he can afford the note, keep it Dodd-Frank compliant. Keep it compliant not only to keep my butt out of jail but also selling the note is always an exit strategy. It’s not one that I want to use but it’s oftentimes a plan C.

It should always be somewhere in the toolbox. You’re originating contracts that are 100% compliant and that they’re always marketable. When you do that, you’re fine. You have to be marketable. That also protects your investors. It protects your private lender. When you get down the road six months, a year, two, three, four, five, eight years, you’ll say, “This note is performing. I’m done. He owes me $88,000. I got $50,000 owed to my investor. I’m cashing out. Maybe I’ll sell the note for $80,000. Maybe I’ll still cashflow in it for the next fifteen, eighteen years.” I could do lots and lots of options with these things. Let’s just say I just dump it and I sell it for $80,000. I stood at a $30,000 spread and my investing gets paid off. You only put up $50,000. He gets his money back. If you decide you don’t want to play anymore, there’s a big market out there for buying notes.

Buying paper, buying debt is big money.

Make sure you buy compliance stuff.

Everything is above board, there’s nothing shady. Get the lawyers to draft it up in the state where you’re doing it. It’s a point that I’ve got. I’ll come back to it in a future episode how to vet an attorney when you’re doing self-financing or any private lending. There are a lot of people will hang shingles and say, “I do this,” but you come to find out they do 10% of their business is business law, 20% is family law, states. I want the guy that’s zeroed in. He’s got his niche. It’s all he or she does. We could keep going on. I will definitely bring you back on in the future. I want to hear more about your business but in the meantime, how can people learn more about you and your business?

I’ve got an email, it’s They can call me, toll-free number 800-607-1942. If they’re thinking about doing some lending and they want to get involved in being a private lender, that’s great. Give me a call because there are many people out there, there’s so much cash out there in the market nowadays. Everybody wants to get into the real estate business. They watch this thing on TV, Flip This House. They make it look easy. They’re having so much fun. They pause for a commercial, they come back and the whole house is finished. I thought I was quick. You want to vet the person you’re doing business with. Do you want to be a passive investor or do you want to be an active investor? That’s the first thing you have to decide on, passive or active. Once you get over that hurdle, what do you want to invest in? Who do you want to invest in? How much do you want to invest in? Work with someone that you’re building chemistry with and you’ll do fine. You’ll do well. You’re in the right deal when you know your liquidation value.

You’re exactly the type of person when I say I’m looking to build a new economy. The economy is already there, it’s bringing people into the fold and showing them this can be done. You can be the bank legally, ethically, morally and even through the IRS.

We’re doing this ethically, the banks aren’t. They’re not going to loan to you.

The government will bail them out but not us. Steve, thanks for coming on.

I have some copies of the book you can give away. I’ll ship some data and you can give them out if someone wants a request or they’re interested. Let them send a request to you and you can take care of it on your end. I’ll send a bunch of them.

Thank you very much. I appreciate that. The book is Real Estate Rock Stars: Real Estate Leaders Rocking the Real Estate Industry Today.

There are a lot of different business models that are in this. It’s a great book.

I haven’t read the whole thing but John Jackson‘s in there. He was on the show.

John leaves a lasting impression.

Take care. All the best. I wish you the happiest of investing and success.

Thank you. I appreciate it.

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About Steve Driscoll

PLP 49 | Private LendingI buy and sell RESIDENTIAL type of property.

I have been buying and selling real estate for over 20 years. Currently investing in SOUTHWEST FLORIDA where I hold and rent. Looking for INVESTORS.

I’m interested in buying REO, SHORT SALE AND SINGLE FAMILY residential properties.

Three geographic areas that I’m interested in for my real estate business:

* Planning to offer financing to my buyers.
* Looking to acquire seller financed properties.

About the author, Keith Baker

My ultimate goal is to create an economy for Real Estate (and other) Investors where banks are no longer needed. An economy where every day people look to each other for leverage and support. During the day I am an insurance adjuster for the oil field, where I handle millions of dollars of other people's money (OPM), and by night I invest in Real Estate and host this podcast. I hope you have an excellent experience and find real value within this website and the Private Lender Podcast. Please leave comments or submit your questions on the Contact Page.

I wish you prosperous, safe and happy lending and investing!

Thanks for listening


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