Getting Our Company Out of the Rut

You know I grew up on a small farm and worked on cattle ranches up through college and then spent a lot of time on my parent’s cattle ranch. One thing everyone has experienced if you have spent any time on a ranch is getting stuck in the mud. Usually after months of snow or rain we would wear ruts through the fields. Often those ruts were so deep you couldn’t get out of them. It wasn’t unusual to occasionally get stuck. When we did get stuck, the first thing we always tried was stepping on the accelerator. Most of the time what happened? The wheels just spun, slinging mud, and wearing the rut deeper. Getting out of the rut required asking for help to give us a push or a tow to put us onto a new path.

You know, this is a great analogy of the way I felt in my real estate business months ago. I felt we were just spinning our wheels, slinging a lot of mud but going now where. It became very apartment to me that to get out of the rut we needed a tow or push onto a new path. Sometimes being in a rut is okay if it is going in the direction you want to go, but I knew for my business staying in the rut we were in wasn’t getting me and my company to the place I wanted to go. Thus, we are blazing a new path with other investors that have gone ahead of us toward investing in distressed debts, bad paper, non- performing loans whatever you want to call it.

Let me share with you 5 basic reasons why for us, it was the right choice.

ABUNDANCE OF ASSETS

First, as a fix and flipper I was constantly hustling to find deals with descent profit margins. Many times, when I showed up at a property there would be 10-15 other investors looking at the same deal and often the profit margins just didn’t justify the effort. Now I’m not saying you can’t make money doing fix and flips, but for us we felt the need to find another source. With distressed or non-performing notes, there is an abundance of assets. For example, this last weekend I spend time with 3 other investors and two more experienced note investors. We were able to begin breaking down a tape (a list of distressed assets) of over 200 properties. Now all of them weren’t great buys, but there were plenty that were.

HIGHER RETURNS

The second reason I love notes is that the profit margins are much better than the hard asset. In the hard assets, I was hoping to purchase at 70% of fair market value, but often found the properties going much higher than that. With distressed notes, we are offering 30-55% of value most of the time.

MORE EXIT STRATEGIES

The third reason I find notes more attractive is that we have 5-7 different exit strategies compared to 2 or 3 with fix and flip. With a fix and flip if bought directly from the home owner you can wholesale the deal to another hungry investor, or do the rehab and sell to a home owner or possibly hold onto the property for a rental and then you end up with all the issues of being a tenant. With the purchase of non-performing notes, you are now the bank and you have numerous options available to you from wholesaling the deal, to offering cash for keys, to modifying the loan, doing a short sale, and unfortunately even proceeding with a foreclosure process along with several other options. The point is I have numerous ways to make a substantial ROI.

PURCHASE NATIONALLY

The final reason, that we like notes is that we can purchase assets all over the country. The list of over 200 assets we looked at this last weekend were in over 20 states. I was able to put offers in on 5 properties, one in South Carolina, one in Kentucky, one in Las Vegas and two more here in Texas. And I did all that with my computer in Dallas.

COMMUNITY

The fifth reason I find the note arena attractive is that up to this point we have found everyone to be helpful as we enter this niche of investing. Let’s face it whether you’re doing fix and flips or other you have another focus, we all need input, correction, and occasionally push or pull to keep us moving in the right direction. None of us want to be around mud slingers. Everyone in the note niche has had an abundance mentality. We appreciate it. Thank you.

As we move forward with a greater sense of purpose and passion, the first thing as the 3rd Act brand had to do is we had to get real honest with ourselves and our future in real estate. For us, we decided to get out of the rut we felt we were in. If you feel you might be in a rut, and would like to talk more about buying distressed debt at a discount or would like to find a place to invest your money reach out to the Bigger Pocket community. Just as there was a tow truck that pulled us onto a new path I'm sure there is one here for you if you find yourself or your company in a rut. If you feel you are in a rut in your business or personal life, it is probably because you have gotten comfortable. Never be ashamed to admit you're in a rut and to ask for help as we did.

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