Show Summary

If you think ‘buying notes’ is something that only ‘secret society’ members can do…think again. Gordon Moss buys non-performing junior liens, and today shares the details with us…as well as tell us how to learn more. Don’t miss this episode of the FlipNerd.com Flip Show! We also discuss Gordon’s view on how critical it is that all real estate investors build a rental portfolio, and stay flexible to adjust their business with changes in the market…which are all but inevitable!

Highlights of this show

  • Meet Gordon Moss, real estate investor of all shapes and sizes for over 30 years.
  • Join the lesson on how to buy notes, and what a second or junior lien is.
  • Listen to Gordon’s lesson on the importance of building up a rental portfolio or accumulating assets (i.e. build wealth and cash flow).

Resources and Links from this show:

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

Mike: Welcome to the FlipNerd.com podcast. This is your host, Mike Hambright, and on this show I introduce you to expert real estate investors, awesome entrepreneurs and super cool vendors that serve our industry. We publish new shows each week, and have hundreds of previous shows and tip videos available to you, all of which you can access by visiting us at flipnerd.com or visiting us in the iTunes store.
By the way, FliNerd.com is the most robust social platform in existence for real estate investors where you can find off-market wholesale deals in your market, find great local vendors to help you in your business in your market, and socialize, learn and grow with others in our industry. There is truly nothing like it. If you’re not already a member, please visit us at FlipNerd.com today where you can set up a free account in about 30 seconds. Everybody’s doing it, the cool kids and even the nerdy ones, so get on over to FlipNerd.com. And now let’s get started with today’s show.
Hey, it’s Mike Hambright with FlipNerd.com. Welcome back for another exciting VIP interview where I interview some of the most successful real estate investing experts and entrepreneurs in our industry to help you learn and grow.
Today I’m joined by Gordon Moss. Gordon has a lot of experience in many different areas of real estate investing. He’s been investing for over 30 years. But he’s really heavily focused on buying non-performing notes. And I know the word “notes” to many people make you feel like you have to be part of a secret society of some sort to participate. But it might be easier than you think, and like anything in real estate investing, it really takes knowledge, confidence, and persistence to be successful. So today Gordon is going to tell us all about buying non-performing notes and share some of his insights with us. But before we started though, let’s take a moment to recognize our featured sponsors.

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Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.

Now let’s start today’s show.
Hey, Gordon, welcome to the show.

Gordon: Hey, Mike. Thank you for having me. I appreciate the opportunity.

Mike: Yeah, I’m glad you’re here. So before we get started, I know you’ve got a rich background in doing all sorts of stuff in real estate investing, and in my experience a lot of the guys that have been around for a long time have had to evolve and ebb and flow with market changes and where opportunities pop up. And I think it’d be great to hear your background. I know enough now to know most of us in the real estate investing are truly in the opportunity business. And opportunities change over time and you’ve got to shift and recreate yourself. But I know you’ve got a lot of experience. Why don’t you tell us about your background?

Gordon: When I was in college, Mike, I didn’t know what I wanted to do like a lot of people. I liked political science. That was kind of my thing so I studied that. But there weren’t many jobs out there in that game. So the guy that I rented from, he had a duplex that we lived on at the beach. I went to UC Irvine in Newport Beach, California. And he had a boat and a nice car. And I said, “Mike,” I said. His name is Mike, too. I said, “What do you do?” And he says, “Well, I’m a commercial real estate broker. And I said, “Oh, okay. Well could I do that?” And he said, “No.” And I said, “Well, okay.”
So I interviewed at a couple of other places, but I was thinking that sounded pretty good, to go out there and build something like he had. And the real estate game always fascinated me, even as a young person. So I did get a job as a slave, frankly, in a commercial real estate business. I was what they called a runner, and I would just go out there and cold-call buildings and ask them if they were moving, and they would throw me out. It was a long, hard road for five years. But I did figure it out.
The one thing I figured out was that the guys that were in that business, although they looked good, they had the fancy suits and they had the cars and the Rolex watches and the whole thing. But they didn’t have any money at the end of the day. They were brokers and the way I put it is the longer you broker, the broker you get.

Mike: Yeah. Well in the commercial space every deal is so big that you either do them or you don’t, and if you don’t you’re done, right?

Gordon: And exactly, that’s the exact way to put it. And like in any business, 99% of the people make no money, and the top 1% makes it all. And it’s hard to get up there at the top of that rung. But I went to an investment meeting in Orange County, California back in the ’80s and I met these guys that were single-family house investors. And I was generally very unimpressed with these guys, that they were old, beat up, badly dressed guys. But you know what I realized, they were the guys that had all the money.
I said, hmm. I’ve got a problem with my thinking here. I need to adjust my thinking. And so these guys were single-family house investors, which to me sounded like that’s what housewives do. I said, ” I’m far above that. I’ll never go there.” But one guy put it pretty well. He said, “People don’t get tired of living inside.” And then when things got bad in 2008, 2009, we learned that pretty clearly, that a single-family house was a good piece of collateral to have in a bad market.

A lot of that commercial property was worth nothing, or couldn’t be rented. And my houses stayed rented, and I survived that debacle because of those guys that kind of steered me towards the single-family house game. So I became a big student of education, and a big student of the single-family house game back then.

Mike: Yeah, awesome. So over time you kind of developed a multiple strategies I guess. Talk about how you kind of got into note buying.

Gordon: Yeah. So all the pros, as I put it . . . and frankly I’ve got a site. I named it realestateandmoteinvesting.com, because I think notes and real estate are a beautiful marriage in a lot of ways. I mean, I keep my buy and hold single-family house investments as a long-term growth strategy. I create and buy bad and good notes for income. And some of that income is highly taxable, and some of my real estate shelters that income. So once again it’s a beautiful marriage between real estate and notes in my opinion.
But what I saw in that ’08, ’09 debacle was these guys, these bankers, made too many bad loans. I said, “You know what? I’m going to go find out how a small fish like myself can play in this game. How could I get a piece of this market? How can I do something, once again, with what my mentors taught me, which was a single-family house, which is a great piece of collateral, and safe, okay?”

And they also taught me about options. How could I pay a little bit of money, a little bit, without risking my whole nest egg? And because you know what, I was going to screw it up. I was going to make mistakes. So if I did screw it up I could live to fight another day. So the non-performing junior lien, which I’ve written a book on . . .

Mike: Yeah, a best seller on Amazon, right?

Gordon: Yeah, my best seller.

Mike: Yeah, that’s awesome.

Gordon: Thank you, but it’s on Kindle, it’s on Amazon, and it’s called Performance Anxiety: How to Create a Fortune in Non-performing Notes. And you can find it on there.

Mike: You know I have a link down below the show here for everybody.

Gordon: Okay, it’s not the Bible on the business. It’s a beginner book at a high level.

Mike: That’s great.

Gordon: But you can always go to the website and get the details of it. I’ve put a lot of stuff on the website, a lot of questions over the last five years. Speeches I’ve made, blogs I’ve written. But that non-performing junior lien was the way that I got my foot in the door of this defaulted note business without taking much risk, and frankly I’ve done very well with it. It’s a tough business. It’s a tough business. I tell people, I said, “Unless you’re committed and slightly crazy, I wouldn’t go after it. I really wouldn’t pursue that business. But if you’re of the mind and you’re not committed like I am, there’s a lot of money to be made in that business.”

Mike: So tell us this, so just to kind of boil it down for my three-year-old mind. I know what you do, but for the other three-year-old minds out there, or five-year-old minds, whatever we want to say. A junior lien is basically the second lien if somebody had a primary mortgage and a secondary mortgage.

Gordon: Yes.

Mike: And you’re buying them where they’re non-performing, meaning they’ve stopped making payments for some period of time right?

Gordon: Yes.

Mike: And the hope is, given that the first lien typically takes priority, the hope is that they just either refinance out totally and pay off the second lien or a number of different things could happen that would kind of get you back in the game. Is that right?

Gordon: Yeah. Let me kind of tell you a story, if I could.

Mike: Yeah, sure.

Gordon: Would that be okay?

Mike: Absolutely.

Gordon: So somebody buys a house, and they have a first lien, correct, their first mortgage. Everybody’s got that. And one day the wife says, “Honey, we need a pool in the backyard. We need a pool in the backyard.” Okay. So he goes down to the bank and says, “Hey, I need a $40,000 loan for that pool in the backyard to make everybody in the house happy.” Okay. So they borrow $40,000 as a second lien, a junior lien behind that first lien. Now they put the pool in and everything’s good.
Now three or four years go by and things change. One of the people loses their job or something like that. Their financial situation changes, so they stop paying maybe their first, maybe their second. And let me kind of give you the ultimate junior lien and the simple one.
So they’re still paying their first, okay. They’ve been in the house for 10 years. They have two kids. They’re a couple. And they go to church down the street and they’re committed to that house. They spent $100 a month at Home Depot, which probably means that they’re buying plants and the rose bushes are planted and the grass is mowed. Okay?
They lose some of their income and they say, “You know what, we’re not going to pay that second anymore. We just can’t. Our budget doesn’t afford it, okay?”
So let’s say Wells Fargo had made that loan to them, that $40,000 junior lien. I would go to the Wells Fargo Bank and say, “Hey, do you have any loans like that?” And they do. Say they sold it to me for ten cents on the dollar. I bought this $40,000 junior lien for $4,000, okay. Now I would call them, call Mr. Smith and say, “Hey, I bought this loan from Wells Fargo. We are now the owner of record, and we need to work something out.” And I said, “What were you paying before with Wells Fargo and what happened?”

“Well we were paying $500 a month for our $40,000 loan, for that pool that we put in the backyard. And frankly my wife lost her job and we could not afford it anymore.”
I say, “How about this. Could you afford $100 a month?” “Yeah we could.” “You could. Okay. Let’s do that.” You see, I bought that loan so cheap that we can do that. They have what I call an emotional equity in their house.
That’s their home. It’s not their house, it’s their home. And I’ve come along and said, “Hey, there’s an opportunity for me. Yeah, I’m here to make money. But guess what, your budget fits $100, not $500. And I bought it so cheap that I can do it that way.” And there are other different angles on it that are more complicated. But that’s a good overview of the junior lien business, buying a little option as I call it. I call that an option, $4,000. I can risk $4,000 to make $40,000.

Mike: Right, and so in that scenario, you tend to like renegotiate the loan as a whole, maybe spread the terms out longer, or maybe you adjust the interest rate or something to get the payment more manageable?

Gordon: That’s exactly it.

Mike: Because whatever you could imagine you could do, right, as long as you could negotiate it.

Gordon: It’s all about them. It isn’t really about what I . . . I used to look at a pool of loans. I used to buy 10 loans and go, “This one, I’m going to take the house back,” which I don’t do very often. “This one I’ll work out with them. This one might go to bankruptcy.” It’s all these different scenarios, but you know what, it’s about me helping them. On these junior liens, Mike, this is what I say. I say, “A first lien is all about the property. It’s all about the property itself. You’re trying to acquire the property through a defaulted loan.
With a second loan it’s about the borrower. It’s about me looking at the borrower ahead of time and saying, “Is this guy a good risk? Does he pay the rest of his bills? Is he in jail?” I don’t know with kind of these different things about him, but it’s about me working it out with the borrower. So I take a risk and try to analyze the borrower ahead of time and say, “Mr. Smith, he’s got emotional equity. He built a pool in his backyard. I get that. He’s got two kids. He’s got a job. His wife lost her job. I get that. And so if we just brought their payment down it’s a huge win/win for them and for me.

Mike: Yeah. How do you kind of go through the discovery process? How do you know that stuff before you buy your second lien? I mean some of this stuff is public record. I guess probably you could find out whether they’re in default with their first loan fairly easily, right?

Gordon: Yes. Now what I do is I buy most of these from hedge funds. A big bank like Wells Fargo doesn’t want to deal with me, because I don’t have $100 million every week to buy a massive pool of loans. So a hedge fund will go up to Wells Fargo and buy a chunk of them and then sell a chunk to me at a premium. So I’ll pay more than they do.
And what they’ll do is they’ll say, “Gordon, I don’t want you calling Mr. Smith ahead of time, or either you’re going to sign an agreement ahead of time that says you won’t do that. But I’ll tell you what, here’s his credit report. And I’ll study his credit report. So I’ve got Joe Smith’s credit report ahead of time and I can say, “Well, he’s got a decent credit score and his first is current. I can see that. And guess what, he spends $100 at Home Depot. I’ll bet that’s for his house, so he’s got emotional equity. He’s not living in the garage or something else. He’s living at his house. I can see that. He’s still got a job.”

So I can kind of put my Sherlock Holmes hat on and say, “This has a good chance of him repaying. He’s still in the house. He’s got emotional equity. He pays his other bills. So that’s kind of my research ahead of time. It’s not perfect, and I’m taking a risk. But it’s an option price on a single-family house, which is really my game.

Mike: Yeah, and by paying that low entry price you’re kind of doing it in a way to where you’re casting a wide net, and you’re going to buy a package of deals. Some of them are going to go south and some of them are going to work out really well.

Gordon: That’s exactly it and it’s well put. The way I put it is it’s like 10 hands of blackjack. Do you plan to win all 10 hands in Vegas? No. You plan to lose three or four. It’s almost guaranteed. But you can still win with those other six hands. So this is just like that. You buy 10 loans in a little pool. Three or four of them aren’t going to work out. But if the six or seven that do will make you enough money, it covers the whole pool and more.

Mike: Right, right. So talk a little bit about how you learned about this, and I know you teach other people too, but how people could get started in this business. It’s not like you could just pick up a phone and call a hedge fund and say, “Hey, I’m interested in buying a chunk of non-performing junior liens.” But just talk about how people get started in this. Because I think part of what I hope to get out of our conversation today is there’s this mystique behind this that only people that have special connections can do it. It’s not like anybody could start doing it today. There’s an education process. But talk a little bit about people kind of getting started moving in that direction to do this.

Gordon: Okay. I didn’t invent this program. And there have always been junior liens, and there always will be. But there’s a glut right now with that whole debacle, with that 2008-2009 over-financing that the banks did.
What I did, Mike, is I said, “Okay. Is this a good business? Does it fit my model?” This was back in 2008. I said it does, because it’s on single-family houses, because I’m that guy. And it’s an option as I define it. So I said okay, what could I do? So I went to every mortgage servicer meeting in the country. About every quarter those MBA guys, the Mortgage Bankers of America, get together, also loan servicers. These are the guys that actually have the loans from the guys that own the loans. I went to those meetings. There are also distressed net meetings, and these meetings are still out there.

So I went all over the country and I got to meet everybody. And I saw the good guys and the bad guys and said, “Who do I fit with? Who do I like? Who do I don’t like? Okay, and then I met a few guys in New York that said, “Okay. What are you doing?” I said, “Well, I’m buying first liens.” And they go, “Well, we’re buying second liens.” And I said, “That sounds even more insane than what I’m doing.”
I’m one of those guys that will hunt something down and just hunt and hunt and hunt and hunt, and I did. But I’ll just say this. I wrote a book on it, which is just a high-level story of my adventure through it for the last five years, and my website. I’ve talked about it at length on blogs, on videos. I would go to that website. You could spend 30 hours on my website and you could be almost a pro. You would know 99% more, and more than most of the hedge funds, about this little business after going to my website.

Mike: Yeah, okay. We’ll definitely add some links down below for that. Maybe you could share some experience on what percentage of the time those liens go into default and you kind of lose out versus . . . I assume since you’re buying them 10 cents on the dollar, just like they hit at blackjack, some of your hands you lose, right?

Gordon: You do lose. But let me kind of tell you this story. I have a theme. I say, “What if your biggest fear wasn’t? What if your biggest fear wasn’t?” So in a junior lien space here’s your biggest fear, or was mine. I get it foreclosed on, because as you said earlier, the junior lien is like the little brother. It’s like the weaker link, right? That’s what I thought, because the first gets foreclosed and I’d get wiped out.
I’d lose on that one, right? Or the borrower could file bankruptcy, and then in a Chapter 13 I’d get delayed, or in a Chapter 7 I’d get wiped out. Those aren’t good, right? And all that has happened to me. And as it happened it wasn’t that bad. Let me give you an example.
Here’s a bankruptcy story, the worst case. My biggest fear was bankruptcy. So what happened? I had a borrower and he said, “Gordon, I was driving down the road and I saw this big billboard, and I talked to my brother-in-law and he said, ‘You know what? You should file bankruptcy.’

And I said, “I think that’s a good idea.” And he says, “What do you mean?” I said, “Well, if you file bankruptcy, then you aren’t paying me right now, are you?” “No.” “Well, the judge is going to require that you do pay me, and frankly he’ll charge you more than I will charge you. And guess what? All the legal fees, you get to pay those, yours and mine. And by the way, when you do your filing for bankruptcy, and you get to fill out a complete package and you wouldn’t want to lie to the judge because you’ll get thrown in jail, so I’ll see everything. It’s public record. All the stuff you’re not telling me, I’ll see it all. So frankly it works better for me if you do file bankruptcy.” And this is the truth.
So bankruptcy deals, I had three or four bankruptcy deals where the guys were not paying me. The judge appointed a trustee. The trustee did pay me every month. And if the guy stopped paying he could go garnish his wages, which I couldn’t do. So I was like, “Wait a minute here. This fear of mine of bankruptcy was actually a good thing.”
And let’s talk about foreclosure. I feared that, too. Do you realize that the junior lien actually has rights if the first starts foreclosing? Let’s say Mr. Smith, we talked about earlier with the pool loan, has a non-performing second that I bought for $4,000, but he also stops paying his first. And the first says, “Hey, this guy is gone. We’re going to foreclose.” Well guess what? I have to let them foreclose if I want to from junior position. I have the right to protect my position. I can basically say, “What are the arrears? What is he behind?” I can bring it current. Then the first can’t foreclose.

Mike: I didn’t know that.

Gordon: I didn’t either. I thought this was illegal or something. I thought something was wrong with it. But the more I learned about it I said, “Wait a minute here.” So do I always protect it? No.
Okay. And let’s give it the worst-case scenario to make this short. Let’s say the first does foreclose on me and wipes me out. So guess what? I no longer have a lien on the property. But Joe Smith still owes me the money. I can file a judgment against Joe Smith directly. And I might not get the money right away, but if Joe Smith ever decides to get another house or buy a car or get married again, he has to come see me. I’ve got a judgment on him. We can talk. So I might not get paid right away, but I’ll probably get paid.
So the bottom line there I’m trying to make it in the long way is just to say that the biggest fears that I had, bankruptcy and foreclosure, were actually good things.

Mike: Yeah, better than I would have thought, yeah. In some instances on the good side though, some of the things that somebody else that I talked to before that does second liens, it was interesting. Because they said that sometimes the person, what they end up doing especially in the past few years where there have been a lot of opportunities to refinance or things like that where they just effectively refinance out. And that loan that you bought for $4,000, where they owe you $40,000, you effectively just get paid $40,000 and they refinance out. I mean, you have an opportunity to hit some preverbal real homeruns in there, too, right?

Gordon: Yes, there are homeruns like that that just kind of happen. It does happen. There are bad things that happen, and a lot of good things like that that happen.
We could also go to somebody’s pension plan or 401k and a lot of times they’ll settle with us and pay us maybe 90%, maybe not get it all. But there are other ways they don’t realize that they can still pay us off. But you’re right. Refinancing is a good thing once in a while.

Mike: Yeah, that’s great. Well, we were going to spend some time talking about some of the other. At the beginning we talked about how important it is for real estate investors to be building up some passive income or build up equity in rentals, stuff like that. Why don’t we talk about that a little bit in terms of some of your experiences early on and how you realize how important that was?

Gordon: Yeah. Let me just kind of say that when I make little presentations, I was in Las Vegas last week and I made a presentation to a real estate club. And most of the guys in the room are what I call flippers. They buy and sell. They wholesale whatever it is. And I’m not knocking that. But where I see the confusion in my opinion is the fact that they think they’re real estate investors. And I don’t. I take exception to that.

I say, “You’re speculators, it’s a business, it’s a job. But it’s not really real estate investing.” I’m not knocking it, but I actually built this poster and it’s of a dolphin. And to those of us who are a little older, there was this show in the 60s or 70s called Flipper. And it was this dolphin and this young kid’s backyard. And I always picture this dolphin jumping out of the water, and usually dolphins are smiling. This one’s not. And he’s got some money flying around him, and there’s a ball and chain tied to his fin. Because what I say is there’s Flipper, and I said, “There’s no happy ending to that.”
The point is this, one of the key fundamentals that these guys taught me, my mentors, Jack Miller, John Schaub, Pete Fortunato, Jimmy Napier, and I keep saying their names, is to be a buy-and-hold guy, that’s where the real money is made. That’s where wealth is created, is by a buy-and-hold guy. My plan was always to have 20 free-and-clear assets, and to me that meant say a single-family house. Say a house is worth $100,000, and if I could net from the rents, and I’m talking net, $500 per house per month, and I had 20 of those, that meant $10,000 a month in passive income. So if I got lazy that day, or sick, or whatever, I didn’t have to do anything.
And that was my goal. I said, “How am I going to create 20 free-and-clear assets?” And in my case once again, it’s a single-family house. That’s what I’ve been baptized into. How could I get 20 of those free and clear? Then I was free, and I could flip if I wanted to. I could be a wholesaler for extra money. But I didn’t have to. And freedom. Freedom, that was the goal.

Mike: Yeah, there’s a ton of real estate investors out there and a lot of people will get started, you mentioned wholesaling, and you’re talking about rehabbers or flipping up front. But especially wholesalers, there’s a ton of wholesalers that get into the business or want to get into the business because there’s all the belief that you don’t need any money, you don’t need a lot of money to get started, which is true.

Gordon: That’s true.

Mike: Now the problem is if all you’re doing is wholesaling, you’re in a hamster wheel. You can never get out. And to be frank, I told you at the beginning, most of the houses that I’ve bought I’ve rehabbed them and resold. I’ve done a lot of wholesaling. But it was always with the guise of saying, “I’m going to buy and sell houses and when one fits my rental criteria, what I’m looking for, I’m going to keep it.
But when I buy one that’s four times higher ARV and just wouldn’t make sense as a rental, I’m going to sell it. If I pick up something that’s in ghetto where I would never want to have a rental property, I’m going to wholesale it. And so I just let those opportunities decide what I do with them. But my first pass was always keeping it as a rental if it fit my kind of criteria.

Gordon: Yes, and you’re right on track. I mean, people forget that part. [Inaudible 00:26:04] to say if there is one thing I could say to people, you’re not an investor, you’re a speculator unless you keep some. That’s the real goal.

Mike: Yeah, absolutely. Some day we don’t want to work as hard as we used to or do, right?

Gordon: Unless we want to.

Mike: Yeah. Well, kind of touching on . . . we have lots of folks who listen to this show, veteran people; a lot of veteran people listen to the show because I have so many great guests on. And we have brand new people, too. I think a lot of the veteran folks understand what we’ve been talking about here. For some of the newer folks, maybe share your insights on how to look at real estate investing in terms of achieving goals, building wealth, some of the things that we just talked about. I know you’re got a lot of experience and you’ve evolved over time. But how should people really be looking at this in terms of accomplishing their goals, financial or otherwise?

Gordon: Yeah, well let me just say a couple of what we’ll call them business philosophies. I used to work for a big corporation in the middle there. I had 100 employees. I never liked being a boss. They didn’t really like me. I wasn’t a very good employee. So I always said, how can I in my next life, which I’ve created now, I have a theme that I borrowed from one of our friends. I call it “stay small, keep it all,” making your gross your net. Meaning that if you do make a big check, so you make $10,000 or $50,000, don’t bring it back to your office and say, “Well, I’ve got to pay the staff and the overhead.”
I have a great friend and he has a great saying. It says, “When you’re outgo exceeds your income your overhead will be your downfall.” So I’m in my office right now. It’s a second bedroom in my house. I’m really a virtual guy and I planned it that way. I’ve got a computer and everything I need. I don’t have a staff. I don’t have a secretary. I don’t have anything. It’s just me, and I’ve designed things that way, because when I get that $10,000 check I want to put it in Gordon’s pocket. I don’t want to make payroll, and I don’t want to do this. I’ve done all that.

So stay small, keep it all was some of the best advice that I’ve gotten just as far as setting up the business. You don’t need to be big. You don’t need a 10-story shiny building with your name on it. Get over that ego thing and consider what your real . . . my real goal was to say, okay, I want to travel on a dime. My friend says, “Hey, we’ve got a free ticket to wherever, let’s go.” I go, “I’m there.” I have the time. I have the money.
That’s I think the best counsel I could give somebody is get over this lust for bigness, or “the seduction of big numbers,” somebody called it. I stay simple with single-family houses. I only bet little options prices. I only bet little option [inaudible 00:28:51] a house and put $100,000 into it. It doesn’t work that way for Gordon. I’ll put a little bit of option money. I’ll put $1,000 up to option it for 90 days so I can maybe resell it to somebody else.
So this whole option thing, you want to take calculated risks. Once you’re got the money, don’t risk it. Stay small. Don’t build a staff. If you have to build a staff, reconsider what you’re doing. So that’s some of the best counsel or advice I can give a newer person. I think I’m answering your question. I’m not sure.

Mike: Yeah, no, it’s good stuff. I think it’s important. I’ve said this a few times on recent shows that I think it’s really important for real estate investors to . . . this may sound a little cheesy, but to almost put time in your calendar once a quarter to say, “Look, I’m going to go to Starbucks or somewhere by myself and veg out for like an hour, two hours, whatever, and just ask myself these questions. Am I on track, am I following the fundamentals for what I know are right?”
Because as real estate investors we’re in the opportunity business, and the reality is we look at a lot of opportunities that don’t come through, right? And it’s not like if you look at 100 houses, it’s not like you’re buying anywhere close to the majority of them. So you get told no a lot. And so I think because of that we tend to pick up bad habits and start doing things that we know probably isn’t a great long-term strategy, but I’m going to make this one work. And then it comes back to bite you.
So I think there are some great lessons in what you just said, of just trying to stay basic and not get too big, because it ends up being a lot of people’s downfall, no doubt about it.

Gordon: I agree, I agree. Talking about other people’s money, too, I see people going out there and saying, “I need to create a fund or get other people’s money.” That is a nasty sword in my opinion. Can it work? Absolutely, but I see everybody do it wrong, or then be beholden to somebody else.
If you focus on small deals . . . I had John Schaub, who wrote a seminar called, “Making it Big on Little Deals.” “Making it Big on Little Deals,” meaning that when you’re playing in the big guys backyard, they’re a lot smarter, they’re a lot nastier, and they’re not as sophisticated. So I would recommend the single-family house game, staying small, keeping your staff small. That would be, I think, the best piece of advice I could give somebody.

Mike: Yeah, great. Well, Gordon, tell us one more time where people go. I’m going to add links below for your website and for your book. But why don’t you just tell us here where people go to learn more about you?

Gordon: I built a website, Mike, five years ago. I’m a total rookie at it, so it’s very unprofessional. But it’s www.realestateandnoteinvesting.com. www.realestateandnoteinvesting.com, that’s my website. You’ll see my face there and I’ve got blogs that I’ve done, videos that I’ve done, resources that I’ve got there. I also, as I mentioned, I wrote a book this last year in March. It’s called Performance Anxiety: How to Create a Fortune Investing in Non-Performing Notes. It’s on Amazon or Kindle. You can go to my site and find it from there, or just go Google it, my name, or “Performance Anxiety.” It’s about notes.
So those are two good resources if somebody’s interested in this whole game. As we were talking earlier, I kind of go back and forth about, well these guys helped me, so I said I’m going to help people. And sometimes it drives me crazy, but I think you see some people just line up and say, because of you I got on the right track, or I stopped doing those things, or I made this and this. It’s kind of a rewarding thing.

Mike: Yeah, absolutely. And your website is not that bad, by the way. It’s a good-looking site, believe me. In the real estate space there are far worse out there.

Gordon: Thank you.

Mike: Awesome. Well, hey, thanks so much for your time today. We’re going to add links for that stuff down below, too, for folks that didn’t have a chance to write it down. So we’ll have it down below the video here. And Gordon, hey, thanks for your time today. It’s so good to see you, and thanks for sharing your insights.

Gordon: Thanks for the opportunity, Mike.

Mike: All right, take care.
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