In this episode of The Paper Trail Podcast, Chris shares what he calls the biggest mistake of his note investing career: buying a 0% interest loan. Despite acquiring it at a steep discount, the loan turned into a frustrating and time-consuming challenge. Chris breaks down what went wrong—from unpredictable borrower behavior and high servicing fees to the illusion of “cheap” deals that aren’t worth the effort.

He explains how low monthly payments can erode returns, why understanding your servicing contract is critical, and how certain borrowers exploit the system. Through this candid story, Chris illustrates the hidden dangers of loans that seem too good to be true and why discipline, due diligence, and realistic pricing matter more than chasing a bargain.

This episode is an unfiltered look at the mistakes, frustrations, and lessons that come with real-world note investing—offering valuable takeaways for anyone entering the business or managing a portfolio today.

Welcome back to another episode of the Paper Trail podcast.

I AM your host, Chris 70, and today I am going to share probably the biggest mistake on a loan, purchasing a loan I ever made.

And interesting thing about it is I knew this going in and it was like, know it's one of those things of like, like touching the hot stove, you know, not to touch the hot stove.

But I still did it anyways.

And I'll share the story.

This is probably one of my the most frustrating notes I've ever had.

So we will dive deep into this and hope you will enjoy this episode.

Inventory.

You are going to see a spike in inventory.

Typically you see it in October and November and then December is, you know, the leftovers and the stuff that doesn't sell on October, November you'll see floating back in December.

So I want to mention that.

So if you're on the hunt for loans, now is going to be a great time.

If you are interested in loans, reach out.

We have loans for sale.

I can put you in contact with other people who have loans for sale.

Just tell me what type of loans you're looking for.

And one thing I'll just mention, make sure your pricing expectations are in reality.

That's the biggest thing I think the biggest hurdle people make.

They want the perfect note at a price of a loan that is not a perfect note.

So and that's why I want to share episodes of this podcast, lessons I've learned.

You know, we're talking a lot about bidding on assets and, you know, mistakes that I've made.

And my end goal with all of this is to make you wiser, smarter, more experienced.

Learn from the lessons I've learned as I'm again preach, I'm.

I believe I'm one of the only podcasts or out there that really share the stories of case studies and things we've been through.

I'm not up here, as you can tell, pitching, marketing, you to buy any course from me.

I don't have a course.

I shut down my membership group.

I'm looking at in the future having some seminars for people.

That's it.

You know, we have over 950 investors in our fund.

That's a completely different animal from people who are actively investing.

But you know, I like to share this with people because again, I'm not up here just marketing you on how to find notes or anything.

I'm rolling up the sleeves and diving in.

So.

Okay, enough of me on my high horse.

Let's talk about one of the loans that, you know, I say, you know, it's, you know, I've done this loan twice.

My first and last time ever doing it.

So drum roll please.

What was that mistake?

Bought a loan, I had a 0% interest rate.

Even though I bought this loan at a huge discount.

It was non performing at the time.

If you listen to my last episode about low interest rate loans that are not, you know, significantly behind.

Yeah, this one, oh man, if you're watching this, you know, I can see, oh, how do I turn my head the right way?

The gray hairs, you know, the gray is moving up and I think like a quarter of this is because of just this loan.

And you always remember the, the, the, the ones, the most vivid remembrance of loans are the ones that kind of, you know, leave the biggest scar.

And outside of the Nightmare on Elm street loan that I've had that I joint ventured with Jamie Bateman on, that one's a disaster.

The four feet of water in the basement on a property in Ohio, that one was pretty ugly and messy.

You know, those were probably, you know, in this one were the hardest loans to manage.

And I've had other loans.

Again, we've been doing, we've done over 750 loans.

Yes, we've lost money on loans.

Anyone that tells you they haven't, haven't been in the business long enough.

So yeah, we lose money.

But there's two ways to lose money is lose money.

That is, didn't you know, the process went through.

There's nothing you can do.

And like you don't have to waste a lot of time on it.

Just hey, deal sucks.

Sorry.

And then there's the ones that you feel like you went four quarters in the trenches and you're fighting an uphill battle.

And this was one of them.

And you know, it was a loan that was at 0% interest and borrow is behind.

And still I forget what the discount was, but it was huge, huge, huge discount.

But I valued it more as, hey, look, we're going to foreclose on this person.

There is no way this person can reinstate or do anything or whatnot.

But they did.

But what they did do is, and this is where I was a rookie, I'll call myself a rookie.

And allowed them to make not full reinstatement but make partial payments to get caught up.

So they got to a point where they basically got to like two or three months behind.

So they made it up.

So I got some money coming in the door.

I did overpay for this because I was predicting foreclosure.

Again I don't remember the full numbers but then what happened?

And the payment on this loan was in like the three.

I think it was like 250 to $300.

It was a low, low monthly payment.

So even though I think I paid, I paid like 12 or 15 thousand dollars for this loan.

Again the UPB was like 30 something thousand dollars or whatever it was.

So it was like less than 50 cents on the dollar.

The issue was the payment was so freaking low and they got behind.

They caught up but then got behind.

What did I not notice anyone?

Of course this recording.

So no one can actually respond to me servicing fees.

So the borrower make a payment, miss two, make a payment, miss one, make two, miss one.

So if the borrower isn't consistent, your servicer will put it as non performing and $95 a month.

So 30% plus of that payment was going to the servicer and there was nothing I could, it would have been cheaper for me to actually make the payments for the borrower to keep them current than it was basically to some of the losses I think I was taking.

But that was the issue.

Here's the other issue with 0% loans.

They may, or typically they don't have a late fee or they may have a late fee but big deal, it's $10.

There's no default interest or like no interest accruing.

So if they miss a payment when they make a payment doesn't matter, it just goes towards a principal.

I see a lot of land loans out there that people should put out there at 0% interest thinking hey the borrower, they love it because 0% all goes to principal.

As a lender I would run from these.

There is no incentive for them to pay if they're savvy, you know.

And let's say payments $500 a month, they don't make payments for six months.

You file foreclosure, you go through the whole process, you know, or if I send a demand letter, 150 bucks whoopty do you know for them it's like okay then gotta wait a 30 days.

You go through some, you know, process, they're like oh, here's two months payment now.

Oh, then do you send another demand and spend the 150 that then you gotta try and go back and collect.

What do you do in those instances?

Because taking action is just going to hurt you, it doesn't help you.

So again you are completely stuck in these 0% loans and again you can get them at such a steep discount.

It's so enticing.

Like oh, I could get a $30,000 loan for $10,000 and I'm a new investor and all I have is 10,000.

I'm gonna go buy this $30,000 loan that's written at 0%.

That's over you know, 20 years or even 10 years, you know, 30,000 divided by 120.

Okay, it's 250amonth.

Woohoo.

So I'm gonna get $3,000 a month, I'm gonna get 30% on my $10,000.

Oh no, 250.

You know, all of a sudden you have the servicing fees and everything else.

A lot of times these payments are over 20 years or more.

So you might see payments of like 150, $200 on some of these loans.

When you see those low monthly payments, understand your costs because it's $200 and you got to pay $95 and that's of today.

I don't know what the non performing charges are anymore but let's say it's 95.

It's basically cutting in half and you're not getting that consistent cash flow.

You're not getting 12 payments a year, you're getting 10 and 11, you know, and then they're keeping enough and then maybe next year you get 12, but then they go back to nine, you go to foreclosure, they'll get you 12.

It's this back and forth and then because you have the inconsistent pay history, how do you sell it?

Can't sell the loan.

I mean somebody's gonna look at and basically like this isn't really performing, it's non performing.

But I'm getting, you know, give me the pay history that shows you made 10 payments and you made $1,000 last year on this thing.

You know, after all your expenses now is it worth all that headache of dealing with a non performing loan or semi performing loan or a thousand dollars a year?

How much time were you spending on?

And that was the biggest thing I was spending so much and this is before I had my company.

I was doing this all alone.

You know, I had several hundred loan.

You know, at one point in time, I had over 200 loans I was managing all by myself.

This was the time I, you know, when I had 50 to 75 loans.

And yeah, I'm sitting here spending the most amount of time on the loan that's providing the least amount of value to me because I was so stuck on figuring out how to win on this thing.

How can I figure it out?

What can I do?

Do I file foreclosure?

Okay, great.

You know, you send a demand, spend 150 bucks, and then, you know, great, they reinstate and they give you the $150, but your money was out the door for, you know, 60 days.

So you're waiting 60.

So you're basically again, you're not making any money on your money because even if you have legal and all that stuff, you know, you can't charge to it.

So you're basically again, giving no interest loans.

So you're putting money out the door, which is costing you money to have it come back in.

So, you know, what's your cost of capital?

So, yeah, and on this one, man, this borrower just had me so frustrated because they knew how to play the game.

They knew that if they would get it 90 days behind and then just say, okay, are they gonna send the demand or not?

If they don't send the demand, they would just keep letting it roll.

Then you send the demand, and then they would basically, you know, reinstate it and make the payments.

Even if they made the four months of payments from four months behind.

Great, you got it, but you didn't get it.

You know, you got four months later and what they would do, still not pay.

And your servicer, even if they reinstate, and this is important, understand, read your servicing agreement.

At the Paper Trail conference, Kevin Cordell Madison was up on stage and we were talking about this and you know, we're talking about how to manage your services.

And I asked Kevin, you know, what's the biggest mistake people make?

He's like not understanding the contract.

And I agree 100% because of some of the stuff I see people post on Facebook.

Why did my service or why didn't my servicer do this?

Or why didn't my servicer.

Now there's one post about the floods in North Carolina and someone made a comment about they're upset with their servicer that didn't go check on the property for them.

And I made a comment like well did you request it from the servicer and did you actually pay them to go look or you know, or contact the borrower?

The area had no power, no phone and you know, basically they were upset with the servicer, that servicer had made contact with the borrower.

They're like, how do you know it's your loan?

You know if you want the servicer to make contact with the borrower, pick up the phone and call a servicer or email them, say hey, can you make contact contact or can you send somebody out?

And of course you have to pay for that.

Now make contact, you know, they make the phone call for you typically as a courtesy.

But if there's no phones or ever, you know the phone lines and they don't have a cell phone number or whatnot, what do you want to do?

Now the only way would be in person communication.

And that's a big thing that people don't understand is reading these contracts.

And in the contract just because a borrower reinstate doesn't mean it's not still under that special servicing.

I believe it's three consecutive, three consecutive monthly payments.

So for borrower misses three months and makes all four months at once, misses three months, makes all four months at once in their mind because they're still doing all the reach out and everything.

That is a non performing loan and you are going to get charged the non performing rates.

Thankfully in this one the borrower did have insurance but if they didn't think about that too, you're paying force place insurance, you can add it to the loan.

Now it's basically at zero, you know, you're not getting any interest on it and you get that payment every four months as well.

So that's a great deal for a borrower if you think about it.

Somebody gives you money and you can go four months, five months without having any interest or any payments due and then just be like, ah, I'll give it to you whenever I want.

And they knew that.

And what was interesting is if we sent the demand at 90, they would pay.

If we didn't send the demand, they wouldn't pay until we sent the demand.

They knew exactly how to play the game.

I think what frustrated me the most or pissed me off the most on this is you know, I'm very, very competitive.

If you didn't know that.

I also like to win and in this one I was so frustrated because I lost.

It's like this guy got me, he duped me and that burned me.

The fact that I was like Damn, he got me.

And it's like, hey, you know, now that I turned 50, and this was probably when, you know, this is.

I don't know, when I was in my early 40s, I was still at that point where I really didn't like to lose.

And I take it personally and figure out tried and way to win, you know, today it's more of, you know, my mindset is, hey, you take your losses, you move on.

Because looking back, and I've always been type person that, you know, I won't look back and dwell on it and learn from my mistakes.

But, man, as you can tell in this episode, you know how I'm talking to you, this one, this one stings.

This one did sting, you know, because it was just like, so frustrating.

And, you know, the.

The arrogance of the borrower, too.

And as the lender, you know, you sometimes think, hey, I'm the lender.

You know, I'm, you know, I've got, you know, the quote, unquote, higher ground.

Oh, no, not in this one.

This guy, I was at the bottom of the valley and he was on, you know, the mountaintop, you know, complete control.

And again, nothing I could do.

So looking back, as we wrap up this episode, so it's maybe like, okay, Chris, you got burned.

What do you do in these instances?

First, I wouldn't buy 0% loans.

I just.

I wouldn't.

If you do buy 0% loans, that discount has to be significant.

And even if it's a performing loan, even if it's performing, let's say the borrower was never, ever behind on a payment.

I would only assume eight or nine payments a year in that calculation and bid off of that.

And I would probably assume some discount on sir.

I mean, I would just discount that value so much that I don't think it would pro.

I mean, they would almost have to give this thing away for me to take on another one.

Now, I am in different shoes today because I do have a fund, and, you know, we are, you know, have a decent portfolio.

You're just starting out.

It's like, great, Chris.

You know, you got a $50 million fund, you can do this.

I've only got 10 or $15,000 to my name.

I might go after something like this because it's a $30,000 note that maybe I can get for 10 or $12,000 or whatever that number is.

I didn't do the math in my head.

So I'm just throwing numbers out there.

I'm not telling you you should pay 30 cents on dollars for these, run the numbers.

I'm just in my head throwing numbers out there, you know, and let's say it's a land loan that you can get for $10,000.

Again, run the numbers to see, okay, if, you know, if it goes non performing and I got to pay 95amonth, what does that look like?

How, look, maybe the borrower continues to pay and you know, I just got burned.

But look at it again.

The whole point of this series is look at the other avenues and options to see how they impact.

Because if the loan payment is only a hundred dollars a month, 95 of it goes to the servicer.

If it's not performing, you're basically making zero on that thing.

So it has to have enough meat on the bone as a payment from that borrower and you know, just really got to dive into the numbers on it and what makes sense.

And again, because I know people buy these, especially on land and you can still make money.

I'm not saying you're not making money on them.

I'm not saying they potentially are bad deals.

I'm just saying you can be burned pretty badly.

So just be careful.

And the whole again premise is for me, as part of these episodes, I am sharing some of the mistakes we made.

I want you all take this again, take it with a grain of salt if you want.

And you could be buying 50 0% loans and they're paying on time, great.

And you're buying them at discount and the cash flow is awesome.

You're selling off partials to other people as well and life is good.

That can happen too.

All I'm trying to do is share with you because a lot of people, especially on social media, only post the rosiest of red stories.

Everything is great.

Everything is wonderful.

You know, have you ever seen on social media someone basically saying, my marriage sucks, I hate my marriage.

You know, there's no, you know, you know what going on or anything like that, or, you know, people being truly honest and open about that, or I fight with my spouse every other day.

That's not me, by the way.

But you know, that happens.

I know.

You know, again, people go through challenges, of course, in life with relationship and everything.

You never see any of that on social media, do you?

What do you see?

People's vacations, people with their kids, winning.

People celebrating.

You see the wins, you rarely see the losses.

And for me, I'm not afraid on the note, investing space to come share my losses, to come share my mistakes.

And again, I feel like I'm one of the only people that do that.

So I hope people appreciate that.

And if you do appreciate it, make sure to leave us a like review on your favorite listening station.

You know, a little plug right there.

But no, as we wrap up this episode, I hope you truly do appreciate some of these podcasts that we do provide, because I hope you can find them valuable in trying to benefit you for your note investing journey.

If you want to stay in touch, get on our mailing list.

Reach out to us go to 7e investments.com again we put out notes for sale.

We're going to be starting having some seminar programs diving deeper into some of this stuff.

Or if you're looking to sit on the sidelines and invest in some type of offering, check out 7e Investments.com can check the offerings that we have live and at any time.

And we have investor relations people, asset management people, myself, we're always willing to talk to you to see how we can better you and understanding the note space and this journey that we all go through.

So thank you, take care and as always, I will catch you on the next one.