Discover the fascinating world of mortgage note investing with the Canadian Note Guy, Nathan Turner. Dial in as Nathan shares how he transitioned from active real estate strategies to a more passive yet powerful approach through note investing. He dives into the benefits of performing and non-performing notes, as well as the potential for steady returns through seller financing. If you're curious about unique investment strategies that could transform your portfolio, this episode is a must-listen!

Key takeaways to listen for

• [04:06] Why you should switch to real estate flipping to passive note investing 
• [10:19] How note investing lets you become the bank, collecting payments without managing properties.
• [16:13] How modifying loan terms helps both investors and homeowners
• [18:23] Ways buying distressed notes at discounts can lead to big profits 
• [26:52] The critical role of industry relationships in finding note investment opportunities

Resources mentioned in this episode

• [03:10] Diversified Mortgage Expo
• [13:14] The Big Short (2015)

About NathanTurner

Nathan is the owner and president of Earnest Inc., specializing in mortgage note investing. He began investing in the U.S. real estate market in 2008, focusing on creating and buying performing and non-performing notes below market value. With experience in both buy-and-hold and note-flipping models, Nathan is passionate about helping struggling homeowners through loan modifications or creative debt solutions. Known as the "Canadian Note Guy," he also hosts the Diversified Mortgage Expo, sharing his expertise with fellow investors.

Connect with Nathan

• Website: Earnest Investing
• Email: nathan@earnestinvesting.com
• Phone Number: (312) 860-3747

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Links referenced in this episode:

• earnestinvesting.com

Mentioned in this episode:

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Nathan Turner: 00:00:42

One of the things that I love about the note industry is when I buy that note and the interest rate to the borrower is 8, 9%, the terms of that note don't change just because the loan has been sold to somebody else. The only thing that changes is where they're sending their payment.

Neil Henderson: 00:00:55

Welcome to Truly Passive Income. I'm Neal Henderson.

Clint Harris: 00:00:58

And I'm Clint Harris. And today's guest is Nathan Turner, also known as the Canadian note Guy.

Nathan's a leader in the mortgage note investing industry, managing assets for accredited investors through his company, Earnest Investing. Nathan is also the host of the Diversified Mortgage Expo, a no pitch educational event for note investors.

And he's here to share his expertise on generating passive income through mortgage notes. And Nathan, excited to have you today. I'm going to be a little selfish today because I got quite a few questions to ask about this.

But before we get started, you better say a word. Neil, don't say a word. He's going to say, what's new?

Nathan, before we get started, why don't you tell us a little bit about yourself, your background and then how you came into to mortgage note investing.

Nathan Turner: 00:01:43

Sure, I'll try to keep it brief. So yeah. Nathan Turner. I live up in Canada. That's the Canadian no guy part. I live just outside of Calgary, Alberta.

We're actually just west, so that much closer to the mountains. We're about an hour and a half from Banff, if anyone's ever heard of that. And yes, it really is as beautiful as all the pictures depict it to be.

I got into Note investing in: 2009

t was so popular in the early: 2000

ing some real estate in about: 2006

I think one of the things that I recognized through my real estate stuff, the fix and flip, I actually really enjoyed. And I would definitely do that again if opportunity presented itself. But it's a lot of work. There's a lot of work involved in that.

the tail end of that. It was: 2007

I could tell there was going to be a, some kind of a shift and sure enough, there was. I didn't expect that kind of proportions, but as a result, I got stuck with one of those properties that it just was not going to sell.

So I ended up renting it. The thing with a rental is it was less work than the Fix and Flip. However, I thought it was still a lot of work.

I couldn't really understand why people were so, so interested in landlording. I mind you, I was doing it from across the country, however, and the cash flow is good and I like that.

But every time somebody moved out, I had to go.

That was actually more economical for me to fly out there with my suitcase full of tools and do whatever repairs on the property than it was to hire somebody locally to do that. It was a lot of work.

My property manager, there was one guy in the whole town that would take one single family property on as a project and he was awful. He was. I had to call him every single month, right around the 15, 20th month. Hey, so did we get paid this month and. Oh, yeah, I. We did. Yeah.

I'm just going to do some accounting. I'll get it out to you. And I would. I'd get that check somewhere around the 20 to 25th of the month. And I just. I don't know.

I'm not sure why people are so interested in this. And then that kind of was the background. And I was introduced to this idea of node investing at the beginning. I actually got to.

Me and my old partner, we thought we'd invented seller financing where we owned the property and then sold it on terms. And for a couple of Canadian boys, I think we did invent it. But in reality, it's been around actually since the Bible.

You can find verses in the Bible that reference selling debts and things like that. So it's been around forever and ever. And what I liked was the cash flow, the same that I liked about being a landlord.

But I didn't have any of those headaches that went along with it. As a node investor, I don't have tenants. I don't need to fix toilets. Taxes are not even a problem for me.

So all of those things put together, I'm like, this is. Now I'm home.

Clint Harris: 00:04:39

We have this recurring theme where we keep seeing.

Neil Henderson: 00:04:42

So I want to interrupt for just a second. I just want to make sure that we cover for people who don't understand what note investing is.

I want to make sure we explain that before we get into the weeds here.

Clint Harris: 00:04:54

I hear you.

Neil Henderson: 00:04:54

Sorry.

Clint Harris: 00:04:55

You can see the excited look in my.

Neil Henderson: 00:04:56

I can't because you're about to. You're about to die. Like, you're about to dive into the deep end. And our. And a lot of our listeners are.

Clint Harris: 00:05:02

Going, I'm actually not. I hear you. And I. All right, you have justified. I'm sorry.

Neil Henderson: 00:05:06

I'm sorry that I jumped in on that.

Clint Harris: 00:05:08

No, you're good. I'm just glad we hit the record button.

This, here's what I was going to say is that I think it's so funny that so many times we find people that have found these, and I know you're actively doing this, but for the investors in this strategy, this is a more passive strategy.

Nathan Turner: 00:05:24

Definitely.

Clint Harris: 00:05:25

We find so many people. And, Neil, you and I are two of those people that start off with an active investment strategy.

You can always find people that love every different strategy, wholesaling or flipping or whatever it may be. And a lot of times it takes people getting into that before you realize, listen, this is not for me. This is not what I want to do.

And ultimately, that's the thing that pushes a lot of people to the next level.

And in this situation, it pushed you to finding something that's more your speed and the same reason that you made a shift from having tenants to now holding the note. And that's what we need to unpack.

But it's the same strategy that a lot of people use when they're buying a mobile home park, and then they're selling the mobile homes back to the tenants, right? And then they're just managing the park. Because all of a sudden all the maintenance and all the burden gets shifted back to the people living there.

The people that are in the properties that you own the note on, they are the homeowner. And so it's their responsibility to pay the taxes and the maintenance and the insurance and everything else.

esting time going through the: 2007

I think it's also really a good point to point out there's a lot of people that are investing long distance these days. And if you're not doing it within economies of scale, it can be hard to find a team on the ground to take care of you.

Nathan Turner: 00:06:48

Right.

Clint Harris: 00:06:48

Especially in: 2008

And all of a sudden, a lot of those turned into rentals, and you were at the mercy of whoever you could find to handle it right. So it's crazy the challenges that tough times can bring up.

But for those of us who are ignorant to this, explain to us how you're becoming the bank and exactly what note lending is and where you're finding these notes and just treat us like we're idiots because I am brand new to this.

Nathan Turner: 00:07:19

Not at all. Not at all. And honestly and truly, most people have never heard of this. So if you haven't, you don't feel like you're lagging behind.

Most people have never heard of this. I had never heard of it. Almost everybody's never heard about this.

But so what it is instead of buying property, all of us are familiar with what a mortgage. All of us either have a mortgage or have had a mortgage. Where you want to go and buy a house, you don't have cash to buy the house outright.

So you go to the bank, they give you a loan in the form of a mortgage, and then you sign a note that goes along with that. For our purposes, we're just going to call it a mortgage or a note. They're different things, getting a little too technical.

So you get this note in a mortgage and you agree to certain terms. You say, okay, I will pay you back, Mr. Banker. So much money per month at this interest rate for this many years and that constitutes the note.

So it's now your promise to pay back to the bank. So this can be the bank, this could be a private seller where they can just create this on their own.

They own a piece of property, they want to sell it on terms and by doing so they have created a note. So now this note becomes its own thing, independent, attached to, but independent of the property itself. So the property acts as the collateral.

It's your just in case, it's your backup plan. But the note itself is something separate.

So when I'm going and buying these notes, I'm either finding back in the day it was much more the banks with the non performers. These days it's more of the seller finance paper where I'm buying performing.

se over the years starting in: 2100

Today those have mostly run their course. There are some still out there and we're seeing another resurgence. We're starting to see those starting to come back.

But for the time being I'm concentrating more on performing notes where people are making regular payments. So those ones Tend to be where I'm finding. Those are seller financed.

So if somebody like I say had a property, they sold it on terms and now they've created this note, they would rather have a chunk of money today versus collecting those payments over the next 20, 30 years. So that's where I step in and I say, okay, I will cash you out, I will take over the responsibility of collecting those payments.

You get your chunk of money that you can go and whatever, renovate your kitchen, go on vacation, whatever you're going to use that money for, that's irrelevant to me. And then they've got their chunk. They're now completely out of the deal.

I have stepped into that role and I become the new bank to the person living in the home. And so those payments, the only thing that changes for the borrower is instead of paying the previous note holder, now they're paying me.

Otherwise all the terms stay the same. So that's the general idea of how that works.

Neil Henderson: 00:10:12

I recently watched the movie the Big Short again. Yeah, great movie.

Not it's not what you're doing, but there's a scene in there that sort of reminds me of what you're doing, which is a scene with Ryan Gosling where he first pitches. He's Jared Vennet and he's pitching the whole idea of the condition of the house and he's talking about the different tranches of loans. Notes.

He was talking about notes.

Nathan Turner: 00:10:36

Yeah.

Neil Henderson: 00:10:36

And I think in that case it's more the bond market.

But the whole idea is that you have these tranches of riskier mortgages where it's somebody, it's more likely that they're going to become non performing all the way up to the really secure 800 credit level, high income earner, things like that. So you start to go down and the level of higher risk, obviously your return starts to grow.

Nathan Turner: 00:11:00

Right.

Neil Henderson: 00:11:00

And then as you go up in the lower risk, the return starts to drop. Is that sort of also what's happening in the note market?

Clint Harris: 00:11:07

You're.

Neil Henderson: 00:11:08

And also the same way that the banks.

I remember back in the day in: 2006

Nathan Turner: 00:11:26

In my case, we're not talking about hundreds of millions, we're talking about millions and just single millions where we'll go and buy that and then yeah, the borrower, the person living in the home will get this statement, a letter that says, by the way, we no longer are the ones collecting on your mortgage, now it's these guys. And then they'll also get a letter from me saying, by the way, now I'm your new collector replacing whoever it was you were paying to before.

That's exactly how it works.

Clint Harris: 00:11:52

So is there a couple different strategies here is like you can buy underperforming notes and the person selling it is trying to sell it on 50 cents on the dollar to recoup some of it and you're going to buy it honestly with the hopes that they continue to underperform and eventually you foreclose on the property and you get it for a discount.

And then the other side is you're buying really secure mortgages that are performing well and it's just a hedge against inflation and it's a long term bet. And then I guess depending on where you are in the market, is it a blend between the two of those?

And then follow up question like when you're buying the paper from someone and you're giving them that payout, you're obviously not getting a loan from that, you're just paying that in cash, is that right?

Nathan Turner: 00:12:32

That's right, yeah. So we'll do the last part first. Yes, it's all cash.

So no, the bank's not going to lend you money to go and buy loans, which is ironic, but yeah, so that's, it's all cash. So hence put together either most of the people, the way it goes is you start out with your own money, friends and family.

And then what I've done is now we've got a fund and we'll get into that later. But let's go back to the other part. So the underperforming. Yes, here's the one kind of difference. The one correction I guess is bad underperforming.

It's actually in almost every case it is more profitable for me to have that person who's living in the home stay there and get back on track and making payments, even if that means modification of their loan, where maybe it's an adjustment to their payment amount. And I've done any, so many different things.

We've raised interest rates, we've lowered it, we've raised their monthly payment and lowered it, extended out their amortization, shortened it, we've done all of those and combination of almost infinite proportions.

You can do almost anything as long as the two of you can agree on that, you sign the new paperwork, they're still in the home, they can make payments. So not only is it a feel good, feels nice to be able to help people and absolutely we are.

But like I say, it's almost always that's the more profitable way to go anyway.

So we're more incentivized to actually keep people in their homes and actually help people so that it's really great business of feeling good and doing good and it's fantastic. So that's on that side of it. On the performing side, like you said Neil, it's less risk and so there's less return on that.

That being said, it's not a bad return and it's a lot easier to manage those ones than it is those non performing underperforming ones where those ones require a lot more work. So obviously they're more risk, more reward. But I'm getting to a point in my life where I'm more interested in just Steady Eddie. Just keep it going.

I got other things I want to do and that's mostly what I'm buying these days.

Neil Henderson: 00:14:33

And so what you're doing, especially in these non performing notes is like Clint hinted, you're buying the note at a discount for the total amount that's due. That then allow gives you the wiggle room to come to the homeowner and make modifications to the loan.

That's now going to get it back to being a performing note and still leaves you room to make money, correct?

Nathan Turner: 00:14:57

Yeah. And it's really cool because I bought it at a discount, I've got that flexibility. And then the other part of that is I'm a human being.

I'm not a big corporation. So I am far more flexible and I can be much more creative than a bank can be that they've got to stay within their parameters.

And I get that, that's fine. I become chaos very quickly in that level of organization. But with mine, we're small enough and nimble enough that we can do all kinds of cool stuff.

And not every loan needs to be approached the same way. Maybe this borrower just. Let's talk about just the arrears. They haven't made payments for six months.

So now you've got these arrears sitting there, money that has piled up that they owe, can they reinstate? Do they have that somewhere in savings or something where they can just pay it out and get back on track? If so, great.

If not, what are we going to do with your arrears? It doesn't just disappear. So how are we going to treat that. And depending on the person, we can do all kinds of things.

We can split that up over the next six months or 12 months. Just the arrears portion. We can do part up front and part on the back end of the note. We can do the whole thing on the back end of the note.

You can actually forgive some if you want or all if you want for various reasons. But we've got just tons of flexibility. That's just the arrears and then we've got the payments that we can deal with as well.

Clint Harris: 00:16:13

So the great thing about this is that we don't have to learn everything about how to do this. And obviously there's no way we possibly could even if we had weeks. Because all we need to do is identify who does know how to do this.

And that's why I want to talk about your fund and get into that.

But before we do, I want to walk through a scenario like I've got a quad plex that I bought for 550 grand that was in rough shape and I put about 100 into it. That was years ago. It's appreciated a lot. And we had it listed recently for around 1.3, oh, about 400 on it or something.

So I've been approached multiple times about seller financing and I'm not really interested in that because that would be a second position lien. Basically. I still owe 400 to the bank and they're not going to come give me a $400,000 down payment.

Nathan Turner: 00:16:57

Correct.

Clint Harris: 00:16:57

Then I would be basically being in seller position. I would be second position on that note. And that's not something that you're going to pick up.

Like I'm assuming you're going to want somebody that seller financed a property because it was hard for them to sell it. You're in first position and you're taking over the whole loan. You're not taking over a part of a loan.

You want to make sure that your first position on the lead. Is that right?

Nathan Turner: 00:17:18

Yes. That really comes down to preference. So my preference is I always want to be in first position.

And I like whole notes and partials are a totally different. That's getting into the weeds. But you can do partials, you can buy seconds. I've got a friend out in California, he buys thirds.

You can do all kinds of different things and different approaches and there's different reasons for all that. But my preference is first lien position.

And again, if you want to get slightly more complicated, some states are known mortgage, other states are deed of trust. You can also buy a lot of the seller. Finance paper is like a contract for deed.

These are all different names for it, but it's all under that same umbrella contract for deed, where it's contract for deed, land contract agreement for deed, bond for deed, depending on the different states they call a different thing. But essentially it's like a rent to own lease option. Contracts are another one. So all of those are first lien.

So those are the ones that I'm interested in.

Clint Harris: 00:18:14

Got it. Follow up question. Let's say for round numbers, I got a million dollar property that I've seller financed. Somebody puts down 20%.

So the notes for 800 and it's 5% interest amortized 30 years, whatever traditional note. What am I selling that paper for? Right? What am I selling that at a discount?

Am I like, am I shaving it off or over the life of the note that's going to be $1.52 million. So if I have a note for 800, am I selling the paper for 850 or am I selling it for 750?

Nathan Turner: 00:18:43

It's going to be at a discount. And the reason for that is as the new note holder now I'm taking on the risk. What happens if they default?

Then I've got to go and deal with that in one form or another. So it's always going to be at some kind of a discount.

I would hopefully get to you before you created that note and say don't try to compete with the bank on the interest rate. Please don't do that. If the bank is offering six, you're offering eight. If the bank is doing seven, you're doing nine. Like you're always going to be.

Yours is a specialty product. If they could get a bank loan, they would do it. They can't. Therefore yours is a premium product. So make sure you're charging more.

All of that to say in for my fund, we're targeting a 12% yield which is slightly different than a return on investment.

But anyhow, because of that, if it's a 5% interest rate on the loan, my discount, in order for me to get to my 12 yield, my discount is going to be fairly substantial. It's going to be 50% kind of thing. So you're not going to like my offer in that kind of a scenario.

If you're sitting at a 9, 10, 11% interest rate, that's much, much closer, my discount's going to be much smaller. Because for me it's all about yield. That is the number one driving force of what we're doing. So it's yield and risk.

Those are the two things we're balancing. But yield is for sure. That's the top thing that we're looking at.

Clint Harris: 00:20:01

Interesting. So the two ways you can get there are by initial basis. Right.

Your price point of getting in significantly lower and building that in or having an interest rate that's closer to that 12% and your offer on the property. You can make an offer on any property. But what that offer is going to be dictated is this is my yield.

And working backwards from that number, this is the offer that I can afford on this property. You're basically a wholesaler.

You're going out there looking for people that need money now and it's got some warts on it and they just need to sell it and get out of it.

And instead of driving for dollars or sending mailers, you're shopping for paper, looking for people that would rather cut their losses and walk away.

Nathan Turner: 00:20:37

Right.

Clint Harris: 00:20:38

And then you can be more empathetic and a person and stabilize. Take those arrears and tack them on the end or whatever you're. You need to do. Yeah, very interesting.

Nathan Turner: 00:20:49

very first Note conference in: 2009

Nor are these still around. They've been around. It's more than 40 years now. That conference has been around. That is the not so secret to success.

that first conference back in: 2009

Today there are two or three conferences annual, that are just all about node investing. And those ones I never miss, I always go to all of those because it is so important. That is how this happens.

We've got all these connections online, but you're actually connecting with people when you're in the room with them and shaking hands and all those kinds of things. And so that's really like I say, that's the not so secret is just get out and talk to people face to face.

You start getting to know each other and you start doing deals together.

Clint Harris: 00:21:49

So as an asset class, I want to shift a little bit. I want to talk about your fund.

Nathan Turner: 00:21:54

Yeah.

Clint Harris: 00:21:54

And I also want people to understand that I'm sure that there's various levels of risk here. There can be risk across the entire market when a massive shift happens.

But because of the cost basis at which you're buying this at and your ability to navigate hopefully not going through the foreclosure process that often when you do, you end up with a property that hopefully has significantly more equity than what you technically bought it for.

Nathan Turner: 00:22:19

Right.

Clint Harris: 00:22:19

But as an asset class, where does this go on the scale of risky versus less risky? If you're looking for a 12 yield, like what does that look like for the passive investors putting money into your fund?

What's the historical data on that and how secure are these like an up and down or is it fairly Steady Eddie?

Nathan Turner: 00:22:38

This is very steady Eddie. So my yield target for the fund is 12% and then we pay our investors 8%. So it sounds like on the surface sounds like a 4% spread.

It's not quite that much. When you're comparing yield and roi, it's slightly different. It's more IR and roi and so it's a little bit different.

In reality, it's closer to about 2 1/2% is the difference if you can compare apples to apples there. But that being said, just like in real estate, you make your money when you buy is you're creating your safety upfront.

For easy numbers, let's say there's property, $100,000 sold on seller finance. They get a 10% down payment and now they've got a note at 9% interest rate. In that case, let's say it's an 11% interest rate.

It's a property down in Texas and you've got itin borrowers and they don't want to deal with the bank, so they're happy to pay 11%, which is a real thing in that kind of a situation. On the surface it sounds like, oh really, my discount's going to be tiny because that interest rate is so high. Yes. But there's also that risk factor.

So for me, I'm always going to work in at least a 25% investment to value. So the most I would pay for that is 75,000 because the property value in today's market is $100,000.

So I'm building in an equity spread there at the beginning in addition to making sure I get that to yield target.

s in case of I got started in: 2010

But again, I'm working in that 25% spread in case of, in case we've got another downturn in values take a drop. Let's say the person stops paying, I end up taking back the property. Now the house is only worth 80,000, I only paid 75.

So I'm still in the clear, I'm still okay. And we can go ahead and in that case I would probably just sell or finance it back out and create a new note.

But if I need to just sell it and get out, then I can do that as well.

Neil Henderson: 00:24:46

I want to hit this again because anytime people listen to people talk about note investing, your eyes glaze over and you're like, well what? Like how is, what, how are you making money?

Clint Harris: 00:24:56

Harry?

Neil Henderson: 00:24:57

Yeah, what's your, and what you just described there, I want people to understand, is the same thing as somebody who's essentially house flipping is you're looking at the ARV and you're building in a margin of safety for yourself right there. That allows you to take that risk of making this adjustment, get it back to being a performing note.

And if worse comes to worse and you're forced to take the property back, you've built in a spread there, that's a margin of safety for you.

Nathan Turner: 00:25:27

If I start out by buying a non performer, my discount is going to be much bigger.

It's going to be, you know, $0.65 or $0.60 or something like that because there's a lot more work there and there's more risk involved with that as well.

Clint Harris: 00:25:39

So from your fund standpoint, what's the size of the fund, how soon does it start cash flowing and then if somebody wants to pull out, is there a time commitment or can people get out it once a year or once every two years? And if so, if you need to recapitalize, are you doing that by raising more money into the fund or do you ever sell paper to recapitalize?

Nathan Turner: 00:26:00

Yeah, great questions. First of all, it's $50,000 minimum to get in and then it's an open ended fund. We just actually switched that over.

I think some of my marketing stuff still says a five year term and we just switched that. Now it's an open ended meaning if people want to invest in and then take their money out a year from now, you can certainly do that.

In order to get that capital back, I'm going to sell that paper. That's going to be the easiest, fastest way for me to do that. There is a, there can be some lag on that. It might take me a minute to sell that.

Give it 30, 60 days in order to get your capital back out, just so that people are aware that there is, I might not have it available on hand today. Ideally I won't in fact shit all deployed and then it's going to take me a minute to get that back out.

Clint Harris: 00:26:42

So when someone invests into your fund, are they investing into an individual property and the individual paper that it's collateralized against or is it all the money's pooled together and it's deployed across a portfolio?

Nathan Turner: 00:26:55

All pooled. So it's, it just goes into one general bucket. Once we're fully funded, the size of the fund, it's relatively small, just 5 million.

And once that is fully funded, we'll have roughly 100 notes in there and then 10 of those stop paying for some reason, no big deal. We've got 90 others that are paying and I'm very experienced on how to deal with those other 10.

Getting them either back on track or foreclose or whatever we need to do.

Neil Henderson: 00:27:20

With the way interest rates have shot through the roof, I mean one of the largest frozen notes, the fastest increase in interest rates in history. How has that affected you and how has that vested adjusted your strategy?

Nathan Turner: 00:27:35

That's part of the reason we're looking more at seller finance paper. So I think I read the other day something like 1 in 5 people in America are locked into under 3% interest rate.

So they're not incentivized to sell or move because they've got such a great rate and to do so they'd have to switch over to today's rate, closer to six or seven.

So because of that a lot of focus is being put on the seller finance because there's still people that want to buy houses and they don't qualify at the bank for all kinds of different reasons.

Actually one of the biggest reasons is they're self employed and anybody who's self employed that has gone through that process will understand that one. Banks don't know how to deal with us. We're outside their box and that's scary for them and unknown at least.

So yeah, that's one of the biggest things.

One of the things that I love about the note industry is when I buy that note, if it's, if I buy it and the interest rate to the borrower is 8, 9%, whatever it is, or 5%, whatever the terms of that note, don't Change. Even just because the loan has been sold to somebody else that the note itself doesn't change.

The only thing that changes is where they're sending their payment. So if they're locked in at 5% and they're happy with that, they can be there for the next 30 years and just pay that off until the end and be done.

Somebody who's at in 8%, let's say rates drop and go back down to three and a half or something like that, could they go and refinance, pay me off? Yes, they certainly can. And you know what? I encourage them to do that value of money. The sooner I get paid off, the more money I make.

So I have done this in the past where I'll look at and say, we had a guy a couple years ago, he was at 9%. This was a few years where he could refinance at 4. And I said, so here's your amortization chart where you're with me. Here's your amortization chart.

If you were at 4%, and I knew he had good credit, so I'm like, so maybe you should talk to them and see if that's something that worked for you. And it did. And I got paid off in full, that full unpaid balance. Now it came back to me. I bought a discount.

So I'm making money just on the spread there. And so it works either way. It works.

Clint Harris: 00:29:43

That was my next question is what happens if you'd go through all the work of putting this together and then six months later somebody refinances? But it's okay, because I was originally thinking all of your value is built in the interest that you're getting over time. But that's not true.

Your value is built in the initial offer. You built in that value delta. And if they hold it for longer, that's fine. You're going to get that money and a tiny bit extra.

But if they sell sooner, you're just getting instead of a single or a double, maybe it's a double or a triple and you're getting paid up front. You can redeploy that capital up and you're at the top of that Laffer curve and able to be able to redeploy. I love that. So let me ask you this.

You talked about the value of relationships. This is obviously a pretty small niche investment strategy.

And it's one of those things that, in my opinion, you either do it really well or you don't do it. This is not something that people should dabble in. Right. You either get it right and this is your profession, or don't do it.

And you talked about the value of relationships and picking up the phone and knowing where your, your product is coming from in terms of the paper market. But now we're in a situation where you're switched and you're focusing on seller financing. So where does that paper come from?

Because that's typically, that's an individual. Maybe they have a small portfolio. Is there a marketplace there? Or are you guerrilla marketing to try to identify that?

Because now it's you're going to people that by definition you probably did not have a preexisting relationship with.

Nathan Turner: 00:31:05

No, that's exactly right. So the vast majority of seller finance is like a mom and pop that have one extra property.

They've done this once and then now they're looking to sell that note for whatever reason. There's a small but growing population of people that are doing this as a business where they are going out and acquiring property.

However they're doing that and then selling it on terms where they're collecting a down payment and then between the down payment, what I'm going to pay them for the note. And in fact we work together and say, they'll approach me and say, okay, so give me the parameters, what are you looking for?

And I'll create a note like that. I'm. Oh, that's music's my ears. Are you kidding me? That's great.

So then they will tailor, make a note that they know I'm going to love and then I can pay them out. Between that and their down payment, they're now making a spread. They can go out and do it again.

And then we just recycle and keep going and keep going.

So I'm very interested in working with those kinds of folks and we can get to know each other on a more deeper level just because we've got time to do more business together. And then let's back up one more time.

those conferences. So it was: 2025

I figured when the owner approached me and said, would you be interested in taking this over immediately? I. There was no hesitation for me because I know what value I get from attending conference.

I figure the only thing better than that is owning the conference and running it myself. And so that has been. It's extra work, but it's an Extra kind of piece to the business in marketing.

Not just to get people to the conference to come and learn about this, but just for people, especially people that are selling notes. And so I put an extra concentration. Anybody who has notes that they're looking to sell, come to this conference.

You're going to find a room full of people that would love to buy what you're creating.

Clint Harris: 00:33:02

That's, that's the Diversified Mortgage Expo. Is that right?

Nathan Turner: 00:33:04

Yeah.

Clint Harris: 00:33:05

Open to everybody, anybody can attend.

Nathan Turner: 00:33:07

This is for anybody who's hearing about it for the first time and thinks it would be fun to learn about all the way up to people that have got million dollar funds that they want to just network with others and it's no pitching. You're not going to have to get your wallet for anything. That's one of the rules.

You cannot say run to the back of the room at conference special only. Like none of that. We don't do any of that kind of thing. Educational networking, that's what we do.

Clint Harris: 00:33:31

So if I've got a property that's paid off that's a hundred thousand dollars, I can pick up the phone and call you and be like, listen, I'm struggling to sell this property. There's plenty of buyers, but they can't get qualified. What kind of note do I need to put together and offer seller financing?

And maybe it's a hundred thousand dollars, but if I'm willing to offer seller financing and open my buyer pool, maybe I can sell it for 110 with seller terms in place and just be willing to take that discount. But my net to owner is going to be the same. And now a house is going to somebody that needs it, that can't get into it.

And I have someone ready, willing and able to buy the paper.

And we've structured in such a way that you're going to give me a decent offer instead of a huge discounted offer because we work together on a structure that's going to make it right for you to take that over.

Nathan Turner: 00:34:17

That's exactly it. Yeah.

So if you've got $100,000 property, I would say get at least minimum 10% down payment and we can talk about creating a first and a second where you can hang on to the second and continue to receive some kind of a cash flow over time.

And we can get into all of that and just decide what's going to be the best case scenario, what's going to work for everybody in that kind of a situation.

Clint Harris: 00:34:40

Being the bank, this is next level. It's thinking Way ahead and working backwards.

Nathan Turner: 00:34:46

Yes.

Clint Harris: 00:34:46

I love that. That's so creative.

Nathan Turner: 00:34:48

Yeah. Yeah. And for me, it's all about setting up my retirement. Honestly, that's really what this is all about, kids.

Amassing enough funds where I can buy enough notes for myself that I'm not depending on anybody else's cash. I'm totally self funded and off we go.

Neil Henderson: 00:35:03

All right, so I want to tie this all up and make it a nice bow for the passive investors in the group. So my understanding is you've got a fund, it's open to accredited investors only, correct?

Nathan Turner: 00:35:14

Correct. Yes.

Neil Henderson: 00:35:15

It's $50,000 minimum. And what are the terms beyond that? What's the ROI? All that.

Nathan Turner: 00:35:22

Yeah. So we pay an 8% annual return. And like I say, it's not a we hope we can pay that. That's not a predicted. It's what we pay.

I talked to my attorney the other day. I can't say guarantee, but I can tell you this is what we pay. We do quarterly distributions. So 2% per quarter.

You can either choose to take the distribution and have cash flow or you can roll that back in and just have it compound. I'm happy either way. Fantastic. For IRA funds or an old 401k.

And if you're not aware of how to do that, I imagine your listeners are, but if you're not, I'd be happy to hook you up with a couple of different IRA custodians. They can walk through the process and show you how to do that.

It works extremely well and it's a fantastic way to build your retirement income tax free.

Clint Harris: 00:36:06

Since you are the debt on that, there would be no UBIT or additional taxes on that as well. So probably a really intelligent vehicle that takes a lot of the volatility out for retirement funds.

Nathan Turner: 00:36:15

Same.

Clint Harris: 00:36:16

Yeah, I love that. All right, Nathan Turner, listen. We really appreciate it. Thank you for your time today. The Canadian Note guy himself on our podcast.

So if people want to learn more about you, hear more about your fund, or find ways that they can engage with you, what would be the best way for them to do that?

Nathan Turner: 00:36:31

I think best thing to do would go to my website, earnest investing.com and that's EAR. We're not trying to compete with the earnest young guys, but we're earnestly Investing.

So Earnest Investing.com there's a little more information there. There's some video clips of some presentations I've done and place there to get in touch with me.

Place there to go see about the Diversified Mortgage Expo. So that's the place to go and get the information.

Clint Harris: 00:36:55

That's great, Nathan. Thank you so much. Appreciate your time. Thank you for educating us.

Nathan Turner: 00:36:58

Hey, thank you.

Neil Henderson: 00:36:59

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