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Seller Financing On Steroids

Seller Financing On Steroids

Dawn Rickabaugh

The Note Queen

Presented at NoteCon 2016

Transcript

Ron Happe: Welcome, everyone. Very fortunate today to have with us Dawn Rickabaugh. Dawn is affectionately and professionally referred to as the note queen, and she is the owner of the Note Queen Capital Funding. She buys seller finance notes across the country, and she helps others get started investing in notes. She's frequently asked to consult in real estate transactions that involve owner financing and will, occasionally, originate private loans. She's a writer, educator, the author of 'Seller Financing on Steroids'. There's Dawn's book, as well as, Dawn's picture. Think you'll agree she certainly is the note queen. She's been interviewed and quoted by all kinds of influential publications such as, Investors Business Daily, The Wall Street Journal, MarketWatch, National Association of Real Estate, Today Radio, and so on, and so on, and so on.

Seller Financing, in Dawn's opinion gives birth to the note business through owner financing and notes, online membership and training site where Dawn helps others understand the "Dance between property and paper." When you understand how the secondary market for notes functions, for both real property and paper assets, notes ... You are in a world that not many people understand. She actively supports members of her community, I know that she has a Saturday morning "coffee" she calls it, once a month. That she invites people to participate in, where they just talk about real estate, financial notes. And often they'll have a guest speaker. Dawn is a real sharer. She really shares what her knowledge, and is very, very supportive in anybody that wants to get in this business. So Dawn, if we could just get started about how ... I know that your background was in nursing. And can you kind of give me an idea, and our audience ... How does a professional nurse get involved as a full time note investor?

Dawn Rickabaugh: Well thank you very much Ron, just thank you for having me. This is a real privilege that you invited me to participate. So let me just thank you there. I could have, if I would have known what I know now, I may not have needed to quit my nursing job to invest for notes. But for me, I was in for a whole life change. So I took that leap from W2 employee to entrepreneur back in 2004 after several years of going to the conferences and the boot camps, and you know, just spending too much money on things.

Ron Happe: We've all done that.

Dawn Rickabaugh: Right, I mean I just always thought to myself that, I thought I had the ability to make money in another way than just trading my hours for dollars. And so even all those years I was working as a nurse, making good solid money, which is really convenient when you're raising four kids ... To have nice insurance and solid income. I always had this feeling that just kept nagging at me. So I basically consider myself a tire kicker. I think for seven years I finally decided that the note business was what captivated me for whatever reason. Even though I don't consider myself of the financial calculator, I just fell in love with it. Just knowing five buttons on that financial calculator has allowed me to build a whole business over the years. And I just love the power that comes from that. So I just made the leap at some point. And that's a whole story that I intend to write about. Because realistically, I really love this whole business. Owner financing and notes, and creating financial solutions, just one mom and pop to another. It doesn't' have to do with any institutional parties whatsoever in my world. 

But the most important thing that I learned was that transitional process. Who I had to become, from that nursing person to this note queen person. And for me that was a fairly significant transition. 

Ron Happe: Did you go from real estate to notes? Or did you dive right in to the note business?

Dawn Rickabaugh: I thought that ... I had a very ill conceived plan. So let's just say that it was very ... It was kind of an intuitive thing. Ultimately the thing that pushed me over the edge to make me say "I'm quitting my job tomorrow." On a time, was a dream that I had, that was very vivid, that said "Time to take the leap." And I had no real estate experience in anything. I was a mom and I was a nurse. And so I had a little bit of money saved up but I said "It's just time for me to make the leap." "I feel like I'm old before my time, I'm getting depressed, I just need to go for it." And so I did. But logically in my mind "Well, how can I understand notes if I don't know anything about real estate?" So that was kind of like "Okay, at least let me get my real estate license and hang my license somewhere so I can learn about real estate while I'm cultivating my own niche in the note business and figuring out what I'm doing." So I did. 

I got my real estate license, I worked with a company that was doing wholesaling. Everyone was making a killing between 2000 and 2005. You didn't have to be very smart to make a lot of money while the prices were accelerating at that time. So I got experience in the wholesaling and the rehabbing. I tried being an agent and doing short sales and I wanted to kill myself. So after a year of trying that, I said "The agent bit's not me." But it was a valuable experience. And when they closed up shop just I said "Oh I'm gonna go off on my own." And in the mean time I got the nickname of note queen from those meetings, because every time they're talking about a deal I would always say "Well why do we need all cash, why don't we ask [Phil Kerry 00:07:19]?" And so one of the gay guys in the office just started calling me note queen. "Oh here's the note queen, talking about notes. Talking about owners financing." And so when they closed up shop I said "Okay, well I'm just going to brand around this and either people will love it, or hate it. But maybe they won't forget it." And so that's kind of how that started.

Ron Happe: I find it very interesting how ... Which we're going to get into I hope later, about your business specifically, but for somebody that wasn't an experienced real estate investor ... Like a lot of people in this business, they come from a real estate investing background and something happened in that. Like the bubble burst, or they realized they couldn't sell their property without carrying paper. And they did, and then found out "Hey, this is a great idea." How to help other people do this and buy the note. So on and so forth. But for somebody to go from just getting into real estate sales, and to get into the note business the way you have, and the niche that you found. I find it fascinating and I want to cover that a bit in a little bit. But to start, can we just ... We have some neophytes and newbies, and a lot of professionals in the audience. Can you just define for us, what seller financing is.

Dawn Rickabaugh: Well for me it's when someone who owns the property just puts on a different hat and they decide to be the lender, or the bank on that same property. So sometimes that's because of retirement planning strategy. The first property that I ever bought was with owner care- not the first, the second property. It was a commercial property. And their whole retirement strategy was to offer owner financing because they could do better on the note by double than what they could get as a CD in the banks. And deferring the capital gains and all the other things that we know come with that. Plus it's secured by an asset that they're very comfortable with. So very tangible for them. So what'd ... What'd you ask again? What seller financing is?

Ron Happe: That was a good answer, whether you understood- or I mean, remember the question or not. That was a very good answer.

Dawn Rickabaugh: Okay, so seller financing, you've found out that ... I guess the first one was that the seller realized that after they sold their house, they had to do something with that money. And they weren't really excited about the returns they could get from the CD that they were going to put that money in after they paid their capital gains. 

Ron Happe: If I heard that correctly. So you thought "Well heck, let's have you carry that financing and your return will be far more than you're gonna get out of that CD that you were going to put your money in." Plus this is an asset that you've know for 15 years, or 20 years, or 30 years. You're comfortable with what your security is. That's basically something that you realized and decided on that first deal. Is that correct?

Dawn Rickabaugh: No, I wish I could claim that. It was more like that deal educated me and brought all of my abstract thoughts about it into real life. Because that was their plan. They would not have taken all cash, or a bank loan, even if I could've got it. Which I couldn't have at that time. It was their idea. They said "Honey, we haven't even paid off our house." This commercial building we paid it off free and clear because we knew as part of our retirement that we were gonna charge seven percent interest and deffer our capital gains and use this for ... To supplement our retirement income. And so honey, we're not even gonna take cash. This is how it is. So it was ... The only funny thing was, is that their attorney ... And I'm new, right? So I'm brand new. It was my first owner financing deal. I didn't really ... You know ... This was in 2002 and I didn't quit my nursing job and go down this note queen path until 2004. So yeah, so it was there. Their attorney though really didn't get it. And me, as a novice at that time, I corrected his number and his paperwork three times. So that's where I learned not to be intimidated by attorneys. Because I can use those five buttons on the financial calculator.

Ron Happe: Right. He should've attended your class. Or he should now, lets say. So all right, and even more fascinating is the first deal was a commercial deal.

Dawn Rickabaugh: Yeah.

Ron Happe: Maybe most people listening would not even make that leap to go from real estate agent to putting together a seller financed commercial deal. I think that as, looking back on it, you're probably very thankful to that seller. That they pretty much introduced you to a business model that you took and ran with.

Dawn Rickabaugh: Exactly. And then during that time of working with these rehab or flipper guys ... I was doing all this cold calling, and I would call all these people, time after time, after time. I'd talk to just dozens of older people who had acquired a small portfolio of rental properties that are free and clear at this point, but they were getting tired of managing them. But they always said the same three things "Well why would I sell for cash? I don't want to pay capital gains, I need income for retirement, and I need to leave a good inheritance to my kid." And so finally it dawned on me after all these calls and all this kind of market research that I was informally doing going "My job is to educate those people. Because nobody knows and their CPA is not telling them, and their attorney's not telling them." That owner financing in a lot of these cases would be perfect for them. Because they could double the money, at least in the Southern California market ... Every time I calculated it they could get double the income on a passive basis than they were getting on a rental basis. And then have basically, an easy care free life. Free to either travel, or care for their aging bodies or whatever it is they were into the most.

Ron Happe: Yeah, right.

Dawn Rickabaugh: So then I go "Wow, my job." And then the notes I was starting to attract in the beginning, they were just not good notes. And so I'm going "People just do not know about ..." They don't know about owner financing and notes. And none of the professionals that are counseling them are doing them much of a favor in general. So that's where my whole business, if I want to be in the note business, I've gotta become an educator. Just, you've gotta share the message. Some how in a way that people can access it, or assimilate it or something. I don't think I'm that great at it, but I like the challenge of it anyway.

Ron Happe: So you said a couple of things there that I'd like to expand on. And I think probably the people that misunderstand it or don't understand it the most are the real estate agents that you might have to do with ... Deal with. So can you ... lets just go through, first of all, the benefits to the seller of the property. And then secondly, to the benefits of the buyer of seller financing. What, in your opinion, are the benefits ... Why should a seller consider seller finance? And why would a buyer, where would a buyer come from for seller finance. And then we'll talk about how you put the deal together.

Dawn Rickabaugh: Okay, great. The sellers benefits are those three things that I mentioned, that I got from all those cold calls. They want to deffer capital games so you can use installment ... The installments, IRC, internal revenue code 453, I believe. That allows you, if you take the payment for your property on an installment basis, meaning carry paper on it, you can deffer the capital gains. So someone who's on their property for a very long time, this can be a very significant amount of money that they can save from sending to the IRS upon the sale of the property. Number two, they can create income for retirement, that usually, most people cannot make more than even 5%. Most average people, on a completely passive basis just stick it somewhere. These days it's hard to get a return like that. So even if you just get five percent, and you get your price ... See if you offer the terms, it helps you also to get your price and to sell more quickly. 

And so that can be a really great thing to do. And then you leave a really great inheritance for your kids. They are receiving a hassle free stream of income versus a property that needs to be managed, and fixed up, and maintained and all that kind of stuff. So really, owner financing can help someone sell for top dollar, quickly. So the best possible price, the quickest. And if they structure the deal property they have very little risk. So it's not for everybody. There's some people where they think that they should carry, and I hear their story and I said "No, drop your price 10% and sell for cash right now. That's what you need to do."

Ron Happe: People are going to go to bed every night worrying if they're going to get a payment or not ...

Dawn Rickabaugh: No, it's not right for everybody.

Ron Happe: Yeah. But those four areas there are extremely important. They're ... Especially the long term income that comes. Because today there just is no place, like you say, even under the best circumstances. If somebody's 100% passive, 5% ... A lot of people think "Oh, mutual funds." Well the average mutual fund has returned like 4% over the last 10 or 12 years. 4% annually. Not many people would want to live their retirement on a 4% return. So and that'd be after they've pay their taxes on it. So yeah, those items are huge. Now from a buyers perspective ... Where does the buyer come from and why?

Dawn Rickabaugh: Well, I'll just use myself as an example. For me, I've drawn a line in the sand. I do not work with banks. I do not borrow from banks. The only reason I have a bank account is because I have to do business and that's it. So I don't ask a bank if I can close a deal, ever. I kind of got to that point after that year of trying to do short sales back in 2006-2007 where I wanted to shoot myself in the head after that. But anyway, because as a self employed person, even though I'm making great money, I'm just not going to subject myself to that. So when we moved here to Carson two years ago, we moved out of Southern California to Carson City, Nevada. In that Reno, Tahoe area. Yeah, I'm sorry about that. Turn off the phone. 

You know, we were renting first and then we decided we wanted to buy the house we were living in. But I told the guy, 'cause I don't keep my money laying around lazy. It's usually deployed in some sort of asset that's not entirely liquid. So I said "Look, I can come up with 30% down, but I need you to be the bank for me." So because I don't want to go through the hassle, or the expense, or the grief of wanting to tear my hair out asking for a bank loan. And I just liked the mom and pop solutions. And if something goes terribly sideways, a mom and pop, or someone who's like you and me ... Are going to work together on something that's reasonable, where you cannot get a common sense solution through a bank generally. A large institution, that whatever they pay their employees ... I don't know. If something goes really bad most of the time a real person that's on the other side of the table will work a sensible solution. Just like I do. 

When people are paying on notes to me and they have a situation, I can do the underwriting. I can work with them, I can modify them. So whether I am creating a joint venture for taking out a piece of real estate, or for taking down notes ... Which is the bulk of what I do. That's ... I'm never ever going to ask for a bank loan or a bank line of credit. It's just ... I don't do that. It's just one mom and pop to another. And to me it's the people that, they're the ones that need the solutions. They need to be able to retire than more no cat food. So they're scrambling. Like how can I get my money to safely work as hard for me as I can. Within reason. So why should I grow a hedge fund's bottom line when I could make sure that somebody is able to retire comfortably down the road. That has a lot more personal value to me overall. So that's just me. That's my line in the sand. I'm just ... Maybe it's small time, even though we have a fairly sizeable portfolio, but, you know ... I sort of think of myself as just small time, simple. Maybe I'm even a redneck now that I've been in Nevada for a while. I don't mind.

Ron Happe: Nothing wrong with that. All right. You, I know are a significant investor in these seller financed notes. And before we get into how you are compensated, how you got compensated on that first commercial note, how you get compensated today on the deals that you do. Can you take us through, if there is such a thing, a typical seller financed structure of a deal. Let's say that you have a house ... I guess let's say that it's in Pasadena, and you're going to structure a seller financed deal for the seller and put it together so that a buyer can understand it and wants to do it.

Dawn Rickabaugh: Okay, so if I'm working with the seller and they're saying "Hey, I'm gonna sell my property with owner financing."

Ron Happe: Yeah, let's say they've approached you and said, just because of your reputation and somebody said "You know, you ought to talk to Dawn Rickabaugh." Maybe it was an agent that has done a deal with you before. And they're approaching you to help them put together a seller financed deal.

Dawn Rickabaugh: Okay, fantastic. And that's interesting that you say that because an agent ... There was one agent that I worked with when I was still living in Southern California, and we worked on a couple deals and wow. That just really turned into a great relationship. And even the 1031 exchange, intermediary always calls me when there's a 1031 that requires an owner carry and then ... Simultaneous sale of the note and things like that. So it's not ... you mentioned that realtors have a hard time getting their heads around this and it is true. I thought they would be one of the best lead sources, but they tend to be not that all the time. But it's unfortunate, but it's just how it is.

But okay, if someone, lets take some numbers ... So basically you've got ... Okay, tell me what you have, usually they have an idea of the- the sales price is always agreed upon and the amount of the down payment. And I like it if they haven't inked it already. Because after they ink it there's not that much I can do. So the general guidelines is percentage of down payment. Because in my mind, the hard equity that you get is at the cash down at closing is one of the most important things. That's your protective equity. That's the cream on top of the glass of milk that tastes the best and keeps you the safest. Because ... There's a reason that conventional underwriting requests 20% down. Because statistically speaking there's a much lower risk of default and of financial loss if there is a default. 10% is considered decent down payment, but it's really for 10% to disappear. Depending on how the timing of the market, how they treat the property on their way out and all of that. 

So I would say ... Well first you have to figure out what is the most that the buyer can afford for housing? Because before you put the deal together, PITI. What's the most per month that they can afford without putting themselves at risk. Because you want to know that you're setting them up for success. The last thing that you want to do is be in a position where you're foreclosing on a home owner. It's a lot cleaner if it's an investor, you don't have to worry about that quite so much. But if you're doing an owner [inaudible 00:25:43] sort of deal, you're gonna want the biggest down payment that you can get, and the highest monthly payment that they can afford. You know, with the debt to income ratios you're going to have a ... Generally the cleanest thing to do is have a licensed mortgage originator underwrite that file for you. Because you're going to want to amortize it as quickly as possible. So the highest down payment you can get, the highest interest rate that they will agree to, and the highest monthly payment and the shortest amortization they can afford. 

So those things set the seller up ... You know, the buyer up for success, and the seller with a note that's a good investment, and it's worth holding or selling. Because in the event that they want to sell all or part of their note ... Meaning get some liquidity out of this paper asset, they will get a much better price if they've done all those things that make the note a good asset for holding, it will also make it more valuable for selling.

Ron Happe: Have you found ... You made some comments there about, you want the borrower to be able to afford it, you want to get a down payment that protects the seller in the event that the home owner doesn't pay, and he's required to take it back. How has the regulations of Dodd-Frank, the CFPB, and how does that influence seller finance, and what have you found ... let's say in your business, that's changed from before this became law, to today. And what would you say to the person that's gonna be you in Iowa, that they should be very, very careful of?

Dawn Rickabaugh: Yeah, so basically, since 2014 was that? January 2014 when that all dropped in? It's just something ... Before I never had to think about it, but now I think about it. And it hasn't really changed too much. Like I wouldn't say it was a dramatic effect- had a dramatic effect on my business. Because most of my paper is mom and pop paper. These are one off sellers that they don't ... Either it was originated before that date, or they are not ... They're kind of excluded from that definition of "loan originator" and so the people that ... There's a few guys though, that are the rehab or flipper guys, that every once and a while ... Their disposition of one of their properties, for example, I've got a guy in Kansas City, Missouri area, or Independence Missouri ... Is that the same area? Kansas City?

Ron Happe: Yes it is.

Dawn Rickabaugh: Yeah, so he ... Like all the time, he'll have a deal where he can buy a house for $35,000 all in with repairs. And he could sell it for $69,900. With 5 or 10% down and then he's going to want to sell off a partial to get his seed capital back. And I told him, I said "You've got to be working." Because he's an operator, and it's his business to do it, so I'm like "Mike, you've gotta get your files underwritten by a licensed mortgage originator." So that we can prove that we've proven the ability to pay and done our due diligence. Because to me that's where the risk is in the guys that are creating paper on a regular basis. The mom and pop paper, I like to see that it was set up like a win-win and it wasn't predatory in any way, and it usually isn't. But other than that that's all that's impacted me. And anyone that asks, I say "Yeah, go find yourself a mortgage originator." 

Me personally, I don't worry about it when it's one person selling one property and that's all they're doing. Like I said, if it made sense for both parties and it wasn't predatory or uneven somehow then I don't stress. Because I always ... This is just my opinion, but I think that if most of the time, this isn't always true, that if you do the right thing and have the good intent, it's very unlikely that you can't work out some sort of logical solution with someone if they run into a snag. I never like ... My business model was not to foreclose in my business. It's very rare that ... I definitely will, if someone defaults and they're not responsive. Batta bing, batta boom. There it goes. But ...

Ron Happe: Well, I think the fact that, if there's any gray area on it at all, that you would go to a mortgage originator. Most of the people are doing it once, they're not like the guy in Kansas City, who's doing it as a business. And I'm sure that if he goes to a mortgage ... If he goes to a licensed mortgage originator then he's laying off that responsibility to that mortgage broker, who knows how to go about complying with these things. So it really- and that's a major obstacle for agents and brokers who are afraid ... They seem to be overly afraid because they don't understand it, that they're doing something ... And in fact I've had people tell me "Oh seller financing is illegal."

Dawn Rickabaugh: I know.

Ron Happe: And my comment to them is "You're doing your seller a real disservice when you don't offer, at least the opportunity for them to save on the taxes and have a nice cashflow for the rest of their life and maybe 15 years of their heirs life." So, okay. So we've covered some heavy topics there and now I want to get into the real fun part of your niche business, as I understand it. And that is, how does the note queen earn any money doing this? Let's go back all the way to that commercial deal that you did first and then let's go through how your business developed to where you are today and how your portfolio was built and how you make money as the note queen.

Dawn Rickabaugh: Okay, good question. You know, that first commercial deal, we were owner occupants, because we needed an art studio that wasn't at the house where we had four little kids running around and knocking on the door all the time.

Ron Happe: So let's see, an art studio, a nurse, a guitar player, [inaudible 00:33:04] owner, when do you have time to work? I'm not sure that you can fit that in.

Dawn Rickabaugh: Yeah, well, no. My wife is the artist, and she was not being able to be very productive with all the kids in the house. And I wanted her to be productive so I said "I'm gonna go buy you a building."

Ron Happe: All right, well, hey. Yeah, I hope my wife doesn't hear that.

Dawn Rickabaugh: Yeah, so that ... It ended up being, that one was just a great investment. Because at the time when we bought it for ... 385, and I think we sold it for 750 by the time we were done with it. So in that case we did pretty well on it.

Ron Happe: But that was through appreciation and not really through your seller finance part of it.

Dawn Rickabaugh: No, it wasn't. So ... Is there a weird feedback loop that you're hearing? I'm hearing a bounce back.

Ron Happe: I'm not hearing it.

Dawn Rickabaugh: So as long as it's okay on your side. So That road to the queendom, I said I kind of took the short bus, because it really took me from 2004 ... So I would say five to six years to really catch my stride and figure out how I was going to just find my way. And there's so many ways that you can do it. So I would- first I was doing the thing that everyone tries to do. Try to broker a note. You know? I just figured that's what they were always teaching, and so I was always trying to broker a note, get it under a contract, try to sell it to someone else, and make the spread. Just like the wholesalers do, when they get a property under contract the want to assign the contract for a fee, it's very similar in the notes. You get it under contract at a certain price and you sell it for whatever you can get in the middle. Whether it's $1,000 or $50,000, whatever it is. And I just ... You know, I did a little bit of that, but it just wasn't consistent enough at all. And finally I ran into a guy named ... he's past on now. Do you know [Henry DeVorkin 00:35:13]? He was ...

Ron Happe: Oh yes, I, yeah.

Dawn Rickabaugh: He kind of took me under his wing, because I just loved this thing, I was passionate and I was just kind of too stupid to quit. So it was just about failing forward enough. And we need to become more and learn more as we're making transitions in our lives. But almost just as important, or maybe more, is to unbecome. The art of unbecoming. Peeling away the parts of you that aren't really authentic and aren't really you, so that all that's left is what's really you. And your passion, and your authentic self, and what you're here to do and give to the planet. You know? Why are you here, what are you here to get, how are you here to serve. And so if you get clear down to those things and you're ... You get yourself an alignment, it's almost like you've become a long for the ride instead of clawing and scratching after every little time. 

Like I did that for five years it seemed like. It was ... I made some money and then ... Nothing. Up and down, and up and down. And I was like "Okay, I've had enough of this." I started, I was scared to death, but Henry DeVorkin said "Honey, why don't you quit trying to broker those notes. You need to be an investor. What you do is you get a friend of yours to put up the money." Because by the time I got to the point, I'm ready to invest in notes. I've blown through all my personal assets. I had ... You know, just keeping the household going with four kids and two mortgages and three dogs ... Basically I didn't have a lot left at that point. So it's like "Okay, I need to use other people's money." I didn't know it at the time, but what a blessing just to learn how to put deals together that way. 

My first little note, I was all scared and I called Henry and I said "Henry, I'm really scared." It's just a little note, it was like a $30,000 note. Property was worth $60,000 and I was gonna buy a partial. And it was at a 25% interest. And I borrowed money from a friend at 15%, which is high.

Dawn Rickabaugh: I would never pay that now.

Ron Happe: Better than 25.

Dawn Rickabaugh: So I was making 10 point spread, but it was on a weenie little note. But it was like ... I don't know, $100 passive income out of thin air. So it's basically like "Hey, I found the deal and I'm gonna manage the asset. You put up the money and I create the yield spread." So if I bought the note at a price that gives me ... In this case, my first teenie weenie little note was 25% interest, or yield, by the time I discounted it, and I paid him 15, so I made the spread there. So that's a very common way that I do it. It's very rare for me to take a note and just flip it to someone else because just like ... I got really tired, back in 2006, of trying to get approval for short sales. There again, there's a bank telling me whether or not I'm going to get paid for how hard I've worked the whole dang year. I don't like having to count on some other institution or some other note buyer to close. I want to know that if I say I can pay this price and I'm gonna close on this time, that that's gonna happen.

So what I decided is "Okay, well that just kind of went together." And then another one came up, and then someone else wanted to get in on it, and then someone else wanted to get in on it. So basically it just became an easy flow of people that naturally wanted to invest with me. And I was at the point where I'm ready to say "Hey, I'm gonna do this. I'm gonna be the underwriter. I'm gonna do this deal. I'm gonna decide what we're gonna do, what we're gonna pay. And I'm gonna manage it and work it out and see how this goes." You know? And you learn a lot more about the note business by managing a portfolio than you do just brokering. And it's so much of a deeper experience and education. So it's very rare for me to just sell off a note. So basically I have investing partners that come in with me, just one off on each deal. Sometimes I take them down myself. Especially if I think they're not the most conventional thing. That's just my money. But if it's a super, almost brain dead sort of 50% investment to value, really hard to lose money unless there's an alien abduction of that subdivision or something like that ... Or a terrorist attack. 

So just lots of people, there's a lot of money looking for a home. They want to do business with someone they know, like, and trust. And they don't want to do the note business themselves. I can't make money on people who are looking for active investor yields. I'm looking for the people who are like "Hey, my only other option is so much risk in the stock market, or 1% in the bank. Right now I would say I'm paying 8-9 sometimes 10, like on a commercial deal, or something that's a little longer term or something like that. But most people are just thrilled with that 8-9% just getting the payment.

Ron Happe: I think ... When we were having coffee one day, you had mentioned that ... I thought this was fascinating. That you ... Some of your notes have a $40 a month spread, some of them have $400, some of them have $4,000. And I think somebody that wanted to do what you do, really needs to have that attitude that "I don't have to hit a home run on these, I just need to pile one on top of the other." But to have a really nice portfolio and income.

Dawn Rickabaugh: Yeah, that's the thing that changed my life, when I quit chasing the big sexy money ... Not that I don't think it's fun to get 10-20-40 thousand dollars in a chunk. But to me, I like the turtle approach, not the hare approach. So as soon as I implemented Henry's advice, from that first note deal where I just had maybe $80 or $100, passive income. And I said "Well all I want to do is have a little more passive income this month, than I had next month." And then I just want to ... Even if I just added $100 more I would feel successful. And then a year and a half later I looked back and I had ... And this is none of my own money, this is all on top of investors money. So my passive income is basically my [inaudible 00:41:47] equity. And what I've ... So I had my- the PITI on my primary residence in Southern California covered on a passive basis after just 18 months. That was a game changer for me. Because then I had, I created a base salary for myself, so I'm not ... even if nothing happened for a month or two I'm not scrambling. Because I had my basics covered just on a few little notes, just a little more passive income than I had last month. So that is what I mostly do, so yeah. 

Sometimes I can take more out of the front. Let's say ... I'm gonna share one deal that we just did recently, where .. So they just needed to sell enough of a partial to buy another property. So basically, let's say the property value was $400,000, they only needed $155,000 from me to make their deal work. And so I think ... So I'm very safe, I'm less than 50 cents exposed there. And so I'm gonna put out $155,000 here, I'm gonna get $1,700 a month, and I'm gonna get $155,000 out of the balloon. I bought a partial of the balloon three years down the road. Well, in that case I could've said "Oh, I'm gonna bring my investor in at 155, and I'll only have to pay them $1,400 a month." And I could've had $300 a month easy, maybe even more, I don't know. I'm just pouring it out. But I said "Gosh, I need a little eat money, or I've got another thing I'm investing in." 

So I brought my investor in at 165, they're still below 50 cents on the dollar, but I got $10,000 up front ... And let's say my passive is now 150 or 200 a month. So I got paid $10,000 up front, I keep 200 a month and I probably have something in the back end, too. I can't remember. Or I could say "No, only bring in 150, I'll put in 5." It just depends, do I need more cash money now for a project I'm doing? Which, I do have a big project where I need a lot of cash, right here locally. But otherwise I'll leave it in the monthly payment and in the back end. Because that's what starts to change your life, really fast. If you can just get into that mindset.

Ron Happe: And that's a great philosophy because so many people waste all of their time chasing the big deal that never ever happens. "Oh, I'm gonna make $100,000 on this one." And yeah. Well it never happens. When they could've made $500 a month 50 times during that period of time. So that taught me a lesson when I heard you tell that story. So Dawn, any other things that you think that somebody needs to know that may want to get into the situation with ... Either with you, or do what you're doing? I'm going to recommend right now, that if anybody has an interest, that they get this book. It is a very, very good read. It's not heavy reading, it's pretty quick reading, but it's very thorough. And it lays out pretty clearly what Dawn has done and how she does it. And I think it's just really well done. And that plus the opportunity to get on her conference calls, her Saturday morning coffees ... Another good opportunity, you'll listen to other note investors, and some of the people that invest with Dawn, or have learned from Dawn, I think is very, very helpful. And that button for you to find Dawn's website's right here at the bottom. So Dawn, is there any other tidbits of information that you think that the people that are on this conference should know?

Dawn Rickabaugh: Well, I'll just leave you with ... And thank you for the plug. And I just created this app, for mobile devices-

Ron Happe: Oh the app, holy cow, that's way beyond my understanding. So ...

Dawn Rickabaugh: But anyway, if people would go to notequeen.com and ... It's so brand new I hardly know, but it's in the app store. Note Queen Capital. But in that case, the book you just held up, they can get a free pdf version of that entire book if they download the app. Plus they'll get a video of one of my mastermind calls, where I go over in detail using the calculator, how I think about deals and how I put them together and the profit potential. And then you can also get invited to those, I call them virtual coffee Q&A. It's an informal monthly mastermind. That's one of the funnest things that I do, I really look forward to those. So it's super fun to connect. Whether people are new, I've got a lot of people that come back on and help answer questions for other people. 

But for me, I just want to say, knowing the note business and then moving to a new area, like what I've done. I already have the disposition. I already know the paper side. So now that I want to acquire property here and do local business here, in my home town ... I have such an advantage. I already have my investing partners, that if I say "I want to buy this property." I've got any number of people that'll put up the money for it. And if I decide to do an owner carry, I've already got the people that will buy my paper. So I've been able to quickly ramp up, and I'm ramping up this year, to acquiring properties. Either ... I hate to say it, but I probably will have a little bit of a rental portfolio. I always thought I didn't want to be a landlord, but there is some sense to having a rental portfolio on some level. But I'm also able to give owner financing to a lot of people in my community that otherwise would be left out. 

So to me it's just understanding how the note business works. Even if it's not your 100% calling, it will give you so much more ability to put deals together, solve problems, and to make money. So to me, everyone just should know. It should be part of curriculum. Note queen curriculum. No, it's not me. But it's really important problem solving kind of thing. For me, what I want to do now is say "How do I make my community a better place?" And I have a lot of tools at my disposal to do that. And it's a really fun thing. I feel like I just get to play, I'm playing all the time. And it's fun. And ... Yeah.

Ron Happe: I am so impressed with number one, what you have accomplished, and number two, with your energy. I will say that I know for a fact that Carson City, Nevada, is a lot better place to be a landlord than Southern California. So I understand why you might have decided to do that, again. And your technical ability, the technology, having an app ... And to do that from Carson City, I'm overwhelmed. That's outstanding. So Dawn, thank you very, very much. You were very enlightening. I hope people will make contact with you, 'cause you have such a vast knowledge of this business and could be so helpful to people. I appreciate you being here. Hello to Christie, and ...

Dawn Rickabaugh: Yeah, she misses you.

Ron Happe: Yeah, [inaudible 00:49:52]. For those of you that wondered about that, Dawn's daughter worked with us for a period of time and is just a real sweetheart. So thank you Dawn, thanks for being here, hope to see you soon. Next time I'm up there we do need to get together and have lunch, or at least a cup of coffee. So take care, thanks a lot.

Dawn Rickabaugh: Thanks so much, Ron, I really appreciate it.

Ron Happe: All right.

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