Tracy Z and Fred Rewey with Note Investor

Intro: [00:00:05] Broadcasting live from the Business RadioX Studios in Saint Louis, Missouri. It’s time for Saint Louis Business Radio. Now, here’s your host.

Phillip Hearn: [00:00:18] So hello again, everybody, and welcome back to Doc’s Discussions here on Saint Louis Business RadioX. I am Dr. Phillip Hearn, and I’m kind of geeking out. I told my guests this today. So I grew up in a in a time where even family friends were considered aunts and uncles. So this is kind of my aunt and uncle on the seller finance side of the world. So I’m extremely excited to have Tracy Z and Fred Rewey here on the show with me today. How y’all doing?

Fred Rewey: [00:00:49] Good. Thanks for having us on the show.

Tracy Z: [00:00:52] Yeah, and Iove that you’re doing this, Philip. This is just wonderful. And thanks for having us on.

Phillip Hearn: [00:00:57] Yeah, no, I appreciate you guys’s time. So I want to kind of take the listeners through how we got you to to today. So tell us about, you know, your background kind of how you got started in the business of real estate, but seller notes in general?

Tracy Z: [00:01:13] Well, we had two different paths and then we ended up meeting our paths, ended up joining both business wise and personal wise. Right. So do you want to start? Yeah, go ahead. All right. So I got started in 1988. I moved from a small town to the big city. I’m using air quotes here. Big city, Spokane, Washington.

Fred Rewey: [00:01:33] It is radio, so you got to tell them what do right.

Tracy Z: [00:01:37] And I had some background in real estate, but not a lot, a little bit from the title closing perspective. And so I went to work for a company that bought and sold seller finance notes. And the gentleman I went to work for had been doing it for 40 years. And now fast forward to today and I’ve been doing it since 1988, so over 30 years. So I got started buying and selling seller finance notes through that company. I did it through the company for ten years and then we started our own company in 1997 that buys and sells real estate notes, and we’re honored and fortunate to get to share some of these ideas and concepts with people, which is how we got to meet you. And along this journey, I met Fred, so I’ll let him tell that part of the story.

Fred Rewey: [00:02:20] Yeah, so mine’s a little different, although I started about two years later in the industry than Tracy did, which I don’t think she lets me forget. But apparently that’s a that’s a key extra two years, 1988 to 1990. But actually I was living in the West Coast and I was really just trying to figure out I didn’t have any background in real estate in order to my parents, obviously at that point. And I was really just trying to find a way to buy a house. So I happened to take a class at a college at night and it was on buying homes. And the gentleman that was teaching that has since passed away, but his name was John Richards, and he’s kind of an icon in the note industry way back. And I happened to be his class. He was the one teaching it. And then in one week period during that semester, he taught us notes and he taught us the financial calculator. And I just thought that was the coolest, most empowering thing ever, that, you know, even if you even if you don’t ever pursue notes, which we’ve done our entire lives and you certainly know this from a cash flow perspective, just knowing the financial calculator changes how you look at everything. It doesn’t have to be a house, it could be a car, it can be a credit card, it could be anything.

Tracy Z: [00:03:24] It can be a bobcat. We’re going to work that story of yours in.

Fred Rewey: [00:03:27] It can be a bobcat. Yeah. Yeah. So, Bobcat, the the equipment, not the actual cat.

Phillip Hearn: [00:03:32] Yeah, not an actual bobcat for the people at home. That would be.

Tracy Z: [00:03:35] Weird. Now, let’s not put ourselves here.

Fred Rewey: [00:03:37] But we’re not. We’re not rolling it out. We’re not. We’re just saying. But So anyway, I learned about notes and I thought, well, this is. This is really neat. So then I said, Well, when I when I have my own money, I’m going to definitely invest in notes. And John said, Well, why wait till when you have your own money? And I’m like, Well, how would I do it? And then he talked to me about just, you know, find the notes and flip them onto an investor. So I was kind of like that annoying, you know, that that Warner Brothers cartoon that’s got the big dog and the little dog yapping around him, I was kind of that probably, too, John Richards for about a year. And he kept just giving me information. And then and then finally he was I think he basically fed me my first deal. I think he referred because I don’t know how the person heard him, but I declared myself a business on a 500 square foot apartment and started doing notes from that point on. And then eventually was was doing well. I went to work for the same institution that Tracy was actually at, which is where we met. And then, you know, we left in 97. Basically, the one thing we couldn’t do was buy notes ourselves because it was a little bit of a conflict of interest working for the, you know, one of the largest note buyers in the nation. So we said, you know what? Let’s just let’s just go do it ourselves. And it really wasn’t to make more money because we were we were making plenty of money there. It was really just independence and flexibility. And so now, I mean, you know, now it’s weird. It’s weird, like Tracy said, you know, to be the ones that, you know, we have over 30 years of experience. It’s really strange to be those older people now. I don’t feel older, although yesterday was my birthday, but now, so I guess I am older. But I mean, yeah, it’s all weird.

Tracy Z: [00:05:03] Well, in 97, so Fred and I met through the note business. We had the same boss. Neither one of us were each other’s boss. But in 97, we decided to get married and to start our own company and to quit our. Two jobs, you know, Hey, what could go wrong? What could.

Fred Rewey: [00:05:16] Go wrong? Just push it all into a great idea.

Phillip Hearn: [00:05:19] Right, right.

Tracy Z: [00:05:20] Right. Yeah. We’re still married 25 plus years later. And. And still nobody is the boss of either one of us. And we love this business, and we’re excited to be here to talk about it.

Fred Rewey: [00:05:30] Wait a minute. I’m not the boss.

Phillip Hearn: [00:05:32] Yeah, Fred, we meant to slip you that note. Oh, that wasn’t even.

Fred Rewey: [00:05:38] That wasn’t even the show. Yeah. So we’ve done this for so long now. We’ve seen all the cycles. And so when we first entered, everybody that had been doing it, you know, as long as us or longer was saying, Oh, don’t you know, this industry survives. And both, you know, good economy and bad economy and real estate going up and real estate going down. And it all sounds good because I think every everybody that’s trying to tell you about a business will tell you that. But the reality is not true. But we’ve lived through it now, and the only thing that changes, you know, the seller Carryback financing is roughly 4%, give or take of all real estate transactions involve seller CARRYBACK financing. And the only thing that changes in a up economy or a down economy is the motivation of the person creating and or selling the note. You just get different types of people. So we’ve we’ve done this our whole life. A matter of fact, you know, since about 2000, I guess since about 2000, 2003, we just decided to want to be more mobile so we could still do this business and be out of the country for a month and go somewhere or go on vacation and still do it. So it’s been great.

Tracy Z: [00:06:40] And one of the things I love about it is just the financial calculator side, because if you understand the concept of cash flow and you can apply it to real estate or all sorts of things. And so that’s how we met you. Philip Right? You got interested in seller financing?

Phillip Hearn: [00:06:55] Yeah, Yeah. And as you said, the financial calculator. I can see that lesson in my head. I took that training probably 20 times in a row and just went, wait a minute, did I read this right? Did I see this right? But it’s such a massive component because I love how you guys bring up that it doesn’t matter the end product, right? It could be a house. It could be a car. It could be a piece of equipment. It could be whatever. It could be a business. Right. We talked about those as well, where you can insert that into the financial calculator. I say it like this. We all had the math class where you solved for X, right? This is the real life version of solving for X. So I can actually say my math teacher taught me something beyond the basic arithmetic that has outlasted what I thought it would, right? We’re solving for X at every point in time, so that’s the coolest part about it. So take our listeners into the concept of notes, because I’m sure they potentially mean they they see it every day. We do know that. But don’t think they understand the depth of what notes can become. Can you kind of give them a good snapshot and kind of give them a guide of when you say notes, what comes to mind?

Tracy Z: [00:08:00] For us, notes are backed by real estate. So most people are are used to a note when they think, I’m going to go borrow money from the bank to buy a home. So notes just a promise to pay. And that note can be backed by some security or collateral. So if you buy a home, that promise to pay is backed by the house. If you don’t make payments, the bank has the right to take back that collateral, which is the house. A note can be backed by a car or a boat or a piece of equipment, or it can be backed by nothing, which is called an unsecured note. We don’t play in the unsecured notes. We prefer notes backed by real estate. We can come at these. You can originate notes under certain laws and restrictions which we won’t deep dive into. But I just mention that for people. Or you can go out and look for existing notes. And so we go for seller finance notes. It’s a niche. It means a seller sold a piece of property and let that buyer make payments to them over time instead of getting a bank loan. So think of it kind of as an IOU or layaway program for real estate. So instead of the bank being the person getting the payments, the seller of the property gets the payments. Now the seller gets some advantages, the buyer gets some advantages. But in essence, that’s a seller. Finance note. It’s still documented with a note and a deed of trust or a note and mortgage, depending on what state you’re in. It looks the paperwork looks similar to bank paperwork. But but what it does is it gives people an opportunity to buy a home that maybe might not otherwise have been able to. And it might surprise people that there’s actually, on average 25 billion with a B seller financed paper created every year in the United States. So it’s a bigger number than most people realize.

Phillip Hearn: [00:09:49] Yeah, no, that’s a huge number that most people realize. And so I think it’s interesting, too, that you talk about that there’s so many niches and ways to kind of play in the spaces. Tell the listeners what are some of the favorite ways that you both and you and your teams play in the space itself?

Fred Rewey: [00:10:07] Yeah. So, I mean, the most common, the bread and butter of it really is, is just a residential house. If I owned a house and I sold it to, to you, Philip, and, you know, you just agreed to make me the payments. Um, you know, you might see a sign if you’re driving along. It says for sale by owner. That may be somebody that’s trying to avoid using a realtor. The owner will carry is somebody that’s an indicator that they’re going to carry back that paper or potentially carry back that paper. So a lot of what we’re looking for is to buy a note. And if, say, I sold a house and I carried back a paper and you’re paying me every month, that sounded really good until something changes in my life and I’m receiving those payments. And a year goes by, two years go by, and all of a sudden now I want to buy a car. I want to I want to send a kid to college. I have medical bills, whatever it may be. And so now I need I have the need to sell that note. And that’s where we come in or somebody that comes in and, you know, flips it on to somebody like us or someone else that buys them and that’s somebody that can help them liquidate the note, someone willing to step in and take over the payments and give them a lump sum of cash. So our bread and butter really is a single family residence that is either owner occupied or maybe somebody bought it to use as a rental and they’re making payments on there. The neat thing about this industry is it’s not everything doesn’t have to fit into a box like a bank.

Fred Rewey: [00:11:25] A bank. It’s like, okay, you better have this credit score and you better have this equity and you better have this, you know, this location and all this other, you know, all these other things. And we’re a lot more flexible on that. So we might you know, we look, we’re not necessarily always dealing with the best credit payer, not the person that sold the house, but the person making the payments. But they may have lived there for five years. They may have built up equity by now. There’s a lot of people that will miss a payment on their cable bill or their visa or something, and they’re never going to miss a payment on their house because that’s their house. And that’s just the genetic makeup of how they, you know, they do their payments. So, you know, we don’t have to buy the whole note. So, you know, a lot of times we’ll buy only part of the note. So someone may be owed 300 more payments and we may just buy 100 payments worth to get them the money they need today to go do whatever it is. And then after 100 payments go by, they get the note back and then they can sell it again or move on. But I would say real estate notes are probably the most popular. Then you start to get in a little bit of commercial, sometimes land. But, you know, we get to set how much we want to be in on the property. And that’s that’s kind of important from a risk standpoint. Yeah.

Phillip Hearn: [00:12:32] Absolutely. So let me ask you this. And you guys have a unbelievable knowledge base as long as you’ve done it, but as long as you’ve done it successfully, how do you look at your underwriting policies when it comes to digging into the notes? Right, Because I’m sure you guys get deals that come across your desk a ton every day, but there are some deals, like everything else that stand out more than others. Take us through that process of what that underwriting piece looks like for you and your team.

Tracy Z: [00:13:01] We like to look at some key factors, one being how much equity does that buyer borrower have? So a lower loan to value if they’ve got some equity. So if a house is worth 100,000 and they owe 80,000, they have 20,000 of equity. Maybe they have that because they put a down payment. Maybe they have that because they’ve paid down their loan balance through amortization. Or maybe they have that equity because home values have gone up as we’ve seen in the last few years. So someone that has something to protect skin in the game. That’s one indicator. The more they have to protect, the less likely that they are going to stop making payments. Or if they get into a bind, they have some options. They’ve got some equity. Their backs not up against the wall. They don’t owe $100,000 on a $100,000 house. So that’s the first thing we look at. We also look at seasoning, which means how long have they been making those payments? As Fred mentioned, if somebody’s been making payments for five years and they’ve been making them timely, that that’s a good risk because they’ve shown the ability to make their payments. We do look at their credit score, but that’s already been established. We’re not making new loans. We’re buying existing ones. So we look to see if there’s other compensating factors for that. So those are the main ones. We also look at the type of property. Some types of property are more risky. So we look at that. All of that mashes together. We’ll buy notes that come in all shapes and sizes. We are looking for a return on our investment. So we do look at what the yield is. But if the interest rate on the note is low and we want to hire interest rate, it’s just going to affect what we can pay.

Fred Rewey: [00:14:37] Yeah, I’m going to say this for for when we look at it, it boils for anybody listening, it boils down to two things. And everything Tracy just said comes under one of these two things. There’s two two acronyms to know. One is ITV and one is LTV. So loan to value is, is how much do they owe and what’s the property worth? That’s the equity in the property. And then ITV is what’s the investment that I’m going to put in to the value of the property. And I’m really looking at it in two ways. Loan to value is what is the likelihood if I buy this, the payments will continue. The more equity they have, if they get into trouble, they’re more likely to just sell the property and then pay me off than they are to, you know, create a lot of problems or walk away and jeopardize losing that equity. And then the investment to value is in the event that they don’t pay. What’s the likelihood I’m getting my money back out of it? So, you know, if I’m only owed 50,000 and the property is worth 100,000, then if things go bad for whatever reason, I’m going to be all right. The property is going to sell for something around 100, maybe 90, maybe 80, but I’m only in the first 50.

Fred Rewey: [00:15:40] I’m okay. So but what Tracy’s point of going through those, which is very valid, is everything offsets. So when we show each other a deal, we’re just saying, you know, you’re looking at and go, okay, you know, like, okay, got it. There’s really not a lot of equity in this property, but hear me out, okay? So then we’re like, okay, give me a reason to buy this property. Show me something. I’m really going to like that. It’s, you know, they’ve been paying for a long time. There’s some situation. It’s undervalued. It’s probably, you know, whatever, whatever it may be. And that’s where things that’s where the fun part is, because you can really argue over or discuss, you know, kind of prove your case as to why you should do it. But I would say for us personally, on stuff we’re going to hold, we’re probably more conscious about equity where we are investment to value than just, you know, like, look, I don’t I don’t need to have a giant yield. We don’t chase a big yield because, you know, 20% of nothing is still nothing, as we learned a long time ago.

Phillip Hearn: [00:16:35] So, you know, that’s that quick math, right?

Tracy Z: [00:16:37] Yeah. Yeah. My financial calculator for that one. I think one thing that people often get confused about our industry is because we’re talking about the property and that’s our collateral, but we’re truly not purchasing the property. We’re purchasing that note mortgage or note and deed of trust. And really what we want are just timely payments. We we don’t ever have to touch. Think about the property. That was a good deal for us. So the buyer, the owner of the property is making the payments. They have the right to enjoy it. They also have the obligation to fix it up and to pay the taxes and to pay the insurance and deal with tenants if it’s an investment.

Fred Rewey: [00:17:16] Calls the bank when the toilet’s leaking or anything like that, no one gets to call the bank.

Phillip Hearn: [00:17:19] That’s my favorite line. Over all the years that I’ve heard you guys, that’s what made it click in my brain. You go, It’s a 3 a.m. issue. The toilet or the fridge is broken. Do they call Chase Bank? Yeah, No.

Fred Rewey: [00:17:30] One’s called Chase Manhattan Customer service. Hey, my toilet’s leaking or the garage door broke or any of that. That doesn’t.

Tracy Z: [00:17:35] Happen. Lock myself out at 2 a.m. when the bar where my kid flush their stuffed animal down the toilet. Yeah. They don’t call the bank for that now. Bank of America. Not Mr. Cooper. No, exactly.

Phillip Hearn: [00:17:49] Yeah, they usually don’t care about that. They’re like, mean get a locksmith and hang up the phone.

Tracy Z: [00:17:53] Right, right, right, right. Call a plumber. Get a locksmith. So. So we have the benefits of something backed by real estate without the hassles of owning. So we’re buying the right to receive those payments and we only look to the property if the people can’t make the payments. And that’s really a last resort, because if somebody gets into buying, they can’t make their payment. We’re like, okay, is this a temporary life circumstance? How do we get you back on track? Our end goal is for you to keep this property. If they can’t, then we say, Well, what is a way that we can allow you to get out of this situation so you can move on to the next situation? So we’ll look at a deed in lieu of foreclosure or maybe doing cash for keys, helping them move on in their life to what is a better situation or at the very last resort is we would have to take the property back. But that’s not our intent. Our intent is to be able to have a nice return. They get to own the property and make their payments and someday they pay us off and we give them a release of lien and satisfaction and mark their promissory note paid in full. And that was a good deal for everybody.

Fred Rewey: [00:18:52] Yeah, we’re looking at the benefits of real estate without having to deal with the downside. The downside, you know, the one thing we miss out on is we miss out on the appreciation. So someone buys a house and the value goes up, that’s fine. But I didn’t buy it for that. I bought it at a yield that I’m comfortable earning. And at the same time, you know, sometimes you got a question appreciation when you start talking about, well, there’s maintenance, there’s a new roof, there’s taxes and stuff like, you know, just because your property went up 50,000, it didn’t mean that over the five years or seven years, whatever, you didn’t pay 50,000 and other costs. But, you know, so but we get the benefit of real estate without actually having to deal with all the downside of it.

Phillip Hearn: [00:19:26] So I’m glad you brought that up, because what I meant, what I think of in the last six, 12, 18, 24 months, I call this silly season, right, in terms of folks, let’s just say paying 50 to 100 K over asking price. Now they’re sitting there like Tracy mentioned, with no equity. So you don’t have to then worry about, Hey, by the way, I know I paid over this amount, but now I got to worry about maintenance and you two have seen a ton of cycles. So take us through. There’s always the opportunity in you guys’s words, and I remember this from the training mailbox Money, right? You’re trying to create opportunities for mailbox money with all the different cycles that you you all have worked through and lived through. I mean, 2008 comes to mind when you say real estate in 2008, you see people still tense up. And how many years ago was that? Right now, we’ve gone through this scenario with the pandemic. So take us through how you still create that mailbox money no matter what the cycle is. And Fred, I know you tapped into that a little bit earlier in the conversation.

Fred Rewey: [00:20:24] Yeah, I think I think some of it is, is really like I said, where are we, where are we in where are we exposed in the property. If someone has equity, there’s buffer there. And as Tracy mentioned earlier, when we look at different properties differently. So if there’s going to be a downturn in market, one of the first ones to get hit will be on that will be raw land. So if we’re going to buy into a note with raw land, I mean, it may sell for $100,000 one day and it could be down to 50,000 the next day if things are really turning. That’s one of the fastest products that move the opposite way because it’s a lot of spec. It’s also the first thing someone might like, Oh, so someone buys a piece of property going, Hey, one day I’m going to put a cabin out on this property. One day I’m going to have my me and my kids are going to go out here and go fishing. Well, when times get tough, that’s that’s that one day is the first thing to go. Because now, now today I got to pay my bills at home or whatever it is. So. So those are the first ones you start looking at what property do you own? And you keep a real close eye on that. And sometimes you lower it a little, you lower it, but over time you kind of stick to your guns.

Fred Rewey: [00:21:24] I mean, you’re not really looking at a 35% drop in residential. And I think naturally, also the category we’re in as far as the price point, we’re not buying the nicest house on the lot. You know, these you know, we’re not buying the $600,000, you know, note on a $800,000 house as much we tend to stick in to where it’s more I don’t want to say working class because that’s probably not right. But it’s affordable housing. It’s not it’s not super low. It’s not super high. It’s not going to be hit percentage wise, as strong as the other ones. And again, I would love to see, you know, go back to oh eight and stuff like that and really see the default rate among seller finance notes versus banks, because banks would rubber stamp a lot of stuff, you know, which is what got him into trouble in the first place versus, you know, some of the seller carryback stuff is a little bit more common sense underwriting. And you look sometimes you have to work during COVID, you have to work with the payer. Sometimes, you know, they lost a job and you know what? You just worked with them and go, Hey, what can you do? You know, it’s cheaper to work with somebody than it is to take back a property and try and redo it or have to get an attorney.

Tracy Z: [00:22:31] To fight them.

Phillip Hearn: [00:22:32] Right? Right. You can keep the attorneys out of it. You’ve probably done okay in the deals.

Fred Rewey: [00:22:36] But yeah, to answer your question, I would say, you know, look, we pay attention to most mostly to equity and then also maybe term. You know, if I’m buying into a partial, I may not do as big of a partial or I may do partial period where I normally would have bought a full note. And now I’m like, you know what? You know, this one’s kind of close. It’s a little gray area. We’ll go go to a partial. What do you think?

Tracy Z: [00:22:56] Yeah. And I also look at the opportunity of how can we help in these times that are coming. And we don’t have the crystal ball, but we do see and know for certain that rates have gone up and that as a result of the Fed trying to combat inflation and now we see that mortgage rates have gone up. And so it’s harder for people to qualify for a home loan. And that has helped with the silly season, as you said. I love that. When you first said that to me, said, Oh, that is a good description. Yeah, I don’t know how.

Fred Rewey: [00:23:31] I don’t know how else to describe that season. Yeah, that’s, that’s, that’s solid. I like.

Phillip Hearn: [00:23:35] That’s nuts. Yeah. Yeah.

Tracy Z: [00:23:37] Now that we’re transitioning out of the silly season and people are coming to reality of what interest rates are normally they’re they’re realizing that it’s a little harder to qualify sometimes for financing banks are being a little bit careful on who they lend to. They want to see a higher down payment and a better credit score. And so some very good, well deserving people are getting left by the wayside. And so I believe that seller financing, as has done in past years and the statistics show that there tends to be more seller financing when it’s harder to get a bank loan. There’s something called the Mortgage Credit Availability Index. The Mortgage Bankers Association tracks it. And right now it’s harder to get a bank loan. And when it’s harder to get a bank loan to buy a home, there tends to be more seller financing. It just makes sense. Doesn’t matter what the mortgage bankers say, just makes sense. If a seller selling a property in the silly season and somebody offering 50,000 over asking price, all cash, no contingencies, no inspection, they’ll pay all the closing costs. Why would a seller say, Oh, don’t worry, just pay me over 30 years? They’re like, No, I’m taking my cash and I’m going.

Tracy Z: [00:24:48] And so it makes sense that now sellers are just going to be a little bit more open to carrying back paper. Even though we did fine during the silly season, there were still 25 billion created every year. But we feel that there will be more created, which is more opportunity to help people. There’s one more piece we haven’t talked about yet and that sellers who are selling investment properties and they have a capital gains issue when they sell an investment property and the IRS for many a year has allowed for installment sales, which is seller financing. When you receive payments over time, you only pay your capital gains. Over time. So it’s a way for people to spread out their capital gains and lower it or eliminate it, depending. Talk to your own CPA or accountant. But that’s a that’s another motivation for sellers right now who are tired of being landlords, who want to cash in on some of the appreciation. Want to turn their rental income into interest income and defer their capital gains by using seller financing.

Phillip Hearn: [00:25:46] Yeah, and you guys keep proving it. There’s just so many ways that you can approach and attack different real estate deals that are more creative in nature. Right? We’re very structured to go, okay, like you said, go to a traditional bank, get a loan, here’s what we got to do. But opportunities with paper are out there and in abundance, which is amazing. Here’s another question I have for you, too. Are there specific states that you all look at deals in more than others? Take us through that, because, again, every state is its own its own ecosystem. Right. So how do you guys also work that into underwriting and looking at deal flow?

Tracy Z: [00:26:23] So we look at judicial versus non judicial. That just means how hard is it to foreclose and take back the property if you have to? Non-judicial states usually use a deed of trust and they tend to be a little creditor friendly versus debtor friendly and judicial states. You know, it’s a difference in judicial states. You have to go through a much longer drawn out process to get the property back. If somebody doesn’t pay you, they tend to be the mortgage states. So it’s the difference between, like I said, that’s our last resort. But most investors look at judicial versus non-judicial states differently. But that being said, notes can be bought in any state. You just have to understand, I mean, you know, on the far side, you’ve got a New York or New Jersey. It could take three years to foreclose if you had to. And on the other side, you’ve got a Texas, you know, that could just take, you know, six months or less. So, you know, that is a consideration. But people love the notes in all states. And so, you know, if it’s a good deal, it’s a good deal regardless of what state it’s in.

Phillip Hearn: [00:27:21] Yeah. No, I love it. And that’s a huge piece of understanding. The the judicial versus non judicial. That’s always hard for me to say, but that’s a huge component to at least having that understanding as you’re looking at those deals and go from there. So you guys have had this amazing career. You’ve also decided to share this knowledge in a very cool scenario. Tell the listeners a bit about note investing tools. How did you come about saying, okay, we know how to do this? We kind of want to share this with the masses. Take us through that.

Fred Rewey: [00:27:51] Yeah. Mean. I didn’t want to do it. No, I’m kidding. I’m kidding. No, no, I’m kidding. Tracy wanted to figure out a way. She was talking about a way to give back. So we always had on note investor early on lots and lots of articles. And so we were often approached of people in the industry. Well, do you, do you know, do you have a big live training? Do you have anything you can do on that? You know, do you mentor individual people? And so we just decided to try to figure out, okay, we put out a course, just kind of a soup to nuts on on, on note investing. And then we did. Then you did the book, the manual, if you will. And so then we decided to. Okay, well, what if we we kept having all these questions and all this content we were going to create. So we thought to people.

Tracy Z: [00:28:41] Yeah, so much so.

Fred Rewey: [00:28:44] And again, measure that with lifestyle, measure that with I don’t want to hire 20 employees and have this big training. So we decided to create a very small, intimate membership. That was a very we opened up the doors twice a year. It wasn’t going to be something that cost you, you know, $100,000 to, you know, fly in on an island somewhere or whatever, whatever people, you know. So we we created this membership. And so the first year we were we were like, okay, well, we’ll do two webinars every month and they’ll have a lot of content. We’ll build a PowerPoint, we’ll have documents, we’ll have whatever we need for that. And then we thought, Well, I don’t know what we’re going to do after the first year because we’ve kind of done all these videos and now I think we’re in the fourth year of it. We have 150 of, I think 150 of just webinars plus then we started doing, you know, based on questions and what people wanted, we would have deep dives and masterclass and, you know, calculating notes or creating notes because some people want to create their own notes as opposed to going out and finding them. So we created this membership and that’s what it’s become. So it’s basically it’s 97 bucks a month. There’s no length of time anybody has to stay. The doors open up twice a year. They open up for usually about 4 or 5 days, whatever people can get in during that time, unless we have to cap it off, we do it. We we do cap it just because we don’t outsource the help desk. So if the members, you know, if they get on online and they send us an email, it’s one of the two of us answering, It’s not outsourced to anybody. It’s not you know, you know, if you schedule a call with one of us and it just worked out really, really well. It’s a great group of people that now they’re doing deals with each other. And then we have we added the mastermind. You want to talk about that?

Tracy Z: [00:30:24] Yeah, I think for us it’s just turned into this really cool community and I didn’t know that’s where it was going to go. And it’s it’s fun. People get to we get to geek out and talk about the calculator and deals and problem solve. And we’ve met people like yourself from all over the United States and it’s it’s been you know, somebody showed us different people mentored us and showed us and it seemed time to do that for others. And in the process, our daughters also come along and joined in. And she’s part of the group now. And it’s just it’s been a really cool thing that if somebody told me this is where it would end up, I wouldn’t have known that. But it was supposed to be yeah, it was supposed to happen.

Fred Rewey: [00:31:04] It’s it’s crazy empowering when you when you get somebody that calls you and this oh my gosh, I just did this. And you realize it’s a result of your efforts of sharing information. And I’m sure you get it with like with the show and people you talk to and stuff like that. And it’s just like when you get that, you’re like, You know what? If it’s cool? If I could only help if I could literally change a thousand people’s lives, that somehow something changes in their lives, which automatically changes in their family, which automatically changes in their kids and generations. If you just affect that on on, on a certain number of people. And then if you can do it even more, even better, you know, even better.

Tracy Z: [00:31:37] But we’re in our 50s now and your motivation really does change. It really does. We’re in our 50s. Yes. Yes, you are. So this was.

Fred Rewey: [00:31:45] Radio. Nobody had a.

Phillip Hearn: [00:31:46] Way. Yeah. Nobody would have known. Nobody was going to know. Right.

Fred Rewey: [00:31:50] Air quotes 50s. Yeah.

Phillip Hearn: [00:31:52] Yeah. Mean I knew Fred had a birthday I didn’t even ask what birthday notice that So thank you. Yeah. See, I just let him go. Just. He just had a birthday, I will honestly say. And so I’m a little biased. I know. I ask you guys to be on the show. It is the best $97 a month that I spend. And I’m not even kidding because the amount of depth, the amount of, you know, solid membership, but just the information and you guys give the information in such a way where you go, Oh, that makes complete sense. There’s a lot of times you’ll spend and you know, we’ve all had those discussions about, you know, spending the money to be on some private island, and it’s like, you know, some wastewater treatment in the middle of America, but neither here nor there, right? Uh, where that happens. And, you know, you always are still asking the question like there have been plenty of times where I have personally reached out and go, I think I understand this. I got 85% of that. I need this last 15%. Tell me if I’m on the right track or where. Need to go. So am biased. But it is the best 97 bucks a month that I spend it bar none. Most information, most stuff. You guys are the catalyst for that. So thank you for what you guys have done with this.

Tracy Z: [00:33:02] Oh, thank you. Yeah. Mean like when you brought that deal that you had put together where you did a rap note on equipment instead of real estate. I was just like, wow, the creativity that people use. And so that’s what gives us that jolt. That’s cool. People are applying this in ways we hadn’t even thought of. So it is very rewarding. And and yeah, and you’re doing the same thing. You’re out sharing this information with others because the more we can take control of our own lives, take the money out of Wall Street, put it into Main Street, the more we all benefit because we both come from humble beginnings. We didn’t have somebody who showed us this. We had to learn the ropes the hard way. And so I think. One power that there’s still that opportunity in the United States. It’s easy to get frustrated by what goes on and wonder how we can make a difference or a change. And so I just challenge people, you know, you start with small things in your own life and you can help others in their path and their journey. It might be different than yours, but there might be some tidbits that you can share along the way. And so we’re having a lot of fun doing it. And that’s what this is all about for us now. I think, Philip.

Fred Rewey: [00:34:11] You made a really good point earlier. That was about notes, but you talked about deals being all around you When I learned this process, which ended up being notes. But we’ve done lots of other things where we’ve, you know, bought lottery winnings and, you know, all sorts of stuff, you know, over the years. But I equate it to it’s like, you know, people that feel like there’s no opportunity around them. We’ve I’ve seen people from all walks of life, all different educational levels early on. I’m human and someone say they’re going to do notes and I’m looking at and sizing them up thinking, Oh, they’re going to be great, or no, there’s no way in heck this person has a chance of doing it. And I’ve been wrong almost all the time, you know, So it’s just but I always equated it to once you learn the process or learn what should have been taught in school, the financial calculator and cash flows and money and decide which side of the cash register you want to be on. It’s like having a magic pair of sunglasses that when you walk around town now you can see all the opportunities that have been in front of you all along. You just didn’t have the mindset to see what they look like or identify them. And, you know, so, you know, people listening to, you know, shows like this and stuff like that, it just it expands that, that, that asset.

Phillip Hearn: [00:35:19] And I love it, too, because even as you both teach the concept of notes and how to use them, it doesn’t deter from how people can still attack real estate and almost and I’m going to say traditional I’m using air quotes now too. So I got to tell the listeners air quotes of traditional type work, like case in point, if you’re going to rent out a unit, right, to get it started now, you still have a chance to create a note for an investor who, you know, kind of that 50 over 50 rule. Remember, that was one of my favorite ones when I when I heard kind of how you guys described that create a loaded rental, sell that, you know, create a note for that investor. Now, they already know that they’re going to be paying for it because that renters paying their mortgage. Right. So all of those little steps where you guys are not only teaching this information, but you’re also not looking at people going, well, you shouldn’t do it that way because you hear a lot of gurus almost make it sound like you shouldn’t go down this route. This is the only route to go. And the way you guys deliver the information is so much fun because it allows folks to do it their way but still have a baseline of how they need to get that education. So I, like I said, best, 97 bucks a month. I spend it. Try not to spend it on frivolous stuff, but that that’s definitely a good one. So thank.

Speaker5: [00:36:31] You.

Phillip Hearn: [00:36:31] My last question for you too. So you’ve talked a little bit about this, but I want to tap into it for the listeners. How do you relax and recharge? Because you guys are always going you’re putting together this great content, you’re doing deal flow, but it sounds like you’re able to get into a little more travel and have a little bit more fun. Tell us about how you guys refuel and recharge.

Tracy Z: [00:36:53] Well, if you’re doing this, tell us. Tracy Well, yeah. Me because I’m like working. So sometimes work a little much. But if you like what you do, it really is fun. But I have found balance and one of the ways I find balance is I do take time. I like to be on the water. So I paddleboard, I do yoga. I’ve learned to meditate, which is really hard. And because you gotta sit still. So I tend to meditate while I’m on the paddleboard while I’m moving. Um, Fred likes to hit around a tiny ball with a long stick and see if he can get it into the hole.

Phillip Hearn: [00:37:31] That’s me, too, so don’t feel bad. Fred. Yeah, Some days it’s golfing, some days it’s digging to the center of the earth, right? Yeah.

Tracy Z: [00:37:38] We do. We both like to travel. We have a hard time since we’re a couple in business to find the quiet times when we don’t talk about work. That’s something we’ve had to work on over the years. What else do you like to add to that?

Fred Rewey: [00:37:53] I mean, I think travel is a big one. Look, I mean, it’s it’s, um, we’ve had we both love what we do. So even if we go to a vacation that is supposed to do nothing, usually by about the third day, we’re like, Hey, you want to brainstorm some stuff for next quarter? And so try that. So I wouldn’t say we’re really workaholics that way, but we do, you know, it’s this blend. I mean, you know, and I don’t remember who said it was one of the guys from Shark Tank that basically said, you know, when you have your own business, you’re willing to work 80 hours a week for yourself so you don’t work 40 hours a week for somebody else. And so but but I’ve also heard, you know, if you like what you do, then it’s not really work. And we do enjoy what we do. And there’s this balance. I mean, if I want to go golfing on a Wednesday in the middle of the day, if I don’t have any member calls or anything, I can I can go golfing. You know, if we want to take off and go somewhere. We were just in Mexico last week for the whole week and, you know, we logged on from there and did what we needed to do. And we actually for for us, for the first time, we actually had Marco, one of our members, run the mastermind, which is kind of a free for all session. So yeah, I mean, I don’t know. I mean, you know, travel is probably the big one.

Tracy Z: [00:39:02] I think what I’ve learned over the years is to make some time and space for yourself every day and don’t put your health and your mental well-being last, because when you’re owning your own business, you often do that. So I’ve changed. I’ve flip flopped it. Now I take time in the morning so nobody can take that away from me to to do the things for my physicality and my mental well-being. And so that I start off that way with the day. And I think when I start feeling worn out or frustrated or I’m not enjoying it or I don’t want to pick up the phone to talk to somebody, then that’s me telling myself, Hey, need to take a little bit more time for yourself. And so I think we just as we age, we can get a little more in tune with what our own signals are and to make sure you have that balance, because we love what we do. We hope we’re in our 80 seconds and somebody still wants to hear what we have to say. So we’re in it for the long haul and the longevity. So that means you got to maintain your health and your mental well-being along the way every day. You can’t wait and get that back later by abusing yourself now.

Fred Rewey: [00:40:02] No, like an example like we have tonight is a member call tonight’s a member call at 7:00. And, you know, so we started working this morning. We will actually probably stop about 4:00 in the afternoon and take a break, as opposed to some people will just keep working all day through all their 7:00. We will literally stop at 4:00. We’ll go sit out on the deck. We’ll look at the lake and stare out there for a while. We try not to have wine before a call, so we probably won’t have any wine before the call.

Phillip Hearn: [00:40:23] But I think it would make the call a lot more fun. I mean, I’m not drinking if you do, you know? But we have.

Fred Rewey: [00:40:29] We have an interview. We have to interview somebody tonight. So, you know, probably not the best, you know?

Phillip Hearn: [00:40:34] Yeah, that’s fair. Well, look at you being responsible. That’s a good thing, right?

Fred Rewey: [00:40:38] That’s right.

Phillip Hearn: [00:40:39] But I love that answer because I always. So that’s a question that we like to ask all of our guests. But it’s also interesting the most. The people that are in leadership positions like you two are with knowledge base and working with your members. That piece of balance is so important. And I think as business owners, as business leaders, we forget that little. So right. Sometimes it is smart to just go take a walk for 30 minutes and go, I got to stop, Right? As opposed to just trying to keep pushing something through that’s not working. So I love that answer because travel is a beautiful thing. Getting away again, the small ball, the long stick into the hole. Some days that’s great. Some days you’re like, Why did I torture myself to.

Fred Rewey: [00:41:21] One, go home. Happy shot.

Phillip Hearn: [00:41:23] That’s it. That’s it. Because other than that, it’s going to ruin the long walk that I’m having. Right. You know, so.

Fred Rewey: [00:41:27] That’s right.

Phillip Hearn: [00:41:29] I love it. So last question for you guys, and I really appreciate and I’m so excited that you guys were able to join me today. How do our listeners find you? Where do they go? What does it look like? How do they get in touch with you both?

Tracy Z: [00:41:41] Well, you can visit our website note investor.com. So not investor t o r.com. And I’m Tracy at node investor.com and Fred’s Fred at node investor.com. And that’s really the best place to find us we’ve got over 300 articles there and there we have information about our upcoming we have an annual free event online where we have speakers come and talk about how they generate cash flow. They’re not allowed to sell. We have an expo in the fall that centers around women investors. So all of those are the ways we give back. We put out our E-Letter. You can sign up for that for free. And then as Fred mentioned and you mentioned, we have our membership that we do as well and we go to different events. So if you just go to node investor.com, you’ll sign up for the free newsletter and you’ll get all that information as it comes out during the year.

Phillip Hearn: [00:42:34] Perfect. Awesome. Well, thank you guys. Again, like I said, I was I look forward to all my guests, but this one’s a little different, a little more special. So I really appreciate you guys’s time and sharing all the knowledge that you guys have given. So this has been amazing. We really.

Fred Rewey: [00:42:48] Appreciate it. We appreciate you having us.

Tracy Z: [00:42:51] Yeah, Thanks for having us and thanks for what you’re doing to keep sharing the information.

Phillip Hearn: [00:42:55] I appreciate that. So, listeners, this has been another episode of DAX discussions. I want to say thank you again to Tracy Z and Fred Rui. Again, just amazing. People go check out their website. The link will be in the in our website for the recording. And this has been Dr. Philip Hearn with Saint Louis Business RadioX. Take care and we’ll see you next time.