PDF Summary:Invest Like a Bank, by Beaux Blast

In Invest Like a Bank, Beaux Blast explores the vast opportunity of collateral-backed note investing—buying promissory notes secured by properties. With the U.S. mortgage debt market valued at over $10.4 trillion, Blast presents note investing as a path to steady income and economic independence.

The guide covers the mechanics of investing in both performing and non-performing notes backed by residential or commercial properties. Blast delves into strategies for sourcing notes, from online platforms to cultivating direct relationships with banks. He also provides insight on funding acquisitions through personal capital, leveraging others' funds, or developing a note brokerage business with minimal capital requirements.

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Practical Tips

• Create a personal ledger to compare prices across different platforms. Whenever you're eyeing a product, note down its price on various platforms and include any additional fees like shipping or taxes. This will help you spot discrepancies and avoid overpaying for items that are marked up from their original buying cost.
• Develop a habit of conducting quarterly reviews of your investment portfolio. During these reviews, assess the performance of your investments, paying special attention to the fees and expenses associated with managed funds. This will help you make informed decisions about whether to continue with a managed fund or move towards direct sourcing.

Networking With Banks and Financial Institutions

Blast strongly advocates for cultivating direct relationships with banking and financial institutions as a prime strategy for sourcing high-quality note investments at attractive prices.

Banks Sell Non-Performing Loans to Prevent Foreclosures

Banks often find themselves holding non-performing loans that they wish to offload to minimize losses and streamline their portfolio. Blast explains that engaging directly with banks gives investors access to these assets, often at discounted prices, creating a win-win situation for both parties. Banks shed their underperforming assets, and the investor secures potentially profitable investments.

Practical Tips

• You can streamline your personal finances by identifying and offloading unproductive assets. Just like banks sell non-performing loans, look through your investments, such as stocks or real estate, and consider selling those that have consistently underperformed or are no longer aligned with your financial goals. This could free up capital that you can reinvest in more promising opportunities.
• Develop a personalized investment tracking spreadsheet to monitor potential bank-discounted assets. This tool can help you quickly assess which assets are worth investing in based on your financial goals. Include columns for asset type, bank offering the discount, discount rate, and potential return on investment.
• Consider investing in community development financial institutions (CDFIs) which offer a win-win by providing financial services in underserved areas while also offering a return on investment. Research local CDFIs, understand their investment terms, and contribute funds. Your investment helps stimulate economic growth in areas that traditional banks may overlook, while you potentially earn interest.
• Create a 'bad buy' jar where you put a predetermined amount of money every time you make a purchase that doesn't add value to your life. This mirrors the concept of banks shedding underperforming assets by giving you a tangible penalty for unwise spending. At the end of the year, donate the money to a cause you care about, turning past mistakes into positive action.
• Form a small investment study group with friends or community members who are also interested in investing. Meet regularly to discuss investment opportunities, share research, and analyze market trends together. This collective approach can provide diverse perspectives and insights, which can lead to better-informed investment decisions when you're ready to invest actual money.

Accessing Discounted Notes Through Senior Bank Officials

Blast advises aspiring investors in notes to bypass lower-level bank employees and target executives like presidents and vice presidents. These individuals possess a deeper understanding of note portfolios and are likely authorized to execute note sales. While securing a meeting with these executives might require persistence, it yields far better results and opens the door to long-term relationships with institutions, securing a consistent flow of promissory notes. Remember, you want the banks to see you as the answer to their non-performing note problem.

Other Perspectives

• Building relationships with staff at all levels can create a more robust network within the bank, which could lead to more opportunities beyond just accessing discounted notes.
• In some cases, bypassing the usual process and attempting to contact senior executives directly could be viewed as inappropriate or aggressive, potentially damaging the investor's reputation and future opportunities with the bank.
• While targeting executives might seem advantageous, it could also lead to longer decision-making processes due to the need for these high-level officials to consult with their teams or follow more complex internal protocols.
• While persistence can be important, it's also crucial to respect the time and boundaries of busy executives. Over-persistence could be perceived as pushiness or harassment, which might damage potential relationships rather than build them.
• Executives often have limited time and may delegate relationship management to lower-level employees, which can be equally effective.
• Some banks may prefer to handle non-performing notes through bulk sales or auctions rather than through relationships with individual investors.
• The idea that one investor could be the solution to a bank's non-performing note problem may be overly simplistic, given the complexity and diversity of financial institutions' portfolios.

Making Connections Through LinkedIn

Beyond traditional networking, Blast emphasizes the power of LinkedIn in connecting investors in notes with potential sellers and partners.

Connecting With Note Investors and Professionals Through Introductions

LinkedIn's vast network allows investors to identify professionals in the financial services industry, including hedge funds and various financial institutions. Using personal introductions through mutual connections dramatically increases the chances of establishing a fruitful business relationship. This approach, based on trust and recommendation, can unlock a consistent stream of note-based investing opportunities.

Practical Tips

• Use LinkedIn's advanced search to identify and connect with financial services mentors. Tailor your search to find individuals with the experience and job titles that align with your career goals. Once you've identified potential mentors, craft personalized connection requests explaining your interest in learning from their expertise.
• Host a small, informal 'Introduce Me' gathering where each attendee brings along someone from their network specifically to introduce to the group. This creates a space where personal introductions are the main focus, and it can be as simple as a coffee meet-up or a potluck dinner.
• Start a "trust journal" to track and reflect on daily interactions that involve trust-building. Each day, jot down instances where you either placed trust in someone or had to earn it. Note the outcomes and your feelings about the interaction. This practice will make you more aware of trust dynamics and help you identify patterns in behavior that either foster or hinder trust.

Posting To Relevant Groups Boosts Your Reputation and Visibility

Blast further advises readers to leverage groups on LinkedIn dedicated to note investing, financial services, and property. Actively engaging in these groups by sharing valuable insights, participating in discussions, and showcasing your expertise establishes your credibility in note investing, attracting potential sellers who recognize your genuine interest and competence.

Other Perspectives

• The impact on reputation may be limited if the audience within these groups is not well-aligned with the user's target demographic or if the groups are not active.
• Over-posting or posting irrelevant content in an attempt to boost visibility can have the opposite effect, leading to a loss of credibility and potential removal from the group by moderators.
• Leveraging groups on LinkedIn may not be effective for everyone, as it requires a significant time investment to actively engage and contribute in a meaningful way.
• Over-engagement in discussions can sometimes be perceived as spammy or self-promotional if not done tactfully, which could actually harm one's reputation rather than enhance it.
• There is a risk of intellectual property theft or ideas being used without credit when sharing insights in open forums like LinkedIn groups.
• The dynamics of online groups can change rapidly, and what works at one time may not be effective later, requiring continuous reassessment of the strategy.
• Overemphasis on showcasing expertise might come across as self-promotion, which could be off-putting to some members and counterproductive to building a positive reputation.
• Credibility alone does not guarantee business success; effective marketing, networking, and the ability to close deals are also critical components.
• The strategy assumes that potential sellers are present and active in the same LinkedIn groups, which may not always be the case.
• Attracting potential sellers also depends on the market conditions and competition, which may overshadow an individual's demonstrated interest and competence.

Create Notes Yourself

Blast ventures into the realm of originating notes, empowering investors to "become the bank" by creating their own investments in notes.

Building Realtor Relationships With Seller-Financed Loans

This strategy involves building strong relationships with realtors who often encounter situations where buyers struggle to secure traditional financing. In these cases, a seller-financed note can bridge the gap, allowing the buyer to purchase the property while the seller receives regular payments with interest. Note investors can partner with realtors to act as a source of seller financing, creating a win-win scenario for all parties.

Practical Tips

• Host informal meet-and-greet events to connect with realtors on a personal level. Rent a local coffee shop for a couple of hours on a weekend and invite realtors for a casual gathering. This provides a relaxed environment to discuss common interests, market trends, and potential collaborations without the pressure of formal business meetings. Ensure you follow up with attendees afterward to reinforce the connection.
• You can explore peer-to-peer lending platforms to offer alternative financing options to buyers. By registering on websites that connect borrowers directly with individual lenders, you can facilitate loans for buyers who may not qualify for traditional bank financing. This approach can open up a new pool of potential buyers who are willing to pay competitive interest rates for the convenience of a more personalized lending experience.
• Enhance your negotiation skills by taking an online course or attending a local workshop focused on negotiation tactics. This will prepare you to effectively negotiate the terms of a seller financing agreement, such as the interest rate, down payment, and repayment schedule. By honing these skills, you'll be in a better position to secure a deal that fits your financial situation and investment goals.
• Explore the use of a mobile app that sends automated payment reminders to buyers. This proactive approach can help ensure timely payments and reduce the need for manual follow-ups. You might find an app that allows for customization of reminder messages and scheduling, which can be tailored to each buyer's payment plan.
• Develop a one-page pitch document that outlines the benefits of seller financing for both the seller and the buyer. This document should be clear, concise, and persuasive, highlighting how seller financing can lead to faster sales, potentially higher sale prices, and benefits for buyers like more flexible terms. Having this pitch ready allows you to effectively communicate the value proposition to realtors and sellers who may be unfamiliar with the concept.
• Develop a habit of identifying common goals in group settings by initiating a 'shared vision' exercise where each member lists their top priorities for a project. Then, find the overlap and focus on those shared objectives to drive collaboration. For instance, in a community meeting about a new park, have each person write down what they want from the park, and then work together to design a space that includes the most common elements.

Directly Acquiring Seller-Financed Loans and Contacting Sellers

Beyond partnering with realtors, Blast suggests tapping into existing seller-financed notes by scouring online platforms like Craigslist and Facebook Marketplace. These platforms often feature properties being sold through seller financing, presenting an opportunity for those who invest in notes to purchase these notes directly from the sellers. Blast recommends calling these sellers, introducing yourself as a note buyer, and expressing your interest in acquiring their note should they decide to sell in the future.

Practical Tips

• Set up alerts on multiple online platforms for seller-financed property listings to compare options. Use the alert features on Craigslist, Facebook Marketplace, and other real estate platforms to receive notifications when new properties are listed. This will give you a broader view of the market and help you spot good deals quickly.
• Develop a tracking system for your interactions with note sellers using a simple spreadsheet or a free CRM tool. Keep detailed records of who you've contacted, their response, and any follow-up actions. This will help you stay organized and make timely follow-ups, increasing your chances of being remembered when a seller decides to sell.

Funding Your Purchases of Notes

This section delves into the often-overlooked but essential aspect of note investing—securing the necessary capital for acquisitions. Blast provides a comprehensive look at different funding options, assessing their pros and cons, and recommends strategies for amplifying your investing capacity.

Employing Personal Capital

Blast begins with the most straightforward approach: funding note acquisitions using your personal capital. He acknowledges this method minimizes external dependencies and allows complete control over your portfolio.

Least Risky, but Limits Ability

While utilizing your own funds poses the least financial risk, Blast cautions that relying solely on personal funds severely limits your investment capacity and your ability to scale your note portfolio. Relying solely on your own capital might work initially, but you'll need to utilize other strategies if you want to turn this into a business.

Context

• Personal funds used for investments may become illiquid, meaning they are not easily accessible for other uses, which can be a risk if unexpected expenses arise.
• In competitive markets, having access to more capital can provide a strategic advantage, allowing investors to act quickly and decisively when opportunities arise.
• Using external funds allows investors to leverage their investments, potentially increasing returns on equity by using borrowed money to amplify gains.

Leveraging Others' Funds (OPM)

This section explores the power of leveraging other people’s funds (OPF)—the cornerstone of accelerating growth in property investment. Blast analyzes various avenues for accessing OPM, from traditional hard money lending to forging partnerships with like-minded investors.

Hard Money, Private Investors Offer Costly Funding

Blast cautions against relying on hard money loans as a primary source for note investments. While loans from private lenders provide quick access to capital, the high-interest rates associated with them can significantly erode profits. Similarly, while seeking funding from individual financiers is a viable option, Blast acknowledges the legal complexities and research required to comply with regulations, making it somewhat cumbersome for those new to note investing.

Context

• The availability and terms of hard money loans can be influenced by broader economic conditions, such as interest rate trends and real estate market dynamics.
• For investors, the high cost of borrowing can reduce the overall return on investment, especially if the property does not appreciate as expected or if there are delays in selling or refinancing.
• For investors, private lending can offer higher returns compared to traditional savings or investment products, though with increased risk.
• Accepting funds from private investors might involve giving up some control over the investment decisions, depending on the terms agreed upon.
• Conducting due diligence is crucial to verify the legitimacy and financial stability of individual financiers, which involves background checks and financial assessments.
• Note investments can have complex tax implications, requiring investors to understand how interest income and capital gains are taxed.

If You Qualify, Business Credit Lines Are Ideal

Blast highly recommends credit lines for businesses as the ideal source of funding for note acquisitions, particularly if you have good credit and can secure favorable terms. Business lines of credit offer flexibility, allowing you to draw funds as needed and only pay interest on the amount borrowed. This minimizes costs, allowing you to reinvest profits and increase returns.

Practical Tips

• Develop a relationship with a financial advisor or banker who specializes in business credit. They can provide personalized advice on how to prepare your finances and business plans to increase the likelihood of securing a credit line. This professional can also keep you informed about the best times to apply for credit based on market conditions and interest rates.
• You can start building a positive credit history by becoming an authorized user on a family member's credit card. This allows you to benefit from their good credit habits without the responsibility of owning a card yourself. For example, if your parent has a long-standing credit card with a good payment history, ask to be added as an authorized user to help establish your credit.
• Engage in a financial role-play scenario where you must make a significant investment or purchase that could advance your personal or professional life. Outline the costs, potential returns, and how you would navigate the situation if you had access to a flexible funding source like a line of credit. This thought experiment can sharpen your strategic planning skills and help you understand the value of having flexible financial options at your disposal.
• Regularly review your credit line statements and compare them with your financial forecasts to identify borrowing patterns and optimize your borrowing strategy. If you notice consistent peaks and troughs in your borrowing needs, consider negotiating better terms with your lender or looking for credit options with lower interest rates to reduce overall costs.
• Consider negotiating with suppliers to accept payments via your business credit line. This could allow you to take advantage of early payment discounts or bulk purchasing deals, as you'll have immediate access to funds without depleting your cash reserves, ultimately reducing overall costs.
• Establish a separate business savings account to set aside a percentage of profits for reinvestment. Decide on a fixed percentage of your profits to transfer to this account each month. This practice creates a self-sustaining fund that you can use to leverage opportunities without always relying on credit lines. It also instills financial discipline and ensures that you have a clear view of the funds available for reinvestment.

Note Brokerage

This section revisits note brokering as a powerful strategy to navigate the initial hurdles of note investing, particularly for those lacking substantial capital.

Start With No Capital by Finding Investors for Notes

Blast reiterates the benefits of starting your note investment journey through note brokerage. This essentially involves finding undervalued notes, researching them, and connecting with investors who want to purchase those notes. By facilitating these transactions, brokers earn a commission or "spread", generating income without deploying their own capital.

Practical Tips

• Develop a personal checklist of criteria for evaluating notes, such as issuer creditworthiness, interest rates compared to market averages, and time to maturity. Use this checklist to systematically assess potential investments, ensuring you don't overlook key factors that could indicate an undervalued note.
• Engage in a 'mock investment' exercise where you pretend to allocate a certain amount of virtual funds to undervalued notes you've researched. Track the performance of these notes over time as if you had actually invested in them. This practice can help you refine your research skills and decision-making process without the financial risk.
• Start a niche podcast or YouTube channel discussing the ins and outs of note investing. Use this platform to share your experiences, interview other investors, and discuss market trends. This will help you establish credibility and attract investors who are actively seeking knowledge and opportunities in note investing.
• Offer your services as a local intermediary for people who aren't tech-savvy, helping them buy or sell items online for a small fee. This could involve posting items on online marketplaces, handling inquiries, and managing transactions. You could start with neighbors or family members who might struggle with technology and want to sell items like electronics, collectibles, or furniture.
• Offer to manage social media accounts for small businesses on a performance-based payment model. Instead of charging upfront fees, negotiate a deal where you are paid a percentage of the increased sales or leads you generate through your social media marketing efforts. This allows you to leverage your skills to create income without initial capital.

Builds Relationships and Skills Before Investing Funds

Beyond generating immediate income, note brokering provides invaluable experience. It immerses you in the intricacies of note acquisition, evaluation, and valuation, honing your skills and building a circle of potential backers for future ventures. This hands-on learning, coupled with relationship building, paves the way for a smooth transition to purchasing notes using your own capital or OPM after you've gained confidence and expertise.

Other Perspectives

• Some skills necessary for evaluating notes, such as advanced financial modeling or regulatory compliance, may require formal education or training beyond what is learned through practical experience in note brokering.
• Note brokering may attract backers with specific interests in the debt market, which might not align with future ventures that diverge from this niche.
• Building relationships through note brokering often requires a significant time investment before seeing any return, which might not be feasible or attractive for individuals seeking quicker or more direct networking results.
• Note brokering might not fully prepare an individual for the risks associated with using personal or other people's money, as brokering primarily involves mediating transactions rather than bearing the full risk of investment.
• The transition to using OPM for note investing can introduce new challenges, such as increased responsibility and legal considerations, which may not be fully anticipated through the experience of note brokering alone.