Thoughts from the Desk of Bob Repass…
Happy New Year! Yes, believe it or not 2021 is FINALLY here!
Here at Colonial and NoteSchool we are excited about the market opportunities we see ahead of us this coming year. We have positioned ourselves to be ready to move quickly and have the capital to deploy in various asset classes.
One area specifically that we think there will be some opportunities in our industry is in the commercial real estate secured note space. We have a strong appetite for “mom-n-pop” seller financed notes secured by various commercial properties. We typically stay away from loans secured by churches and gas stations or any similar property type that may have potential EPA issues. Let’s dig deeper into the different commercial property types.
“The pandemic has affected different commercial property types in very different ways, and they will likely perform differently when the economy bounces back,” said MBA Vice President of Commercial Real Estate Research Jamie Woodwell at the 2020 MBA Annual Conference.
Commercial Real Estate’s Four-Bucket Theory
Counter-cyclical. These are property types where the pandemic has actually created a bit of a tailwind in terms of incomes, operations, and occupancy. For example, self-storage buildings and industrial properties have tended to perform better this year than they did before the pandemic.
Accelerated change. These are properties where changes were already taking place and since the pandemic those changes are taking place much more quickly. For example, retail, especially shopping malls. There was already a move towards e-commerce and away from traditional retail. “We saw in just about two or three quarters movement to e-commerce that might have taken five to seven years if not for COVID” said Woodwell.
Changed Permanently. These are properties where the pandemic fundamentally changed the use of these properties. The poster child would be the office sector. There are ongoing debates about getting back into offices. How quickly will companies get back to the office? Has the work-from-home movement become permanent? There are strong proponents on both sides. We can get together through Zoom and other technologies and have good experiences that way. But it is not quite the same experience as having everyone be in the same office or in the same ballroom for a conference.
Speed bump. These are properties that were chugging along before COVID-19, but the pandemic recession created speed bumps for these properties. The expectation is that they should get back to normal relatively quickly after COVID wanes. For example, multifamily and hotels. “Right now, hotels and apartments are in very different places, performance-wise, Woodwell said. “But after the pandemic, likely both will perform similarly to what they were doing before the pandemic.”
We will continue to keep our finger on the pulse of the ever-changing market conditions and opportunities. Are you prepared to make the most of 2021?
Stay up to Speed with Eddie
Make a Resolution to Keep Your Resolutions
by Eddie Speed
It’s taken me a long time to learn it. But after 40 years as an entrepreneur and 61 trips around the sun, I’ve learned that personal goals and business goals have more of a common thread than we want to believe. The same good habits that help you reach your business goals will also help you reach your goals in other areas.
You’ve heard me say it a zillion times, but it’s worth repeating: The smartest guy in the room doesn’t always win. Why? Because intelligence is only one ingredient in the recipe for success. If you’re smart but don’t take action, those extra points on your IQ score are useless as a chocolate teapot.
I admire action takers a lot, but not the headless chicken types. To ensure success you have to take what I call “accurate action.” You have to take actions that are goal-focused, data-driven, and align with your talents and passions.
The start of a new year is a perfect time to reflect and set goals. That’s why I brought in my buddy Pat Precourt to share his thoughts on turning dreams into reality. In my opinion, he’s one of the top Head Game Guys in the real estate investing space. You’ve probably heard him speak at NoteExpo or in other video interviews for my blog.
Pat’s enthusiasm for life is contagious. Every time I talk to him, I always come away more excited about the future and more focused on being a better person.
Lots of people set goals, but few people reach their goals. To start the new year off right, I want you to listen to Pat share his expertise on setting your goals; but more importantly on reaching your goals. If you’re searching for wisdom, listening to Pat is like panning for gold inside Fort Knox. In this short article, I’ll present a few of the nuggets he shared. At the bottom of the article there’s a link to his entire interview. (As you watch the video, you’ll definitely want to take notes.)
If this video doesn’t light your fire, your wood’s wet!
THE CHANGING OF THE CALENDAR DOESN’T AUTOMATICALLY CHANGE YOU
After just two or three weeks into the new year, most people realize that nothing has changed and their goals aren’t one inch closer to becoming reality. That’s because if you do the same things today that you did yesterday, your tomorrow will be just like your yesterday. To get somewhere you’ve never been, you have to do something you’ve never done. You have to become the person you’ve never been.
Pat says that about 65% of our decisions are pre-made before we even think. Our brains operate on automatic pilot, and most behaviors are performed automatically based on the habits we’ve already formed. Unproductive habits are why so many goals never get reached. On the other hand, if you have good habits then your automatic pilot works in your favor. With the right habits, your goals are a lot closer to becoming reality.
ARE YOUR DREAMS WORTH FIGHTING FOR?
Are your dreams worth doing the things you’ll have to do to achieve your goals? Are they worth the sacrifices you’ll have to make to turn your dreams into reality? Are you willing to break old habits and start new ones?
Is there something you haven’t been able to achieve? Maybe you have plenty of information to get started, you know how to do it, you desire the results, but you can’t get yourself to take consistent action toward that outcome? Are you going to keep on coasting downhill or get in gear and climb the mountain?
Whether your goals are about finances, health, or relationships (which are the top three areas people set goals for), it’s not just about you. Every one of us has a sphere of influence. Your kids pay attention to everything you do (or don’t do). Whether you consciously realize it or not, you’re constantly teaching your kids, and there’s always more caught than taught.
Think about the results of your goal, but then think about what are the results of your results. Reaching your goals could very well determine whether your kids will reach their goals.
WHY DO GOALS FAIL?
Pat shared several reasons why goals never get reached. Here are his top three reasons:
Set goals you believe in. If you believe it, you can achieve it. If you don’t believe you can do it, then the fight is already over before it begins. (Pat shares a great story about some unforgettable advice he got right before his first MMA fight—at 42!) Simply by believing that your goal is attainable, it’s already halfway accomplished.
A goal has to have meaning. Many people who have won millions of dollars in lotteries end up more miserable than before they won. Why? Because the money had no meaning. They didn’t earn it. Remember this 3-step formula: Be. Do. Have. If a person wins a lottery but didn’t first have to better themselves or do anything, then they skipped the first two steps—so their achievement has no meaning. Achievements have to be earned and deserved to have value.
Your goals have to have clarity. A goal lacking clarity is not actionable. How can you hit the bullseye if you don’t even know where the target is? Write out your specific goals and review them frequently.
YOUR ENVIRIONMENT MATTERS MORE THAN YOU REALIZE
Your mental and emotional environment have a huge impact on how you feel.
The way we feel affects the way we think. The way we think affects our decision making. Our decisions affect the actions we take. Ultimately, our actions are responsible for our results.
Pat makes no apologies for being very selective about who he spends time with. He avoids people who are emotionally draining, and he seeks out people who are uplifting. People transfer their energy before anything else. If you have the wrong people around you, they’ll suck out your enthusiasm like a giant leech, then pull you down to their level of misery and mediocrity. Living life surrounded by these emotional black holes is like trying to swim with an anchor chained to your neck.
PAT CLOSES BY DESCRIBING HIS GREATEST FEAR
Pat doesn’t claim to be a theologian, but he closes with a sobering thought: “My greatest fear is that when my time on earth is done I’ll meet my Creator; but that’s not the scary part. Next to Him will be another version of me—the ultimate me that I was capable of becoming in my lifetime. The me that I should have been if I hadn’t taken the easy path through life. My fear is that I won’t measure up to the me I could have been.”
There’s never been another you, and there never will be again. Every single one of us is a one-of-a-kind combination of talents, skills, and experiences. So learn to embrace your uniqueness instead of trying to squeeze yourself into somebody else’s mold. Find whatever it is in life that you’re good at without even trying, then try your hardest.
Reaching any goal will take effort and determination, but like Pat says, “If you can believe it, you can achieve it.”
While other people are waiting for their ship to come in, an entrepreneur dives in the water and swims out to it.
I’ve shared just a fraction of the wisdom Pat offers in the video. Just click the link below to hear the rest. I know you’ll be inspired.
Capital Markets Update
7-Point Early Planning Checklist
By: Ryan Parson
Though year-end deadlines have passed us, we still have items that need focus and to be completed prior to tax season – which is quickly approaching. Your financial planning will interact heavily in this process to ensure alignment. Here is a list of seven important items that I recommend that you review:
- YOUR GOALS
When you first sat down to focus on your long-term financial plan, you outlined long-term goals and worked to build a financial plan to reach them. You have been working toward those goals ever since.
But have your goals changed? Or have other things changed that might make reaching those goals more challenging or easier?
If you’re really honest, the likelihood that something has changed is pretty high. Maybe you’ve had some health worries over the past year, want to retire a little sooner, or perhaps you have discovered a new passion. The point is your financial plan needs to reflect these changes and you need to determine if any alterations in this plan will affect deductions or tax filings.
- YOUR PERFORMANCE
This is one that gets a lot of attention, so it’s unlikely you even have to ask. But it’s important that you understand how you performed relative to your goals as opposed to relative to indices that might not be appropriate.
Sure, it helps to measure your results relative to major market indices, but there is not one single index by which your performance should be measured. But if you are not measuring your performance against your goals and a group of indices, how do you know whether you’re on track or not?
- CHARITABLE GIFTS
Many nonprofits and charities ramp up their efforts at the end of the year to ask for contributions. And many of us also forget to contribute until the end of the year. In fact, nearly one-third of all giving happens in the month of December, and 12% of all giving happens in the last three days of the year. Why wait? Plan your 2021 contributions now and check with your CPA or tax professional on any benefit of contributions that can occur in Q1.
- 529 PLAN CONTRIBUTIONS
If you are funding a 529 college savings plan, most state plans require your contributions to be postmarked by the 12/31 deadline of the calendar year you want it to apply in, but you should check with your specific 529 plan for their contribution rules.
Whether you recently had an end of year scramble to fully fund a 529 or not, you can set up automatic contributions into these plans on a regular basis. Now is a good time to set up automatic savings from your checking or savings account for the year.
- RETIREMENT PLAN CONTRIBUTIONS
Yes, you have until April 15th of 2021 to contribute to IRAs for 2020, but most other retirement plan contribution deadlines were December 31st. This applies to establishing new plans such as simplified employee pension plans and SIMPLE (Savings Incentive Match Plan for Employees) IRAs.
Review all of your plans, including bonuses that arrived the end of last year. Make sure you tell your employer, or change your preferences, to put a portion of your bonuses into your 401(k) or other retirement savings plan at work.
- TAX LOSSES AND GAINS
We hope you already took all realized tax losses (or gains) in your portfolio by December 31st. Regardless, you should also review your year-to-date gains or losses and any tax-loss carry-forwards from previous years with your CPA so you can plan accordingly for the upcoming year and also schedule this year’s year end meeting.
- UPDATE YOUR BENEFICIARIES
As you reflect back over 2020, think about anything that may impact who you want designated as your beneficiaries. It is not uncommon for people to overlook the importance of keeping the beneficiary form updated. This one-page document, not your will, decides who gets your retirement account.
If you got married, had kids, lost a loved one, or got divorced recently, chances are the form is out of date. Should something happen to you, your family members may be shocked to find out who is, or isn’t, going to be the recipient of your 401(k) (or IRA) money. Most plans give you online access to the form, so make sure you capture any changes.
With the busy cadence of the holiday season as well as an ever changing and challenged 2020, be sure to take time to get yourself organized this month. Time spent now on these tax and financial planning items will help avoid missing deadlines, and the associated consequences, later this year. If we can assist you in any way with you financial planning for 2021 please reach out to us! We would welcome the opportunity to work with you!
To your financial independence.
The Trading Corner
Haste Makes Waste
By: Scot Tyler
So, it is now 2021 and we can say good-bye to 2020. Like most I am glad to see 2020 in the rearview mirror and I am looking forward to 2021 like no other year before. Since it is a new year, I was reviewing old marketing material, mentoring guides and articles we have published over the years and ran across some info Eddie wrote in a 2010 mentoring guide regarding negotiations. He says when negotiating with a note seller “Do not rush the negotiation process. Slow it down!” – Eddie Speed
That was written 10 years ago and still applies today. The note business is different than most as we normally negotiate on the phone and not in person. The seller receives a marketing letter from you and calls your toll-free number for a free no obligation quote. Now there might be an instance where you receive a lead from someone local where you can meet in person but the majority of the time your negotiation will be done via phone.
Most new to the note business or even new to negotiating on a regular basis normally rush the negotiation process. Of course, during our normal everyday life we all have had to negotiate with a car salesman etc. but actually having to negotiate over the phone with a seller you have never met to sell their loan to you at a discount is a much different scenario. What we have found over the years is when a negotiation is rushed, mistakes are typically made, and a deal is never made.
When you take that next call and find yourself anxious, rushed or wanting to make a quick decision remember to “slow it down!” Another part of what Eddie wrote was to slow down the process by breaking up the negotiating into several sessions. In other words, have multiple conversations, phone calls with the seller before negotiating a purchase price. Eddie calls it “multiple touch points”. The idea is to begin building that relationship and trust with the seller. The more contacts, dialog, “touch points” you have with your seller the greater opportunity of building trust with the seller before you deliver your discounted offer. It also opens up the possibility of uncovering additional information that might even change the direction of the negotiation.
I remember when I first started in this business and began taking calls from noteholders for the first time for Eddie and his partner Joe. Man, was I nervous, rushing through questions, not listening to the seller, and waiting no time to begin trying to close the deal after the seller just told me the terms of the loan. As I took more calls, I began to gain more experience and my negotiation skills improved. This will happen for you too. Obviously in any negotiation being face to face is preferable but as we know the note business does not allow that very often and possessing good negotiation skills is imperative in this business. As Eddie wrote in the same piece 10 years ago, “HASTE MAKES WASTE.” Pretty sure that applies to today as well!
Here is a note that came across our trade desk that we recently funded. If you’re interested in purchasing it, email me at: [email protected]
Performing Loan – Manufactured Home Owner Occupied
BPO $90,000.00 – March 2020
$89,999 sales price with $20,000 down payment
$69,999 / 8.0% / $466.66 interest only for 36 months
5 made / 31 left until balloon
Current UPB $69,999
Until next month. and @ColCapMgmt, if not, why not?
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