Crises really put things into perspective. Born of these challenges are your realizations about the things that truly matter, like being able to consistently put food on the table and continuously provide for your family especially during trying times. You begin to see how quickly your years of hard work can disappear when you’re unable to come up with a financial strategy that caters to longevity and timelessness. This is where the importance of learning how to generate consistent passive income really comes to light. James Maffuccio learned this the hard way when the housing crisis tore down his thriving business in real estate development. James is a 30-year real estate veteran and an expert in mortgage notes. He is deeply networked in the secondary mortgage industry and is responsible for acquisitions and underwriting as well as relationships with primary sources and key vendors. Because of the housing crisis, James had to flip houses in order to put food on the table. This is also when he realized that when the market stabilized, the people on the right side of debt would cash in big. He acted on this realization by placing himself on the lending side of the industry. In 2009, he began investing in mortgage notes, and three years later, with his investments proving to be secure, consistent, and highly profitable, he partnered with Bob Fraser to launch Aspen Funds - a fund management company focused on mortgage investments. With Aspen Funds, James created passive wealth for himself. At the same time, he helps people receive consistently high yields on their investments while helping homeowners stay in their homes, too. What makes mortgage note investing a strong source of passive income? How do you assess profitability in this niche? How do you turn a profit on zero-equity notes? Tune in to learn more about the hottest and most relevant information on real estate investing! Thank you all for listening and I will see you on the next episode. When you are ready head on over to https://billyalvaro.com or go grab your tools to help you at https://billyssecrets.com
Crises really put things into perspective.
Born of these challenges are your realizations about the things that truly matter, like being able to consistently put food on the table and continuously provide for your family especially during trying times.
You begin to see how quickly your years of hard work can disappear when you’re unable to come up with a financial strategy that caters to longevity and timelessness.
This is where the importance of learning how to generate consistent passive income really comes to light.
James Maffuccio learned this the hard way when the housing crisis tore down his thriving business in real estate development.
James is a 30-year real estate veteran and an expert in mortgage notes. He is deeply networked in the secondary mortgage industry and is responsible for acquisitions and underwriting as well as relationships with primary sources and key vendors.
Because of the housing crisis, James had to flip houses in order to put food on the table. This is also when he realized that when the market stabilized, the people on the right side of debt would cash in big. He acted on this realization by placing himself on the lending side of the industry.
In 2009, he began investing in mortgage notes, and three years later, with his investments proving to be secure, consistent, and highly profitable, he partnered with Bob Fraser to launch Aspen Funds - a fund management company focused on mortgage investments.
With Aspen Funds, James created passive wealth for himself. At the same time, he helps people receive consistently high yields on their investments while helping homeowners stay in their homes, too.
What makes mortgage note investing a strong source of passive income? How do you assess profitability in this niche? How do you turn a profit on zero-equity notes?
Tune in to learn more about the hottest and most relevant information on real estate investing!
Thank you all for listening and I will see you on the next episode. When you are ready head on over to https://billyalvaro.com or go grab your tools to help you at https://billyssecrets.com
[00:00:00] BILLY: What's going on everybody. This is Billy. Alvaro the unstoppable BA and this is unstoppable REI wealth. Number 53. Today I'm interviewing Jim. Maffuccio from Colorado. Jimmy owns a company called Aspen funds, little bit of his spin instead of him going out and actually investing into real estate Jimmy's company. invests into distressed mortgage notes made a killing on the second mortgage note, which I thought that a lot of people out there might have thought it was crazy, but he breaks it down and explains why investing in second mortgages could be one of the most profitable things to do. If it's done the right way, he's now branched out. He's doing investments in the first notes and he has some other investments that he's doing in the other syndications you're going to enjoy. I hope you enjoy the, uh, the interview he's um, he brings a lot of wisdom and it was just a really easy conversation. So enjoy this podcast. Number 53. Thanks so much, guys. Talk to you again.
[00:00:55] Welcome to unstoppable real estate investing wealth. My name is [00:01:00] Billy Alvaro, AKA the unstoppable VA former billion dollar mortgage banker gone bankrupt turned professional real estate investor where each week you'll learn the tools, strategies, systems, and secrets myself and other highly successful real estate investing entrepreneurs use to start, grow and scale [00:01:00] their businesses, creating massive profits and how you can too. And we'll teach you how to put those profits to work. So you no longer have to get ready to finally experience financial freedom and generational wealth. Now let's get started.
[00:01:34] Welcome back everybody. To the episode of unstoppable REI. wealth. I'm your host The unstoppable BA and I'm here today with somebody who's going to become a friend. We don't know each other yet. This gentleman's name is James, and I'm not going to butcher you last name. I promise Maffuccio I got it. Right. Perfect. Perfect. So Jimmy is in the space where he's raising a large amount of capital and he's deploying it in different alternative assets. We're going to speak about a couple of those assets today. [00:02:00] One in particular Jim your company. I think it's Aspen funds. Is that correct? That's right. Aspen funds. You go out and you focus on distressed second mortgages that you guys are buying and bringing them into your pool. That's right. Let's talk about how you get started in this whole real estate, I guess, business or note buying business what did that look like?
[00:02:20] JAMES: Well, for me, what it looked like was, uh, just real quick background, you know, there was a civil engineer by education, went to work in the corporate world for about five and a half years had enough of that. And so I jumped ship, got my real estate license in 1985. Early 86. I, uh, resigned from the corporate world and jumped into the world of, uh, of real estate. Mostly I was involved in, uh, development, residential development work in Southern California. So I went through the cycles there, of you know, the market cycles and it's usually debt related. So. The SNL crisis the mortgage crisis. If you're familiar with [00:03:00] 2008 and beyond, and I ended up, uh, the very, very short version of the country Western song, cause I ended up broke, uh, bankrupt about, you know, 55 years old with five teenagers under roof. And all I had was my gray hair and my education. You know, my experience in the real estate world. And I just kind of had an epiphany that, uh, you know, the debt structure is what has killed me twice is the finance, the financial structure behind real estate. And I said, you know, I got to figure out how to be the lender and not the borrower. So there was a distressed debt everywhere in this. So this is like in 2010, I went to a conference. On a note buying conference and started learning about the, uh, where you source these, these broken notes. And everybody else was buying the boarded up houses and doing, you know, fix and flips. And, uh, and I did some of that, you know, in the, uh, 2000 10, 11, 12 timeframe. But I started, I, I just transferred my skills, my under general understanding of real estate. [00:04:00] Over into the buying debt side. And so started going to conferences, jumping online, watching webinars, just kind of self-taught. But again, I had 30 years of real estate background, so came the knowledge came pretty quickly and just started networking with people. And I mean, I bought my first, uh, Hanford. First of all, most everybody was talking about buying senior liens, the first mortgage, and you know, the, the numbers, there are pretty simple, pretty easy to understand. And often a side room, there was a guy talking about buying seconds and I think most people thought he was insane. And, uh, I went in and listened to it and said, oh my goodness, this is genius. You know, because of the leverage you get and the price points are lower, the risks can be spread better and the returns are phenomenal. So, so I jumped in, started doing that. Raise a little bit of money from some close friends that I'd made. And in Kansas city, I just moved to Kansas city in 2007 and we bought a handful of these things and I started, you know, working them out, contacting the borrowers and [00:05:00] figuring out what they can afford, what they can pay. And I was buying these for pennies on a dollar, so it was very profitable. And then I bumped into who's. Now my business partner in 2012, Bob Frazier. And he was kind of in between opportunities and it was just one of those serendipitous things where he said, Hey, I'm looking for a rodeo to go raise money for. And I said, well, that's my next step. I've got my beta test done. And my next step was to go raise money. He goes, why don't you let me do that? And I'll kind of do the investor relations and the, you know, the, the soft side of the business and you go find deals and do deals. And, you know, after I kinda got over the ego thing of like, I'm used to doing it all myself and thought, you know, that's a pretty good gig for me. I can do. Focus on the part. I like to do the best. So we started that in earnest in 2013 as a company. And now we're like 23 people run the Inc 5,000 fastest growing private companies all built on this little model of buying these distressed mortgages. So, so we've scaled this thing up and, uh, just having a, having a blast, doing it and. [00:06:00] Yeah. So, so we've got two sides of the business. One is we buy the non-performing second mortgages and we have a whole workout team. And these are, these are former bankers and attorneys that are on our staff. And we work with attorneys, uh, in, in all 50 states and licensed servicers. And we, we have this workout process where we modify most of these loans or work out a settlement with the borrowers, keep them in their homes. That's important to us every now and then we have to foreclose. That's pretty rare. And then the other side of the businesses, we. Re-performing mortgages because we realize a lot of the institutional buyers, they don't want to buy a modified mortgage from somebody whose FICO scores are lower, but we buy them at a discount. We buy them at a decent yield. So it makes a whole lot of sense for us. And so that's kind of it in a nutshell.
[00:06:46] BILLY: I love it. All right. So the podcast is over. You gave us everything you have
[00:06:49] JAMES: now, now, now hit me with the questions put coals in it, man,
[00:06:55] BILLY: this is good. So I want to first understand. I'm going to rewind back to when you went to that seminar [00:07:00] and you had the guy speaking to the side room doing second. So there's a lot of people out there who are saying to themselves, Jim second mortgages in distress. That's like the highest risk asset you could possibly investing in. What's the strategy. When you go into it, I know you do in the workouts, but like peel back the onion. Let us take a peak in, how do you go about analyzing the dollar amounts of buy that second mortgage? How do you know what to buy for, or you do a research on the first mortgage to see if they're in the full too?
[00:07:26] JAMES: Yeah, you hit the main thing right there is, is that is what is going on with the Sr. So a typical deal that we'll buy, uh, will be, you know, let's just say the property is. $300,000. Right. And the first mortgage is, you know, 200. So we may buy a, um, a second where maybe it's, maybe it's a hundred thousand dollars of unpaid principal balance or UPB. And we may buy that for that mortgage for, and let's say the seniors performing. Okay. So we know that we know they're paying on the senior, but they haven't been [00:08:00] paying on the second yeah, on the second mortgage. So when I started into this, we were buying that exact second that I just mentioned. We were buying that for something like 10 or $12,000. That's a hundred thousand dollars. owed . So we still have a bunch of equity above our investment. We call it our ITV investment to value ratio would be the 200,000 on the first plus 10,000, what we pay for the second divided by the value of the home. So we have three, three value drivers that are working in our, in our favor. Number one, every dollar, every mortgage payment they make on their first, the principal is being paid down. So we're actually. Our position in the capital stacks getting better. Every time they make a payment on the first, secondly, every time they don't make a payment on our second, that interest continues to accrue. So it becomes more valuable. And then thirdly, if we're in an appreciating real estate market, which of course we we've been, our timing was actually really good when we got into this. [00:09:00] So now the equity cover above our position above our investment gets better and better, which gives us more. Opportunity to work with the borrower and come up with a solution that makes sense for them. So we forgive a lot of debt and we, uh, we are usually able to keep a homeowner in their, in their property with a, uh, an affordable payment. We underwrite them just like a bank would, uh, we're pretty, uh, except we can do some things. The banks won't do, you know, we have a lot of flexible we're entrepreneurial, we're very compliance minded. So. And that's where our, where our staff kind of comes in. But so you can see, I mean, we're working first mortgages, it's kind of like playing checkers. You kind of follow the logic tree, like, okay. Is, is the house occupied or unoccupied? If it's occupied, is it owner occupied or renter occupied or squatter occupied. And the way that you go with that, the exit strategy you move to. Is becomes very self-defining, it's pretty logical. What you're going to do next. If the property is vacant, you want to hurry up, secure it, gain possession of [00:10:00] the property, and then, you know, either sell that or whatever with seconds, it's a little different, it's like financial chess, because there's a relationship between the borrower and the first mortgage. The borrower and the second mortgage, it's usually been a divorce between the borrower and the second mortgage, but then there's the borrower and the property. So we buy some of these where there's really not equity above our position, but there's something we call emotional equity. In other words, a homeowner doesn't necessarily wake up in the morning and look at the Zillow curve to see how much equity they have in their property and make a decision whether they want to stay or leave. It's more than. Can we afford to stay. This is where we've raised our kids. They go to school down the street. So they're pretty sticky when it comes right down to it. So, uh, but you nailed it is it's seeing what the condition and the status of that underlying senior mortgage is that's probably that in the gross equity that we have, that's probably the, the main metrics that we look at in our decision-making
[00:10:57] BILLY: take us through, um, the, the various workout [00:11:00] plans that you can do with somebody, whether it be second or first, if you're buying a distressed note what are the four or five or six options, the waterfall of options that your company goes through this, see what the, what the outcome could be for that particular mortgage or that particular situation
[00:11:13] JAMES: right? So the ideal situation, and what we aim at is to end up with a modification or a, a cash settlement. Okay. Got it. Most people aren't in a position for a cash settlement. Although we are seeing a lot of situations where they actually have a decent FICO score. Again, and they can refinance and pay us a will. We'll offer a discounted payoff to help them get refide out if that makes sense for us. So we actually have a pretty elaborate software that we've built that looks at one time at all these five or six different exits, you know, what's the foreclosure take back and resale. Cause we have to analyze that because at the end of the day, we might end up having to go that route. But what, where we start the waterfall is we try, we reach out to the borrower and we try to get them to. I realize that we're here to help them. [00:12:00] We're not just after they're home and we try to get a financial intake package from them, which is just like, again, just like a mortgage originator. We want to find out, you know, what their income is. We want their tax returns pay stubs, you know, any 401k information like that. And we'll go through an underwriting process. Cause we don't want to put somebody in a loan mod and set them up to fail again. So, you know, we're able to modify a bunch of them. So we, we worked back and forth with the borrower. Uh, once we have the financial information that they're willing to give us, some of them just don't want to talk to us. Don't want to give us financial info and right off the bat, they'll say, Hey, if I can come up with 70 or 50,000 on the a hundred thousand, will you take it? And then we have to run. We have to weigh that against our other options. Uh, well, w how does that work? If there's a ton of equity, we don't really have to take a discount, right? I mean, you've already had, you've already been living mortgage free for 10 years in some cases. And so we just kind of, you know, we're really kind of a one guy that I was kind of a mentor in this, in this little niche that we're in. He used to say, [00:13:00] you go every direction at once, and it's really kind of true. I mean, you, we don't know what the outcome is gonna be. On a particular loan, whether we're going to end up with a modification, whether we're going to end up with a settlement or a, a friendly, short sale where we help facilitate a short sale or a full payoff or a foreclosure. So we have to kind of start going down several of those tracks. Like we have found through experience that if we can't, if we can't get a borrower in a, in a, in a meaningful dialogue within the first, you know, 10 to 20 days, we have to start, you know, the legal process. Yeah. Now, so we start foreclosure probably 75, 80% of the time, but I think like 2% of the time do we actually complete it. And a lot of times it just takes that to get them a meaningful conversation with the borrower. And, and a lot of times we never do and we have to go all the way through the process. And they've either given up on the home or they've left or whatever. So
[00:13:54] BILLY: what is your process for sourcing, uh, your, all your deals? Because I know, you know, in the [00:14:00] investment side investment world, Facebook marketing, Google marketing, direct mail. So in your space, how do you aggregate the before?
[00:14:07] JAMES: Yeah, so honestly it is a such a relationship based business, especially in the second world, because you just, there's just no place. You can go and like, There's no big box store for, for defaulted. Second mortgages. You know, there are a lot of banks have not even sold that paper because they've already written it off. They charge it off their books. It's not worth it to them. I mean, these are, these are small dollar amounts for them, but, uh, you find, we find hedge funds that have. Success in, in opening the vault at a bank we've bought directly from some institutions. We go to conferences and build relationships. That's honestly, that's the number one way to source product in this business is get, get to know people. You have to build trust with people. It's interesting. The very first I bought five notes. It was my first purchase and I think they average [00:15:00] like $11,000 each my purchase price. And the guy that I bought these from, I didn't know it, it was my first purchase. It was his first sale working for working for another guy that was, you know, one of the speakers at a conference. And I got to know this guy and he was really a really a likable guy. I, I felt like, man, this guy really knows his stuff. Well, then later we we laugh a lot about it because, well, first of all, he ends up like two years after that he becomes our act. We hire him, he becomes our acquisitions director and he's a good friend and one of our senior VPs to this day. And so he's, he's really kind of our sourcing guy, you know, he. He makes these builds these relationships with other hedge funds and with institutions and there's brokers in this space. So, um, that's, that's mainly it is through relationships,
[00:15:46] BILLY: relationships. Are you buying onesies? or Are you doing bulk packages?
[00:15:50] JAMES: Both we'll buy we'll buy anything that moves that's in our that's in our box. And, uh, So I'm mostly, I mean, we've been buying, you know, bidding on larger pools when we can find those. But then, [00:16:00] you know, there's, there's people there smaller people in the space that are just like, Hey, I need to raise some capital because I want to go do this, that or the other thing. Do you guys have any, any dry powder? Cause I'm looking to offload a few loans. We'll say, send them over. We'll take a look at them and you just never know where it's going to come from. But I would say that probably 80% or more of the volume that we buy in any given quarter. 80% of that. It's, it's, it's somebody we've, we've dealt with before. And so maybe even higher than that in terms of the actual dollar spend. So, um, you know, things have definitely cooled down as far as, um, product availability. Uh, you know, obviously the 2008 through 2010, I mean, it was a lot of this paper that was a lot of opportunity that was created for our world. Well, that stuff's pretty much played out by now. And there's things like statute of limitations. So some of this paper's uncollectable what's happened with us is what started as what I thought was going to be a two to three year [00:17:00] opportunistic entrepreneurial venture, which is kind of how I've lived my life on those. It's actually turned into like, we're, we're pretty much perennial players now. So, you know, uh, it doesn't take a lot of volume to sustain a, like I said, a 23 employee, company's not that big. So we're able to, we're able to keep the, you know, keep the lights on and keep everybody working. And, uh, we've kind of hit a steady state on, on the amount of product flow that we can find, you know, until the next crisis hits and so we're not, we're not hoping for a crisis, but we're starting to move into first to non-performing first. There's a whole lot more of that product available. And usually that goes, and it's sold the big GSEs, like HUD Freddie Mac they'll have these big auctions and those notes will be sold to fairly large hedge funds. And then those funds we'll break them down and sell smaller, smaller chunks of them to some of the smaller players. So we're, we're, uh, we're looking to gear up and, and have a seat at the table and go to some of these larger auctions. The numbers are [00:18:00] a little tighter with the first mortgages. You have to really look at the real estate and, uh, and the foreclosure law. You know, the, the timeframes and the costs are everything. And, and we've, we've, we've learned that. I mean, we've got attorneys in all 50 states that are, that we've worked with and vetted and have
[00:18:16] BILLY: I'm gonna ask Jim. So, you know, I come from an extremely litigious state. I lived in New York, my whole life and, you know, there's, they just had somebody in news today I think he had the longest foreclosure ever in the state of New York. And I think it lasted like 18 years. This guy was, he bought the house like in 2002, 2003, made two payments never made a payment since, and he played the system for either the 17 or 18 years. They couldn't get him out new, every trick in the book you do, you buy in states like New York and New Jersey, where the floor how do you manage that? Like knowing going in that it could possibly take six or seven years to foreclose.
[00:18:56] JAMES: Yeah, well, we have some pretty kick-butt attorneys and yeah, that is [00:19:00] true. And we have had some that have been, you know, in the seven to 10 year timeframe that were in foreclosure before we ever bought the note. So we just have to make sure we're buying it right. And we have room to put an offer on the table to this borrower that they're going to pay attention to. There's actually a, yeah, this is like hot off the press for us. But I mean, we've actually found a law firm that actually will take these, um, there's some requirements and conditions. Um, most of our loans will fall into this box that we actually can go to federal. We can actually foreclose these in federal court. Wow. So there they've been able to yeah. And it's from what this law firm has told us. It's the conversation with opposing counsel and the borrower goes to a whole nother level. When they start getting served papers, you know, regarding a federal case against them. So, I mean, New York is, I just don't get it. I mean, you say gaming, the system is designed to be abused. I mean, it's, I just don't even know how else to say it. It's [00:20:00] you and you hit it. I mean, there are people that that's their life figuring out how to game the system and live at somebody else's expense. So yeah, we do run into those and you know, what it's priced into the is priced into the equation. I mean, there's a lot of people out there that won't touch New York loans. We say, send us your huddled masses. We'll, we'll buy them. It's a risk management. It's a risk management thing, you know?
[00:20:21] BILLY: So, so Jim talked to me, um, when you look at your business, do you look dollar amounts under management? Do you look at units on the management? How do you articulate, how many deals you have going on in your overall balance sheet? Like what does that look like when you say it? Is it dollars of the management or is it, Hey, we have, you know, 5,000 units, 5,000 mortgages.
[00:20:42] JAMES: I mean, it just depends on who we're, who we're talking to. I mean, that's not really a, you know, we're not out there like, Hey, we got 14,000 doors. I mean, you know, we're in the apartment space. I mean, it's, you know, w we, we probably have 3000 loans right now, but I mean, what does that mean? I mean, the average, you know, the, our average buy on those might be [00:21:00] $20,000. Our average what's owed to us might be $80,000. So the way I think is our capital capitalization. What is our capital under management? Because at the end of the day, That's really who we're serving. So it's, it's what kind of capital investor capital can we deploy into this particular model? And I think we're running right about 70 million right now. Beautiful. So, so for a small, you know, I mean for, for a small niche where they're pretty low priced assets, low cost assets, that's, that's a pretty. That's a lot of real estate that's, that's really levered and controlled by that. But, um, that's about where we're at on the income side. That's a growing thing. That's just, uh, we do some hard money lending out of that, our income fund as well. And so really anything that's producing a cashflow that's that's secured by residential property. We'll buy it or we'll, we'll originate some of it, you know, so we can continue to grow. We have, like I said, we have a wait, a wait list. Um, several million [00:22:00] dollar wait lists of investors to get in on that because we pay a nice, strong, preferred return and they get a monthly by ACH.
[00:22:06] BILLY: that actually leads me to my next question. So we covered the front end, how you source your deals a little bit of how you underwrite, what the waterfall. I want to now get into the back end, which is the investor relations to capital markets. So you're putting the other private placements or the private placements, or they're very specific as to what you're going to be investing
[00:22:23] JAMES: they're pooled pooled investment. So for instance, we'll do a, we'll do serial closed end funds on our non-performing mortgages. We'll typically do serial funds where we'll open, we'll open up and say, Hey, we want to raise $15 million. And we'll set up a raise period, a deployment period, and a harvest period. And, you know, we try to hit those. And sometimes we have to extend a little and sometimes they overlap, but, uh, you know, like the last fund we did, we're very close to. Are in fact in a couple of weeks there, we won't, we won't be deploying any more out of this fund, but we raised, you know, I think we raised about, I know we have $8 million in institutional investor [00:23:00] that actually has a senior debt facility in that fund. And then our equity investors, I think there was about a 10 million of equity investment. I might be wrong on those numbers. That's really, this is really in my end of the business, but we'll raise for a period and then close that. And then we'll be deploying while we're raising and then we'll stop the deployment. And then the rest is just harvest and the investors that are getting paid back and the returns are being split and, and that's, that's the way we've been operating. We also have, uh, on the income fund side, it's an evergreen fund. So it's always open and we have, we have redemption opportunities of people want their all or some of their money back. They just need to kind of give us some notice and because we have. Uh, internal revenue generated in that fund. We always have hard money loans paying off, or even our Reaper formers get paid off. So if we ever had calls for redemption, we could, we could meet those redemption calls. The fact of the matter is we've had very little redemption with most people that get in. They just really get used to getting that. The deposit show up in their account and they [00:24:00] love it. So, you know, that's been,
[00:24:02] BILLY: um, what kind of returns do you offer your investors for the two different funds you spoke about?
[00:24:07] JAMES: So the income fund we're, uh, we're running at an eight and a half preferred return and that's super safe. It's super secured our investment to value ratio. For the properties that secure our loans are, is, uh, you know, I think we're, we're averaging about 65 or 70%. And again, these aren't mostly not hard. Money loans are actually residential. These are home sweet home, so that's a pretty sweet investment to value ratio.
[00:24:29] So the exposure is we're strongly strong on capital preservation in that fund. So a, you know, it's been eight and a half to 9% preferred return on that. And then on our, uh, on our other funds and we keep tweaking the design there. Uh, but we, we ha we were operating under a, uh, for our, our serial funds. It was a, you know, 50, 50 split, 50, 50 profits split with those investors. They don't get to prefer, we're working now on kind of a hybrid model where there will be some people that just want, you know, a [00:25:00] straight percent and, um, you know, so they'll get. what's that?
[00:25:05] BILLY: The straight percent has no equity K currently upside
[00:25:07] JAMES: right for that type of investor. And then, and then others that do want some, you know, they want to play and they, they can wait longer for their money. So
[00:25:14] BILLY: What's been the aggregate of that fund, what has been your, your annualized returns that
[00:25:19] JAMES: our, our, our target IRR and what we've been hitting is in the high, high teens. So it, we always, you know, we targeted. Mid teens to low twenties. And it seems like it ends up in the high teen area.
[00:25:33] BILLY: Thats good You make an 18, 19 70% that you whack and open the investors and you guys for each taking your cut. That's a good business.
[00:25:39] JAMES: Yeah. Honestly, if I were talking to somebody, you know, that's just wanting to get started and, you know, an entrepreneur, a real estate entrepreneurial venture, I probably would advise them not to get involved in buying distress debt or at least not. If they want to do it on a mom and pop basis, that's one thing. And then, then there's [00:26:00] certain states you want to stay out of and avoid, but it has really become a very highly regulated there's statutes of limitations. There's a different statute of limitations on a promissory note that is on the security instrument, which is either the mortgage or deed of trust. And then that can vary. It does vary from state to state and there's licensing. There's like three different layers of licensing. You know, there's, uh, we've actually the, some states you actually have to get licensed as though you were originating mortgages. So a new person coming in, I would say, okay, avoid these states. And these states, you know, focus on these states where you can kind of be beneath the radar and, and, um, but it's, uh, you know, we, we spend a lot of money on legal and compliance and we have, now we have a national bank. That's are the trustee of all of our, of all we form trusts now for all of our, um, the loans that we buy and so, um, our structure is pretty, it's gotten, it's gotten pretty sophisticated, but the bottom line is that now having the national bank, we piggyback on their license on, [00:27:00] in a lot of cases. So, um, so we're. Yes. Yeah. They're there under the FTSE licensing.
[00:27:06] BILLY: Cause you can just start it right underneath them and circumvent all the BS laws and all the states.
[00:27:11] JAMES: Right. And when I started, I mean, and I would talk to people cause I'm kind of a little bit anal and um, you know, having that engineering background, I would ask people everything from like what kind of offering are you doing for your using a five? Oh. C or if I was six B for your, when you raise money and they look at me like I was, you know, crazy and say, no, we just have a simple little joint venture agreement. I said, okay, so you're selling, you're selling securities. You know, I said, a friend lend me some money and we just wrote up a quick agreement. And, you know, I said, okay, you're selling securities. I said, Hey, that's fine. You know, as long as you know, Hey, I've been speeding on this highway for the last 20 years and I've never had a problem. Well, that's fine. , you know, the niche that we're in it's it's, it's really not a good starter. niche yeah, which for jumping into real estate, I mean, if somebody wants to invest passively, I know this can [00:28:00] sound self-serving, but you know, uh, invest in a mortgage fund, let someone else do the heavy lifting and take, take on all the risk, uh, unless you want to let go by, you know, in your market, you want to buy some defaulted firsts. There's actually some note exchange. Out there. And some, um, you know, some online marketplaces where you can buy notes. You just gotta be careful. You got to do your due diligence. You gotta get, get educated on it. But you know, if you want to do that on a one-off basis, you know, or a handful of loans, you know, that's a, still safe enough I would say
[00:28:31] BILLY: yeah, but it's a business man like any business, you have your education and understand what the nuances are with the business. You started off, you spent a lot of time going to these seminars and learning and getting the information in your head in business. You know, I'm an advocate is don't try to be the master of everything. If you have a lane that you're running in and you're making good for you, you're making great money. Take that money and invest it into somebody else's lane let them put it to work and you just keep focusing on what you're doing,
[00:28:58] JAMES: you know, that's yeah. That, [00:29:00] and that, for me, that was a big, huge lesson because, uh, focusing and when I, when I partnered up with the guy that I partnered up with, I mean that, it just, I focused on one thing and it's drill one. Well, and get it flowing before you even think about drilling another. And then, and then from the produce of that, you can, you know, like right now I'm, I'm having a blast investing passively and learning about other people's models. And it's like, I see some of these models go, oh man, that looks great. Like, well, do I want to go become a Bitcoin miner? No, do I want to go, do I want to go be the self storage guy? No, not if I can, if I can invest in someone else's deal and I make a decent return on my capital. I like to keep focused on my, like you said, I could focus on my lane and keep building that out so and find something that you really enjoy doing and, uh, that you can do well and, and just, just get real deep in it. Go big, be the best, you know, so
[00:29:49] BILLY: I love it, brother. Listen, if I'm, if people are out there and want to learn more about you and your business, where can we send them?
[00:29:55] JAMES: Our website's probably the best place to start. So it's Aspen funds.us. [00:30:00] So it's Aspen funds is like one word F U N D s.us. And, uh, just, just Snoop around there, put your information in there and, you know, we'll, we'll, uh, get you any information. We have a podcast and there'll be a link to the podcast. It's called invest like a billionaire. And, uh, we have some really awesome speakers that come in and we, you know, people that are raising money themselves on that for their deals. And. Well educate guys that are like, have gone into full-time passive investing now that, you know, there's one guy actually works for us. He's our, our COO. And, um, we were interviewing him and he was first off an investor before he came to work for us. And, uh, you know, we asked him, so what, what is your, you know, I mean, how many alternatives are you typically in? Cause that's what we want to do is we want to bring people into the world of alternative investments and help them learn how to vet out the right sponsors. And now. He goes well, uh, you know, I typically, I typically get like a hundred K ones, so suddenly that's not, doesn't sound all that passive anymore, but now the reality is you turn these [00:31:00] K ones over to your accountant and it's like, it's a cookie cutter kind of, but you know, so, uh, we're loving it. We're just loving this whole alternative investment world. And, and, uh, we love to educate in that realm as well.
[00:31:11] BILLY: Good space to be in. It's a good space to live. It's a really good information to the gym. I really appreciate it brother yeah, you gave it to the listeners. We appreciate that.
[00:31:19] JAMES: All right. My pleasure.
[00:31:21] BILLY: Absolutely brother well, I'll see you in the next one.
[00:31:23] JAMES: All right. Thanks Billy.
[00:31:24] BILLY: Take care, bye.
[00:31:26] Thank you so much for listening to today's episode of unstoppable real estate investing wealth. My mission is to give you my listeners, the blueprint for success inside the secrets for starting growing and scaling. Real estate investing business, So you could experience and live unstoppable lifestyle. I've made it simple for you to catapult yourself to success. Go to Billys secrets dot com@thebillyssecrets.com. There you will find every single tool. Trick strategy system. And you used to make millions of dollars as real [00:32:00] estate. Everything my team uses and my guest views all in one place for you to [00:36:00] tap into, you could start, grow and scale the real estate investment business. I really hope you implement what you're learning. I hope you utilize these tools, tips, tricks, strategies, and secrets, and I hope to see you on the next episode god bless. Bye-bye.