Martin Saenz  0:00  

So what a bank will do, over, after a certain set of time, for most banks, will will bundle those defaulted mortgages in their tranches, and sell them into the secondary mortgage market at a discount. So the homeowner may owe $100,000 and principal balance, but the bank is just going to try to recoup some investment and get it off their books. So they might sell it for 20 30,000 to a hedge fund in the end, so So it allows us to kind of work towards a win-win situation with the homeowner. And obviously, you know, more profit, the better if we can swing it. But here’s the thing if we, if we, you know, hold the homeowners feet to the fire, you know, in full and it’s not a plan that they can afford, it’s not going to be sustainable and they’re not going to make payments over a long, long period of time, which is absolutely our whole business model is 20 30 year cash flow streams.

Announcer  0:57  

Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney or accountant we are here to learn from the experts.

J Darrin Gross  1:17  

Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio. 

Today, my guest is Martin Saenz,  Martin is the managing partner of BeQuest Funds. Together with his business partner Sean Muneio, Martin co founded BeQuest Funds with a dual purpose of helping investors grow their wealth and helping mortgage borrowers stay in their homes. He has directly helped over 1000s of families, stay in their homes, and countless more through the influence of his mentorship. And in just a minute, we’re going to speak with Martin about note investing. 

Insurance for Lenders 

https://www.buildinginsurancerisk.com/insurance-for-lenders.html

But first, a quick reminder, if you like our show, CRE PN Radio, there’s a couple things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment, we’d love to hear from our listeners. Also, if you’d like to see how handsome Our guests are, be sure to check out our YouTube channel. And you can find us on YouTube at Commercial Real Estate Pro Network. And while you’re there, please subscribe. With that, I want to welcome my guest, Martin, welcome to CRE PN Radio.

Martin Saenz  2:48  

Darrin, thanks for having me on.

J Darrin Gross  2:50  

You bet. I’m really looking forward to our talk. But before we get started, if you could take just a minute and share a little bit about your background.

Martin Saenz  3:00  

Sure. So you know, I started my, my, my career in corporate America like most folks after getting an MBA, and I just just found that it wasn’t a fit after a few years of working in corporate America. So my wife and I decided to start a government contracting company in 2005. And, and so after going through small business ownership and all the all the rigors behind that, you know, we started buying commercial property in the DC area, which we were living in at the time, in oh nine. And so, so really, we just were rolling profits from the company into real estate. And this was after three grueling years of getting the business off the ground and bleeding, bleeding money, like like nobody’s business. So with that said, though, you know, we found that small business ownership was very taxing, very demanding, ours wise, stress wise. So we sold that company in 2013. And a month after selling the business, I stumbled upon a note investor, and I was hooked ever since.

J Darrin Gross  4:18  

Awesome, awesome was quite the background there. I mean, the fact that you you tried different things, I love that as opposed to just kind of you signed up for the corporate gig and never left kind of thing. And, and, and also to get it to get a flavor of the challenges of small business. Because even in real estate, and I’m sure even what you’re doing now with notes, some of those lessons learned probably carry carry forward do the not

Martin Saenz  4:47  

Oh, absolutely. I mean, just the imprint of, of being broke, staying broke. Whereas, you know, because we ran hungry for many years, getting the business off the ground. So that’s never left me. It’s allowed me to appreciate what I have much more so now, and not take anything for granted and live within my means and be humble with, you know, all that I have in my life. And I got all that from all the painstaking years of getting a business off the ground

J Darrin Gross  5:22  

I hear you. Well, let’s talk a little bit about notes about note investing, probably a great place to start is if you can just kind of describe what is it?

Martin Saenz  5:32  

Sure. So in the context of what we do, because there’s various forms of note investing, if you take a homeowner that’s looking to buy a home, and they go to a bank, and they apply for a mortgage, and it goes through underwriting gets approved, and they go to the closing table, and they sign a promissory note, which means they’re going to borrow this money, they’re going to pay it back, given a certain certain set of terms. Now, they’re also going to sign a mortgage or deed of trust, which is going to tie that promise to the property in the form of collateral. So if they don’t make their payments as promised, then the bank or lending institution will take back foreclose and take back that property. So what happens in 4% of the cases with bank originated mortgages is they go into default, something happens in the homeowners life, like a divorce or health or job loss whereby they stopped making payments. And so what a bank will do over after a certain set of time for the most banks will bundle those defaulted mortgages in tranches, and sell them into the secondary mortgage market at a discount. So the homeowner may owe $100,000 In principal balance, but the bank is just going to try to recoup some investment and get it off their books. So they might sell it for 20 30,000, to a hedge fund in the secondary mortgage market. We operate a hedge fund on one side of the fence and have been for the past nine years that buys these mortgages in and works with the homeowner to create a payment plan that they can afford, while keeping them in their home in making a profit for a company of course. And so that’s our whole business model, we take in mortgages, you know, that are four or five years past due. And in normally what we find is at this point, the homeowners have remarried or they’ve gotten their job back or their health back something has happened in their life, whereby now we can go to the table with them, figure out what they can afford, and give them a plan accordingly.

J Darrin Gross  7:50  

So the I think the the key to that whole opportunity. Sounds like it’s based on the percentage discount, you’re getting up front because the debt hasn’t gone away. It’s still intact, but you you purchased it at a discount if if they owed 100. And you’re buying for 20 or $30,000. Is that not pretty much the the model there is that the I mean, as far as the the key to the opportunity.

Martin Saenz  8:17  

Yeah, we look at it as a way of allowing us to provide concessions to the homeowner. So if if someone owes, you know, 100,000, and we look through their financials, and we determine that, you know, it makes sense, if we lower the balance and make sense, if we lower the interest rate, extend the terms, you know, to help to help make it affordable for the homeowner, we’re able to make certain concessions because we did pay for that mortgage at it at a discounted price point. And so so it allows us to kind of work towards a win win situation with the homeowner. And obviously, you know, more profit, the better if we can swing it. But here’s the thing, if we if we, you know, hold the homeowners feet to the fire, you know, in full and it’s not a plan that they can afford, it’s not going to be sustainable, and they’re not going to make payments over a long, long period of time, which is absolutely our whole business model is 2030 year cash flow streams.

J Darrin Gross  9:20  

Now it’s beautiful. You mentioned 4% of bank loans. That’s the running average for forever or is that like a recent like, period or I’m trying to think just given the 

Martin Saenz  9:39  

Probably over like the past 1020 years? It’s about it’s just it’s a small percentage that goes it goes into default.

J Darrin Gross  9:48  

Well, I mean, that makes makes, I mean again, makes it clear why real estate’s a good, a good investment if test the the rate of failure and that Residential loans, I’m assuming, correct?

Martin Saenz  10:02  

Yes, that’s correct. Okay. And we have the second side of the business, which is bequest funds, which is an income fund that so our hedge fund buys in distressed mortgages that’s privately owned with my partner myself, we have an income fund, it’s a 506 C reg D Income Fund for accredited investors. And that only buys in what we call re performing mortgages. So these are these are bank originated, the homeowner, you know, had a credit, you know, they’re in a tight bar, and they got into default, something happened. And then they got back on their feet, and through a loan modification or reinstatement, and they’ve been making their payments on time for 12 months, 24 months. And so they’re back in good standing. And so request will buy that into the Income Fund.

J Darrin Gross  10:54  

And are you buying from the other fund? Are you buying out of the market? Or how are you attracting or finding those?

Martin Saenz  11:00  

Yeah, we’re part we’re primarily buying from other hedge funds that operate the same business model as ours, we really don’t want to tap on our own reserve, because we use the reserve in the hedge fund to operate our whole operation from an expense standpoint. But if we have, if we have an abundance of capital in the fund, in the funds bank account, and we don’t have a trade teed up, you know, we may look to pull from our own, from our own stash.

J Darrin Gross  11:31  

So let me ask you a little bit about like the rate of return. My dad was a banker, and, you know, for most of my life, I didn’t understand what he did until I went to go borrow money, and then, you know, became very clear. But my basic concept is that the bank borrows money at a discount, you know, from Fannie or Freddie, mark it up a point or whatever, and then retail it, and they might get fees, you know, for the transaction on top of that, but just the loan itself and repayment, there’s that spread that they’re looking for over the life of the loan. Is that similar on your situation, or I mean, cuz you’re if you’re buying at a discount, I’m assuming you have a lot more opportunities or leverage to kind of create a return.

Martin Saenz  12:24  

So as as the paper goes into defaulted status, majority of this paper was securitized at one point with Fannie because all of its underwritten with Fannie and Freddie underwriting guidelines. And so it goes, it goes into securitization, with most lenders and then, but once it goes into default, it gets kicked out of the securitized bucket. In some cases, there’s, there’s additional collateral reserve requirements placed upon the bank to hold default to paper. So it’s just not it’s just not a good business for them. And so they’ll they’ll bundle it up once they sell it to the secondary mortgage market. It’s, it’s out of any kind of securitize. tranche so it’s it’s not Fannie and Freddie. government sponsored mortgages. That’s not applicable in our case.

J Darrin Gross  13:19  

Yeah. But you’re when you take them in or whether it be in the your original fund, or your or the B quest, again, how much capital I mean, does it take to start one of these these funds, I mean, to be a player buying from banks and their defaulted mortgage? how big or how big of a, a fund or you know, checkbook do you need in order to to be a participant?

Martin Saenz  13:52  

Well, checkbook is just one, one of the factors of what it takes to run a successful fun. You know, we’ve been doing this for the past nine years. So I can kind of speak to regulation, compliance, licensing, you know, capital reserves, you know, the list goes on in terms of the risks out there. There’s less inventory out there in the open market than there was before. So So to answer your question, it’s it’s much more than just an amount of capital. There’s a whole risk element to running our operation. We have people full time on compliance. We have attorneys that that keep us in compliance. We have licensed servicers that keep us in compliance. And, you know, we carry various licensing across the United States. So there’s a lot to kind of maintain the operation from from that standpoint to keep you out of trouble. But then there’s a whole other component about building relationships with to other hedge funds so that you can have an ongoing supply of deal flow, as well as having the capabilities to run due diligence on large portfolios. And managing those portfolios. We have a whole team of asset managers. So what do you do once you buy the mortgages, you know, you have to go and convert them from a non performing state into a performing state. And that’s the whole asset management approach.

J Darrin Gross  15:24  

Gotcha. And just that process, you you you get a portfolio of non performing loans. What’s a typical timeline for you to get them, you know, performing?

Martin Saenz  15:40  

Yeah, so, you know, we’d like to look at a two year a two year time point to fully convert or work out all the notes in a, in any particular by, obviously, depends on the size of the pool, and the states that the notes are held in, because each state has its own foreclosure requirement and various legal steps that we have to take to work out these mortgages. So it really, it really depends, but we’ve just looked on average two years.

J Darrin Gross  16:13  

So in two years, you’ve worked through the cost of acquiring the I mean, the the the borrower is now paying as agreed, and, and now you have a potential deal, if you wanted to sell it, you know, somewhere else or just retain it, but it is performing the appointed.  Is that what I’m hearing?

Martin Saenz  16:34  

So so if you buy 100 mortgages, you might have 10 or 15, that start performing out of the gate, and then you might have another 20 to 30 that start performing at the six month point. And then you know, another batch at the eight month point and other another batch at the 15 month point in some someone’s lagging towards the second year point. So you’re you know, is as it depends on the effectiveness, or actually the defense depends on the quality of your due diligence to know that you bought notes that they were, you know, high quality that they can, resolutions can be had. And then you know, having all the asset management approaches in place to connect with the homeowner, and work out a resolution to help keep them in their home. So based on how effective you are in those two areas will determine you know how soon you convert that pool. But the beauty of it is that is it. And this is why we created request funds two years ago, we my partner and I just own the hedge fund privately just ourselves. So we don’t have any investors in that. And so about two years ago, we had just thought, you know, I have I have three books written on the note in industry. So I have people reaching out all the time. And I just, you know, we came to the conclusion like, hey, we need to open this up. People don’t want to necessarily start a new business because of all the requirements, but they want to be a part of the profits. So but with that income fund, when we buy a pool of mortgages they’re performing from day one, we’re receiving cash flow from day one.

J Darrin Gross  18:11  

And what kind of a rate of return that opportunity present in the note. Note fund?

Martin Saenz  18:20  

Yes, so it’s a an eight, there’s an 8% annual preferred return that pays monthly. And there’s a 9% annual return that pays monthly, The 9% carries a four year lock in period and the 8% carries a one year lock in period. So depending on liquidity needs of that individual.

J Darrin Gross  18:45  

And I know you said accredited investors only what’s the minimum investment for somebody?

Martin Saenz  18:51  

Sure. So minimum is 50,000. In the maximums, a million. And most people are come in for about 200 is what we normally see on average. Gotcha. But it’s a very boring, we like to call it a very boring fun, because it’s it’s just boring, predictable income. You know, there’s people that we I talk to investors daily, because I run the investor relations side of the business and some people you know, I need 14% I need them like great, you know, you should go go go for it, you know, there’s always risk associated with higher returns, you know, if there’s something that you need to kind of, if you can manage the risks, you know, great. And we could be a diversification tool but if you’re looking for just steady, boring money, ACH into your account where it’s a good option,

J Darrin Gross  19:46  

right. So as far as the so the first things you have to be an accredited investor. The the funds I know I’ve talked to other people about different options penalties and I know that you know, like with syndications and all these kinds of things, there’s, there’s, if you were to put just your own cash in the deal, that’s, that’s a very clean deal. And sometimes people are looking about moving around some retirement funds. Is that an option for somebody? If they had a 401k? And they, you know, self directed now they wanted to put some money in is there? Is there any resistance or reasons why they could not put their money in? In a, one of your your funds are? Big Question.

Martin Saenz  20:38  

Yes, so, probably about 45% of the money in our fund, is, it’s a $50 million fund, is comes from Ira self directed IRAs. So a good majority of the money, or a good portion of the of the money in our portfolio, comes from self directed IRA money, and most of those folks come in at the 9%, because they’re not looking to pull money out anytime soon. I would just add that, you know, kind of tier tier initial point you kind of touched on, when we, when my partner and I Sean launched the fund, we decided that we wanted to put our own money into to just get it kicked off. So we put about 1.3 in of our own money. And that was really important. Because for us to be able to ask anyone else to put their money, you know, we wanted to show that we had our money in there. I know there’s a lot of investments that you know, that that kind of work, the operators really don’t have any skin in the game, so to speak.

J Darrin Gross  21:43  

Yeah, I’m always happy to hear that, that the the operators have some skin as opposed to, you know, nothing. So on on a fun when you’re investing into fun, I mean, a lot of times we talking in on this podcast about the tax benefits of, of investing in real estate, if you’re directly investing, you have the opportunities for depreciation, and interest write off, I’m assuming and correct me if I’m wrong, investing in a fund where you’re doing notes, you’re not necessarily taking title in these properties. So there wouldn’t be any kind of, you know, depreciation, nor would be any kind of interest write off because you’re, you’re now the bank here, you’re making interest? Am I reading that, right?

Martin Saenz  22:36  

That’s correct. You we, I do have a CPA opinion letter and sample k one, if anyone wants to see, you know, that they can they can shoot me an email, what the one savings we do have is a portion of our income is derived as capital gains income. So we pass that portion on to each individual investor. So if our overall income 25% of our overall income came as a capital gains, as a capital gains, earnings, then we would pass down that to the investor. So 25% of what they earned that year would be capital gains. 

J Darrin Gross  23:18  

So you get the benefit of lower tax rate on capital gains, as opposed to just ordinary income.

Martin Saenz  23:25  

Or if you’re in with a Roth IRA, you know, what does it matter? Or, you know,

J Darrin Gross  23:30  

say I was just thinking in my cell, I win, and this would be pretty good opportunity to, to move some Roth funds over and, and do that to begin some. So, quick question. So you, obviously you’re you’re in and now it’s working? You’ve you’ve got it established? And that you mentioned that somebody introduced it to you? What was that opportunity that you saw? Was it was it an individual property? Or was it a fund or what was the what was a saw?

Martin Saenz  24:01  

Yeah, so I was going to my local Ria, at the time real estate club in the DC area. And we had a presenter that was from a note education company. And they did you know, they did their song and dance on Wednesday night, and I signed up for this satellite session on Saturday. And, and from that point, I was hooked. I’m thinking, you know, I had been on the real estate side. So I kind of I kind of understand real estate, I’m still a landlord. So I still still manage properties. So I get I get that side of the fence, but I was also looking for something that I can do remotely, they gave me a little bit more freedom of time. So so that was what was intriguing, you know, buying mortgage notes, rehabbing them, essentially, like you would rehab a property, getting the homeowner back on track, keeping them in their home, developing, you know, 2030 year payment I’m in cash flow streams for yourself. And so, so I read every book I could get my hands on, and really just kind of learned by trial by fire. I bought some 10 notes that I shouldn’t have bought, you know, out of the gate, but I learned a lot from them.

J Darrin Gross  25:17  

Yeah, well, experience I think is always one of the the best teachers period, just like your small business experience. And, you know, if you if the 10, you bought work beautifully, you never know what the problems might be. So that’s right. Pretty, pretty powerful learning.

Martin Saenz  25:36  

Yeah, you know, what was interesting about the 10 Is that is that I was focused initially out of the gate, I was focused on obtaining the property. So this was going to be a backdoor into acquiring property as a landlord, because that’s all I really knew. So what I learned, though, is that when you focus all your due diligence efforts on on obtaining the property back, then you’re going to get what you focus on, right, like kind of simple rule of thumb. And so what I ended up getting back was vacant properties, you know, blighted properties, stripped out properties, and so on. And so I was having to kind of be a long distance landlord kind of turning over these properties. But after I bought those 10, the first one I actually modified. So I got a deed in lieu 90 modified, I’m sorry, I got a deed in lieu I resold it for half down, 18,000 down, and I took back an $18,000. Note, over eight years, it’s 7% interest. So that was my first experience of doing a seller financing note, and earning cash flow. And that really changed my perspective, because I’m like, why am I trying to focus on the property when all I want is someone to pay me every month. Like, that’s truly all I want. And so that I shift my whole focus, I started performing due diligence on the homeowner, and understanding their ability to pay where they’re at, in addition to the property.

J Darrin Gross  27:08  

That’s a I’m glad you made that point. Because the, the emphasis, you know, and again, a lot of times in real estate investing, you’re taking location and and you know how much rent you can get for it. But, you know, you stick the wrong tenant in there. The one that signs up first and the first one with cash, you may find out in a hurry, the the landlord tenant laws, and how long it’ll be before you see your money kind of thing. Yeah, so yeah, underwriting the tenant, you know, underwriting the borrower the tenant is, is really key to success and in real estate, period. And that’s why, you know, banks and, and insurance companies have so much, you know, invested in underwriting is trying to understand what they have to make it all work. So, definitely.

Martin Saenz  27:58  

Yeah, in what’s interesting, and we do everything from an underwriting perspective, everything that a bank would do. So we’re looking at property valuations, pulling bright broker price opinions, we obviously can’t go in the home, we’re not legally allowed to, we pull only reports, title reports. So we’re looking at lien validity, lien positioning ownership, we’re looking at property tax records, bankruptcy searches, credit report, pulling in analysis, skip tracing, I mean, on and on, and we triangulate data, and we make determinations and cash on cash projections. So we were very sophisticated in that regard. But at the end of the day, you’re really, you’re really going to get what you focus on. And that’s just from a sourcing perspective to not just due diligence, so, so our whole world is sourcing pools and mortgages that have equity coverage, where we where we believe we can work with the homeowner. And then so so we build relationships with other hedge funds that are aligned with that in that we can be downstream from them, who receive deal flow. And then so once we massage those relationships over the course of years, which we’ve done, then we receive opportunities, and then we run it through due diligence to really make the determination, can we get this bar to the table, so we can do a payment arrangement?

J Darrin Gross  29:23  

Right? It just occurred to me is where you were describing what you do there? You’re buying a blind pool, aren’t you? When you when you get this from one of your other hedge funds? Do they say okay, we got a tranche of, you know, 20 million or whatever the number is. You want it or whatever. And at that point, you get a chance to underwrite that list, or is it? How much upfront due diligence opportunity do you have?

Martin Saenz  29:55  

So it’s due diligence runs in two phases for the most part So you have a, you know, you get an initial snapshot of the opportunity and Excel file, and you get to to run due diligence and then put in an initial bid. And if that initial bids accepted, you’ll have, you’ll put some stipulations on there to run further due diligence. So in commercial world of study period, if you will, and so then you can go into deep dive, and then through going into deep dive on, let’s say, 50 mortgages, then you might find that a few are not the liens are valid, you might find the the fair market values were way off on what was projected, and then you might price adjust some of the notes. But you have to be careful that you’re not that you’re not being a nuisance to the seller. And you’re not kicking things arbitrarily or just trying to manipulate the situation because you’ll get blacklisted at the end of the day. So you want to kind of be delicate about how you take that that back and forth. Approach.

J Darrin Gross  31:04  

Yeah, no, that’s, that’s similar in the, you know, real estate acquisition mode, you make the offer, you get accepted, then you have your, your due diligence period, and you’re trying to confirm all the information you you thought to be in, I think, is it considered a Retrade. And that’s the word they use. And in commercial real estate, if you come back, and you try and say, Hey, wait a minute, I thought it was this, it’s got all these things, we need a credit or a discount for for that. I’m assuming if it’s legitimate, if you can say way, way, way, way, you know, we like the deal. We like the package. But these things were not disclosed. We never dealt with these before. These are issues that we we need some credit for is that if it’s legitimate, is it pretty well understood.

Martin Saenz  31:54  

So it is so but here’s, here’s the thing is, this is where our competitive advantage comes into place. We have long term relationships with very large hedge funds, and they trust us. So when they have a deal, most of our trades are negotiated trades. So they’re coming to us and we’re just negotiating against ourselves really, right, it’s for us to lose. And so these aren’t out in the open market with 2030 bidders. So with that said, you know, we have to be real delicate with that relationship. And in what we’ve learned over the course of time, is we’ve learned to manage defects in the mortgage notes. So we know won’t call it out, we’ll call out, you know, hey, it’s missing this piece of collateral, it’s missing. The original note, it’s missing, you know, the fair market value skewed hear that, but but we also understand our internal systems to be able to overcome certain obstacles, whereas other hedge funds may just kick that paper, they made this kick that note here in there, and then we’re not creating that relationship with the seller. Got it?

J Darrin Gross  33:06  

Is there any kind of a timeline to perform once the the offers? Made? If somebody says, hey, Martin, we’ve got this, and you can take a look at it. Yeah, we’re interested in in your, in your, your study period? Is there a time is it weeks months, what’s what’s a typical on that, to close a deal,

Martin Saenz  33:27  

like, like any transaction, the seller wants to close immediately, and the buyer wants as long, long of a period as time typical trade, you know, 50 100 mortgage notes, you’re looking at a good month to get through the whole process. But what I would say is we do everything our other competitive fannish is we like to be speedy to closing. So we like we have a whole acquisitions team that, that does, these individuals do other functions in the company, but when we ever trade in hand, they all come together and form an acquisitions team. And we do that because we take an assembly line approach to run a due diligence, so that we can get through it promptly and get back to the seller, get them paid and closed out. Because what we have found is we’ve lost opportunities because of time. So whereas most buyers want more time, because they want to truly understand and I get that we’ve had loans that paid off before we close so we never got those got kicked out of the pool. You know, we’ve had we’ve had other other kinds of whatever happened, you know, and trades got pulled. So we want to rush it to closing but know what we’re buying before we buy.

J Darrin Gross  34:43  

Right? Well, your your history and your performance sounds like it speaks volumes to you know, the other hedge funds that you buy from. So, you know, kudos to you and, and your team. And, you know, like anything I think that the relationship of one that can perform, you know that, that history there carries a lot of weight. And, you know, you’re going to get additional opportunities, the more you do that, prove that you are an option in the marketplace. So I get it

Martin Saenz  35:17  

Yeah, yeah, it’s worked out. But like anything else, you know, I found I found a spiritual relationship with a higher power 2013. So I kind of always stay humble. And what that’s helped me do is, is it’s helped me not settle. So it’s not not even though the relationships are there, I’m not waiting for the Batphone to rain. And so we’re always aggressively looking at new asset classes, looking at connecting with new hedge funds, they could they could be trading partners. And we’re not just kind of settling for where we’re at.

J Darrin Gross  35:57  

Now, I got it, kind of, Martin, if we could, I’d like to shift gears here for a second. By day, I’m an insurance broker. And I work with my clients to assess risk, and determine what to do with risk. It sounds like you probably do a lot of that yourself. In your business. There’s three, three strategies that we typically present as options. The first is we look to see, can we avoid the risk? When that’s not an option, we look to see if there’s a way to minimize the risk. And then the third option is can we transfer the risk, and we transfer to an insurance company and insurance policy. That’s what what it is, it’s a risk transfer vehicle. So I like to ask my guests, if they can look at their own situation, could be their their clients, the borrower’s the market, hedge funds, however you want to frame that. But if you could take a look at your situation and identify what you consider to be the biggest risk. And for clarification, while I am an insurance broker, I’m not necessarily looking for an insurance related answer. So if you’re willing, I’d like to ask you, Martin Saenz, what is the BIGGEST RISK?

Martin Saenz  37:16  

I would say compliance, being out of compliance, so missing something in the due diligence process, such as you buy a loan that’s outside the statute of limitation, and you and you begin legal activity on that loan, then then you could be held liable as an organization. So there’s a risk that way? Property, the collateral, right? That’s it, that’s really what’s backing the the obligation at the end of the day. So not having force placed insurance on a senior lien mortgage note in the house burns down, then, you know, you’re not going to get paid, you know, you need force placed insurance, errors in emissions from an insurance perspective. You know, there’s just there’s, there’s so much, you know, we say paper, but this paper is full of words that are written by attorneys. And there’s a lot of those pages. So so, you know, just making sure that, you know, say all the promissory note, all the collateral files have been signed and initialed by the, by the, by the bars. And whereby, you know, they’re validating that debt to, you know, to be there and existence. And so I would say some of those and then licensing to I mean, you have to have certain licenses to operate in certain states. So if you’re, if you’re operating out of compliance from a licensing perspective, then you can have a state regulatory body come down on you with fines and in they could they could prohibit you from operating in that state.

J Darrin Gross  38:54  

Yep, no, compliance is a big deal. And especially when you’re working across multiple states, you find out that they’re not all the same, right?

Martin Saenz  39:03  

Oh, gosh, yeah. No. Yeah. Right. And that’s why like, you know, whether, whether it’s be quest, or it’s a syndication or read something that’s out there, you know, you have other guests on that, that have other opportunities. You know, that that’s what I would always want to know, as an investor, because I’ve been an investor for a while is, you know, what, what’s the risk there with that, with that opportunity? You know, how are the are the operators licensed? Are they you know, what, you know, what’s the downside and all that. Very important to know.

J Darrin Gross  39:36  

Yeah, definitely. Martin, where can listeners go if they’d like to learn more or connect with you?

Martin Saenz  39:43  

Sure. Just send me an email Martin at BBQ funds.com. And I’ll send you the tax treatment document. I’ll send you a free ebook I’ve written I’ve written three books on the mortgage note industry. Two other books I’ve written five in total. I’ll be happy to mail you out a book. You know, I love connecting with people and it’s really a passion for me like, same way you’re doing this program you’re you’re helping educate people in new ways to invest how to be better investors, in that I have the same passion. You know, I’m a believer in passive income, cashflow, financial independence, and and you have to do that by taking control of your future and educating yourself and, and being disciplined. So, so if I can help anyone in any way, whether it’s note related or other, you know, let me know.

J Darrin Gross  40:40  

Awesome. Martin, I can’t say thanks enough for taking the time to talk today. I’ve learned a lot. And I hope we can do it again soon. Thank you, Dan. All right. For our listeners. If you liked this show, please don’t forget to like, share and subscribe. Remember, the more you know, the more you grow? That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.

Announcer  41:13  

You’re listening to CRE PN Radio for influential commercial real estate professionals. For more information on this or any of our guests like us on Facebook CRE PN Radio