Mortgage Notes Investing with Emily Cortright

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Interview Transcription

ADRIENNE: 
Welcome back, and thanks for listening to the Team Lally Real Estate Show home of the guaranteed sold program or we’ll buy it. I’m Adrienne, and I’m Hawaiian. And if you have any questions, just give us a call at 7999596 or check us out on the web at Teamlally.com.

ATTILIO: 
You see what I did there? I did that for a Magic Island Mike. Okay, very

ADRIENNE: 
good. Then there was some there was a couple of other comedians too that were very confused about what you do.

ATTILIO: 
I was gonna walk around. Hi, my name is Attilio and I’m Hawaiian. No way I’m gonna say and I’m Hi Julian.

ADRIENNE: 
Okay, on that note, we do have a very special guest. Yeah. Who actually we got to meet her in Nashville at a conference and all her best life very impressed with her. So we just really wanted to bring her to the show and share some of her wealth of knowledge.

ATTILIO: 
I was wondering if it’s her best life. What about the rest of you ladies? Was it just one lady had her best life? We all did. Oh, y’all did okay.

ADRIENNE: 
Okay, so our guest today is a wealth ambassador and investor in real estate and notes at A & E Real Estate Group at Keller Williams Realty. She left her corporate job in 2013 to pursue entrepreneurship and financial freedom through real estate investing. As a speaker and educate educator, she imparts valuable insights and expertise on various aspects of wealth creation, empowering individuals to take control of their financial future. Yes.

ATTILIO: 
All right. So oh, wait, I supposed to read some stuff. Please. welcome

ADRIENNE: 
today’s guest Emily Cortright.

ATTILIO: 
You know, we run a very professional show here he to you Don’t mess things up. Hey, Emily, are you there?

EMILY: 
Yes, I’m here. Hi, Adrienne. Hi, Attilio. Hello, hello.

ATTILIO: 
Hello. So, so good to have you on the show. Because the information that you shared with our team, thank you for coming from contribution being on one of our huddles is you know what, I like it what it? I don’t know if you’d you said it, or it’s on money or things, but I think it was like a question. Do you have dead money? Now I know there’s dead people on the money. But what is dead money?

EMILY: 
That is a great question. And it’s the same topic today. Yeah. Because so dead money is money that is sitting in a checking or savings, savings account making almost 0% interest. So it’s barely doing anything. I looked back at one of my statements earlier this year, and I had made 15 cents in interest all year, would you spend? I know, right? I can barely buy you can’t even buy a piece of candy for 15 cents anymore.

ATTILIO: 
30 seconds on a parking meter? Yeah.

EMILY: 
And so one of the even as the market has shifted, and rates are historically high right now, yeah, one way that that can actually benefit us as personal investors is we can move our dead money or money that’s sitting there making no interest. And it can easily make between four and five and a half percent interest just by putting it in, in a different type of account. And some of these accounts are FDIC insured, they’re secured by the US government, they are extremely safe investments. And so we’ve seen, I’ve ran the numbers, let’s say you put aside money for your federal taxes come next April. Well, if that money is sitting aside, it should be making between four and a half to five and a half percent interest. And that could be that could be 1000 2000 3000 extra dollars that you have between now and April, just for moving the money into a different type of account. So you’re basically throwing away money, you’re giving up the opportunity for free money, just by not moving, not just by not taking action. So if you move the money into a high yield savings, money market or into treasury bills, for example, you could be getting four and a half to five and a half percent on your money that is sitting there waiting to be invested waiting to go to taxes, or just waiting for like business reserves.

ADRIENNE: 
So Emily, that is obviously one of the strategies that you have personally followed. And I know that there’s probably quite a few more Yes. And I know that at the her best life and even you know, when he came and talk to our team, it was something that was quite interesting. That was,

ATTILIO: 
would this be in alignment with this question where you have you want us to ask you Have you shifted your investments based on current market conditions?

EMILY: 
Yes. And what I have found in my personal portfolio and what I what I know from other investors out there is that it is harder and harder to get a good cash flowing investment. With today’s market. We have expenses going up. Rents aren’t going up as quickly. And so to find a really solid cash flowing investment in real estate, is extremely difficult. So about a year ago, I learned about a brand new type of investing that I’ve never heard about, but it’s been around for decades, called mortgage note investing. And it’s a it’s a hidden gem. Not a lot of people know about it. But you are essentially buying a mortgage that is already in place. It’s existing and it’s getting paid on it’s what they call performing. And so a homeowner is paying their mortgage every month. Well you can buy it on the Secondary market at a discount. And I’ll give an example. Let’s just say I buy a note that has $50,000 left, but I can buy it for $35,000. And I get that I get a discount if that homeowner sells tomorrow, I get that $15,000. back tomorrow. Wow.

ATTILIO: 
Rewind, say that one more time again, rewind.

EMILY: 
Yeah, right. So we can buy notes, mortgage notes at a discount. And so, so the loan amount might be 50,000. Okay, but I am only paying $35,000. But I will nothing, nothing changes for the homeowner, they keep paying their mortgage payment. And except it now goes to me. And so it’s a really, really powerful strategy, and it creates a long term cash flow stream. Gotcha. So I might pay $35,000. And this note might have 10 years left on it. And so I might get this monthly mortgage payment for the next 10 years. And what is really okay, go ahead.

ATTILIO: 
What was the motivation of the person? Because this, somebody has the 50 50k? No. So they’re selling it? Why did they sell them? Why would they sell it to you at a discount? I have us understand that part.

EMILY: 
Great question. So the current lender, they want money today, instead of their money over the next 5,10,20 years. Gotcha. I, on the other hand, I want to buy a cash flow stream that can last me the next 5,10,20 years. And so when they want to when they want their money today, then it creates a great marketplace for people to come in and buy it. Yeah, I

ADRIENNE: 
think too, with it being like the last 10 years of the note in this particular example, that first mortgage owner got a big brunt of that interest, because typically interest is front loaded. But there’s still interest paid throughout the life of the loan. Yeah, amortization is Yeah, yep. So but it’s still a great way to make passive income. And I love the example that you use Emily with the amount. Yeah, so what is like the smallest amount that somebody can get involved with? If they’re

ATTILIO: 
not a big baller? Like you exactly.

EMILY: 
So the the smallest, that balanced note that I bought, I have paid $5,000. And it probably had three, three years left.

ATTILIO:
People are getting really pissed off right now because they got $5,000 in some dumb CD that’s losing their money, because it’s not even keeping up with inflation.

EMILY: 
Right? Yeah. So. So notes can be very, very affordable. There was a whole portfolio of notes that came out. And it was 40 notes total, and 31 of the 40. Were under 50,000. So notes can be a very have had very affordable entry points. Yes.

ATTILIO: 
You converted one of your single family rental properties to an owner finance property. Tell us why and how that’s going.

EMILY: 
So this was a rental property that I had owned for about seven years, and I had spent a lot of money on upgrading the systems. I actually had the same tenant the whole time, and she finally moved out. And I said you know what? I am done being the landlord. I’m done dealing with the overflowing sewer pipes and the air conditioner

ATTILIO: 
issue bears down the toilet.

EMILY:
Yep, yep. Believe me, she had two grand grandbabies, boys. And as they were going through the potty training phase, I would always get called when the toilets were overflowing. Yes. And so I was done being a landlord while going along the same lines of the mentality of becoming the lender in terms of buying notes. Yes, I became the lender on my own rental property. I sold it. Owner financing. So when I sold it, I became the bank. And

ATTILIO: 
did you have a top hat? One of those kind of weird mustaches and they’re like a vest with.

ADRIENNE: 
Like the monopoly guy.

ATTILIO: 
That’s what I was describing. Oh, did you look like do you look like a monopoly guy? No, no,

EMILY: 
I am a just a normal average person. Yeah. And I, I was able to find a great buyer. And she and typically owner finance buyers, they can’t qualify for traditional mortgages. And so she’s she’s really the perfect buyer. She makes great money, but it’s a lot of cash. And so she doesn’t report it all on her taxes. And she was able to afford pretty much a 10% interest rate. Wow. And 10% down and

ATTILIO: 
whatever. How am I going? You’re helping her own a home. That’s all So yes, yes.

EMILY: 
And the best part about it is financially, I am making $500 more per month by being the lender than I was by being the landlord

ATTILIO: 
with all the headaches. The headaches, your your, your the amount of money your budget for Tylenol went to zero, because of all the headaches you got.

ADRIENNE: 
Plus you got that 10% chunk for her down payment.

ATTILIO: 
You know, folks, we met Emily in person, she’s a beautiful sexy lady, you know, it’s so beautiful and sexy about her her mind, because she’s thinking of different ways to own investment property. Without the headaches now, okay, we’re gonna be, you know, y’all, I can tell you right now our listeners are going by when he stops making mortgage payments.

ADRIENNE: 
Yeah, what happens, then

ATTILIO: 
what happens then? What do you do?

EMILY: 
So I have a couple, I have a couple options. I am the lender, so I can work with her. And we could modify the loan term. So let’s say her mortgage payment is $1,700 a month. Yeah. And I may go through and say, Okay, what you can’t afford 1700 anymore, how about 1400s. And we could extend the loan out 10 more years. For example, if you think about the the financial industry, the lender is always going to win in the deal. So it’s always going to be financially better for the lender, even though it feels better for the borrower. So that’s one option. The other option is pursuing foreclosures, I could get the house back, and then I could sell it again, to another owner, finance buyer and do the same thing. So it’s a really beautiful thing.

ATTILIO: 
I think that’s what people are freaked out and scared about. But it’s like, you know, you Oh, bummer. You’re getting a house back. That’s terrible. But you want to get there, you’re making

ADRIENNE:
10% on your money, like, where else can you make 10% on your money? And that’s one of the things too, that we like to ask our clients to do with the money. Yeah, and, you know, in a an owner finance deal, you know, where it’s, you know, 6%, seven, eight, even 10%. Like, that’s pretty good. Money, especially if you’re first position lender. Yeah.

ATTILIO: 
And, and, obviously, on your own home, you’re a first position lender and tell people what that means and what’s important about it.

EMILY: 
And that means that you are first in line, if this property goes into foreclosure, so you get paid back first. And, and that is that is the best that is the most ideal position to be in,

ATTILIO: 
ya know, are some of your notes. And I don’t know if this is the word you guys use, but I know from being a relative subordinating loan notes.

EMILY: 
So we do have some second position notes, but we also own the first one. Gotcha. So if I prefer, I would want to own the first and the second. Yeah.

ATTILIO: 
Okay. That’s smart.

ADRIENNE: 
That’s a smart strategy.

EMILY: 
Yeah. And one of the other things, one of the other questions I get asked a lot about, is that, they say, well, Emily, you sold the house. So now you’re not going to get the appreciation anymore. And when you look at the numbers, yes, I’m not going to get the appreciation. But like Adrienne said, the 10% interest, I’m going to make $100,000 in interest over the next five years. And honestly, I don’t think the House is going to appreciate another $100,000 in the next five years, so we trade off, we don’t get the appreciation. But that interest rate is so powerful in the amount of money that it brings in.

ATTILIO: 
Yeah, and if you get a bunch of those going, the ideal objective is you have a passive income passive income truly passive that’s truly passive. It’s so passive that when you look at it you like fall asleep. It’s so passive. Yes, like better than no dose I mean, not know those but better than melatonin melatonin. So, so start falling asleep. Emily,

ADRIENNE: 
I mean, you make this sound like so simple. And I know that you offer some mentorship and some classes, like How could our listeners learn more? Learn more sign up for you know, to get your your deals of the week? Yeah, what’s the best strategy?

EMILY: 
So they are welcome to email me at my whole name. Emilycortright@kw.com. Yes, it’s E m i l y c o r t r i g h t@kw.com. Or they can they can reach out by text to and I have a lot of recorded classes. Nice. And then I also like Adrienne mentioned I have resources if you want to pursue greater education, in the note investing space, for example. I have a lot of great links that I could send you to the same place that I learned about note investing. You

ATTILIO: 
know, I call It recruiting without recruiting but you notice that she’s with Keller Williams. So if you’re not with Keller Williams, not that she’s not going to turn you away and educate you. But I just want to point out that these are the type of resources that we bring to the table for our agents,

ADRIENNE: 
and then are encouraged, I know that there’s a lot of different ways to make money in real estate. And we’ve got a lot of, you know, little niches like what Emily has. And then I just want to, you know, give like, my testimonial, like, she’s, I get the emails, you know, you can just, you know, click on it and say, Okay, I want to do that. I want to know, you don’t have to, like, know, all of the, you know, the specifics, you know, her and her team, they do it, and you can just invest without

ATTILIO: 
the specifics, and you’re up late at night, you

ADRIENNE: 
can go through the course, or you can just partner with Emily and her team. I’m more

ATTILIO: 
like our Guru rather than I’m the easy button. I just pushed the easy button. Yeah, Emily, here’s some money. Yes. Run with it. I don’t want to know the details. Just I’m like Disneyland, I don’t want to go below the street and find out what’s going on. Now,

ADRIENNE: 
Emily, I know that you guys are really, like very cautious as far as the states that you’d like to carry the notes. And yeah, can you tell us these, you know, these parameters that you’ve come up with, give us some

ATTILIO: 
examples of some you know, what you’re looking for in the States, we’re doing these notes.

EMILY: 
Absolutely. And similar to what landlords look for when it when you talk about a landlord friendly state? Well, now I’m looking for foreclosure friendly state, lender friendly states. And so we do look at whether it’s a judicial foreclosure or non judicial, which basically just means if it has to go through the courts, or if it doesn’t have to go through the courts, I prefer if it does not have to go through the courts. And that just means that if for some reason the homeowner stops paying, and I do have to foreclose, I can get that house back quicker. But it doesn’t mean that we won’t invest in, in other states, but we do look at the state policies, how lender friendly they are, we look at the house, or the asset, and I, you make sure you would want that house back, you know, make sure it’s not falling down potential to get condemned by the city, you wouldn’t want that kind of house back. And then we look at the borrower. And what we get in our in the package that comes with a note for sale is the borrower’s payment history. So it shows all of their history, their payments, come through through the life of the loan. So if it’s a 10 year loan, it’ll show the last 10 years, if it’s a two year loan, it’ll show the last two years. And you can see anytime they made a late payment, you can see if they pay extra and on time every month. And so we put a lot of weight in that in determining our risk. Because if they were late, if they were four months, late last year, the whole year, and then they Oh, they got a big bonus check, and they caught up to me that’s a higher risk borrower than somebody who just paid on time. You know, the whole life of the loan, we looked at, we looked at those kinds of things.

ATTILIO: 
And to simplify it for people you’re like, you’re like, Mrs. Santa, you’re seeing who’s on the naughty list and who’s on the nice list. People on the nice list you’re gonna do the notes with, and I’m sure you do it for the people on the naughty list, except they’re gonna get the naughty interest rate. That’s right, much higher, yeah, higher risk, but you, maybe you just just don’t even go there and you just do it the other way. Let’s stick with the people that have a good payment history.

EMILY: 
Every investor has their own criteria and just you hit the nail on the head, if it’s a little bit riskier situation a little bit riskier borrower that the return is going to be higher, because it is higher risk.

ATTILIO: 
Okay, so interesting, and tell people, how did you come across this? Did a coconut hit you on the head and you’re like I should invest? How did you come across?

EMILY: 
I have to give a lot of credit to a mastermind group through Keller Williams called KW Wealth Mastermind. And it was an organization if they it was a group that started last year. And Gary Keller, who leads Keller Williams wants agents to invest and he wants them to invest in real estate and grow their wealth. And so it is I would say the top investor agents all across the country that get together and we talk about advanced wealth building strategies. And notes was one of them. We had a guest speaker brought in to mentors, the leader of KW well, and I can tell you, the my jaw hit the floor when I learned about mortgage note investing and the cash flow that it can bring in. And I texted my husband, I said, we’re going to be investing in notes. And he’s like, what? And

ATTILIO: 
I said, Yes, dear. I

EMILY: 
know right? Yeah. So I had to get him to come to a class to see the numbers were numbers, people. So when I saw the numbers behind it, I was hooked. And I said this is this is where I want to take my investing business. This is where I want to diversify our portfolio into because we are very heavily invested in real estate. And it’s just not cash flowing the way we expected it to you did

ATTILIO: 
a pivot. So, Emily, are you saying that Gary Keller, the founder of Keller Williams, is putting together opportunities to mastermind for us KW agents to build wealth, and not just be transactional based agents. That sounds crazy.

EMILY: 
Is the reason that I will never leave Keller Williams because I am in a room with phenomenal investors that have built amazing businesses. And you said it, we get to mastermind, and we see what everybody else is investing in. We share success stories, and it makes us all better investors. And it allows us all to grow our wealth. Yeah. Well,

ADRIENNE: 
Emily, we want to thank you for sharing your story sharing this, this valuable information on note investing. And, you know, we hope to be investing very soon with you on some notes. We have some extra we are going to

ATTILIO: 
Yes, we have some dead money we do. It’s really smells bad. It’s getting rigor mortis. We need to get we need to, you know, put the ad thing on it. Clear revive, I need a better return.

ADRIENNE: 
So thank you so much, Emily, we appreciate your time. And

ATTILIO:
just It’s Emily Cortright. That’s with a C like, Charlie @kw.com.

ADRIENNE: 
That’s right. So get a hold of her where you can get a hold of us and we’ll connect you with Emily will. Alright. Thank you so much, Emily, we appreciate you.

ATTILIO:
You’re awesome.

EMILY: 
Thank you. Have a great day.

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