Co-founder of the Money with Meaning Fund and President of Paperstac, Rick Allen joins Jonathan on this episode. His Money with Meaning Fund has a double bottom line mission of making money and also measuring success by doing good through buying underperforming notes. They purchase non-performing loans at pennies on the dollar, restructure the loan so homeowners can afford to keep their home, and then sell these performing loans to investors at a good profit. His company, Paperstac is a platform to buy and sell these loans. Rick has loads of knowledge to share, so if you want to learn to do good in the world and do well at the same time, be sure to pay close attention!
Rick’s real estate career prior to non-performing loans
Rick began investing in real estate in 2005. He sourced investment houses and hard money. As the economy began to take a downturn in 2008, he saw home prices declining and then nose diving. He was able to purchase homes far enough below value to make a profit by selling to other investors. He sourced properties through short sales, direct mailers, and probate. During the recession there were so many houses in foreclosure, investors were focused there. Rick found diamonds in the rough in life estates.
How non-performing loans allowed Rick to help others and make money
Rick’s goal is to help borrowers and make a financial return. When a realtor brought Rick a non-performing loan to purchase, he was able to buy it for under ten cents to the dollar. Throughout that first year, he purchased a dozen of these non-performing loans. Rick’s sole goal was taking people’s houses back. However, he soon learned about performing loans, and he realized that people don’t always want to give you their house back. He educated himself on modifying loans and letting people keep their house. He was able to save money by not going through the expensive foreclosure process and was able to do good by helping the borrowers stay in their homes.
Key indicators of a good note to buy
Rick shares several indicators of a good note to buy:
- The property is owner-occupied and about 4 years behind on payments
- There has been a life event that happened to cause payments to be behind
- The property owner has requested a loan modification
- The size of the asset is $100k or under – there is an abundance of inventory in this price range
What is Paperstac?
When Rick began purchasing and rehabbing non-performing loans, there was no process for buying them. They make an excellent investment class but there was a need for technology. His company developed Paperstac, a platform for buying and selling these notes. Sellers are able to list mortgage notes for sale in the marketplace, and the software provides a step-by-step process from the time of looking at the asset to closing the transaction. Everything that occurs is recorded, so there is a full digital audit trail. Paperstac allows a first-time investor to do everything himself, with a third party collateral audit and escrow company. The buyer wires money to this escrow company while the seller sends the collateral file to the audit. Paperstac not only provides a platform to buy and sell but allows investors to do so with peace of mind.
In This Episode Rick Allen says…
- [1:40] Who he is and what he does
- [4:07] The timing of getting into the note business
- [9:20] The early period of buying notes
- [17:21] The key indicators of a good note to buy
- [22:01] Paperstac explained
- [34:23] How Paperstac fits into his business
- [37:22] Why there are more foreclosures in the current market
- [41:16] Looking to the future
Resources Mentioned In The Episode
- Jonathan@MultifamilyLaunchpad.com – Learn to be an asset manager and Investor
- Bellwether Enterprise(sponsor) – contact Will Oldham email@example.com
Connect with Rick Allen
- Rick (at) Paperstac.com
- Rick (at) MWMFund.com