#113: Residential Mortgage Notes

Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and your investing with The Accelerated Investor Podcast. 

Josh: So, hey, welcome back to Accelerated Investor. Thank you so much for all of you. I know a lot of you guys are tied up in your homes, you’re social distancing. You’re spending time with your spouses and your kids at home. And the engagement on our podcast, skyrocketing. People listening to this, whether they’re in their cars, but mostly at home, whether you’re working out in your home going for walks. Just want to tell you that we’re thinking about you. We’re thinking about all of your safety, of course, but for sure, your pursuit of freedom as an entrepreneur or a real estate entrepreneur or a business entrepreneur. And we’re really happy to bring these podcasts and this information to you in this crazy time. So thanks for sharing this on social media. Thanks for sharing this with all of your members and all of your comments, questions and reviews that you’ve been sending in today. Have a special guest. His name is Bob Frazier. He is the founder of an organization called Aspen Funds. They invest in mortgage notes, both performing and non-performing high yield performing and non-performing mortgage notes. He’s been an investor for a long, long time. He invested through the crash of the dot com crash of 2001. His partner invested through the crash of 2008. Of course, we’re going to talk about those experiences and how they you know, how it helps them create perspective around what’s going on with this natural disaster of 2020. They have over 2000 mortgage notes in their portfolio. And we’re going to talk about different ways to create cash flow, alternate ways to invest, especially investing in debt and how to run a business and how to really kind of fly the plane in uncertain economic times. So, Bob, thanks so much for joining us on Accelerated Investor. How are you?


Bob: Fun to be here with you, Josh.

Josh: Fantastic. So, Bob, so what I’d love to start my podcast with, my guests interviews with is to talk a little bit about what’s going on right now. I think our audience always wants to know not to maybe start with your background from maybe 10 or 20 or 30 years ago. But let’s talk about what’s going on today. So tell us a little bit about your your kind of moneymaking strategy in your businesses today. What do you do on a day to day basis in the business that you run? And, of course, tell us a little bit about how your business has been impacted by this virus that we’re fighting now.

Bob: Sure. Well, we’re basically super busy buying notes, mortgage notes and raising money from investors to do the same. So, you know, and we buy two kinds of notes. We buy non-performing notes and then we repair them. And we also buy performing notes and collect cash flows and pay the cash flows. We have five different funds. And so it’s good times and bad times. Right. And, you know, I love, you know, listening to what you guys are doing because you’re very opportunistic as well. You’re not just looking for a hunker down. But where’s the opportunity? So we’re doing exactly the same thing. We’re seeing prices softening, which we love. You know, we love that opportunity. And so we’re very busy buying, very busy building those relationships. You know, we find investors are a little more, you know, asking more questions, sharing a little slower to pull the trigger. Everybody in all the sphincters tighten when this happened. Right. But that’s all right, you know.

Josh: So, Bob, tell us a bit about how you guys acquire notes. Are you guys an originator who originates private money and hard money loans? Is it resi, commercial residents or commercial? Or are you finding now that maybe some other private money lenders or hard money lenders are, you know, maybe feeling some of that liquidity problem and they’re looking to sell portfolios. Tell us a little bit about it, you know, for your own fund and obviously for our investors and our listeners, you know, how would they get into the note business of acquiring and finding notes to buy?

Bob: Yeah, we buy notes. And we generally, we don’t deal in very many hard money loans. Almost all our notes are bank originated. So we buy loans that were one time defaulted. They’re called troubled debt restructures. Recently modified loans. They’re sold at a deep discount to the UPB. And those are where we buy cash flowing and we generally buy from direct from the financial institutions or brokers, note brokers or hedge funds who buy these. And that kind of thing. So we’re very busy generally. They’re bottom pools, you know, larger pools. But there are some also just third party Web sites where these things are available.

Josh: Fantastic. So obviously, this whole business of this virus is creating all this forbearance and a lot of these notes are going to go into forbearance plans. I just recorded a podcast with a friend of mine who’s the V.P. of market economics at auction dot com. And we were talking about the spike in forbearance is that are happening, which is going to create more non. Forming loans. Banks are going to need liquidity to sell off some of their even their performing paper to create liquidity. You know, just stay within their lending guidelines. So how do you anticipate that this this health scare, this virus business is going to impact your business? You guys are going to see a lot more opportunity and people needing to sell their portfolios.

Bob: Yeah. Definitely. We’re already seeing it. And, you know, a lot of you know, when these money crises happens, money kind of disappears. And so the liquidity disappears from the markets and that that affects all investment sectors. We are seeing we’re going to see an increase in the defaulted notes. You know, and there’s always a crisis. There’s always these things happening. And what happens with banks is once a note goes into what’s called nonaccrual status, meaning that they don’t expect to receive any more payments on this note. They basically have to write it down. And for second mortgages, for example, in most cases have to write it down to zero. So it literally becomes a zero on their books. At that point, you know, they can keep it around. But, you know, somebody just got to clean out, you know, take out the trash. And so. So even if those loans are restructured and they end up performing, they’re still considered trash. So generally doesn’t create a lot of opportunity. No doubt down the road it doesn’t happen fast. You know, it’s a, you know, six months to year delay after the fact that those things really start hitting the market. But yeah, but then there’s a lot of right now we’re buying portfolios of funds that are kind of, you know, exiting the business because they have liquidity concerns are selling off. They’re not portfolios. You know, it may be unrelated. You know, you’d have a margin call in your stock account. You need to sell off something else. So that’s the kind of thing we’re saying right now.

Josh: Yes. So for those folks who are looking at investing in notes, why, we talked about this, getting ready for this podcast. But the comparison between, you know, maybe investing equity in rental properties versus debt or on a piece of real estate. Help our audience understand what’s the benefits of each. You’ve done both. You’ve seen other investors do both. And you really feel strongly you like being on the debt side of things. So help our audience understand, where’s the play to buy notes or own debt versus owning an asset and owning equity? And you know, why is your passion gone to the debt side of things?

Bob: Yeah, definitely. Well, you know, I lost everything in in to 2000. My partner lost everything in 2008. And he was a real estate guy. He was a he was a real estate developer. Guy took hard money, loans, buying undeveloped land. And, you know, and, you know, while undeveloped land, the value drops something like 70 percent. And you know where the housing market dropped 35 percent. Developed land, undeveloped or partially undeveloped…

Josh: Because getting financing to fund and develop land became almost impossible. That was the last tranche of financing that banks wanted to do. Coming out of the recession.

Bob: Right. So he borrowed money from hard money lenders, bought this stuff, was going to develop it. Everything just everything evaporated ability to finance this new project. The economics didn’t make sense anymore. And then in spite of him having plenty of margin in this in this land was in, it all disappeared. And he’s handing it back to guess to who his hard money lender. Right. And the hard money lender basically ended up making money on that transaction at the end of the day. And that’s when the lights went on. You know what? You know, someone was always super smart up front. But we you know, we learned a lesson when it’s presented to us on a two by four. Right. And, you know, you know, so. Yeah, exactly. So that the lights go on. Maybe debt makes sense. Let’s get on the other side of the debt equation. And so we started this business eight years ago to get on the debt equation and to really make something bulletproof. Having gone through two crashes and we both lived through the S&L crisis in the 90s. So. We’ve endured three crashes. And guess what? You know, here we are, number four. And you know one of the one of the lessons I’ve learned through this is that everybody is waiting for the last crash to happen again. It never happens, right? There’s another one coming after this too. Yeah. The next crash is never like the last one. You can be sure that. It’s the one thing you’re sure of. Yeah. And so we built a very bullet proof type model with notes by by building high equity notes. We do very unique underwriting. For instance, we calculate how much money if this property were to rent versus the principal and interest payment that’s being paid to us. What’s the ratio there? We only go where the rent is quite a bit higher than the principal and interest, which means this property is a super good value.

Josh:So you’re looking at basically debt service coverage ratio, right?

Bob: You call the coverage ratio, but nope, to rents, to rents. Well, if it works. So we’re the lender. We don’t own the property. We want to know if someone were to buy this property and rent it and pay us our debt, how much are they going to make money? And if the answer is yes, well, then it’s cheaper to own than to rent. And as long as it’s cheaper to own than to rent, we know the price of this property is a good price. So we basically bulletproofed our entire portfolio over the last two years as we saw the prices going up to move where they were, the rents exceed the principal interest payments by significant margin. We moved to bread and butter areas in the Midwest.

Josh: And I’m curious, Bob, what’s the margin are you looking for? 25, 30 percent margin over principal and interest. What’s the number?

Bob: Yeah. Double in some cases. So we want to see it higher, you know. And so we’ve aggressively moved our portfolio into these kind of things. The other things we looked at is we buy owner occupied loans. Okay. Versus hard money. So if you’re a hard money developer and you get upside down. Right, you go negative equity on that. What are you gonna do with that? Well, you going to hand the keys back to your lender, right? Sure. The other hand, if this is your home and your kids are going to school and your wife is living there and your property was underwater, what are you going to do? Yeah, you’re not going to do anything. Yeah, it’s your castle. So we buy, you know, probably ninety five percent owner occupied. So again, we’ve built a bullet proof kind of, you know, bulletproof’s a big word. But we’ve bullet proofed our system. And all intentionally, with our scars. You know, you want to make sure that whatever came next. You know, we’re gonna be able to take care of our investors.

Josh: That’s fantastic. For people who are interested in this type of investing, passively investing, you have funds we have. We have three funds that we run. So where can people go to learn more? You have a Web site. Believe it’s Aspen Funds dot com if they want to check that out. Is that right?

Bob: It’s Aspenfunds.us.

Josh: Perfect. And what would they would be investing in would be a pool of these performing or depending on the fund nonperforming that you’re going to get worked out. These notes that you’re buying basically at a discount. And when you factor in, OK, there’s a certain yield on that note based off of the unpaid principal balance, you’re buying that note at some sort of a discount which jacks up the yield. Right. So people need to understand that’s where the yield comes from. Because people might be thinking, well, you know, a performing residential owner occupied loan might only have a 5 percent interest rate. So how do I make money on that? Well, the difference is, is that Bob’s company acquires that portfolio at a discount, but they’re still getting the 5 percent yield off the u.p, unpaid principal balance. And but they’re all in number is some fraction, some wholesale price beneath that. So the yield that goes up significantly, that’s where Bob’s talking about.

Bob: You got it. You’ve got it. Exactly. And what’s more is because we buy at a discount when that loansold or refinanced, we recover that discount and ends up being cap gains. And so people think in note investing, there’s no cap gains. Well, we have a lot of cap gains. I’ll tell you another secret. But then I’ll have to kill you.

Josh: Yeah, well, tell me. You know, you got to have come find me in my basement home office.

Bob: Buy a lot of seconds and we prefer to buy seconds. They are better financially than first. Yeah. Well, so if you have a three hundred thousand property. Hundred thousand first, and a hundred thousand dollar second. OK. Which one would you rather own? Well I’ll take the second. All day long. Because the first you may be, you’re not going to get much of a discount. Maybe you get a 20 percent discount. 10 percent discount Max. The second I can get a 30, 40, 50 percent discount on that. So my yields go to the moon. And let’s say in a crash scenario, am I really at risk? Not really. You still got 30, 35 percent equity. And then so let’s say you do get a 50 percent discount. So I pay 50 grand for this hundred thousand dollar amount. Well, when this guy refinances or sells that home, guess what? I make 100, 100 percent profit. I double my money. So not only do I get double my yield, I double my money. And these things are sold at crazy discounts. So I’ll buy seconds all day long. Seconds are our magic. And I love that people hate seconds. I love when I tell him I buy second mortgages. They’re like, you know, stay away. You know, I love that because. Super inefficient market.

Josh: Yeah. So help me understand the inefficiency, because if they’re the lender that made the second. But they can still see the same equity that you see. But why would they want to get out of that mortgage?

Bob: It’s a second. This is that’s not the way the world works. You’re right. No one’s really doing the true risk, risk and modeling of this. We’re deep financial nerds. And we do real work risk workup of this. We do. We basically model… Our underwriting model, we look at every potential outcome for this note as a scenario. We do a probabilistic analysis of how likely is that scenario? And then we do a present value cash flow analysis of all the cash flows created from that scenario. And that becomes a cap of the price we pay for a note. So we’re nerds and we do things that the banks don’t do because they just don’t. You know, honestly, most people are just box checkers, right? It’s like checking the box. Do the systems. We’ve done the homework to figure out the models that actually make financial sense.

Josh: That’s fantastic. So you’ve learned your lesson from ’01. You partner learned a lesson from ’08. What are some of the things that you think you’d like to pass along to our audience with this health scare? What have you learned, just as now, a seasoned entrepreneur? You know, you’ve been through some of those scares, gotten wiped out and rebuilt your businesses multiple times. Some people might be thinking right now, like, I’m going to get wiped out. I don’t know what’s going to happen, but you’ve already proven because you and your partner have come back and reinvested successfully that it can be done. You know, there’s some crazy statistic that, you know, the most successful entrepreneurs sometimes get wiped out two or three times before they hit the jackpot. So what advice would you pass along to our audience to say, look, you know, even if you do get wiped out through this health scare, you can rebuild? There are some principles, some things that you can do now and in the future to rebuild another successful business down the road. What are your thoughts on that?

Bob: Yeah. And I think that’s a great point, Josh.. You know, there’s statistics that show. Most successful entrepreneurs share a couple of characteristics. The first is resilience. And the second is grit, you know. And you know, so there is no substitute for those things. Resilience means, you know, look, it doesn’t matter. You know, dust yourself off. Get up. Figure it out and look for the opportunities. And so there’s gonna be massive opportunities coming out of this. I personally don’t see a big real estate crash coming from this from this virus. As I said, I’ve done economic analysis. You know, I ran a hedge fund for many years and published an economic newsletter for many years. And this looks very different than 2008. You know, I think I think you guys are on the same page with me. I’m sure we are. You know, we’re 80 percent of FICOs are over 700 recently. Back in the back in the crash, only 50 percent were in 2008. So we’re seeing underwriting is a very different standard. We’re not seeing the same level of speculation which drove up home prices in 2008. None of that. Plus, we’re seeing that the housing market. Single family homes have been massively under built relative to of demand. Yeah, relative to the number of single family starts is lower than anytime in the last 20 years. And it has been.

Bob: And if you look at relative to population, single family structure of the population is lower than it’s been in any time in the last 60 years. That’s good news for been any new product built. Population continues to grow. So you’re seeing massive demand. Number one. And then then you’re seeing basically this is an external shock versus an internal shock. There’s nothing fundamentally wrong with the economy. So you know what? Most economists are predicting a V-shaped recovery, meaning big, big crash here, Q2, but a recovery. I think it may be a little bit longer. I think this virus is going to hang out for a year or so. Right. You may have multiple kind of quarantines, which hits cash flows. So what we’re modeling is basically reduced cash flows. So as borrowers, you know, struggle a certain percentage of borrowers and say not all borrowers, but let’s say, you know, a certain percentage in the in the great crisis in 2008. You know, you know what the default rate was on first mortgages. I have to remind me it was five percent. Soso it’s not as bad as people think. Now, wait, maybe what? Maybe this will be worse. Maybe we’ll hit more. But maybe it hits 10, but that hits cash flows. So I think cash flows are going to be going to be impacted for a while. And that creates opportunity for cash for investors to buy at a discount. But I don’t think our allies are going to be significantly impacted. Except in Europe here in commercial and hospitality or, you know, retail type products. Right. Residential type products. I don’t I don’t think it will be significantly impacted. My advice would be, look for opportunities to solidify your investor base, you know, really, really take a lot of time to make your investor base comfortable and look for the opportunities, especially in the cash flow sectors.

Josh: Yeah, I agree with that. I’ve got a couple of comments on that, too, and I like to hear your feedback on a few things. The I just did this this other recording again with my friend Darren from auction.com. And we were doing an analysis comparison to some of the hurricanes that happened in New York, New Jersey, Hurricane Irma, you know, Houston. And then obviously the stuff that happened in Florida. And the amount of banks that stepped up to do forbearance agreements and there was a big spike in forbearance agreements. And those  submarkets right. Now we’re talking about really the whole United States being impacted by this virus versus those hurricanes impacting certain cities or certain areas. But what they found was, is that out of all the forbearance agreements that were offered in those areas during those natural disasters, less than 1 percent ended up in a in a foreclosure short sale scenario. So what bankers are looking at now is say, OK, we basically have a nationwide forbearance issue, not just in Houston or Florida or New York, New Jersey. So let’s go into this massive forbearance plan and let’s get realistic that people are going to need some forbearance. But if we if we strategically work these out with people over the next six months, a year, two years, tack the payments onto the back, work with people again, these people will be able to afford their mortgages and there’s not going to be as many foreclosures. Right, because we’re talking about natural disaster versus systemic economic financial problem like 2008.

Josh: So that was really good to hear that the bankers have already modeled out a couple times through these hurricanes that if they offer forbearance and I think that’s why the Fed and the government were so quick to offer forbearance right away and say, you know, let’s give people mortgage relief. Let’s give people rent relief because we’ve seen some areas where this forbearance has worked out well. So I’m excited to see it. Regardless of that, there’s some people that just can’t afford their mortgage. They’re out too long. They have a cash flow problem like you discussed, and they just can’t recover. But people always gonna need a place to live. Right. So whether you’re in apartments, residential or the debt underneath those things, that’s going to tend to work out pretty well in the long term. So I’m interested to hear, Bob, your take on liquidity and investors. So we recruit a lot of money from investors just like you have. What have you seen in real time? You said, again, like the amount of calls that you’d maybe need to have, investors maybe not pulling the trigger as quickly. May takes more time to educate them on what’s going on, but you probably have a lot more money flocking to your offers because of what happened to the stock market. So talk about those levers that you have to pull. Maybe more investor inquiries, but longer education timeframe.

Bob: Yeah. And this is where having a 8 year track record, you know, makes a difference. Right. So people tend to look at you a little different. And, you know, we can point to a lot of things. And we actually had some investors come to us that were on the fence and after this virus and the stock market crash, because literally we just posted a record breaking quarter last quarter. And so, you know, so there’s. So it’s kind of like, you know, you’re flipping off the stock market here. And investors tend to pay attention. Exactly right. No, I think I think results really matter. I think execution really matters. And I think investor communications really matters. You know, we’re in our last communication. We didn’t we didn’t sugarcoat anything. You know, we definitely are seeing some impact. We’re cautiously optimistic. And but our but our funds are doing so well in spite of that. That didn’t even matter. We still posted a record. I’m a little bit. But we’re not we’re not we’re not sugar coating it. I’d never want to surprise an investor, ever. Right. I always want to play my cards face up. Right. Yeah. And it earns a lot of investor trust. So I would say it’s super important. Don’t sugarcoat. Don’t make things better than they are. But. And then track record matter so you can last it out and find the opportunities. I think you’ll find the ambassadors. But just generally I’ve been through several of these crashes and been raising money through the bull, you know, and. And money ran scared as soon as soon as these things happened, you know. But right now, because of our tracker, we got institutional investors wanted to give us, you know, tens of millions in lines of credit and these kind of things that we’re talking to. So the smart money is not scared money. A lot of time. So you think after the smart money.

Josh: I just again saw some additional statistics about the amount of money, institutional money that was moved to cash just this last month or so was something like three hundred twenty five billion dollars. And so a lot of investors that had money, but it wasn’t because necessarily like lack of yield and what they were doing it was that they had to create liquidity because of. Again, residential investors who are freaking out, pulling their money out of institutions. So then institutions have to take some of their money and pull it out and move. That’s a cash to create liquidity. And so there is still opportunity. I mean, there was one of the one of the hard money lenders, private money lenders that we originated for, literally stopped originating a month ago. Just had a call with them earlier today that they’re starting to originate again, which is great. Now, the product is get loan to values or lower 500s or higher you know, the amount of experience they want is more. So it’s a more expensive product and tougher to get it, which is what exactly what we expected we expect will come out and say we’ll lend again. But the criteria is going to be higher. You look at what Chase has done and Bank of America, they’ve jacked their FICOs up to over 700 at a minimum. So that’s gonna let some of those people that had maybe marginal credit, marginal experience, not gonna be able to get as much liquidity or as much as much money. And so what’s going to happen now is the operators who have great investor relationships, continue to talk with their investors, can manage through this, could basically fly the plane while the plane is going down, fly the plane and do well if they’re going to end up with even more money, more relationships on the back end of this.

Bob: Right. And, you know, so we find these kind of crises that external shocks, to your point. Exactly. About the hurricanes and those kind things. Again, those were external shocks as these very, very you know, I think there’s a lot of lessons we can learn from those efforts, as you’ve pointed out. And, you know, I would be I would be expecting a depression if our government had not done what they did. So my hat’s off to D.C. We give them a bad time. Most of the time, right. Once. So say what they do. But. But if they did it. And as you know, it’s kind of a problem of what they did. But I don’t I think it’s awesome in there that they saved us from a depression. And what’s happened is they put money in people’s pockets so they can pay their bills. They can go shopping and even, you know, bumping up the unemployment, this kind of thing, you know, so. But what we find is the weak players get pushed off. And, you know, so I’m driving around my neighborhood and seeing all these, you know, the you know, the rent retail spaces with lease signs out, you know, with these were these were guys that were probably really on the edge. Right. You know what I mean? The comic book shop that never quite made it. You know, and yes. Cigar shop that never quite made it. And all of a sudden, and it’s the same in everything, the weak players get pushed off the cliff. And, you know, and that’s in one sense, it’s sad for them. I get that. But this the same with the bars. The bars are barely making it. Well, now. Now they’re going to have to get rid of the home, you know. And that’s but that’s not it. Not as a bad thing. It’s a fresh start. You know, they can pull some equity out of their property and go get a cheaper place. They can they can get live in a culture, their means. You know, same with the retail guy who is struggling with a business that wasn’t making it. Let him go start fresh. It’s better to start fresh sometimes. And it also cleans up, you know, all the noise in the system for us who are who are, you know, investors looking for foreign investors or those looking for deals. It clears out the noise. So, again, the weak players are kind of moved aside. Right. So that’s to me what is happening and that’s an opportunity.

Josh: That’s right. Bob, I’m curious, I guess just maybe two questions left for and then we’ll kind of round third and head for home. What’s your favorite way to communicate with investors? Are you, is it a conference call. Is it. Is it webinar? Is it video? Is it a writing? Maybe in a memo? I’m always looking for ways to up my game and way I communicate with investors. Investors are always asking for more information, whether it’s more consistently, whether it’s more transparency, all those kind of things. But what’s your favorite sort of mechanism for communicating with them?

Bob: And I guess I’m kind of old school. We actually take the time to do a full workup of our portfolio, risk factors, all this. And we publish a newsletter. Sure, a quarterly newsletter, it’s typically three or four pages. You know, I you know, my favorite, you know, person I follow is Warren Buffett. And you’re kind of his you know, here’s the State of the Union. I give the State Union. Here’s what’s working. Here’s what isn’t working. I’ll send you full financial workup and send that out for those that care. I care. And I know, you know, I do things that I think I would want to see. Don’t get a lot of questions on that. And because I think people see our full disclosure. But I love the quarterly newsletters. And we also if there’s ever anything that says, you know, I try to treat it like we’re a public company. So anything material that happens, I will also send notices out. As that happens. So. So that and then we just we’ve been doing for the last four years, we do a annual shareholder meeting again. Following Buffett’s model, you know, and we’re this year we’re doing that all virtual. So that’ll be a first in the past when we ask because I want to see my investor. So I actually yeah, we meet we made a really nice spread for them and really took care of them, you know, catered everything and really try and because I want to see them want to shake their hands, I want to get it. I want to know them. And so once a year we do a one day deal. This year it’s all virtual and.

Josh: Yeah. So that’s fantastic. Thanks for that feedback. Yeah, we love it. We do a lot of stuff via webinar, PowerPoint presentation, which is essentially, you know, very similar to a newsletter just broken down in a different format, if you will. I’d love to get on and do a webcam type of update where people can see me, look me in the eye, even though it’s a virtual looking me in the eye, you know, just a way to see that I’m still there. I’m not hiding behind anything very similar to the way you guys are very transparent with your newsletters. So Bob, last question then I definitely want you again to kind of plug your Web site first. People get more information about Aspen funds and about you, but any kind of final thoughts or pieces of advice? You’ve obviously been through several different ups and downs, SNL. You know, I think people always like to hear if people have kind of been through the ringer. Right. As an entrepreneur. So what have you learned over the past 20, 30 years? What are some kind of couple bullets? As for running a business, being a successful entrepreneur, that you can kind of pass along your audience to say, look, these are something that you’ve got to have. Does it matter if it’s a crisis or not? Here’s how to run a successful business.

Bob: Couple of characteristics that are must haves that you’ve seen that you think you carry through this crisis for you, you know, and, you know, I think there’s no easy there’s no shortcuts to this. You know, truthfully, this is what it matters how you treated people, you know, are your people going to stick with you, you know? And if they aren’t, are you a jerk or are you do you treat people well? Are your investors going to stick with you? I’ll get us the same thing. Do you trade your investors well? And so I think it really matters how you ran your business. And I think if this is a time to figure out if you’re going to lose everything, well, then figure out how to do it right next time. You know, take care of your investors. And then and I think it’s grit and it’s resilience. You know, don’t be shaken. I’ve been there, man. We’re known as a term, the phone calls. And, you know, you wonder what why you were waking up every morning, you know? And that’s the situation you’re in. And trust me, it will get better and look for the opportunities, not just problems. And, you know, and get a good community. Right. Get around friends. Get around people right there. Upbeat that are can do people that are solution people versus problem people. And I mean, change or change your view. Right. Change your atmosphere. Change your change your environment to a to a positive, upbeat, entrepreneurial thinking culture.

Josh: Yeah, I love it, Bob. That’s fantastic. One of the things I’ve seen, too, in this time is I see entrepreneurs who are running businesses. You know, they get maybe a little bit fat and happy over the last 10 years. And now, you know, they’re thinning their business out. They’re saying, OK, who’s my absolute critical people I’ve got to have. Let’s get a little leaner. Let’s get a little meaner. Let’s run the business. Let’s not get, let’s not take things for granted. Let’s not keep too many people that we really don’t need. And they’re finding the ways that, you know, keep their absolute best, a players creme de la creme people that can help them develop things on the back side of this and take their business off to the next level. Because I do think it’s going to be a V-shaped or U-shaped type of curve to be a lot of opportunity on the backside. A lot of things are going to be thinned out, a lot less competition. And the people who have access to capital, investor relationships are going to win.

Bob: That’s right. We’re not looking for how to reduce our costs. Right now, we’re looking for how to take market share. And, you know, so that’s our, you know, and I think this is the perfect time to do that.

Josh: Fantastic. Bob. So tell us again, where can we reach out if our audience wants to get more information about you or about Aspen funds?

Bob: Aspen like the tree, funds dot us. Aspendfunds.us

Josh: Fantastic. We’ll put that in the show notes. Guys, go check out Aspen Funds dot us for more information about their offerings and their funds, and how you can invest passively with them. Bob, this is great visiting with you. Get to know you little bit more.

Bob: I appreciate you jumping on Accelerated Investor. My pleasure. Great to be with you.

You’ve been listening to Josh Cantwell and the Accelerated Investor Podcast. Leave a comment on our iTunes channel and let us know what you want to learn next, or who you’d like Josh to interview. While you’re there, give us some five star rating and make sure to subscribe so you can be the first to hear new episodes. Follow Josh Cantwell and his companies, the  trategic Real Estate Coach and Freeland Ventures on all social media platforms now and stay up to date on new training and investment opportunities to start your journey toward the lifestyle you’ve always dreamed of. Apply for coaching at JoshCantwellCoaching.com.


If the idea of owning debt intrigues you, then Bob Fraser from Aspen Funds is the guy you want to listen to. Bob’s done both sides of the real estate equation, and his passion has gone toward the debt side of real estate. His company currently has over 2,000 mortgage notes in their portfolio. Just like you, Bob’s company is looking for opportunities where they can find them.

Currently, Bob and his partner buy 2 kinds of notes, non-performing notes and performing notes. And between those, they have five different funds. He talks about how he and his partner moved away from land developing and real estate into purchasing residential mortgage notes, and the elaborate models they build to make sure they’re making sound financial decisions.

Bulletproofing his portfolio was a big concern for Bob and his partner because they’ve been through three real estate crashes, and even the S&L crisis in the ‘90s. Security is a large part of the way he invests, and he explains why that has yielded a portfolio full of owner-occupied loans.

As a seasoned investor, Bob says that resilience and grit are hugely important for entrepreneurs. Massive demand, undersupply, and the external shock from the virus mean that the real estate market isn’t crashing anytime soon. But Bob does have a theory of what will be impacted by COVID-19. We talk about what a recovery might look like, and some precedents that we see from previous experiences.

This recovery period might be long, but that doesn’t mean it won’t be without opportunities for investors. Bob and I discuss where we think the market will shift too, and how this will impact our current investment strategies.

What’s Inside:

  • What’s the difference between investing in equity in real estate and investing in debt in real estate?
  • The next crash is never going to be like the last one.
  • Bob explains why he prefers to buy seconds.
  • Rebuilding is going to require grit and resilience, but that’s what entrepreneurs are made of.

Mentioned in this episode​

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