Today’s episode is part two of a four-part conversation with Kristin Gerst. Kristin Gerst is the Managing Director at Capricorn Mortgage Investments. Capricorn Mortgage Investments buys high-interest rate mortgages from small business owners and companies and sells them to large institutional buyers.

For today’s episode, we focus on the things you’ll need when starting to invest in real estate. Also, Kristin digs deeper into what notes buying and why it is an excellent investment opportunity.

If you haven’t listened to part one yet, please check out our previous episode for some context going into these conversations.

[00:01 – 06:29] Hire a Professional

• Always hire a professional. They’ll keep you out of trouble
• Kristin gives a list of professionals you’ll need when buying or selling a property and explains why you need them.
• • Residential Mortgage Loan Originator (RMLO)
  • Attorney
  • Title Company
  • Note Servicer

[06:30 – 16:53] Sources of Underlying Financing

• Kristin talks about the two things you need when starting in real estate investing.
• • You need either money or experience. If you have neither, you need to get a partner.
  • There’s a lot of people out there with the money but doesn’t have the time.

• It’s tough for real estate investors during this COVID-19 pandemic.
• Individual Retirement Account (IRA) Investors
• Private Money Lenders
• Friends and Family
• Get a Home Equity Line of Credit (HELOC) Loan

[16:54 – 28:48] What Note Buyers Look For

• High-Interest Rate
• • 9 to 10%

• Understand the Loan to Value Ratio
• • Loan amount can’t exceed 75% of the property value

• Down Payment
• • Minimum of 10%

• Good Property Condition
• Seasoning
• What are the prices for notes?
• Kristin gives a transaction example for the list mentioned above
• How does the second lien part work?

[28:49 – 38:51] Building Your Financial Investments

• Kristin gives a scenario where your goal is eight transactions a year
• • Explains the math and how much you will earn

• Finding the difference maker to make it through the year
• Kristin talks about the beauty of investing in notes
• • Owning a piece of property is a liability

Tweetable Quotes:

“Times are tough. I get it. Times are tough, and everybody wants to own a home. But, you know, not everybody gets to own a home, and maybe they need to wait a year. And you know, don’t be so desperate. Make sure that you wait for the right borrower and the right buyer.” – Kristin Gerst

“Owning a piece of property is called a liability. It is, you own a piece of property; you are liable for everything that goes on at that location. I don’t want to do that. No way. I want to own a piece of paper. Piece of paper means I get to make money.” – Kristin Gerst

Resources Mentioned:

• Residential Mortgage Loan Originator (RMLO)
• Title Company
• Note Servicing
• Due-on-Sale Clause