Real Estate Growth with Notes

John Harcar (00:00.942)
Welcome back to the show. I’m your host John Harar and we’re here today with Patrick Franz and what we’re going to talk about is What we’re going to talk about we’re going to talk about real estate growth with notes Sorry guys. It’s been one of those days Remember at investor fuel we help real estate investors service providers and really all real estate entrepreneurs two to five extra business and by doing by giving the proper tools and resources to help you live that life you want to live and build that that business you wanted to build

Patrick, welcome to our show.

Patrick Franz (00:34.335)
Thank you, John, I appreciate it. I’ve seen and followed Investor Fuel over the last bit. I’ve seen you guys. And so it was cool for me to get an email from you and say, hey, we’re looking for some new guests. And I said, hey, I’d love to be on that show. what a beautiful thing you do for folks with this kind of content, which is just to try to help people learn something new. Maybe they don’t know, scale their business bigger. I’m all for that, paying it forward, because I’m one of those stories.

John Harcar (00:41.326)
Cool.

John Harcar (01:00.162)
I love it.

Patrick Franz (01:03.029)
I’m one of those stories where I would tell everybody, if I could do it, you could do it too. If I can do it, you can do it too, right?

John Harcar (01:07.61)
Right? Well, our goal, you our goal is to try to provide as much value as we can because we know that, you know, there’s a lot of misinformation out there. So we just like really try to help people be on the right track. But before we talk about notes and all that, get into the weeds, kind of tell our audience a little bit more about you, you know, how you got into real estate, kind of where you got you here.

Patrick Franz (01:28.617)
Well, I mean, I was in high risk, high reward stuff my whole life. So I was selling venture capital and you know, cause you said we had the conversation before the show about San Diego, but you know La Jolla very well then. so yeah, at 19 years old, back when I was just a young whippersnapper, was selling venture capital for startup.com companies in the boiler rooms in La Jolla already. So I’m kind of like you where my life was built around sales.

John Harcar (01:37.442)
Mm-hmm. Yes, yes.

John Harcar (01:48.514)
Wow.

Yeah.

Patrick Franz (01:51.941)
And I had adventures throughout 20 years with sales as far as even going to, you know, corporate sales management and training, having 25 reps under me, making the override and the whole, all the fancies, right? Done all that, you know? So that was kind of how I.

John Harcar (02:00.622)
Yeah, yeah, Sure.

Patrick Franz (02:07.38)
grew up and I always knew like getting into investing real estate and all was where the hype was and the people were making the money. And so I ended up getting this house and you’ll know where Escondido California is then. And so I ended up getting this house in Escondido and did kind of a live in flip. So I lived in it and I’m pretty handy had a dad that was good with tools. I was in high ticket home remodeling sales for quite a while. So I had some connections to get vinyl windows and stuff like that. So I ended up kind of living in it and just flipping it.

John Harcar (02:13.806)
Mm-hmm.

John Harcar (02:17.976)
Yes, very much.

John Harcar (02:23.148)
Okay.

Patrick Franz (02:34.324)
slowly but surely, I remodeled the kitchen, then I did the flooring, then I did the, you know, the carpeting and all that good stuff. And I was pretty much doing all the labor, mostly myself and saved a ton of money doing that and made it pretty slick and all, and decided, well, I don’t wanna continue flipping houses and especially in the real estate market where it’s been from 20, say 2020 to now.

John Harcar (02:35.47)
Sure. Yep.

John Harcar (02:46.488)
Hmm

John Harcar (02:57.645)
Yeah.

Patrick Franz (02:59.06)
I’ve been expecting some sort of a correction or crash. It just hasn’t happened yet. But so I was just weary, just weary about getting into the house flip game. And I knew a lot of other people that had done quite a bit of house flipping. And, and, you know, it was kind of, it seemed great and it seems on television shows, it looks great, but real life, it’s tougher than it looks. And I’m like, okay, so I don’t want to do that. And I was just kind of floating around with really what I wanted to do. But I knew this, I knew one thing.

John Harcar (03:03.342)
I think you’re not alone.

John Harcar (03:16.79)
It looks easy on television shows. yeah.

Patrick Franz (03:27.122)
I knew one thing. I was always searching for something that could sort of earn me some type of financial freedom because as you know, no matter what sales job I had, no matter what high level of income I was earning, no matter how much praise I got in the community and in that network of people of the business I was in of saying that you want that guy, you you get him to work for your company, you’re lucky, he’s good. I had all that, the reputation, I was making good, but you there was zero freedom in it.

John Harcar (03:53.678)
Still have the grind.

Patrick Franz (03:55.421)
And that was, you know, kind of the problem I had. I didn’t have a problem. I didn’t have a problem with hustle. I didn’t have a problem with making okay money and be, but I had a problem with freedom. I didn’t have any. And so it was kind of an interesting thing. You’ll laugh at maybe a little bit because you know, the, you know, the, the old bull teaching the young bull, that kind of a thing. Right. But it was like my partner who’s now 71.

John Harcar (04:03.4)
Right, right, right.

John Harcar (04:17.759)
Yeah, yeah, yeah.

Patrick Franz (04:21.562)
This is few years back in 2018 or so, and we were having dinner at Chili’s restaurant, right? Super class, eating some hot wings. But the crazy thing is we were there for like an hour having dinner and I had to get up from the dinner table in the middle of Convo and eating wings. I had to get up from the table in an hour long dinner, hour and a half long, maybe at Chili’s. I probably got up about five or six times and went out to have a five minute phone call.

John Harcar (04:29.814)
Mm-hmm. Baby Becker is.

Patrick Franz (04:46.452)
because I had 25 sales reps under me that were all on sales appointments and they needed the sales manager for the closes and all that. Yeah, you get it, right? It was that hustle. It was that hustle. And so it was so funny that I came and I sat down and I’m like, whew, you know, sorry, man, I’m just busy. so he, and he looked at me sort of like set down the fork and looked at me and said, like, kind of like, I call it the big question in my recent life, the big question that kind of, he said, how much longer do you want to waste 10 or 12 hours of your life, six days a week to make 120 grand a year?

John Harcar (04:46.478)
Mm-hmm.

John Harcar (04:50.702)
They needed the step out call, yeah. Yeah, yeah.

Patrick Franz (05:15.955)
And I’m like.

Like no one had ever really just said it to me like that, right? But the fact is we all think it, we all know we’re like, we have golden handcuffs as they call it, where you’re, you have no freedom because you wanted to have a great job and now you have a great job, you have no freedom and it doesn’t work great in life. It’s just unnatural. So I’m like, okay, always figuring out how can financial freedom happen. Well, do you stack a bunch of rental properties as a landlord? I know that’s extraordinarily popular. Do you start flipping houses?

John Harcar (05:21.838)
Right.

Patrick Franz (05:45.973)
Do you syndicate? Do you raise a bunch of money from some people and go try to buy a 50 unit apartment building, you know, for value add. So I’m looking at all these options, right? And after that question was asked to me, I said back to who my mentor ended up becoming. I said to him, look, it sounds great. I’d quit yesterday. I’d quit yesterday if I could.

But I got bills to pay and I got a good job. What am I supposed to do? That kind of a thing, right? He literally said, I think you have what it takes to become wealthy and financially free using mortgage note investing as the vehicle. And I went, what’s a mortgage note? Okay. So that’s where I was back then.

John Harcar (06:10.734)
Right, right, of course.

John Harcar (06:21.646)
Right?

Patrick Franz (06:24.596)
But the idea was somebody really said to me and kind of put it to me that he said, I think you have what it takes to become wealthy and financially free using mortgage notes as the investment. And that kind of struck me and I’m like, well, tell me more, right? But I was so green to it that I almost didn’t know what a mortgage note was except for the one that I was paying to Wells Fargo on the house that I owned. So I knew what a mortgage note was from the borrower and payor standpoint, but I didn’t know that an individual investor like us.

John Harcar (06:37.432)
Yeah, yeah.

John Harcar (06:43.362)
Mm-hmm. Mm-hmm.

Patrick Franz (06:54.356)
could own someone’s mortgage. And what’s the beauty of it? Of course, for those of you who are saying what that’s kind of goofy in that and it does sound goofy, right? Well, it’s like kind of still the best kept secret in real estate. I do believe great opportunity for people because it’s less competitive. It’s easier entry. It’s easier to do the deals. It’s done from your computer. I mean, let’s go over all that. But the bottom line is this. You’ve got security with collateral. When you invest in a mortgage note, you’ve got security with collateral. You’ve got

John Harcar (06:56.354)
could buy a mortgage on.

Patrick Franz (07:24.156)
a better than average yield, even in comparison to most people’s rental properties and portfolios, okay? And you’ve got monthly passive cashflow. Now here’s the big difference with that passive cashflow in owning a rental property and acting as a landlord versus owning a mortgage note and acting as the bank. Here’s a big difference, right? Is that the cashflow that gets spit off of a rental property, there’s a renter in the house paying you rent. That’s what that’s called, right?

In a mortgage note investment, when you step into the shoes of the bank and become the lender, there is a homeowner living in that real estate who’s paying you their mortgage payment every month. So the way I kind of, I looked at it in dummy terms was I was like, okay, so wait, you mean you can collect passive monthly cashflow from real estate all over the country without all the garbage hassles associated with being a landlord? The terrible tease.

John Harcar (07:59.757)
Right?

John Harcar (08:13.998)
Well the three T’s the tenants the toilets and the termites, I mean you don’t have to deal with those as a note investor Yeah

Patrick Franz (08:20.466)
You get it, right? It’s like, and then I started thinking about it and I’m like, huh, wait a minute, banks are pretty good at making money, okay? We can all agree they have the biggest buildings in downtown, okay? But anyways, banks are pretty good at making money.

John Harcar (08:31.81)
They don’t take care of property.

Patrick Franz (08:33.928)
Does Wells Fargo own a portfolio of 2.7 million rentals?

John Harcar (08:35.278)
I never see the guy with the most power shirt out there doing a repair on the trellis of a property or on the gutters or anything like that.

Patrick Franz (08:44.094)
So it’s pretty cool. And then it was even funnier to go, well, hey, look at even most people’s rental houses, right? Real estate investor rental houses. Most real estate investors are leveraging other people’s money in some way or another, even if it’s like a bank’s money and not an individual private lender’s money, they’re leveraging Wells Fargo’s money, whatever it is. But it’s like most people aren’t buying their rental houses all cash, right? Most people are going in there and buying with a mortgage loan and then putting a renter in there, collecting rent and so forth. And we looked at that and said, well, then there’s two pieces of cashflow being spat off of that same piece of real estate every single month.

John Harcar (08:54.776)
Mm-hmm.

John Harcar (08:59.212)
Right, right.

Alright.

Patrick Franz (09:14.36)
One is the rent that gets paid from the renter to the landlord. And then that landlord turns around and writes a big old check to who he owes the mortgage to, the lender. Who’s a better position there collecting passive cashflow off the same piece of real estate, but without having to deal with, like you said, late night phone calls, leaky toilets, repairing the roof, replacing the water heater. Right, right, right. So at the end of the day, it was kind of obvious to me that…

John Harcar (09:17.634)
And then one is the…

John Harcar (09:22.658)
Mm-hmm.

John Harcar (09:32.062)
Sagging ceilings, yeah, I get that.

Patrick Franz (09:40.149)
in 20 years, 25 years of sales and entrepreneurial endeavors and looking for a good thing to do to make me financially free. I hadn’t really seen a vehicle that was this clear of a path to financial freedom. And when I say a clear path, here’s what I mean by that, is that if you take someone’s mortgage and let’s say they have 24 years left before their house is paid.

John Harcar (09:50.914)
Yeah.

Patrick Franz (10:04.5)
If I do some work upfront and we’re all used to busting ass, like remember I told you, my mentor said, how long are you going to work 10 or 12 hours a day, six days a week for 120 grand a year? Right? It’s like, good point. Okay. Got it. Stop trading your time and energy for money. Let’s veer you over to the other side of things where you get passive cashflow so you can have a life. But it’s like this. I never saw anything. I was never shown anything ever up to this point where you could do a little bit of work upfront one time.

John Harcar (10:12.907)
Right.

John Harcar (10:21.997)
Yeah.

Patrick Franz (10:33.502)
Put the note in your portfolio and get paid then from that initial work month after month after month after month without trading any more time or effort for that money.

John Harcar (10:44.332)
Now, when you say go in and put a little work in, talking about rehabbing the place?

Patrick Franz (10:48.402)
No, see, I’m not having anything to do with the property whatsoever. Just simply to find a note on the secondary market to purchase, to evaluate it, to perform due diligence, to get the offer accepted, and do the paperwork and wire the money. That’s the work, right?

John Harcar (10:52.162)
What work are you putting in?

John Harcar (10:59.171)
Got it.

John Harcar (11:03.852)
Got it. Okay. So that’s the work. Okay. I just wanted to clarify for our listeners that it wasn’t about, you know, doing it, going and doing anything on the property. You’re not dealing with the property, you’re dealing with the note. That’s it. Yes.

Patrick Franz (11:13.714)
you’re dealing with the buying the promissory note, which is literally the promise to pay back debt and the mortgage document collateralizes the physical real estate for basically for the rules of the promissory note. So a promissory note is written when you borrow money to buy a house and you go, I’m going to pay you back this much per month on this day of every month. And there’s a late fee if I’m late more than 15 days late. And so they’re writing the rules in a promissory note of how the borrowed money is to be paid back.

John Harcar (11:26.254)
All right.

Patrick Franz (11:40.904)
So understand that’s what we’re buying folks. I’m buying the promissory note. I’m buying the debt, not buying the house, not buying that.

John Harcar (11:41.016)
Mm-hmm.

John Harcar (11:44.91)
Right, the debt. That makes it more, that makes it more maybe easier for them to send buying the debt.

Patrick Franz (11:49.863)
Yeah. So the mortgage document accompanies a promissory note, which are two really important documents that are in the gigantic file of paperwork when you buy out. But you’ll get two really important documents. The promissory note, because it shows you borrowed money and how you’re going to pay it back. And the mortgage document, which pledges one’s home as collateral to the lender in case they don’t pay back the promissory note proper. Okay. So it gives the bank or the lender the ability to repossess a physical piece of real estate as their collateral. If the note say stops paying, right. Okay.

John Harcar (11:57.623)
Hahaha

John Harcar (12:14.808)
Mm-hmm.

Patrick Franz (12:19.548)
So, anywho, I was just thinking, okay, back to that and I’ll finish it up. But it’s like, man, I never saw anything like even a dentist, right? A dentist, can you imagine a dentist say, helping fix teeth on 50 clients? And if that dentist just helps fix the teeth of 50 clients, they’re now financially free and can shut down their dental practice? It sounds ridiculous, right? A chiropractor adjusts 50 people’s backs, adjust back up and you’re financially set. Well, I really did math and I looked at

John Harcar (12:37.774)
Hahaha

John Harcar (12:42.55)
Yeah, and you’re financially set.

Patrick Franz (12:48.702)
For most folks, depending on your level of income, where you live around the United States and such, right? I’m in San Diego, California. It’s ridiculously overpriced here, okay? But around the United States, when you survey most people around the whole United States, it looks like it’s about $5,000 a month of monthly income that would pay people’s bills. If you can get your bills paid, that means you’re free, because you don’t have to trade your time for money for a paycheck to keep paying bills, okay? So let’s start with five grand a month.

John Harcar (12:55.947)
Mm-hmm.

John Harcar (13:11.65)
Right. Right.

Patrick Franz (13:14.108)
At $5,000 a month, did you know it takes the average person who gets into notes 33 transactions to be financially free?

So that’s what got me when I reverse engineers numbers to see what would create financial freedom. For me, I had a little higher number I needed to reach than 5,000 because of where I live. But average United States, about five grand a month that people spend 40 hours a week to, earn with only, with only 33, with 33 transactions done from your computer, which is pushing paper, wiring money, those kinds of things by acquiring 33 mortgage notes and planting in the, in your

John Harcar (13:33.379)
Yeah.

Yeah, 160 hours a month.

Patrick Franz (13:49.525)
portfolio, which I say is planting money trees in your orchard. Okay. This orchard bears fruit every month. Okay. But you plant those money trees in your orchard and you’ve now earned financial freedom and it’s 33 deals. So again, it sounds crazy in any other business, a chiropractor to adjust 33 clients backs. They’re making five grand a month passive now. A dentist fixed 33 fillings. They’re making five grand a month passive now without doing any more work. It just doesn’t work anywhere. So I go, okay, I’m sold. I go, okay, I’m sold.

John Harcar (13:55.16)
Uh-huh. Uh-huh.

John Harcar (14:11.136)
Right, no it doesn’t.

Patrick Franz (14:16.424)
So anyways, that’s what happened. And then I realized that, of course, notes, when you buy a mortgage note, you’re buying them in cash. So you don’t get a loan to buy a loan, okay? It’s a little different than real estate. So you’re buying them cash and then that becomes the ultimate problem is, okay, yeah, Patrick, I get it. I would love to buy 33 mortgages, okay? Sounds nifty, but I don’t have much money. How do I go about doing that? The average-

John Harcar (14:28.471)
Right.

John Harcar (14:35.296)
You

John Harcar (14:39.608)
That was gonna be my question. How did you start that? How did you get going? You had the epiphany, you saw the Holy Grail, and how does he start?

Patrick Franz (14:49.084)
Well, I quit my house, quit my job, moved, got about a 250 square foot office and put desks, two desks back to back because my mentor who had asked me the great question at dinner that one time said, you know, you’re a lot of talk when I see that you’re really committed, I’ll teach you this. So I really like uprooted my life and showed him I was committed. And so anyways, that’s neither here nor there, but I made big commitments to shift my life because I wanted financial freedom that badly. I was ready for it.

John Harcar (15:15.566)
So you, essence, you got the mentor to teach you, right? You didn’t do the whole YouTube you, you didn’t go try to learn on your own. You got someone that’s been in the trenches that knows what they’re talking about to guide you the right way. Why is that important?

Patrick Franz (15:21.534)
No.

Patrick Franz (15:26.964)
100%. Highly recommend it. Notes is not a good transition from real estate. A lot of people transition from real estate to notes, obviously, because real estate is our collateral as a note investor. So when you take back a piece of collateral, now you own a piece of real estate, it’s good to have some real estate knowledge. OK, let’s face it. It’s just not the same, though. So the legalities, the terminologies, the paperwork, all this stuff is different because we’re now stepping into the money business, not the real estate business.

John Harcar (15:35.063)
Mm-hmm.

Sure.

John Harcar (15:42.616)
Right.

John Harcar (15:51.5)
Yes. Right.

Patrick Franz (15:54.163)
It’s just different, right? We’re stepping into a banker’s game, the money business. And you know, here’s an interesting thing. Don’t you think the money’s in the money business?

Patrick Franz (16:04.66)
It’s where the money’s at. It’s where the money’s at. It’s where the money’s at.

John Harcar (16:04.728)
I would think so it’s where the money is at it’s called money. okay let’s talk about money were you using at the beginning right when you just started right you have this mentor were you kind of going through deals with his deals and his money and then you saw the transition to getting your own money what how did that all come about?

Patrick Franz (16:12.318)
Yes. Yes.

Patrick Franz (16:23.998)
Well, when I sold my house, had a little bit of money, not a ton. And so I bought my first two notes with my own money. And it would be just enough if somebody’s listening that you had, you know, 60 grand, 70 grand in your IRA account. Okay. And nothing else. You weren’t wealthy. And matter of fact, you didn’t have a high income because you quit your job. Okay. That’s where I was. But the bottom line was I had some money. So I bought two notes. I bought two notes.

John Harcar (16:37.698)
Huh.

John Harcar (16:43.214)
Okay.

Patrick Franz (16:50.769)
One was $31,000 in change and one was $37,000 in change. And that was my first go-round of, you know, I got the expertise handled now, I think. Let’s go get some experience now. And I only had a little bit of money.

John Harcar (17:03.554)
Where did you find these properties?

Patrick Franz (17:06.18)
You find mortgage notes in the secondary mortgage market. And how you find these notes in secondary mortgage market and just for ease of use, right? And I give my boys a shout out, Brett Berkey over there at paper stack. And there’s a website called paper stack spelled with a C at the end paper stack.com. And just so that people realize it’s not that big of a secret. If you go to paper stack.com right now, you can see there’s notes for sale. There’s no, those aren’t properties. They’re not selling houses on that site. They’re selling the notes. So the notes, notes are plentiful.

John Harcar (17:09.068)
or the notes, okay?

John Harcar (17:29.26)
Yeah. Right, right, right,

Patrick Franz (17:36.317)
See, it’s not difficult to find good notes to buy. That’s kind of the easy part. But as I found out, and as most people find out when they get in this business, since notes is a cash business and you have to buy the note cash, well, like I did, I had a little bit of money starting out. I bought two notes. Now I owned those two notes. But how was I going to buy my third? Because no longer was I liquid for 30, 40, 50 grand to buy my next note. So that becomes most people’s problem.

John Harcar (17:59.639)
Right.

Patrick Franz (18:02.868)
When you get educated about notes and you realize how awesome it is and you say, want to buy more of these, usually it is just people run out of their own liquidity. So I don’t think, and I think people understand that’s why people do syndications and startup little funds and things like this, because the whole name of the game to scale any real estate investing business is to learn the skill of raising private capital period. Okay.

John Harcar (18:03.584)
I could see it.

John Harcar (18:22.85)
Yep. Yep.

Patrick Franz (18:24.114)
So that’s what was the next thing for me to learn was, like, how do you go about raising private capital and put systems in place to kind of help you automate it a little bit? So it’s not the hardest thing in life to get interested people. Now.

John Harcar (18:31.534)
Okay, cool.

Patrick Franz (18:36.314)
Lending is where we go. And I’ve kind of coined it Rhino lending just to give it some sort of a catchy name. I think because rhinos are pretty big, rhinos are pretty big, rhinos are pretty shielded, pretty protected. They’re pretty tough, right? And they can stop and they can stop on a lot of stuff, but not a lot of stuff can stomp on them. So if you look at like a rhino like that, Rhino lending is a great thing that not only can help a professional note investor to scale their portfolio like we’re talking.

John Harcar (18:43.916)
hahaha

John Harcar (18:49.696)
Yeah, yeah, right. Thick skin.

Patrick Franz (19:05.446)
and earn that financial freedom fairly quickly. But also there’s people that don’t want to be professional investors. They don’t want to get the expertise. They don’t want to know all the terminology. They’re dentists and doctors and lawyers. They’re people that are busy, but they’re always looking for a really good place to put their money. Understood. And so what a great matchup that is. In a note investment, you get security with collateral, a great yield and passive monthly cashflow. If you try to find those three things all in one place in many other investments, it’s very difficult to do.

John Harcar (19:15.756)
Yeah. Yeah.

John Harcar (19:22.158)
pray.

John Harcar (19:33.454)
There it is.

Patrick Franz (19:34.005)
So you have these three great things in one investment, which a dentist, a doctor, and a lawyer would certainly understand. And so let’s say then you are my private lender, John. And let’s say I’m a pro in the business and I see great note deals coming across my desk all the time because I’m in the game. I see a $50,000 note deal come across my desk today and I do some pre-search and due diligence on it. And I go, dude, I don’t want to pass up on this thing. This is too beautiful of an opportunity for an investment.

If I pass up, I know one of my fellow note investors in the industry is going to pick it up and okay, let’s swipe it. I want this one, right? But you know what? At the moment, all my money is deployed because as a good investor, whenever I, whenever I get any cash, it immediately goes into an investment. So here’s this note deal comes across my, I call you John and I say, John, I know you’re busy running your dental practice, but I have this wonderful note I’m going to purchase and maybe we could do a private loan between you and I. And so you become my private lender.

John Harcar (20:03.854)
Come on, come on, swipe it from you.

John Harcar (20:14.114)
Yeah.

Patrick Franz (20:28.784)
in the note space, just like if I was a house flipper. And I came to you and I said, John, I have this house, man. I got it under contract here. I’ve already got the house. I’ve got all the stuff demoed and ripped up, but I need to borrow money from a private lender to buy all the moldings and the new cabinets and the carpets and stuff to finish the flip. And I’ll obviously give you a promised return on your loan to help me get the flip done. Same thing. If I’m going to buy a note, that’s just the niche business I’m in, not a house flipper.

John Harcar (20:43.671)
Yeah.

John Harcar (20:51.523)
Yeah.

Patrick Franz (20:56.072)
and I need capital to grow my portfolio to get my job done, I can come to you and say, hey John, how about you loan me money? When you say, but, that’s interesting loaning people money because if they drive off a cliff, run to Mexico or whatever, that’s a sketchy thing, right? Why don’t I lend people money? Well, here’s the cool thing why we call it rhino lending, which is really the technical term is hypothecation. And so here’s what’s cool about it is that,

John Harcar (20:56.098)
Right.

John Harcar (21:11.458)
Mm-hmm.

Patrick Franz (21:21.424)
I’m going to give you, John, in case I drive off a cliff, in case I default on our loan to, you know, between one another, in case I die in a plane crash, in case anything, okay? I’m going to give you a collateral assignment. So all that means is, John, I’m going to take this note that has a unpaid principal balance that’s owed, that’s far more than the 50 grand that you’re letting me borrow. And I’m going to assign to you that this note, which is an asset, remember a note is just same as an asset, tradable asset as the physical real estate.

John Harcar (21:41.911)
Sure.

John Harcar (21:50.328)
Right.

Patrick Franz (21:50.377)
So I’m basically assigning you the note as your collateral until I’ve paid you back free and clear on our agreement of the private loan. And so you’re very protected. And so what I like to say is this, and here’s my spiel and you’ll think it’s funny, but it’s very true. It’s very true is that when we say, why would you want to get into note investing as a pro? Because maybe you’re already sort of delving into real estate investing and you kind of get it, right? Why would you want to go to note investing as a pro? Well, because we say that.

Node investors get all the benefits, right? We get the monthly cashflow from the real estate without the terrible tees. So you might say that node investing has certain advantages over being a landlord. Well, then you say node investing though requires education and expertise and elbow grease. And you’re then putting some more time in to creating this passive cashflow and financial freedom. So it’s very active. Well, then you have your passive investor. Like we talked about the dentist or the doctor or lawyer, this passive investor can come in as a private lender.

John Harcar (22:29.965)
Right.

Patrick Franz (22:48.73)
And here’s what I like to say, the rhino lender in a note deal, getting the note as collateral and being a private lender, they get all the benefits of being a professional note investor without all the hassles involved in being a note investor.

John Harcar (23:05.15)
Right, yeah, okay, yeah, yeah. Sing it.

Patrick Franz (23:06.918)
Okay, you get the passive cash flow security with collateral a great yield. It’s easy. It’s passive. You can run your dental practice and you don’t have to worry about the fluctuations of the stock market or crypto markets because it’s a contractual rate of return not subject to the markets. So what a beautiful opportunity, right? That I tend to say that if you’re a real estate investor, you don’t want to totally shift gears, totally get it.

John Harcar (23:23.35)
Not subject to yet. Wow. Yeah, 100%.

Patrick Franz (23:34.281)
I don’t dog flipping houses. I don’t dog owning doors. I don’t, right? I’m developing some apartments in Florida right now, folks. I’m involved in real estate as well, okay? I’m not dogging that stuff, but it’s like, if you don’t wanna make the total shift and go, forget real estate, it’s too much headache, let me go to notes, like I did. I believe that the paper side of real estate, creative financing and understanding the paper side of the real estate business is something that all real estate investors should have in their quiver.

John Harcar (23:42.476)
Hahaha

Patrick Franz (24:03.57)
I think it adds much value to how they can operate in their real estate investment. And so anyways, that’s why I recommend a bunch of people do notes. then, but so that’s where I have note investor university comes into play, where we have a school where we teach people how to do what we do to be a pro note investor, to get all the fundamentals, how to do the due diligence, acquisition, asset management, exit strategies, financial calculator work, how to set up raising private capital, all this stuff is what we give you as far as our note investor university is delivering those. Now.

John Harcar (24:06.264)
Good advice.

John Harcar (24:31.79)
Okay.

Patrick Franz (24:34.076)
We have that for people that want to be pros at this. But also too, for people that don’t want to go through all of that, just remember there’s the Rhino lending opportunity where most people don’t even know this exists. You can be a private lender to a professional note investor instead of a private lender to a house flipper. Okay. You’d be a private lender to a note investor and get the three main benefits that note investors love.

without all of the effort because you have a contractual private loan with that note investor and you have a mortgage note as your collateral. you’re safe. You want to save, but you have security. You’re secure, secured with collateral. You get that monthly cashflow. You get a great yield and you don’t have to do all the things that a pro note investor has to do. So what a cool opportunity.

John Harcar (25:12.92)
Huh?

John Harcar (25:21.614)
Yeah, it sounds fantastic. And I know that there’s probably a lot of people out there going, wait a minute, wait a minute, it can’t be that easy. If they want to call you and talk to you about it or reach out to you or learn about being a Rhino investor, how do our folks get in contact with you?

Patrick Franz (25:38.136)
They can just get on my calendar. It sometimes can be a bit of a mouthful, but people usually know it these days. It’s Calendly, right? Calendly. Yeah, Calendly. Calendly.com forward slash The Note Mentor.

John Harcar (25:46.04)
Talendly. Okay.

John Harcar (25:51.98)
the note mentor. Okay, I’ll make sure we put that in the in the show notes. Any last bit of advice, words of wisdom do you want to leave our listeners with?

Patrick Franz (25:53.32)
The Note Manual.

Patrick Franz (26:02.704)
Yeah, yeah, I really would. I really would. You know, when we talk about the normal traditional real estate endeavors that, John, we talked about being involved with just before we started the show, you have your stacking doors, of course, which we know is just acquiring as many rental properties as possible for your passive cash flow and wealth. There’s that. There’s people that maybe aren’t there yet. So most people that aren’t there yet get into wholesaling because they’re like, well, I got to stack some cash so that I can finally have some money to do something with.

John Harcar (26:11.596)
Mm-hmm.

Patrick Franz (26:30.438)
And they start wholesaling in that and wholesaling is very difficult as people. It looks, seems easier than it is. Okay. For, for most people. So here’s all these endeavors that I’ve seen many, many people get into over the years. And for many of them still have not achieved financial freedom. We have a plan in place that within 36 months time or less.

We want to help people achieve that financial freedom that we’ve all been searching for. And the word passive has been a little bastardized around a lot of different industries, but especially real estate. And I would tell you that people tend to pay their mortgages. And so when you step into the shoes of the bank, you become the first lean mortgage lender.

It creates one of the most passive income scenarios that I really have seen truthfully that is not fluff, right? A lot of our portfolio, John, is just making sure that they pay it again.

John Harcar (27:33.656)
Great.

Patrick Franz (27:35.047)
Okay. And I don’t get the calls when their toilet leaks, John, they got to fix it. It’s their house. The member, they’re a homeowner. Okay. So I, I highly suggest that if somebody’s looking for real financial freedom and they want really a clear path to financial freedom, that’s actually doable for most people. You don’t have to be tall, handsome or a superstar. See, look, I’m perfect example of that, but, it is something to where, again, it is taking a little bit of time and using a little bit of expertise to take and buy a note, even if you use other people’s money to do it and make a win-win situation for both.

John Harcar (27:37.678)
Yeah, remember you’re the homeowner. Yeah, exactly.

John Harcar (27:52.909)
Hahaha

Patrick Franz (28:04.98)
but it’s being able to buy a note. And what if I told you it’s just buy one note per month? That would be the goal that wouldn’t maybe overwhelm some people. I got a full-time job, man. It’d be nice, but no. So even if you have a full-time job, if you’d find one private lender on the planet and you find one note, which they’re all over the place, and you put the two together and you do the deal, which is just paperwork. It’s five or six documents, okay?

And that’s the work, that’s the heavy ditch digging of note investing, okay? And you put that note in the portfolio because you did that little bit of work upfront and you planted that thing in your money orchard. It continues to be fruitful and pay you cash month after month after month after month. The reason I say I have a program to get people financially free in 36 months is this. If you buy one note per month for the next 36 months.

I promise you, you’ll be at or over $5,000 a month in passive cash flow that you no longer have to work for. That just hits the mailbox every month. So I just strongly urge that if that sounds really good to you, that you at least start pursuing this to get some education and some knowledge about it, because of course, don’t go jumping into things that you don’t understand fully. But yeah, look at our YouTube channels, invest brilliantly.

John Harcar (29:11.116)
Yes.

Patrick Franz (29:20.2)
or you can just look me up, Patrick Franz or what have you, and just start diving in because man, not only can it change your life, but also it could just be a really great additive to your current real estate investing endeavors.

John Harcar (29:31.458)
Awesome, awesome, awesome advice guys. I hope you enjoyed this one as much as I did. mean, that makes me wanna never go look at a house again and just start buying notes. Go ahead.

Patrick Franz (29:39.338)
may I say one thing, John, before we end? Just to blow your mind, obviously we can buy performing notes, which means people are living in the house paying their mortgage payment on time. And I don’t want to blow people’s heads up, but we buy non-performing notes where people are already in delinquency.

And perhaps the current note owner, the current debt owner does not want to go through the hassle of going through a loan mod or a foreclosure or something like that. They just want to get it off their books and give it to somebody like me who’s willing to put in the elbow grease, right? So you buy non-performing note. Now here’s something interesting for you real estate investors. Let’s say you do have a focused goal of stacking more doors. You do want to own more rental properties. Well, I’ll tell you what, I’ve backed into a lot of rental properties.

John Harcar (30:02.466)
Hmm, interesting.

Patrick Franz (30:17.906)
by buying a non-performing note at say 50 % of what the home is valued at. And I’ve bought that non-performing note and I have ended up working with that borrower to either get a deed in lieu of foreclosure, them a cash for keys option, or even go through a judicial foreclosure. But take back real estate now. So I’m in for a $50,000 note purchase as my investment.

John Harcar (30:36.332)
Huh.

Patrick Franz (30:42.212)
I end up getting back a $100,000 piece of real estate. Now, once I own that real estate, is it fair to say, John, that I have options with it? Like maybe if I want to, I can turn it into a rental. So then here you go. Here’s another thing for you real estate investors to choke on, which is I’m able to back into new rental properties and stack more doors to my rental portfolio by coming through the back door, by coming through the back door and I get them for less money than you do.

John Harcar (30:50.999)
yeah, for sure.

John Harcar (31:01.112)
with a lot of equity on them.

John Harcar (31:05.964)
Man, guys, hope you took notes. Hope you got his information. Reach out. I hope you guys enjoyed the show today, and I look forward to seeing you guys on the next one. Patrick, thank you very much, man. I appreciate you.

Patrick Franz (31:09.876)
you

Patrick Franz (31:17.919)
Thank you.