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Show Summary
In this episode of the Real Estate Pros Podcast, host Michelle Kesil interviews Fred Moskowitz, an expert in mortgage note investing. Fred shares insights on the benefits of investing in mortgage notes, the challenges faced in the industry, and strategies for scaling a business through social media. He discusses the importance of diversifying income streams, leveraging retirement accounts for investments, and the significance of networking and building relationships in the investment space.
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Fred Moskowitz (00:00)
For most, most investors, when they think about a note in the mortgage,They think about being the borrower and not as being the lender. And so with note investing, we can purchase the note, own it, and now this allows you to step across the aisle and become the bank. And so here we transition from being the one making the monthly payments to being the one receiving the monthly payments. And that’s a powerful shift.
Michelle Kesil (02:01)
Hey, everybody. Welcome to the Real Estate Pros Podcast. I’m your host, Michelle Kesil. And today I’m joined by someone I’m looking forward to connecting with, Fred Moskowitz, who is an educator, investor and best selling author who’s trained investors on creating cash flow and passive income streams. So excited to have you on the show today, Fred.Fred Moskowitz (02:27)
Thank you, Michelle. It’s great to be here.Michelle Kesil (02:29)
Yeah, of course. think our listeners are really going to take something away from how you’re approaching teaching people how to scale and leverage their income. So let’s dive in.First off, for those who are not yet familiar with you and your world, can you share what your main focus is?
Fred Moskowitz (02:49)
Yeah, absolutely. My main focus is investing in notes, mortgage notes specifically. And ⁓ I love focusing on residential ⁓ mortgage notes. A lot of people are familiar with real estate investing. However, it’s ⁓ not so many people that are familiar with investing in the debt side of that.which is more hitch notes, that’s the industry I’m in.
Michelle Kesil (03:22)
Awesome. And are you operating in a specific market or nationwide?Fred Moskowitz (03:28)
It’s nationwide. That’s one of the beauties of investing in mortgage notes is you can do it from anywhere and you can invest in all real estate markets across the US. And so that adds a lot of diversity because we’re not focused on one particular real estate market. We can go really broad.Michelle Kesil (03:56)
Yeah, definitely. Can you expand on mortgage notes for those who maybe have not heard that term?Fred Moskowitz (04:05)
Yeah, absolutely. So I’ll say this, a lot of people are familiar with investing in real estate, whether it’s single family houses or commercial property or multifamily or even vacation property, those short term rentals. But what if instead we talk about investing in the paper, which isThe notes and the mortgages associated with all those different properties. The majority of investment properties are purchased with some kind of leverage, some kind of financing. And I feel that this is a very interesting part of the real estate business. And for some reason, a lot of real estate investors, they don’t pay any attention to it.
For most, most investors, when they think about a note in the mortgage,
They think about being the borrower and not as being the lender. And so with note investing, we can purchase the note, own it, and now this allows you to step across the aisle and become the bank. And so here we transition from being the one making the monthly payments to being the one receiving the monthly payments. And that’s a powerful shift.
Michelle Kesil (06:11)
Yeah, definitely. That is a very cool way to invest. What have been some of the main keys that have made the biggest difference in allowing your business to be able to grow and get successful?Fred Moskowitz (06:29)
Well, there’s a couple of things that I started to learn about mortgage notes because I’ve invested in real estate for decades, owning and managing properties and being involved in larger multifamily deals, all these different transactions. But with mortgage notes, what I found was that there’s really three key characteristics.The first is that you can buy them at a discount. Now when it comes to real estate, everyone wants to buy a property below market value, right? Get that discount. In the note industry, this is very typical in a transaction. Notes are bought and sold at a discount. So you’re buying it for less than the amount owed on the principal balance of the loan. Second is that
you’re buying an asset that’s backed by hard collateral, it’s backed by real estate. These are homes just like the homes that you and I live in, right? And so ⁓ that’s the collateral that gives you that downside protection. The third is that you can earn a high rate of return. ⁓ If you do your investing well, you can earn a high rate of return. And so when I learned about those three characteristics,
That made me become very interested in more hitching out investing.
Michelle Kesil (08:03)
Yeah, absolutely. Is there any sort of limitations or obstacles that are common when it comes to investing in mortgage notes?Fred Moskowitz (08:17)
Yes, ⁓ certainly. So with mortgage notes ⁓ to be successful in this business, there are three pillars and I talk about this in my book on node investing. There’s three pillars to node investing. The first is capital. You have to have access to capital. ⁓ Mortgage notes are purchased as cash transactions.And so ⁓ you need to have cash, that capital. Second is the availability of notes, access to notes. Can you buy them? Do you have the relationships in place to be able to ⁓ bid on and buy notes? And third is the systems and processes. It’s the management of the assets. Are you set up?
in your business to effectively manage those assets. So you need to have all three of those areas covered in order to be successful.
Michelle Kesil (09:25)
Yeah, definitely. What is your book about?Fred Moskowitz (09:30)
Yeah, my book is called The Little Green Book of Note Investing and I wrote it to provide a high level introductory overview to the entire ⁓ business of node investing. We talk about why do banks sell loans and recapitalize why are notes sold?to tap into that secondary market. We talk about due diligence, how to analyze a note, how to conduct due diligence and look for problems and pitfalls. And ⁓ also have several chapters dedicated to one of my favorite topics which is investing in notes using retirement account capital because as I said earlier you need cash.
But for a lot of investors, a great source of capital is our retirement accounts. Maybe you have an IRA, you have a Roth IRA, hopefully, or an old 401k from a previous employer, and you’re looking for ways to put that money to work. Well, that’s a great source of capital for investing in notes. ⁓ so the book provides a high level overview of many of these topics.
so that an investor that’s interested in learning about node investing, whether you want to do it actively and be hands-on or passively, you can also be a passive node investor as well, there’s a strategy for you and that’s what we cover in the book.
Michelle Kesil (11:47)
Yeah, that’s incredible. I’m sure many people could use that advice as they get started on their journeys.What are you most focused on solving or scaling to next in your business?
Fred Moskowitz (12:06)
there’s so many areas. ⁓ So scaling for me is ⁓ I’m learning to get better at utilizing social media, leveraging social media platforms because a big part of what I do is education and outreach and ⁓ teaching and so I want to use social media as part of that and it’s a never-endingprocess, learning the different ⁓ strategies, techniques. There’s always places to improve. There’s new platforms coming on the scene. There are changes in the way the social media platforms are ⁓ promoting content creators. And so it’s all about staying on top of that and getting better.
And I really like the idea about how can I be a better content creator? Because if I can get better at that, that’s a larger audience that I can reach out to. I have a larger addressable audience to share my message with, to share value and bring about these new concepts and strategies and techniques. Because ⁓ let’s face it,
I’ve had the pleasure to learn from so many powerful mentors in my investment career and I want to be able to give back to others now. And so by creating this body of work, I’m able to share that with others and I feel that social media is a big part of that.
Michelle Kesil (13:55)
Yeah, it’s definitely the modern marketing strategy that we all are getting used to. ⁓Awesome. So what got you started in the investing world? Like how did you come across mortgage notes and yeah, start your journey?
Fred Moskowitz (14:20)
Well, ⁓ I started out my career working as a computer engineer for ⁓ many decades. I loved the work I was doing. And what happened for me was that I came up through the time of the dot-com boom, the birth of the internet. had the dot-com boom that was then followed by the bursting of the dot-com bubble andSeptember 11th terrorist attacks and so we had all this turmoil in the world at the time and so through all of that it made me realize that I was taking on this huge risk because I was relying on my paycheck for my job as my only source of income and that was a huge risk and so I wanted to diversify my income streams.
I read a statistic that the average millionaire has seven different income streams. And here I was with just one. And so this is what led me to ⁓ alternative investments in general. I got into real estate and then after a number of years started learning about node investing as a niche area. And what I loved was that
I said this is something that I could really grow and expand into something big and that’s what I’ve been focusing on but I’m so excited about this asset class because the ability to scale is so powerful. So powerful. You’re limited by the amount of capital that
that you have access to. That’s really it.
Michelle Kesil (17:01)
Yeah, absolutely. That’s so important. What’s your suggestion for people who maybe think that they don’t have enough capital and how can they tap into other sources of capital?Fred Moskowitz (17:14)
Yeah, absolutely. ⁓ for a lot of people, ⁓ real estate can be a great way to get started when you don’t have capital because you can use leverage. You can buy properties with ⁓ relative low money down compared to the value of asset. And holding that over years, over the long term,you can really grow and expand. That’s something that, that’s how I got started and I’ve seen a lot of investors be very successful with that. ⁓ moving along from that, as I mentioned earlier, retirement accounts, ⁓ old 401ks, IRAs, Roth IRAs, which is one of my favorite strategies by the way, because of the tax benefits there, ⁓ all are
sources of capital and so if you learned a good education about real estate investing you’ve learned a lot about how to leverage assets that you own and so when you do that that can create new opportunities for you.
Michelle Kesil (18:37)
Yeah, that’s awesome. How can people leverage their Roth IRA like you mentioned? That’s what you prefer.Fred Moskowitz (18:45)
Yeah, the reason I love Roth IRA is the ⁓ tax treatment because if you look at it from the perspective of the agricultural analogy, right, with a Roth IRA, you’re paying taxes on the seeds and not on the harvest of your crops. And so all the growth is tax free in the account. And that’s really powerful.But utilizing retirement accounts, you can invest in individual notes, right? If you have a self-directed retirement account, you can invest in notes. You can invest in note funds if you want to be a passive investor and really resulting in tax-free compounding. And if you ever look at some of the differences in growth of an account value,
whether it’s subject to tax or not, it’s tax free, it’s tremendous, tremendous difference in the growth and compounding. ⁓ you know, it reminds me of this quote by Albert Einstein that compound interest is ⁓ the eighth wonder of the world. And it’s such a powerful force when you can do it.
compound interest with tax-free growth, it’s tremendous.
Michelle Kesil (20:24)
Definitely, thank you for sharing that. What is something that maybe you had to overcome on your journey that now you have the lessons that looking back you wish you knew in hindsight?Fred Moskowitz (20:42)
Yeah, absolutely. ⁓ One of the biggest lessons that I’ve learned is the power of proximity. The people you’re putting around yourself. Who’s in your neighborhood? Who do you hang out with? Who do you spend time with? And so that power of proximity, because if you are in a room with people that are successful,then that’s really going to change your mindset. It’s going to change the kind of conversations that you’re having. It’s going to change the kind of events you get invited to, the kinds of books that you might read, the content you consume. And so think about this. If you have, let’s say you’re a business owner, you have $100,000 a year business, that’s your annual income.
in annual revenue and you step into a room full of people that have million dollar a year business in revenue well they’re going to be talking about different kind of problems at a higher level they’re going to be going to different events and activities ⁓ where it’s at a higher level and so what happens well that’s going to pull you up over time
because of all of this constant exposure. And so that’s one of the best things that I learned is be purposeful about where you’re spending your time and who you’re spending your time with.
Michelle Kesil (22:25)
Absolutely, that is very powerful advice. Are there certain networking strategies that you like to implement?Fred Moskowitz (22:36)
Yeah, as far as strategies and tactics, ⁓ I love using CRM. I think it’s a very powerful tool to keep track of your contacts and keep track of the conversations you’re having and ⁓ really set you up for success. And a lot of people that I talk to investors, I talk to different people and they say, hey, Fred,which is the best CRM, which is your favorite one? And my answer is always the same. It doesn’t matter. The best CRM is the one that you’re gonna use consistently every day. Every day you’re going in, you’re updating, you’re making your calls based on that, your outreach. It doesn’t matter which one it is. The one that you use consistently
day in and day out, that’s going to be the best one because ⁓ that’s going to set you up for success.
Michelle Kesil (23:41)
Yeah, I love that approach. Thanks for sharing. So before we wrap up here, if somebody wants to reach out, connect, learn more, where can people find you and connect with you?Fred Moskowitz (23:52)
Yes, thank you Michelle. I appreciate that. So my book is called The Little Green Book of Note Investing. It’s available on Amazon. You can search for it by name or by my name. It will come up. And for anyone that wants to reach out, connect with me, please visit my website. It’s at FredMoskowitz.com. However, maybe you prefer a little bit of an easier spelling.So what I’ve got is you can go visit giftfromfred.com and they’ll take you right to my website. And once you’re there, I have a special report about node investing and introductory guide. I’d be happy to send that out to anyone that would like just visit gift from Fred.com, put in your information and we’ll email that out to you right away. And ⁓ you can learn more about me. You can send a message to connect with me.
And always love connecting with investors, building relationships, because it’s a big part of what we do. It really is. so invite anyone, please reach out, connect with me. Would love to talk, would love to learn more about what you’re doing in the investment space.
Michelle Kesil (25:10)
Amazing. I appreciate your time and your perspective. Thank you for being here.Fred Moskowitz (25:16)
Thank you, Michelle. Thank you for having me on today.Michelle Kesil (25:19)
Yes, of course. And for those that are tuning into the show, if you got value, make sure you’ve subscribed. We’ve got more conversations with operators like Fred who are building real businesses and we’ll see you on the next episode.
