Transform Your Life: How to Thrive in Real Estate Investing

Christian (00:01.392)
Hey everybody, welcome to the show. I have a special guest here with us. His name is Marco Bario. He’s a former film and television and industry pro who traded the fast paced world of entertainment for the world of real estate investing. So now as the president of porch swing funding, Marco is focused on a unique and powerful niche, which is seller finance, real estate notes and install installment contracts. But I’m going to let Marco dive into that Marco. Welcome to the show. My friend. I’m super excited to have you on.

You and I were just spending a few minutes just getting to know each other before we started recording. So super excited. Why don’t you just introduce yourself to the audience and just talk a little bit about your background and just tell people where you’re at with your journey.

Marco Bario (00:42.136)
Thank you, Christian. Thanks for inviting me to do this with you. I’m looking forward to it. My name is Marco and I’m a seller finance real estate note buyer. By background, as Christian said, I worked in the film and television industry and I pushed kind of schedules and budgets and crews and things like that around. But around 2015, that world started to evolve where they needed less of me.

to be completely frank and when one door closes, I was looking for another one to walk through. I’ve been lucky in that world. worked for a large service provider. We were a multimillion dollar international company called Technicolor. And I was exposed to a lot of things I hadn’t been when I worked in the production world, such as profit and loss statements and cash flows and things like that. So I got the entrepreneurial bug.

But I also wanted to do something outside the industry that ultimately I could do from anywhere. For a minute, I was doing a couple of different online businesses just to try my hand at that. But fate, I guess, took me to a local real estate meetup in Manhattan Beach, California. And there every month is a new topic, as anybody knows who goes to these meetings. And I swear to you, the first month it was flipping and I was going to be a flipper.

And then I swear to you the next month it was about buying apartment buildings and I was going to buy apartment buildings. And a month after that short term rentals, well, after about four or five months of that, I said, I better pick something. And that month there was a panel of note investors and we’ll get into what that means in a moment. What I really liked about what they were talking about were two things. One, note buyers

And we buy the debt on real estate. will go into this in more detail, but note buyers don’t go to the properties that secure our investments. So we can work from anywhere. So when a bank lends to you to buy a house, they send an appraiser to the house, but they don’t physically buy the house or need to be near the house. Right. So it had that advantage, but then also

Marco Bario (03:02.7)
I didn’t have a real estate background. And the thing about note investing is it does get pretty technical at times, especially how I started. started by non-performing notes. I don’t do that anymore. but I wanted to, this is how my brain works. I wanted to be thrown into the deep end of the pool. And I’ve always had this philosophy that everything is to steal a phrase, figure out a bowl. And I knew that if I was in a situation kind of like a Houdini

may have been locked into a box and then dropped into water and figured out how to get out. He obviously had an idea how he was going to do it, but unexpected things can happen. And that’s true in note investing. So on purpose, I sought something out where I was going to have to learn my way through title and the paperwork and the documents and all the mechanics kind of behind the scenes of real estate finance. So that’s how I got into it all.

Christian (03:58.32)
Very, very cool. I’m interested to know.

Marco Bario (03:59.214)
And Christian, if you want, can go into what note investing is. Yeah, go ahead. I’ll follow your lead, Go ahead.

Christian (04:04.4)
Yeah, so I’m interested to know and I appreciate, know, given some of the breakdown and some of your origin story there. So one of the big draws of what I know and for those that don’t know is the passive income when it comes to notes, right? mean, what type of, were you more interested in getting inside of the note business and really scaling to where you are now because the passive income model attracted to you and were you looking at maybe, cause I know you were, you know, going to different seminars, different things like that and.

You’re saying one week, it’s like, hey, I wanna be a flipper, one week I wanna be this. And as you know, with fix and flip and wholesaling, it’s a more active business, right? So where you have to actively be in and on the day to day, and then obviously, you know, get one single transaction and it’s almost like a base hit, right? But you don’t have the passive when it comes to those models. So is that something that really attracted you with notes is the passive income side.

Marco Bario (04:58.158)
Yeah, I won’t lie. I thought it was more passive than it really is. Just like anything, acquiring customers or acquiring leads or acquiring assets takes a fair amount of work. Most of my work goes into making a phone ring and talking to sellers and then buying the assets. The nice thing about notes, so let’s, let’s I keep using the term and I want to make sure we’re not leaving anyone out here. So what I do is this.

I think most people are familiar with a mortgage in real estate or some version thereof. have installment sale contracts, mortgages, deeds of trust, promissory notes. They’re all kind of put them under the same umbrella. Christian’s going to buy a property and Christian can go to a bank or a private lender or any, you know, rocket mortgage, perhaps to go get a loan to buy a piece of real estate. And when that transaction closes, he’ll sign documents that make a promise.

That document is called a promissory note that make a promise to make payments with a certain interest rate over a certain number of months or years, but payable monthly. And that promise in real estate, and this is the nice thing, is secured by a mortgage or a deed of trust. That gets recorded in the county records. So when you order a title search, you see what liens may be placed on the property. You’ll generally see a mortgage or a deed of trust.

if not more than one, if there’s a second position note on the property as well. So that secures the lender. It gives them the right to enforce their lien, which is done generally through a foreclosure process. So foreclosure results in an auction. Auction results in one of two things. The property sells at auction and the lender gets paid from the proceeds of that sale at auction, or no one shows up to the auction or they don’t bid enough at auction to match what the

lender is asking for to be made whole and they get the property. So that in a nutshell is note investing. Now, I do is a neat, now note investing, I view as a niche within real estate investing. Again, I could flip houses, I could buy apartment buildings, I could be a private lender, but I buy existing paper.

Marco Bario (07:18.188)
general term for the notes and mortgages and so forth. buy existing paper on what’s called the secondary market. If you buy a used car, you’re buying a car on the secondary market. You’re not buying it from the dealer and it’s brand new. It’s now been used. So I kind of buy used notes and notes are always traded on secondary markets. They’re debt instruments, they’re negotiable instruments, they’re tradable. Banks and large institutional lenders do it all the time.

If you’ve ever gotten a letter saying, we sold you your mortgage. Now you just send the payment over here instead of to us that they’ve sold your note. I work in a specialized area within note investing. What I do now is I work, buy seller finance notes. So if we go back to our example of Christian buying a property, let’s say he’s buying it from me, he can go to a lender to get a loan or we can just work it out between us, frankly.

So I can say, Hey, how about you give me a down payment at closing? It doesn’t have to be a down payment. I want a down payment because I’m smart. I guess for a down payment at closing. And then we agree to terms that he can pay over time. Number of months, monthly payment interest rate are the big ones. Now, when we close, I’m like the bank. I have a promise from Christian secured with a mortgage or deed of trust that I can sell to somebody.

called a seller financed note or seller carry back. I market to people who have those. So I’m dealing with individuals, not banks all over the country to buy these debt instruments.

Christian (09:01.66)
That’s incredible. Thank you for breaking that down. So I’m curious to know, how do you go about sourcing your notes individually? Is there any certain type of marketing channels that you’re utilizing, maybe cold calling? Is there ringless voicemail drives? Are you running Google PPC campaigns? I’m curious to get your understanding on how are you sourcing your deals and also how does your acquisition process as well? So this might be a two tie question. What kind of due diligence are you looking for before you are purchasing a note?

in your acquisition phase.

Marco Bario (09:34.2)
Okay, so first to make the phone ring. All the things that you mentioned, Christian, are all the things that work for people who, investors who buy houses, wholesalers or flippers who market directly to homeowners to buy houses or any type of property. All those things work for buying notes. Essentially, I do the same thing. I can send direct mail. I could cold call. I don’t. I could Google a pay-per-click or Microsoft ads. I do both of those.

or lots of other channels. I also now get a referral network because over time I’m dealing with attorneys who have clients who have these notes or accountants or title companies or I get referrals too. That builds over time. Real estate clubs, et cetera. People know me and know what I do. So that’s how I make the phone ring. And then…

Then frankly, the challenge is talking to the seller. Let’s not leave that part out because it’s something like this. Hey, I’ve got a note has a hundred and thousand dollars left on it. what would you pay me for it? Or sometimes they don’t even say, what would you pay me for it? They assume I’m going to pay them a hundred thousand dollars. I always buy at a discount. There are a couple of reasons for that. One, I to recoup my marketing cost to

Just like any secondary market. Remember during COVID when used cars got really expensive because the supply was constrained? That’s an example of market pricing fluctuating in a secondary market. I think that we can all identify with. the same is true with notes. if with interest rate fluctuations, with real estate market fluctuations, with general risk in the economy, the types of assets we deal with can be more or less valuable. So

Christian (10:59.11)
Yes.

Marco Bario (11:22.506)
Let’s say that someone calls me and their note has a hundred thousand dollar balance on it, but they wrote it at five percent. Well, first of all, bank rates these days are they were going down towards six. They might, I don’t, depends every 20 minutes right now. Today’s April 8th. I don’t know when you’ll see this, but we just had this thing called tariffs and the markets, the mortgage rates are bouncing up and down right now for institutional. But to begin with, let’s say those rates are between around six and a half, seven percent, just for argument’s sake.

Christian (11:45.692)
Mm-hmm.

Marco Bario (11:53.762)
that’s qualified or at least institutional level, non-qualified debt. Seller finance notes aren’t that. These are non-qualified, I’ll be honest, but these are regular folks doing transactions with regular folks. They’re fine, they’re serviceable, but our yields are generally higher. So let’s say that 5 % note, I feel comfortable buying at a 10 % yield to compensate for my risk or even 12 sometimes. So I discount it. So I’ve got to tell them,

I can pay you whatever the number is $70,000. They never liked the discount, shockingly. But that’s part of my job too, right? There’s that sales acquisitions component, just like wholesalers do, right? I can pay you this for your house. But Zillow says it’s worth that. Yeah, but here’s why we can’t pay what Zillow says it’s worth. You know, it’s all fair explanations, but that’s just the fact of it. And then the due diligence, I get into the quality of the collateral, first of all.

If I want that $100,000 note to be secured by something that’s worth preferably a lot more than $100,000, but definitely more than $100,000. And the quality of the payer, the borrower, what’s their credit score? How many payments have they made? Is there a history of them making payments that suggests they’ll continue to? And then we get into the paperwork itself, you know, not just the rate and the number of payments, but things like is it

Did they download the thing off of the internet or did they use an attorney and a title company to close? And did they keep track of the payments? We, we drill into all that stuff too.

Christian (13:30.534)
Very nice, very nice. So I know you actually give the opportunity for passive investors to also get involved with your deals as well. So I wanna get your take on, let’s say someone wants to get involved with you or just in this industry in general with getting involved and investing in passive notes, walk us through that process, right? Walk us through exactly how do you educate someone wanting to come on board? Are you running through the actual deal on live time with them and giving them the expectations?

Many people obviously that are from different backgrounds, right? They might’ve been investing in traditional investments like maybe other single family, traditional rentals, maybe stocks. There’s so many different industries, right? So I wanna get your take on how are you educating others and how can other people get involved with you and investing into your deals?

Marco Bario (14:22.638)
I’ll only let people invest in my deals if they have some basic knowledge because I don’t want to, I want them to understand what they’re investing in. So I, you mentioned, you do I educate them? Yes, absolutely. Do they have to know everything? I do know they have to trust me at a certain point. But the most important thing is here’s how I work with private investors. We’ll start with that. There’s, I’m out there.

finding the lead, closing the lead. And then I buy it and then I put it in my account with my servicer and I make sure a comfortable number of payments have been accepted by my servicer. I mentioned earlier, for some reason, the thing goes bad when I first buy it. So, I was talking in the previous conversation, I’m sorry, but yeah, for some reason.

When I buy a note, if it’s going to go bad, tends to go bad right away. It’s like the substitute teacher showed up that day. And for some reason that sends out the signal. It’s like goof off day. We’ll find out it’s not really goof off day, but, but I want to go through those bumps and make sure it’s stable in my environment, which is more stable environment to begin with. And then I offer it to a private investor and I can do that one of two ways. let’s say there are 120 payments remaining on a note. I can sell the next 60.

Christian (15:21.756)
Yeah.

Marco Bario (15:42.702)
perhaps payments of the note that’s called a partial. And then I retain the right to collect the payments on the backend. So not only does that protect that investor because they’re aligned with me or interest are aligned, I’m still involved. I still retain the rights to the backend. And if anything goes wrong, I’m going to step in and make sure it’s dealt with. Um, but also their exposure is less. If it was a hundred thousand dollar balance and they invested $50,000, let’s say

their exposure is less, it’s like a first on a first. If it’s a partial on a first lien, they’re in line to get the first $50,000 at the road or whatever they’re still owed at that point. Does that make sense, Christian? Okay. The other way I do it, the other way I do it is a way where they’re sort of double secured is I can use a note I own as collateral for another loan. So just like you can use a house,

Christian (16:21.788)
That does make sense. Yeah, definitely.

Marco Bario (16:39.96)
You’ve got a house that’s worth $200,000 and you’d like to borrow $150,000 against it. No problem. There’s plenty of collateral there. I’ll be put your pledge, your house is collateral. We’ll refinance you out. Maybe do the burr method. If cover things like that on this show, I can do a pretty similar model. It’s just instead of a property, I’m using paper as collateral. So if my note balance is a hundred thousand dollars and I’m looking to borrow $50,000 from a lender,

I’ll pledge my note as collateral. So if something goes wrong, that note sits in my attorney’s office in an escrow account. And if they go to my attorney and say, Marcos disappeared, okay, here’s the note because there’s already, they have the actual, the original documents and a signed document for me saying that they’re entitled to it as long as they produce evidence that haven’t been paid. And then,

And course the attorney is going to reach out to me and confirm that, that’s, that’s easy to do. Um, and then in that scenario, if you can imagine now they own the note that had the hundred thousand dollar balance, they borrowed 50, I borrowed 50, they have a hundred thousand dollar note and let’s say things are really messed up and the payer stops paying on the a hundred thousand dollar note. Guess what? They own the note. They can foreclose on the house. That’s hopefully worth 150 or more to, uh, to make them whole. And I make sure those buffers are built in.

Christian (18:09.136)
Now I love your approach on how you’re very straightforward about how someone can work with you, right? And what you look for. And you also set the expectations upfront. I think that’s so important. And I can definitely just see that you definitely put your relationships first. And as you know, even with your business that you’re in, mean, you’re there to solve someone’s problems, right? And also when you’re working with somebody as well to get involved with you, it’s the same thing. It’s relationship, relationship, right?

So it’s all about being upfront, setting the expectations upfront, right? With that, that’s gonna set you up for long-term success. it’s no coincidence. Obviously, you’re at where you’re at. I know you, do you feel like even coming from the television industry and media, do you feel like that experience really helped you be able to influence and build strong connections with potential investors, investors you work with, and also sellers? Do you feel like that?

definitely gave you an extra edge on how you’re utilizing that presently today.

Marco Bario (19:14.21)
You mentioned solving problems. There’s no, probably no better place other than maybe the military to learn how to solve problems on the fly. Cause we all show up on set every day with a plan. And I don’t remember any particular day that went according to the plan by the time we were done. That’s okay. We’ve seen things go off plan. We, you know, like Houdini, we kind of knew that maybe wouldn’t, the lock wouldn’t unlock the way it was supposed to, but I think I have another way to do it. But we’ve

Christian (19:15.644)
Mm-hmm.

Marco Bario (19:43.086)
it’s figureoutable again to use that phrase. So yeah, that above all, think prepared me for the most and it made me confident that I could step into something I had no experience in and figure it out.

Christian (19:55.708)
That’s awesome. No, I love that. love that. Marco, man, I honestly wish we had another 30 minutes to an hour together on this, but there’s a lot of stuff I want to ask you. So hopefully we can actually bring you on here in the near future to answer some of the questions that I’ve put together that I wasn’t able to get here today. But I appreciate you making the time out of your day to jump on and just deliver nothing but value to our audience. I definitely learned a lot. No investing is something that I don’t have a lot of experience or knowledge myself in. So I know the audience is going to love this one, but

How can people reach out to you? Where do people need to find you? Where do people need to go? If you can share some of that.

Marco Bario (20:33.834)
If it, hopefully you get from the way I talk about this, I like to share this knowledge with people. Like you said, Christian, not a lot of people in real estate investing, have ever dove into the note space. It’s super useful, even if you never buy a note, just to understand it. Cause it’s, it’s really understanding how things under the hood work and you can start to put together creative deals and things better. So with that said, I like to share and talk about it. sometimes that leads to opportunity. Sometimes it just helps our industry.

So I publish a newsletter, it’s called Seller Financing Sunday. It’s about seller financing and note investing. And it comes out every Sunday and it’s free and it comes from me directly. So the place to sign up for that is through my website. If you just go to newsletter.porchswingfunding.com newsletter.porchswingfunding, that’s my company.com. If you sign up for that,

you’ll get an email from me every week and all you ever would need to do is reply to that. And, and then we’ve got a dialogue going. So that’s probably the best place to start. And then through that website, of course, you’ll find other ways to, to submit forms and so forth. If you, if you want to talk about a specific note, you might have.

Christian (21:49.724)
Awesome, awesome. Thanks so much for sharing. Marco will definitely be able to grab some of those links and drop those in our YouTube description so people know exactly where to go and where to find you. But again, thank you so much for taking the time Marco to jump on it and join us. And I’m just wishing you nothing but the best here in the future in your endeavors, my friend.

Marco Bario (22:02.136)
My pleasure.

Marco Bario (22:07.662)
Thanks, same to you, Christian.

Christian (22:08.848)
Thanks so much, thank you. Well guys, I hope you enjoyed today’s episode as much as I did and as always my friends, we will see you on the next episode. See you on the inside, take care.