Three things I’ve learned (or re-learned) from starting a note-investing business
#1: It’s all about marketing; oh, and more marketing
I recently took Scott Carson’s three-day, virtual workshop, which I highly recommend, and right off the bat, I realized that if I’m going to succeed in the note business, I am going to have to up my marketing game. I’ve never really been one who loved the idea of “sales,” but when it really comes down to it, we are all in sales. That doesn’t have to mean we are selling something we don’t believe in. Ultimately, sales should lead to mutually beneficial outcomes.
In the note world, most investors end up marketing both for notes and for capital from funding partners. Without notes themselves and with money to buy them, you won’t have much of a note business. You have to be able to generate leads for both of these things. So, you need to market.
#2: You have to learn as you go; the conditions will never be perfect
I’m learning a ton. Specifically I’m learning about website development, marketing, due diligence, ROI calculations, systems for running a small business, and much more. And there is a lot more to learn.
At first, this may seem overwhelming. After all, it’s all up to me. Whether my business fails or succeeds has everything to do with my abilities and the actions I take. That’s a lot of pressure. However, there’s another way to look at this: as a challenge and a blessing. Life would be pretty lame if you didn’t get to learn along the way. I’m not naïve enough to think it’s all going to be sunshine and butterflies, but if I already had all the answers, what would be the point? Think about the relationships I’d miss out on and the transferrable skill of learning itself I would not otherwise develop.
I’ve devoted considerably more time to this business over the past few months. (I had a lot more free time once fantasy-football season wound down. Think I’m kidding? Ask my wife and my league-mates. Actually, my wife is in one of my leagues, so that helps a bit.) I started Labrador Lending, LLC about a year ago, but frankly, I hadn’t taken much action until recently. I wouldn’t say I had fallen victim to the popularly labeled “paralysis by analysis” mindset, but one thing I finally realized was the stars were never going to align. There was never going to be a perfect time to get started.
#3: Someone has the answer; I’m never stuck
Let’s face it, I’m not the first note investor ever. What’s convenient about that? Well, one thing I’d say I’m pretty good at is modeling. (“Modeling” sounds way better than “copying” or “stealing,” doesn’t it?) Although the environment is always changing, I take comfort in knowing that others have been successful in this business long before I began.
The note-investing space is a very supporting group, in general. I’ve found other note investors to be generous with their time and knowledge. (Obviously, you still need to be careful. There are plenty of people who will take from you and never look back.) The BiggerPockets forums and podcasts have been an excellent resource, and people like Chris Seveney (7E Investments) have proved invaluable thus far.
The main point here is that I’m never completely stuck. There is always someone out there who is an expert in whatever area I need to improve. Further, there isn’t just one way to do things. The note business in particular can be approached in an abundance of ways. For example, one can get into performing or non-performing notes, commercial or residential debt. And at the deal level, one can acquire notes via any number of methods. Then there are the various possible exit strategies for each deal. The bottom line? Others have done this before; there’s no need to reinvent the wheel. If I’m willing to provide value, I can always find a way. What’s more, I can then pass this expertise on to others. Networking and listening are key here.
What lessons have you learned from starting a small business, in notes or otherwise?