September 24, 2021

JF2579: Note Investing Pitfalls to Avoid with Jay Tenenbaum

Former debt collection attorney Jay Tenenbaum spent most of his career in the legal field before he made his first investment. Now, his main focus is syndicating defaulted mortgage acquisitions. Jay talks about the pros and cons of investing in mortgage notes, the most common mistakes he sees by rookie investors, and how he uses his legal background to help educate his investors.

Jay Tenenbaum Real Estate Background:


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Ash Patel: Hello, Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, Jay Tenenbaum. Jay is joining us from Phoenix, Arizona. He’s a full-time real estate investor and syndicator with eight years of experience. Jay’s main focus is syndicating defaulted mortgage acquisitions.

Jay, before we get started, can you give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Jay Tenenbaum: Certainly, Ash. Thank you so much for having me. So I spent the majority of my career as a debt collection attorney; then I transitioned into buying distressed mortgage notes. So I’ve been in debt all my life, just not personally. So from debt collection to chasing mortgage notes, different debt instruments, started investing in notes in 2013… I’ve done over 450 deals all over the United States, and not a single one in my own backyard.

Ash Patel: Interesting. Is there a reason that you don’t do any in Arizona?

Jay Tenenbaum: Yes, I started investing when I lived in California. And at the time, in 2013, pricing of notes in California was 80-90 cents on the dollar, Midwest and South was like 30-40 cents, so the opportunity existed elsewhere. So I just learned how to do it basically sight unseen, building teams etc. Moved Arizona four years ago… I hadn’t seen a note in Arizona since the very beginning anyway. So besides the lack of availability and just the ability to know how to do it out of state, it was just kind of the model; wash, rinse, repeat.

Ash Patel: Well, why is that? There was a ton of defaults in Arizona.

Jay Tenenbaum: Part of it is because Arizona, like California, is a deed of trust state, meaning it’s really quick to go to foreclosure. So everything that was a default just went to foreclosure; investors were buying properties at foreclosure. So the availability of hedge funds buying notes in Arizona became less than less, so these weren’t available.

Ash Patel: Alright, so I know a lot of people that invest in notes; I know very little about investing in notes myself. Is there a way you could take us through the beginners’ how to get involved in investing in notes course?

Jay Tenenbaum: Certainly. So I have built relationships with banks, mostly hedge funds, in the course of my career. So when I say, “I’m lazy, I don’t like to hunt,” these relationships bring me deals on spreadsheets on almost pretty much a daily basis. So you’re looking at an asset on a mortgage note; you’re not buying the house. We are especially buying notes that are secured by single-family 1-4 units, and the borrower at some point has gone into default, and the bank or the hedge fund has sold off the loan to somebody else as a commodity; that comes down to investors like ourselves, who will actually do something with it. Like in the beginning, I was buying very low-value notes, where the houses were maybe worth 50 grand in the Midwest, with unpaid balance that was underwater; $80,000 to $100,000, I’m picking up for maybe $10,000 or $15,000. And at that point in time, I would work out loan modification with borrowers, keeping them in the home.

Today, we’ve migrated into buying mortgage notes on higher-value properties. We’re in a contract now where the purchase price of the notes could be actually over a million dollars. The highest single transaction limit I’ve ever done. So we’re buying houses now that are worth $400,000; $500,000; $6000,00 ; $700,000 or $800,000. So actually, getting paid off [unintelligible [00:03:57].03] a lot recently… That is where we’re going.

Ash Patel: That high dollar transaction, was that a multifamily property?

Jay Tenenbaum: No, it’s one note on a property in Connecticut. A single-family.

Ash Patel: What was that house worth?

Jay Tenenbaum: You could do anything — currently it’s worth probably $3 million; we put a little square footage into it, we can probably get it up to $5 million without really doing much to it.

Ash Patel: And did you do the due diligence that any investor would do, or did you just buy the paper, and not really worry about the condition of the house or anything?

Jay Tenenbaum: When you’re buying mortgage notes, you’re not so worried—the condition of the house and the values is somewhat important. When you’re buying mortgage notes, the diligence is in the mortgage itself – making sure that the mortgage is clean, making sure that the chain of assignments are correct and all that, and that you have to foreclose on it or it’s in foreclosure, that you can continue without any hassle. So that’s where we are right now. [unintelligible [00:04:49].06] actually did this thing that mortgage is in foreclosure already.

Ash Patel: And what was the disposition of that property?

Jay Tenenbaum: We’re under contract, we haven’t even finished the due diligence yet.

Ash Patel: Okay. And what’s your plan? Are you going to do a loan mod on that?

Jay Tenenbaum: No. The price point’s too high; return to investors would be pretty minimal to buy something for a million dollars and do a $3,000 to $4,000 monthly mortgage payment. So no, we will finish the foreclosure, take the property back and then flip it.

Ash Patel: So you’re looking at non-performing notes, versus performing notes.

Jay Tenenbaum: Correct, for a specific reason. Yes.

Ash Patel: So the people that don’t have the contacts with the banks and hedge funds, how do they get into this arena?

Jay Tenenbaum: Partner up with somebody who does, like ourselves; we work with investors all the time to teach them how to do it with us. I was fortunate enough to get involved in this business with a mentor who brought me those initial relationships, and I’ve built my own since then. So that’s kind of have been my why ever since. I’ve got the deal flow, because — we all have the experience of going to seminars and bootcamps and all that, and you get great education in some hotel over the course of a weekend… But come Monday morning, where do you find your first deal? That was my biggest challenge until I got exposed to investing in notes, because I met even in that three day weekend a couple hedge fund sellers and established those relationships, and was capable of [unintelligible [00:06:02].26] where I was able to find my first deal right away pretty much.

Ash Patel: And Jay, do you run a formal boot camp or school or courseware?

Jay Tenenbaum: Not really. I am involved, I’m a leader in a real estate community that now with Zoom is nationwide. And I run all the mastermind programs inside that community, including my own mastermind, Out of State mastermind, where we show our members how to invest out of state. And I’ve got to tell you, we started it in 2018, and the members of our community, irrespective of my business partner, have done them over 90 deals themselves; spent a little bit over $2 million in taking down assets worth well over $6 million in that timeframe.

Ash Patel: And what’s the typical cash-on-cash return they’re seeing?

Jay Tenenbaum: We’re delivering our investors probably somewhere consistently in the high teens, or better.

Ash Patel: And what are the risks involved with beginner investors in notes?

Jay Tenenbaum: Well, the biggest risk is the rookie investor doesn’t know what they’re doing and overpays for the note. There’s no such thing necessarily as a bad note; just a bad price. If you’re overpaying for the note, your exit strategies, your exit returns are going to get impaired. So we find a lot of times when the market is flooded, when the gurus are bringing in new investor notes that we see, pricing go up because rookies are overpaying for what they should be paying for. I can’t say necessarily whether their diligence was good or bad, it’s just they overpaid for what they’re getting.

Ash Patel: Jay, you’ve been doing this for a long time… Is this something you would advise your kids to get into or a rookie investor to get into, versus the typical multifamily, commercial, single-family route?

Jay Tenenbaum: Actually, my oldest son did work in our business from 2015 to 2018. Then he took a course at Arizona State University to be a web developer to enhance our websites, whatever. He liked that so much, he’s a full-time website developer, he lives in Colorado, and he’s out of the business. My other sons don’t really have the affinity for it. I don’t think they really understand what it is. But working with my son was awesome, during that timeframe, it certainly was. We got closer together. It was a lot of fun.

As a rookie investor, just like anything else, whether it’s single-family, multifamily, notes, whatever – I learned, even though I had a legal background, which helped me a lot in this space… But even without that, I still partnered up in the beginning with other people who knew what they were doing as well. That is crucial, essential, to doing anything. To be honest with you – yes, we bought a property, we bought a 14 unit in Pittsburgh, but I really don’t know multifamily that well.

Ash Patel: Okay. When you purchase these notes, do you always have the same end game, where you just sell the property off, or do you sometimes want to keep them?

Jay Tenenbaum: In the note space, we have potentially 14-15 separate exit strategies, all to our disposal. So the one thing I learned a long time ago was you can’t predispose. So you just take your loan, you buy it, you start working through it, and the outcome almost materializes to you. Now granted, recently in the last year, year and a half, we’ve been buying a lot of reverse mortgages. So with the borrower being dead, a loan modification is obviously not an option. And some of the stuff that we’ve been buying has been late-stage foreclosure, meaning we’ve gone to foreclosure sale within a couple months or so after we bought it. And what’s really the low-hanging fruit right now is investors. As we all know, there’s been such a shortage of inventory. Investors are showing up at these auctions and they’re hungry for a potential opportunity. They’re overpaying at the auction, to our benefit, because we’re getting paid off at auction.

I just had a note in Newport, Rhode Island. We wanted to keep it as an Airbnb. We were owed $377,000; we bought it for $285,000, I think. The high bid today was $413,000; probably is worth probably $500,000-something.

Break: [09:49] to [11:50]

Ash Patel: Why not do this with commercial retail office buildings?

Jay Tenenbaum: I don’t have the space for them. So I don’t go to my hedge fund to establish other relationships to buy those kinds of assets. Some of my colleagues do; they buy what’s really considered a true commercial note. This was back before the pandemic, where they’re buying hotels or commercial strip centers or what have you, and getting good discounts, obviously. I don’t know this space well enough. In this economy, with strip centers and everything else going online, you’re probably going to buy a mortgage note on a commercial center, at really, really, wild, wild west discounts. What are you going to do with it?

Ash Patel: Yeah, you have to know the space. You have to have a plan on what you’re going to do with turning it around or re-leasing it or selling it. There’s got to be an action plan. What are the mistakes most commonly made by rookies that are graduating from a weekend boot camp, getting into notes?

Jay Tenenbaum: Well, as I said before, the first thing is they’re overpaying. They’re caught up in the frenzy; they’re getting exposed to a hedge fund relationship who’s giving them the opportunity to buy and there’s this frenzy of, “I just got out of boot camp. I just got out. I’ve got to buy, buy buy. I’ve got to buy yesterday,” right? “I’ve got to validate what I’m doing. I’ve got to buy.” And they don’t sufficiently do their due diligence. They overpay for this stuff. And unfortunately, in most situations, it’s one-and-done money. They go in, they lose their shirt, and they’re like, “This isn’t for me.”

I see a lot of times, even when you’re buying right, I see a lot of times probably—and I’m just speculating here… Probably every five new investors, you look at them a year or two later down the road, and even if it had success, only one or two will probably still be in the business.

Ash Patel: Interesting. So unlike multifamily, where once somebody goes from residential to multifamily, they stick with it because they think it’s great. Do you see a lot of people investing in notes, and then later on veering in another direction?

Jay Tenenbaum: Yes, and I think for a variety of reasons. For example, when I first started – again, where do I find my first deal, or a deal, was a challenge to me. So when I first got exposed to notes, I looked at it initially as, “Okay, now I have a source where I can buy.” So now what I’m buying, let’s say I’ve finished foreclosure fix and flipping, now I’ve figured out how to buy notes as an acquisition strategy. Now, five minutes into it, I realized that, “Wait a second, what is my core strength?” Well, as a debt collection attorney, we could have turned the lights off and gone off to the Bahamas for a month, and we probably would still earn six figures-plus in revenue from wage garnishments and bank account levies and [unintelligible [00:14:19].03] payments and stuff like that.

So what did I do? I realized, “Wait a second, I’m able to do loan modifications with the borrowers and keep them in their homes. All I’m doing is replicating the cash flow that I was generating in my law practice.” But that’s just my investor ID. So I think for an investor who is not sustainable, I think you get caught up into whether in this as a business or as a hobby.

And second of all, like for example, in the beginning, when I was buying, my investor ID was “I’m a debt collection attorney.” I knew volume. I knew how to manage volume. In 2015, I bought 100 notes, 77 notes in 2016, because I knew volume. And so the grind of the volume was what I was used to. But I don’t know if necessarily if that’s the investor ID for everybody else. So I think the grind of saying, “I’m only buying one or two. It’ll only give me $1.95.” Hmm, what am I going to do? I think then you’ve got the exposure to someone else’s boot camp, and then I think the other part of it is, people just get the shiny object.

Ash Patel: How important was being a debt collection attorney to your success?

Jay Tenenbaum: The legal knowledge and background that I have, I use even innately, every single day; it’s invaluable to what I think is our success in our company. Because I can make chicken salad from chicken, whatever, because I’m resourceful enough to know the ins and outs of stuff. I know what I’m looking at; I’m knowing what to look at and diligence that most other non-legal investors probably don’t look at.

One of my points of diligence is I’m communicating with the foreclosure attorney that’s involved with the hedge fund we’re buying it from, and I’m getting an understanding of where they are and whether there’s any issues involved; because there’s so much flow out there… I don’t need to buy a note on a protracted litigation that’s going on, foreclosure that has been going on for five years. There’s plenty of other opportunities out there.

Ash Patel: Yeah. And, Jay, when the market is in turmoil, is that the best time to buy notes?

Jay Tenenbaum: Yes and no. When I first got in this business, I asked the proverbial question, how long is this gravy train going to last? I was told 3-4 years, right? Now 2021, I think anybody would say, probably another 3-5 years; a different 3-5 year landscape, potentially, right? But when the market turns, it should make what we buy now cheaper than what we’re buying it now.

Now, when I got involved in 2013, really note buying became prevalent in 2010-2011, and most banks had no idea what they had, no idea how to get rid of it, and my brethren used to call it the wild wild west. I got involved, and I think picking up anything around 50 cents on the dollar was pretty standard. And then around 2017, rookie investors overpaying, caused pricing to go up… It didn’t make any sense. We actually were buying the property off in that period of time. And then at the pandemic, we got involved in buying mortgage notes, because again, we were buying rental properties in 2019, and then getting about 1.5% rental income over capital. But with the pandemic causing the pricing of rental properties going crazy, we turned to notes, because notes were still providing the best-discounted value for us. And this continued with that; even though the properties appreciated, its continued.

The difference now, 2021 versus 2013, is I could look at a tape in 2013 and pretty much close my eyes, point my finger at whenever I wanted on that tape, I would get it at a good price. Now we’re going through more assets and evaluating the assets. And the assets—okay, let’s take a step back. Back in 2013, I could get probably any asset on that tape for the price I wanted. I may not want the asset that was probably in a warzone.

Now, assets are fine, and most of them these days all have equity, they’re good places, it’s all fine. But the pricing the sellers want may not fit our model. We go through much, much more assets that we’re looking for in a spreadsheet. For every 15 we looked at, probably only six make our model.

Ash Patel: And who is the seller? Is it a middleman, a broker? Because it’s not the bank, right?

Jay Tenenbaum: No. What happens is banks originate their loans, and either they sell them off five minutes after the originator is performing, or they sell them off with a default. They sell them off to Wall Street hedge funds who stroke 7-8 figure checks. And all they do is pack them up and sell them as commodity for $1.95 to hedge fund B; hedge fund B sells to hedge fund C, hedge fund C starts marketing it to guys like us. Some of them work them a little better, put them through foreclosure, and then sell them to recapitalize, they can buy more assets from the big boys, Freddie, Fannie, HUD, etc. So they’re recapitalizing, that’s why they’re selling it to us; or they just don’t really have the appetite to take them all if they get a retired portfolio of thousands and thousands of loans through that. So we’ve been pretty fortunate to establish relationships that are what we call forward flow. So we can pretty much go to them monthly and go, “Okay, what do you have this month?” Or, “What do you have next month?” And kind of continue to buy from them. And it’s a mutually beneficial relationship. They know they’ve got a buyer in us that closes on time and funds timely, and we know that we’ve got relationships that we can rely on to bring us deal flow.

Ash Patel: And, Jay, every note that you buy – is it a negotiation or is it a set price?

Jay Tenenbaum: Both. Sometimes we know it’s a set price and doesn’t fit our model. And sometimes out of 50 assets, the set price doesn’t work, so we may try to go back and renegotiate a little, or we just say, “Look, out of the 50, here’s the six that will work for us at your price.” It makes it easier. There’s a lot of negotiation that goes on with other sellers at times. Right now we’re working with one seller, and we’ve probably got 30 or 40 assets we bid on and we just can’t get a price that makes sense, either individually or as a pool. It’s kind of frustrating, but we’re hoping that will end soon. The pricing is just too high. It just doesn’t work.

Ash Patel: So is it like used car sales, where each person wants the best deal, a lot of back forth?

Jay Tenenbaum: Not really that — the larger hedge funds, everything’s done by analytics these days, right? It’s not me. I’m not wired to be the analytical guy on the team. I’m the capital raiser, the loss mitigation guy. But my partner is the analytical guy in his team, right? So they’ve got their model, the hedge fund’s got their model, saying “Look, we’re going to sell it to you at this price, because that’s what works in our model,” based upon their returns and [unintelligible [00:20:16].05] etc. But really, at the end of the day it’s pretty much based on what returns you’re capable of providing to your investors. So they’re going to sell it at a price, they’re going to get the necessary return on investment or return on their capital that works for them. We’ve got to buy it at a spot that’s attractive enough for our investors.

Ash Patel: And, Jay, speaking of loss mitigation, what’s an example of a deal where you lost money? And what was your lesson learned from that?

Jay Tenenbaum: Early on, I think that there were probably a couple deals where we lost money because my investor didn’t want to either put more money in to flip it, he wanted to wholesale it. He kind of put my hand tied behind my back and said, “You need to dispose of it. Here is a fire sale”, and we lost money.” And that’s what he wanted to do.

Recently, we lost a little bit of money on a note in New Orleans. It’s kind of an interesting story. The story was, we bought it last summer. So we’ve had it a little over a year. And we knew going in that the payoff amount was not that high, and there was a possibility – and we looked at it over a year ago – that we could get paid off at auction and make a little bit of money. But the plan was we wouldn’t get paid off at auction, we take it back, and there’s a lot next door, we’re going to pick it up, build on both lots and do really well.

Well, since it didn’t go at auction for a year almost, and the auction market changed so much, we got paid off. And after New Orleans with all their voodoo, after everybody got their hand in the pie, the shares fees, they take a percentage of the payoff, whatever – so we ended up losing a little bit of money.

Lessons learned was it really couldn’t be avoided. We don’t analyze our deals on speculation that the market’s going to go up. But a year ago, we had no idea of just how hot the foreclosure market was. Now, the moral of the story is we approached our investors and said, “Look, we’ve got another deal that is a fix and flip; a little more — just a straight property fix and flip. We want to roll over that loss into it. And you make better return than you would have made even if we would have got this one back and rehabbed ourselves.” So that’s how we resourcefully dealt with it.

Ash Patel: And when you buy notes, is it all cash, or do banks finance on that?

Jay Tenenbaum: Very good question. Traditionally, no banks will finance mortgage notes; they don’t know how to securitize it.

Ash Patel: Especially the underperforming ones.

Jay Tenenbaum: Correct. So I’ve been raising private capitals at the start of my career. Now, it just so happens this one seller I was referring, that we’ve got this logjam with 30-40 bids – they are providing assets; their hedge fund is funding their own deals, about 70% of the purchase. The problem is, it’s attractive to us, we just can’t get pricing. And not that the debt service is really going to move the needle a whole lot on the evaluation, but it is there.

So as we’ve evolved as a company, we’ve raised private capital to buy the note. Now, if we take it back at auction, it now becomes a property, we’ve got a pre-approved credit facility that we bring in, replace 70% to 90% of our investors’ capital, and then it also includes traditional — not hard money; the rates are [unintelligible [00:23:11].19] 80% to 90% but 70% to 90% of the acquisition, 100% of the rehab.

So now my investors have gotten some certainty of saying, “My cash is in.” In the beginning, their cash would be in if we liquidated the asset; if it was low mod, they were getting low mod payments until we sold the loan. Now, it’s a fix and flip, they don’t necessarily have to wait till we fix it and flip it and put more money into it. They’re getting an initial capital investment on the acquisition back, and the rehab’s being funded by the loan. So they’re either cash in the deal for about six months on average… So for those of you who are analytical experts, the XIRR, which takes into consideration not the cash-on-cash return, but the time, a specific time your money is out in stages – the returns are substantially greater under the XIRR, because you’re getting most of your money back in about six months off of your investment.

Break: [23:56] to [25:59]

Ash Patel: Jay, does an investor put money into a fund, or is it per deal?

Jay Tenenbaum: Right now we’re per deal. And that’s where we’ve evolved from one on one investments, especially for the lower price points; if we just buy something for 50 grand, we raise 50 grand and we’re just working with one investor. Now that we’re buying the higher value assets, we’re syndicating those, bringing multiple investors in a member-managed limited liability company, and that’s been working out fantastic. We’re now putting together our 20th since the start of the year.

Ash Patel: It’s hard enough to raise money for multifamily syndications… But you’ve got an even more difficult task, because you have to educate your investors on what note investing is. How do you overcome that?

Jay Tenenbaum: Very good question. I’ll answer the question in this respect. As I said before, I was a debt collection attorney. I had no real estate experience other than living and owning my own homes. I had no capital raising experience whatsoever. And using my debt collection background, I kind of accidentally figured out a process of how to capital raise. What I mean by that is a traditional debt collection trial is your the debtor, you owe somebody — or they didn’t pay an open invoice. So you go to court and you say, “Your Honor, here’s my witness; they know the books and records of the company. Here’s the open invoice established in the normal course of business.” “Did you get paid?” “No.” “Judgment for you.” They let the documentation speak for itself, is my point.

So what I’ve done is we’ve put together similar sets of normal specifications, we’ve put together a perspective which shows the deal, how much do you need, what do you need it for, what house has been secured, what’s my returns? All that kind of fluffy stuff, right?

But what I do is, we have a conversation — let’s say one of your listeners on your podcast says, “I want to know more.” We have a really minimal conversation. I ask them what their goals and objectives are; you just got to get to know them a little bit. Then I show him other perspectives of deals that were already done. So I’m not asking you to make an investment decision with me right now. I want you to be comfortable in what we do. So we’ll have another conversation, and you’ll go through the already closed deal and go, “Okay, what about this? What about this?” And then you’ll say, “Next time you have an opportunity, I’m in.”

And when I started working with my business partner a couple years ago, he came to me one day and he says, “I know you’ve got a call with a potential investor coming up. I want to listen in on the call.” I’m like, “Okay, fine.” And at the end of the call, he was extremely disappointed. And if you want to know why, the why is because I’d already had a couple conversations with this guy, so the call that he listened in on was a conversation where it was the actual deal, and the conversation took approximately three minutes. He said, “I looked it over, I’m in.”

Ash Patel: And what was the disappointment?

Jay Tenenbaum: Like, part of the disappointment, there wasn’t any dialog.

Ash Patel: Ah, so he didn’t learn anything?

Jay Tenenbaum: Yeah, because, “I read the proposal, I mean in.” And it took less than three minutes.

Ash Patel: Do you run into investors that are just confused and don’t understand how this all works?

Jay Tenenbaum: Yes. And like you said, I tried to simplify it, because I’m not going to be able to teach them note investing in five minutes; their head would explode, right? You slow it down, and like you said, you let a lot of the documentation speak for itself. Our model is basically it’s — you’re coming in on the 10th hole of the golf course; I’ve already found the asset, I have already done the diligence, here’s what we believe it’s going to do. So you’re making an investment decision. And we’re going to work together and you’re going to make decisions with us on every disposition that goes on during the course of this.

And once you get your feet wet on that, then if you want to re-invest with us, then we’ll bring you in on the diligence side, so you learn that piece separate. So you don’t try to throw it all to them all at once. You say, “Look, we’ve already done the heavy lifting, just learn it.” So basically, what we’re doing is showing our investors what we do, how we do it, why we do it, when we do it. And that’s how they really get up to speed on what’s going on.

When buying something at such a discount, the risks are minimized, because we’ve got such spread in what you’re doing. And again, with syndications and the credit facility, what’s the risk? You’re getting your money back regardless, either you’re getting paid off at auction, or you’re getting money back at the credit facility, one way or the other, within about six months, regardless of ultimate disposition. So we’ve kind of eliminated the risks; we’ve kind of solved the problems before they arise, eliminating the risk continuously.

Ash Patel: And Jay, is there a typical investment size per investor, a dollar amount?

Jay Tenenbaum: No, because it all depends on the size of the deal. We have no investment minimums. But I’ll tell you, with the syndications we try to keep the members of the LLC manageable, say 2, 3, 4 or 5 at most maybe. So depending on the size of the deal, I’d say typically an investment’s around 50 grand; sometimes it can come in for a little less when we’re looking to put together the last piece of the thing [unintelligible [00:30:34].23] add a little more, but it all depends.

Ash Patel: And do they have to be accredited investors?

Jay Tenenbaum: Not to do the member-managed LLC syndication that we do. No. But we’re in the process of raising a true fund and they would have to be accredited for that. Yes.

Ash Patel: And then you are turning these typically inside of one year. So there’s no capital gains, it’s just ordinary income. Are there any ways to offset taxes on the gains?

Jay Tenenbaum: That we leave to the investors and their tax professional. I’m not a tax professional and I’m not giving any my investors any tax advice on that.

Ash Patel: Yeah. But typically, if they’re getting their money returned to them in under a year, it’s ordinary income, versus capital gains.

Jay Tenenbaum: Right. And it’s an interesting comment for doing low mods and getting monthly payments.

Ash Patel: Yeah. Jay, what is your best real estate investing advice ever?

Jay Tenenbaum: Two things – shoot, ready, aim; and partner up with somebody who knows what they’re doing, so they can lead you through it, so you’re not the lone wolf. Lone wolves don’t succeed in this business very often.

Ash Patel:  Jay, are you ready for the Best Ever lightning round?

Jay Tenenbaum: Absolutely.

Ash Patel: Let’s do it. Jay, what’s the best ever book you recently read?

Jay Tenenbaum: Three Feet from Gold.

Ash Patel: What was your big takeaway from that?

Jay Tenenbaum: Just the perseverance, because basically anything you do, you go from the outhouse, to the penthouse, to the outhouse and back again, depending on what you did yesterday, right? So just to be able to persevere and know the other day could be a great day or it could be a bad day, but it all works out.

Ash Patel: Jay, what’s the best ever way you like to give back?

Jay Tenenbaum: I was shown the way, so a huge why in my life is giving back and showing other investors. When I moved to Arizona in 2017, I got into the community that I referred to, because I wanted community—I’d just moved Arizona. I wanted a community, I knew I could bring deal flow into the community to solve the challenge of where their members could find their first deal… And being a leader in the community and managing the masterminds and just supporting everybody’s success… We do a virtual property tour the second Saturday of every month, and it warms my heart, because what we do on these property tours is showcase other members of our community inside our mastermind and what they’ve done. And like a proud parent, you’re like – you were able to facilitate their success. They learn from you, and the gratitude, the appreciation makes my heart warm all the time.

Ash Patel: Yeah, that is fantastic. Jay, how can the Best Ever listeners reach out to you?

Jay Tenenbaum: Our website is I’ll even give you my email, it’s And even my phone number. Yes, I will answer my phone, 714-458-6317.

Ash Patel: Awesome, Jay. Thank you so much for sharing your time with us today. You’ve given us a great glimpse into the ins and outs of notes investing, some of the pitfalls to avoid, and just overall great advice towards investing in general. So thank you very much for that.

Jay Tenenbaum: You’re welcome.

Ash Patel: Best Ever listeners, thank you for joining us, and have a best ever day.

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