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3 years ago

Buying and Selling Owner Financed Notes with Kristin Gerst

Episode 358

Scott: We have a special guest, somebody who is rocking the note industry doing a great job of closing deals and also sharing what they’re doing as well. I’m honored that this person who looked like they had an amazing vacation would come back to the States and be on the show with us. Give a warm welcome to the woman, the myth, the legend, the amazing note investor, Miss Kristin Adam Gerst.

Kristin: Thanks for having me on.

Scott: You are the rock star behind Capricorn Mortgage Investments. For those that don’t know who you are, share with my extended note family, Note Nation, what you do and how you’re awesome at what you’re doing.

Kristin: At Capricorn Mortgage Investments, I am purely looking for performing mortgage notes, owner-financed and high-interest rates. I’m looking in that 9% to 11% interest rate range. If it’s got a good payment history, even if it’s an older note like ten years old, I want it. I want the cashflow off of it. I’m paying in the 90s for it consistently. I don’t have a problem doing that. My margins are super small but I do a lot of volumes. I did $15.8 million. I’m missing that mark, unfortunately.

Scott: That’s the good thing is that you’re buying performing notes. Are you buying just in Texas or are you buying in other areas as well?

Kristin: Nationwide. While I was in Italy, I put in 55 notes all totaled about $3.1 million. That was completely nationwide, no notes in Texas. I prefer Texas because I know the market. I know how it works. I’m comfortable here. For everybody who does notes, you’ve got judicial and non-judicial states. Until I buy in those states, I’m not going to know specifically how much I can pay for those things and it’s less. My guys who are buying for me, I’ll buy one-offs from individual investors. What I do is I package them into large portfolios and then I sell them to banks, hedge funds, those types of buyers. They won’t talk to me unless I get a lot of paper there. They only want performers. It’s got to be stuff that I can stack to make bank paper. Underwriting, I help that along if we need to redo some stuff. I go through word by word in almost every document looking for errors and making sure that the product that I’m giving to my banks is top notch.

Scott: How did you get into what you’re doing? What’s your background?

Kristin: My original background was I started buying low-income properties. When the market crashed in ‘08, I had 61 doors all rented Section 8 that I was self-managing and I hated it. I started owner financing all of these. I just learned how to do it. “I don’t have anything to owner finance this month,” then I started talking to other investors and saying, “I’m doing this. Do you want me to do it for you?” I started originating notes for other investors as well and then I started teaching realtors how to get their clients to do it. That was all back in the heyday of creating these, taking things subject to and wrapping them back in ‘08, ‘09, 2010.

Starting Capricorn, everybody knows that I also do hard money with Bay Mountain Capital. Dean Lontos over there said, “If you could show me that you could sell these things and show me that there’s a market for these notes, we’ll do a fund and we’ll lend on that.” I said, “There’s got to be a market for this stuff.” I left Bay Mountain in 2015 and I started Capricorn because I had all these wraps and I wanted to get them completely paid off and pay off these underlying liens