Discover the real story behind rental cash flow in 2025 with note investing pioneer Eddie Speed. With over 40 years in the business and more than 50,000 notes purchased, Eddie explains why rental properties are underperforming—and how switching to discounted mortgage notes can significantly increase your returns.
Rental Cash Flow:
•Why traditional rental cash flow is declining in 2025
•How seller financing can dramatically outperform renting
•How to structure and sell high-yield mortgage notes
•What non-QM loans are and why they’re key to this strategy
•Real math comparing rental vs. note cash flow in today’s market
Eddie is the founder of NoteSchool, the leading education platform for note investing, and Colonial Funding Group, a private note-buying firm. Together, they help investors learn and implement proven strategies for building long-term wealth through mortgage notes.
Get Eddie’s free training and bonus resources here:
https://NoteSchool.com/PassiveCF
Whether you’re a landlord, real estate syndicator, or just exploring passive income strategies, this episode is packed with actionable insights.
#RealEstateInvesting #NoteInvesting #PassiveIncome #EddieSpeed #RentalMarket2025 #MortgageNotes #SellerFinancing #CreativeFinance #CashFlowStrategy
00:00 – Introduction to Notes & Capitalization Rates
02:22 – Eddie Speed’s Entry into the Note Business
04:46 – Building a Note Manufacturing System
07:27 – Why Be the Bank? The Rental vs. Note Profit Disparity
11:26 – Understanding Non-Qualified Mortgages (Non-QM)
14:47 – How to Sell Your Seller-Financed Note
18:14 – Notes as a Diversification Strategy
22:00 – The Process of Creating and Selling Notes
26:19 – High Interest Rates and Market Cycles in Notes
Enhance your real estate investing knowledge !
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Transcript:
00:00:00:04 – 00:00:31:23
Eddie Speed
The same house in Philly or Dallas or whatever market you’re in. In 2018, you could buy at about an eight cap, 8% capitalization rate, right? No words you made if you invest it all cash 2018. Then all of a sudden today it’s worth $200,000. And the reason that it is, is because a disparity of rent left and expense left or its expenses way outpaced the rent increases.
00:00:32:00 – 00:00:53:03
Aaron Fragnito
All right, ladies and gentlemen, welcome back to the Passive Cash Flow podcast on your host, Aaron Frag. Neato. And we have an interesting guest today. I wanted to have him on the, show here because he is a notes expert. And I am not. I’ve actually, well, we’ve bought notes before. We really don’t specialize in that.
00:00:53:03 – 00:01:01:02
Aaron Fragnito
But I know people are making a lot of money buying, trading, selling notes. And his name is Eddie Speed. How are we doing today, Eddie?
00:01:01:08 – 00:01:03:07
Eddie Speed
I’m good. How are you?
00:01:03:09 – 00:01:23:11
Aaron Fragnito
I’m good, my friend. I’m good. I was impressed with your bio. Over 50,000 notes you’ve purchased and traded. That’s incredible. You know, we’ve bought notes a few times here and there. We bought one at auction a little while ago on a condo in Philly. And, I took, like, title the asset. And then we had to clear out a few other notes.
00:01:23:11 – 00:01:30:19
Aaron Fragnito
But you, man, I don’t fully understand the note business, and I just want to have you on the show here to drop some knowledge on us. How’s that sound?
00:01:30:24 – 00:01:33:07
Eddie Speed
I’d love it. Yes, sir. Thank you.
00:01:33:09 – 00:01:53:12
Aaron Fragnito
Absolutely, absolutely. By the way, a quick, quick, piece here to our listeners and our viewers, if you’re enjoying our content, please share it and like and subscribe. We’re always, looking at reach more people here with more content. So we’re going to talk about how you can buy notes, how you can invest in notes, how you make profits, investing essentially in promissory notes.
00:01:53:12 – 00:02:09:24
Aaron Fragnito
So these are, you know, this is the money you owe to the bank, you know, or the lender. And when you’re buying a property, if you own a home, you signed a note, probably to buy that property. You borrowed money from a bank. And, you know, maybe you’re paying 3% interest, maybe you’re paying 6 or 7% interest, but.
00:02:09:24 – 00:02:22:07
Aaron Fragnito
So how do people really make money in this business? Eddie, let’s, maybe start from the beginning and just give us a quick summary of how you got started in this business, and we’ll kind of go into a situation of how you buy and make a profit on a note, you know.
00:02:22:09 – 00:02:44:17
Eddie Speed
Well, I’m today I’m an old guy in the business, right? I’m, 65. I started when I was 20 years old. So I’ve been doing it a very long time. I started when seller finance note buying really was a really big thing. And that was because, you know, inflation, right. It that’s really in the 1980s.
00:02:44:17 – 00:03:03:20
Eddie Speed
That’s what drove this incredible mountain of seller financing, which is really what formed our industry. Other than that there was just people that bought a note every once in a while, but they there really wasn’t an industry. And so that really is I got on the ground floor of that just accidentally. It wasn’t like I was a smart guy.
00:03:03:21 – 00:03:19:09
Eddie Speed
I just got I stumbled into the idea and got coached by a couple of guys that were industry pioneers. So I got very lucky that, you know, my junior high football coach was Michael Jordan, so to speak. Right.
00:03:19:11 – 00:03:19:14
Aaron Fragnito
Okay.
00:03:19:17 – 00:03:43:12
Eddie Speed
And, so that was luck. And, I moved to Dallas Fort Worth in 1982. And we, my wife and I married, and we started this journey of buying notes. And, several things happened. A guy that I met in the later 80s, probably 87 or 88, was a guy named Candy Angelo. And I bought some notes from him.
00:03:43:14 – 00:04:07:01
Eddie Speed
Candy Angelo found at home investors. Right. And so then I developed the note system and it’s very infant stages of home Vestas and did that for about ten years for them. And that’s how I bought so many notes like you asked me before we started. You’re like 50,000 notes. Like really like you’re not sure if that’s really true or not.
00:04:07:03 – 00:04:28:20
Eddie Speed
The answer is I developed a note manufacturing system for real estate investors. That’s how I did so many notes because you create their notes to a formula, you create notes to a system and they’re, they’re, they’re, they’re all they look the same and they’re done in a way. That is what the banks and the institutions and the hedge funds want.
00:04:28:22 – 00:04:55:23
Eddie Speed
You don’t write them on long contracts. That’s not cute right? It’s not good in the secondary market. So that’s the things. And so here I was after I taught all this to a lot of people that, you know, had done a lot of volume in notes. And then all of a sudden, you know, here I am. And around 2000 now, 25 years ago, you know, I said, you know, what I really need to do is have a school, because if you could teach people how to do this, then it would really help them.
00:04:55:23 – 00:05:21:23
Eddie Speed
And it would also create a system where people could then sell notes to us or whatever. And so that’s kind of how I got down the line. I’d been doing the business literally for 20 years before I formed a school, but that’s been the that’s been the intention of the school. And there’s been different market eras, obviously. So, you know, we’ve lived through we’ve lived the, you know, the early 2000s and people kind of losing their minds.
00:05:21:23 – 00:05:42:01
Eddie Speed
And anybody can get a loan, you know, and everybody needs to buy real estate to then all of a sudden we went to 2008 and oh my God, everybody’s, you know, left town and you know, that bank debacle. And then boom, we built back up and rental properties were half price. And you know, then all of a sudden we went through that.
00:05:42:03 – 00:06:02:23
Eddie Speed
Then all of a sudden we went through the virus and everybody lost their minds again. And they started paying too much for property. This seems like a cycle. And so at this point in my career I can see segments in the cycle much quicker and easier than I could when it was the first time I’d ever seen the forest fire.
00:06:03:00 – 00:06:28:09
Eddie Speed
Now I’m not saying they’re not different at time to time, but there are patterns that are the same. So here’s a couple of things I figured out at the moment. People aren’t making they’re making money out of rent houses, right. The same house in Philly or Dallas or whatever market you’re in in 2018. You could buy at about a eight cap, 8% capitalization rate.
00:06:28:09 – 00:06:56:11
Eddie Speed
Right now. Where do you mate if you invest it all cash? And we’re using some really easy math on this would be too cheap of a house. But if you invested $100,000 in the house in in in 19 in 2018, excuse me 2018. Then all of a sudden today, it’s worth $200,000. Yeah, right. It actually made more profit in 2018 than is making today.
00:06:56:13 – 00:07:27:07
Eddie Speed
And the reason that it is, is because a disparity of rent left and expense left or its expenses way outpaced the rent increases. Call it two and a half times more. And so that is what caused the situation. And the result of that is that extra $100,000 in equity that your house gained is is an equity that you’re not getting paid for.
00:07:27:09 – 00:07:50:23
Eddie Speed
Call it trying to eat an equity sandwich okay. Right. So so that’s worth that’s just a market condition Eddie didn’t make that. Aaron didn’t make that. That’s just what the market is. Sure. So I come in and I’m in several real estate masterminds that probably most of the top 500 house buyers are in one of those masterminds.
00:07:51:00 – 00:08:09:24
Eddie Speed
So if you go in those masterminds, there’s Eddie’s be the note guy, like, oh, dude, been doing it forever, has it? Most people had the same reaction. You did 50,000 notes. How in the world, blah blah blah, right? And there’s market areas where I don’t really offer that much to masterminds because they’re just doing something else right now.
00:08:09:24 – 00:08:37:15
Eddie Speed
All of a sudden I walk in and you have a real estate portfolio and you’re a landlord. And on a 250,000 or a house that rents for $1,800 month, you’re netting 900 a month before that service. So your 250,000 for collateral is making you $10,000 a year. Okay. Yeah. You take $250,000 and you go buy first mortgages, own property.
00:08:37:16 – 00:08:52:09
Eddie Speed
You can make, you know, $30,000 a year, $25,000 a year on the same, on the same investment dollars. Just investing in a different asset.
00:08:52:11 – 00:08:54:11
Aaron Fragnito
Okay. And that’s interesting. You’re saying you can.
00:08:54:11 – 00:09:11:00
Eddie Speed
Sell or finance your property instead of renting same property. Now all of a sudden I’m going to I’m going to get rid of it as a rental, but I’m going to sell it now. I’m going to be the bank. You know, there is a reason that the tallest building in most town is the bank.
00:09:11:02 – 00:09:13:03
Aaron Fragnito
What about the church?
00:09:13:05 – 00:09:17:22
Eddie Speed
Well, it’s usually not taller than that multistory bank. And I’m not taking anything away from the church.
00:09:17:22 – 00:09:20:20
Aaron Fragnito
Right. Because that’s on the town, right? Depends on the town. It. Yeah.
00:09:20:22 – 00:09:44:19
Eddie Speed
It, let’s let’s take a big city. Right. Okay. So the idea, the idea is really this. Yeah, yeah, yeah. Is, is that none of us did anything right or wrong. But we were programed since after 2008. That the way to earn long term wealth in real estate was rentals. And that’s what you did and that’s how you do it.
00:09:44:19 – 00:10:09:01
Eddie Speed
And that’s how I tell these stories and people. That’s how I did it. The answer is I’ve now been I now have four and a half decades in the business, and I could see that was a good strategy because real estate was on sale. Now we’re in a market era where the house that you buy is not going to produce you even close to the income it should be producing.
00:10:09:03 – 00:10:36:06
Eddie Speed
So it starts triggering, like what should I do. Is that to say wait a minute. Has somebody move my cheese. And I believe that’s just the market era that we’re in. So if you owner financed an identical house right. Owner finance it versus renting it. That house. If you owner financed it with a good downpayment of about 15% down is a payment of about $2,000 a month.
00:10:36:08 – 00:11:02:11
Eddie Speed
Now remember you took some of the money off the table because you got like a 15% down payment. And if you took the capital, you still have in it versus the capital. You have an A rim house. You’re going to find out that the math is pretty true at 2.5 to 3 x two and a half times to three x, the return to be the bank versus the landlord.
00:11:02:11 – 00:11:26:18
Eddie Speed
And it goes back to this. Okay, well you say, well, what are the terms of these loans, Eddie? Tell me what that is. 40% in the residential housing market, 40% of loan originations are non-qualified mortgages. They’re not Fannie Freddie, they’re not FHA, VA. They’re noncompliant. I’m just showing you how to create non QM loans. And those rates are higher.
00:11:26:20 – 00:11:52:08
Aaron Fragnito
Yeah. Well okay. Let me let me jump in here for sex. So I’m just thinking about the real estate I own. I mean the cash flow is not where we make the money. We make the money through refinancing the asset over time. And if the value of it doubled over eight years, which a lot of it did, I mean, we’re laughing all the way to the bank, you know, as we refinance and harvest that equity grow through a refinance, it’s tax free distribution, right?
00:11:52:08 – 00:11:58:02
Aaron Fragnito
To my bank account. So when you close, what was that?
00:11:58:04 – 00:12:00:12
Eddie Speed
As long as it cash flows, for sure.
00:12:00:12 – 00:12:21:12
Aaron Fragnito
Yeah. Well, we buy, you know, multifamily real estate, the rents have gone up significantly on these assets. So the debt service coverage ratios is strong. And, you know, you wait five, six years. You have some equity growth. Your rents go up significantly. Say 5% a year. You know rent growth grows by 25%. Property value grows by 25.
00:12:21:12 – 00:12:42:22
Aaron Fragnito
You know, 35%. You harvest that equity growth over time, you know, so that’s generally how we make money on these properties. But let’s say, you know, I’m trying to take a back seat and not be a landlord, right? Because there is a value to holding a note and truly having a true passive income. Right. Because I have a management company, I know how much work it is to be a landlord and, have a management staff that manages these assets.
00:12:42:22 – 00:12:56:23
Aaron Fragnito
And then it’s a it’s a lot of work. So I do like the idea of being the bank and holding the note. But you have to own the property outright or have a very small loan amount on it. Right. Like if I have a most people leverage.
00:12:56:23 – 00:13:19:24
Eddie Speed
There, that’s where that’s actually where I come in. Right? I bought 50,000 notes. So if I get you to manufacture the right note. And I get then there’s a lot of ways I can show you how to recapitalize and get enough money to pay off the underlying debt, but yet keep cash flows out of it. So you’re, you’re do it.
00:13:19:24 – 00:13:44:19
Eddie Speed
Most people have rent houses. They do it because they want they wanted to earn cash flow. They wanted to earn wealth. They just the economics became very different. And so that’s the point of me having a school. That’s the point of me having kind of a directive of, let me help you manufacture your notes so that then they’re creating notes that will fit the institutional market.
00:13:44:21 – 00:14:10:12
Eddie Speed
So here’s some fairly easy math. I might come in and buy 70% of your payment, not 100% of your payment. I’m going to buy 70% of your payment. You create a non QM loan at a non QM loan rate. I might fund 80% of the amount of your principal to buy 70% of your payment.
00:14:10:14 – 00:14:11:12
Aaron Fragnito
Okay.
00:14:11:14 – 00:14:36:02
Eddie Speed
So now now you start to realize like wait a minute. Eddie’s kind of put me in a position where I could act like a mortgage bank. Like. And it’s because we created paper that fit, you know, a defined market and not not Fannie, Freddie, but it’s still a defined market. And so that’s where I come in and help people do it.
00:14:36:07 – 00:14:47:14
Eddie Speed
So yeah. Then you can have underlying debt and you can pay it off and do those kind of things. And you’ll be quite surprised at how some of this stuff models okay.
00:14:47:15 – 00:15:04:02
Aaron Fragnito
So I own a property and just for numbers like, you know, I it’s worth $100,000 and, I bring in a buyer and let’s say I owe on the mortgage $70,000. Okay. Yeah. I bring in a buyer.
00:15:04:04 – 00:15:27:02
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00:15:31:17 – 00:15:50:05
Aaron Fragnito
He’s going he’s willing to put down 20% and he’s going to sign a note for $80,000. Before I close, before I sell the asset to that buyer, I’m lining up a, a buyer for that note, where it’s essentially. Where’s me?
00:15:50:07 – 00:15:50:24
Eddie Speed
That’s me.
00:15:50:24 – 00:16:23:23
Aaron Fragnito
Okay, so I line up you to buy the note. The notes worth $80,000. It’s going to make, you know, whatever $1,000 a month in interest. Okay. And you say, I’ll pay you $80,000 for that. No, but I and I want $700 of that thousand every month. Okay, so now I say the no for 80,000. That covers my mortgage amount of, 70,000 or so.
00:16:24:03 – 00:16:45:16
Aaron Fragnito
So I pocket a little bit on the sale, the note, and then every single month I’m pocketing a little override, about $300 on that note, payment that buyer, the property now closes on the asset kind of simultaneous closing selling the note same day the buyer’s buying the property. So the money comes in to pay off the original lender on my property.
00:16:45:18 – 00:17:01:04
Aaron Fragnito
And, now I’m no longer the landlord. I don’t have to worry about tenants toilets or trash and, if the buyer doesn’t pay me, I could foreclose and take back the asset because I’m going to first lien position. Well, actually, you are. I’m just.
00:17:01:06 – 00:17:25:23
Eddie Speed
Well, you’re. That doesn’t mean you can’t buy up my interest. You can buy up my interest in foreclose. We’re going to we’re going to create an underwriting box that probably is going to say that you’re looking at the, at a default rate that is not terribly high. Not very high at all. Like, you know, if you have Fannie Freddie’s default rate, which is 2 to 3%, we want to be right above that number.
00:17:26:00 – 00:17:49:17
Eddie Speed
Right? We don’t want to be way up here in your default rates, 8 or 10%. And so the way you do that, like every other aspect of underwriting, which you’re a professional landlord and you know, this is you just tweak the underwriting to say this is my target, acceptable customer. And so it’s you know, in most cases it’s going to be the case.
00:17:49:19 – 00:18:14:04
Eddie Speed
And here’s the thing about it, Aaron, let’s be let’s be honest about it. Like, you know, the multifamily thing has had quite a cycle that’s been forming. Right. And it doesn’t mean that it’s bad, but it means that it’s not the rent. It’s not the, the big, you know, hockey stick straight up like it has been. And so for some people out there just saying what about an alternative?
00:18:14:04 – 00:18:37:23
Eddie Speed
I’m not trying to take anybody out of what they do every day. But like if you did an alternative right now, if you did an alternative. Notes would be a very good alternative to what you’re currently doing. Look you’ve already figured out how to raise money. Right. And so there’s a way to go structure and point your asset your your capital raising machine.
00:18:38:02 – 00:19:03:12
Eddie Speed
But just add a different target. Right. So that’s for the syndicator guy. Like syndicator guy. Right. Like I already know that story. I mean I’ve got a ton of people in notes goal that came from the syndication world. Sure. And once again they’re just, they’re they, they find something that’s an alternative that gives them a cash flow model that might be, you know, different than what they have.
00:19:03:14 – 00:19:27:21
Eddie Speed
If you’re a rent property guy. And you have rentals, it’s pretty simple like you now you’re trying to say like okay, if I have this house, what’s the most profitable thing you can do right now. Most profitable thing you can do. And by the way I mean for whatever it is like, let’s just say the analogy that I gave you a while ago, 250,000 or a house, maybe that’s too cheap in your market.
00:19:27:21 – 00:20:05:09
Eddie Speed
Maybe that’s perfect price range. But we’re talking about a decent house. We’re not talking about a piece of junk is not in the ghetto. But it doesn’t have to be an executive white collar house either, right? It can be. It’s okay to be working class and, and so this house nets way more money per year. The example that I gave you on 250,000, a house with a 15% down payment, not 20, but with a 15% in the first year you get $50,000 more money, doing a note model than you will renting in five years.
00:20:05:09 – 00:20:36:02
Eddie Speed
You get $100,000 more. Right. So it’s kind of like what you’re saying, like you’re getting more money. So it’s a way to have access. And as you said you refine do whatever. Now once again it all is all relative to rates at the moment. I’m not saying this is always true because it’s certainly when what I’m saying may not have been true in 2016 or 18, but it is today because rent houses are making way less profit.
00:20:36:04 – 00:20:53:16
Eddie Speed
Right. But what I will say to you is you go stand up a burr model on a house at the moment I’m going to say no, it’s probably going to kick its butt. So I numbers same math either way. It’s just more profitable to note it than it is to do it as a burr.
00:20:53:18 – 00:21:15:17
Aaron Fragnito
Right, right. I could see that. I mean generally single family homes mean anything less than like 50 units. For us it’s hard to cash flow on 40 units. Maybe anything less than that. You know, generally it’s about a five year investment, right? We’re refinancing by year 3 or 4. We’re selling by year five. There is cash flow along the way, you know, but that’s for apartment buildings.
00:21:15:17 – 00:21:37:07
Aaron Fragnito
You know, farm buildings are nice right now because rent has really grown. And, with interest rates high, apartment buildings have come down in cost. So that’s a good mark. But if you’re talking about single family homes or duplexes. Yeah. I mean, there’s not a lot of money to be made in them right now with where interest rates are at, where prices are at, you know, by the way, in North Jersey here, 250 grand isn’t getting much maybe.
00:21:37:07 – 00:21:39:06
Eddie Speed
No, no no I’m just yeah.
00:21:39:08 – 00:21:40:10
Aaron Fragnito
Yeah. I’m just like.
00:21:40:10 – 00:21:44:13
Eddie Speed
I’m not trying to do it to any, any local market standard, you know. Yeah.
00:21:44:15 – 00:22:00:13
Aaron Fragnito
You know but I understand what you’re saying. That’s interesting. And so what you do is, you teach people exactly how to do this, how to paper up the notes, and then you even offer to buy the properly done notes. Is that right?
00:22:00:15 – 00:22:05:17
Eddie Speed
So I teach people how to create notes or buy notes.
00:22:05:19 – 00:22:06:12
Aaron Fragnito
Okay.
00:22:06:14 – 00:22:31:07
Eddie Speed
Right. Either one. Like in your case, to be honest with you, if I’m tracking with your story, let’s just say, you know what? Eddie’s right. I’ve raised, I’ve raised, you know, all this capital, and I bought all these multifamily. What if I, like, decided to buy, own a note portfolio and use some of these leveraging techniques that Eddie’s talking about?
00:22:31:09 – 00:22:35:03
Eddie Speed
Leveraging techniques when you buy a multifamily, don’t you?
00:22:35:05 – 00:22:38:04
Aaron Fragnito
Yeah, sure. You leverage every right you can.
00:22:38:04 – 00:22:56:04
Eddie Speed
You can use some of these same leveraging techniques. And once again, you have people that come to you and say, look, I don’t want any brain damage. Just here’s my money. You you figure out what to do with it and stuff, and you say, well, look, I’m going to diversify and point my gun. Not at just multifamily at the moment.
00:22:56:04 – 00:23:23:09
Eddie Speed
I’m going to point my gun towards opportunities with notes, which I’ve had a lot of multifamily guys do. So there’s kind of like it depends on what seat somebody’s sitting in as to which advantage that they start pursuing. Yeah, right. I’m not probably not. Somebody comes to me with 100 rentals. The odds are not very high that I’m going to convert all of their 100 rentals to notes, but I will bet you almost anything that I can show them.
00:23:23:09 – 00:23:28:15
Eddie Speed
The math is very logical to say, convert half.
00:23:28:17 – 00:23:41:13
Aaron Fragnito
Interesting. So do you do that as a service. So like we own like about 30 properties or so. You know you look at the portfolio and you might say hey this one makes sense or this one doesn’t, you know.
00:23:41:19 – 00:24:04:10
Eddie Speed
We use it a hybrid between using the school because that way it keeps my mortgage company out of the education business. So we utilize the school versus we utilize that. We have a system that somebody follows. The biggest thing I do in seller financing is I give you the formula of how to do it, and vendors to help you do it right.
00:24:04:10 – 00:24:27:21
Eddie Speed
No words. You’re saying, I don’t have anybody in my office that knows how to do transaction coordination for a seller finance deal. I already know that, and neither does anybody else. I mean, for the most part, right? So I create a vendor system of somebody that oversees the transaction, where you end up being able to sell the note, because the note is created to the recipe that we’ve given.
00:24:27:23 – 00:24:37:21
Eddie Speed
If I give the recipe to somebody that’s not, you know, well intended but not as experienced, then all of a sudden it seems to somehow get off track a little bit.
00:24:37:23 – 00:25:02:18
Aaron Fragnito
Well it’s all about underwriting and finding the proper borrower, underwriting them properly, getting the notes structured so that you can essentially sell it. You already have a buyer lined up because you need to sell it as soon as it’s signed to pay off the, the lender. That’s right. The who’s who’s originally on title. Yeah. And so you’re really just creating a note that is, sellable and desirable.
00:25:02:20 – 00:25:24:22
Aaron Fragnito
And then kind of creating an override on that, that note, yeah, it’s interesting. And as the note gets paid off, I guess that that’s the. So you collect, you know, what do you do, like 30 year amortization on these notes generally. Yeah. So collecting a paycheck for 30 years or they sell the property at some point and you get a lump sum payout.
00:25:24:24 – 00:25:25:09
Aaron Fragnito
Right.
00:25:25:09 – 00:25:48:12
Eddie Speed
And just like your industry math, you’re saying your normal refi has a five year target, right? So normally you look at a loan paying off in about eight years, right? Yeah. It’s not always the same because refinance there’s no refi at the moment. There were a mountain of refinance in 2022 right. Yeah. So it will always cycle the same.
00:25:48:14 – 00:25:53:07
Eddie Speed
But within a ten year cycle it’s likely going to cycle okay.
00:25:53:09 – 00:25:56:05
Aaron Fragnito
Do you do a prepayment penalty. So you make sure you’re at least you.
00:25:56:07 – 00:26:02:15
Eddie Speed
You’re you’re you’re you’re selling to consumers. And so you got to be really careful about like punishing them to pay off the line.
00:26:02:19 – 00:26:03:12
Aaron Fragnito
Right. Right.
00:26:03:15 – 00:26:14:10
Eddie Speed
But a you can put a like prepayment penalty in it. But it’s not like this isn’t a hard money loan. Like the rates are high. They’re higher than people think. They’re probably ten or north.
00:26:14:12 – 00:26:15:08
Aaron Fragnito
Oh okay. Wow.
00:26:15:09 – 00:26:18:01
Eddie Speed
But that’s what non-cash rates are right.
00:26:18:03 – 00:26:28:01
Aaron Fragnito
So these are for borrowers that couldn’t really get, a regular loan or like a.
00:26:28:03 – 00:26:43:19
Eddie Speed
40% of loan originations today on the Ramsey side, 40% of them are non QM loans. Underwriting is as big a problem in the loan origination business today as rates are.
00:26:43:21 – 00:26:49:20
Aaron Fragnito
Aren’t they just going to refinance rates drop next year. I mean you’re at 10%. You know, rates drop down to.
00:26:49:22 – 00:26:52:04
Eddie Speed
Not less underwriting changes. They’re not.
00:26:52:06 – 00:27:06:18
Aaron Fragnito
Yeah. Okay. It’s interesting. And if they do refinance a pay off the note I mean you get you really it’s it’s tough because most you’re the longer they pay the note the more money you earn like you want. You don’t want them to. You don’t want health, you know.
00:27:06:19 – 00:27:14:14
Eddie Speed
Right. Okay. I mean, the loan pays off. And you I’ve taught you now how to buy notes and you just go buy a note. Replace the income.
00:27:14:16 – 00:27:16:17
Aaron Fragnito
Okay. Okay. Right.
00:27:16:20 – 00:27:36:17
Eddie Speed
So people think I will. I never have any interest in bond notes. All I want to do is create notes on my own property. But the longer they stay around the cycle, they’re like, hey, wait a minute. You mean that if I got my income that paid off, now all of a sudden I can just turn right around and redeploy the money into a next note?
00:27:36:17 – 00:27:39:03
Eddie Speed
And I’m like, yeah.
00:27:39:05 – 00:27:54:21
Aaron Fragnito
Okay. Okay. Interesting. Well I gotta say Eddie you got an interesting business model there. You know I’ve learned a lot from this podcast and shoot I’m about ready to sign up for the notes school over here. And my note was, you know, well.
00:27:54:23 – 00:28:15:03
Eddie Speed
I will tell you that there’s a probably a lot of people that, you know, from, you know, that space that, you know, have done a lot of that. And really, it’s just because of market cycles, right? Every dog has his day. But we’re in a pretty good there’s a pretty good runway in front of us for notes right now.
00:28:15:05 – 00:28:16:02
Eddie Speed
00:28:16:06 – 00:28:28:05
Aaron Fragnito
Yeah. Well because rates are so high you know. But so you got to play the market there. Yeah. Well and what do you do when rates are super low. And you’re locked in like a low rate note that no one wants to buy.
00:28:28:08 – 00:28:55:07
Eddie Speed
Well, you know, I mean, I don’t create low rate nets. I mean, you know, when rates were 3% I wasn’t creating 5% seller finance notes. Right. But once again, you know, I mean, you know, it’s, it’s cycles and you know, so the note buying business wasn’t great in 2022. But it got really better about 23.
00:28:55:09 – 00:29:25:12
Eddie Speed
Right. So understand that when, I’m in one of those businesses, when it’s when everything is really, really great, it’s not great for the distressed side of the business. Yeah. How when notes are needed is when there’s distress in the mortgage industry. Right. And and if you, but if you look at the cycles you know it’s almost 5050 as to whether everything is great or there’s, you know, there’s distress in the market.
00:29:25:14 – 00:29:34:06
Eddie Speed
I mean I’ll bet as you see some distress in this multifamily, I bet you’ve got, you’re, you’re licking your lips going, I can’t wait for the distress. Right.
00:29:34:07 – 00:29:48:07
Aaron Fragnito
Oh, everything’s on sale, my friend. Yeah. I’m out there buying, you know, so I’m that right now is a great time to buy properties for discounted prices in the commercial space. Not so much in the residential space, but in commercial for sure. Right.
00:29:48:09 – 00:30:15:22
Eddie Speed
So once again, it’s the same thing, right? You can make money on both sides of the market. And that’s what I do is make money on both sides of the market. We’ve got, you know, when they create this inventory of notes. Yeah. When they create a big surge of, like, seller financing, you’re going to pick off that pile for like, years, like you’re not going to not every loan is going to get traded in the marketplace.
00:30:15:24 – 00:30:32:23
Eddie Speed
So all of a sudden there’s going to be as inventory of notes. And so my a year and a half from now or three years from now or five years from now says, well, I want to go do something else with my notes. So anytime we see a big amount of inventory created, it’s not like, well, you get immediate benefit from it and it’ll nothing.
00:30:33:00 – 00:30:50:11
Eddie Speed
You’ll get no future benefit. Like, yeah, the notes literally that were created in the 19 early 1980s, which was really about, honestly, about a three year band. We picked out those notes for 10 or 12 years.
00:30:50:13 – 00:30:54:14
Aaron Fragnito
Interesting. So they, they, can refinance less than.
00:30:54:15 – 00:30:57:04
Eddie Speed
Not everybody needs the money at the same time.
00:30:57:06 – 00:31:04:04
Aaron Fragnito
Yeah, yeah, exactly. Okay. Well, Eddie, how can people, find you and learn more about what you do there?
00:31:04:06 – 00:31:30:18
Eddie Speed
The best thing to do is I want to give your audience, a little class. Now, I’ve got a lot of deliverables. Spreadsheets that you can run, modeling on your own rentals. You know, a book like I’ll answer in about 150 questions about people have about notes and stuff. But along with all those great materials, we’ve got a class to kind of go through and show modeling and show what’s possible and stuff.
00:31:30:20 – 00:32:02:14
Eddie Speed
What’s the best way for somebody to spend a limited amount of time? Call it a couple of hours or an hour and a half to go figure out, like, am I? Am I a candidate for this? Do I like it? What’s it look like? So anyway, it’s note school.com/passive CFO. Obviously it stands for cash flow. And and we do you know, we see a lot of, you know, people like from an audience like yours that kind of come in and I’m not really sure.
00:32:02:16 – 00:32:10:18
Eddie Speed
Yeah. You know this seems like it and stuff. And so hopefully I think we do a pretty good job of kind of giving them the ESPN version.
00:32:10:20 – 00:32:16:02
Aaron Fragnito
Yeah. That’s great. That’s great. And so is that a is that a free class or. That’s part of.
00:32:16:05 – 00:32:21:23
Eddie Speed
It is it’s it’s we do sell it, but I’m, I’m giving it to your audience for free. It’s virtual.
00:32:22:00 – 00:32:22:09
Aaron Fragnito
Yeah.
00:32:22:09 – 00:32:44:02
Eddie Speed
And so you go in and enter it and, you know, it gives you it gives you the class time and date. It’s a real class. It’s a real thing. Sure. And, so one of the one of the guys on my team that actually runs our marketing, it’s real good. It making it simple. Yeah. And, but it’s it’s a very informative class.
00:32:44:02 – 00:32:58:22
Eddie Speed
I get a lot of compliments on how informative it is. It moves like we do it live. So it’s like, you know, what might have been the most relevant thing, you know, two months ago may not be so relevant now. And so it’s very relevant to the market.
00:32:58:24 – 00:33:04:18
Aaron Fragnito
That’s great. That’s great. That’s a beautiful thing to, hand out to our listeners here. What’s that website one more time.
00:33:04:20 – 00:33:12:02
Eddie Speed
It’s, note school.com/passive KF that’s great.
00:33:12:04 – 00:33:25:04
Aaron Fragnito
Yeah. We’ll put that in the show notes as well. For our listeners so they can go check that out. I mean, what do you have to lose? You know, I mean, the worst case scenario you learn about no trading here. Maybe it’s a fit for you. Maybe it isn’t, but that’s that’s very nice theory. That’s good to hear.
00:33:25:04 – 00:33:43:08
Aaron Fragnito
And, you know, I think myself, I’m going to try that out and, and learn more about notes here. You know, we are in the business of raising capital. We’ve raised millions of dollars. And, we’ve done hundreds of real estate transactions. So I think, sharp enough to understand this business. I, I’ve seen other people do well in it, and I’m curious to learn more myself.
00:33:43:08 – 00:34:05:20
Aaron Fragnito
So, I’ll look into that also. And, you know, to our listeners that are enjoying this content, hopefully you got some serious knowledge dropped on you today from, Eddie Speed here and, you know, share it. And if you like it, please, like it as well. If you find value from our Passive Cash Flow podcast here, you can share it on all the major platforms that podcasts are found on, on YouTube as well.
00:34:05:20 – 00:34:24:00
Aaron Fragnito
Or you can subscribe to our channel, the Passive Cash Flow Podcast, and, People’s Capital Group there. As you know, my name is Aaron Frank Nieto, one of the co-founders of People’s Capital Group. We help people build and preserve their wealth in new Jersey apartment buildings. And, Eddie boy, if I, keep watching your content, who knows?
00:34:24:00 – 00:34:42:09
Aaron Fragnito
Maybe one day I’ll say, we help people build and preserve their wealth through new Jersey apartment buildings and notes. You know, that could that could be part of the future investment here, right? That’s awesome. Absolutely. So thank you so much to our listeners. I’ll put that, link in the show notes so you can get Eddie’s, awesome offer here.
00:34:42:11 – 00:44:18:06
Aaron Fragnito
And, keep listening to the Passive Cash Flow podcast. Thanks a lot, my friend. Good day.
