What Is Note Hypothecation And How It Can Work For You | Part 4 - YouTube

Alright, we're at part 4 in episode, "what is  note hypothecation and how it can work for you?"  

You've come a long way, I hope you've been watching.  Today we're going to discuss: how to get the best  

interest rates, how to get the best terms, and  that means you're probably going to have to go  

to a bank or an institutional lender. So, stay tuned  I'm going to show you how you talk to these folks.

My name is Mitch Stephen and I've bought thousands  of houses in or about my hometown of San Antonio, Texas.  

I borrow money other people's money to  buy these houses, I owe about 26 million dollars  

as we're filming this. So, I know a little bit about  how to talk to banks and how to talk to private  

lenders. Today, we're going to be talking about: 1.) what  banks to approach when you want to hypothecate  

notes, 2.) how to leverage banks 3.) how to find bankers  that understand what you want to do, and last but  

not least is, 4.) note hypothecation a real estate loan?  Uh-huh, I bet you didn't think about that. Okay, here we go. 

Okay, so in episode three we did this whole  case study where I wanted to take out my private  

lenders using a bank or an institutional lender.  You don't go to the big box banks I can tell you  

that, because this kind of strategy isn't going to  check the boxes that they need to be checked off.  

Matter of fact I'll be surprised if the person  that you're talking to at the big box bank even  

knows what you're talking about. We want to go to  community banks small local banks, probably this  

bank someone on the board in the back room has  the last name that's either in the bank's name  

or the last name of the great grandfather who  started the bank. These are regular business  

people that can sit down look at a business plan  and go, well that makes sense. I see exactly what  

you're talking about, I think we'll do it. We want  people that can think and rationalize to say "yes"  

and that's the local community banks. Once upon  a time, I was invited to a bank by a very long  

time friend and he gave me my start, and I was  loyal to that bank to no end, because without him  

I'd have never ever had a banking relationship. But  one day, he got hired by another bank, and that bank  

didn't do the kind of loans that I needed. I was  a free agent and now I was free to go out and  

have banks compete for my business. You see, when  that one friend did me that favor and I was loyal  

I could never go to another bank and say,  "Hey, my friend! this other bank's offering  

me a little bit better deal." I couldn't do that  because I'm a loyal person. He was there for me  

and I wasn't going to split hairs over him over a  couple of percent or-- or a term or two." But when he  

left I became a free agent and now I was starting  to leverage all the banks around me. I would take  

my business proposal to all the banks all of them,  and make them compete for my business and it was

a wonderful thing. Because "did it make a difference?"  Heck "yes" it made a difference and they don't get  

upset and they're not mad at you for doing it. They  actually expect you to do it, I thought this would  

be kind of precarious you know. I was friends with  this bank they took me to some basketball games.  

I was friend with that bank they took me dove  hunting, I was friends with this bank over here  

they took me quail hunting, and then here I was  making them compete. And you know what? that's a day  

in the life for them. That's all they do, and I was  surprised they wanted to compete for my business,  

they still took me to lunch, they still took me  to even when they didn't get the loan. They were  

coming back next week to compete for the next loan.  They were still taking me to the basketball games,  

they were still taking me to the hunts. So, leverage  the banks make them compete for your business.  

I was amazed that not every banker could get their  arms around hypothecating notes and the scenario  

that I had described right here. A lot of times, I'm  positive I was talking over that banker's head, not  

that they were dumb it's just they weren't used  to doing those kind of loans, they were used to  

doing other kind of loans, and either they really  weren't understanding what I wanted to do or they  

just weren't getting it. But not every banker  understands or wants to do these hypothecations.  

How you find bankers that understand it, is ask  every banker you know and every banker you talk  

to in the future. This is another misnomer that  I had when I would go into a bank and start to  

talk to them about the loan that I wanted. We would  come down to the point where they'd say, "this isn't  

the kind of loan we do, we really don't want to do  this kind of loan. We appreciate you coming in but  

we're sorry." And then I would just leave, that was a  big mistake. Before I left, I should have asked him  

"Do you know anyone that likes these kind of loan, that likes to hypothecate notes as collateral?"

You see, I thought banks were competitors and there was  no way in hell that they were going to recommend  

another bank down the street that there  was competitor. But I was completely wrong  

all these bankers the banking community is a tiny  little community, they've all worked for each other  

over the years and the decades. You know these  three used to be at this bank and this one went  

to be president at that bank, this one went to be  president of another bank, and then they all ended  

up over another, they've all worked together. They  all know each other's names, it's-- it's amazing how  

small the banking community is in San Antonio  texas with a population of roughly just under  

2 million. Everybody knows everybody in the banking  industry, not only that. But every banker knows what  

every other bank specializes in. It's their  job to know exactly what those people charge,  

exactly what kind of terms they like or they don't  like to know all their competitors inside and out.  

So, when you ask somebody who tells you no we don't  do that long. Well, do you know anyone who does?  

If I'd had just done that, I would have found the  banks that hypothecate right off the bat. Instead,  

I had to go to 28 banks to get 4people  in town that really really wanted this kind  

of note, this kind of business, this kind of loan.  Okay, I went to 28 banks to find 4. When if I 

had just asked the first three banks I went to  that said "no", they would have told me what 4  

banks I needed to go to in the first place. So,  always when someone turned you down for a loan  

ask that banker or that bank, "who do you know in  town that will do this loan?" And don't be surprised  

if they give you the name and number right  off the bat. They do it as a community service.  

They think we don't want this loan, but maybe the  next time he needs some money it won't be this  

kind of loan. Maybe he'll need a loan for his house  or his ranch, or a car, or whatever. I want to treat  

this guy good I want to turn him on to someone who  can help him. Even though I can't help him, I want  

to turn him on to someone who can help him. Because  he'll remember that, and that's why they do it and  

it makes perfect sense. I have always remembered  the people that helped me get to where I was going.  

Another very interesting point that might save  you a lot of money and might open the eyes of  

your banker and they won't get it at first, 99% of  them won't get it at first is. You're not asking  

for a real estate loan you see in this scenario  right here, I was pledging 35 notes on houses.  

I was pledging my notes-- notes are personal  property, I'm pledging my personal property  

is collateral. That's not a real estate  loan, I'm pledging personal property  

and pledging my notes. So, a lot of people  will assume that it's a real estate loan  

and they'll make you go out and get all these  appraisals. If I had to get full-blown regular  

appraisals because this was a real estate loan, if  I had to get full-blown appraisals on 35 houses  

it would cost me $15,000/$16,000. But when my banker said well we're going  

to have to get appraisals I pointed out to him,  that this is not technically a real estate loan.  

Now, this loan is backed up ultimately by real  estate i.e houses. But it's not a real estate loan.  

He's-- he's taking my personal property my notes  as collateral and then the light bulb went off  

and he says, "well, I think you're right Mitch let  me check with the president." So they checked with  

the president, I was right. The underwriters the  regulators they could get by without having to get  

full-blown appraisals. But they still wanted some  value placed on that real estate, so we came to an  

agreement that they would pick 15 random houses  that I had notes on, and they would send out  

a broker to get his professional opinion. He would  give a BPO and that was like 150 bucks a piece on  

half of my houses instead of $500 on every single  one of my houses, so it saved me a ton of money.  

You're doing really great and I want to  appreciate you for staying with me. For those  

of you who stayed with me through part 1, part 2, part 3 and now this part 4 and you've  

gotten this far, smash that LIKE button for me and  SHARE with your friends. And of course if you're  

not already subscribed, please SUBSCRIBE there's  a lot more where this comes from, and I'm gonna  

get to the final point. This one's really important  it's key and it could change your life yet again.   

I coach people all the time all over the nation,  the key is how to find funding for your deals.  

Either how to find private money or how to talk  with these banks. One of the biggest stumbling  

blocks of all time when I'm talking to students  and trying to get them to get enthusiastic about  

going out and finding funding and raising  private money is. They don't believe it, 

anyone would want to loan them money. I haven't  been in the business very long I don't have a  

track record who's going to loan me money. I have  bad credit, who's going to loan me money? I filed  

bankruptcy a few years ago, who's going to loan  me money? You know, I don't have anything in my  

savings, I have some derogatory credit. You know it's not about that, the most important thing I

do as a mentor when this obstacle arises is, I have to convince my student that it's not about  

them it's about the deal. A person could be in jail  for murder and if he wants to borrow $200,000  

in a first lien position  on a $2,000,000 piece of property,  who cares?

They're either going to pay back the  $200,000, or the person who loaned the $200,000  

is gonna get a $2,000,000 house.   So, what you need to do to raise private money  

is realize that it's not about you it's about the  deal. Find stellar deals, offer your lenders stellar  

opportunities to get in positions on property  where they can hardly get hurt. I mean something  

out of this world catastrophic nuclear would have  to happen before they would be upside down in  

their position on this property. So, remember it's  not about you it's about the deal find great deals  

ask to pay reasonable amounts and reasonable  people will show up and fund your deals.

You know, I offer a private money webinar where I talk  about private money and I talk about coaching and  

helping you get through those obstacles and find  that money. I like to be completely transparent  

I can change your life if I only help you find  one private lender that loans you $50,000 

or a $100,000. It's still going  to change your life mainly because if you can  

do it once, you can do it over and over again.  A lot of times, all we need as a young investor  

is for something to go right one time and then  we have the fever we get at a high pitch and  

we can run and flat out and do it over and over  again. It's that first one that's always important.  

Remember the first time you bought your first  house and you made your first 10 or 15,000  

check, didn't that change things for you? Well, it's  going to be exactly the same way when you get that  

private money changes everything course, and you go  out and you do exactly what I'm telling you to do.  

Remember, I've raised $26,000,000 bucks and I owe  payments on the first on $26,000,000

all from private people, okay. If I can do it you can do  it, you're going to get one guy to say "yes" to you  

and your whole world is going to change. So, check  it out. Go to one 1000houses.com/free-stuff,

scroll down till you see  private money webinar click on it it's free.  

Watch and I hope you decide to join me, because I  will make a difference. Alright, that concludes  

the 4 part series on "what is note hypothecation  and how it can work for you" I hope you enjoyed it  

it's certainly going to change some people's  lives out there I know. Because a lot of people  

don't even think about pledging notes as  collaterals, but now you know that's possible.  

Stay tuned with us, if you have any comments  or questions leave them in the comments below  

and I promise you we try our best to get back  to each and every one of you with a solid answer.