Real estate is one of those industries that managed to thrive even in the middle of the COVID-19 pandemic. But without diverse planning and the right expertise, surviving such a financial crisis would be challenging. Chris Larsen is joined by Fuquan Bilal, CEO/Founder of NationalNoteGroup Capital Fund, to discuss how they pivoted according to the pandemic’s drastic market changes. He shares how their automated processes and hybrid real estate-notes model brought success to their company. Fuquan also talks about his books on real estate learnings throughout the years that serve as a helpful guide during distressful times.

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Navigating Through The Financial Crisis And The Pandemic Using A Diverse Real Estate Strategy With Fuquan Bilal

We have Fuquan Bilal and he talks about his history of getting through the financial crisis of 2008 and becoming the bank, what he learned from his son to make that business successful, and how he helps investors diversify even during the pandemic, paying them out every month.

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In this episode, we have Fuquan Bilal. Fuquan is a real estate investor with over 21 years of broad experience. His financial acumen proprietary set of investment criteria enable his company to purchase underperforming real estate assets at a deep discount, both face and market values, thereby increasing the value of these assets. Coupled with his ability to maximize the use of leverage, this enables him to build strong, secure portfolios with solid passive income flows. Fuquan effectively hedges investors’ risk by spreading their investment across the portfolio of alternative assets to diversify and stabilize the funds’ return and valuation. Fuquan, welcome to the show.

Thanks for having me. I appreciate it.

I’m fired up. Talking to you puts a smile on my face going back with some of our histories. I had a great time being a guest on your podcast. I’m excited to share your story and what you have going on with our audience. Fuquan, for people that don’t know you as well as I do, please go ahead and share with the audience a little bit about your background and how you ended up where you are now.

I’ve been in sales all my life. When I was a kid, my mom used to take us out to the bazaars and flea markets to get stuff and wholesale from Chinatown, New York. She taught us entrepreneurship at a young age. From eleven years old, I had the opportunity to bring income to my family. I helped my mom go to these places. It inspired me as an independent thinker to always want to do something on my own and have my own business. You see some kids with the lemonade stand when you’re driving down the street. I love that entrepreneurial spirit. Through that process, it got me into being into sales and that’s one thing that I wanted to do.

I didn’t know if it was going to be real estate. I got a job with a telemarketing company and that morphed into being a director of sales on the West Coast for years. That transferred to being director of sales for a computer technology company that did microchip repairs. They called it FRU, Field-Replaceable Units. I was good at that. At the time, my cousin was doing real estate. I was probably 23, 24 years old at the time making great money, $80,000 a year. At that age, any kid would dream of having that much money. I was able to make it through the ranks of corporate at that young age and bring myself to the table and the owners appreciated that.

My cousin was doing real estate and he did a deal in two months and made half my salary, $40,000. I was like, “He made six months of my salary in two months.” I started to shadow him and learned the real estate business that way. At the same time, my older brother was a loan officer and he was trying to get me out of the corporate world from getting a comfortable paycheck every two weeks and do mortgage loan origination. I was like, “I don’t want to do that. You got to wait to get paid.”

Between both of those guys and see how the real estate world has evolved and this was back in ‘96, ‘98, I took the leap of faith in ‘99 and gave my two-week notice in. I started my real estate journey from there. I did fix and flips all the way to the market crash and then became a landlord because the banks were not lending or do anything at that time. You were forced to be a landlord. The areas where I was invested in were the areas where I come from, low-income areas. It’s not good to try to ride around in those areas and collect rent. There was no AppFolio back then. You had the knock on the door and collect rentals and get it in the mail.

Through those trials and tribulations and the inventory that I had, I was able to sell some of the stuff and pay off my investors. I didn’t have to file bankruptcy. I still have relationships with a lot of those investors from day one. I learned the note business during that time because it was going short during that time. Anything on the market can be listed cheaper than what you will get in a short sale. I started in the note business. My story began with learning notes. After I built mastery in that, I opened up my first fund in 2013. The rest is history from there.

That’s how we got connected. In my book, I talk about how we invested in notes and that was with you. You taught me so much. I went through the program that you had at the time. I remember I was on vacation in Charleston, South Carolina, sitting there with all my note portfolios spread out all over the table, going through all that stuff. We were looking at all the different investment options that there were.

You impressed me with your knowledge and the system that you put in place. That’s key. Maybe you could share a little bit with the audience some of the systems that you’ve used and how you’ve automated a lot of these processes to help you get success. What appealed to me was you were telling me that your returns were big. You had to tone down your returns when you advertise to investors because people couldn’t believe how much money you were making them.

It was weird. I’ve learned that with raising capital. The more return, the bigger the risk. If you tell people you’re making 20% returns, they’re like, “That has to be a risky investment. There’s something wrong with that.” If you say 6%, they’re all over it. I couldn’t understand that. I wanted to brag about the returns I was making but when people don’t understand the industry, they can’t connect and understand.

Going back to your first point, I’ve learned that if you do a business, you want to set it up like a franchise so you can scale. You always want to scale to be better instead of bigger. A lot of people put systems in place so they can make more money and forget about efficiency. One of the things that I wanted to bring to the note business is how do I become more efficient? With the industry that I was in, which was second mortgages, we were in a niche market buying second mortgages and that’s a real business.

If you spend $1 million on some notes, you’re going to get $300,000, $400,000 versus if you’re buying first mortgages, you may get $10,000. You have to build up a system and process to execute on borrower management and that’s one part of the business. You have to be raising money. You have to have the resources to buy. You have to be able to scale. Scalability has to be in place. To do all three of those things, you need a process and system.

I reached out to a few of my board of advisors at the time and try to figure out what was some of the things they were doing successfully in their business and they kept saying, “It’s people, processes, and systems. If you can perfect that, nothing can stop you.” I did my homework and I started to put that stuff into place. When I created the education, it was more of a gig. If you look at the way I’ve structured it, I would sell the notes and then train you and reverse engineer it to show you how I came up with the price to pay for it.

I had everybody on the call because some people were like, “How do I know you sold me something good or ugly?” You’re going to be on the call for three months. Whatever happens during those three months, come to the light. I wasn’t afraid to show what’s under the hood and teach people how to do it because it made me a sharper and better person that can make better connections with people. That’s how we did that with the processes and system. That’s important in anything you do.

I took my company through the EOS model, the Entrepreneur Operating System. That’s important in learning how to dissect the rocks and do the deliverables and having weekly level ten meetings with your team. Having your quarterly is where you get the chance to work on a business that is in the business. We had one for Q3. That helps you level up all the time. Planning, learning how to pivot, and everything else.

I take all my coaching clients the same way I use to take my sales team through this. Sales are all about results. Being a business owner is all about results. I coach them through that process, that weekly cadence, those quarterly goals. I explain to them how important it is to stay on top of those things. Those systems and those metrics are super important. You talked about the educational piece. I was fortunate enough to do a little blurb in the book that you wrote. Tell the audience a little bit about why you wrote your first book and some of your subsequent stuff since then.

The first book was Turning Distress into Success. I was excited when I learned the business. I was inspired by my, at the time, eight-year-old son because I taught sales for a little while after the market crashed before I got into the notes. What got me into the notes is I was on the phone with a negotiator and he was like, “Why don’t you buy it?” “How do you do that?” He walked me through the steps and I learned. I had a mentor who taught me. The raising capital thing was my eight-year-old son at the time when I was going back and forth to the bank. He said, “Why don’t you become your own bank?” I was like, “You can’t do that.” He said, “Dad, you said anything is possible.” I mentioned that in the book, too. I was like, “I did say that. Now I got to do it.”

I began to learn how to run a fund, open it up, raise capital, and everything else. I hired an SEC attorney from 2013 that I still use today. I learned a ton from this guy. That opened my mind up and that inspired me to write the book. When I started to raise capital for debt and I started to be able to manage 1,000 loans. When we purchased 1,000 loans, I saw the opportunities. In this 1,000-loan package, there were auto loans and 600 of the loans with second mortgages, but the rest of them broke up into auto loans, unsecured lines of credit that people take from the bank, business, personal.

Also, when people’s accounts go into zero, non-sufficient funds, or whatever, they have thousands of dollars up south for writing bad checks, those go into the collection as well and the bank sells it. I never knew that. It was a credit card. There was a whole bunch of stuff in here. It was $30 million of debt that we purchased. $30 million of unpaid balance. When I got that and started working through that, I’m like, “Where you can buy debt on this is people who sell boat loans.” People finance boats, they go into default. People finance cars, they go into default.

That inspired me to write the book to let people know that you can turn a distressed situation into a success. You can share your discount with people and help them. For us, it’s homeowners. When we buy a note and we buy at a discount, we share our discount with them. We want to keep them in the house. We don’t foreclose on it. We will if we have to. Our motto, foreclosures, you fail. The goal is to keep them in a house. Let them get a property manager. We collect the payment passively. That’s what inspired me to write the first book because I learned how to navigate through the debt collection business and I wanted to share that with the world.

It’s like, “It’s not only about real estate, you got car loans, you got boats, you got all this type of stuff.” I never understood before, “Why would somebody buy credit that don’t move? They’re not paying Amex. Why would they pay you?” I had to learn that they owe Amex $50,000. They’re going to sell the debt to you for $5,000. You can go to the person and say, “Pay me $10,000 and we’re all done.” “Give me $7,500 and we’re all done.” Who’s going to do that from $50,000? We’ll spend a little bit. You understand why and how it works. I wanted to share that with the world in the first book. My second book was called The Tire Kicker. It’s a pamphlet. A buddy of mine always jokes and said, “It’s only 60 pages. It’s not a book. It’s a pamphlet. Cut it out.”

That’s like my book. It came out 50 pages. You then publish it and it’s 100 pages. People love it because they’re like, “Your book, I read it in one sitting.” “I read it on a weekend.” “I read it on the flight.” I’m an engineer. I’m not a good writer. I like to get the point across.

At the time, I was going for Dale Carnegie and all the other stuff I was listening to. I was like, “I need to summarize some of the stuff I learned.” I put it into action and shared with my audience and people what I called The Tire Kicker because I would go to these seminars all the time and I was doing education and people were not taking action. I was like, “All of us have a tire kicker. All of us procrastinate.” I wanted to share some of my procrastination stories and how I got over them and how I overcame being a tire kicker. How To Beat The Mind Game & Seize The Results You Want Most is the subtitle. I wrote that book, The Tire Kicker. It’s a good book. It’s on Amazon also. My third and last book is Passion for Real Estate Investments. I have a podcast, PFREI. I talk about the different real estate investment asset classes I invest in, what you could do from IRA, different things related to real estate, and why the passion for real estate. Those are the three books that I wrote.

They’re all great. I highly recommend checking out Fuquan’s books. I had this conversation on the last episode. There’s the abundance mindset and there’s the scarcity mindset. When you don’t want to share things with people, you’re afraid. You’re afraid that they might pick up what you’re doing or steal your idea or steal the deal that you have. The reality is so many people are tire kickers and they don’t take action. I love Tony Robbins. He says, “Take massive action.” You can have the vision. You can read the secret and visualize and have your vision board and everything that you want, but if you aren’t taking massive action, you’re not doing it.

You take that mindset and you share with people, but they ultimately have to do that. You talked a little bit about your passion for real estate. We talked about on your show all the different types of real estate that you share. Talk about a little bit of how your business has evolved, Fuquan. We talked about the notes. What are you doing in your business? How are you working with investors today?

I started off doing fix and flips and then became a landlord and then morphed into the note business. When I got into the note business, that was my one thing for years. I wanted to build mastery in it. I took a fund in 2013. By the time I got to the fourth fund, I was winding up the third fund and paying all the investors back. I opened up another fund in December 2019. We strategized a little bit before that and I was like, “We need to pivot. The market has been great for a long time. Something is coming and we don’t know what. We’ve been punched in the face before, Fuquan. What are you going to do? How are you going to pivot?”

We started with a small PPM of $15 million and that was to buy smaller multifamily units for rentals. It’s maybe anywhere between 70 to 100 doors. I’m using financing as well. I’m still buying notes. Sixty percent of the capital I use would be to purchase real estate.

If we can leverage the institutional financing and put down 25% from the money we raised in the fund, we can also use some of the money in the fund and do fix and flips in areas where I’ve been at for the last 21 years or so. We can also use about 40% of the money from the fund to continue the note business. With the income, now we get the depreciation of their rentals to offset that, which shows up on the K-1s and everything else. It was a great mixture. We launched our strategy in December of 2019 and then we had COVID.

It’s tough but what a great time to launch the fund.

It was weird because we were like, “We’re going to launch this fund.” We started promoting it and then COVID hit. At that time, I probably raised close to $3 million out of $15 million. COVID came and everything shut down. We didn’t open back up until June. We had a whole 3, 4 months where nothing was happening. The beauty of it, though, 85% of our rental portfolio is covered with secondary tenants. We had consistent payments from those government-paying tenants and that helped carry us through. It was making a 10% return in 2020, where a lot of people struggle.

It was tough for a lot of operators. We continued to pay our investors, which was great because of the mixture we had. The notes we had in our portfolio, yes, some of them went to link when people stopped paying. We did everything we could to jump ahead of the curve and defer payment and put out fires there. It was such a beauty that we had the rents in there to be able to carry that over. We continued to do repairs on a fix and flip stuff. Once we came out of that, we’re able to liquidate some of that stuff.

Now in the market is crazy. We’re getting way more than we anticipated. The repairs that we did at that time didn’t have high material costs. During COVID, that didn’t happen and things started to go out of control. That’s what we’re doing. Our strategy is diverse. It’s a hybrid model with real estate and notes. The notes allow us to build a few income streams from this payoff. We’re performing loans. We sell loans. That’s not in our footprint when we take that to fix income and a rental income. That’s our strategy.

As we build out our offerings for our investors, we have the multifamily and our self-storage funds, mobile home deals, different stuff. I love how you give your investors that option. We were talking about a deal, Fuquan. You were telling me you bought it for some ridiculous amount.

Ninety-five unit.

You got to share that with the audience.

I’m flying out to meet the architect and some other place. As we pivoted and we started looking at different types of things to invest in, I was like, “I want to get more distressed.”

I love how there are opportunities in every area of real estate. We bought a 354 luxury Class A property.

I wanted to get into more distressed. First of all, our goal is impact projects. I come from North New Jersey, a low-income area. It gives me the feeling of importance to be able to go back to these communities, revitalize them, and put their properties back on the tax roll. Giving the residents a better place to live is what gets me up in the morning. I’m doing that already locally where I’m at. I’m figuring out, “Where else can we do that?” We looked at areas like Tennessee, Alabama, Ohio. Those have distressed areas. We looked at the marketplace there and said, “How can we force appreciation? We can help the community. We can buy undervalued assets that no one wants to go in and touch. Chris won’t be over here, so let me go look over here.”

I don’t like to get my fingers dirty.

Fuquan, I loved having you. I always enjoyed our conversations, your energy, sharing stories about our kids. Before I let you go, if you can go back and give your 25-year-old self one piece of advice, what would it be?

Get into a mastermind earlier. That’s the one thing I believe that has helped me level up. I’m in four different masterminds. One of them is all about personal vision. It has nothing to do with business. That balances everything out. The other one is being connected with great people to level you up. It would be definitely to get into a mastermind and connect with higher people at an earlier stage.

As soon as I joined our first mastermind group, my wife and I, that led to you, the multifamily industry, all these amazing opportunities. It’s amazing the people you can meet and the connections and that’s what was all about. Thank you for connecting with our audience, Fuquan. I hope you enjoy the time. Have a safe and happy weekend with your boys.

Thank you. Enjoy.

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I hope you found this episode valuable. I have one more thing to give to you. We have a page for my coaching clients where you can get a free copy of my book as well as much more from previous guests on the show. Check out NextLevelIncome.com/coaching to get a free copy of my book, audiobook, and much more. I’ll send you a copy of my book and cover all the shipping costs as a thank you for reading. Also, please like, share, and take 90 seconds to give us a rating on Apple Podcasts.

Important Links:

• Fuquan Bilal

• AppFolio

• Turning Distress into Success

• The Tire Kicker

• Passion for Real Estate Investments

• A Passion For Real Estate Investments – Apple Podcasts

• Walkthrough with Fuquan – YouTube

• A Passion For Real Estate Investments – YouTube

• NextLevelIncome.com/coaching

• Apple Podcasts – The Next-Level Income Show

• Passion For Real Estate Investing – Free Book Giveaway

About Fuquan Bilal

His financial acumen and proprietary set of investment criteria enable him to purchase under-performing real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows. Fuquan effectively hedges investors’ risk by spreading their investment across a portfolio of alternative assets that diversify and stabilize the fund’s return and valuation.

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Tagged: Debt Collection Business, Performing Notes, Home Rentals, Personal Vision, Hybrid Model, COVID-19 pandemic, Group 3