You had to see people on stage, get tapes, and books. I have boxes of them.

They had some of those guys out there, very few. Carleton Sheets was around that time. Dave Del Dotto, Jimmy Napier, and Jack Miller but they were obscure. They were cult-like way back in the background somewhere. When I was doing this, just so you know, 45 houses in my first year. When I started out, you could get in the classifieds at 8:00 in the morning and by noon, you could have a perfectly good deal. If you screwed up, you’d have two and you wouldn’t even know how you’re going to pay for the one, much less two. It was a different time. I want to be clear about that, but it does still show adaptive, out-of-the-box thinking and how to manipulate wherever you’re at. These days, there’s much more sophistication in what you can do and what you can’t do although, prices are higher. I went on beyond that.

I took the credit cards to another level. In 1996, you could buy houses on the lesser parts of town, Eastside, Westside, Southside for $10,000, $12,000, $8,000, $15,000, or $20,000. We had the cheapest houses like Detroit. My neighborhoods were functional rough, but they weren’t blowouts like Detroit. There were still semi-decent neighborhoods or you could still function in these neighborhoods without getting killed. I started buying houses. It’s not the same time, but I figured out that if you have good credit and you apply for a credit card, they send it to you, the full card, the full boat, the full cash advance. They check your credit and send you the card. When I figured that out, I sent out 75 credit cards in a two-week period and I got 45 or 50 of them.

I went around town going, “I need $10,000 on this card and this buys the house and rehabs it.” I took those two credit cards inside the file because when I sold the house, I would get 100% of the money in my bank account because it had no liens on it because it was on the credit cards. I opened up the file and called the credit card company, find out how much I owed both of them. We paid the credit cards and whatever was left over was mine, which most of the time was $15,000, $20,000, $25,000, or $30,000.

I went from not knowing where I belonged to like shooting out of a rocket trying to figure all this stuff out by myself and common sensing my way through. At one point, I had like $250,000 worth of credit card debt and $500,000 where the house was free and clear. That’s when my wife packed her bags when she found the credit card bills. We’d only been married about 30 days. I knew she wasn’t going to say yes, so I did it on my own and tried to make it to the mailbox. With so many credit cards coming in every day, I missed the mailbox one day and I got discovered. She was going to divorce me because she thought I was a lunatic.

The reason I didn’t ask her was it’s taken me seven years and all these books of reading to get where I was at. There’s no way I was going to explain it to her in a 30-day period or anything. It’s taken me years to get this nerve or this confidence, whichever way both. I explained to her. She had her bags packed. I stepped between the car and the door, so she couldn’t shut it when she got in. I said, “If you give me 60 seconds, I’ll explain and then you can do whatever you want to do. You’re being irrational,” which I learned not to say to your wife. She looked at her watch.

She says, “You got 60 seconds.” I said, “This is not gambling by any stretch of the imagination. This house that I bought for $20,000, I know exactly what it’s worth when it’s fixed up. It’s worth $45,000. I’m going to put it into a context that I’m gambling and here we go. You think I’m gambling. Let’s put it in the context of a five-card draw. I’m at a poker table. We’re in a five-card draw game. I got $250,000 on a table and I’m discarded two cards and I’m waiting for my other two cards to come back and you’re leaving before I get my two cards. What if I win? Leave me if I lose. Why are you leaving before the game’s over?” She said, “You better win,” and she went back to the house. I proceeded to win and I’ve been winning for many years after that.

Let’s shift gears a little bit, Mitch. This is the fourth book that you released. Your fourth book is The Art Of Private Lending.

I wrote it with my partner, Mike Powell. In the book, we’re explaining how to minimize your risk and how I’ve been able to survive for many years without having gone under because of the loans that I make and why my private lenders haven’t gone under because they made loans to me under certain conditions. I explained these conditions and the paperwork and why that a person shouldn’t be afraid if the maximum they’re loaning is $65,000 on a home that’s $100,000. To put that in more complicated terms, when you’re only loaning a 65% loan to value, you have a 35% pad there. Everyone should be comfortable. I’m comfortable as the guy who’s buying the house because I got enough margin in case something goes wrong. I don’t get upside down, but my lender, if he happens to not get paid by me, which has never happened.

In the event I didn’t pay him, he would get my house. My promise always was, if I can’t pay you or don’t want to pay you, I will walk my position in that house to you. Be it a note that I have with someone in it, I’ll walk the note over to you and my first-lien collateral rights or I’ll walk the deed over to you depends if I own the house or I have sold the house on seller finance terms that I have a note. If I ever can’t pay you, you won’t have to sue me. I’ll walk these papers over to you. That’s the integrity level. I tell my private lenders that every time, “I have two rights every day. I have the right to pay as agreed or the right to walk my position over to you,” because all the $26 million that I have out is non-recourse collateral only wrappable loans. I’m allowed to wrap.

Let’s talk about this. Our investors are familiar with this. We go and buy apartment buildings and that debt for them is non-recourse. That means the banks are not coming after them. They’re going to take that property back. Mitch, you’re doing this with single-family homes. Share with the audience how you are doing that.

You don’t pull money. If you start pooling money, you get into SEC regulations and all that. Mine doesn’t fall under the regulations because I have one lender, one piece of collateral, and one borrower. It’s a collateral-only loan. If I don’t pay them, they either get the house because I walked it over to them or they file a foreclosure on me, hire an attorney and foreclose me out of the house. They’re going to get my house one way or the other. My promise is if for any reason I don’t pay, I’m going to walk it over to you. You’ll never have to sue me. That’s the agreement. That’s how I sleep at night, owing $26 million.

The only reason I have collateral-only loans and I pay a premium interest rate to these people, 8% on average, 10% to some of them, is they’re sharing in the downside catastrophic risk, which was the only thing that kept me awake at night, not whether I was going to be able to run my business right and make it all work. What petrified me is, what if Kim Jong dumb ass over in Korea drops a nuclear bomb in downtown San Antonio and pollutes a twenty-mile radius of my town. That’s not my fault. I don’t want to lose my storage and house and all my free and clear stuff that has nothing to do with this over something that I had no way of knowing. I’m paying a premium, but you share in the catastrophic risks of this house. If you’re not worried about a meteor hitting this town, a volcano going off or a nuclear bomb being dropped, then you’re in a great position.

How are you finding all these houses, Mitch? How are you finding the money? Are you keeping these houses forever? Are you selling them? How’s the whole process work for that?

The problem was, I used to buy the houses, create the notes and sell the notes. One day in 2001, the associates, which was a division of Ford motor credit who blocked all the secondary notes out there, all the subprime notes. No matter who you sold your note to, they were bundling them all up into millions of dollars where the bundles, if not billion-dollar bundles. They were taking them to associates, selling to the associates, and making 1%, but they were huge numbers. When they closed, the note buying business ceased in the United States of America for all practical purposes for about seven years.

I had 53 houses in my inventory at the time and my whole way of doing business was ruined. My exit strategy was ruined. I was in a panic for that for a few days and then I said, “The only problem is, I’ve been borrowing money for twelve months because I was in and out of these houses. I have to change the color of the money underneath. I need 10-year and 15-year money that I can wrap. That they make a payment to me and I make a payment to my private lender.” It goes on for years. That’s why I have $26 million out because, unlike a flipper, you could put out $300,000 and then in 90 days or whatever it comes back. I put out $300,000 or $1 million on a bunch of houses. They don’t come back for ten years. I had to keep finding more money and it keeps racking up, so I became very good.

One of the reasons I wrote this book was to help explain to people why loaning on real estate is a good deal, how you can move your 401(k)s and your IRAs into a self-directed plan so that you can decide and quit leaving your financial future to the whims of Wall Street and that ticker tape and/or taking the only other choice, which is the leave it in a CD at 1%. I found a happy medium, great collateral, premium interest rate that they’re earning and a track record to boot.

I’m explaining in there the paperwork and why it all worked and why it’s all worked these many years and that you can go out there and loan your money if you want to directly to people like me, individuals and make 14%,16%, or 18% if you want to go to work. If you’re going to make 14%, 16%, or 18% on your money, you’re going to have to do the work. If you want to make 8%, 9%, or 10% and keep playing golf, then loan it to me, but I’ll use the same strategy, the same protections that I’m telling you to use otherwise. Some people that get my book go on to open their own hard money business or take their own stuff and get their own money out themselves. Other people say, “It sounds like a little more work than I want to do at 68 years old. I think I’ll loan my money to this guy that seems to have it all figured out for many years.”

That’s how you’re finding. About how many houses you buy a year now, Mitch?

It’s always about 100 since. In 2020 and COVID, I did 83, which was a little less than I thought but a lot better than I thought because I thought I was only going to be at 30.

If you’re buying 100 houses a year, are you keeping all these? Are you selling them? How what’s going on?

I’m selling them. Seventy percent of them, I owner-finance my buyer. They make payments to me. I give them a 30-year note at 10%, no balloon. They own me payments for 30 years.

You got both sides of it figured out now.

I buy the house for $50,000. I bought it from a private lender, 8% percent for 15 years. The lender knows I’m going to wrap. He’s given me permission to wrap in the deal. He also knows its non-recourse collateral only. Banks love me. I’m so bankable. It’s not even funny because I have lots of debt, but I don’t have any recourse debt. I take this $50,000 purchase and I sell it for $100,000. I sell it with 10% down and I’ll carry the $90,000 at 10% for 30 years.

I’m paying out on $50,000 at 8% and I’m collecting on $190,000 at 10%. I’m making 2% on my borrowed money. If I have $26 million out, that’s like I have a $26 million, 2% CD and then I’m making the full 10% on the difference between the $50,000 and the $90,000, so there’s $40,000 there. I’m making the full 10%. I got paid $10,000 as a down payment to do this because I have zero of my own money in this. That $50,000 represents the whole house, the repairs and everything. I’m all-in at what I borrowed. I never want to be all-in over 65% of what I can owner-finance the house for. I get those things racked up and to answer your question, no, I don’t have 2,500 notes. People pay me off whether I like it or not. Now, my people are not inclined to go refinance. That’s the problem with putting a balloon in with these people.

The reason they’re buying a house that you had 30 years at 10% interest from seller finance is because they’re flawed. If you think by putting in a balloon payment that they’re somehow going to straighten themselves out, they’re not. They’re going to be flawed in five years, too. They can’t seem to always make the car payment on time or whatever. I learned early on that expecting these people to change and to be able to refi, no matter how you work with them.

You are setting yourself up for failure.

You’re setting yourself up for worse because if a person puts a lot of money down, which should be a good deal in the beginning like, “This guy put down $25,000 on a $75,000 house. Way to go.” In five years when he doesn’t make the balloon, we’re all in court and a judge going, “You’re going to take this man’s $25,000 in five years worth of payments and he put in grass, a fence, a back porch and a pool? No.” By the law, it should be my house. He can’t do what he said, but the court hates you and they’re going to rule against you. I started making straight seller finance notes.