Jamie Bateman on Raising Private Money: Unlocking Success in Mortgage Note Investing

Speaker 0

Welcome to another amazing episode of Raising Private Money. I'm your host, Jay Conner, also known as the Private Money Authority. This is the podcast where we talk about how to raise private money for your real estate deals without ever having to ask for money. And if you're listening to this show and you're interested in just being a passive investor, interested in being a private lender yourself, we'll be speaking with you as well. Well, my special guest today has already raised over three million dollars in private money, and he's got a very, very interesting background. So he left his w two job some time ago to actually fully commit to this entrepreneurial journey, which is focused on empowering others, teaching others, inspiring others such as yourself in mortgage note investment. So if you've never heard about investing in mortgage notes, we're going to talk about that. If you've already been investing in mortgage notes and you'd like to raise more private money for investing in mortgage notes, we're going to talk about that as well. Well, in addition to that, my guest has built really an impressive portfolio of single family rental properties. And as I just said, mortgage notes as well. He's operated multiple successful mortgage note funds. He's got a couple of funds going on right now. And in addition to that, he's helped numerous investors navigate the market and really achieve amazing returns. Now I was a guest on his podcast, which is called From Adversity to Abundance. That's an amazing podcast, and you'll want to check out that as well. On his podcast, he actually shares really valuable insights and highlights the stories and the quote unquote mental fitness tips of successful real estate entrepreneurs that inspires others on their path to financial abundance. In just a moment, you're going to meet my very, very special guest, mister Jamie Bateman, right after this. 

Speaker 1

Welcome to From Adversity to Abundance, the go to podcast for real estate entrepreneurs seeking not just to thrive, but to conquer with resilience and mental sharpness. Each week, join us as we dive into the compelling world of real estate through the lens of mental fitness, where challenges transform into opportunities. Get ready to transform your mindset and expand your understanding of what it takes to succeed in real estate. Let's explore these stories of triumph and resilience together. 

Speaker 0

Jamie Bateman, welcome to the show. How are you, my friend? 

Speaker 2

I'm doing great. Thank you so much for having me, Jay. This is gonna be fun. 

Speaker 0

Absolutely. Well, I really enjoyed being a guest on your podcast, From Adversity to Abundance. That was fantastic. So I knew after being a guest on your podcast, I for sure wanted wanted to have you over here on raising private money because you've raised millions of dollars in private money. You show other real estate investors how to raise private money for mortgage note investing, and you've got opportunities as well, for passive investors that just want to sit back and get high rates of return. So before we dig into all that, what motivated you to leave your w two job, and what was that, and why was that investing? 

Speaker 2

Yeah. I think what motivated me was having the the control and flexibility like all many entrepreneurs envision and and want many people many w two employees want that as well. I think, I was I was really getting tired of the Groundhog Day of over and over and over commuting to my nine to five and just felt like I, yeah, might get a little promotion or bump in pay, but it was really just a number at a a large organization. I worked for the Department of Defense. I had served in the the US military, and so it was a natural transit transition, excuse me, and, worked there for fourteen years. And it was a it was a good good job, and I felt like we, you know, it was served a served a good purpose and everything, but I just got so tired of of just being a a, you know, a number and really just wanted that control and the freedom that entrepreneurship offers. And so why real estate was because I did have a background a background in title work. I started to, during my commute, listen to a lot of real estate podcasts and use that time to kind of gain knowledge and and inspiration. And I started to realize, who's in my corner? Who's on my team? Well, I've got my father has been a real estate agent for decades. My brother was a loan officer. I had worked at a title company previously. And so I just started to realize real estate is kind of the niche. Residential real estate in particular is is the niche that I understood. And so you point to your strengths and your network, and you rely on that. And so it it was a natural fit to move into initially rental property investing where we were doing the the BRRR method, you know, where you'd buy and rehab, rent, refinance, repeat. I think that's that's what it is. And then then, so my wife and I actually built out that single family residential portfolio. And then in twenty eighteen, I really focused, switched my focus over to mortgage notes and currently do both, but, really, mortgage notes is is ninety five percent of my professional focus. 

Speaker 0

Now, Jamie, did I just hear you say you worked for the Department of Defense for thirteen years? 

Speaker 2

Fourteen. Yep. 

Speaker 0

Fourteen years. Alright. I'm gonna ask you a question, very relevant question 

Speaker 2

Okay. 

Speaker 0

That I believe you're gonna have a very strong opinion on. Here's the question. Does our government know what's going on with all those drones? 

Speaker 2

Let me just answer that by saying when people have these conspiracy theories, I tend to get off the conspiracy theory train only because I've seen a decent amount of incompetence, and I'm not sure that the government could pull off anything too coordinated. You know, I I don't have any any really up to date relevant information on the drones, but it's a little scary, to be honest with you. 

Speaker 0

Yeah. Well, my my prediction is with and, of course, what I'm getting ready to say is I'm on time, date, stamp this podcast, but that's okay. My best guess is with all the all the scuttlebutt and all the buzz that's going on about these drones 

Speaker 2

Yeah. 

Speaker 0

That are flying around, I think the cat's gonna get out of the bag here within the next couple or a few weeks. 

Speaker 2

I mean, usually where there's smoke, there's fire. Right? 

Speaker 0

Exactly. Well, anyway, I digress, but you said you work for the Department of Defense. I have to ask a question. Yeah. No. I Let's talk about private money. So first, let's talk let's let's talk to the segment of our audience that are real estate investors looking to raise private money. What was it that came along in your investing career that caused you to be motivated to start raising private money? 

Speaker 2

The reality is, I think similar to really any other investor, if you're trying to scale your business, you run out of your own capital or at least the amount of capital that you have set aside to put into a a particular deal. So in my case, I had, through mortgage notes, I'd done deals on my own with my own capital initially, purchased. I don't know how many handful of mortgage notes initially, understood the concept. And but then, again, you run out of your own capital that you so if I want you know, that you can put to work. So if I wanted to scale the business, I needed to access other people's money. And the way that I typically frame this, and, I didn't come up with this by any means, but for a mortgage note, business, and I would say the same is is true for any kind of real estate investing business, it really comes down to three legs of the stool. One is finding those deals, finding the assets, and in our case, those are mortgage notes that we buy. Two is, managing those notes, and three is raising capital. So you could you could then put put as a two b maybe, managing the capital. But raising capital is is a really important leg of the stool, and you're not gonna be able to scale your business without access to capital, and oftentimes, that's private money. 

Speaker 0

So when you started raising private money private capital, how did you start out doing it? 

Speaker 2

Yeah. Specifically, in my case and it's interesting because I know the episode that you were on on my show, Jay, was entitled, desperation has a smell, the psychology of of raising private money. And that that was my biggest takeaway from our episode was you saying that, and and it actually rings true. I didn't know I was approaching it in that way, but in hindsight, I was. So in my first, the the first time that I raised private money was for a nonperforming mortgage note, but I didn't have the deal. You know, I wasn't ready to close. I didn't have pressure where I needed the capital immediately and needed some private loan, you know, by Friday to close on the deal. I actually was just documenting my progress as a note investor and document documenting my journey. I would publish blog posts on LinkedIn and other places on social media, on my website. And I would just I was learning, so I figured I would document things. Well, what ended up happening was an old friend of mine who I played lacrosse with in in college, He apparently had been following what I was doing and got very interested. And he he was a he's a finance guy. He knows different types of investments and asset classes. And he actually reached out to me and said, hey. I wanna get on in on this mortgage note thing, you know, but I don't have time. I've got a career and a family. How do we work together? So, I didn't I wasn't desperate. He reached out to me, and so we we talked about, okay. How much do you have to invest? And and I went out looking for deals for us. So and and we ended up buying a deal together, and and, actually, it did turn out to be quite profitable for for both of us. 

Speaker 0

So let's unpack what you just shared. Because what you just shared, there's a lot to unpack. You got your first private lender or investor without asking for any money. Yes. By the way, this is the show where we talk about raising private money without asking for money. So you attracted you attracted that private lender or investor by simply starting to share on social media documenting what you were doing. You've got a connection that is now following you, reading about what you're doing. They're interested. They reach out to you, and it's all because you're just simply sharing, you know, what you're doing. So have you continued to do that, since that very first person reached out to you? Yes. And you still have people reaching out to you the same way just because you're sharing what you're doing. 

Speaker 2

Yes. Our the the way that we approach things has certainly evolved. And, for example, I was in the initial stages doing really just deal level joint ventures. So, briefly, what that would look like is, I'd have a capital partner, and, I was the day to day manager of the assets. So the capital partner would bring the funds, and I would go looking for the deal or maybe the deal would arrive first. But, oftentimes, the money was was there first, and then we'd buy, oftentimes, a nonperforming note. And so just the two of us were the joint venture partners on this deal. Since then, I've I've, I'll say I don't know if I wanna say graduated, but I've I kinda moved on to different types of, raising private capital. One is selling partial notes or doing hypotheticians, and we could do a whole podcast just on hypotheticians. And then now, like you mentioned earlier in the intro, Jay, I have two mortgage note funds that I that I manage, and that's another way of of raising private capital. What I've found in my business is from an accounting standpoint, scaling, doing joint ventures, deal level joint ventures, and scaling your business, at least on the mortgage note side, created such a a nightmare, for from an accounting perspective. It was just a lot of of work each month to reconcile the books, etcetera. So I found that going to the fund model actually was a lot more simple and easier a lot easier from a bookkeeping standpoint. But to answer your question more directly, absolutely. We still document what we're doing. We still do a lot of social media posting, and I get a lot of people investing in my fund without I mean, it's a it's a five zero six c, so I can I can talk about the fund? I can advertise it, etcetera. And these are for it's for accredited investors. People that I've never heard of don't know where they're coming from specifically. I mean, we do our best to track that, but, it's all because we've started to we've we've got our name out there, and I have my own podcast and etcetera. And so, ultimately, what they're investing in is me. Right? They're trusting me, the operator, to put their capital to work and make good decisions. So I think, you know, building that that long term trust is is very important. So, yes, it things have evolved, but I still have people reaching out and placing capital with me, you know, to this day. So absolutely. 

Speaker 0

So for someone listening to the show that's never raised private money, private capital, for for real estate or notes or whatever, what advice could you give them on how to start, and secondly, what mistakes to avoid? 

Speaker 2

How to start? I mean, I would say look for other people who are doing it and and copy them. And I don't mean that in a steal, you know, someone's, you know, proprietary system, from that viewpoint. But other people are doing this successfully, so you don't need to be the first person to have ever raised private money or ever done a real estate deal. And, you know, what mistakes to avoid? I I would say, make sure you understand. Don't don't, you know, don't push the fake it till you make it too far. There's a fine line there, Jay, between getting out of your comfort zone and pushing yourself that's on one side. And then on the other side of the fine line is is is being dishonest and telling people you've done all these deals and and and really faking it till you make it and lying to your investors. Oh, no. No. I've done this many times. Just be honest. You know? One of the things that can help with that, another tip is to align yourself. I guess I'm combining the two tips really, but align yourself with someone who has more experience than you. So in my case, for my first fund, it was our mortgage, nonperforming note fund, which is winding down. I started that fund with a peer of mine. His name is Chris Seveny. He's he was a mentor and still is. And he had run six or seven funds by that point. Well, not only am I learning from him on a day to day basis, but I'm also using that, his credibility. And, you know, through his association with me, that gives me credibility. And so that's a a way to kind of get started, you know, in in in an honest way without getting too far over your your skis, so to speak. 

Speaker 0

Well, I couldn't agree with you more, Jamie. I advise people all the time. Don't make the mistake I did. I started investing in single family houses in two thousand three. I've rehabbed or my team has rehabbed more than five hundred houses in my career since two thousand three. But I made the mistake I did. For goodness sakes, the first six years, I was out here on an island by myself, figuratively speaking, and I was just relying on my experience from my previous manufactured housing corporate career and reading books. Well, you know, you're gonna pay for your education one way or the other, and the most expensive way to pay for your education is making stupid mistakes that you didn't know was even a mistake at the time that you were making it. So as you say, align yourself with someone who knows what they're doing. And one of your expertise is raising private money for mortgage notes specifically. So I gotta ask you this question. There's all kinds of real estate asset classes. I mean, there's land, there's self storage, there's multifamily, there's commercial, there's single family, and then an asset class is mortgage notes. Yeah. Why why mortgage notes? 

Speaker 2

It's a great question. And and, you know, I am not somebody who acts like you know, you'll you'll see some of these, what I'll call gurus, touting mortgage notes as the end all be all or whatever asset class they're they're focused on. But in my case, mortgage notes. Mortgage notes has have pros and cons just like any other asset class. Frankly, there are no real inherent tax advantages to investing in mortgage notes. Now there are ways to mitigate that and get around that, like, using self directed IRAs and other self directed accounts, but there are downsides to mortgage notes. The the upsides that drew me to it to that particular asset class were, you can do it from anywhere, so I don't need to go to the property. Now I I understand you can do certain other real estate investing from a distance as well, but we're not in the business of doing rehabs. And, you know, I've done a few I've done one long distance rehab. I would not recommend that necessarily, although I we'd it was profitable for me in that case. But, mortgage notes, you can do from anywhere. So I can invest across the country in all fifty states, as long as I have a laptop and a phone. Really, it's location independent. The barrier to entry is fairly low. I'm not saying that everyone should just jump into mortgage notes because there is a lot to learn, but there aren't a ton of, you know, compliance hurdles or licensing hurdles as long as you're using a licensed, loan servicer. And so those are two big ones is the location independence and the low barrier to entry. And and I guess the third one I'll throw in is that I was already very familiar with residential real estate investing and like we talked about. So I felt like this was almost the other half of the the circle, so to speak, in the residential space. Now I kinda feel like I have it's really just one big circle. You know, you can buy a property and, you know, you can buy a a property, a pre REO, and end up with the property, and then you could sell the property on terms, and then you become a lender. You can sell that loan. You can but it's all kinda part of the same circle. So So now I feel like I have tools that, I can kinda plug and play depending on market conditions and, different what whatever is needed at that time. So, why mortgage notes for me were those those particular reasons? We see people coming into the mortgage note space from a lot of different backgrounds. We have I deal with people who are more of the engineer type, who love to crunch numbers, or more of the real estate investor, the traditional real estate investor who's familiar with the property itself. And then we have more of, like, finance people, mortgage lenders, and finance, you know, professionals who come over and certainly plenty of other types of people with other backgrounds as well. Before I at the risk of rambling on, the other thing I love about it is it allows you to be both creative and, kind of that math and science, person. So there are a lot of strategies that creativity really is required because each mortgage note has a story. There's a borrower behind the mortgage note, and that borrower has a story. And so you can crunch numbers all day long on a spreadsheet, and that's important, But there's also the the human element, and so there's kind of an art and a science to being a successful mortgage note investor. And I love that kind of that variety, of in skill set and variety in, you know, you don't know how each each, asset is gonna unfold. So it's kinda it's intriguing in that way. 

Speaker 0

So let's talk about, Jamie, how it is that private money works logistically with funding, investing, and mortgage notes. So Sure. Let me start it out this way. And let's contrast how to use private money for funding in the mortgage notes versus, say, single family houses. So with a single family house, the way I use private money and and take care of my private lenders is I have a private lender or a couple private lenders will fund a single family property. And to protect that private lender, they're they're gonna get a promise for a note. So we're laying out the terms. What's the length of the note? What's the interest rate? What's the frequency of payments they're gonna receive? And then how do I mitigate the risk and protect my private lenders? Well, I don't borrow unsecured. I give them a deed of trust. Most of the people call it a mortgage, but in North Carolina, the note is collateralized by a deed of trust Mhmm. Which gives the borrower, excuse me, gives the private lender the legal right to foreclose if I don't pay them. I also name them on the insurance policy as the mortgagee. So if there's a claim against that property, an insurance claim, the insurance company makes the check payable to the private lender and to my company. They gotta sign off on that. Maximum loan to value is seventy five percent of the after repaired value, so it's a conservative note to value. I give them a ninety day call option. They can call the note due early if they've got an emergency. So that's just some ways that, you know, private money works, say, with single family houses in my world. What are the logistics? How does private money work with mortgage notes? 

Speaker 2

Sure. To be honest, it's not that much different. And, I think the closest example is the hypothecation, example. So, in a similar way that your the the property itself is the collateral in your case. In my case, if I'm borrowing money from a private lender, the note itself is the collateral. So you you could say the note and the deed of trust are the collateral that you refer to. So the the private lender to me lending me capital, is actually one step further from that property. But the note that I own and it gets a little bit complicated if you're not if if you're completely unfamiliar with buying mortgage notes, but the note and deed of trust that I own is the collateral for that loan. And so it may take a little bit longer to get to that property for that the private lender, but there may we write into the agreement. You know? An example would be, I would go out and buy a mortgage note with my own capital, say, for fifty thousand dollars. Maybe the the principal balance of the mortgage note is seventy thousand dollars. I buy it for fifty thousand. I wanna sell, you know, I wanna use that note as collateral to borrow thirty thousand dollars from a private lender. The note itself is now the collateral. So I'm borrowing thirty thousand dollars from a private lender, and those terms can be really whatever we the private lender and I come to an agreement how whatever we agree upon. And so oftentimes, hypothecating is a great way, and it's very similar to to what you're referring to with with hard real estate, a great way of expanding your note buying business. Yet from the private lender standpoint, it's it's pretty, nothing has no risk in this space, but it's fairly low risk because they're putting in thirty thousand dollars, and their collateral is a note that has a seventy thousand dollar principal balance. And likely, the property itself has a hundred thousand dollar value. So there's some some backing there. And what's what's really nice is it's really just a loan. So meaning, we we can spell out the term. It may be a three year loan, a four year loan, five year loan. And so there's flexibility on the front end for the the private lender and me as the borrower to agree to those to terms that are mutually beneficial. 

Speaker 0

Excellent. Thanks for the explanation. Now in addition to that, do you have an opportunity now for people that are listening to passive investor with you to where they can just earn high rates of return? 

Speaker 2

We do. For the passive investor, we have the integrity income fund, and that is for accredited investors only, just to be clear. And that fund pays it it we target an eight percent annual preferred return, for any investment under one hundred thousand dollars and a ten percent, targeted annual preferred return, for those investments above one hundred thousand dollars. We distribute monthly, so we've never missed a distribution in the two and a half years that the fund has been operating. And another highlight of our fund, the integrity income fund, is that it has only a twelve month lockup period. Most mortgage note funds you'll find have at least a three year term. So you put your capital in, and you can't get it out without some kind of hardship reason for less for within the first three years. In our case, you put your capital in. You're committed for one year. If you if you need to redeem, that's not a problem. You can get your money back, after that one year. So the integrity income fund is the opportunity that that we have for passive investors, for accredited passive investors. We we do have some other passive opportunities for nonaccredited investors, but the Integrity Income Fund is our primary focus for passive investors. 

Speaker 0

Alright. And how do people reach out to you, and how do they learn more about these opportunities? 

Speaker 2

Yeah. Thank you, Jay. Labrador lending dot com, l a b r a d o r, lending dot com, is our primary my primary website for our mortgage note, business. So all the mortgage note information in including what I just spoke about can be found there. Also, my podcast, From Adversity to Abundance, has a separate website, adversity to abundance dot com. It's the number two as you can see there. And then lastly, I'll just throw out my email address, and I I apologize if you don't have this, here on the screen, but bateman james at labrador lending dot com. So, labrador lending dot com is home base. If if you just if you only take one thing away, that's the that's the site to go to. 

Speaker 0

Alright. If you're listening to this show, looking for some high rates of return, and you like what you're hearing here from my friend, Jamie Bateman, on the show, be sure and visit him at w w w dot labrador lending. That's l a b r a d o r, labrador lending dot com. And, Jamie, we'll have all of your contact information in the show notes. Jamie, thank you so much for joining me here on the show. 

Speaker 2

This has been fantastic, Jay. I knew it would be a lot of fun, and I really appreciate your time. 

Speaker 0

Absolutely. I appreciate you too, Jamie. And there you have it. Another amazing episode of Raising Private Money. I really appreciate you being here and tuning in. If you happen to be listening on one of your favorite podcast platforms, be sure and follow me so you don't miss out on upcoming episodes. I really appreciate the, five star ratings and the reviews as well. That allows me to have more amazing guests like Jamie that we just had on the show. And if you happen to be watching on YouTube, be sure to subscribe and ring that bell so you also get notified of the upcoming episodes. I look forward to seeing you right here on the next episode of Raising Private Money. 

Speaker 1

Thank you for joining us on From Adversity to Abundance. We hope today's episode has equipped you with valuable insights and practical advice to elevate your real estate journey. For more inspiring stories and resources, visit us at w w w dot adversity to abundance dot com. If this episode has inspired you, please share it with a friend who could also benefit from our conversation. Together, let's turn adversity into abundance. Until next time, keep building your mental fitness and your real estate empire.