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2021 is coming to an end. In this special episode, Dan Deppen looks back on how the note industry has fared this year. On another note, he discusses his own business and personal goals that he’s met this year and what didn’t go so great. As the new year approaches, Dan shares his goals in business and with his personal interests. Tune in and get tips plus access to tools to help you get a head start on your 2022 plans!

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Looking Back On 2021 And Moving Forward To 2022

Welcome to show. I got a very special episode for you. I’m going to be recapping a lot of the things that happen in 2021. Not just in the note industry in general but also for me personally. We’re going to talk about goals for 2022. Going back to at least the late ’90s is setting goals every year and then tracking my progress towards them. I’m going to talk about some of the goals I hit and missed in 2021. Some of the things I’m thinking about as we get into 2022. For me, this is one of my favorite subjects and one of the things I enjoy and personally get a lot of value out of. What did the year 2021 hold for us?

Looking Back On 2021

We’re still dealing with COVID. As we got to the end of 2021, I would have thought that COVID would be done and gone. I knew the vaccines were coming out and those did come out in the early part of 2021. Somehow, this stuff is still going on I know in Colorado, where mass mandates seemed to come on and off randomly and varied depending on where you are that has continued to drag on.

At the same time, for the last many years, we’ve seen real estate prices climb. For the last several years, I’ve been waiting for them to at least level off, if not decline. In 2021, real estate prices soared. I did get a few REOs this year, which was great. The market is in a wacky place. We’ve had these continued moratoriums in some cases, foreclosures and evictions that restricted the supply of REO especially in that REO part of the market. When one does come available, the prices are high.

At the same time, the broader stock market and economy have continued to stay on fire and done well. I would have thought with all the effects of COVID, shutdowns and other disruptions that would be damaging to the broader economy and the stock market. That hasn’t been the case at all. I’ve got a self-directed IRA where I have a lot of notes and then I’ve got a more traditional 401(k) where I have a lot of stocks. Those things have been on fire.

Also, we’ve had these weird hiring issues where a lot of people have decided to stop working. We’ve seen wages increase, which is a good thing but on the bad side, a lot of employee shortages. It’s been a weird, wacky market. That whole thing with the whole employment shortage, I honestly not been able to wrap my head around. I’ve had discussions with a number of smart people. No one I’ve talked to has seemed to have a good understanding of why this is going on or how this works. It’s definitely something I’m still confused about.

I’ve heard some of the theories. I know some of the ideas behind that but I’m not so sure. I don’t know. We’ve also had all these wacky supply chain issues. There are issues in China with these rolling blackouts where they’re shutting down power plants. We have all these weird backups at ports where goods can’t get in from overseas that’s caused all kinds of mayhem throughout the economy, which makes the economy and the stock market being on fire all the much weirder and harder for me to understand.

We’ve had some unprecedented levels of government spending. There were a lot of programs, giving people a lot of money, basically for free for a long time. A lot of those have wound down but that’s definitely been a rather unique scenario. A lot of these moratoriums on foreclosures and evictions have caused the whole destruction in the note industry and our ability to deal with nonperforming notes.

Once you get a good formula down for how to make money in notes, you can run that playbook again and again. Click To Tweet

Although, there has been a lot of confusion over this too. A lot of those moratoriums are for government-funded loans, FHA loans. A lot of loans that I own, contract for deeds, things like that non-government loans have not been affected. I’ve actually done a number of foreclosures and evictions over 2020.

Bottom line 2021, at the beginning of the year, I thought we would see some return to normalcy. We haven’t quite seen that. It’s not quite as weird as it was in 2020 but still not where I expected it to be. Over the last several years, my ability to do economic and market conditions, market predictions have been pretty horrific overall and that continued in 2020.

2021: The State of The Mortgage Note Market

What was the state of the mortgage note market in 2021? If we look at 2021, it was pretty similar to how it was in 2020. Pricing remains high coming into the year and high coming out of the year. I don’t know that it necessarily increased. It stayed at that level from what I could see. Supply continued to be tight. Fortunately, my year 2021 was made by a couple of large acquisitions. One earlier in 2021 and then one later in 2021. I was able to opportunistically pick up some good deals. Overall supply was tight. It wasn’t necessarily an easy market.

It continued to be this big mismatch between buyer and seller expectations. For the sellers, they’ve looked at things from the standpoint that real estate prices are very high. There’s a lot of equity in those loans. When they tried to sell a loan, they had pretty high pricing expectations. On the other hand, borrowers have been skish, scared and very conservative. I’ve seen a lot of lowball offers. There’s been this mismatch between buyers and sellers and not as much deal flow as you would have in a “normal market.”

2021: Things That Didn’t Go Great

I’m going to talk about some things that didn’t go great for the market and for me in 2021 then I’ll talk about some things that did go well. Starting with the things that didn’t go great. A pretty gigantic one for me was I got divorced in 2020. This actually started when COVID broke out in early 2020. Got things finalized earlier in 2021. We’re here at the end of 2021. I’m on the backside to this. There was definitely not a great thing for me and pretty traumatic as anybody who’s gone through that has known.

Although at the end of the day, that’s a better thing. My kids have doing very well. It’s not a great thing but ultimately, I’m going to be better off. If you follow me for a while, I tend to talk about golf a lot. I’ve been obsessed with golf since I was probably twelve years old. Whether you’re into golf or not, if you’re talking to me, I’m probably going to jabber about golf and my golf game sucked in 2021. I had some pretty big goals and I struggled. This was a bad and good news thing. I was working on some things with my swing. I had hit a limit in my game.

 

In 2020, I got my handicap to a plus one. I play a lot of competitive golf. It had some flaws in my swing that I wanted to correct to give myself the potential to get to like a plus 2 plus 3 golf and be one of the more competitive men amateurs and the state of Colorado. I bit the bullet in 2021 to work on some of those swing changes, which I’ve got implemented. This is going to set me up well for the future. It’s like 1 step back, 2 steps forward in my golf game. In the tournaments I played, I did not perform well. My handicap is 1 or 1.2, which relatively speaking is good but not where I want it to be.

For the note market, it didn’t go great. It continued to remain tight. There hasn’t been a ton of supply out there. Even though I’ve been able to find some deals and be opportunistic, it’s been a little bit of a tough market. If you look at the note market over the decades or any market for that point whether you’re talking about real estate in general or stocks or specific industries, they go through their cycles over the decades.

The last couple of years, we’ve been in the note market that’s been fairly tight. As you probably know, if you read the one with Franco Barile, I think that’s probably about to change fairly soon. The other thing I had that was new for me is I had two REOs that had the wire and copper stripped out of them. Back during the financial crisis, the 2010 timeframe, there were a lot of areas out there and commodity prices were high. Copper wire stripping was a pretty big thing. It went away while commodity prices went down but commodity prices are back up. Apparently, that’s a thing again.

The first one that this happened on, I had insurance paid off. It took a deal that was going to be a losing deal that put me into the back. The second one is we’ll find out as we get to the very end of 2021 and beginning of 2022 if insurance is going to pay off and how that’s going to pan out. Some other things that didn’t go great, bad behavior on the part of certain individuals in the note market continued.

This is something that’s always perplexed me. I found the note market to be this amazing opportunity, cool industry but there’s been a number of people who are bad actors in the industry. I continued to see some of that in 2021. Some of this has been flaky buyers. I’ve been selling notes on Paperstac.com. These buyers that make an offer, I accept it. They screw around for like 3 or 4 weeks and then back off.

I’ve had a lot of lowball offers. Insanely non-credible offers where all these performing notes for reasonable prices. I’ve literally had bids of like 15% of UPB for loans that are paying. I began to screw with those people a little bit. I’ll adjust my asking price by $1 or I’ll mess with them in other ways because I find their behavior absurd and ridiculous.

If you've been waiting for the note market to turn good, there's a good chance that 2022 is going to be your year. Click To Tweet

At the same time have continued to see flaky sellers. One thing that’s happened to me a number of times or anybody that’s been active in the industry for a while has certainly seen this is where you have flaky sellers, where you make an offer, they accept, you start doing your due diligence. Maybe you pay for BPO, pay that we need, then somebody else comes along that offers a couple of dollars more and they screw you over and sell it to that other person. I saw that a couple of times. I’ve even seen this from some large sellers that you would not expect to see it from.

The other thing that surprises me is, I buy for an individual a reasonable volume and certainly not a large fund or something like that. I’m not the person that it would make sense to host to make a couple of hundred dollars on a deal. I’m going to buy a lot of stuff over the next several decades, “Why would you alienate me and turn me off to where I’m never going to work with you to save a couple of bucks. It doesn’t make sense?”

A lot of these people exhibit bad behavior and it’s not even in their own best interests. I’ve also seen a number of flaky buyers of REOs. More than once, I’ve accepted an offer have the buyer adjust their offer lower, not based on anything that wasn’t already available to them. I’ve turned around and said, “I want to get this thing off my plate. Let’s get it done.” They then lower their offer again.

At which point, they get a giant middle finger. I continued to be surprised at how many people in the real estate business more broadly tend to optimize for the short-term. I view real estate investing and note investing specifically as a very long-term game. I’m 46 years old, as this has been recorded. I’ve probably got a good 30 years to be active in the industry. All of the people that I interact with, I assume I’m going to interact with them again.

The other thing I love about the real estate industry and the note industry specifically is it’s a very rinse and repeat business. Once you get a good formula down for how to make money in notes, you can run that playbook again. It makes zero sense to alienate potential counterparties to make a couple of bucks on one deal.

I’m thinking about the very long term, although there are a lot of people out there if who don’t quite do that. As we get into 2022, especially that my business is larger and more stable and I liked my position in the industry, I’m going to be calling out a lot more of this bad behavior specifically. I look forward to more of that as we get into 2022.

 

One of the things that didn’t go great. I continued to have problems with loan servicers. Madison Management was the first loan servicer that I used and they’ve steadily gotten worse over the last few years and is continued in 2021. Allied has been my go-to servicer and they’ve had some problems as well. They got kicked out of Michigan and Pennsylvania so I’ve had to transfer all of my Michigan loans. I’m concerned they may be on their way out of the business. They’ve been great because they’re cheap. Some of their people have been good to work with but they’re not as great to work with. They’ve been having a lot of problems.

On the bright side of the loan servicer business, we’ve had BIFI that started up. If you read to the episode with Shante Duffy, BIFI is a new investor-friendly loan servicer that was started by Chris Seveney and Jamie Bateman and being run by Shante. All people who I have a lot of respect for and are good guys in the industry and on the ball. They’re getting up and running. I haven’t moved any loans over there yet but I look forward to doing that as we get into 2022. I hope that they can solve some of these problems in the loan servicing industry.

On the one hand, as much as I like to complain and gripe about these loan servicers, I don’t know that I could do any better. In 2020, I went through that thought process as an entrepreneur. It’s like, “You got all these loan servicers who were doing a horrible job for investors. There’s definitely an opportunity for someone who can come in here and do it right.”

When I look at all of the myriads of regulations that have to be complied with and other issues, for me, that business completely grosses me out, I would not want to be in that business. I would not be happy at all. God bless Chris, Jamie and Shante. I hope they can get it right. It’s not going to be an easy thing but hopefully they can do it by the end of 2022. I’m saying, “BIFI is the way to go.”

2021: Things That Went Great

Let’s talk about some things that went great. I’m pretty goal-oriented since the late ’90s. At the end of every year, I’ve written down my goals for the following year. Some of these, I’m not going to provide details because they’re personal and business-related but I did have some profit goals for Fusion Notes and I crushed those. That felt good. That was largely in part to some particularly big exits that I had.

Some deals that went through foreclosure, I got the property back in good shape. Then some of that was building the scale of my business. My portfolio has slowly grown over time. The other thing that’s happened is my portfolio has shifted from nonperforming to performing. It’s become more stable and predictable. On that one deal where I had the copper wire stripped, I had my first insurance payoff. Insurance paid off in full and it took that deal that would have been way in the red into the wax. That was nice.

Another thing that went well is the vast majority of my portfolio is performing. A few years ago, the majority were nonperforming. I was working on trying to get borrowers in forbearance agreements and completing foreclosures. I certainly still have a lot of those going on but the vast majority of my portfolio is performing, which is cool because, on a day-to-day basis, there’s less upkeep, less following up with servicers, less following up with borrowers. It’s much easier to manage than it was a couple of years ago.

If you've got goals for 2021 that you wrote down and forgot about, or you haven't quite achieved yet, you've still got a handful of weeks to get there. Click To Tweet

Another thing that went great for me was I released the Note Launchpad course earlier this 2021. That’s an online training course that can take someone who wants to get into note investing from zero to buying notes in under 30 days. I was able to get that released and the sales of that have been good. I am an engineer, a planner, I have an MBA and I don’t go into anything without a plan or a baseline or some expectations. The sales of the course far exceeded my expectations. The feedback on the course has been good and overwhelmingly positive. That’s been awesome and I’m happy with that.

On a more personal note, I also like to set a lot of fitness goals and take care of myself. I was able to get my body fat to 13.9%, which is for someone who’s in their 40s, that’s above 90% for men. I was very happy with that. I was also able to gain a few pounds of muscle to be 46 and actually be stronger than I ever have been. I’m pleased with that. I’m interested to see as I get older how long I can continue to get stronger until things start to fall by the wayside.

The other thing that I did personally was I bought my dream house. Real estate prices have been super high. This was not the best market to buy-in. Just about every market in the United States in 2021 has been pretty tough. Colorado is probably tougher than most, not quite as insane as maybe California or Austin but it’s definitely up there. It wasn’t cheap.

The timing for me made sense and the place that I’m in is completely awesome. It’s close to my kids’ schools. They can walk or ride bikes to the schools. I’ve got a double oven and a gas stove, which I’ve never had. This place was built in 2015. It’s very modern. The wife of the family who had lived here before and had built it was an interior designer. The whole place is freaking amazing. I’ve been enjoying it. When I made the offer on the house and got accepted, I knew it was nice and I was going to like it. As I’ve been in here every day, I like it more and more. Something in my life that’s been awesome for me this 2021.

Another thing that went great, even though I missed it was note investors were able to get together in person again. The NoteExpo Conference that Eddie Speed and Bob Repass run happened in early November 2021 in Texas. That’s a great conference. I’ve been there a few times. Unfortunately, I was not able to make it this 2021. That was bad for me. In general, it’s good when investors can get together and talk about the industry. Even though the world has not completely gotten back to normal, this is a nice thing to see happen. They run a good event.

If you’ve never been there before, if you weren’t there this 2021, I highly recommend checking that out as we get into 2022. Another thing that went well for me is my audience has grown overall. I’m up to 1,190 YouTube subscribers, which is a 40% increase over 2021 and a 1,900, watch time which is up 27%. I didn’t quite reach my goals for this. I had goals of getting 1,500 subscribers and 4,000 watch hours but it’s a significant increase.

I view note investing and my Fusion Notes business as a long-term game. I feel like I have about, at least like 30 years left. If I can grow these things at 27%, 40% and can continue to do this over the decades, it’s going to be great. Back to golf, even though my golf game was a struggle but I did have some wins on the golf course. One of my goals was related to how far I hit the ball and the ball speed. I was able to hit 170-mile an hour ball speed, which is smoking. That equated to a 330-yard carry distance in Denver where I played.

 

I was also able to take a short game lesson with a former PGA Tour pro named Larry Rinker up in Vail, Colorado. Larry Rinker played the PGA Tour from the very early ’80s up into the ’90s. I learned a lot of amazing things. He had a lot of great anecdotes. He’s a funny guy. As he’s showing me things on putting, chipping and other things, he would tell me where he got them from. He was showing me these things on chipping and he’s like, “Paul Azinger taught me this.”

He was showing me something on bunker play and he’s like, “Jack Nicklaus taught me this when we were playing a practice round at the Memorial.” It was a very awesome experience. Even though overall, I didn’t have my golf game or my handicap where I wanted it. I didn’t win any tournaments. There were a lot of cool things that happened.

Moving Forward To 2022: Setting Goals

It’s time to think about 2022. I highly recommend that you sit down and make some goals. Especially, this part where we get to the end of 2021 and it’s holiday time, generally things tend to slow down. Usually, people have a little bit more free time than they have at other points of the year. It’s a good time to sit down and do your goals. You’re going to want to have a framework for that. There are a lot of different frameworks that you can use.

I have my own that’s evolved over time but there are frameworks from folks like Jim Collins, who talks about his big hairy audacious goals. There are smart goals, which are the most popular ones. From Jim Rome or OKR, Objective and Key Results from a John Doerr. A lot of different ways to do it. How you do it doesn’t matter. If you want to do it your own way as I do, that’s great. The key thing is to sit down and plan those out and be deliberate about what you want to accomplish in 2022.

Predictions for 2022

What are my predictions for what’s ahead of us in 2022? I already mentioned that my predictions for 2020 and 2021 were pretty far off the map. However, I think that for 2022, this next wave of foreclosures is finally going to hit. If you look at the foreclosure rate over the decades, it ebbs and flows. It has these peaks and valleys. It’s been very low for a few years. If you didn’t read the last episode with Franco Barile, I highly encourage you to go back and check that out.

They could be extended. However, a lot of the moratoriums are scheduled to expire on January 1, 2022. If those are not delayed or even if they’re delayed just into the front part of 2022, you’re going to see all of this pent-up demand for foreclosures hit the market. A lot of these lenders are going to start foreclosing. You’re going to see more REOs in the market. You’re also going to see more inventory of notes on the market.

One of the big things that enlightened me last time with Franco that I had not thought about myself was that with this challenge of hiring that I talked about at the beginning, a lot of the midsize banks, hedge funds are having trouble hiring people. When they were able to kick off this large wave of foreclosures, they’re not necessarily going to have the bandwidth to manage those and that could encourage them to sell them instead.

2022 is going to be an awesome year. We're going to see the next wave of notes hit the market, a return to normalcy after COVID, and there should be a lot of good things happening. Set yourself up to take advantage of those things. Click To Tweet

My Goals For 2022

If you’ve been waiting for the note market to turn good, there’s a good chance that 2022 is going to be your year. I know I’m sitting here waiting to pounce on this. For my goals for 2022, I want to do a lot of new deals but I’m going to be opportunistic about it. One of my advantages of taking a multi-decade approach to notes is I can take advantage of the deals when they come and if there aren’t deals available, I can wait. If this next foreclosure wave hits, I’ve got a lot of investors lined up, cash on the sidelines I can deploy, I can go all in and buy.

However, if the moratoriums get continued and this pent-up demand for foreclosures gets delayed, I’m content to sit back and wait. The other thing that is going to happen to my business in 2022, I mentioned how in 2020, most of my portfolio has shifted towards performing. I’m not doing as much nonperforming as I was a few years ago. If this next wave of foreclosure hits, I’m going to see a big shift to nonperforming loans and that’s probably going to be my focus.

Also, from my content standpoint, from my YouTube channel and podcast, I’m going to be focused on getting the right content to the right people. For the people who consume my podcast and my YouTube channel, what they’re interested in is all over the map. You’ve got people who find the note business entertaining. They’re fascinated by this whole world. You’ve got other people who have learned about it, want to know more and want to understand if they should dip their toe, then you’ve got people who are ready to dive in and start doing deals and other things.

I’m going to be doing some things in my different channels, my newsletter, my YouTube channel, to try to focus the right content on the people who are looking for it. The main thing for me is preparing for this next wave of notes. This next wave of notes may or may not hit again. I’m going to be opportunistic. I’m going to make sure I get ready for it. Part of that is expanding my network, tightening my systems, processes even more, planning ahead and getting things dialed in.

This big opportunity is coming in. If it doesn’t come this 2021, it’s going to come at some point. I’m going to be so ready to pounce on that. For my YouTube channel, I talk about all the growth that I had over 2021. I do want to increase those subscribers from 1,190 up to 1,500. That would be about a 21% increase. I want to get those hours watched from 1,900 to 4,000, which would be an over 100% increase. That’s pretty aggressive. If I can get to those goals then YouTube will allow me to do some extra cool things on that channel that I can’t do now that I think will be a lot of fun for everybody.

I want to make the Note Launchpad training course even better. I plan to add some new content. People who were already members of that get the new content. I’ve got my Note Ninjas private Facebook group, which honestly, I haven’t posted as much content there as I would’ve liked to but I want to have more exclusive content there for those members.

On the golf front, I hit a 170-mile an hour ball speed. I want to make that not just the max achievable but my standard. If I do that, I’ll be hitting the ball and insanely long ways. My handicap, which was zero for most of the year, went up to one. The lowest it’s ever been has been plus one. I’m going to get that all the way down to plus two, which I think is going to be very achievable.

 

One of the great things about my new dream house that I talked about is I’ve got a basement with a roof tall enough that I can swing a driver. I’ve got a golf simulator in the basement. I’m going to be building out a whole practice area in the basement that’s going to help me get a lot better. One of my other goals is to win another club championship in golf. I’ve won five club championships in the past, that didn’t happen in 2020 but I want to add another one of those and 2022.

Now is the time for you to think about what your goals are in 2022 if you haven’t already. I would love it if you drop me an email at Dan@FusionNotes.com and let me know what your goals are. This is the best time of year to think about this. It’s the best way to progress your real estate business and other aspects of your life.

At the same time, don’t forget that 2021 is not over yet. If you’ve got goals for 2021 that maybe you wrote down and forgot about or you haven’t quite achieved yet, you’ve still got a handful of weeks to get there. As much as I like to talk about 2022 and I’m thinking about it, don’t forget that there’s a lot that you can still accomplish in 2021.

If nothing else, make sure you make your plans for 2022. What I’ll leave you with is as we get into this holiday season, when people tend to have more time, if you’ve been thinking about notes and haven’t gotten into it yet, this next wave of notes is coming here pretty soon. When the next wave of notes hits, that’s not when you want to be figuring out how to take advantage of it. When the next wave of notes hits you and to have your systems and your game plan together so you can jump in and take advantage of it. Between now and the end of the year is a great time to do that.

I highly recommend checking out the Note Launchpad training course at NoteLaunchpad.com. I’ve got a ton of videos that go in-depth about all the phases of note investing. I’ve got spreadsheets and calculators that you can download. You don’t have to be an Excel expert. You can download these things and run them. I’ve got templates, checklists, all of my standard operating procedures and a lot more. Access me through the private Facebook group. We can ask whatever questions you have.

If you stay tuned, there’s probably going to be a holiday special that comes out. If you follow my channels, please stay tuned to those because there’ll be some good deals coming out. That’s my show on goal setting for 2022 and my recap of 2021. I hope you enjoy that. I hope you sit down and hit a lot of those goals in 2021 that you may not have wrapped up yet and start making some detailed plans for 2022.

2022 is going to be an awesome year. It’s good for the economy. We’re going to see the next wave of notes hit the market. We’re going to see a return to normalcy after COVID and there should be a lot of good things happening. Set yourself up to take advantage of those things and I will see you next time. Thanks.

Important Links:

• Paperstac.com
• BIFI
• Note Launchpad
• YouTube – Fusion Notes
• Shante Duffy – Past Episode
• Note Ninjas – Private Facebook Group
• Dan@fusionnotes.com