AHP Servicing Financial Review w/ Jorge Newbery

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Hey everybody, we are going to be doing a deep dive into the 2020 financial audit of servicing. If you guys haven’t heard about this, go to my website @simplepassivecashflow.com/AHP. I’ve known George since 2016 more poorly. I’ve floated a 60 to a hundred grand in his fund.

Got a nice cool. Return every single month, like clockwork. If you guys go back@simplepassivecashflow.com slash HP, you’ll see all the past webinars we’ve done on this fund. One of the things I personally invest in, but the question that comes up a lot of times is, as a fund, it’s hard to determine other than, talking to other investors had they had a good experience, but supposedly the financials are audited.

But look around. Nobody knows what the heck that means. So we’re going to dive into it today and George has got the report up and I guess let’s get into it. Welcome George. Hey, Eileen. Thanks for having me on. these reports can be pretty dry and overwhelming.

Maybe walk us through what are things, this is the HP. Audit obviously, this is something you can do with any private fund that you’re investing in or possibly wanting to invest in. But maybe George take us through how these reports put together and who does it?

How do they go about it? Sure. So we have all. Regulation eight plus companies generally are required to file audited financials with the sec through their Edgar system. And in fact, I believe that’s a requirement of most, if not all publicly traded companies.

And The reason for it is you want to know if you’re investing in a company and like you said, you don’t know the minutia, what did they invest in today? What did they sell today? So the independent auditor’s report will be an independent company.

That’s engaged to review all the financial records of the company and then issue a report. And so we do this every year. We’ve been doing it since we started our first regulation, a plus fund in 2016 and we get these done and then they’re filed with the sec and they can be reviewed there. This was a challenging year, 2020, but this will show how we fared and then I can go through each page and interpreted, everyone can interpret for themselves, but I can certainly share some context about how we did last year and what the state of HP is right now.

And of course, this is obviously George is the principal HP, and you guys can look at the numbers on your own, but, as I always do it, like with our apartments we have the PNLs and all the line items, I usually look at a certain things I personally do it and we’ll see how it kind of George does it.

And, but you guys can all have a C dig through this stuff, find your own. Yep. I’ll try to add some color. So it may all make sense. And certainly if you’re an investor HV, or even if you’re not, if you’re considering an investment in HP, we definitely encourage you. If you have questions on it or anything else about HP to reach out to us and we can assist we’re at HP servicing.com and this little plug in there, Jane.

I’ll dive in and go through this. This is Richie may that’s our auditor. You can choose through any. There’s a number of auditors in the country. Richard Mays has a lot of expertise in the mortgage industry, which is why we chose them. They do a lot of mortgage servicers, originators companies and invest in mortgages.

They have a lot of experience.

There’s a whole bunch. You can access this. This is on the SCCs website. We can also provide your copy. If you go sec filings or Edgar HP service, and you’ll see all our filings since the beginning of when we first filed with the sec in order to do the HP servicing offering.

that’s on their 20, 15, eight pluses on there. And. This first page is simply, some background on the audit and the auditor disclosures and whatnot. So not really too much meat there, but certainly something that anyone is welcome to to read same with the second page, but then you get to the meat, we started out with a balance sheet and then we’ll get to the profit and loss, but basically it’s showing and this report what we held.

On our balance sheet at the December 31st of 2020. And it also compares it what we held on our balance sheet on December 30, first, 2019. At the end that year we had 665,000 in cash. Some of these are fairly easy I’m going to mention them anyway. So cash.

End of the year, 665,000. We had an escrow cash of over $3 million. as our servicing portfolio has grown. we’re servicing both loans that we own, and that is own. We do continue to hold more and more cash and in escrow Accounts receivable. This is money that we’ve advanced sometimes on behalf of third parties.

So if somebody has a loan that we’re servicing, we may advance money on their behalf to let’s say, pay a legal bill or pay taxes. It’s typically repaid the next month when their remittance comes through and we can apply the payments that they received against the amount that we’ve advanced.

In this case, it’s almost a million bucks, $922,000. Here’s the biggest item though is mortgages that we held for sale. And they categorize basically all the mortgages that we purchased as held for sale. These totals, you can see just over $37 million. I’m looking right here. can see my cursor.

So just over $37 million in mortgages. Now a key item to understand is this is basically what we paid for the mortgage. So if we buy a mortgage. Where a family owes a hundred thousand dollars and the home is worth $150,000. And we buy that mortgage for $50,000 using very round numbers.

Then it’s booked at 50,000, even though they’ll oh, 150, we book it at what we paid. We don’t realize a gain or a loss until the asset is actually disposed of. This 37 million is what we actually paid for those loans. A note receivable third-party this is if we make any advances on loans that we actually own, or two entities that were related to, I’d say specific like 20, 15, eight, plus if we made advances on or legal or anything for them, that would be included in their prepaid expenses.

If we paid Prepaid and expenses on behalf of the company that we expect for services that not yet been rendered, that would be in the $300,000 other assets, property, and equipment any kind of computer equipment servers Would be included in there deposits, probably our security deposit on our bill, on our leases and other things like that.

$40,000 in the end, $45 million in assets. Now what do we owe? We have out 1.3 million in payables. These can be any kind of bills that we owe 1.1 million in escrow liability. So this is in all likelihood. This escrow that we’re holding $3 million. It’s probably offset by. We probably owe some of that.

So 1.1 is likely money that we owe that produces that cash probably down to 1.9 short-term debt. We borrowed money on a credit line or something like that. Short-term $662, I’m sorry. $662,000. Long-term debt. If we are long-term note we had last year, we bought a lot of loans. We spent almost 50 million at the end of the year.

I think we bought a significant number and We borrowed $14 million against the notes that we purchased. In fact, that was all incurred in the last six months of last year. But it’s what, like the number of the average one, the value on that stuff, and then the rate

it’s very light leverage still. It’s very light level. Yeah. We bought about in the last six months of last year the ideal strategy for the performing stuff, to use on that. We just use it to, if we had enough money to close, so basically we bought about $50 million.

I think it was 48 million in change that we spent for loans where the amount due on the loans was about a hundred million. The property values back in those loans was about 120. That’s what we purchased between July 20 20 and February, 2021. That’s pretty aggressive for us. And we bought these a great prices.

I think on average, we’re talking about 50 cents on those. And again, you look back to last June through November, which is when we made the deal. Some of them didn’t actually close to February for different reasons, but that’s when we made the deal and set the pricing, it was still pretty uncertain, the real estate market was surprisingly doing well, but I don’t think people would consider it

we’re acknowledging that it was doing great. And so as we kept buying the pricing was very attractive and we’re seeing that some of those loans were exiting right now and 2021 at significant markups, because back then you buy a loan it’s based on what’s the value of the underlying property.

And if that value goes up, people are willing to pay more. And also if we ever sell the property, let’s say we get an REO or a deed in lieu and we’re selling it. We thought it was worth a hundred last year and now it’s worth 120 and we’re selling it. That’s great. So we’re seeing a ton of that happening now.

And I think we’ll continue to see that through. I would expect certainly this year and probably sometime into next year, I imagine there’ll be a A point where this goes the other direction and in my mind strategically. We want to sell as much as possible today. If we get an REO, it will sell at a big premium, typically over what we paid for it, whether it was last year, early this year, or even or before COVID but also all the loans that we modified, we didn’t sell loans.

Since I came back as CEO in, in mid 2019, I said, Hey, no more loan sales. Let’s just hold everything we had. And we did that. But now these loans where we modified the loan and people are paying we’re now selling these loans at the average is mostly they’re selling for over 90 cents, which we typically bought them at 50 to 60 cents or less.

So that’s. Resulting in some significant gains this month we’re selling about 5 million next month, we’re selling about 9 million and we’re working on another pool that we’re probably closing in July or August. Those should provide some significant liquidity and we’re hardly buying anything right now because we see so few opportunities out there that have attractive pricing.

So back to the audit So member’s equity. That’s how much equity is in the company, $27 million. They add up the liabilities and the equity to come up with a total of $45 million now profit and loss. How did we do last year? We lost money. We earned asset management fees of two oh nine loan servicing fees of six oh nine interest income of nine 21.

Gain on on sale of mortgages, seven 24 other income, one 63. So we made $2.6 million last year. Significantly offset by expenses. We had over $4.4 million in expenses. In salaries and wages occupancy, basically rents and equipment 346,000. Admin nine oh six oh four professional services like attorneys just over a million dollars advertising.

115,000 depreciation, one 33 interest expense four oh two. So total loss of 4.4. Now, why is that? Why would we lose? We’d be losing money while ASP servicing is two things are the money that we raised goes for two purposes. One is to buy mortgage loans. Two is to build out a national mortgage servicer.

So that’s why, we’re all the salaries that’s because we have a national mortgage servicer that we built, which is licensed everywhere, except for the state of New York. We’re still working on getting her license in the state of New York has taken a long time,

 

where’s the interest paid to the investors.

We’re fortunate that is. Distribution. So next page. Right here. So we can jump there right now. Member equity, this is we’ll go for each year. We started out in the first year. We were active for two months. We raised 3.9 million. And then the next year we had $15.7 million come in as investments in 20 19, we distributed a 4.3 million so at the end of 2019, we had $12.9 million outstanding to investors that rose a lot through 2020, we raised over $20 million and we distributed Around a million dollars.

We didn’t do too many ramps with, so we distributed just over a million dollars and we lost $4.4 million. So basically think about this when we raise we’re always bringing in money every day from interest payments. We’re bringing in money from. Loans that are sold Oreos that are sold.

I shouldn’t say loans that are sold like short sales, REO sales. And so that’s the money that we pay out to investors in our monthly distributions. Overall, still we lost $4.4 million last year. So our total on sanction investors right now, 27, or right now as of December 30, first, $27 million,

the 10%. Back to investors 1% every month. Which line is that again? It’d be member distributions right here. 1.1 million. Okay. So that didn’t skip a beat. It came a little tough in March and April and bear in mind. Roughly half of our investors, because we’re still in the capital raising phase reinvest their money.

So they simply, instead of getting money out the door, that money is added to their investments. So with the reg a plus offering, you go out to a whole bunch of the masses. How many investors isn’t this whole there’s over 1300 investors. Wow. So you’re saying George and email.

It don’t expect an answer. Yeah, I know we have our investor relations. Michael Distasio is our primary contact in investor relations. He’s the one who’s normally responding to emails phones and other outreach. If you email me, I’ll definitely try to assist.

I usually forward it to Michael, unless it’s something that’s particularly out of the ordinary. I think you’ve told me this before, but now that we have the financials up, What is your logic on, like how much cash to keep on hand to be able to go after a good opportunity?

Or do you just raise it? We just raise it or we borrow it if we get caught short and we have a closing, like that’s next week or at the end of the month or something like that. So we don’t have Hey, we always want to keep a certain amount of cash on reserve. Literally money does come in every single day.

We usually know if there’s a big purchase coming up. That if we get over short money, we can usually borrow it on a short-term basis. So I’m not, keeping cash on hand, we’re paying investors or return on that. So I don’t try to keep anything significant dilute your investor pool.

What is there a certain percent number that you’d like to keep as cash? No, it’s a couple hundred thousand, $200,000. I think people will get nervous if they say, oh, we’re, we only have a hundred thousand dollars in the bank just because there’s always pay, just as money comes in every day, there’s bills that come And once in a while, it’s like an emergent, Hey, we got to cover this taxes today or something like that. So there’s always typically a hundred or 200, lots of times more and we try to manage that. Sometimes we’ll get Significant payoffs or Oreos or significant money comes in or investments come in and it’s not readily deployed.

We sweep that money to a money market account. So we’re earning some anemic rate of interest, but at least there’s a little bit of money versus sitting in the kind of operating account order earned zero. So that’s done regularly. It doesn’t add up to much, but it’s something.

Just a, I guess a personal question. What do you think about sweeping that money into a block five or like how Elon is putting money in Bitcoin? What is your thoughts on. I’m sure it goes against the PPM. Yeah, you’re right. In our STC offerings statement, we’d have to disclose that.

I don’t know. I guess the only reason to keep cash on hand is because we may have needs payables and stuff like that, acquisitions, but it is not I’d be a little nervous if we did that and then it wasn’t readily available when we needed it. So I think, These sit in the bank either in an operating account or in a money market account.

And definitely not Bitcoin. I don’t know how it’s doing today. I was reading on the news the other day. It seems to take a big hit. Went through the numbers and let’s get into how did the business go last year? I know you’ve mentioned March and April and I feel your pain.

I was a little. Afraid myself of what would happen with collections and March came. And then I was really afraid of April, right? Because that was when the lake happened. You would think people exhausted their cash reserves in their bank accounts that maybe can’t pay rent. But yeah, take us through 20, 20.

March and April were really tough. And even in may we were anxious that this was it, we had seen a big run-up for years ever since the 2008, nine, 10, 11 things started creeping up in 12 and 13 and primarily real estate values increasing.

And that had gone on for a long time, 18, 19. I kept thinking it was going to turn and and then COVID hit, I thought, okay, this is it. There’s usually a trigger that emotionally people say. That’s it, things are collapsing. And I was braced for that. And I was really concerned because we have tens of millions of dollars in assets and the potential, they’ve they could have gone down 10, 20, 30% and that would have been have a significant negative impact.

But the opposite has happened. They’ve gone up 10, 20, 30%. And I don’t think anybody expected that in March and April when our phone suddenly start lighting up from customers who were historically paying. And now they’re saying I just can’t pay, I’ve been laid off.

I don’t know if you remember the number and unemployment of our car correctly. It was spiking into the, 10 million, 20 million some. Huge numbers. And if I’m recalling correctly and all of a sudden, a lot of people were laid off. A lot of people couldn’t pay. We were giving forbearances because these are people that historically were paying income interrupted.

They needed a cup, a little break, but now our income started. Drawing up and then most challenging is we had a decent number of Oreos when an REO cells, that’s a big infusion of cash, anywhere from, tens of thousands, sometimes hundreds of thousands, and that stopped in most parts of the country.

Many parts of the country. We couldn’t complete a sale. We couldn’t get the deed. Some of the county recorders closed. The sheriffs maybe had the deed from a foreclosure and they wouldn’t issue the deed and that went on for months. So it really challenged our cashflow.

But we started seeing funds also getting nervous and they started selling a loan. So in June we said, Hey, we’re going to start buying opportunistically and that’s Turned out to be a good bet. And things have gone up significantly since then. And now it’s the opposite side.

For seven, eight months, we were aggressively buying, every dollar. We were paying distributions but just about every other dollar we had, we were buying loans. And now it’s the opposite. The last pool of loans we bought. Of significance was in February right now, we’re selling aggressively everything that we can sell.

Everything. that’s REO, we’ll sell everything. That’s a performing loan. That’s been, we modified and is now performing. We sell, there’s no extra value we can add to either of those situations and to exit into this market is great. The loans that we hold that are unresolved, that we’re still working on the homeowner with a modification or to complete a foreclosure, any of those things we’re holding onto, we’re going to take them to a resolution.

And then sell them and again, we’re not buying. So what we have is what we’re focusing on are I really want to get these things max resolved as many as possible and sold, by the end of this year. And I think for the next, six, seven months to get to the end of the year, it’d be a great opportunity to sell.

You mentioned you sold some of your apartment buildings. I imagine you did well, probably a lot better than you thought when COVID first hit that things you could sell stuff so strongly. We’re doing that and I think the buying opportunities will be limited and what you can buy.

There’s certainly stuff to buy, but you have to pay a lot. And so we will be on the sidelines as the buyer, but be out there aggressively selling. And I think that would be is the thing to do there’s time to buy at a time to sell, I think right now it’s time to sell. Yeah. I think it’s I think there might be a divergence within like residential stuff, which you guys work with.

And then the commercial assets, like I haven’t seen the run-up in prices in commercial assets, maybe like a quarter point across the board of cap rates, lowering, which by the way, it’s you guys means that the prices are going up when the cap rates are what they sell for lower. But nothing nearly is like the residential world.

That’s what I’m like. I’ve lower my like waterline for like people to buy turnkeys to me buying is make absolutely no sense. Right now. But so if I were to understand how you’re thinking in summarize it, you’re thinking this is an opportunity to sell residential properties

What do you think a lot of people in the middle of the pandemic and the summertime will creating a lot of videos that YouTube offers. God love them, right? They’re always doing those tweetable or those SEL terms where the world’s going to end. There’s the weight loss of foreclosures.

Is that really gonna happen? Where are you putting your money? I put my money on that. I think there will be a bigger disruption. I think I was in Dallas, Texas last week for a couple of conferences, had a meeting with some manager of the billion dollar fund that we were talking about.

What would they thinking? And it lines up with I’m thinking this cycle will end and we’re not sure if it’s going to end in six months. 12 months, 18 months, but this high that the cycle will end and then it will go the other way.

In the managers Words it will lead to an extended period of depreciation. And we’ll see these prices steadily declined and his thought was late this decade. Our economy is really weak right now. And the fundamentals are not good. I think there’ll be Some significant challenges ahead.

They’re not reflected in the current real estate market, but at some point they will be. And most of the rosiness today is the result of, a good chunk of it is government intervention, which is the record low interest rates are near record low, and then all

the the stimulus money that has been pumped into the economy over the last year that’s been, I think that’s there’ll be another side of this, that we’ll pay for it. I think about 2005, six, seven, it was such a. Dramatic run-up, there had to be a turn and eventually it turned in late oh seven and through oh eight.

And if it came a people were at that point, you got to, oh, nine, 10 people are looking back at oh seven and oh eight and oh six and thinking, what were they thinking? Why do they think this will keep going up? Why were they paying so much for houses? And and I think right now, fast forward, A year, two years, three years.

At some point, there’s going to be people looking back and saying, what were they thinking in 2021 people are paying For assets, be it a mortgage or a real estate. I’m happy to sell into that market. In fact, I’m thrilled to sell in that market, but I’d be really scared as a buyer I’m having to buy.

And I know, talking to some of the funds, they have to buy they have money. They can’t not use it. And so they have to buy they’re buying, with expectations of Very modest yields like low single digits that they have here. They’re getting four or 5%.

And that is not even three and a half percent people. It’s better either. They have a super cheap cost of capital, which some of them do, or it’s better than not investing the money at all, but I’d be nervous if they, if you buy something and you’re getting three, four, 5% return, and then the market turns and suddenly you lose your road, your principal That would be challenging.

So my thought, if you own real estate or you own a mortgage or any kind of type of asset with the exception of probably hospitality or our office buildings, which are probably you sell in today’s market, you probably won’t do well, but everything else by and large, not residential real estate, I think to do with that, I think it’s definitely time to be a bestseller.

You think It all indication because of the stimulus money and things move slowly. What we have, pretty high, maybe single digit GDP growth, these next couple of quarters, at least. Yeah. That could be the case. But I think it’s slightly artificial just because of the stimulus, I think that’s driving it.

It’s not the That the economy is doing as great as the numbers may reflect. So at some point maybe once that burns off, people are going to have struggling to pay their mortgages. And that’s going to start the foreclosure that perhaps they come in and move into our apartments. Yeah.

Reversal. The reality is, think about this the rallies, there’s millions of families who are having trouble making their payments right now. You just wouldn’t know it necessarily because there’s millions. There’s a significant number of millet. There’s millions that are in some kind of forbearance or other types of a payment plan.

And that is, I, in my mind is masking the underlying challenges, which will, you know, once the foreclosure moratorium, Zen. Once you know, the forbearances and it’s pulling up the covers. What’s really going on down here. And I think that’s when we’ll start seeing some disruption that’d be a trigger.

Now what concerns me and what we’re trying to get ahead of is once these foreclosure more attorneys lift, there will be In my expectation is that there will be millions of loans that are suddenly moving through the foreclosure process that will clog the courts that will just clog the whole system.

Now, what if we have a loan today and we’ve exhausted the options of modification or any type of consensual solution, we are trying to move that. Forward as fast, as possible. And also as far as possible, recognizing that in some cases we can’t complete the foreclosure because of some kind of restriction like a moratorium.

And so we move it to that point and then the foreclosure moratorium is lift and we can, we’re far along in the process. And part of it, there is a little bit of it that some consumers, some borrowers maybe You are saying, Hey, I’ll just deal with this. Once they can actually foreclose on the home.

And then I will be more than maybe I’ll do a modern or something like that. And that’s fine. We’ll work on some mods then, but some people are just not responding to any kind of outreach today because they know that we can’t foreclose on their home and that’s a little bit frustrating, it’s the way it is and we will recommend it.

But I think there’s a lot of struggles right now. Families that are hidden by all the government intervention that foreclosure moratoriums is extra stimulus money, the extra unemployment money, there’s a lot of stuff that is propping.

This country’s economy up. And I think that kick out a couple of stilts and we’ll start seeing some adjustments and things won’t be so rosy and people won’t be making multiple offers, sight unseen, no contingencies, all this stuff that we’re seeing today, which is great if you’re a seller, but not so good if you’re the buyer who is looking in two years and saying, oh my gosh, oh, 20% more than my house is worth.

Which is what happened last time. And then people stopped paying and then people who aren’t even in trouble say I’m not going to pay because I own, 20% more than my house is worth. It does make sense, which is what happened last time. And then it just starts this thing where people go, everything collapses the other way.

Sounds good to me. Cause I got a couple more properties. So single-family homes that I’ve reluctantly done the purchase strategy with we’ll probably sell here in the next year, hopefully. And I think that’d be great timing for me. Yeah. Exit. My message is to sell while you can.

For HP servicing, we have two things. One is we built a service or partially in anticipation that we want to be ready for the next turn and for the next downturn. And We will be here once there’s all that disruption occurs, we expect that our servicing portfolio will significantly grow.

And now we can grow as a company. So that’s a period. Those periods of disruption is where you can take market share away from the market leaders and hopefully become a market leader ourselves. And that’s when you guys start thinking your chops with all that stress out there.

Exactly. It’s a stretch. it’s an opportunity to make money, but it’s also opportunity to help people. They can’t be one in the same thing in our attention, this and do that. One of the big questions that my folks have asked me, or they asked, I got a question like that somewhere every month is HPS retentions.

And some people I’m just like, seriously, it’s not like a fricking bank. You can’t just put money in a fund and expect it to come back out, maybe comment on there was a big, a lot of people that panicked right in the beginning of COVID that wanted their money back and it’s just that’s not how it worked, guys.

I know that we had one internet trouble that was like, HB is horrible. I like it. When you look at them profile and it says, who’s this ? There was one guy who had a hundred dollar investment who was waiting on his redemption and he was like, every place he could go, he was like, this is terrible.

It was a hundred dollar investment. Here’s where we are with redemptions. That’s why not a credit investors , you don’t want them. Yeah, we do, but we didn’t expect this to happen, but here’s what happened. We offered redemptions best efforts redemptions.

So if somebody requests their money back, we would undertake our best efforts to redeem that money within 30 days. And we started offering them in 2016 with the first regulation A-plus offering 20 1500 plus. And we were able to consistently do them within 30 days. And COVID hits.

We had, and that’s what I did. I took her ademption at one time, I needed to take some money and go into a syndication deal. That was more long-term. That was more of an equity deal. And then I put the money back. I think I took a month or two to process it. That was the reason why I went into the fund because there was like, there’s nothing out there that has something that even resembles redemption, but I knew very well.

I’m a responsible investor informed investor, knowing that, Hey, it’s up to you guys to see if it works. The most important thing is the fund and the whole investor base. Exactly. I’m glad you brought that up because last year we could have just simply said, Hey, we’re just going to not buy anything.

And every dollar we get our hands on returned it to, that comes in and revenue return it to investors. But for the investors that are staying in this that are in it for the long haul, that would have been the best strategy. We were seeing great opportunities. We spent a lot of money last year, almost $50 million or over the period from July, 2020 to February, 2021 in buying loans.

And those investments appear to be paying off very well this year as we resolved them. But now our focus is returning money. We don’t see opportunities. You’re absolutely right. We have to look out what’s best for the company.

And we want to honor redemptions. I think we’ll be back to honoring redemptions within 30 days this summer and right now without buying anything new and of significance and selling as much as we can, we’re starting to see big cash come in. In a nutshell on the redemptions.

So we’re having big cash come in and we are starting to redeem significantly. And this month, I think we’re in a process around 200 redemptions, a couple million dollars. There’s probably another 2 million that we probably right at the end of this month. And then through Late June, July, I expect we’ll probably have about close to $8 million.

That’ll come in. And a good chunk of that can go to redemptions as well. I was curious because you had a big backlog, right? And they were sitting in there when you’re like, Hey, we lean, it’s your turn. What percentage of people are actually following through now that we’re on the other side of COVID it’s like you’re just getting scared.

You’re absolutely right. I think yesterday we sent out about 100 emails to investors saying, Hey, we have money available to redeem. We’re seeing about 25% maybe even a little bit more that are saying, Hey, don’t worry about it. And and they don’t need it anymore. So that’s fine.

That means we just , move down the road to the two additional investors we have. Currently, and ever since COVID started, we’ve been. Processing redemptions in the order received. Whoever requested earliest, those are the ones getting redeemed. And we got wildly behind , in March and April last year, we had a huge number of redemption requests.

But now we chipped away at it through the year. Now we’re making big strides and I think we’ll start seeing over the next couple of months They’re getting actually caught up in being back to the point of where we are reviewing within 30 days.

Yeah. It’s harder than I thought. I’ve not thought it’d be more like half, but that’s a surprise. I’ll make people actually follow through. Yeah. I know actually a fair amount. Yesterday we sent out a hundred. I’m not sure what, number previously it’s been more modest numbers.

I’d say about 25%. Maybe a little bit more, based on what we had through the beginning of the end of last month, we forecast a 25%. We’ll cancel it. It may even go up and you’re right. I wasn’t really focused on it, but now that COVID has easing people, seeing the market NHP getting stronger, I think they start thinking, Just leave it in there, if that’s all your true friends are I understand some people were calling in, Hey, I need money for payroll.

I got a margin call because you remember a year ago or when COVID first hit, the stock market was wildly fluctuating, and a lot of people lost a lot of money. And they needed to cover stuff. So I get it. And people also. You mentioned big landlords their forecasts were like a huge number of people were not going to be paying rent that never really materialized as much.

Certainly it was an impact, but it wasn’t as severe, I think as people were nervous about, but all those things were factors. And I certainly understand people’s concerns. If people needed to bail, we’ve done our best. I appreciate patients from those investors. And I think the extent you still need the money we are working on getting those back in and we’ll probably be completely caught up in the next couple of months.

Maybe part of that’s my fault too, because I wrote that article spool pass a castle.com/oh, fund. I use you guys as like an opportunity fund that kind of siloed money as I’m waiting for another deal to come by. And this is a lesson learned on my part. I should not have the expectation to get at that money.

Within a couple of months. I need to have some other dry powder elsewhere. A lot of people, I do know a lot of rehabbers and investors who they’d get, close the sale. They would put the money with us and it worked pretty well. Through we were able to get the money back promptly before COVID hit.

And I think it works so people needed the money, Hey, entered under contract. I need the money in a month or two. They got it, but COVID hit. And that was no longer The issue, so what’s coming up next. I’m in that other fund. That gives 12%.

Cause I was one of the early adopters you’re kicking me out now, our first fund you’re right. First regulation A-plus fund was 12%. That’s 2015, eight plus it’s been close to investments since 2018. It’s now been five years, or I should say not now,

next month in June, it will be five years since we launched that fund. And that is the end of that investment term. So we will start redeeming those investors who’ve been in there for five years starting next month. It coincides to me, the timing is actually good. We’re catching up with the old redemptions.

We now start redeeming people who haven’t even asked their money back, but it is five years. We want to honor What we agreed to at the beginning, which is, we’re going to return. Our goal is to return our money within five years now, the good news to that you may see it as bad news, but the we have another fund that will be opening up which is HP title.

And people are welcomed there was sending out emails, just like we’re sending out right now for redemptions. Hey, your money is due to be redeemed. We now have money available to redeem it. You can either have the money back, or if you elect, we can invest it in the new fund, which is HP title, which should go live.

Probably in July, maybe end of June. And that one pays 7%. So it is a return. , I think that’s better align with what the market is today. So that goes live, as soon as that goes live, we closed investment into HP servicing and we opened it up into HP title.

So that’s the reality of 7% in today’s market is a strong return. But I guess that’s for every investor to decide after themselves what makes the most sense to them? The OGs and that first fund myself included. I don’t know if I was one of the early people in that fund.

I get a run rate of five years, they’re going to contact me and then a year or so. Yeah, the five-years comes from when you first invested . I don’t remember the exact time that you invested, but whenever that was, it’d be five years from them. Now that said our goal is to start.

We’ve been behind our redemptions. We’re catching up. We’re going to get to the point where we’re caught up with the 30 days. And now we’re redeeming those investors that are maturing on five years, but our goal, I see it now us getting ahead and actually returning money even before the five years that’d be our goal.

The rally is the there’s very little opportunities to redeploy that money. There’s very few buying opportunities. As a result, the best thing we can do for the company is to return the money, even if that’s earlier than the five years, rather than continue to pay at 12%.

And the opportunities to deploy that money right now are typically under 12%. I’m enjoying my time in that first fun house. So you just take your time, redeeming me out. I’m fine. Hanging out, but. If I’m reading between the lines here and for the people, who’ve actually stayed to the end of this thing video.

So what I, if I’m, you’re smart, you’re in the first one and you have some liquidity, you throw it in the current fund servicing before it closes. That’s the ninja.

actually we do, there’s actually some investors that figure that out too. And this is not figured out in a good way or bad way, but today you could redeem your 12% investment and put it

in the current fund, which is phase 10%. So absolutely you could do that. Now your question is, will they align if you’re wanting to do that, you probably should get your request in because the question is and there’s a reasonable likelihood of who knows the time is going to be pretty close, but if you’re afraid of redemption in today, there’s a decent chance that you could transfer it into 2015 flood.

From 2015, eight plus into HP servicing and during the 10%, instead of the 7%. Okay. I have, and have everyone requesting more to this tomorrow questions now, so nobody catches on and what’s going on. The whole, new fund is going to be 7%, which I think is pretty decent out there because yields are going down.

Bore chasing yields, they’re looking for safe places to put their capital. It is what it is. If you guys can find something better with some potential possibility, let me know. Lane@simplepassivecashflow.com. I’d like to invest my money in that, you can’t really find anything out there that does the same thing, at least in an audited legitimate company, you can invest in how slipper Harry, that also is working his engineering job on the side, flip a house. Giving them a private money lending know, but I think our friends with suits would probably call that junk box or bad paper. But but yeah, any other questions I think you get asked a lot, lately, those are the main ones.

And so we still have a lot of investors coming into HP servicing right now we finance we’re not really buying aggressively on the market, but we do have a platform on called pre reo.com. Right now, HP servicing is financing the loans where people are putting down 25% and we’re financing the 75%.

So we’re doing that and that earns us, modest markup And so that’s basically it I think closing note, everything we’re doing right now as a servicer is HP servicing. And soon to be HP title is to gear up for what I talked about a bit earlier is that downturn in that downturn we expect there to be significant direct disruption, and significant opportunity there will be our hit, we’ve built this national servicer.

We have a reputation for resolving distress deals right now there’s limited distress. So I’m not as much as demand for our services fast forward a year, or thereabouts. We expect that there’ll be a significant demand for extraordinary demand for our services. And we want to be prepared for that.

So that’s what we are. Our big focus is here. Have you ever thought about doing like a growth fund, a little bit more higher risk, but they get equity upside and then complementing that with like the current fund, if you guys do now, when the impending actions happen or like that market conditions happen.

No, I think we’re going to move. Right now, everything we’re trying to do is to. Be prepared for that next downturn. And I think, we’ve been buying and I know I’ve shared this with you and your audience before we’ve historically bought the most challenged loans where we get the greatest discounts and then we try to create value and add value to them and that’s worked, but it’s also means everything’s a customized solution.

It’s less scalable, repeatable as we would like. We’re trying to grow and scale this and how do we best scale? So our HB titles focus will be to buy defaulted mortgages, just like we’ve always done except only government backed default mortgage.

Let’s think FHA VA, USDA and these are where there’s government guarantees. We’ll probably pay more, but there’s a government backing. We’re going to be able to to the extent money’s lost, we can we can make a claim that backing and these ones. We see a big opportunity there.

It becomes much more repeatable, much more scalable. We can’t customize as much. We’re going to need to follow the FHA guidelines or the USDA guidelines or the VA guidelines in order to. How we interact with the customers, but we think we can use our high touch expertise and still work within the government guidelines and then turn in claims for when we don’t recover all the money and and we buy these discounts.

There’s a, built-in we buy them at 80 cents and we exit we’re eventually going to get, X amount of dollars depending on the backing that becomes more repeatable and scalable. I see that’s where our big growth is, that all said we probably won’t have, we’re actually going lower risk than higher risk, mostly because we want to scale the whole operation.

It’s like me buying class B assets. As opposed to slumming it in the class C with the headaches exactly right. Your potential return is lower, but it’s something you can do a lot more of. That is exactly the same thing. I can see we’re both evolving in different ways, daddy syndrome.

Exactly. It’s so less, more conservative, less headaches. Hopefully neither of us will be working around the clock. Yeah, exactly. George, you want to put your information out there. People would get ahold of you guys. If you guys want to learn more about HP, you can check out our old videos@simplepassivecashflow.com slash HP.

But. George wants, you guys dropped the, you guys always changed the URLs for the new funds, but what is it? It’s AHP servicing.com is where the current fund is open. And reach out to us there, HB servicing dot com. All our contact information is there and you can invest online or reach out to us with questions.

Guys thanks for listening. And I hope this was useful. I know a lot of us in our group invest in HB. They got a little nice liquidity sorta semi liquidity there and for a nice monthly yield. Thanks for joining us, George. We’ll see you next time. All right, thanks.

I’ll talk to you later.

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