116: Understanding Real Estate Note Investing with Kevin Galang

Millennial Real Estate Investor

Love is a funny thing sometimes. Kevin Galang discovered the wealth-generating power of real estate investing thanks to his girlfriend. Growing up, Kevin was brought up with the mindset of growing your income, while his girlfriend believed in growing your income stream. Kevin believed in investing in a 401(k) for retirement, and his girlfriend believed in investing in real estate for cash flow. They set aside their differences and Kevin figured he’d give real estate an open consideration and look into it. Can you guess how he thought about finances afterwards?

After months of learning and networking, Kevin jumped into note investing, doing three deals right off the bat. And while at the time it felt as if investing in notes was going against the current, Kevin knew his strengths as well as the benefits to know that he was going in the right direction. He stuck with it and the results speak for themselves.

Up to date, Kevin educates others about the nitty-gritty of real estate note investing, as well as other types of investments, in his podcasts Tech Guys Who Invest and Note Nuggets.

Takeaways from our conversation with Kevin: 1) What is a real estate note? In essence, it is a promissory note in which the borrower promises to pay back a specified loan to the lender (in this case being a mortgage on a property). In other words, when you invest in a note, you are acquiring existing debt and acting as the bank, using the property (or otherwise) as collateral should the lending terms be broken or become non-performing.

2) Why invest in notes? As Kevin explains, the largest (and most obvious) benefit is the ability to essentially own real estate without being the attached landlord to any given property. That means that you still earn a return (through cash flow and/or recapitalization), but don’t necessarily have to handle the day-to-day operations like renovations, evictions, or leasing.

3) What are the advantages in notes? For one thing, you can get really creative with how you invest in notes. For example, you can buy in bulk or you can buy in shares. The other thing, Kevin mentions, are the multitude of exit strategies available at your disposal should a note become void or non-performing. You have the choice to create a solution with the borrower directly, you can eliminate the borrower from the investment, or you can part ways with the investment yourself, all of which could be winning solutions if done properly.

4) How do I get started? Kevin talks about how note investing is generally thought of as an “old person’s game.” He explains while it may be true to an extent, you don’t have to invest in notes the traditional way. So while it may carry more risk, with only a few thousand dollars, you can gain a secondary or (even) tertiary position, or even become a partial note holder. Or say you have more capital available in an IRA, that can also be a source of income to then originate or purchase a primary-position note. Either way, as per Kevin, go learn and network as you get started.

If Kevin could go back and talk to his 16 year old self, he’d tell him, “Read Rich Dad Poor Dad sooner because it would challenge the way [you think] about creating financial success.”

An unexpected benefit of real estate investing, Kevin said, is the ability to endlessly learn new things and learn with a purpose simultaneously.

A piece of advice Kevin would tell his friends looking to get started in real estate would be to know what you want to do, know how much you’re willing to dedicate, and double down on what you’re good at.

Kevin recommends using a HP 10bII Financial Calculator to help you analyze deals on the fly, as well as Google Drive to have a centralized place to store important business information.

Kevin recommends reading How To Win Friends and Influence People by Dale Carnegie to learn the foundation of talking to people and how to build better relationships with others.

If you’d like to get in touch with Kevin, visit: tgwipodcast.com and info.notenuggets.com/home